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VOL. 297, OCTOBER 8, 1998 469


Saudi Arabian Airlines vs. Court of Appeals

*
G.R. No. 122191. October 8, 1998.

SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF


APPEALS, MILAGROS P. MORADA and HON. RODOLFO
A. ORTIZ, in his capacity as Presiding Judge of Branch 89,
Regional Trial Court of Quezon City, respondents.

Conflict of Laws; Actions; Where the factual antecedents


satisfactorily establish the existence of a foreign element, the
problem could present a conflicts case.Where the factual
antecedents satisfactorily establish the existence of a foreign
element, we agree with petitioner that the problem herein could
present a conflicts case. A factual situation that cuts across
territorial lines and is affected by the diverse laws of two or more
states is said to contain a foreign element. The presence of a
foreign element is inevitable since social and economic affairs of
individuals and associations are rarely confined to the geographic
limits of their birth or conception.

Same; Same; The forms in which a foreign element may


appear are many, such as the fact that one party is a resident
Philippine national, and that the other is a resident foreign
corporation.The forms in which this foreign element may
appear are many. The foreign element may simply consist in the
fact that one of the parties to a contract is an alien or has a
foreign domicile, or that a contract between nationals of one State
involves properties situated in another State. In other cases, the
foreign element may assume a complex form. In the instant case,
the foreign element consisted in the fact that private respondent
Morada is a resident Philippine national, and that petitioner
SAUDIA is a resident foreign corporation. Also, by virtue of the
employment of Morada with the petitioner SAUDIA as a flight
stewardess, events did transpire during her many occasions of
travel across national borders, particularly from Manila,
Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a
conflicts situation to arise.

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Same; Same; Damages; While Article 19 of the Civil Code


merely declares a principle of law, Article 21 gives flesh to its
provisions; Violations of Articles 19 and 21 are actionable, with
judicially enforceable remedies in the municipal forum.Although
Article 19

________________

* FIRST DIVISION.

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merely declares a principle of law, Article 21 gives flesh to its


provisions. Thus, we agree with private respondents assertion
that violations of Articles 19 and 21 are actionable, with judicially
enforceable remedies in the municipal forum. Based on the
allegations in the Amended Complaint, read in the light of the
Rules of Court on jurisdiction we find that the Regional Trial
Court (RTC) of Quezon City possesses jurisdiction over the subject
matter of the suit. Its authority to try and hear the case is
provided for under Section 1 of Republic Act No. 7691.

Same; Same; Forum Non Conveniens; Forum Shopping;


Plaintiff may not, by choice of an inconvenient forum, vex,
harass, or oppress the defendant, e.g. by inflicting upon him
needless expense or disturbance, but unless the balance is strongly
in favor of the defendant, the plaintiffs choice of forum should
rarely be disturbed.Pragmatic considerations, including the
convenience of the parties, also weigh heavily in favor of the RTC
Quezon City assuming jurisdiction. Paramount is the private
interest of the litigant. Enforceability of a judgment if one is
obtained is quite obvious. Relative advantages and obstacles to a
fair trial are equally important. Plaintiff may not, by choice of an
inconvenient forum, vex, harass, or oppress the defendant, e.g.
by inflicting upon him needless expense or disturbance. But
unless the balance is strongly in favor of the defendant, the
plaintiffs choice of forum should rarely be disturbed.

Same; Same; Forcing a party to seek remedial action in a


place where she no longer maintains substantial connections
would cause a fundamental unfairness to her.Weighing the

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relative claims of the parties, the court a quo found it best to hear
the case in the Philippines. Had it refused to take cognizance of
the case, it would be forcing plaintiff (private respondent now) to
seek remedial action elsewhere, i.e. in the Kingdom of Saudi
Arabia where she no longer maintains substantial connections.
That would have caused a fundamental unfairness to her.

Same; Same; A party effectively submits to the trial courts


jurisdiction by praying for the dismissal of the complaint on
grounds other than lack of jurisdiction.The records show that
petitioner SAUDIA has filed several motions praying for the
dismissal of Moradas Amended Complaint. SAUDIA also filed an
Answer In Ex Abundante Cautelam dated February 20, 1995.
What is very patent and explicit from the motions filed, is that
SAUDIA prayed for other

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reliefs under the premises. Undeniably, petitioner SAUDIA has


effectively submitted to the trial courts jurisdiction by praying for
the dismissal of the Amended Complaint on grounds other than
lack of jurisdiction.

Same; Choice-of-law problems seek to answer two important


questions: (1) What legal system should control a given situation
where some of the significant facts occurred in two or more states;
and (2) to what extent should the chosen legal system regulate the
situation.As to the choice of applicable law, we note that choice-
of-law problems seek to answer two important questions: (1) What
legal system should control a given situation where some of the
significant facts occurred in two or more states; and (2) to what
extent should the chosen legal system regulate the situation.

Same; Although ideally, all choice-of-law theories should


intrinsically advance both notions of justice and predictability,
they do not always do so, in which case the forum is then faced
with the problem of deciding which of these two important values
should be stressed.Several theories have been propounded in
order to identify the legal system that should ultimately control.
Although ideally, all choice-of-law theories should intrinsically
advance both notions of justice and predictability, they do not
always do so. The forum is then faced with the problem of
deciding which of these two important values should be stressed.
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Same; Characterization or Doctrine of Qualification; Words


and Phrases; Characterization is the process of deciding whether
or not the facts relate to the kind of question specified in a conflicts
rule.Before a choice can be made, it is necessary for us to
determine under what category a certain set of facts or rules fall.
This process is known as characterization, or the doctrine of
qualification. It is the process of deciding whether or not the
facts relate to the kind of question specified in a conflicts rule.
The purpose of characterization is to enable the forum to select
the proper law.

Same; Same; An essential element of conflict rules is the


indication of a test or connecting factor or point of contact.
Our starting point of analysis here is not a legal relation, but a
factual situation, event, or operative fact. An essential element of
conflict rules is the indication of a test or connecting factor or
point of contact. Choice-of-law rules invariably consist of a
factual relation-

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ship (such as property right, contract claim) and a connecting


factor or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of wrongdoing.

Same; Same; Test Factors or Points of Contact or


Connecting Factors.Note that one or more circumstances may
be present to serve as the possible test for the determination of
the applicable law. These test factors or points of contact or
connecting factors could be any of the following: (1) the
nationality of a person, his domicile, his residence, his place of
sojourn, or his origin; (2) the seat of a legal or juridical person,
such as a corporation; (3) the situs of a thing, that is, the place
where a thing is, or is deemed to be situated. In particular, the lex
situs is decisive when real rights are involved; (4) the place where
an act has been done, the locus actus, such as the place where a
contract has been made, a marriage celebrated, a will signed or a
tort committed. The lex loci actus is particularly important in
contracts and torts; (5) the place where an act is intended to come
into effect, e.g., the place of performance of contractual duties, or
the place where a power of attorney is to be exercised; (6) the
intention of the contracting parties as to the law that should

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govern their agreement, the lex loci intentionis; (7) the place
where judicial or administrative proceedings are instituted or
done. The lex forithe law of the forumis particularly
important because, as we have seen earlier, matters of procedure
not going to the substance of the claim involved are governed by
it; and because the lex fori applies whenever the content of the
otherwise applicable foreign law is excluded from application in a
given case for the reason that it falls under one of the exceptions
to the applications of foreign law; and (8) the flag of a ship, which
in many cases is decisive of practically all legal relationships of
the ship and of its master or owner as such. It also covers
contractual relationships particularly contracts of affreightment.
(Italics ours.)

Same; Same; Same; Torts; Where the action is one involving


torts, the connecting factor or point of contact could be the place
or places where the tortious conduct or lex loci actus occurred; The
Philippines is the situs of the tort where it is in the Philippines
where the defendant allegedly deceived the plaintiff, a citizen
residing and working here, and the fact that certain acts or parts
of the injury occurred in another country is of no moment, for what
is important is the place where the over-all harm or the totality of
the injury to the person, reputation, social standing and human
rights of the plaintiff

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had lodged.Considering that the complaint in the court a quo is


one involving torts, the connecting factor or point of contact
could be the place or places where the tortious conduct or lex loci
actus occurred. And applying the torts principle in a conflicts case,
we find that the Philippines could be said as a situs of the tort
(the place where the alleged tortious conduct took place). This is
because it is in the Philippines where petitioner allegedly
deceived private respondent, a Filipina residing and working
here. According to her, she had honestly believed that petitioner
would, in the exercise of its rights and in the performance of its
duties, act with justice, give her her due and observe honesty and
good faith. Instead, petitioner failed to protect her, she claimed.
That certain acts or parts of the injury allegedly occurred in
another country is of no moment. For in our view what is
important here is the place where the over-all harm or the totality
of the alleged injury to the person, reputation, social standing and
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human rights of complainant, had lodged, according to the


plaintiff below (herein private respondent). All told, it is not
without basis to identify the Philippines as the situs of the alleged
tort.

Same; Same; Same; Same; State of the Most Significant


Relationship Rule; The State of the most significant relationship
rule is the appropriate modern theory on tort liability to apply in
the instant case.With the widespread criticism of the traditional
rule of lex loci delicti commissi, modern theories and rules on tort
liability have been advanced to offer fresh judicial approaches to
arrive at just results. In keeping abreast with the modern theories
on tort liability, we find here an occasion to apply the State of the
most significant relationship rule, which in our view should be
appropriate to apply now, given the factual context of this case. In
applying said principle to determine the State which has the most
significant relationship, the following contacts are to be taken into
account and evaluated according to their relative importance with
respect to the particular issue: (a) the place where the injury
occurred; (b) the place where the conduct causing the injury
occurred; (c) the domicile, residence, nationality, place of
incorporation and place of business of the parties; and (d) the
place where the relationship, if any, between the parties is
centered.

Same; Same; Same; Same; Same; Where the Philippines is the


situs of the tort complained of and the place having the most
interest in the problem, the Philippine law on tort liability should
have

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paramount application to and control in the resolution of the legal


issues arising therein.As already discussed, there is basis for
the claim that over-all injury occurred and lodged in the
Philippines. There is likewise no question that private respondent
is a resident Filipina national, working with petitioner, a resident
foreign corporation engaged here in the business of international
air carriage. Thus, the relationship between the parties was
centered here, although it should be stressed that this suit is not
based on mere labor law violations. From the record, the claim
that the Philippines has the most significant contact with the
matter in this dispute, raised by private respondent as plaintiff
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below against defendant (herein petitioner), in our view, has been


properly established. Prescinding from this premise that the
Philippines is the situs of the tort complained of and the place
having the most interest in the problem, we find, by way of
recapitulation, that the Philippine law on tort liability should
have paramount application to and control in the resolution of the
legal issues arising out of this case. Further, we hold that the
respondent Regional Trial Court has jurisdiction over the parties
and the subject matter of the complaint; the appropriate venue is
in Quezon City, which could properly apply Philippine law.

Same; Pleadings and Practice; Evidence; A party whose cause


of action is based on a Philippine law has no obligation to plead
and prove the law of another State.We find untenable
petitioners insistence that [s]ince private respondent instituted
this suit, she has the burden of pleading and proving the
applicable Saudi law on the matter. As aptly said by private
respondent, she has no obligation to plead and prove the law of
the Kingdom of Saudi Arabia since her cause of action is based on
Articles 19 and 21 of the Civil Code of the Philippines. In her
Amended Complaint and subsequent pleadings, she never alleged
that Saudi law should govern this case. And as correctly held by
the respondent appellate court, considering that it was the
petitioner who was invoking the applicability of the law of Saudi
Arabia, then the burden was on it [petitioner] to plead and to
establish what the law of Saudi Arabia is.

PETITION for review on certiorari of a decision of the


Court of Appeals.

The facts are stated in the opinion of the Court.


Siguion Reyna, Montecillo & Ongsiako for petitioner.
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Padilla, Jimenez, Kintanar & Asuncion Law Offices for


private respondent.

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the1 Rules


of Court seeks to annul and set aside 2the Resolution dated
September 27, 1995 and3 the Decision dated April 410, 1996
of the Court
5
of Appeals in CA-G.R.
6
SP No. 36533, and 7
the
Orders dated August 29, 1994 and February 2, 1995 that

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were issued
8
by the trial court in Civil Case No. Q-93-
18394.
The pertinent antecedent facts which gave rise to9 the
instant petition, as stated in the questioned Decision, are
as follows:

On January 21, 1988 defendant SAUDIA hired plaintiff as a


Flight Attendant for its airlines based in Jeddah, Saudi Arabia. x
xx
On April 27, 1990, while on a lay-over in Jakarta, Indonesia,
plaintiff went to a disco dance with fellow crew members Thamer
AlGazzawi and Allah Al-Gazzawi, both Saudi nationals. Because
it was almost morning when they returned to their hotels, they
agreed to have breakfast together at the room of Thamer. When
they were in te (sic) room, Allah left on some pretext. Shortly after
he did,

________________

1 Annex A, PETITION, October 13, 1995; rollo, p. 36.


2 Annex A, SUPPLEMENTAL PETITION, April 30, 1996; rollo, pp. 88-102.
3 Penned by Associate Justice Bernardo L1. Salas, and concurred in by
Associate Justice Jorge S. Imperial and Associate Justice Pacita Caizares-Nye.
4 Entitled Saudi Arabian Airlines vs. Hon. Judge Rodolfo A. Ortiz, in his
capacity as Presiding Judge of Branch 89 of the Regional Trial Court of Quezon
City and Milagros P. Morada.
5 Issued by respondent Judge Hon. Rodolfo A. Ortiz of Branch 89, Regional
Trial Court of Quezon City.
6 Annex B, PETITION, October 13, 1995; rollo, pp. 37-39.
7 Annex B, PETITION, October 13, 1995; rollo, p. 40.
8 Entitled Milagros P. Morada vs. Saudi Arabian Airlines.
9 Supra, note 2.

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Thamer attempted to rape plaintiff. Fortunately, a roomboy and


several security personnel heard her cries for help and rescued
her. Later, the Indonesian police came and arrested Thamer and
Allah Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several
SAUDIA officials interrogated her about the Jakarta incident.
They then requested her to go back to Jakarta to help arrange the
release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer
Sirah Akkad and base manager Baharini negotiated with the
police for the immediate release of the detained crew members
but did not succeed because plaintiff refused to cooperate. She
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was afraid that she might be tricked into something she did not
want because of her inability to understand the local dialect. She
also declined to sign a blank paper and a document written in the
local dialect. Eventually, SAUDIA allowed plaintiff to return to
Jeddah but barred her from the Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi
Arabian government, the Indonesian authorities agreed to deport
Thamer and Allah after two weeks of detention. Eventually, they
were again put in service by defendant SAUDIA (sic). In
September 1990, defendant SAUDIA transferred plaintiff to
Manila.
On January 14, 1992, just when plaintiff thought that the
Jakarta incident was already behind her, her superiors requested
her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in
Jeddah, Saudi Arabia. When she saw him, he brought her to the
police station where the police took her passport and questioned
her about the Jakarta incident. Miniewy simply stood by as the
police put pressure on her to make a statement dropping the case
against Thamer and Allah. Not until she agreed to do so did the
police return her passport and allowed her to catch the afternoon
flight out of Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to
Manila, plaintiff was not allowed to board the plane and instead
ordered to take a later flight to Jeddah to see Mr. Miniewy, the
Chief Legal Officer of SAUDIA. When she did, a certain Khalid of
the SAUDIA office brought her to a Saudi court where she was
asked to sign a document written in Arabic. They told her that
this was necessary to close the case against Thamer and Allah. As
it turned out, plaintiff signed a notice to her to appear before the
court on June 27, 1993. Plaintiff then returned to Manila.

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Shortly afterwards, defendant SAUDIA summoned plaintiff to


report to Jeddah once again and see Miniewy on June 27, 1993 for
further investigation. Plaintiff did so after receiving assurance
from SAUDIAs Manila manager, Aslam Saleemi, that the
investigation was routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on
June 28, 1993, a Saudi judge interrogated plaintiff through an
interpreter about the Jakarta incident. After one hour of
interrogation, they let her go. At the airport, however, just as her
plane was about to take off, a SAUDIA officer told her that the
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airline had forbidden her to take flight. At the Inflight Service


Office where she was told to go, the secretary of Mr. Yahya
Saddick took away her passport and told her to remain in Jeddah,
at the crew quarters, until further orders.
On July 3, 1993, a SAUDIA legal officer again escorted plaintiff
to the same court where the judge, to her astonishment and
shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes.
Only then did she realize that the Saudi court had tried her,
together with Thamer and Allah, for what happened in Jakarta.
The court found plaintiff guilty of (1) adultery; (2) going to a disco,
dancing and listening to the music in violation of Islamic laws;
and (3) socializing
10
with the male crew, in contravention of Islamic
tradition.

Facing conviction, private respondent sought the help of


her employer, petitioner SAUDIA. Unfortunately, she was
denied any assistance. She then asked the Philippine
Embassy in Jeddah to help her while her case is on appeal.
Meanwhile, to pay for her upkeep, she worked on the
domestic flight of SAUDIA, while Thamer11 and Allah
continued to serve in the international flights.
Because she was wrongfully convicted, the Prince of
Makkah dismissed the case against her and allowed her to12
leave Saudi Arabia. Shortly before her return to Manila,
she was

________________

10 Decision, pp. 2-4; see rollo, pp. 89-91.


11 Private respondents Comment; rollo, p. 50.
12 Ibid., pp. 50-51.

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terminated from the service by SAUDIA, without her being


informed of the cause. 13
On November 23, 1993, Morada filed a Complaint for
damages against SAUDIA, and Khaled Al-Balawi (Al-
Balawi), its country manager.
On January
14
19, 1994, SAUDIA filed an Omnibus Motion
To Dismiss which raised the following grounds, to wit: (1)
that the Complaint states no cause of action against
SAUDIA; (2) that defendant Al-Balawi is not a real party
in interest; (3) that the claim or demand set forth in the
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Complaint has been waived, abandoned or otherwise


extinguished; and (4) that the trial court has no jurisdiction
to try the case.
On February 10, 1994,
15
Morada filed her Opposition
16
(To
Motion to Dismiss). SAUDIA filed a reply thereto on
March 3, 1994.
On June 17
23, 1994, Morada filed an Amended
Complaint wherein Al-Balawi was dropped as party
defendant. On August 11, 1994, SAUDIA filed its
Manifestation18
and Motion to Dismiss Amended
Complaint. 19
The trial court issued an Order dated August 29, 1994
denying the Motion to Dismiss Amended Complaint filed by
SAUDIA. 20
From the Order of respondent Judge denying the
Motion to Dismiss, SAUDIA filed21
on September 20, 1994,
its Motion for Reconsideration of the Order dated August
29, 1994. It alleged that the trial court has no jurisdiction
to hear and try

________________

13 Dated November 19, 1993, and docketed as Civil Case No. Q-93-
18394, Branch 89, Regional Trial Court of Quezon City.
14 Dated January 14, 1994.
15 Dated February 4, 1994.
16 Reply dated March 1, 1994.
17 Records, pp. 65-84.
18 Rollo, p. 65.
19 Supra, note 6.
20 Hon. Rodolfo A. Ortiz.
21 Dated September 19, 1994.

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the case on the basis of Article 21 of the Civil Code, since


the proper law applicable is the law of the Kingdom of
Saudi Arabia.
22
On October 14, 1994, Morada filed her
Opposition (To23Defendants Motion for Reconsideration).
In the Reply filed with the trial court on October 24,
1994, SAUDIA alleged that since its Motion for
Reconsideration raised lack of jurisdiction as its cause of
action, the Omnibus Motion Rule does not apply, even if
that ground is raised for the first time on appeal.
Additionally, SAUDIA alleged that the Philippines does not
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have any substantial interest in the prosecution of the


instant case, and hence, without jurisdiction to adjudicate
the same. 24
Respondent Judge subsequently issued another Order
dated February 2, 1995, denying SAUDIAs Motion for
Reconsideration. The pertinent portion of the assailed
Order reads as follows:

Acting on the Motion for Reconsideration of defendant Saudi


Arabian Airlines filed, thru counsel, on September 20, 1994, and
the Opposition thereto of the plaintiff filed, thru counsel, on
October 14, 1994, as well as the Reply therewith of defendant
Saudi Arabian Airlines filed, thru counsel, on October 24, 1994,
considering that a perusal of the plaintiffs Amended Complaint,
which is one for the recovery of actual, moral and exemplary
damages plus attorneys fees, upon the basis of the applicable
Philippine law, Article 21 of the New Civil Code of the
Philippines, is, clearly, within the jurisdiction of this Court as
regards the subject matter, and there being nothing new of
substance which might cause the reversal or modification of the
order sought to be reconsidered, the motion for reconsideration of
the defendant, is DENIED.
25
SO ORDERED.

Consequently, on February 20, 1995, SAUDIA filed its


Petition for Certiorari and Prohibition with Prayer for
Issuance of

________________

22 Records, pp. 108-116.


23 Records, pp. 117-128.
24 Supra, note 7.
25 Ibid.

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Writ of Preliminary
26
Injunction and/or Temporary
Restraining Order with the Court of Appeals.
Respondent Court of Appeals promulgated
27
a Resolution
with Temporary Restraining Order dated February 23,
1995, prohibiting the respondent Judge from further
conducting any proceeding, unless otherwise directed, in
the interim.

28
In another Resolution promulgated on September
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28
In another Resolution promulgated on September 27,
1995, now assailed, the appellate court denied SAUDIAs
Petition for the Issuance of a Writ of Preliminary
Injunction dated February 18, 1995, to wit:

The Petition for the Issuance of a Writ of Preliminary Injunction


is hereby DENIED, after considering the Answer, with Prayer to
Deny Writ of Preliminary Injunction (Rollo, p. 135) the Reply and
Rejoinder, it appearing that herein petitioner is not clearly
entitled thereto (Unciano Paramedical College, et al. v. Court of
Appeals, et al., G.R. No. 100335, April 7, 1993, Second Division).
SO ORDERED.

On October 20, 1995, SAUDIA 29


filed with this Honorable
Court the instant Petition for Review with Prayer for
Temporary Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition,
30
respondent Court of Appeals rendered the Decision dated
April 10, 1996, now also assailed. It ruled that the
Philippines is an appropriate forum considering that the
Amended Complaints basis for recovery of damages is
Article 21 of the Civil Code, and thus, clearly within the
jurisdiction of respondent Court. It further held that
certiorari is not the proper remedy in a denial of a Motion
to Dismiss, inasmuch as the petitioner should have
proceeded to trial, and in case of an adverse ruling, find
recourse in an appeal.

________________

26 Dated February 18, 1995; see supra, note 4.


27 Supra, note 7.
28 Records, p. 180.
29 Rollo, pp. 1-44.
30 Supra, note 2.

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On May 7, 1996, SAUDIA filed its Supplemental Petition 31


for Review with Prayer for Temporary Restraining Order
dated April 30, 1996, given due course by32this Court. After
both parties submitted their Memoranda, the instant case
is now deemed submitted for decision.
Petitioner SAUDIA raised the following issues:

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

II.

Leave of court before filing a supplemental pleading is not a


jurisdictional requirement. Besides, the matter as to absence of
leave of court is now moot and academic when this Honorable
Court required the respondents to comment on petitioners April
30, 1996 Supplemental Petition For Review With Prayer For A
Temporary Restraining Order Within Ten (10) Days From Notice
Thereof. Further, the Revised Rules of Court should be construed
with liberality pursuant to Section 2, Rule 1 thereof.

III.

Petitioner received on April 22, 1996 the April 10, 1996


decision in CA-G.R. SP No. 36533 entitled Saudi Arabian Airlines
v. Hon. Rodolfo A. Ortiz, et al. and filed its April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary
Restraining Order on May 7, 1996 at 10:29 a.m. or within the 15-
day reglementary period as provided for under Section 1, Rule 45
of the Revised

________________

31 Rollo, pp. 80-86.


32 Memorandum for Petitioner dated October 9, 1996, rollo, pp. 149-180; and
Memorandum for Private Respondent, October 30, 1996, rollo, pp. 182-210.

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Saudi Arabian Airlines vs. Court of Appeals

Rules of Court. Therefore, the decision in CA-G.R. SP No. 36533


has not yet become final and executory
33
and this Honorable Court
can take cognizance of this case.

From the foregoing factual and procedural antecedents, the


following issues emerge for our resolution:

I.

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WHETHER RESPONDENT APPELLATE COURT ERRED IN


HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON
CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE
NO. Q-93-18394 ENTITLED MILAGROS P. MORADA V. SAUDI
ARABIAN AIRLINES.

II.

WHETHER RESPONDENT APPELLATE COURT ERRED IN


RULING THAT IN THIS CASE PHILIPPINE LAW SHOULD
GOVERN.

Petitioner SAUDIA claims that before us is a conflict of


laws that must be settled at the outset. It maintains that
private respondents claim for alleged abuse of rights
occurred in the Kingdom of Saudi Arabia. It alleges that
the existence of a foreign element qualifies the instant case
for the application of the law of the Kingdom of34 Saudi
Arabia, by virtue of the lex loci delicti commissi rule.
On the other hand, private respondent contends35 that
since
36
her Amended Complaint is based on Articles 19 and
21 of

________________

33 Rollo, pp. 157-159. All caps in the original.


34 Memorandum for Petitioner, p. 14, rollo, p. 162.
35 Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
36 Art. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damages.

483

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Saudi Arabian Airlines vs. Court of Appeals

the Civil Code,


37
then the instant case is properly a matter of
domestic law.
Under the factual antecedents obtaining in this case,
there is no dispute that the interplay of events occurred in
two states, the Philippines and Saudi Arabia.
As stated
38
by private respondent in her Amended
Complaint dated June 23, 1994:

2. Defendant SAUDI ARABIAN AIRLINES or


SAUDIA is a foreign airlines corporation doing
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business in the Philippines. It may be served with


summons and other court processes at Travel Wide
Associated Sales (Phils.), Inc., 3rd Floor, Cougar
Building, 114 Valero St., Salcedo Village, Makati,
Metro Manila.x x x x x x x x x
6. Plaintiff learned that, through the intercession of
the Saudi Arabian government, the Indonesian
authorities agreed to deport Thamer and Allah
after two weeks of detention. Eventually, they were
again put in service by defendant SAUDIA. In
September 1990, defendant SAUDIA transferred
plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought
that the Jakarta incident was already behind her,
her superiors requested her to see Mr. Ali Meniewy,
Chief Legal Officer of SAUDIA, in Jeddah, Saudi
Arabia. When she saw him, he brought her to the
police station where the police took her passport
and questioned her about the Jakarta incident.
Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case
against Thamer and Allah. Not until she agreed to
do so did the police return her passport and allowed
her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in
Riyadh, Saudi Arabia, a few minutes before the
departure of her flight to Manila, plaintiff was not
allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Meniewy,
the Chief Legal Officer of SAUDIA. When she did, a
certain Khalid of the SAUDIA office brought her to
a Saudi court where she was asked to sign a
document written in Arabic. They told her that this
was necessary to close the case against Thamer and
Allah. As it

________________

37 Memorandum for Private Respondent, p. 9, rollo, p. 190.


38 Records, pp. 65-71.

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turned out, plaintiff signed a notice to her to appear before


the court on June 27, 1993. Plaintiff then returned to
Manila.

9. Shortly afterwards, defendant SAUDIA summoned


plaintiff to report to Jeddah once again and see
Miniewy on June 27, 1993 for further investigation.
Plaintiff did so after receiving assurance from
SAUDIAs Manila manager, Aslam Saleemi, that
the investigation was routinary and that it posed no
danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff
to the same Saudi court on June 27, 1993. Nothing
happened then but on June 28, 1993, a Saudi judge
interrogated plaintiff through an interpreter about
the Jakarta incident. After one hour of
interrogation, they let her go. At the airport,
however, just as her plane was about to take off, a
SAUDIA officer told her that the airline had
forbidden her to take that flight. At the Inflight
Service Office where she was told to go, the
secretary of Mr. Yahya Saddick took away her
passport and told her to remain in Jeddah, at the
crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again
escorted plaintiff to the same court where the judge,
to her astonishment and shock, rendered a decision,
translated to her in English, sentencing her to five
months imprisonment and to 286 lashes. Only then
did she realize that the Saudi court had tried her,
together with Thamer and Allah, for what
happened in Jakarta. The court found plaintiff
guilty of (1) adultery; (2) going to a disco, dancing,
and listening to the music in violation of Islamic
laws; (3) socializing with the male crew, in
contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the
case, plaintiff sought the help of the Philippine
Embassy in Jeddah. The latter helped her pursue
an appeal from the decision of the court. To pay for
her upkeep, she worked on the domestic flights of
defendant SAUDIA while, ironically, Thamer 39
and
Allah freely served the international flights.

Where the factual antecedents satisfactorily establish the


existence of a foreign element, we agree with petitioner
that the problem herein could present a conflicts case.

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A factual situation that cuts across territorial lines and


is affected by the diverse laws of two or more states is said
to

________________

39 Supra, note 17, pp. 65-68.

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Saudi Arabian Airlines vs. Court of Appeals

contain a foreign element. The presence of a foreign


element is inevitable since social and economic affairs of
individuals and associations are rarely confined40
to the
geographic limits of their birth or conception.
The41forms in which this foreign element may appear are
many. The foreign element may simply consist in the fact
that one of the parties to a contract is an alien or has a
foreign domicile, or that a contract between nationals of
one State involves properties situated in another State. In
other42cases, the foreign element may assume a complex
form.
In the instant case, the foreign element consisted in the
fact that private respondent Morada is a resident
Philippine national, and that petitioner SAUDIA is a
resident foreign corporation. Also, by virtue of the
employment of Morada with the petitioner SAUDIA as a
flight stewardess, events did transpire during her many
occasions of travel across national borders, particularly
from Manila, Philippines to Jeddah, Saudi Arabia, and vice
versa, that caused a conflicts situation to arise.
We thus find private respondents assertion that the
case is purely domestic, imprecise. A conflicts problem 43
presents itself here, and the question of jurisdiction
confronts the court a quo.
After a careful 44study of the private respondents
Amended Complaint, and the Comment thereon, we note
that she aptly predicated her cause of action on Articles 19
and 21 of the New Civil Code.
On one hand, Article 19 of the New Civil Code provides:

________________

40 Salonga, Private International Law, 1995 edition, p. 3.


41 Ibid., citing Cheshire and North, Private International Law, p. 5 by
P.M. North and J.J. Faucett (Butterworths; London, 1992).

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42 Ibid.
43 Paras, Philippine Conflict of Laws, sixth edition (1984), p. 24, citing
Leflar, The Law of Conflict of Laws, pp. 5-6.
44 Supra, note 17.

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Saudi Arabian Airlines vs. Court of Appeals

Art. 19. Every person must, in the exercise of his rights and in
the performance of his duties, act with justice give everyone his
due and observe honesty and good faith.

On the other hand, Article 21 of the New Civil Code


provides:

Art. 21. Any person who willfully causes loss or injury to another
in a manner that is contrary to morals, good customs or public
policy shall compensate the latter for damages.

Thus, in45 Philippine National Bank (PNB) vs. Court of


Appeals, this Court held that:

The aforecited provisions on human relations were intended to


expand the concept of torts in this jurisdiction by granting
adequate legal remedy for the untold number of moral wrongs
which is impossible for human foresight to specifically provide in
the statutes.

Although Article 19 merely declares a principle of law,


Article 21 gives flesh to its provisions. Thus, we agree with
private respondents assertion that violations of Articles 19
and 21 are actionable, with judicially enforceable remedies
in the municipal forum. 46
Based on the allegations in the Amended Complaint, 47
read in the light of the Rules of Court on jurisdiction we
find that the Regional Trial Court (RTC) of Quezon City 48
possesses jurisdiction over the subject matter of the suit.
Its authority

________________

45 83 SCRA 237, 247.


46 Supra, note 17, at p. 6. Morada prays that judgment be rendered
against SAUDIA, ordering it to pay: (1) not less than P250,000.00 as
actual damages; (2) P4 million in moral damages; (3) P500,000.00 in
exemplary damages; and (4) P500,000.00 in attorneys fees.
47 Baguioro v. Barrios, 77 Phil. 120.

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48 Jurisdiction over the subject matter is conferred by law and is


defined as the authority of a court to hear and decide cases of the

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Saudi Arabian Airlines vs. Court of Appeals

to try and hear the case is provided for under Section 1 of


Republic Act No. 7691, to wit:

Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise


known as the Judiciary Reorganization Act of 1980, is hereby
amended to read as follows:
SEC. 19. Jurisdiction in Civil Cases.Regional Trial Courts
shall exercise exclusive jurisdiction:
x x x x x x x x x
(8) In all other cases in which demand, exclusive of interest,
damages of whatever kind, attorneys fees, litigation expenses,
and cost or the value of the property in controversy exceeds One
hundred thousand pesos (P100,000.00) or, in such other cases in
Metro Manila, where the demand, exclusive of the above-
mentioned items exceeds Two hundred thousand pesos
(P200,000.00). (Emphasis ours)
x x x x x x x x x

And following Section 2(b), Rule 4 of the Revised Rules of


Courtthe venue, Quezon City, is appropriate:

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


Court]
(a) x x x x x x x x x
(b) Personal actions.All other actions may be commenced and
tried where the defendant or any of the defendants resides or may
be found, or where the plaintiff or any of the plaintiff resides, at
the election of the plaintiff.

Pragmatic considerations, including the convenience of the


parties, also weigh heavily in favor of the RTC Quezon City
assuming jurisdiction. Paramount is the private interest of
the litigant. Enforceability of a judgment if one is obtained
is quite obvious. Relative advantages and obstacles to a fair
trial are equally important. Plaintiff may not, by choice of
an inconvenient forum, vex, harass, or oppress the
defendant, e.g. by inflicting upon him needless expense or
disturbance.

________________

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general class to which the proceedings in question belong. (Reyes v.


Diaz, 73 Phil. 484, 487)

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But unless the balance is strongly in favor of the


defendant,49 the plaintiffs choice of forum should rarely be
disturbed.
Weighing the relative claims of the parties, the court a
quo found it best to hear the case in the Philippines. Had it
refused to take cognizance of the case, it would be forcing
plaintiff (private respondent now) to seek remedial action
elsewhere, i.e. in the Kingdom of Saudi Arabia where she
no longer maintains substantial connections. That would
have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no
unnecessary difficulties and inconvenience have been
shown by either of the parties. The choice of forum of the
plaintiff (now private respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over
the persons of the parties herein. By filing her Complaint
and Amended Complaint with the trial court, private
respondent has voluntarily submitted herself to the
jurisdiction of the court.
The records 50show that petitioner SAUDIA has filed
several motions praying for the dismissal of Moradas
Amended Complaint. SAUDIA also filed an Answer In Ex
Abundante Cautelam dated February 20, 1995. What is
very patent and explicit from the motions filed, is that
SAUDIA prayed for other reliefs under the premises.
Undeniably, petitioner SAUDIA has effectively submitted
to the trial courts jurisdiction by praying for the dismissal
of the Amended Complaint on grounds other than lack of
jurisdiction.

________________

49 Supra, note 37, p. 58, citing Gulf Oil Corporation v. Gilbert, 350 U.S.
501, 67 Sup. Ct. 839 (1947).
50 Omnibus Motion to Dismiss dated January 14, 1994; Reply (to
Plaintiffs Opposition) dated February 19, 1994; Comment (to Plaintiffs
Motion to Admit Amended Complaint dated June 23, 1994) dated July 20,
1994; Manifestation and Motion to Dismiss Amended Complaint dated
June 23, 1994 under date August 11, 1994; and Motion for
Reconsideration dated September 19, 1994.
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As held
51
by this Court in Republic vs. Ker and Company,
Ltd.:

We observe that the motion to dismiss filed on April 14, 1962,


aside from disputing the lower courts jurisdiction over
defendants person, prayed for dismissal of the complaint on the
ground that plaintiffs cause of action has prescribed. By
interposing such second ground in its motion to dismiss, Ker and
Co., Ltd. availed of an affirmative defense on the basis of which it
prayed the court to resolve controversy in its favor. For the court
to validly decide the said plea of defendant Ker & Co., Ltd., it
necessarily had to acquire jurisdiction upon the latters person,
who, being the proponent of the affirmative defense, should be
deemed to have abandoned its special appearance and voluntarily
submitted itself to the jurisdiction of the court.

Similarly, the case of De Midgely vs. Ferandos, held that:

When the appearance is by motion for the purpose of objecting to


the jurisdiction of the court over the person, it must be for the sole
and separate purpose of objecting to the jurisdiction of the court.
If his motion is for any other purpose than to object to the
jurisdiction of the court over his person, he thereby submits
himself to the jurisdiction of the court. A special appearance by
motion made for the purpose of objecting to the jurisdiction of the
court over the person will be held to be a general appearance, if
the party in said motion should, for example, ask for a dismissal
of the action upon the further ground 52
that the court had no
jurisdiction over the subject matter.

Clearly, petitioner had submitted to the jurisdiction of the


Regional Trial Court of Quezon City. Thus, we find that the
trial court has jurisdiction over the case and that its
exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-
law problems seek to answer two important questions: (1)
What legal system should control a given situation where

________________

51 18 SCRA 207, 213-214.


52 64 SCRA 23, 31.

490

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some of the significant facts occurred in two or more states;


and (2) to what extent 53
should the chosen legal system
regulate the situation.
Several theories have been propounded in order to
identify the legal system that should ultimately control.
Although ideally, all choice-of-law theories should
intrinsically advance both notions of justice and
predictability, they do not always do so. The forum is then
faced with the problem of deciding 54
which of these two
important values should be stressed.
Before a choice can be made, it is necessary for us to
determine under what category a certain set of facts or
rules fall. This process is known as characterization, or
the doctrine of qualification. It is the process of deciding
whether or not the facts relate to55the kind of question
specified in a conflicts rule. The purpose of
characterization
56
is to enable the forum to select the
proper law.
Our starting point of analysis here is not a legal 57
relation, but a factual situation, event, or operative fact.
An essential element of conflict rules is the indication of a
test or connecting factor or point of contact. Choice-of-
law rules invariably consist of a factual relationship (such
as property right, contract claim) and a connecting factor or
point of contact, such as the situs of the res, the place of
celebration, 58the place of performance, or the place of
wrongdoing.
Note that one or more circumstances may be present to
serve as the possible test for the determination of the
applica-

________________

53 Coquia and Pangalangan, Conflict of Laws, 1995 edition, p. 65, citing


Von Mehren, Recent Trends in Choice-of-Law Methodology, 60 Cornell L.
Rev. 927 (1975).
54 Ibid.
55 Supra, note 40 at p. 94, citing Falconbridge, Essays on the Conflict of
Laws, p. 50.
56 Ibid.
57 Supra, note 37 at p. 136; cf. Mussbaum, Principle of Private
International Law, p. 173; and Rabel, The Conflict of Laws: A
Comparative Study, pp. 51-52.
58 Supra, note 37, p. 137.

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59
ble law. These test factors or points of contact or
connecting factors could be any of the following:

(1) the nationality of a person, his domicile, his


residence, his place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a
corporation;
(3) the situs of a thing, that is, the place where a thing
is, or is deemed to be situated. In particular, the lex
situs is decisive when real rights are involved;
(4) the place where an act has been done, the locus
actus, such as the place where a contract has been
made, a marriage celebrated, a will signed or a tort
committed. The lex loci actus is particularly
important in contracts and torts;
(5) the place where an act is intended to come into
effect, e.g., the place of performance of contractual
duties, or the place where a power of attorney is to
be exercised;
(6) the intention of the contracting parties as to the law
that should govern their agreement, the lex loci
intentionis;
(7) the place where judicial or administrative
proceedings are instituted or done. The lex forithe
law of the forumis particularly important
because, as we have seen earlier, matters of
procedure not going to the substance of the claim
involved are governed by it; and because the lex fori
applies whenever the content of the otherwise
applicable foreign law is excluded from application
in a given case for the reason that it falls under one
of the exceptions to the applications of foreign law;
and
(8) the flag of a ship, which in many cases is decisive of
practically all legal relationships of the ship and of
its master or owner as such. It also covers
contractual relationships
60
particularly contracts of
affreightment. (Italics ours.)

After a careful study of the pleadings on record, including


allegations in the Amended Complaint deemed admitted

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for purposes of the motion to dismiss, we are convinced


that there is reasonable basis for private respondents
assertion that

________________

59 Ibid.
60 Supra, note 37 at pp. 138-139.

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although she was already working in Manila, petitioner


brought her to Jeddah on the pretense that she would
merely testify in an investigation of the charges she made
against the two SAUDIA crew members for the attack on
her person while they were in Jakarta. As it turned out,
she was the one made to face trial for very serious charges,
including adultery and violation of Islamic laws and
tradition.
There is likewise logical basis on record for the claim
that the handing over or turning over of the person of
private respondent to Jeddah officials, petitioner may have
acted beyond its duties as employer. Petitioners purported
act contributed to and amplified or even proximately
caused additional humiliation, misery and suffering of
private respondent. Petitioner thereby allegedly facilitated
the arrest, detention and prosecution of private respondent
under the guise of petitioners authority as employer,
taking advantage of the trust, confidence and faith she
reposed upon it. As purportedly found by the Prince of
Makkah, the alleged conviction and imprisonment of
private respondent was wrongful. But these capped the
injury or harm allegedly inflicted upon her person and
reputation, for which petitioner could be liable as claimed,
to provide compensation or redress for the wrongs done,
once duly proven.
Considering that the complaint in the court a quo is one
involving torts, the connecting factor or point of contact
could be the place or places where the tortious conduct or
lex loci actus occurred. And applying the torts principle in a
conflicts case, we find that the Philippines could be said as
a situs of the tort (the place where the alleged tortious
conduct took place). This is because it is in the Philippines
where petitioner allegedly deceived private respondent, a
Filipina residing and working here. According to her, she
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had honestly believed that petitioner would, in the exercise


of its rights and in the performance of its duties, act with
justice, give her her due and observe honesty and good
faith. Instead, petitioner failed to protect her, she claimed.
That certain acts or parts of the injury allegedly occurred
in another country is of no moment. For in our view what is
important here is the place where the
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over-all harm or the totality of the alleged injury to the


person, reputation, social standing and human rights of
complainant, had lodged, according to the plaintiff below
(herein private respondent). All told, it is not without basis
to identify the Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the
traditional rule of lex loci delicti
61
commissi, modern theories
and rules on tort liability have been advanced to offer
fresh judicial approaches to arrive at just results. In
keeping abreast with the modern theories on tort liability,
we find here an occasion to apply the State of the most
significant relationship rule, which in our view should be
appropriate to apply now, given the factual context of this
case.
In applying said principle to determine the State which
has the most significant relationship, the following contacts
are to be taken into account and evaluated according to
their relative importance with respect to the particular
issue: (a) the place where the injury occurred; (b) the place
where the conduct causing the injury occurred; (c) the
domicile, residence, nationality, place of incorporation and
place of business of the parties; and (d) the place where
62
the
relationship, if any, between the parties is centered.
As already discussed, there is basis for the claim that
overall injury occurred and lodged in the Philippines. There
is likewise no question that private respondent is a
resident Filipina national, working with petitioner, a
resident foreign corporation engaged here in the business
of international air carriage. Thus, the relationship
between the parties was centered here, although it should
be stressed that this suit is not based on mere labor law
violations. From the record, the claim that the Philippines
has the most significant contact

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________________

61 Includes the (1) German rule of elective concurrence; (2) State of the
most significant relationship rule (the Second Restatement of 1969); (3)
State-interest analysis; and (4) Cavers Principle of Preference.
62 Supra, note 37, p. 396.

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63
with the matter in this dispute, raised by private
respondent as plaintiff below against defendant (herein
petitioner), in our view, has been properly established.
Prescinding from this premise that the Philippines is the
situs of the tort complained of and the place having the
most interest in the problem, we find, by way of
recapitulation, that the Philippine law on tort liability
should have paramount application to and control in the
resolution of the legal issues arising out of this case.
Further, we hold that the respondent Regional Trial Court
has jurisdiction over the parties and the subject matter of
the complaint; the appropriate venue is in Quezon City,
which could properly apply Philip-pine law. Moreover, we
find untenable petitioners insistence that [s]ince private
respondent instituted this suit, she has the burden of
pleading64 and proving the applicable Saudi law on the
matter. As aptly said by private respondent, she has no
obligation to plead and prove the law of the Kingdom of
Saudi Arabia since her cause of action is based on Articles
19 and 21 of the Civil Code of the Philippines. In her
Amended Complaint and subsequent pleadings, she 65
never
alleged that Saudi law should govern this case. And as
correctly held by the respondent appellate court,
considering that it was the petitioner who was invoking
the applicability of the law of Saudi Arabia, then the
burden was on it [petitioner] 66
to plead and to establish what
the law of Saudi Arabia is.
Lastly, no error could be imputed to the respondent
appellate court in upholding the trial courts denial of
defendants (herein petitioners) motion to dismiss the case.
Not only was jurisdiction in order and venue properly laid,
but appeal after trial was obviously available, and
expeditious trial itself indicated by the nature of the case at
hand. Indubitably, the

________________

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63 Supra, note 59, p. 79, citing Ruben v. Irving Trust Co., 305 N.Y. 288,
305, 113 N.E. 2d 424, 431.
64 Memorandum for Petitioner, p. 22; rollo, p. 170.
65 Memorandum for Private Respondent, pp. 21-22; rollo, pp. 202-203.
66 CA Decision, p. 10; rollo, p. 97.

495

VOL. 297, OCTOBER 8, 1998 495


Saudi Arabian Airlines vs. Court of Appeals

Philippines is the state intimately concerned with the


ultimate outcome of the case below, not just for the benefit
of all the litigants, but also for the vindication of the
countrys system of law and justice in a transnational
setting. With these guidelines in mind, the trial court must
proceed to try and adjudge the case in the light of relevant
Philippine law, with due consideration of the foreign
element or elements involved. Nothing said herein, of
course, should be construed as prejudging the results of the
case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is
hereby DISMISSED Civil Case No. Q-93-18394 entitled
Milagros P. Morada vs. Saudi Arabia Airlines is hereby
REMANDED to Regional Trial Court of Quezon City,
Branch 89 for further proceedings.
SO ORDERED.

Davide, Jr. (Chairman), Bellosillo, Vitug and


Panganiban, JJ., concur.

Petition dismissed, Civil Case No. Q-93-18394 remanded


to lower court.

Notes.Forum-shopping originated as a concept in


private international law, where non-resident litigants are
given the option to choose the forum or place wherein to
bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a
more friendly venue. (First Philippine International Bank
vs. Court of Appeals, 252 SCRA 259 [1996])
After having acquired jurisdiction over a plaintiff foreign
corporation by virtue of the filing of the original complaint,
the Philippine court now has the discretion, based on the
facts of the case, to either give due course to the suit or
dismiss it, on the principle of forum non conveniens.

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(Communication Materials and Design, Inc. vs. Court of


Appeals, 260 SCRA 673 [1996])

o0o

496

496 SUPREME COURT REPORTS ANNOTATED


Everett Steamship Corporation vs. Court of Appeals

*
G.R. No. 122494. October 8, 1998.

EVERETT STEAMSHIP CORPORATION, petitioner, vs.


COURT OF APPEALS and HERNANDEZ TRADING CO.,
INC., respondents.

Common Carriers; Contracts; Bills of Lading; A stipulation in


the bill of lading limiting the common carriers liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law.A stipulation in
the bill of lading limiting the common carriers liability for loss or
destruction of a cargo to a certain sum, unless the shipper or
owner declares a greater value, is sanctioned by law, particularly
Articles 1749 and 1750 of the Civil Code.

Same; Same; Same; Contracts of Adhesion; Contracts of adhe-


L; sion are not invalid per se.The trial courts ratiocination that
private respondent could not have fairly and freely agreed to the
limited liability clause in the bill of lading because the said
conditions were printed in small letters does not make the bill of
lading invalid. We ruled in PAL, Inc. vs. Court of Appeals that the
juris-prudence on the matter reveals the consistent holding of the
court that contracts of adhesion are not invalid per se and that it
has on numerous occasions upheld the binding effect thereof.
Also, in Philippine American General Insurance Co., Inc. vs. Sweet
Lines, Inc. this Court, speaking through the learned Justice
Florenz D. Re-galado, held: x x x Ong Yiu vs. Court of Appeals, et
al., instructs us that contracts of adhesion wherein one party
imposes a ready-made form of contract on the other x x x are
contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres he gives
his consent. In the present case, not even an allegation of
ignorance of a party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of carriage devolves
not on the carrier but on the owner, shipper, or consignee as the
case may be. (Emphasis supplied)

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Same; Same; Same; Same; Greater vigilance is required of the


courts when dealing with contracts of adhesion in that the said
con-

________________

* SECOND DIVISION.

497

VOL. 297, OCTOBER 8, 1998 497

Everett Steamship Corporation vs. Court of Appeals

tracts must be carefully scrutinized in order to shield the unwary


(or weaker party) from deceptive schemes contained in ready-made
contracts.Greater vigilance, however, is required of the courts
when dealing with contracts of adhesion in that the said contracts
must be carefully scrutinized in order to shield the unwary (or
weaker party) from deceptive schemes contained in ready-made
covenants, such as the bill of lading in question. The stringent
requirement which the courts are enjoined to observe is in
recognition of Article 24 of the Civil Code which mandates that
(i)n all contractual, property or other relations, when one of the
parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection.

Same; Same; Same; Even if the consignee is not a signatory to


the contract of carriage between the shipper and the carrier, the
consignee can still be bound by the contract.The next issue to be
resolved is whether or not private respondent, as consignee, who
is not a signatory to the bill of lading is bound by the stipulations
thereof. Again, in Sea-Land Service, Inc. vs. Intermediate
Appellate Court (supra), we held that even if the consignee was
not a signatory to the contract of carriage between the shipper
and the carrier, the consignee can still be bound by the contract.
Speaking through Mr. Chief Justice Narvasa, we ruled: To begin
with, there is no question of the right, in principle, of a consignee
in a bill of lading to recover from the carrier or shipper for loss of,
or damage to goods being transported under said bill, although
that document may have beenas in practice it oftentimes is
drawn up only by the consignor and the carrier without the
intervention of the consignee. x x x.

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Same; Same; Same; When the consignee formally claims


reimbursement for the missing goods from the common carrier and
subsequently files a case against the latter based on the very same
bill of lading, it accepts the provisions of the contract and thereby
makes itself a party thereto.When private respondent formally
claimed reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very
same bill of lading, it (private respondent) accepted the provisions
of the contract and thereby made itself a party thereto, or at least
has come to court to enforce it. Thus, private respondent cannot
now reject or disregard the carriers limited liability stipulation in
the bill of lading. In

498

498 SUPREME COURT REPORTS ANNOTATED

Everett Steamship Corporation vs. Court of Appeals

other words, private respondent is bound by the whole


stipulations in the bill of lading and must respect the same.

PETITION for review on certiorari of a decision of the


Court of Appeals.

The facts are stated in the opinion of the Court.


Soo, Gutierrez, Leogardo & Lee for petitioner.
Atilano Huaben B. Lim for private respondent.

MARTINEZ, J.:

Petitioner Everett Steamship Corporation, through 1


this
petition for review, seeks the reversal of the decision of the
Court of Appeals, dated June 14, 1995, in CA-G.R. No.
428093, which affirmed the decision of the Regional Trial
Court of Kalookan City, Branch 126, in Civil Case No. C-
15532, finding petitioner liable to private respondent
Hernan-dez Trading Co., Inc. for the value of the lost cargo.
Private respondent imported three crates of bus spare
parts marked as MARCO C/No. 12, MARCO C/No. 13 and
MARCO C/No. 14, from its supplier, Maruman Trading
Company, Ltd. (Maruman Trading), a foreign corporation
based in Inazawa, Aichi, Japan. The crates were shipped
from Nagoya, Japan to Manila on board
ADELFAEVERETTE, a vessel owned by petitioners
principal, Everett Orient Lines. The said crates were
covered by Bill of Lading No. NGO53MN.

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Upon arrival of the port of Manila, it was discovered


that the crate marked MARCO C/No. 14 was missing. This
was confirmed and admitted by petitioner in its letter of
January 13, 1992 addressed to private respondent, which
thereafter made a formal claim upon petitioner for the
value of the lost cargo amounting to One Million Five
Hundred Fifty Two

________________

1 Penned by Justice Pacita Canizares-Nye and concurred in by Justices


Conchita Carpio-Morales and Antonio P. Solano; Rollo, pp. 33-40.

499

VOL. 297, OCTOBER 8, 1998 499


Everett Steamship Corporation vs. Court of Appeals

Thousand Five Hundred (1,552,500.00) Yen, the amount


shown in an Invoice No. MTM-941, dated November 14,
1991. However, petitioner offered to pay only One Hundred
Thousand (100,000.00) Yen, the maximum amount
stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner.
Private respondent rejected the offer and thereafter
instituted a suit for collection docketed as Civil Case No. C-
15532, against petitioner before the Regional Trial Court of
Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that
they have no testimonial evidence to offer and agreed
instead to file their respective memoranda. 2
On July 16, 1993, the trial court rendered judgment in
favor of private respondent, ordering petitioner to pay: (a)
1,552,500.00; (b) 20,000.00 or its peso equivalent
representing the actual value of the lost cargo and the
material and packaging cost; (c) 10% of the total amount as
an award for and as contingent attorneys fees; and (d) to
pay the cost of the suit. The trial court ruled:

Considering defendants categorical admission of loss and its


failure to overcome the presumption of negligence and fault, the
Court conclusively finds defendant liable to the plaintiff. The next
point of inquiry the Court wants to resolve is the extent of the
liability of the defendant. As stated earlier, plaintiff contends that
defendant should be held liable for the whole value for the loss of
the goods in the amount of 1,552,500.00 because the terms
appearing at the back of the bill of lading was so written in fine
prints and that the same was not signed by plaintiff or shipper

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thus, they are not bound by the clause stated in paragraph 18 of


the bill of lading. On the other hand, defendant merely admitted
that it lost the shipment but shall be liable only up to the amount
of 100,000.00.
The Court subscribes to the provisions of Article 1750 of the
New Civil Code

Art. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction or de-

________________

2 Penned by Judge Oscar M. Payawal, Rollo, pp. 43-50.

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500 SUPREME COURT REPORTS ANNOTATED


Everett Steamship Corporation vs. Court of Appeals

terioration of the goods is valid, if it is reasonable and just


under the circumstances, and has been fairly and freely agreed
upon.
It is required, however, that the contract must be reasonable
and just under the circumstances and has been fairly and freely
agreed upon. The requirements provided in Art. 1750 of the New
Civil Code must be complied with before a common carrier can
claim a limitation of its pecuniary liability in case of loss,
destruction of deterioration of the goods it has undertaken to
transport.
In the case at bar, the Court is of the view that the
requirements of said article have not been met. The fact that
those conditions are printed at the back of the bill of lading in
letters so small that they are hard to read would not warrant the
presumption that the plaintiff or its supplier was aware of these
conditions such that he had fairly and freely agreed to these
conditions. It can not be said that the plaintiff had actually
entered into a contract with the defendant, embodying the
conditions as printed at the back of the bill of lading that was
issued by the defendant to plaintiff.

On appeal, the Court of Appeals deleted the award of


attorneys fees but affirmed the trial courts findings with
the additional observation that private respondent can not
be bound by the terms and conditions of the bill of lading
because it was not privy to the contract of carriage. It said:

As to the amount of liability, no evidence appears on record to


show that the appellee (Hernandez Trading Co.) consented to the
terms of the Bill of Lading. The shipper named in the Bill of

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Lading is Maruman Trading Co., Ltd. whom the appellant


(Everett Steamship Corp.) contracted with for the transportation
of the lost goods.
Even assuming arguendo that the shipper Maruman Trading
Co., Ltd. accepted the terms of the bill of lading when it delivered
the cargo to the appellant, still it does not necessarily follow that
appellee Hernandez Trading Company as consignee is bound
thereby considering that the latter was never privy to the
shipping contract.
x x x x x x x x x
Never having entered into a contract with the appellant,
appellee should therefore not be bound by any of the terms and
conditions in the bill of lading.

501

VOL. 297, OCTOBER 8, 1998 501


Everett Steamship Corporation vs. Court of Appeals

Hence, it follows that the appellee may recover the full value of
the shipment lost, the basis of which is not the breach of contract
as appellee was never a privy to the any contract with the
appellant, but is based on Article 1735 of the New Civil Code,
there being no evidence to prove satisfactorily that the appellant
has overcome the presumption of negligence provided for in the
law.

Petitioner now comes to us arguing that the Court of


Appeals erred (1) in ruling that the consent of the
consignee to the terms and conditions of the bill of lading is
necessary to make such stipulations binding upon it; (2) in
holding that the carriers limited package liability as
stipulated in the bill of lading does not apply in the instant
case; and (3) in allowing private respondent to fully recover
the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability
clause in the bill of lading.
A stipulation in the bill of lading limiting the common
carriers liability for loss or destruction of a cargo to a
certain sum, unless the shipper or owner declares a greater
value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:

ART. 1749. A stipulation that the common carriers liabilityis


limited to the value of the goods appearing in the bill of
lading,unless the shipper or owner declares a greater value, is
binding.

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ART. 1750. A contract fixing the sum that may be recovered by


the owner or shipper for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.

Such limited-liability clause has also been


3
consistently
upheld by this Court in a number of cases. Thus, in Sea-
Land

________________

3 St. Paul Fire and Marine Insurance Co. vs. Macondray & Co., 70
SCRA 122 [1976]; Sea Land Services, Inc. vs. Intermediate Appellate
Court, 153 SCRA 552 [1987]; Pan American World Airways, Inc. vs.
Intermediate Appellate Court, 164 SCRA 268 [1988]; Phil. Airlines, Inc.
vs. Court of Appeals, 255 SCRA 63 [1996].

502

502 SUPREME COURT REPORTS ANNOTATED


Everett Steamship Corporation vs. Court of Appeals

4
Service, Inc. vs. Intermediate Appellate Court, we ruled:

It seems clear that even if said section 4 (5) of the Carriage of


Goods by Sea Act did not exist, the validity and binding effect of
the liability limitation clause in the bill of lading here are
nevertheless fully sustainable on the basis alone of the cited Civil
Code Provisions. That said stipulation is just and reasonable is
arguable from the fact that it echoes Art. 1750 itself in providing
a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this
the private respondent does not pretend to do. But over and above
that consideration, the just and reasonable character of such
stipulation is implicit in it giving the shipper or owner the option
of avoiding accrual of liability limitation by the simple and surely
far from onerous expedient of declaring the nature and value of
the shipment in the bill of lading.

Pursuant to the afore-quoted provisions of law, it is


required that the stipulation limiting the common carriers
liability for loss must be reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy
specifically provides, among others:

18. All claims for which the carrier may be liable shall be
adjusted and settled on the basis of the shippers net invoice cost
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plus freight and insurance premiums, if paid, and in no event


shall the carrier be liable for any loss of possible profits or any
consequential loss.
The carrier shall not be liable for any loss of or any damage to
or in any connection with, goods in an amount exceeding One
Hundred Thousand Yen in Japanese Currency (100,000.00) or
its equivalent in any other currency per package or customary
freight unit (whichever is least) unless the value of the goods
higher than this amount is declared in writing by the shipper
before receipt of the goods by the carrier and inserted in the Bill of
Lading and extra freight is paid as required. (Emphasis supplied)

________________

4 153 SCRA 552 [1987].

503

VOL. 297, OCTOBER 8, 1998 503


Everett Steamship Corporation vs. Court of Appeals

The above stipulations are, to our mind, reasonable and


just. In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand
(100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the
value of its cargo was higher than the limited liability of the
carrier. Considering that the shipper did not declare a
higher valuation, it had itself to blame for not complying
with the stipulations.
The trial courts ratiocination that private respondent
could not have fairly and freely agreed to the limited
liability clause in the bill of lading because the said
conditions were printed in small letters does not make the
bill of lading invalid. 5
We ruled in PAL, Inc. vs. Court of Appeals that the
jurisprudence on the matter reveals the consistent holding
of the court that contracts of adhesion are not invalid per se
and that it has on numerous occasions upheld the binding
effect thereof. Also, in Philippine American 6
General
Insurance Co., Inc. vs. Sweet Lines, Inc. this Court,
speaking through the learned Justice Florenz D. Regalado,
held:

x x x Ong Yiu vs. Court of Appeals, et al., instructs us that


contracts of adhesion wherein one party imposes a ready-made
form of contract on the other x x x are contracts not entirely
prohibited. The one who adheres to the contract is in reality free to

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reject it entirely; if he adheres he gives his consent. In the present


case, not even an allegation of ignorance of a party excuses non-
compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of
a contract of carriage devolves not on the carrier but on the owner,
shipper, or consignee as the case may be. (Emphasis supplied)
7
It was further explained in Ong Yiu vs. Court of Appeals
that stipulations in contracts of adhesion are valid and
binding.

________________

5 255 SCRA 48, 58 [1996].


6 212 SCRA 194, 212-213 [1992].
7 91 SCRA 223 [1979]; Philippine Airlines, Inc. vs. Court of Appeals,
255 SCRA 63 [1996].

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504 SUPREME COURT REPORTS ANNOTATED


Everett Steamship Corporation vs. Court of Appeals

While it may be true that petitioner had not signed the plane
ticket x x, he is nevertheless bound by the provisions thereof.
Such provisions have been held to be a part of the contract of
carriage, and valid and binding upon the passenger regardless of
the latters lack of knowledge or assent to the regulation. It is
what is known as a contract of adhesion, in regards which it has
been said that contracts of adhesion wherein one party imposes a
ready-made form of contract on the other, as the plane ticket in
the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. x x x, a contract limiting liability
upon an agreed valuation does not offend against the policy of the
law forbidding one from contracting against his own negligence.
(Emphasis supplied)

Greater vigilance, however, is required of the courts when


dealing with contracts of adhesion in that the said
contracts must be carefully scrutinized in order to shield
the unwary (or weaker party) from8 deceptive schemes
contained in ready-made covenants, such as the bill of
lading in question. The stringent requirement which the
courts are enjoined to observe is in recognition of Article 24
of the Civil Code which mandates that (i)n all contractual,
property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence,

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ignorance, indigence, mental weakness, tender age or other


handicap, the courts must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been
extensively engaged in the trading business. It can not be
said to be ignorant of the business transactions it entered
into involving the shipment of its goods to its customers.
The shipper could not have known, or should know the
stipulations in the bill of lading and there it should have
declared a higher valuation of the goods shipped. Moreover,
Maruman Trading has not been heard to complain that it
has been deceived or

________________

8 Ayala Corporation vs. Ray Burton Development Corporation, G.R. No.


126699, August 7, 1998. See also Qua Chee Gan vs. Law Union and Rock
Insurance Co., Ltd., 98 Phil. 95 [1955].

505

VOL. 297, OCTOBER 8, 1998 505


Everett Steamship Corporation vs. Court of Appeals

rushed into agreeing to ship the cargo in petitioners vessel.


In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private
respondent, as consignee, who is not a signatory to the bill
of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate
Appellate Court (supra), we held that even if the consignee
was not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by
the contract. Speaking through Mr. Chief Justice Narvasa,
we ruled:

To begin with, there is no question of the right, in principle, of a


consignee in a bill of lading to recover from the carrier or shipper
for loss of, or damage to goods being transported under said bill,
although that document may have beenas in practice it
oftentimes isdrawn up only by the consignor and the carrier
without the intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent
here, to recover for loss of a shipment consigned to him under a bill
of lading drawn up only by and between the shipper and the
carrier, springs from either a relation of agency that may exist
between him and the shipper or consignor, or his status as
stranger in whose favor some stipulation is made in said contract,
and who becomes a party thereto when he demands fulfillment of

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that stipulation, in this case the delivery of the goods or cargo


shipped. In neither capacity can he assert personally, in bar to any
provision of the bill of lading, the alleged circumstance that fair
and free agreement to such provision was vitiated by its being in
such fine print as to be hardly readable. Parenthetically, it may be
observed that in one comparatively recent case (Phoenix
Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15)
where this Court found that a similar package limitation clause
was printed in the smallest type on the back of the bill of lading,
it nonetheless ruled that the consignee was bound thereby on the
strength of authority holding that such provisions on liability
limitation are as much a part of a bill of lading as though
physically in it and as though placed therein by agreement of the
parties.
There can, therefore, be no doubt or equivocation about the
validity and enforceability of freely-agreed-upon stipulations in a
contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher
value

506

506 SUPREME COURT REPORTS ANNOTATED


Everett Steamship Corporation vs. Court of Appeals

and inserts it into said contract or bill. This proposition,


moreover, rests upon an almost uniform weight of authority.
(Italics supplied)

When private respondent formally claimed reimbursement


for the missing goods from petitioner and subsequently
filed a case against the latter based on the very same bill of
lading, it (private respondent) accepted the provisions of
the contract and thereby made itself a party 9
thereto, or at
least has come to court to enforce it. Thus, private
respondent cannot now reject or disregard the carriers
limited liability stipulation in the bill of lading. In other
words, private respondent is bound by the whole
stipulations in the bill of lading and must respect the same.
Private respondent, however, insists that the carrier
should be liable for the full value of the lost cargo in the
amount of 1,552,500.00, considering that the shipper,
Maruman Trading, had fully declared the shipment x x x,
the contents of each 10crate, the dimensions, weight and
value of the contents, as shown in the commercial Invoice
No. MTM-941.
This claim was denied by petitioner, contending that it
did not know of the contents, quantity and value of the

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shipment which consisted of three pre-packed crates


described in Bill of Lading11
No. NGO-53MN merely as 3
CASES SPARE PARTS.
The bill of lading in question confirms petitioners
contention. To defeat the carriers limited liability, the
aforecited Clause 18 of the bill of lading requires that the
shipper should have declared in writing a higher valuation
of its goods before receipt thereof by the carrier and insert
the said declaration in the bill of lading, with the extra
freight paid. These requirements in the bill of lading were
never complied with by the shipper, hence, the liability of
the carrier under the limited liability clause stands. The
commercial Invoice No. MTM-

________________

9 See Mendoza vs. Philippine Air Lines, Inc., 90 Phil. 836, 845-846.
10 Rollo, p. 116.
11 Rollo, p. 13.

507

VOL. 297, OCTOBER 8, 1998 507


Everett Steamship Corporation vs. Court of Appeals

941 does not in itself sufficiently and convincingly show


that petitioner has knowledge of the value of the cargo as
contended by private respondent. No other evidence was
proffered by private respondent to support its contention.
Thus, we are convinced that petitioner should be liable for
the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo
is limited to One Hundred Thousand (100,000.00) Yen,
pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals
dated June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby
REVERSED and SET ASIDE.
SO ORDERED.

Regalado (Actg. C.J.), Melo, Puno and Mendoza,


JJ., concur.

Judgment reversed and set aside.

Notes.Parties to sales contracts and/or bills of lading


are bound by arbitration clauses thereat. (Puromines, Inc.
vs. Court of Appeals, 220 SCRA 281 [1993])

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9/3/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 297

The validity of provisions limiting the liability of


carriers contained in bills of lading have been consistently
upheld, though the Supreme Court has likewise cautioned
against blind reliance on adhesion contracts where the
facts and circumstances warrant that they should be
disregarded. (Philippine Airlines, Inc. vs. Court of Appeals,
255 SCRA 48 [1996])
A contract of adhesion is one in which one of the
contracting parties imposes a ready-made form of contract
which the other party may accept or reject, but cannot
modify. (Polotan, Sr. vs. Court of Appeals, 296 SCRA 247
[1998])

o0o

508

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