PAKISTAN INT’L AIRLINES CORP., vs OPLE
(In cases of regular employment, the ER
Pet. Pakistan Int’l Airlines Corp. (PIA), a foreign Corp.
licensed to do business in the PH, executed in Manila
2 separate contracts of employment, one with pr.Rsp.
Farrales and the other with pr. Rsp. Mamasig.
Under the contract: (effective on 9 Jan. 1979)
5. DURATION OF EMPLOYMENT: 3 years, but can be
extended by mutual consent of the parties.
6. TERMINATION: PIA reserves the right to 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.
10. APPLICABLE LAW: laws of Pakistan, and only
the Courts of Karachi, Pakistan shall have the
jurisdiction re: any matter arising out of this agreement.
Rsps., as flight attendants, had their base station in
Manila and flying assignments to different parts of the
Middle East and Europe.
1yr & 4mos prior to the expiration of the employment
contracts, PIA informed Rsps. that their services
would be terminated effective Sep.1,1980, conformably
to clause 6(b) of the employment contract.
Rsps. filed a complaint for illegal dismissal against
PIA before the Ministry of Labor and Employment
(MOLE).
MOLE Regional Director: ordered the reinstatement
of pr.rsps. basis: Rsps. had attained the status of
regular EEs after rendering more than a year of
continued service; the stipulation limiting the period
of the employment contract to 3 years was void as
violative of the Labor Code.
The Deputy Minister, MOLE, adopted the findings of
the Regional Director and affirmed the latter's award.
Appeal to SC: PIA assails the Order; ground: in
violation of PIA's rights under the employment
contracts. with private Rsps;
HELD: Rsps. were illegally dismissed. 1st, while a
contract freely entered into should be respected since
it is the law between the parties, under Art. 1306, CC,
said stipulations must not contrary be to law, morals,
good customs, public order or public policy.
The law relating to labor and employment deals with
matters heavily impressed with public interest.
Here, the provisions of the employment contract are
inconsistent with Art. 280 & 281, Labor Code:
Art. 280.
shall not terminate the services of an EE except for
a just and authorized cause)
Art. 281. (an employment shall be deemed to be
regular where the employee has been engaged to
perform activities w/c are usually necessary or
desirable in the usual trade/bus of the ER)
2nd, PIA cannot rely on par.10 of its employment
contract w/c specifies (1st clause) the law of Pakistan as
the applicable law of the agreement and, (2nd clause)
lays the venue for settlement of any dispute in re:
agreement only in courts of Karachi Pakistan.
The 1st clause cannot be invoked to prevent the
application of Philippine labor laws and regulations to
the ER-EE rel. between PIA and Rsps. 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.
The 2nd clause cannot also be invoked bec. a cursory
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: 1) the contract was executed in the PH, 2) it
was also performed here, at least partially; 3) pr. Rsps.
are Filipino citizens; 4) while PIA is a foreign Corp.,
it is licensed to do business (and actually doing
business) and hence resident in the PH; 5) pr.Rsps.
were based in the PH 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.
KING MAU WU vs. SYCIP
King Mau filed a collection suit before the CFI
Manila against Sycip, arising from a shipment of
coconut oil emulsion sold by King Mau, as Sycip’s
agent, to Jas. Maxwell Fassett.
Under the agency agreement set forth in a letter in
N.Y., addressed to Sycip and accepted by the latter,
King Mau was made Sycip’s exclusive agent in the
sale of coconut oil outside the PH and was to be paid
2 ½ % on the total actual sale price of sales obtained
through his efforts + 50% of the difference between
the authorized sale price and the actual sale price.
CFI: in favour of King Mau.
Appeal to SC: contention, among others of defendant
appellant Sycip: CFI Manila – no jurisdiction bec. the
contract was executed in NY.
HELD: CFI Manila has jurisdiction over the case.
A non-resident may sue a resident in the PH courts
where the defendant may be summoned and his
property leviable upon execution in the case of a
favorable, final and executory judgment.
Here, the case is a personal action for the collection of
a sum of money w/c CFI is granted the jurisdiction to
try and decide. There is no conflict of laws involved
in the case, because it is only a question of enforcing
an obligation created by or arising from contract; and
unless the enforcement of the contract be against
public policy of the forum, it must be enforced.
HENSON vs. IAC
Henson leases out office spaces in her building at
Ermita, Manila. The lessee was Sto. Niño Travel and
Tour Agency, a sole proprietorship duly organized and
existing under the laws of the PH, represented by
private Rsp. Fuderanan.
Stipulation in the lease contract: “the contract shall
have a duration of 1yr, commencing from May 15, 1980”
During the duration of the contract, on May 30, 1980,
the Chief of the Licensing and Inspection Division of
the Bureau of Tourism Services, Ministry of Tourism
disapproved the request of the pr. Rsps. to transfer
their office to the premises owned by Henson; ground:
failure to meet the minimum 50 sq.m.-space requirement.
On June 10, Rsps. informed Henson that they had to
vacate the leased premises on or about June 14, 1980
in view of the disapproval of their request to operate
their business in the office space rented from Henson.
Meanwhile, Henson demanded from Rsps. that they
make good their payment in compliance with the
terms and conditions of their lease contract.
Rsps. replied: they had to rescind the lease contract
and requested the refund of the amounts they paid by
way of advance and deposit rentals less the amount of
rental due. Their request was denied.
Henson filed an action against the pr.rsps. to collect
the rental fees corresponding to the unexpired portion
of the term of the lease contract.
TC dimissed the complaint; in favour of pr.rsps. IAC
affirmed. It did not find pr.rsps. in breach of their
obligations under said contract bec. the reason for the
non-compliance of the obligation to occupy the leased
premises came from a 3rd party -- the Chief of the
Licensing and Inspection Division of the Bureau of
Tourism Services, Ministry of Tourism.
HELD: CFI erroneously interpreted the lease contract.
Contracts are respected as the law between the
contracting parties.
Here, the lease contract exec. by the parties remains as
the law between them. In litigations involving the
adjudication of rights and obligations between the
lessor and the lessee, the lease contract shall govern.
The disputed lease contract is plain and unequivocal
in its terms and leaves no doubt as to the intention of
the contracting parties.
Nowhere is it provided in the contract that the
fulfillment of the terms and conditions of the lease
depend upon an act of a 3rd party.
Thus, the contract should be interpreted according to
their literal meaning.
IAC erred in making room for construction of the
provisions of the contract.
The 1st stipulation in the disputed lease contract
provided for a specific period of 1 year as the duration
of the lease. This ought to be followed .
For IAC to hold that the rsps.-lessees are justified in
disregarding their obligation to pay f throughout the
term of the lease due to the requirement of the
Ministry of Tourism, is tantamount to the court's
revising the contract for the parties. Courts have no
power to make contracts for the parties.
ZALAMEA vs. CA
Sps. Cesar and Suthira Zalamea, and their daughter,
Liana, purchased 3 airline tickets from the Manila
agent of Rsp. TWA for a flight to NY to LA on June 6,
1984. The tickets of the sps. were purchased at a
discount of 75%, while that of their daughter was a
full fare ticket. All three tickets represented confirmed
reservations.
June 6: the Zalameas checked in 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.
Out of the 42 names on the wait list, the first 22
names were eventually allowed to board, including
Cesar, who happens to carry the ticket of his daughter.
As it were, those holding full-fare tickets were given
first priority among the wait-listed passengers.
Even in the next TWA flight to LA, Mrs. Zalamea and
her daughter, could not be accommodated because it
was also fully booked. Thus, they were constrained to
book in another flight.
Upon their arrival in the PH, the Zalameas filed an
action for damages based on breach of contract of air
carriage against rsp.TWA.
TC: in favour of the Zalameas. CA: while there was a
breach of contract on Rsp. TWA's part, there was
neither fraud nor bad faith because under the Code of
Federal Regulations by the Civil Aeronautics Board of
the USA, it is allowed to overbook flights.
HELD: The Zalameas are entitled to damages.
1st, clearly, there was fraud or bad faith on the part of
Rsp. airline when it did not allow the Zalameas to
board their flight in spite of confirmed tickets.
Rsp. TWA relied solely on the statement of Ms.
Lather (its customer service agent), 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, CA'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.
Since the tickets were sold and issued in the PH, the
applicable law in this case would be PH law. Under
our jurisprudence, overbooking amounts to bad faith,
entitling the passengers concerned to an award of
moral damages.
A contract to transport passengers is quite different in
kind and degree from any other contractual relation
because 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.
MOLINA vs. DE LA RIVA
Molina and De la Riva entered into an agreement,
whereby Molina transferred to De la Riva his abaca
and coprax business at various places in Catanduanes,
for a consideration of P134,636.12.
De la Riva promised to pay the balance on three
installments. For failure to pay the same when due
Molina filed an action to recover the debt due before
the CFI Manila.
De la Riva demurred to the complaint; ground: CFI
Manila had no jurisdiction of the subject of the action.
CFI overruled the demurrer. It then ruled in favour of
Molina.
Appeal to SC: CFI Manila is without jurisdiction bec.
the parties had mutually designated in the contract
(par.9), the town of Bato, Catanduanes, as the place
where all judicial and extrajudicial acts necessary
under the terms thereof should take place. This
amounted to an express submission by the parties to
jurisdiction of CFI Albay, in w/c the town of Bato was
located, to the exclusion of other courts.
HELD: CFI Manila has jurisdiction over the case. The
designation of the town of Bato made by the parties
had no legal force and effect. It cannot deprive CFI
Manila of the jurisdiction conferred on it by law. This
is true even though it may be granted that the parties
actually intended to waive the rights of domicile and
expressly submit themselves to the exclusive
jurisdiction of CFI Albay.
The jurisdiction of a court is conferred by law and not
by the will of the parties. As a matter of public policy,
parties can only stipulate in regard to that w/c is
expressly authorized by law.
Jurisdiction of courts depends on the nature of the
action.
Thus, the agreement between the parties to submit
themselves to the jurisdiction of CFI Albay, if there
was any such agreement, was void, in so far as it had
for its object to deprive the CFI of Manila of its own
jurisdiction.
Art. 1255 and 1278, CC relied upon by De la Riva are
not applicable to cases relating to the jurisdiction of
courts. The Law of Procedure, and not the CC which
defines the jurisdiction of courts.
The right to contract, recognized in the CC, has
nothing to do with the right to establish and fix the
jurisdiction of a court. This right can only be
exercised by the legislature.
BRYAN, ET AL., vs. EASTERN &AUSTRALIAN S. S.
CO., LTD.,
This is an action to recover damages allegedly caused
by defendant corp’s negligence in handling plaintiffs’
baggage.
Plaintiffs were passengers on the steamer owned by
defendant Co. w/c was engaged in carrying freight
and passengers between Shanghai, China, and Manila,
PH.
Shortly after its arrival in Manila, plaintiffs' baggage
was placed in a sling and was swung from the side of
the vessel. The employee of the defendant Co.
permitted the baggage to drop with great rapidity. The
baggage, however, dropped into the water alongside
of the ship. The damages are stipulated at P1,188.
The defendant denied that the damage was the result
of its negligence. Special defense: limitation of
liability established by the contract under w/c the
defendant undertook to transport the plaintiffs from
the city of Hongkong to Manila.
It appears that plaintiffs bough fr. defendant's agent in
Shanghai, 2 first-class tickets for Manila, w/c entitled
them to travel from Hongkong to Manila by the
defendant's steamship. The tickets were issued subject
to the conditions printed on the back. One of these
conditions: “the Co. will not hold itself responsible
for any loss, or damage to or detention or overcarriage
of luggage, under any circumstances whatsoever
unless it has been booked and paid for as freight.”
TC: defendant co. – negligent. Appeal to SC: it is
exempt from liability pursuant to the contract
appearing on the tickets. Since that contract was valid
in the place where made--the Colony of Hongkong , it
will be enforced according to its terms in the PH.
HELD: (TC’s decision—affirmed)
A contract made in Hongkong for the transportation
of persons and baggage from Hongkong to Manila
will be construed according to the law of the Colony
of Hongkong and will be enforced in the PH in
accordance with that law, provided it is not in
violation of a law or the public policy of the PH.
A contract printed at the back of a ticket purchased in
Hongkong for the transportation of passengers and
baggage to Manila, w/c provides that ---"the company
will not hold itself responsible for any loss, or damage
to or detention, or overcarriage of luggage, under any
circumstances whatsoever unless it has been booked
and paid for as freight" ---is valid and binding in the
Colony of Hongkong upon the purchaser of the ticket.
However, such a stipulation, does not, according to
the law of that colony, relieve the carrying company
from liability for negligence of its servants by which
the baggage of the passenger is lost or damaged.
Such a limitation, according to the law of the Colony
of Hongkong, is strictly construed against the carrier
and will not, by construction or interpretation, be held
to include an exemption from damages by negligence.
Therefore, when the baggage of a passenger who has
purchased a ticket with the limitation as to liability
above set forth, is injured or destroyed in Manila by
the negligence of the carrier’s servants, the passenger
is entitled, under the lex loci contractus, to recover for
the damages caused thereby in spite of the limitations
upon the carrier’s liability as above set forth
EASTERN SHIPPING LINES, INC., vs. IAC
These two cases, for the recovery of the value of
cargo insurance, arose from the same incident--
sinking of the M/S ASIATICA when it caught fire,
resulting in the total loss of ship and cargo.
1st case: M/S ASIATICA, a vessel operated by Pet.,
loaded at Kobe, Japan for transportation to Manila,
lance pipes valued at P256,039.00 and spare parts valued
at P92,361.75. Both sets of goods were insured against
marine risk with Rsp. Dev’t Insurance and Surety Corp..
2nd case: same vessel took on board cartons of
garment fabrics and accessories, and surveying
instruments insured by Rsp. Nisshin Fire & Marine
Insurance Co., for US $46,583.00, and Rsp. Dowa Fire &
Marine Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught
fire and sank, resulting in the total loss of ship and
cargo.
The Insurers paid the corresponding marine insurance
values to the consignees concerned and were thus
subrogated unto the rights of the latter as the insured.
Rsps. Insurance filed respective suit against Pet.
Carrier for the recovery of the amounts it had paid to
the insured; ground: non-observance of extraordinary
diligence.
Pet.-Carrier denied liability mainly on the ground that
the loss was due to an extraordinary fortuitous event,
hence, it is not liable under the law; that the fire w/c
caused the sinking of the ship is an exempting
circumstance under Sec. 4(2) (b) of the Carriage of
Goods by Sea Act (COGSA).
ISSUE: w/c law should govern — the CC provisions likewise show he amount of diligence made by the
on Common carriers or the COGSA. crew, on orders, in the care of the cargoes.

HELD: The law of the country to w/c the goods are to
be transported governs the liability of the common
carrier in case of their loss, destruction or
deterioration.
As the cargoes in question were transported from
Japan to the PH, the liability of Pet. Carrier is
governed primarily by the CC.
However, in all matters not regulated by said Code,
the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special
laws. Thus, the COGSA, a special law, is suppletory
to the provisions of the CC.
Under the CC, common carriers, from the nature of
their business and for reasons of public policy, are
bound to observe extraordinary diligence in the
vigilance over goods, according to all the
circumstances of each case. Common carriers are
responsible for the loss, destruction, or deterioration
of the goods unless the same is due to any of the ff.
causes only:
(1) Flood, storm, earthquake, lightning or other
natural disaster or calamity;
Pet. Carrier claims that the loss of the vessel by fire
exempts it from liability under the phrase "natural
disaster or calamity."
However, the fire may not be considered a natural
disaster or calamity.
What appears is that after the cargoes were stored in
the hatches, no regular inspection was made as to
their condition during the voyage. Consequently, the
crew could not have even explain what could have
caused the fire. The defendant, in the Court's mind,
failed to satisfactorily show that extraordinary
vigilance and care had been made by the crew to
prevent the occurrence of the fire. The defendant, as a
common carrier, is liable for the loss of the cargo.
Pet. Carrier cannot seek refuge under the COGSA:
Sec. 4(2). Neither the carrier nor the ship shall be
responsible for loss or damage arising or resulting
from
(b) Fire, unless caused by the actual fault or privity
of the carrier.
There was "actual fault" of Pet. carrier shown by
"lack of diligence". When the smoke was noticed, the
fire was already big; the fire must have started 24hrs.
before the same was noticed; and after the cargoes
were stored in the hatches, no regular inspection was
made as to their condition during the voyage.
The foregoing suffices to show that the circumstances
under w/c the fire originated and spread are such as to
show that Pet. Carrier or its servants were negligent in
connection therewith. Consequently, the complete
defense afforded by the COGSA when loss results
from fire is unavailing to Pet. Carrier.

As the peril of the fire is not comprehended within the

exception in Art. 1734, supra, Art. 1735, CC provides
that all cases than those mention in Art. 1734, the
common carrier shall be presumed to have been at
fault or to have acted negligently, unless it proves that
it has observed the extraordinary diligence required
by law.

HERE, the respective Insurers. as subrogees of the

cargo shippers, have proven that the transported goods
have been lost. Pet. Carrier has also proved that the
loss was caused by fire. The burden then is upon Pet.
Carrier to prove that it has exercised the extraordinary
diligence required by law.

Pursuant to Art. 1733, common carriers are bound to

extraordinary diligence in the vigilance over the
goods. The evidence of the defendant did not show
that extraordinary vigilance was observed by the
vessel to prevent the occurrence of fire at hatches
numbers 2 and 3. Defendant's evidence did not