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[G.R. No. L-40597. June 29, 1979.]ONG YIU vs PALFactsIn this Petition for Review by Certiorari, petitioner, a practicing lawyer and businessman, seeks a reversal of the Decision of theCourt of Appeals in CA.-G.R. No. 45005-R, which reduced his claim for damages for breach of contract of transportation.The facts are as follows:On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan, Cebu, bound for Butuan City. He was scheduled to attend the trial. As a passenger, he checked in one piece of luggage, a blue "maleta" for which he was issued Claim Check No. 2106-R. Upon arrival to destination, petitioner claimed his luggage but it could not be found. In the meantime, petitioner was worried about the missing luggage because it contained vital documents needed for trial the next day. At 10:00 o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his baggage before noon the next day, otherwise, he would hold PAL liable for damages, and stating that PAL's gross negligence had caused him undue inconvenience, worry, anxiety and extreme embarrassment. This telegram was received by the Cebu PAL supervisor but the latter felt no need to wire petitioner that his luggage had already been forwarded on the assumption that by the time the message reached Butuan City, the luggage would have arrived.Early in the morning of the next day, August 27, 1967, petitioner went to the Bancasi Airport to inquire about his luggage. He did not wait, however, for the morning flight which arrived at 10:00 o'clock that morning. This flight carried the missing luggage. The porter clerk, Maximo Gomez, paged petitioner, but the latter had already left.

Issue/s

W/N PAL PAL IS GUILTY ONLY OF SIMPLE NEGLIGENCE AND NOT BAD FAITH IN THE BREACH OF ITS CONTRACT OF TRANSPORTATION WITH PETITIONER W/C LIMITS ITS LIABILITY TO P100.00 AS STIPULATED AT THE BACK OF THE TICKET

W/N PETITIONER DID NOT ENTER INTO CONTRACT WITH PAL TO LIMIT PALS LIABILITY TO P100.00

RulingThere is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. The question is the correctness of respondentCourts conclusion that there was no gross negligence on the part of PAL and that it had not acted fraudulently or in bad faith as to entitle petitioner to an award of moral and exemplary damages.From the facts of the case, we agree with respondentCourtthat PAL had not acted in bad faith. Bad faith means a breach of a known duty through some motive of interest or ill will. It was the duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due diligence in complying with such duty.Petitioner is neither entitled to exemplary damages. In contracts, as provided for in Article 2232 of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in this case.While it may be true that petitioner had not signed the plane ticket , 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 latter's 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.And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosencheinvs Trans World Airlines, Inc., 349 S.W. 2d 483, "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."[G.R. No. 70462. August 11, 1988.]

PAN AMERICAN WORLD AIRWAYS vs INTERMEDIATE APPELLATE COURTFacts

On May 18, 1978, plaintiff Pangan obtained from defendant PAN Am's Manila Office, through the Your Travel Guide, an economy class airplane ticket with No. 0269207406324 for passage from Manila to Guam on defendant's Flight No. 842 of May 27, 1978, upon payment by said plaintiff of the regular fare. The Your Travel Guide is a tour and travel office owned and managed by plaintiff's witness Mila de la Rama.On May 27, 1978, two hours before departure time plaintiff Pangan was at the defendant's ticket counter at the Manila International Airport and presented his ticket and checked in his two luggages, for which he was given baggage claim tickets Nos. 963633 and 963649. The two luggages contained the promotional and advertising materials, the clutch bags, barong tagalog and his personal belongings. Subsequently, Pangan was informed that his name was not in the manifest and so he could not take Flight No. 842 in the economy class. Since there was no space in the economy class, plaintiff Pangan took the first class because he wanted to be on time in Guam to comply with his commitment, paying an additional sum of $112.00.When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two luggages did not arrive with his flight, as a consequence of which his agreements with Slutchnick and Quesada for the exhibition of the films in Guam and in the United States were cancelled.Thereafter, he filed a written claim for his missing luggages.

Issue

Liability of the carrier under the Warsaw Convention and Civil Law

Ruling

On the basis of the stipulations printed at the back of the Airline ticket, specifically referring to the applicability of the Warsaw convention the airline carrier's liability for the lost baggage of private respondent Pangan is limited to $20.00 per kilo or $600.00, as stipulated at the back of the ticket as the latter did not declare a higher value for his baggage and pay the corresponding additional charges, the case of Ong Yiuv. Court of Appeals (G.R. No. L-40597, June 29, 1979, 91 SCRA 223) is squarely applicable to the instant case.The Court set aside the decision of the trial court and affirmed by the Court of Appeals, awarding private respondent's damages as for and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled. Applying the ruling in Mendozav. Philippine Airlines, Inc. (90 Phil. 836), petitioner cannot be held liable for the cancellation of respondents' contracts in the absence of showing that petitioner's attention was called to the special circumstances requiring prompt delivery of the respondent's luggage on or before a certain date.[G.R. No. 61594. September 28, 1990.]PAKISTAN INTERNATIONAL AIRLINES VS OPLE

Facts

Pakistan International Airlines (PIA) executed in Manila two separate contracts of employment which provided that PIA reserves the right to terminate the agreement at any time by giving the employee notice in writing one month before the intended date of termination and that the governing law shall be the laws of Pakistan and the venue for actions is Karachi courts. PIA terminated the employment of the two Filipinas who filed complaint for illegal dismissal.Issue

Whether Pakistani law is the governing lawRulingNo. The contractual provision is contrary to public policy and cannot be invoked to prevent the application of Philippine labor laws and regulations to the subject matter of this case. Employer-employee relationship is much affected with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties by agreeing upon some other law to govern their relationship. Moreover, the relevant circumstances of the case will show the multiple and substantive contacts between Philippine law and Philippine courts, on the one hand, and the relationships between the parties upon the other: (a) contract was executed and partially performed in the Philippines; (b) Private respondents are Philippine citizens and residents; and (3) Petitioner, although a foreign corporation, is licensed to do business here and is actually doing business here and hence a resident of the Philippines. Karachi courts, therefore, cannot be the sole venue for the settlement of disputes.

PIA also did not prove Pakistani law, thus it is presumed to be the same as Philippine law.G.R. No. 129584December 3, 1998

Triple Eight Integrated Services, Inc. vs. National Labor Relations Commission

FactsPetitioner Triple Eight Integrated Services recruited private respondent Erlinda Osdana for its principal Gulf Catering Company, a firm based in the Kingdom of Saudi Arabia. The employment contract provides that Erlinda was to be employed as a food server for a period of three (3) years. However, prior to the expiration of said contract, Erlinda was terminated by Gulf Catering Company on the ground of illness. Erlinda sued petitioner for breach of contract claiming that the termination was illegal as the same was done in violation of the Labor Code provision requiring employers to secure a certification from a competent public authority declaring that the illness cannot be cured within a period of six (6) months. Petitioner contends that the termination of employment was valid since under the laws of Saudi Arabia the employer may terminate the employee without having to secure such certification.

Issue

Which law will govern?

Ruling

The principle of lex loci contractus (the law of the place where the contract is made) governs in this jurisdiction. The contract of employment was perfected in the Philippines, hence, following the above-mentioned principle, the Labor Code, its implementing rules and regulations, and other laws affecting labor apply in this case.Phil. Export and Foreign Loan Guarantee Corp. V. V.P. Eusebio Construction Inc. (2004)FactsNovember 8, 1980: State Organization of Buildings (SOB), Ministry of Housing and Construction, Baghdad, Iraq, awarded the construction of the Institute of Physical TherapyMedical Rehabilitation Center, Phase II, in Baghdad, Iraq, (Project) to Ajyal Trading and Contracting Company (Ajyal), a firm duly licensed with the Kuwait Chamber of Commerce for ID5,416,089/046 (or about US$18,739,668)March 7, 1981: 3-Plex International, Inc. represented by Spouses Eduardo and Iluminada Santos a local contractor engaged in construction business, entered into a joint venture agreement with Ajyal. However since it was not accredited under the Philippine Overseas Construction Board (POCB), it had to assign and transfer all its right to VPECI.

VPECI entered into an agreement that the execution of the project will be under their joint management.To comply with the requirements of performance bond of ID271,808/610 and an an advance payment bond of ID541,608/901, 3-Plex and VPECI applied for the issuance of a guarantee with Philguarantee, a government financial institution empowered to issue guarantees for qualified Filipino contractors to secure the performance of approved service contracts abroad.

Subsequently, letters of guarantee were issued by Philguarantee to the Rafidain Bank of Baghdad. Al Ahli Bank of Kuwait was, therefore, engaged to provide a counter-guarantee to Rafidain Bank, but it required a similar counter-guarantee in its favor from the Philguarantee

The Surety Bond was later amended to increase the amount of coverage from P6.4 million to P6.967 million and to change the bank in whose favor the petitioner's guarantee was issued, from Rafidain Bank to Al Ahli Bank of Kuwait.SOB and the joint venture VPECI and Ajyal executed the service contract for the construction of the Institute of Physical Therapy Medical Rehabilitation Center, Phase II, in Baghdad, Iraq. It commenced only on the last week of August 1981 instead of the June 2 1981

Prior to the deadline, upon foreseeing the impossibility to meet it, the surety bond was also extended for more than 12 times until May 1987 and the Advance Payment Guarantee was extended three times more until it was cancelled for reimbursement On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner demanding full payment of its performance bond counter-guarantee. VPECI requested Iraq Trade and Economic Development Minister Mohammad Fadhi Hussein to recall the telex call on the performance guarantee for being a drastic action in contravention of its mutual agreement that (1) the imposition of penalty would be held in abeyance until the completion of the project; and (2) the time extension would be open, depending on the developments on the negotiations for a foreign loan to finance the completion of the project.

VPECI advised the Philguarantee not to pay yet Al Ahli Bank because efforts were being exerted for the amicable settlement of the Project.VPECI received another telex message from Al Ahli Bank stating that it had already paid to Rafidain Bank the sum of US$876,564 under its letter of guarantee, and demanding reimbursement by Philguarantee. VPECI requested the Central Bank to hold in abeyance the payment by the Philguarantee "to allow the diplomatic machinery to take its course, for otherwise, the Philippine government , through the Philguarantee and the Central Bank, would become instruments of the Iraqi Government in consummating a clear act of injustice and inequity committed against a Filipino contractor. Central Bank authorized the remittance to Al Ahli Bank. Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli Bank, and reiterated the joint and solidary obligation of the respondents to reimburse the Philguarantee for the advances made on its counter-guarantee but they failed to pay so a case was filed in the RTC.RTC and CA: Against Philguarantee since no cause of action since it was expired because VPECI. Inequity to allow the Philguarantee to pass on its losses to the Filipino contractor VPECI which had sternly warned against paying the Al Ahli Bank and constantly apprised it of the developments in the Project implementation.Issue

W/N the Philippine laws should be applied in determining VPECI's default in the performance of its obligations under the service contract

Ruling

YES. No conflicts rule on essential validity of contracts is expressly provided for in our laws

The rule followed by most legal systems, however, is that the intrinsic validity of a contract must be governed by the lex contractus or "proper law of the contract." This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci intentionis) - none in this case.In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi Government and the place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its obligations may be determined by the laws of Iraq. However, since that foreign law was not properly pleaded or proved, the presumption of identity or similarity, otherwise known as the processual presumption, comes into play. Where foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours.In the United States and Europe, the two rules that now seem to have emerged as "kings of the hill" are (1) the parties may choose the governing law; and (2) in the absence of such a choice, the applicable law is that of the State that "has the most significant relationship to the transaction and the parties Another authority proposed that all matters relating to the time, place, and manner of performance and valid excuses for non-performance are determined by the law of the place of performance or lex loci solutionis, which is useful because it is undoubtedly always connected to the contract in a significant way.In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi Government and the place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its obligations may be determined by the laws of Iraq. However, since that foreign law was not properly pleaded or proved, the presumption of identity or similarity, otherwise known as the processual presumption, comes into play. Where foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours.Delay or the non-completion of the Project was caused by factors not imputable to the respondent contractor such as the war in Iraq.Petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be compelled to pay the creditor SOB unless the property of the debtor VPECI has been exhausted and all legal remedies against the said debtor have been resorted to by the creditor. It could also set up compensation as regards what the creditor SOB may owe the principal debtor VPECI. In this case, however, the petitioner has clearly waived these rights and remedies by making the payment of an obligation that was yet to be shown to be rightfully due the creditor and demandable of the principal debtor.