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[G.R. No. L-40597. June 29, 1979.] ONG YIU vs PAL F !

"s In this Petition for Review by Certiorari, petitioner, a practicing lawyer and businessman, seeks a reversal of the Decision of the Court of Appeals in CA. !.R. "o. #$%%$ R, which reduced his claim for damages for breach of contract of transportation. &he facts are as follows' (n August )*, +,*-, petitioner was a fare paying passenger of respondent Philippine Air .ines, Inc. /PA.0, on board 1light "o. #*2 R, from 3actan, Cebu, bound for 4utuan City. 5e was scheduled to attend the trial. As a passenger, he checked in one piece of luggage, a blue 6maleta6 for which he was issued Claim Check "o. )+%* R. 7pon 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 ne8t day. At +%'%% o9clock that evening, petitioner wired PA. Cebu demanding the delivery of his baggage before noon the ne8t day, otherwise, he would hold PA. liable for damages, and stating that PA.9s gross negligence had caused him undue inconvenience, worry, an8iety and e8treme embarrassment. &his telegram was received by the Cebu PA. 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 4utuan City, the luggage would have arrived. :arly in the morning of the ne8t day, August )-, +,*-, petitioner went to the 4ancasi Airport to in;uire about his luggage. 5e did not wait, however, for the morning flight which arrived at +%'%% o9clock that morning. &his flight carried the missing luggage. &he porter clerk, 3a8imo !ome<, paged petitioner, but the latter had already left. Issue#s =>" PA. PA. I? !7I.&@ (".@ (1 ?I3P.: ":!.I!:"C: A"D "(& 4AD 1AI&5 I" &5: 4R:AC5 (1 I&? C("&RAC& (1 &RA"?P(R&A&I(" =I&5 P:&I&I(":R =>C .I3I&? I&? .IA4I.I&@ &( P+%%.%% A? ?&IP7.A&:D A& &5: 4ACA (1 &5: &ICA:& =>" P:&I&I(":R DID "(& :"&:R I"&( C("&RAC& =I&5 PA. &( .I3I& PA.B? .IA4I.I&@ &( P+%%.%% Ru$%n& &here is no dispute that PA. incurred in delay in the delivery of petitioner9s luggage. &he ;uestion is the correctness of respondent CourtBs conclusion that there was no gross negligence on the part of PA. and that it had not acted fraudulently or in bad faith as to entitle petitioner to an award of moral and e8emplary damages. 1rom the facts of the case, we agree with respondent Court that PA. had not acted in bad faith. 4ad faith means a breach of a known duty through some motive of interest or ill will. It was the duty of PA. to look for petitioner9s luggage which had been miscarried. PA. e8erted due diligence in complying with such duty.

Petitioner is neither entitled to e8emplary damages. In contracts, as provided for in Article ))2) of the Civil Code, e8emplary 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. =hile it may be true that petitioner had not signed the plane ticket , he is nevertheless bound by the provisions thereof. 6?uch provisions have been held to be a part of the contract of carriage and valid and binding upon the passenger regardless of the latter9s lack of knowledge or assent to the regulation6. It is what is known as a contract of 6adhesion6, 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. &he one who adheres to the contract is in reality free to reCect it entirelyD if he adheres, he gives his consent. And as held in Randolph v. American Airlines, +%2 (hio App. +-), +## ".:. )d E-ED Rosenchein vs &rans =orld Airlines, Inc., 2#, ?.=. )d #E2, 6a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.6

[G.R. No. 704'2. Au&us" 11, 19((.] PAN A)*RI+AN ,ORL- AIR,AY. vs IN/*R)*-IA/* APP*LLA/* +OUR/ F !"s (n 3ay +E, +,-E, plaintiff Pangan obtained from defendant PA" Am9s 3anila (ffice, through the @our &ravel !uide, an economy class airplane ticket with "o. %)*,)%-#%*2)# for passage from 3anila to !uam on defendant9s 1light "o. E#) of 3ay )-, +,-E, upon payment by said plaintiff of the regular fare. &he @our &ravel !uide is a tour and travel office owned and managed by plaintiff9s witness 3ila de la Rama. (n 3ay )-, +,-E, two hours before departure time plaintiff Pangan was at the defendant9s ticket counter at the 3anila International Airport and presented his ticket and checked in his two luggages, for which he was given baggage claim tickets "os. ,*2*22 and ,*2*#,. &he two luggages contained the promotional and advertising materials, the clutch bags, barong tagalog and his personal belongings. ?ubse;uently, Pangan was informed that his name was not in the manifest and so he could not take 1light "o. E#) in the economy class. ?ince there was no space in the economy class, plaintiff Pangan took the first class because he wanted to be on time in !uam to comply with his commitment, paying an additional sum of F++).%%. =hen plaintiff Pangan arrived in !uam on the date of 3ay )-, +,-E, his two luggages did not arrive with his flight, as a conse;uence of which his agreements with ?lutchnick and Guesada for the e8hibition of the films in !uam and in the 7nited ?tates were cancelled.&hereafter, he filed a written claim for his missing luggages. Issue .iability of the carrier under the =arsaw Convention and Civil .aw Ru$%n&

(n the basis of the stipulations printed at the back of the Airline ticket, specifically referring to the applicability of the =arsaw convention the airline carrier9s liability for the lost baggage of private respondent Pangan is limited to F)%.%% per kilo or F*%%.%%, 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 (ng @iu v. Court of Appeals /!.R. "o. . #%$,-, Hune ),, +,-,, ,+ ?CRA ))20 is s;uarely applicable to the instant case. &he Court set aside the decision of the trial court and affirmed by the Court of Appeals, awarding private respondent9s damages as for and for lost profits when their contracts to show the films in !uam and ?an 1rancisco, California were cancelled. Applying the ruling in 3endo<a v. Philippine Airlines, Inc. /,% Phil. E2*0, petitioner cannot be held liable for the cancellation of respondents9 contracts in the absence of showing that petitioner9s attention was called to the special circumstances re;uiring prompt delivery of the respondent9s luggage on or before a certain date.

[G.R. No. '1594. .e0"e12e3 2(, 1990.] PA4I./AN IN/*RNA/IONAL AIRLIN*. 5. OPL* F !"s Pakistan International Airlines /PIA0 e8ecuted in 3anila 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 Aarachi courts. PIA terminated the employment of the two 1ilipinas who filed complaint for illegal dismissal. Issue =hether Pakistani law is the governing law Ru$%n& "o. &he contractual provision is contrary to public policy and cannot be invoked to prevent the application of Philippine labor laws and regulations to the subCect matter of this case. :mployer 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. 3oreover, 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' /a0 contract was e8ecuted and partially performed in the PhilippinesD /b0 Private respondents are Philippine citi<ens and residentsD and /20 Petitioner, although a foreign corporation, is licensed to do business here and is actually doing business here and hence a resident of the Philippines. Aarachi 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. 1295(4 -e!e12e3 6, 199(

/RIPL* *IG7/ IN/*GRA/*- .*R5I+*., IN+. 5.. NA/IONAL LA8OR R*LA/ION. +O))I..ION F !"s Petitioner &riple :ight Integrated ?ervices recruited private respondent :rlinda (sdana for its principal !ulf Catering Company, a firm based in the Aingdom of ?audi Arabia. &he employment contract provides that :rlinda was to be employed as a food server for a period of three /20 years. 5owever, prior to the e8piration of said contract, :rlinda was terminated by !ulf Catering Company on the ground of illness. :rlinda sued petitioner for breach of contract claiming that the termination was illegal as the same was done in violation of the .abor Code provision re;uiring employers to secure a certification from a competent public authority declaring that the illness cannot be cured within a period of si8 /*0 months. Petitioner contends that the termination of employment was valid since under the laws of ?audi Arabia the employer may terminate the employee without having to secure such certification. Issue =hich law will governI Ru$%n& &he principle of le8 loci contractus /the law of the place where the contract is made0 governs in this Curisdiction. &he contract of employment was perfected in the Philippines, hence, following the above mentioned principle, the .abor Code, its implementing rules and regulations, and other laws affecting labor apply in this case. P9%$. *:0o3" n; Fo3e%&n Lo n Gu 3 n"ee +o30. 5. 5.P. *use2%o +ons"3u!"%on In!. <2004= F !"s "ovember E, +,E%' ?tate (rgani<ation of 4uildings /?(40, 3inistry of 5ousing and Construction, 4aghdad, Ira;, awarded the construction of the Institute of Physical &herapyJ 3edical Rehabilitation Center, Phase II, in 4aghdad, Ira;, /ProCect0 to ACyal &rading and Contracting Company /ACyal0, a firm duly licensed with the Auwait Chamber of Commerce for ID$,#+*,%E,>%#* /or about 7?F+E,-2,,**E0 3arch -, +,E+' 2 Ple8 International, Inc. represented by ?pouses :duardo and Iluminada ?antos a local contractor engaged in construction business, entered into a Coint venture agreement with ACyal. 5owever since it was not accredited under the Philippine (verseas Construction 4oard /P(C40, it had to assign and transfer all its right to KP:CI. KP:CI entered into an agreement that the e8ecution of the proCect will be under their Coint management. &o comply with the re;uirements of performance bond of ID)-+,E%E>*+% and an an advance payment bond of ID$#+,*%E>,%+, 2 Ple8 and KP:CI applied for the issuance of a guarantee with Philguarantee, a government financial institution empowered to issue guarantees for ;ualified 1ilipino contractors to secure the performance of approved service contracts abroad.

?ubse;uently, letters of guarantee were issued by Philguarantee to the Rafidain 4ank of 4aghdad. Al Ahli 4ank of Auwait was, therefore, engaged to provide a counter guarantee to Rafidain 4ank, but it re;uired a similar counter guarantee in its favor from the Philguarantee &he ?urety 4ond was later amended to increase the amount of coverage from P*.# million to P*.,*- million and to change the bank in whose favor the petitioner9s guarantee was issued, from Rafidain 4ank to Al Ahli 4ank of Auwait. ?(4 and the Coint venture KP:CI and ACyal e8ecuted the service contract for the construction of the Institute of Physical &herapy J 3edical Rehabilitation Center, Phase II, in 4aghdad, Ira;. It commenced only on the last week of August +,E+ instead of the Hune ) +,E+ Prior to the deadline, upon foreseeing the impossibility to meet it, the surety bond was also e8tended for more than +) times until 3ay +,E- and the Advance Payment !uarantee was e8tended three times more until it was cancelled for reimbursement (n )* (ctober +,E*, Al Ahli 4ank of Auwait sent a tele8 call to the petitioner demanding full payment of its performance bond counter guarantee. KP:CI re;uested Ira; &rade and :conomic Development 3inister 3ohammad 1adhi 5ussein to recall the tele8 call on the performance guarantee for being a drastic action in contravention of its mutual agreement that /+0 the imposition of penalty would be held in abeyance until the completion of the proCectD and /)0 the time e8tension would be open, depending on the developments on the negotiations for a foreign loan to finance the completion of the proCect. KP:CI advised the Philguarantee not to pay yet Al Ahli 4ank because efforts were being e8erted for the amicable settlement of the ProCect. KP:CI received another tele8 message from Al Ahli 4ank stating that it had already paid to Rafidain 4ank the sum of 7?FE-*,$*# under its letter of guarantee, and demanding reimbursement by Philguarantee. KP:CI re;uested the Central 4ank to hold in abeyance the payment by the Philguarantee 6to allow the diplomatic machinery to take its course, for otherwise, the Philippine government , through the Philguarantee and the Central 4ank, would become instruments of the Ira;i !overnment in consummating a clear act of inCustice and ine;uity committed against a 1ilipino contractor. Central 4ank authori<ed the remittance to Al Ahli 4ank. Philguarantee informed KP:CI that it would remit 7?FE-*,$*# to Al Ahli 4ank, and reiterated the Coint 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 R&C. R&C and CA' Against Philguarantee since no cause of action since it was e8pired because KP:CI. Ine;uity to allow the Philguarantee to pass on its losses to the 1ilipino contractor KP:CI which had sternly warned against paying the Al Ahli 4ank and constantly apprised it of the developments in the ProCect implementation. Issue =>" the Philippine laws should be applied in determining KP:CI9s default in the performance of its obligations under the service contract Ru$%n& @:?. "o conflicts rule on essential validity of contracts is e8pressly provided for in our laws &he rule followed by most legal systems, however, is that the intrinsic validity of a contract must be governed by the le8 contractus or 6proper law of the contract.6 &his is the law

voluntarily agreed upon by the parties /the le8 loci voluntatis0 or the law intended by them either e8pressly or implicitly /the le8 loci intentionis0 none in this case. In this case, the laws of Ira; bear substantial connection to the transaction, since one of the parties is the Ira;i !overnment and the place of performance is in Ira;. 5ence, the issue of whether respondent KP:CI defaulted in its obligations may be determined by the laws of Ira;. 5owever, 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. =here 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 7nited ?tates and :urope, the two rules that now seem to have emerged as 6kings of the hill6 are /+0 the parties may choose the governing lawD and /)0 in the absence of such a choice, the applicable law is that of the ?tate that 6has 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 e8cuses for non performance are determined by the law of the place of performance or le8 loci solutionis, which is useful because it is undoubtedly always connected to the contract in a significant way. In this case, the laws of Ira; bear substantial connection to the transaction, since one of the parties is the Ira;i !overnment and the place of performance is in Ira;. 5ence, the issue of whether respondent KP:CI defaulted in its obligations may be determined by the laws of Ira;. 5owever, 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. =here 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 ProCect was caused by factors not imputable to the respondent contractor such as the war in Ira;. Petitioner as a guarantor is entitled to the benefit of e8cussion, that is, it cannot be compelled to pay the creditor ?(4 unless the property of the debtor KP:CI has been e8hausted 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 ?(4 may owe the principal debtor KP:CI. 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.

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