BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B.

EVANGELISTA, (ii) denied the

and the rest of 1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in- "three-hour daily average" formula in the computation of petitioners'
fact, Atty. GERARDO A. DEL MUNDO, petitioners,  overtime pay; and
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR, (2) to reverse the Resolution dated March 24, 1992 of NLRC,
NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT denying the motion for reconsideration of its Resolution dated
INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS September 2, 1991 (Rollo, pp. 8-25; 26-220).
CORPORATION, respondents.
The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation,
G.R. Nos. 104911-14 December 5, 1994 et. al., v. National Labor Relations Commission, et. al." was filed under Rule 65 of the
Revised Rules of Court:
BIENVENIDO M. CADALIN, ET AL., petitioners, 
vs. (1) to reverse the Resolution dated September 2, 1991 of NLRC in
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and
INTERNATIONAL, INC. and/or ASIA INTERNATIONAL BUILDERS L-86-05-460, insofar as it granted the claims of 149 claimants; and
CORPORATION, respondents.
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar
G.R. Nos. 105029-32 December 5, 1994 as it denied the motions for reconsideration of AIBC and BRII
(Rollo, pp. 2-59; 61-230).
QUIASON, J.:
The Resolution dated September 2, 1991 of NLRC, which modified the decision of
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine POEA in four labor cases: (1) awarded monetary benefits only to 149 claimants and
Overseas Employment Administration's Administrator, et. al.," was filed under Rule 65 (2) directed Labor Arbiter Fatima J. Franco to conduct hearings and to receive
of the Revised Rules of Court: evidence on the claims dismissed by the POEA for lack of substantial evidence or
proof of employment.
(1) to modify the Resolution dated September 2, 1991 of the
National Labor Relations Commission (NLRC) in POEA Cases Nos. Consolidation of Cases
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to
render a new decision: (i) declaring private respondents as in G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while
default; (ii) declaring the said labor cases as a class suit; (iii) G.R. Nos. 104911-14 were raffled to the Second Division. In the Resolution dated
ordering Asia International Builders Corporation (AIBC) and Brown July 26, 1993, the Second Division referred G.R. Nos. 104911-14 to the Third Division
and Root International Inc. (BRII) to pay the claims of the 1,767 (G.R. Nos. 104911-14, Rollo, p. 895).
claimants in said labor cases; (iv) declaring Atty. Florante M. de
Castro guilty of forum-shopping; and (v) dismissing POEA Case No.
L-86-05-460; and In the Resolution dated September 29, 1993, the Third Division granted the motion
filed in G.R. Nos. 104911-14 for the consolidation of said cases with G.R. Nos.
104776 and 105029-32, which were assigned to the First Division (G.R. Nos. 104911-
(3) to reverse the Resolution dated March 24, 1992 of NLRC, 14, Rollo, pp. 986-1,107; G.R. Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the
denying the motion for reconsideration of its Resolution dated Resolution dated October 27, 1993, the First Division granted the motion to
September 2, 1991 (Rollo, pp. 8-288). consolidate G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo,
p. 1109; G.R. Nos. 105029-32, Rollo, p. 1562).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon.
National Labor Relations Commission, et. al.," was filed under Rule 65 of the Revised I
Rules of Court:
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B.
(1) to reverse the Resolution dated September 2, 1991 of NLRC in Evangelista, in their own behalf and on behalf of 728 other overseas contract workers
POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-799 and (OCWs) instituted a class suit by filing an "Amended Complaint" with the Philippine
L-86-05-460 insofar as it: (i) applied the three-year prescriptive Overseas Employment Administration (POEA) for money claims arising from their
period under the Labor Code of the Philippines instead of the ten-
year prescriptive period under the Civil Code of the Philippines; and
recruitment by AIBC and employment by BRII (POEA Case No. L-84-06-555). The the "Compliance" and "Urgent Manifestation" of claimants. On November 6, 1984, it
claimants were represented by Atty. Gerardo del Mundo. filed a second motion for extension of time to file the comment.

BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in On November 8, 1984, the POEA Administrator informed AIBC that its motion for
construction; while AIBC is a domestic corporation licensed as a service contractor to extension of time was granted.
recruit, mobilize and deploy Filipino workers for overseas employment on behalf of its
foreign principals. On November 14, 1984, claimants filed an opposition to the motions for extension of
time and asked that AIBC and BRII be declared in default for failure to file their
The amended complaint principally sought the payment of the unexpired portion of answers.
the employment contracts, which was terminated prematurely, and secondarily, the
payment of the interest of the earnings of the Travel and Reserved Fund, interest on On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other
all the unpaid benefits; area wage and salary differential pay; fringe benefits; refund of reliefs, that claimants should be ordered to amend their complaint.
SSS and premium not remitted to the SSS; refund of withholding tax not remitted to
the BIR; penalties for committing prohibited practices; as well as the suspension of
the license of AIBC and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14). On December 27, 1984, the POEA Administrator issued an order directing AIBC and
BRII to file their answers within ten days from receipt of the order.
At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and
was given, together with BRII, up to July 5, 1984 to file its answer. On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the
said order of the POEA Administrator. Claimants opposed the appeal, claiming that it
was dilatory and praying that AIBC and BRII be declared in default.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the
claimants to file a bill of particulars within ten days from receipt of the order and the
movants to file their answers within ten days from receipt of the bill of particulars. The On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position
POEA Administrator also scheduled a pre-trial conference on July 25, 1984. Paper" dated March 24, 1985, adding new demands: namely, the payment of
overtime pay, extra night work pay, annual leave differential pay, leave indemnity pay,
retirement and savings benefits and their share of forfeitures (G.R. No. 104776, Rollo,
On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On pp. 14-16). On April 15, 1985, the POEA Administrator directed AIBC to file its answer
July 23, 1984, AIBC filed a "Motion to Strike Out of the Records", the "Complaint" and to the amended complaint (G.R. No. 104776, Rollo, p. 20).
the "Compliance and Manifestation." On July 25, 1984, the claimants filed their
"Rejoinder and Comments," averring, among other matters, the failure of AIBC and
BRII to file their answers and to attend the pre-trial conference on July 25, 1984. The On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the
claimants alleged that AIBC and BRII had waived their right to present evidence and same day, the POEA issued an order directing AIBC and BRII to file their answers to
had defaulted by failing to file their answers and to attend the pre-trial conference. the "Amended Complaint," otherwise, they would be deemed to have waived their
right to present evidence and the case would be resolved on the basis of
complainant's evidence.
On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the
Records" filed by AIBC but required the claimants to correct the deficiencies in the
complaint pointed out in the order. On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit
and Motion for Bill of Particulars Re: Amended Complaint dated March 24, 1985."
Claimants opposed the motions.
On October 10, 1984, claimants asked for time within which to comply with the Order
of October 2, 1984 and filed an "Urgent Manifestation," praying that the POEA
Administrator direct the parties to submit simultaneously their position papers, after On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and
which the case should be deemed submitted for decision. On the same day, Atty. BRII to file their answers in POEA Case No. L-84-06-555.
Florante de Castro filed another complaint for the same money claims and benefits in
behalf of several claimants, some of whom were also claimants in POEA Case No. L- On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a
84-06-555 (POEA Case No. 85-10-779). petition for the issuance of a writ of injunction. On September 19, 1985, NLRC
enjoined the POEA Administrator from hearing the labor cases and suspended the
On October 19, 1984, claimants filed their "Compliance" with the Order dated October period for the filing of the answers of AIBC and BRII.
2, 1984 and an "Urgent Manifestation," praying that the POEA direct the parties to
submit simultaneously their position papers after which the case would be deemed On September 19, 1985, claimants asked the POEA Administrator to include
submitted for decision. On the same day, AIBC asked for time to file its comment on additional claimants in the case and to investigate alleged wrongdoings of BRII, AIBC
and their respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA same until the resolution of its motion for reconsideration of the order of the NLRC
Case No. L-85-10-777) against AIBC and BRII with the POEA, demanding monetary dismissing the two appeals. On April 28, 1987, NLRC en banc denied the motion for
claims similar to those subject of POEA Case No. L-84-06-555. In the same month, reconsideration.
Solomon Reyes also filed his own complaint (POEA Case No. L-85-10-779) against
AIBC and BRII. At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the
same hearing, the parties were given a period of 15 days from said date within which
On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for to submit their respective position papers. On June 24, 1987 claimants filed their
the substitution of the original counsel of record and the cancellation of the special "Urgent Motion to Strike Out Answer," alleging that the answer was filed out of time.
powers of attorney given the original counsel. On June 29, 1987, claimants filed their "Supplement to Urgent Manifestational
Motion" to comply with the POEA Order of June 19, 1987. On February 24, 1988,
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to AIBC and BRII submitted their position paper. On March 4, 1988, claimants filed their
enforce attorney's lien. "Ex-Parte Motion to Expunge from the Records" the position paper of AIBC and BRII,
claiming that it was filed out of time.
On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case
No. 86-05-460) in behalf of 11 claimants including Bienvenido Cadalin, a claimant in On September 1, 1988, the claimants represented by Atty. De Castro filed their
POEA Case No. 84-06-555. memorandum in POEA Case No. L-86-05-460. On September 6, 1988, AIBC and
BRII submitted their Supplemental Memorandum. On September 12, 1988, BRII filed
its "Reply to Complainant's Memorandum." On October 26, 1988, claimants submitted
On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, their "Ex-Parte  Manifestational Motion and Counter-Supplemental Motion," together
1985 and September 18, 1985 by AIBC and BRII. with 446 individual contracts of employments and service records. On October 27,
1988, AIBC and BRII filed a "Consolidated Reply."
In narrating the proceedings of the labor cases before the POEA Administrator, it is
not amiss to mention that two cases were filed in the Supreme Court by the claimants, On January 30, 1989, the POEA Administrator rendered his decision in POEA Case
namely — G.R. No. 72132 on September 26, 1985 and Administrative Case No. 2858 No. L-84-06-555 and the other consolidated cases, which awarded the amount of
on March 18, 1986. On May 13, 1987, the Supreme Court issued a resolution in $824,652.44 in favor of only 324 complainants.
Administrative Case No. 2858 directing the POEA Administrator to resolve the issues
raised in the motions and oppositions filed in POEA Cases Nos. L-84-06-555 and L-
86-05-460 and to decide the labor cases with deliberate dispatch. On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial
Appeal" from the decision of the POEA. On the same day, AIBC also filed its motion
for reconsideration and/or appeal in addition to the "Notice of Appeal" filed earlier on
AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the February 6, 1989 by another counsel for AIBC.
Order dated September 4, 1985 of the POEA Administrator. Said order required BRII
and AIBC to answer the amended complaint in POEA Case No. L-84-06-555. In a
resolution dated November 9, 1987, we dismissed the petition by informing AIBC that On February 17, 1989, claimants filed their "Answer to Appeal," praying for the
all its technical objections may properly be resolved in the hearings before the POEA. dismissal of the appeal of AIBC and BRII.

Complaints were also filed before the Ombudsman. The first was filed on September On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal
22, 1988 by claimant Hermie Arguelles and 18 co-claimants against the POEA Memorandum," together with their "newly discovered evidence" consisting of payroll
Administrator and several NLRC Commissioners. The Ombudsman merely referred records.
the complaint to the Secretary of Labor and Employment with a request for the early
disposition of POEA Case No. L-84-06-555. The second was filed on April 28, 1989 On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating
by claimants Emigdio P. Bautista and Rolando R. Lobeta charging AIBC and BRII for among other matters that there were only 728 named claimants. On April 20, 1989,
violation of labor and social legislations. The third was filed by Jose R. Santos, the claimants filed their "Counter-Manifestation," alleging that there were 1,767 of
Maximino N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of violations of them.
labor laws.
On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision
On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated January 30, 1989 on the grounds that BRII had failed to appeal on time and
dated December 12, 1986. AIBC had not posted the supersedeas bond in the amount of $824,652.44.

On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for On December 23, 1989, claimants filed another motion to resolve the labor cases.
suspension of the period for filing an answer or motion for extension of time to file the
On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the (b) complainants identified and listed in Annex
1,767 claimants be awarded their monetary claims for failure of private respondents "E" attached and made an integral part of this
to file their answers within the reglamentary period required by law. Resolution, whose awards decreed by the POEA,
to Our mind, are not supported by substantial
On September 2, 1991, NLRC promulgated its Resolution, disposing as follows: evidence" (G.R. No. 104776; Rollo, pp. 113-115;
G.R. Nos. 104911-14, pp. 85-87; G.R. Nos.
105029-31, pp. 120-122).
WHEREFORE, premises considered, the Decision of the POEA in
these consolidated cases is modified to the extent and in
accordance with the following dispositions: On November 27, 1991, claimant Amado S. Tolentino and 12
co-claimants, who were former clients of Atty. Del Mundo, filed a petition
for certiorari with the Supreme Court (G.R. Nos. 120741-44). The petition was
1. The claims of the 94 complainants identified dismissed in a resolution dated January 27, 1992.
and listed in Annex "A" hereof are dismissed for
having prescribed;
Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC
were filed. The first, by the claimants represented by Atty. Del Mundo; the second, by
2. Respondents AIBC and Brown & Root are the claimants represented by Atty. De Castro; and the third, by AIBC and BRII.
hereby ordered, jointly and severally, to pay the
149 complainants, identified and listed in Annex
"B" hereof, the peso equivalent, at the time of In its Resolution dated March 24, 1992, NLRC denied all the motions for
payment, of the total amount in US dollars reconsideration.
indicated opposite their respective names;
Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R.
3. The awards given by the POEA to the 19 No. 104776), the claimants represented by Atty. De Castro (G.R. Nos. 104911-14)
complainants classified and listed in Annex "C" and by AIBC and BRII (G.R. Nos. 105029-32).
hereof, who appear to have worked elsewhere
than in Bahrain are hereby set aside. II

4. All claims other than those indicated in Annex Compromise Agreements

"B", including those for overtime work and
favorably granted by the POEA, are hereby Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII
dismissed for lack of substantial evidence in have submitted, from time to time, compromise agreements for our approval and
support thereof or are beyond the competence of jointly moved for the dismissal of their respective petitions insofar as the claimants-
this Commission to pass upon. parties to the compromise agreements were concerned (See Annex A for list of
claimants who signed quitclaims).
In addition, this Commission, in the exercise of its powers and
authority under Article 218(c) of the Labor Code, as amended by Thus the following manifestations that the parties had arrived at a compromise
R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this agreement and the corresponding motions for the approval of the agreements were
Commission to summon parties, conduct hearings and receive filed by the parties and approved by the Court:
evidence, as expeditiously as possible, and thereafter submit a
written report to this Commission (First Division) of the proceedings
taken, regarding the claims of the following: 1) Joint Manifestation and Motion involving claimant Emigdio
Abarquez and 47 co-claimants dated September 2, 1992 (G.R.
Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo,
(a) complainants identified and listed in Annex pp.
"D" attached and made an integral part of this 470-615);
Resolution, whose claims were dismissed by the
POEA for lack of proof of employment in Bahrain
(these complainants numbering 683, are listed in 2) Joint Manifestation and Motion involving petitioner Bienvenido
pages 13 to 23 of the decision of POEA, subject Cadalin and 82 co-petitioners dated September 3, 1992 (G.R. No.
of the appeals) and, 104776, Rollo, pp. 364-507);
3) Joint Manifestation and Motion involving claimant Jose 13) Joint Manifestation and Motion involving claimant Dante C.
M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Aceres and 37 co-claimants dated September 8, 1993 (G.R. No.
Nos. 105029-32, Rollo, pp. 613-722; G.R. No. 104776, Rollo, pp. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14,  Rollo, pp.
518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516); 987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);

4) Joint Manifestation and Motion involving claimant Antonio T. 14) Joint Manifestation and Motion involving Vivencio V. Abella and
Anglo and 17 co-claimants dated October 14, 1992 (G.R. Nos. 27 co-claimants dated January 10, 1994 (G.R. Nos. 105029-
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650- 32,  Rollo, Vol. II);
713; G.R. Nos. 104911-14, Rollo, pp. 530-590);
15) Joint Manifestation and Motion involving Domingo B. Solano
5) Joint Manifestation and Motion involving claimant Dionisio and six co-claimants dated August 25, 1994 (G.R. Nos. 105029-32;
Bobongo and 6 co-claimants dated January 15, 1993 (G.R. No. G.R. No. 104776; G.R. Nos. 104911-14).
104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp. 629-
652); III

6) Joint Manifestation and Motion involving claimant Valerio A. The facts as found by the NLRC are as follows:
Evangelista and 4 co-claimants dated March 10, 1993 (G.R. Nos.
104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp. 1815-
1829); We have taken painstaking efforts to sift over the more than fifty
volumes now comprising the records of these cases. From the
records, it appears that the complainants-appellants allege that they
7) Joint Manifestation and Motion involving claimants Palconeri were recruited by respondent-appellant AIBC for its accredited
Banaag and 5 co-claimants dated March 17, 1993 (G.R. No. foreign principal, Brown & Root, on various dates from 1975 to
104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp. 1983. They were all deployed at various projects undertaken by
655-675); Brown & Root in several countries in the Middle East, such as
Saudi Arabia, Libya, United Arab Emirates and Bahrain, as well as
8) Joint Manifestation and Motion involving claimant Benjamin in Southeast Asia, in Indonesia and Malaysia.
Ambrosio and 15 other co-claimants dated May 4, 1993 (G.R. Nos.
105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo, pp. Having been officially processed as overseas contract workers by
679-729; G.R. No. 104776, Rollo, pp. 1773-1814); the Philippine Government, all the individual complainants signed
standard overseas employment contracts (Records, Vols. 25-32.
9) Joint Manifestation and Motion involving Valerio Evangelista and Hereafter, reference to the records would be sparingly made,
3 co-claimants dated May 10, 1993 (G.R. No. 104776, Rollo, pp. considering their chaotic arrangement) with AIBC before their
1815-1829); departure from the Philippines. These overseas employment
contracts invariably contained the following relevant terms and
10) Joint Manifestation and Motion involving petitioner Quiterio R. conditions.
Agudo and 36 co-claimants dated June 14, 1993 (G.R. Nos.
105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp. PART B — xxxx
748-864; G.R. No. 104776, Rollo, pp. 1066-1183);
IV
11) Joint Manifestation and Motion involving claimant Arnaldo J.
Alonzo and 19 co-claimants dated July 22, 1993 (G.R. No. The issues raised before and resolved by the NLRC were:
104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp.
1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);
First: — Whether or not complainants are entitled to the benefits
provided by Amiri Decree No. 23 of Bahrain;
12) Joint Manifestation and Motion involving claimant Ricardo C.
Dayrit and 2 co-claimants dated September 7, 1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776,  Rollo, pp. (a) Whether or not the complainants who have
1243-1254; G.R. Nos. 104911-14, Rollo, pp. 972-984); worked in Bahrain are entitled to the above-
mentioned benefits.
 (b) Whether or not Art. 44 of the same Decree (b) Whether or not the undisputed fact that AIBC
(allegedly prescribing a more favorable treatment was a licensed construction contractor precludes
of alien employees) bars complainants from a finding that Brown & Root is liable for
enjoying its benefits. complainants claims.

Second: — Assuming that Amiri Decree No. 23 of Bahrain is Sixth: — Whether or not the POEA Administrator's failure to hold
applicable in these cases, whether or not complainants' claim for respondents in default constitutes a reversible error.
the benefits provided therein have prescribed.
Seventh: — Whether or not the POEA Administrator erred in
Third: — Whether or not the instant cases qualify as a class suit. dismissing the following claims:

Fourth: — Whether or not the proceedings conducted by the POEA, a. Unexpired portion of contract;
as well as the decision that is the subject of these appeals,
conformed with the requirements of due process; b. Interest earnings of Travel and Reserve Fund;

(a) Whether or not the respondent-appellant was c. Retirement and Savings Plan benefits;
denied its right to due process;
d. War Zone bonus or premium pay of at least
(b) Whether or not the admission of evidence by 100% of basic pay;
the POEA after these cases were submitted for
decision was valid;
e. Area Differential Pay;
(c) Whether or not the POEA acquired jurisdiction
over Brown & Root International, Inc.; f. Accrued interests on all the unpaid benefits;

(d) Whether or not the judgment awards are g. Salary differential pay;
supported by substantial evidence;
h. Wage differential pay;
(e) Whether or not the awards based on the
averages and formula presented by the i. Refund of SSS premiums not remitted to SSS;
complainants-appellants are supported by
substantial evidence; j. Refund of withholding tax not remitted to BIR;

(f) Whether or not the POEA awarded sums k. Fringe benefits under B & R's "A Summary of
beyond what the complainants-appellants prayed Employee Benefits" (Annex "Q" of Amended
for; and, if so, whether or not these awards are Complaint);
valid.

l. Moral and exemplary damages;

Fifth: — Whether or not the POEA erred in holding respondents
AIBC and Brown & Root jointly are severally liable for the judgment
awards despite the alleged finding that the former was the employer m. Attorney's fees of at least ten percent of the
of the complainants; judgment award;

(a) Whether or not the POEA has acquired n. Other reliefs, like suspending and/or cancelling
jurisdiction over Brown & Root; the license to recruit of AIBC and the
accreditation of B & R issued by POEA;
 o. Penalty for violations of Article 34 (prohibited On the seventh issue, which involved other money claims not based on the Amiri
practices), not excluding reportorial requirements Decree No. 23, NLRC ruled:
thereof.
(1) that the POEA Administrator has no jurisdiction over the claims
Eighth: — Whether or not the POEA Administrator erred in not for refund of the SSS premiums and refund of withholding taxes
dismissing POEA Case No. (L) 86-65-460 on the ground of and the claimants should file their claims for said refund with the
multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55). appropriate government agencies;

Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules (2) the claimants failed to establish that they are entitled to the
on Evidence governing the pleading and proof of a foreign law and admitted in claims which are not based on the overseas employment contracts
evidence a simple copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for nor the Amiri Decree No. 23 of 1976;
the Private Sector). NLRC invoked Article 221 of the Labor Code of the Philippines,
vesting on the Commission ample discretion to use every and all reasonable means (3) that the POEA Administrator has no jurisdiction over claims for
to ascertain the facts in each case without regard to the technicalities of law or moral and exemplary damages and nonetheless, the basis for
procedure. NLRC agreed with the POEA Administrator that the Amiri Decree No. 23, granting said damages was not established;
being more favorable and beneficial to the workers, should form part of the overseas
employment contract of the complainants.
(4) that the claims for salaries corresponding to the unexpired
portion of their contract may be allowed if filed within the three-year
NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who prescriptive period;
worked in Bahrain, and set aside awards of the POEA Administrator in favor of the
claimants, who worked elsewhere.
(5) that the allegation that complainants were prematurely
repatriated prior to the expiration of their overseas contract was not
On the second issue, NLRC ruled that the prescriptive period for the filing of the established; and
claims of the complainants was three years, as provided in Article 291 of the Labor
Code of the Philippines, and not ten years as provided in Article 1144 of the Civil
Code of the Philippines nor one year as provided in the Amiri Decree No. 23 of 1976. (6) that the POEA Administrator has no jurisdiction over the
complaint for the suspension or cancellation of the AIBC's
recruitment license and the cancellation of the accreditation of BRII.
On the third issue, NLRC agreed with the POEA Administrator that the labor cases
cannot be treated as a class suit for the simple reason that not all the complainants
worked in Bahrain and therefore, the subject matter of the action, the claims arising NLRC passed sub silencio  the last issue, the claim that POEA Case No. (L) 86-65-
from the Bahrain law, is not of common or general interest to all the complainants. 460 should have been dismissed on the ground that the claimants in said case were
also claimants in POEA Case No. (L) 84-06-555. Instead of dismissing POEA Case
No. (L) 86-65-460, the POEA just resolved the corresponding claims in POEA Case
On the fourth issue, NLRC found at least three infractions of the cardinal rules of No. (L) 84-06-555. In other words, the POEA did not pass upon the same claims
administrative due process: namely, (1) the failure of the POEA Administrator to twice.
consider the evidence presented by AIBC and BRII; (2) some findings of fact were not
supported by substantial evidence; and (3) some of the evidence upon which the
decision was based were not disclosed to AIBC and BRII during the hearing. V

On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and G.R. No. 104776
AIBC are solidarily liable for the claims of the complainants and held that BRII was the
actual employer of the complainants, or at the very least, the indirect employer, with Claimants in G.R. No. 104776 based their petition for certiorari on the following
AIBC as the labor contractor. grounds:

NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator
through the summons served on AIBC, its local agent.

On the sixth issue, NLRC held that the POEA Administrator was correct in denying
the Motion to Declare AIBC in default.
 (1) that they were deprived by NLRC and the POEA of their right to (4) that the prescriptive period for filing the claims is that prescribed
a speedy disposition of their cases as guaranteed by Section 16, by Article 291 of the Labor Code of the Philippines (three years)
Article III of the 1987 Constitution. The POEA Administrator allowed and not the one prescribed by Article 1144 of the Civil Code of the
private respondents to file their answers in two years (on June 19, Philippines (ten years); and
1987) after the filing of the original complaint (on April 2, 1985) and
NLRC, in total disregard of its own rules, affirmed the action of the (5) that they are not concerned with the issue of whether POEA
POEA Administrator; Case No. L-86-05-460 should be dismissed, this being a private
quarrel between the two labor lawyers (Rollo, pp. 292-305).
(2) that NLRC and the POEA Administrator should have declared
AIBC and BRII in default and should have rendered summary Attorney's Lien
judgment on the basis of the pleadings and evidence submitted by
claimants;
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint
manifestations and motions of AIBC and BRII dated September 2 and 11, 1992,
(3) the NLRC and POEA Administrator erred in not holding that the claiming that all the claimants who entered into the compromise agreements subject
labor cases filed by AIBC and BRII cannot be considered a class of said manifestations and motions were his clients and that Atty. Florante M. de
suit; Castro had no right to represent them in said agreements. He also claimed that the
claimants were paid less than the award given them by NLRC; that Atty. De Castro
(4) that the prescriptive period for the filing of the claims is ten collected additional attorney's fees on top of the 25% which he was entitled to
years; and receive; and that the consent of the claimants to the compromise agreements and
quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In the
(5) that NLRC and the POEA Administrator should have dismissed Resolution dated November 23, 1992, the Court denied the motion to strike out the
POEA Case No. L-86-05-460, the case filed by Atty. Florante de Joint Manifestations and Motions dated September 2 and 11, 1992 (G.R. Nos.
Castro (Rollo, pp. 31-40). 104911-14, Rollo, pp. 608-609).

AIBC and BRII, commenting on the petition in G.R. No. 104776, argued: On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce
Attorney's Lien," alleging that the claimants who entered into compromise agreements
with AIBC and BRII with the assistance of Atty. De Castro, had all signed a retainer
(1) that they were not responsible for the delay in the disposition of agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).
the labor cases, considering the great difficulty of getting all the
records of the more than 1,500 claimants, the piece-meal filing of
the complaints and the addition of hundreds of new claimants by Contempt of Court
petitioners;
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty.
(2) that considering the number of complaints and claimants, it was De Castro and Atty. Katz Tierra for contempt of court and for violation of Canons 1, 15
impossible to prepare the answers within the ten-day period and 16 of the Code of Professional Responsibility. The said lawyers allegedly misled
provided in the NLRC Rules, that when the motion to declare AIBC this Court, by making it appear that the claimants who entered into the compromise
in default was filed on July 19, 1987, said party had already filed its agreements were represented by Atty. De Castro, when in fact they were represented
answer, and that considering the staggering amount of the claims by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-1614).
(more than US$50,000,000.00) and the complicated issues raised
by the parties, the ten-day rule to answer was not fair and On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De
reasonable; Castro for unethical practices and moved for the voiding of the quitclaims submitted
by some of the claimants.
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter of G.R. Nos. 104911-14
the controversy — which was the applicability of the Amiri Decree
No. 23. Likewise, the nature of the claims varied, some being based The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the
on salaries pertaining to the unexpired portion of the contracts while grounds that NLRC gravely abused its discretion when it: (1) applied the three-year
others being for pure money claims. Each claimant demanded prescriptive period under the Labor Code of the Philippines; and (2) it denied the
separate claims peculiar only to himself and depending upon the claimant's formula based on an average overtime pay of three hours a day (Rollo, pp.
particular circumstances obtaining in his case; 18-22).
The claimants argue that said method was proposed by BRII itself during the The Solicitor General expressed his personal view that the prescriptive period was
negotiation for an amicable settlement of their money claims in Bahrain as shown in one year as prescribed by the Amiri Decree No. 23 of 1976 but he deferred to the
the Memorandum dated April 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. ruling of NLRC that Article 291 of the Labor Code of the Philippines was the operative
21-22). law.

BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that The POEA Administrator held the view that:
the prescriptive period in the Labor Code of the Philippines, a special law, prevails
over that provided in the Civil Code of the Philippines, a general law. These money claims (under Article 291 of the Labor Code) refer to
those arising from the employer's violation of the employee's right
As to the memorandum of the Ministry of Labor of Bahrain on the method of as provided by the Labor Code.
computing the overtime pay, BRII and AIBC claimed that they were not bound by
what appeared therein, because such memorandum was proposed by a subordinate In the instant case, what the respondents violated are not the rights
Bahrain official and there was no showing that it was approved by the Bahrain of the workers as provided by the Labor Code, but the provisions of
Minister of Labor. Likewise, they claimed that the averaging method was discussed in the Amiri Decree No. 23 issued in Bahrain, which ipso
the course of the negotiation for the amicable settlement of the dispute and any offer facto  amended the worker's contracts of employment. Respondents
made by a party therein could not be used as an admission by him (Rollo, pp. 228- consciously failed to conform to these provisions which specifically
236). provide for the increase of the worker's rate. It was only after June
30, 1983, four months after the brown builders brought a suit
G.R. Nos. 105029-32 against B & R in Bahrain for this same claim, when respondent
AIBC's contracts have undergone amendments in Bahrain for the
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its new hires/renewals (Respondent's Exhibit 7).
discretion when it: (1) enforced the provisions of the Amiri Decree No. 23 of 1976 and
not the terms of the employment contracts; (2) granted claims for holiday, overtime Hence, premises considered, the applicable law of prescription to
and leave indemnity pay and other benefits, on evidence admitted in contravention of this instant case is Article 1144 of the Civil Code of the Philippines,
petitioner's constitutional right to due process; and (3) ordered the POEA which provides:
Administrator to hold new hearings for the 683 claimants whose claims had been
dismissed for lack of proof by the POEA Administrator or NLRC itself. Lastly, they Art. 1144. The following actions may be brought
allege that assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC within ten years from the time the cause of action
erred when it did not apply the one-year prescription provided in said law (Rollo, pp. accrues:
29-30).
(1) Upon a written contract;
VI
(2) Upon an obligation created by law;
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
Thus, herein money claims of the complainants against the
All the petitions raise the common issue of prescription although they disagreed as to respondents shall prescribe in ten years from August 16, 1976.
the time that should be embraced within the prescriptive period. Inasmuch as all claims were filed within the ten-year prescriptive
period, no claim suffered the infirmity of being prescribed (G.R. No.
To the POEA Administrator, the prescriptive period was ten years, applying Article 104776, Rollo, 89-90).
1144 of the Civil Code of the Philippines. NLRC believed otherwise, fixing the
prescriptive period at three years as provided in Article 291 of the Labor Code of the In overruling the POEA Administrator, and holding that the prescriptive period is three
Philippines. years as provided in Article 291 of the Labor Code of the Philippines, the NLRC
argued as follows:
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different
grounds, insisted that NLRC erred in ruling that the prescriptive period applicable to The Labor Code provides that "all money claims arising from
the claims was three years, instead of ten years, as found by the POEA Administrator. employer-employee relations . . . shall be filed within three years
from the time the cause of action accrued; otherwise they shall be
forever barred" (Art. 291, Labor Code, as amended). This three-
 year prescriptive period shall be the one applied here and which establishes the period of limitation for all such rights, except certain
should be reckoned from the date of repatriation of each individual ones which are enumerated in Article 621. And there is nothing in
complainant, considering the fact that the case is having (sic) filed the record to indicate that the Panamanian legislature gave special
in this country. We do not agree with the POEA Administrator that consideration to the impact of Article 623 upon the particular rights
this three-year prescriptive period applies only to money claims sought to be enforced here, as distinguished from the other rights to
specifically recoverable under the Philippine Labor Code. Article which that Article is also applicable. Were we confronted with the
291 gives no such indication. Likewise, We can not consider question of whether the limitation period of Article 621 (which
complainants' cause/s of action to have accrued from a violation of carves out particular rights to be governed by a shorter limitation
their employment contracts. There was no violation; the claims period) is to be regarded as "substantive" or "procedural" under the
arise from the benefits of the law of the country where they worked. rule of "specifity" we might have a different case; but here on the
(G.R. No. 104776, Rollo, pp. surface of things we appear to be dealing with a "broad," and not a
90-91). "specific," statute of limitations (G.R. No. 104776, Rollo, pp.
92-94).
Anent the applicability of the one-year prescriptive period as provided by the Amiri
Decree No. 23 of 1976, NLRC opined that the applicability of said law was one of Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code
characterization, i.e., whether to characterize the foreign law on prescription or statute of the Philippines, which was applied by NLRC, refers only to claims "arising from the
of limitation as "substantive" or "procedural." NLRC cited the decision in Bournias v. employer's violation of the employee's right as provided by the Labor Code." They
Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was the assert that their claims are based on the violation of their employment contracts, as
applicability of the Panama Labor Code in a case filed in the State of New York for amended by the Amiri Decree No. 23 of 1976 and therefore the claims may be
claims arising from said Code. In said case, the claims would have prescribed under brought within ten years as provided by Article 1144 of the Civil Code of the
the Panamanian Law but not under the Statute of Limitations of New York. The U.S. Philippines (Rollo, G.R. Nos. 104911-14, pp.
Circuit Court of Appeals held that the Panamanian Law was procedural as it was not 18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70
"specifically intended to be substantive," hence, the prescriptive period provided in the SCRA 244 (1976).
law of the forum should apply. The Court observed:
AIBC and BRII, insisting that the actions on the claims have prescribed under the
. . . And where, as here, we are dealing with a statute of limitations Amiri Decree No. 23 of 1976, argue that there is in force in the Philippines a
of a foreign country, and it is not clear on the face of the statute that "borrowing law," which is Section 48 of the Code of Civil Procedure and that where
its purpose was to limit the enforceability, outside as well as within such kind of law exists, it takes precedence over the common-law conflicts rule (G.R.
the foreign country concerned, of the substantive rights to which the No. 104776, Rollo, pp. 45-46).
statute pertains, we think that as a yardstick for determining
whether that was the purpose this test is the most satisfactory one. First to be determined is whether it is the Bahrain law on prescription of action based
It does not lead American courts into the necessity of examining on the Amiri Decree No. 23 of 1976 or a Philippine law on prescription that shall be
into the unfamiliar peculiarities and refinements of different foreign the governing law.
legal systems. . .
Article 156 of the Amiri Decree No. 23 of 1976 provides:
The court further noted:
A claim arising out of a contract of employment shall not be
xxx xxx xxx actionable after the lapse of one year from the date of the expiry of
the contract. (G.R. Nos. 105029-31, Rollo, p. 226).
Applying that test here it appears to us that the libelant is entitled to
succeed, for the respondents have failed to satisfy us that the As a general rule, a foreign procedural law will not be applied in the forum. Procedural
Panamanian period of limitation in question was specifically aimed matters, such as service of process, joinder of actions, period and requisites for
against the particular rights which the libelant seeks to enforce. The appeal, and so forth, are governed by the laws of the forum. This is true even if the
Panama Labor Code is a statute having broad objectives, viz: "The action is based upon a foreign substantive law (Restatement of the Conflict of Laws,
present Code regulates the relations between capital and labor, Sec. 685; Salonga, Private International Law, 131 [1979]).
placing them on a basis of social justice, so that, without injuring
any of the parties, there may be guaranteed for labor the necessary
conditions for a normal life and to capital an equitable return to its A law on prescription of actions is sui generis  in Conflict of Laws in the sense that it
investment." In pursuance of these objectives the Code gives may be viewed either as procedural or substantive, depending on the characterization
laborers various rights against their employers. Article 623 given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied Sec. 3. The State shall afford full protection to labor, local and
the statute of limitations of New York, instead of the Panamanian law, after finding overseas, organized and unorganized, and promote full
that there was no showing that the Panamanian law on prescription was intended to employment and equality of employment opportunities for all.
be substantive. Being considered merely a procedural law even in Panama, it has to
give way to the law of the forum on prescription of actions. Having determined that the applicable law on prescription is the Philippine law, the
next question is whether the prescriptive period governing the filing of the claims is
However, the characterization of a statute into a procedural or substantive law three years, as provided by the Labor Code or ten years, as provided by the Civil
becomes irrelevant when the country of the forum has a "borrowing statute." Said Code of the Philippines.
statute has the practical effect of treating the foreign statute of limitation as one of
substance (Goodrich, Conflict of Laws 152-153 [1938]). A "borrowing statute" directs The claimants are of the view that the applicable provision is Article 1144 of the Civil
the state of the forum to apply the foreign statute of limitations to the pending claims Code of the Philippines, which provides:
based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are several kinds of
"borrowing statutes," one form provides that an action barred by the laws of the place
where it accrued, will not be enforced in the forum even though the local statute has The following actions must be brought within ten years from the
not run against it (Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 time the right of action accrues:
of our Code of Civil Procedure is of this kind. Said Section provides:
(1) Upon a written contract;
If by the laws of the state or country where the cause of action
arose, the action is barred, it is also barred in the Philippines (2) Upon an obligation created by law;
Islands.
(3) Upon a judgment.
Section 48 has not been repealed or amended by the Civil Code of the Philippines.
Article 2270 of said Code repealed only those provisions of the Code of Civil NLRC, on the other hand, believes that the applicable provision is Article 291 of the
Procedures as to which were inconsistent with it. There is no provision in the Civil Labor Code of the Philippines, which in pertinent part provides:
Code of the Philippines, which is inconsistent with or contradictory to Section 48 of
the Code of Civil Procedure (Paras, Philippine Conflict of Laws 104 [7th ed.]).
Money claims-all money claims arising from employer-employee
relations accruing during the effectivity of this Code shall be filed
In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex within three (3) years from the time the cause of action accrued,
proprio vigore insofar as it ordains the application in this jurisdiction of Section 156 of otherwise they shall be forever barred.
the Amiri Decree No. 23 of 1976.

xxx xxx xxx

The courts of the forum will not enforce any foreign claim obnoxious to the forum's
public policy (Canadian Northern Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402,
64 L. ed. 713 [1920]). To enforce the one-year prescriptive period of the Amiri Decree The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc.,
No. 23 of 1976 as regards the claims in question would contravene the public policy 70 SCRA 244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable
on the protection to labor. to the cases at bench (Rollo, p. 21). The said case involved the correct computation
of overtime pay as provided in the collective bargaining agreements and not the
Eight-Hour Labor Law.
In the Declaration of Principles and State Policies, the 1987 Constitution emphasized
that:
As noted by the Court: "That is precisely why petitioners did not make any reference
as to the computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and
The state shall promote social justice in all phases of national 4, CA No. 494) and instead insisted that work computation provided in the collective
development. (Sec. 10). bargaining agreements between the parties be observed. Since the claim for pay
differentials is primarily anchored on the written contracts between the litigants, the
The state affirms labor as a primary social economic force. It shall ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code should
protect the rights of workers and promote their welfare (Sec. 18). govern."

In article XIII on Social Justice and Human Rights, the 1987 Constitution provides: Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No.
19933) provides:
 Any action to enforce any cause of action under this Act shall be It is true that the constitutional right to "a speedy disposition of cases" is not limited to
commenced within three years after the cause of action accrued the accused in criminal proceedings but extends to all parties in all cases, including
otherwise such action shall be forever barred, . . . . civil and administrative cases, and in all proceedings, including judicial and quasi-
judicial hearings. Hence, under the Constitution, any party to a case may demand
The court further explained: expeditious action on all officials who are tasked with the administration of justice.

The three-year prescriptive period fixed in the Eight-Hour Labor However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy
Law (CA No. 444 as amended) will apply, if the claim for disposition of cases" is a relative term. Just like the constitutional guarantee of
differentials for overtime work is solely based on said law, and not "speedy trial" accorded to the accused in all criminal proceedings, "speedy disposition
on a collective bargaining agreement or any other contract. In the of cases" is a flexible concept. It is consistent with delays and depends upon the
instant case, the claim for overtime compensation is not so much circumstances of each case. What the Constitution prohibits are unreasonable,
because of Commonwealth Act No. 444, as amended but because arbitrary and oppressive delays which render rights nugatory.
the claim is demandable right of the employees, by reason of the
above-mentioned collective bargaining agreement. Caballero laid down the factors that may be taken into consideration in determining
whether or not the right to a "speedy disposition of cases" has been violated, thus:
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing
"actions to enforce any cause of action under said law." On the other hand, Article In the determination of whether or not the right to a "speedy trial"
291 of the Labor Code of the Philippines provides the prescriptive period for filing has been violated, certain factors may be considered and balanced
"money claims arising from employer-employee relations." The claims in the cases at against each other. These are length of delay, reason for the delay,
bench all arose from the employer-employee relations, which is broader in scope than assertion of the right or failure to assert it, and prejudice caused by
claims arising from a specific law or from the collective bargaining agreement. the delay. The same factors may also be considered in answering
judicial inquiry whether or not a person officially charged with the
The contention of the POEA Administrator, that the three-year prescriptive period administration of justice has violated the speedy disposition of
under Article 291 of the Labor Code of the Philippines applies only to money claims cases.
specifically recoverable under said Code, does not find support in the plain language
of the provision. Neither is the contention of the claimants in G.R. Nos. 104911-14 Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:
that said Article refers only to claims "arising from the employer's violation of the
employee's right," as provided by the Labor Code supported by the facial reading of It must be here emphasized that the right to a speedy disposition of
the provision. a case, like the right to speedy trial, is deemed violated only when
the proceeding is attended by vexatious, capricious, and oppressive
VII delays; or when unjustified postponements of the trial are asked for
and secured, or when without cause or justified motive a long
G.R. No. 104776 period of time is allowed to elapse without the party having his case
tried.
A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1)
that while their complaints were filed on June 6, 1984 with POEA, the case was Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the
decided only on January 30, 1989, a clear denial of their right to a speedy disposition amended complaint, claimants had been asking that AIBC and BRII be declared in
of the case; and (2) that NLRC and the POEA Administrator should have declared default for failure to file their answers within the ten-day period provided in Section 1,
AIBC and BRII in default (Rollo, pp. Rule III of Book VI of the Rules and Regulations of the POEA. At that time, there was
31-35). a pending motion of AIBC and BRII to strike out of the records the amended
complaint and the "Compliance" of claimants to the order of the POEA, requiring them
to submit a bill of particulars.
Claimants invoke a new provision incorporated in the 1987 Constitution, which
provides:
The cases at bench are not of the run-of-the-mill variety, such that their final
disposition in the administrative level after seven years from their inception, cannot be
Sec. 16. All persons shall have the right to a speedy disposition of said to be attended by unreasonable, arbitrary and oppressive delays as to violate the
their cases before all judicial, quasi-judicial, or administrative constitutional rights to a speedy disposition of the cases of complainants.
bodies.
The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. to strike out the complaint from the records for failure of claimants to submit a proper
Said complaint had undergone several amendments, the first being on April 3, 1985. bill of particulars. While the POEA Administrator denied the motion to strike out the
complaint, he ordered the claimants "to correct the deficiencies" pointed out by AIBC.
The claimants were hired on various dates from 1975 to 1983. They were deployed in
different areas, one group in and the other groups outside of, Bahrain. The monetary Before an intelligent answer could be filed in response to the complaint, the records of
claims totalling more than US$65 million according to Atty. Del Mundo, included: employment of the more than 1,700 claimants had to be retrieved from various
countries in the Middle East. Some of the records dated as far back as 1975.
1. Unexpired portion of contract;
The hearings on the merits of the claims before the POEA Administrator were
2. Interest earnings of Travel and Fund; interrupted several times by the various appeals, first to NLRC and then to the
Supreme Court.
3. Retirement and Savings Plan benefit;
Aside from the inclusion of additional claimants, two new cases were filed against
AIBC and BRII on October 10, 1985 (POEA Cases Nos.
4. War Zone bonus or premium pay of at least 100% of basic pay; L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA
Case No. L-86-05-460). NLRC, in exasperation, noted that the exact number of
5. Area Differential pay; claimants had never been completely established (Resolution, Sept. 2, 1991, G.R.
No. 104776, Rollo, p. 57). All the three new cases were consolidated with POEA
6. Accrued Interest of all the unpaid benefits; Case No. L-84-06-555.

7. Salary differential pay; NLRC blamed the parties and their lawyers for the delay in terminating the
proceedings, thus:

8. Wage Differential pay;

These cases could have been spared the long and arduous route
towards resolution had the parties and their counsel been more
9. Refund of SSS premiums not remitted to Social Security System; interested in pursuing the truth and the merits of the claims rather
than exhibiting a fanatical reliance on technicalities. Parties and
10. Refund of Withholding Tax not remitted to Bureau of Internal counsel have made these cases a litigation of emotion. The
Revenue (B.I.R.); intransigence of parties and counsel is remarkable. As late as last
month, this Commission made a last and final attempt to bring the
counsel of all the parties (this Commission issued a special order
11. Fringe Benefits under Brown & Root's "A Summary of
directing respondent Brown & Root's resident agent/s to appear) to
Employees Benefits consisting of 43 pages (Annex "Q" of Amended
come to a more conciliatory stance. Even this failed (Rollo,
Complaint);
p. 58).

12. Moral and Exemplary Damages;

The squabble between the lawyers of claimants added to the delay in the disposition
of the cases, to the lament of NLRC, which complained:
13. Attorney's fees of at least ten percent of amounts;
It is very evident from the records that the protagonists in these
14. Other reliefs, like suspending and/or cancelling the license to consolidated cases appear to be not only the individual
recruit of AIBC and issued by the POEA; and complainants, on the one hand, and AIBC and Brown & Root, on
the other hand. The two lawyers for the complainants, Atty. Gerardo
15. Penalty for violation of Article 34 (Prohibited practices) not Del Mundo and Atty. Florante De Castro, have yet to settle the right
excluding reportorial requirements thereof (NLRC Resolution, of representation, each one persistently claiming to appear in behalf
September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74). of most of the complainants. As a result, there are two appeals by
the complainants. Attempts by this Commission to resolve
counsels' conflicting claims of their respective authority to represent
Inasmuch as the complaint did not allege with sufficient definiteness and clarity of
the complainants prove futile. The bickerings by these two counsels
some facts, the claimants were ordered to comply with the motion of AIBC for a bill of
are reflected in their pleadings. In the charges and countercharges
particulars. When claimants filed their "Compliance and Manifestation," AIBC moved
 of falsification of documents and signatures, and in the disbarment must fairly represent and protect the interests of the others (Dimayuga v. Court of
proceedings by one against the other. All these have, to a large Industrial Relations, 101 Phil. 590 [1957]). For this matter, the claimants who worked
extent, abetted in confounding the issues raised in these cases, in Bahrain can not be allowed to sue in a class suit in a judicial proceeding. The most
jumble the presentation of evidence, and even derailed the that can be accorded to them under the Rules of Court is to be allowed to join as
prospects of an amicable settlement. It would not be far-fetched to plaintiffs in one complaint (Revised Rules of Court, Rule 3, Sec. 6).
imagine that both counsel, unwittingly, perhaps, painted a rainbow
for the complainants, with the proverbial pot of gold at its end The Court is extra-cautious in allowing class suits because they are the exceptions to
containing more than US$100 million, the aggregate of the claims in the condition sine qua non, requiring the joinder of all indispensable parties.
these cases. It is, likewise, not improbable that their misplaced zeal
and exuberance caused them to throw all caution to the wind in the
matter of elementary rules of procedure and evidence (Rollo, pp. In an improperly instituted class suit, there would be no problem if the decision
58-59). secured is favorable to the plaintiffs. The problem arises when the decision is adverse
to them, in which case the others who were impleaded by their self-appointed
representatives, would surely claim denial of due process.
Adding to the confusion in the proceedings before NLRC, is the listing of some of the
complainants in both petitions filed by the two lawyers. As noted by NLRC, "the
problem created by this situation is that if one of the two petitions is dismissed, then C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and
the parties and the public respondents would not know which claim of which petitioner NLRC should have declared Atty. Florante De Castro guilty of "forum shopping,
was dismissed and which was not." ambulance chasing activities, falsification, duplicity and other unprofessional
activities" and his appearances as counsel for some of the claimants as illegal (Rollo,
pp. 38-40).
B. Claimants insist that all their claims could properly be consolidated in a "class suit"
because "all the named complainants have similar money claims and similar rights
sought irrespective of whether they worked in Bahrain, United Arab Emirates or in The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop
Abu Dhabi, Libya or in any part of the Middle East" (Rollo, pp. 35-38). to the practice of some parties of filing multiple petitions and complaints involving the
same issues, with the result that the courts or agencies have to resolve the same
issues. Said Rule, however, applies only to petitions filed with the Supreme Court and
A class suit is proper where the subject matter of the controversy is one of common or the Court of Appeals. It is entitled "Additional Requirements For Petitions Filed with
general interest to many and the parties are so numerous that it is impracticable to the Supreme Court and the Court of Appeals To Prevent Forum Shopping or Multiple
bring them all before the court (Revised Rules of Court, Rule 3, Sec. 12). Filing of Petitioners and Complainants." The first sentence of the circular expressly
states that said circular applies to an governs the filing of petitions in the Supreme
While all the claims are for benefits granted under the Bahrain Law, many of the Court and the Court of Appeals.
claimants worked outside Bahrain. Some of the claimants were deployed in Indonesia
and Malaysia under different terms and conditions of employment. While Administrative Circular No. 04-94 extended the application of the anti-forum
shopping rule to the lower courts and administrative agencies, said circular took effect
NLRC and the POEA Administrator are correct in their stance that inasmuch as the only on April 1, 1994.
first requirement of a class suit is not present (common or general interest based on
the Amiri Decree of the State of Bahrain), it is only logical that only those who worked POEA and NLRC could not have entertained the complaint for unethical conduct
in Bahrain shall be entitled to file their claims in a class suit. against Atty. De Castro because NLRC and POEA have no jurisdiction to investigate
charges of unethical conduct of lawyers.
While there are common defendants (AIBC and BRII) and the nature of the claims is
the same (for employee's benefits), there is no common question of law or fact. While Attorney's Lien
some claims are based on the Amiri Law of Bahrain, many of the claimants never
worked in that country, but were deployed elsewhere. Thus, each claimant is
interested only in his own demand and not in the claims of the other employees of The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was
defendants. The named claimants have a special or particular interest in specific filed by Atty. Gerardo A. Del Mundo to protect his claim for attorney's fees for legal
benefits completely different from the benefits in which the other named claimants services rendered in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844).
and those included as members of a "class" are claiming (Berses v. Villanueva, 25
Phil. 473 [1913]). It appears that each claimant is only interested in collecting his own A statement of a claim for a charging lien shall be filed with the court or administrative
claims. A claimants has no concern in protecting the interests of the other claimants agency which renders and executes the money judgment secured by the lawyer for
as shown by the fact, that hundreds of them have abandoned their co-claimants and his clients. The lawyer shall cause written notice thereof to be delivered to his clients
have entered into separate compromise settlements of their respective claims. A and to the adverse party (Revised Rules of Court, Rule 138, Sec. 37). The statement
principle basic to the concept of "class suit" is that plaintiffs brought on the record
of the claim for the charging lien of Atty. Del Mundo should have been filed with the 4. Payment of US$8.72 per months (sic) of service as
administrative agency that rendered and executed the judgment. compensation for the difference of the wages of the overtime done
for each Philippino (sic) employee . . . (Rollo, p.22).
Contempt of Court
BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and a subordinate official in the Bahrain Department of Labor; (2) that there was no
Atty. Katz Tierra for violation of the Code of Professional Responsibility should be showing that the Bahrain Minister of Labor had approved said memorandum; and (3)
filed in a separate and appropriate proceeding. that the offer was made in the course of the negotiation for an amicable settlement of
the claims and therefore it was not admissible in evidence to prove that anything is
due to the claimants.
G.R. No. 104911-14
While said document was presented to the POEA without observing the rule on
Claimants charge NLRC with grave abuse of discretion in not accepting their formula presenting official documents of a foreign government as provided in Section 24, Rule
of "Three Hours Average Daily Overtime" in computing the overtime payments. They 132 of the 1989 Revised Rules on Evidence, it can be admitted in evidence in
claim that it was BRII itself which proposed the formula during the negotiations for the proceedings before an administrative body. The opposing parties have a copy of the
settlement of their claims in Bahrain and therefore it is in estoppel to disclaim said said memorandum, and they could easily verify its authenticity and accuracy.
offer (Rollo, pp. 21-22).
The admissibility of the offer of compromise made by BRII as contained in the
Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April memorandum is another matter. Under Section 27, Rule 130 of the 1989 Revised
16, 1983, which in pertinent part states: Rules on Evidence, an offer to settle a claim is not an admission that anything is due.

After the perusal of the memorandum of the Vice President and the Said Rule provides:
Area Manager, Middle East, of Brown & Root Co. and the Summary
of the compensation offered by the Company to the employees in
respect of the difference of pay of the wages of the overtime and Offer of compromise not admissible. — In civil cases, an offer of
the difference of vacation leave and the perusal of the documents compromise is not an admission of any liability, and is not
attached thereto i.e., minutes of the meetings between the admissible in evidence against the offeror.
Representative of the employees and the management of the
Company, the complaint filed by the employees on 14/2/83 where This Rule is not only a rule of procedure to avoid the cluttering of the record with
they have claimed as hereinabove stated, sample of the Service unwanted evidence but a statement of public policy. There is great public interest in
Contract executed between one of the employees and the company having the protagonists settle their differences amicable before these ripen into
through its agent in (sic) Philippines, Asia International Builders litigation. Every effort must be taken to encourage them to arrive at a settlement. The
Corporation where it has been provided for 48 hours of work per submission of offers and counter-offers in the negotiation table is a step in the right
week and an annual leave of 12 days and an overtime wage of 1 & direction. But to bind a party to his offers, as what claimants would make this Court
1/4 of the normal hourly wage. do, would defeat the salutary purpose of the Rule.

xxx xxx xxx G.R. Nos. 105029-32

The Company in its computation reached the following averages: A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits
than those stipulated in the overseas-employment contracts of the claimants. It was of
A. 1. The average duration of the actual service of the employee is the belief that "where the laws of the host country are more favorable and beneficial
35 months for the Philippino (sic) employees . . . . to the workers, then the laws of the host country shall form part of the overseas
employment contract." It quoted with approval the observation of the POEA
Administrator that ". . . in labor proceedings, all doubts in the implementation of the
2. The average wage per hour for the Philippino (sic) employee is provisions of the Labor Code and its implementing regulations shall be resolved in
US$2.69 . . . . favor of labor" (Rollo, pp. 90-94).

3. The average hours for the overtime is 3 hours plus in all public AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to
holidays and weekends. enforce the overseas-employment contracts, which became the law of the parties.
They contend that the principle that a law is deemed to be a part of a contract applies Applying the said legal precepts, we read the overseas-employment contracts in
only to provisions of Philippine law in relation to contracts executed in the Philippines. question as adopting the provisions of the Amiri Decree No. 23 of 1976 as part and
parcel thereof.
The overseas-employment contracts, which were prepared by AIBC and BRII
themselves, provided that the laws of the host country became applicable to said The parties to a contract may select the law by which it is to be governed (Cheshire,
contracts if they offer terms and conditions more favorable that those stipulated Private International Law, 187 [7th ed.]). In such a case, the foreign law is adopted as
therein. It was stipulated in said contracts that: a "system" to regulate the relations of the parties, including questions of their capacity
to enter into the contract, the formalities to be observed by them, matters of
The Employee agrees that while in the employ of the Employer, he performance, and so forth (16 Am Jur 2d,150-161).
will not engage in any other business or occupation, nor seek
employment with anyone other than the Employer; that he shall Instead of adopting the entire mass of the foreign law, the parties may just agree that
devote his entire time and attention and his best energies, and specific provisions of a foreign statute shall be deemed incorporated into their
abilities to the performance of such duties as may be assigned to contract "as a set of terms." By such reference to the provisions of the foreign law, the
him by the Employer; that he shall at all times be subject to the contract does not become a foreign contract to be governed by the foreign law. The
direction and control of the Employer; and that the benefits provided said law does not operate as a statute but as a set of contractual terms deemed
to Employee hereunder are substituted for and in lieu of all other written in the contract (Anton, Private International Law, 197 [1967]; Dicey and Morris,
benefits provided by any applicable law,  provided of course, that The Conflict of Laws, 702-703, [8th ed.]).
total remuneration and benefits do not fall below that of the host
country regulation or custom, it being understood that should A basic policy of contract is to protect the expectation of the parties (Reese, Choice of
applicable laws establish that fringe benefits, or other such benefits Law in Torts and Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]).
additional to the compensation herein agreed cannot be waived, Such party expectation is protected by giving effect to the parties' own choice of the
Employee agrees that such compensation will be adjusted applicable law (Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The
downward so that the total compensation hereunder, plus the non- choice of law must, however, bear some relationship to the parties or their transaction
waivable benefits shall be equivalent to the compensation herein (Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no question that the
agreed (Rollo, pp. 352-353). contracts sought to be enforced by claimants have a direct connection with the
Bahrain law because the services were rendered in that country.
The overseas-employment contracts could have been drafted more felicitously. While
a part thereof provides that the compensation to the employee may be "adjusted In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982),
downward so that the total computation (thereunder) plus the non-waivable benefits the "Employment Agreement," between Norse Management Co. and the late husband
shall be equivalent to the compensation" therein agreed, another part of the same of the private respondent, expressly provided that in the event of illness or injury to
provision categorically states "that total remuneration and benefits do not fall below the employee arising out of and in the course of his employment and not due to his
that of the host country regulation and custom." own misconduct, "compensation shall be paid to employee in accordance with and
subject to the limitation of the Workmen's Compensation Act of the Republic of the
Any ambiguity in the overseas-employment contracts should be interpreted against Philippines or the Worker's Insurance Act of registry of the vessel, whichever is
AIBC and BRII, the parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine- greater." Since the laws of Singapore, the place of registry of the vessel in which the
Verkaufs-Union, 93 SCRA 257 [1979]). late husband of private respondent served at the time of his death, granted a better
compensation package, we applied said foreign law in preference to the terms of the
Article 1377 of the Civil Code of the Philippines provides: contract.

The interpretation of obscure words or stipulations in a contract The case of Bagong Filipinas Overseas Corporation v. National Labor Relations
shall not favor the party who caused the obscurity. Commission, 135 SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to
the facts of the cases at bench. The issue in that case was whether the amount of the
death compensation of a Filipino seaman should be determined under the shipboard
Said rule of interpretation is applicable to contracts of adhesion where there is already employment contract executed in the Philippines or the Hongkong law. Holding that
a prepared form containing the stipulations of the employment contract and the the shipboard employment contract was controlling, the court differentiated said case
employees merely "take it or leave it." The presumption is that there was an from Norse Management Co. in that in the latter case there was an express
imposition by one party against the other and that the employees signed the contracts stipulation in the employment contract that the foreign law would be applicable if it
out of necessity that reduced their bargaining power (Fieldmen's Insurance Co., Inc. afforded greater compensation.
v. Songco, 25 SCRA 70 [1968]).
B. AIBC and BRII claim that they were denied by NLRC of their right to due process NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which
when said administrative agency granted Friday-pay differential, holiday-pay empowers it "[to] conduct investigation for the determination of a question, matter or
differential, annual-leave differential and leave indemnity pay to the claimants listed in controversy, within its jurisdiction, . . . ."
Annex B of the Resolution. At first, NLRC reversed the resolution of the POEA
Administrator granting these benefits on a finding that the POEA Administrator failed It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to
to consider the evidence presented by AIBC and BRII, that some findings of fact of remand a case involving claims which had already been dismissed because such
the POEA Administrator were not supported by the evidence, and that some of the provision contemplates only situations where there is still a question or controversy to
evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But be resolved (Rollo, pp. 41-42).
instead of remanding the case to the POEA Administrator for a new hearing, which
means further delay in the termination of the case, NLRC decided to pass upon the
validity of the claims itself. It is this procedure that AIBC and BRII complain of as A principle well embedded in Administrative Law is that the technical rules of
being irregular and a "reversible error." procedure and evidence do not apply to the proceedings conducted by administrative
agencies (First Asian Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542
[1986]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]). This
They pointed out that NLRC took into consideration evidence submitted on appeal, principle is enshrined in Article 221 of the Labor Code of the Philippines and is now
the same evidence which NLRC found to have been "unilaterally submitted by the the bedrock of proceedings before NLRC.
claimants and not disclosed to the adverse parties" (Rollo, pp. 37-39).
Notwithstanding the non-applicability of technical rules of procedure and evidence in
NLRC noted that so many pieces of evidentiary matters were submitted to the POEA administrative proceedings, there are cardinal rules which must be observed by the
administrator by the claimants after the cases were deemed submitted for resolution hearing officers in order to comply with the due process requirements of the
and which were taken cognizance of by the POEA Administrator in resolving the Constitution. These cardinal rules are collated in Ang Tibay v. Court of Industrial
cases. While AIBC and BRII had no opportunity to refute said evidence of the Relations, 69 Phil. 635 (1940).
claimants before the POEA Administrator, they had all the opportunity to rebut said
evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were VIII
able to present before NLRC additional evidence which they failed to present before
the POEA Administrator. The three petitions were filed under Rule 65 of the Revised Rules of Court on the
grounds that NLRC had committed grave abuse of discretion amounting to lack of
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use jurisdiction in issuing the questioned orders. We find no such abuse of discretion.
every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest WHEREFORE, all the three petitions are DISMISSED.
of due process."
SO ORDERED.
In deciding to resolve the validity of certain claims on the basis of the evidence of
both parties submitted before the POEA Administrator and NLRC, the latter Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.
considered that it was not expedient to remand the cases to the POEA Administrator
for that would only prolong the already protracted legal controversies.

Even the Supreme Court has decided appealed cases on the merits instead of
remanding them to the trial court for the reception of evidence, where the same can
be readily determined from the uncontroverted facts on record (Development Bank of
the Philippines v. Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan
v. National Labor Relations Commission, 127 SCRA 463 [1984]).

C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the
POEA Administrator to hold new hearings for 683 claimants listed in Annex D of the
Resolution dated September 2, 1991 whose claims had been denied by the POEA
Administrator "for lack of proof" and for 69 claimants listed in Annex E of the same
Resolution, whose claims had been found by NLRC itself as not "supported by
evidence" (Rollo, pp. 41-45).
G.R. No. 112573 February 9, 1995 On April 24, 1980, bailiff returned to the defendant's office to serve
the summons. Mr. Dinozo refused to accept the same claiming that
NORTHWEST ORIENT AIRLINES, INC. petitioner,  he was no longer an employee of the defendant.
vs.
COURT OF APPEALS and C.F. SHARP & COMPANY INC., respondents. After the two attempts of service were unsuccessful, the judge of
the Tokyo District Court decided to have the complaint and the writs
of summons served at the head office of the defendant in Manila.
On July 11, 1980, the Director of the Tokyo District Court requested
the Supreme Court of Japan to serve the summons through
PADILLA, JR., J.: diplomatic channels upon the defendant's head office in Manila.

This petition for review on certiorari seeks to set aside the decision of the Court of On August 28, 1980, defendant received from Deputy Sheriff
Appeals affirming the dismissal of the petitioner's complaint to enforce the judgment Rolando Balingit the writ of summons (p. 276, Records). Despite
of a Japanese court. The principal issue here is whether a Japanese court can receipt of the same, defendant failed to appear at the scheduled
acquire jurisdiction over a Philippine corporation doing business in Japan by serving hearing. Thus, the Tokyo Court proceeded to hear the plaintiff's
summons through diplomatic channels on the Philippine corporation at its principal complaint and on [January 29, 1981], rendered judgment ordering
office in Manila after prior attempts to serve summons in Japan had failed. the defendant to pay the plaintiff the sum of 83,158,195 Yen and
damages for delay at the rate of 6% per annum from August 28,
Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a corporation 1980 up to and until payment is completed (pp. 12-14, Records).
organized under the laws of the State of Minnesota, U.S.A., sought to enforce in Civil
Case No. 83-17637 of the Regional Trial Court (RTC), Branch 54, Manila, a judgment On March 24, 1981, defendant received from Deputy Sheriff
rendered in its favor by a Japanese court against private respondent C.F. Sharp & Balingit copy of the judgment. Defendant not having appealed the
Company, Inc., (hereinafter SHARP), a corporation incorporated under Philippine judgment, the same became final and executory.
laws.
Plaintiff was unable to execute the decision in Japan, hence, on
As found by the Court of Appeals in the challenged decision of 10 November May 20, 1983, a suit for enforcement of the judgment was filed by
1993, 1 the following are the factual and procedural antecedents of this controversy: plaintiff before the Regional Trial Court of Manila Branch 54.2

On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. On July 16, 1983, defendant filed its answer averring that the
Sharp & Company, through its Japan branch, entered into an judgment of the Japanese Court sought to be enforced is null and
International Passenger Sales Agency Agreement, whereby the void and unenforceable in this jurisdiction having been rendered
former authorized the latter to sell its air transportation tickets. without due and proper notice to the defendant and/or with collusion
Unable to remit the proceeds of the ticket sales made by defendant or fraud and/or upon a clear mistake of law and fact (pp. 41-45,
on behalf of the plaintiff under the said agreement, plaintiff on Rec.).
March 25, 1980 sued defendant in Tokyo, Japan, for collection of
the unremitted proceeds of the ticket sales, with claim for damages.
Unable to settle the case amicably, the case was tried on the
merits. After the plaintiff rested its case, defendant on April 21,
On April 11, 1980, a writ of summons was issued by the 36th Civil 1989, filed a Motion for Judgment on a Demurrer to Evidence
Department, Tokyo District Court of Japan against defendant at its based on two grounds: 
office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho, Naka- (1) the foreign judgment sought to be enforced is null and void for
ku, Yokohoma, Kanagawa Prefecture. The attempt to serve the want of jurisdiction and (2) the said judgment is contrary to
summons was unsuccessful because the bailiff was advised by a Philippine law and public policy and rendered without due process
person in the office that Mr. Dinozo, the person believed to be of law. Plaintiff filed its opposition after which the court a
authorized to receive court processes was in Manila and would be quo rendered the now assailed decision dated June 21, 1989
back on April 24, 1980. granting the demurrer motion and dismissing the complaint
(Decision, pp. 376-378, Records). In granting the demurrer motion,
the trial court held that:
 The foreign judgment in the Japanese Court In its decision, the Court of Appeals sustained the trial court. It agreed with the latter
sought in this action is null and void for want of in its reliance upon Boudard vs.Tait  4 wherein it was held that "the process of the
jurisdiction over the person of the defendant court has no extraterritorial effect and no jurisdiction is acquired over the person of
considering that this is an action in personam; the the defendant by serving him beyond the boundaries of the state." To support its
Japanese Court did not acquire jurisdiction over position, the Court of Appeals further stated:
the person of the defendant because
jurisprudence requires that the defendant be In an action strictly in personam, such as the instant case, personal
served with summons in Japan in order for the service of summons within the forum is required for the court to
Japanese Court to acquire jurisdiction over it, the acquire jurisdiction over the defendant (Magdalena Estate Inc. vs.
process of the Court in Japan sent to the Nieto, 125 SCRA 230). To confer jurisdiction on the court, personal
Philippines which is outside Japanese jurisdiction or substituted service of summons on the defendant not
cannot confer jurisdiction over the defendant in extraterritorial service is necessary (Dial Corp vs. Soriano, 161
the case before the Japanese Court of the case SCRA 739).
at bar. Boudard versus Tait 67 Phil. 170. The
plaintiff contends that the Japanese Court
acquired jurisdiction because the defendant is a But while plaintiff-appellant concedes that the collection suit filed is
resident of Japan, having four (4) branches doing an action in personam, it is its theory that a distinction must be
business therein and in fact had a permit from the made between an action in personam against a resident defendant
Japanese government to conduct business in and an action in personam against a non-resident defendant.
Japan (citing the exhibits presented by the Jurisdiction is acquired over a non-resident defendant only if he is
plaintiff); if this is so then service of summons served personally within the jurisdiction of the court and over a
should have been made upon the defendant in resident defendant if by personal, substituted or constructive
Japan in any of these alleged four branches; as service conformably to statutory authorization. Plaintiff-appellant
admitted by the plaintiff the service of the argues that since the defendant-appellee maintains branches in
summons issued by the Japanese Court was Japan it is considered a resident defendant. Corollarily, personal,
made in the Philippines thru a Philippine Sheriff. substituted or constructive service of summons when made in
This Court agrees that if the defendant in a compliance with the procedural rules is sufficient to give the court
foreign court is a resident in the court of that jurisdiction to render judgment in personam.
foreign court such court could acquire jurisdiction
over the person of the defendant but it must be Such an argument does not persuade.
served upon the defendant in the territorial
jurisdiction of the foreign court. Such is not the It is a general rule that processes of the court cannot lawfully be
case here because the defendant was served served outside the territorial limits of the jurisdiction of the court
with summons in the Philippines and not in from which it issues (Carter vs. Carter; 41 S.E. 2d 532, 201) and
Japan. this is regardless of the residence or citizenship of the party thus
served (Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC,
Unable to accept the said decision, plaintiff on July 11, 1989 moved NS, 292, Am. Case 1912 D680). There must be actual service
for reconsideration of the decision, filing at the same time a within the proper territorial limits on defendant or someone
conditional Notice of Appeal, asking the court to treat the said authorized to accept service for him. Thus, a defendant, whether a
notice of appeal "as in effect after and upon issuance of the court's resident or not in the forum where the action is filed, must be
denial of the motion for reconsideration." served with summons within that forum.

Defendant opposed the motion for reconsideration to which a Reply But even assuming a distinction between a resident defendant and
dated August 28, 1989 was filed by the plaintiff. non-resident defendant were to be adopted, such distinction applies
only to natural persons and not in the corporations. This finds
On October 16, 1989, the lower court disregarded the Motion for support in the concept that "a corporation has no home or
Reconsideration and gave due course to the plaintiff's Notice of residence in the sense in which those terms are applied to natural
Appeal. 3 persons" (Claude Neon Lights vs. Phil. Advertising Corp., 57 Phil.
607). Thus, as cited by the defendant-appellee in its brief:
 Residence is said to be an attribute of a natural person, and can be of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of
predicated on an artificial being only by more or less imperfect law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or
analogy. Strictly speaking, therefore, a corporation can have no elsewhere, enjoys the presumption that it was acting in the lawful exercise of
local residence or habitation. It has been said that a corporation is a jurisdiction and has regularly performed its official duty.
mere ideal existence, subsisting only in contemplation of law — an
invisible being which can have, in fact, no locality and can occupy Consequently, the party attacking a foreign judgment has the burden of overcoming
no space, and therefore cannot have a dwelling place. (18 Am. Jur. the presumption of its validity.7Being the party challenging the judgment rendered by
2d, p. 693 citing Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v. the Japanese court, SHARP had the duty to demonstrate the invalidity of such
Hartfold F. Ins. Co., 13 Conn 202) judgment. In an attempt to discharge that burden, it contends that the extraterritorial
service of summons effected at its home office in the Philippines was not only
Jurisprudence so holds that the foreign or domestic character of a ineffectual but also void, and the Japanese Court did not, therefore acquire
corporation is to be determined by the place of its origin where its jurisdiction over it.
charter was granted and not by the location of its business activities
(Jennings v. Idaho Rail Light & P. Co., 26 Idaho 703, 146 p. 101), A It is settled that matters of remedy and procedure such as those relating to the service
corporation is a "resident" and an inhabitant of the state in which it of process upon a defendant are governed by the lex fori or the internal law of the
is incorporated and no other (36 Am. Jur. 2d, p. 49). forum.8 In this case, it is the procedural law of Japan where the judgment was
rendered that determines the validity of the extraterritorial service of process on
Defendant-appellee is a Philippine Corporation duly organized SHARP. As to what this law is is a question of fact, not of law. It may not be taken
under the Philippine laws. Clearly, its residence is the Philippines, judicial notice of and must be pleaded and proved like any other fact. 9 Sections 24
the place of its incorporation, and not Japan. While defendant- and 25, Rule 132 of the Rules of Court provide that it may be evidenced by an official
appellee maintains branches in Japan, this will not make it a publication or by a duly attested or authenticated copy thereof. It was then incumbent
resident of Japan. A corporation does not become a resident of upon SHARP to present evidence as to what that Japanese procedural law is and to
another by engaging in business there even though licensed by that show that under it, the assailed extraterritorial service is invalid. It did not.
state and in terms given all the rights and privileges of a domestic Accordingly, the presumption of validity and regularity of the service of summons and
corporation (Galveston H. & S.A.R. Co. vs. Gonzales, 151 US 496, the decision thereafter rendered by the Japanese court must stand.
38 L ed. 248, 4 S Ct. 401).
Alternatively in the light of the absence of proof regarding Japanese 
On this premise, defendant appellee is a non-resident corporation. law, the presumption of identity or similarity or the so-called processual
As such, court processes must be served upon it at a place within presumption 10 may be invoked. Applying it, the Japanese law on the matter is
the state in which the action is brought and not elsewhere (St. Clair presumed to be similar with the Philippine law on service of summons on a private
vs. Cox, 106 US 350, 27 L ed. 222, 1 S. Ct. 354).5 foreign corporation doing business in the Philippines. Section 14, Rule 14 of the
Rules of Court provides that if the defendant is a foreign corporation doing business
It then concluded that the service of summons effected in Manila or beyond the in the Philippines, service may be made: (1) on its resident agent designated in
territorial boundaries of Japan was null and did not confer jurisdiction upon the Tokyo accordance with law for that purpose, or, (2) if there is no such resident agent, on the
District Court over the person of SHARP; hence, its decision was void. government official designated by law to that effect; or (3) on any of its officers or
agents within the Philippines.
Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case
to this Court contending that the respondent court erred in holding that SHARP was If the foreign corporation has designated an agent to receive summons, the
not a resident of Japan and that summons on SHARP could only be validly served designation is exclusive, and service of summons is without force and gives the court
within that country. no jurisdiction unless made upon him. 11

A foreign judgment is presumed to be valid and binding in the country from which it Where the corporation has no such agent, service shall be made on the government
comes, until the contrary is shown. It is also proper to presume the regularity of the official designated by law, to wit: (a) the Insurance Commissioner in the case of a
proceedings and the giving of due notice therein.6 foreign insurance company; (b) the Superintendent of Banks, in the case of a foreign
banking corporation; and (c) the Securities and Exchange Commission, in the case of
other foreign corporations duly licensed to do business in the Philippines. Whenever
Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in service of process is so made, the government office or official served shall transmit
personam of a tribunal of a foreign country having jurisdiction to pronounce the same by mail a copy of the summons or other legal proccess to the corporation at its home
is presumptive evidence of a right as between the parties and their successors-in- or principal office. The sending of such copy is a necessary part of the service. 12
interest by a subsequent title. The judgment may, however, be assailed by evidence
SHARP contends that the laws authorizing service of process upon the Securities and The process of a court, has no extraterritorial effect, and no
Exchange Commission, the Superintendent of Banks, and the Insurance jurisdiction is acquired over the person of the defendant by serving
Commissioner, as the case may be, presuppose a situation wherein the foreign him beyond the boundaries of the state. Nor has a judgment of a
corporation doing business in the country no longer has any branches or offices court of a foreign country against a resident of this country having
within the Philippines. Such contention is belied by the pertinent provisions of the said no property in such foreign country based on process served here,
laws. Thus, Section 128 of the Corporation Code 13 and Section 190 of the Insurance any effect here against either the defendant personally or his
Code 14 clearly contemplate two situations: (1) if the corporation had left the property situated here.
Philippines or had ceased to transact business therein, and (2) if the corporation has
no designated agent. Section 17 of the General Banking Act 15 does not even speak a Process issuing from the courts of one state or country cannot run
corporation which had ceased to transact business in the Philippines. into another, and although a nonresident defendant may have been
personally served with such process in the state or country of his
Nowhere in its pleadings did SHARP profess to having had a resident agent domicile, it will not give such jurisdiction as to authorize a personal
authorized to receive court processes in Japan. This silence could only mean, or least judgment against him.
create an impression, that it had none. Hence, service on the designated government
official or on any of SHARP's officers or agents in Japan could be availed of. The It further availed of the ruling in Magdalena Estate, Inc.  vs. Nieto 19 and Dial
respondent, however, insists that only service of any of its officers or employees in its Corp.  vs. Soriano, 20 as well as the principle laid down by the Iowa Supreme Court in
branches in Japan could be resorted to. We do not agree. As found by the the 1911 case of Raher vs. Raher. 21
respondent court, two attempts at service were made at SHARP's Yokohama branch.
Both were unsuccessful. On the first attempt, Mr. Dinozo, who was believed to be the
person authorized to accept court process, was in Manila. On the second, Mr. Dinozo The first three cases are, however, inapplicable. Boudard involved the enforcement of
was present, but to accept the summons because, according to him, he was no a judgment of the civil division of the Court of First Instance of Hanoi, French Indo-
longer an employee of SHARP. While it may be true that service could have been China. The trial court dismissed the case because the Hanoi court never acquired
made upon any of the officers or agents of SHARP at its three other branches in jurisdiction over the person of the defendant considering that "[t]he, evidence
Japan, the availability of such a recourse would not preclude service upon the proper adduced at the trial conclusively proves that neither the appellee [the defendant] nor
government official, as stated above. his agent or employees were ever in Hanoi, French Indo-China; and that the
deceased Marie Theodore Jerome Boudard had never, at any time, been his
employee." In Magdalena Estate, what was declared invalid resulting in the failure of
As found by the Court of Appeals, it was the Tokyo District Court which ordered that the court to acquire jurisdiction over the person of the defendants in an action in
summons for SHARP be served at its head office in the Philippine's after the two personam was the service of summons through publication against non-appearing
attempts of service had failed. 16 The Tokyo District Court requested the Supreme resident defendants. It was claimed that the latter concealed themselves to avoid
Court of Japan to cause the delivery of the summons and other legal documents to personal service of summons upon them. In Dial, the defendants were foreign
the Philippines. Acting on that request, the Supreme Court of Japan sent the corporations which were not, domiciled and licensed to engage in business in the
summons together with the other legal documents to the Ministry of Foreign Affairs of Philippines and which did not have officers or agents, places of business, or
Japan which, in turn, forwarded the same to the Japanese Embassy in Manila . properties here. On the other hand, in the instant case, SHARP was doing business in
Thereafter, the court processes were delivered to the Ministry (now Department) of Japan and was maintaining four branches therein.
Foreign Affairs of the Philippines, then to the Executive Judge of the Court of First
Instance (now Regional Trial Court) of Manila, who forthwith ordered Deputy Sheriff
Rolando Balingit to serve the same on SHARP at its principal office in Manila. This Insofar as to the Philippines is concerned, Raher is a thing of the past. In that case, a
service is equivalent to service on the proper government official under Section 14, divided Supreme Court of Iowa declared that the principle that there can be no
Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code. jurisdiction in a court of a territory to render a personal judgment against anyone upon
Hence, SHARP's contention that such manner of service is not valid under Philippine service made outside its limits was applicable alike to cases of residents and non-
laws holds no water.17 residents. The principle was put at rest by the United States Supreme Court when it
ruled in the 1940 case of Milliken vs.  Meyer  22 that domicile in the state is alone
sufficient to bring an absent defendant within the reach of the state's jurisdiction for
In deciding against the petitioner, the respondent court sustained the trial court's purposes of a personal judgment by means of appropriate substituted service or
reliance on Boudard vs.  Tait  18where this Court held: personal service without the state. This principle is embodied in section 18, Rule 14 of
the Rules of Court which allows service of summons on residents temporarily out of
The fundamental rule is that jurisdiction in personam over the Philippines to be made out of the country. The rationale for this rule was
nonresidents, so as to sustain a money judgment, must be based explained in Milliken as follows:
upon personal service within the state which renders the judgment.
[T]he authority of a state over one of its citizens is not terminated by
xxx xxx xxx the mere fact of his absence from the state. The state which
 accords him privileges and affords protection to him and his banks, savings associations, mortgage banks, development banks,
property by virtue of his domicile may also exact reciprocal duties. rural banks, stock savings and loan associations" (which have been
"Enjoyment of the privileges of residence within the state, and the formed and organized under Philippine laws), making no distinction
attendant right to invoke the protection of its laws, are inseparable" between the former and the latter in so far as the terms "banking
from the various incidences of state citizenship. The responsibilities institutions" and "bank" are used in the Act [Sec. 2], declaring on
of that citizenship arise out of the relationship to the state which the contrary that in "all matters not specifically covered by special
domicile creates. That relationship is not dissolved by mere provisions applicable only to foreign banks, or their branches and
absence from the state. The attendant duties, like the rights and agencies in the Philippines, said foreign banks or their branches
privileges incident to domicile, are not dependent on continuous and agencies lawfully doing business in the Philippines "shall be
presence in the state. One such incident of domicile is amenability bound by all laws, rules, and regulations applicable to domestic
to suit within the state even during sojourns without the state, where banking corporations of the same class, except such laws, rules
the state has provided and employed a reasonable method for and regulations as provided for the creation, formation,
apprising such an absent party of the proceedings against him. 23 organization, or dissolution of corporations or as fix the relation,
liabilities, responsibilities, or duties of members, stockholders or
The domicile of a corporation belongs to the state where it was incorporated. 24 In a officers of corporation. [Sec. 18].
strict technical sense, such domicile as a corporation may have is single in its
essence and a corporation can have only one domicile which is the state of its This court itself has already had occasion to hold [Claude Neon
creation. 25 Lights, Fed. Inc. vs. Philippine Advertising Corp., 57 Phil. 607] that
a foreign corporation licitly doing business in the Philippines, which
Nonetheless, a corporation formed in one-state may, for certain purposes, be is a defendant in a civil suit, may not be considered a non-
regarded a resident in another state in which it has offices and transacts business. resident within the scope of the legal provision authorizing
This is the rule in our jurisdiction and apropos thereto, it may be necessery to quote attachment against a defendant not residing in the Philippine
what we stated in State Investment House, Inc, vs. Citibank, N.A., 26 to wit: Islands; [Sec. 424, in relation to Sec. 412 of Act No. 190, the Code
of Civil Procedure; Sec. 1(f), Rule 59 of the Rules of 1940, Sec.
1(f), Rule 57, Rules of 1964] in other words, a preliminary
The issue is whether these Philippine branches or units may be attachment may not be applied for and granted solely on the
considered "residents of the Philippine Islands" as that term is used asserted fact that the defendant is a foreign corporation authorized
in Section 20 of the Insolvency Law . . . or residents of the state to do business in the Philippines — and is consequently and
under the laws of which they were respectively incorporated. The necessarily, "a party who resides out of the Philippines."
answer cannot be found in the Insolvency Law itself, which contains Parenthetically, if it may not be considered as a party not residing in
no definition of the term, resident, or any clear indication of its the Philippines, or as a party who resides out of the country, then,
meaning. There are however other statutes, albeit of subsequent logically, it must be considered a party who does reside in the
enactment and effectivity, from which enlightening notions of the Philippines, who is a resident of the country. Be this as it may, this
term may be derived. Court pointed out that:

The National Internal Revenue Code declares that the term . . . Our laws and jurisprudence indicate a
"'resident foreign corporation' applies to a foreign corporation purpose to assimilate foreign corporations, duly
engaged in trade or business within the Philippines," as licensed to do business here, to the status of
distinguished from a "'non-resident foreign corporation' . . . (which is domestic corporations. (Cf. Section 73, Act No.
one) not engaged in trade or bussiness within the Philippines." 1459, and Marshall Wells Co. vs. Henry W. Elser
[Sec. 20, pars. (h) and (i)]. & Co., 46 Phil. 70, 76; Yu Cong Eng vs. Trinidad,
47 Phil. 385, 411) We think it would be entirely
The Offshore Banking Law, Presidential Decree No. 1034, states out of line with this policy should we make a
"that branches, subsidiaries, affiliation, extension offices or any discrimination against a foreign corporation, like
other units of corporation or juridical person organized under the the petitioner, and subject its property to the
laws of any foreign country operating in the Philippines shall be harsh writ of seizure by attachment when it has
considered residents of the Philippines. [Sec. 1(e)]. complied not only with every requirement of law
made specially of foreign corporations, but in
The General Banking Act, Republic Act No. 337, places "branches addition with every requirement of law made of
and agencies in the Philippines of foreign banks . . . (which are) domestic corporations. . . .
called Philippine branches," in the same category as "commercial
 Obviously, the assimilation of foreign corporations authorized to do SO ORDERED.
business in the Philippines "to the status of domestic  corporations,
subsumes their being found and operating as corporations, Padilla, Bellosillo, Quaison and Kapunan, JJ., concur.
hence, residing, in the country.
 
The same principle is recognized in American law: that the
residence of a corporation, if it can be said to have a residence, is
necessarily where it exercises corporate functions . . .;" that it is
considered as dwelling "in the place where its business is
done . . .," as being "located where its franchises are
exercised . . .," and as being "present where it is engaged in the
prosecution of the corporate enterprise;" that a "foreign corporation
licensed to do business in a state is a resident of any country where
it maintains an office or agent for transaction of its usual and
customary business for venue purposes;" and that the "necessary
element in its signification is locality of existence." [Words and
Phrases, Permanent Ed., vol. 37, pp. 394, 412, 493].

In as much as SHARP was admittedly doing business in Japan through its four duly
registered branches at the time the collection suit against it was filed, then in the light
of the processual presumption, SHARP may be deemed a resident of Japan, and, as
such, was amenable to the jurisdiction of the courts therein and may be deemed to
have assented to the said courts' lawful methods of serving process. 27

Accordingly, the extraterritorial service of summons on it by the Japanese Court was

valid not only under the processual presumption but also because of the presumption
of regularity of performance of official duty.

We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary
damages to be without merit. We find no evidence that would justify an award for
attorney's fees and litigation expenses under Article 2208 of the Civil Code of the
Philippines. Nor is an award for exemplary damages warranted. Under Article 2234 of
the Civil Code, before the court may consider the question of whether or not
exemplary damages should be awarded, the plaintiff must show that he is entitled to
moral, temperate, or compensatory damaged. There being no such proof presented
by NORTHWEST, no exemplary damages may be adjudged in its favor.

WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is
AFFIRMED insofar as it denied NORTHWEST's claims for attorneys fees, litigation
expenses, and exemplary damages but REVERSED insofar as in sustained the trial
court's dismissal of NORTHWEST's complaint in Civil Case No. 83-17637 of Branch
54 of the Regional Trial Court of Manila, and another in its stead is hereby rendered
ORDERING private respondent C.F. SHARP L COMPANY, INC. to pay to
NORTHWEST the amounts adjudged in the foreign judgment subject of said case,
with interest thereon at the legal rate from the filing of the complaint therein until the
said foreign judgment is fully satisfied.

Costs against the private respondent.

G.R. No. 114323 July 23, 1998 relates and that in the course of his duties as Commission's employee he had
expressed views on all or any of the matter in dispute or difference.
OIL AND NATURAL GAS COMMISSION, Petitioner, v. COURT OF APPEALS and
PACIFIC CEMENT COMPANY, INC., Respondents. The arbitrator to whom the matter is originally referred being transferred or vacating
his office or being unable to act for any reason the Member of the Commission shall
  appoint another person to act as arbitrator in accordance with the terms of the
contract/supply order. Such person shall be entitled to proceed with reference from
the stage at which it was left by his predecessor. Subject as aforesaid the provisions
MARTINEZ, J.: of the Arbitration Act, 1940, or any Statutory modification or re-enactment there of and
the rules made there under and for the time being in force shall apply to the
This proceeding involves the enforcement of a foreign judgment rendered by the Civil arbitration proceedings under this clause.
Judge of Dehra Dun, India in favor of the petitioner, OIL AND NATURAL GAS
COMMISSION and against the private respondent, PACIFIC CEMENT COMPANY, The arbitrator may with the consent of parties enlarge the time, from time to time, to
INCORPORATED. make and publish the award.

The petitioner is a foreign corporation owned and controlled by the Government of The venue for arbitration shall be at Dehra dun. 1*
India while the private respondent is a private corporation duly organized and existing
under the laws of the Philippines. The present conflict between the petitioner and the
private respondent has its roots in a contract entered into by and between both On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra, resolved the dispute
parties on February 26, 1983 whereby the private respondent undertook to supply the in petitioner's favor setting forth the arbitral award as follows:
petitioner FOUR THOUSAND THREE HUNDRED (4,300) metric tons of oil well
cement. In consideration therefor, the petitioner bound itself to pay the private NOW THEREFORE after considering all facts of the case, the evidence, oral and
respondent the amount of FOUR HUNDRED SEVENTY-SEVEN THOUSAND THREE documentarys adduced by the claimant and carefully examining the various written
HUNDRED U.S. DOLLARS ($477,300.00) by opening an irrevocable, divisible, and statements, submissions, letters, telexes, etc. sent by the respondent, and the oral
confirmed letter of credit in favor of the latter. The oil well cement was loaded on arguments addressed by the counsel for the claimants, I, N.N. Malhotra, Sole
board the ship MV SURUTANA NAVA at the port of Surigao City, Philippines for Arbitrator, appointed under clause 16 of the supply order dated 26.2.1983, according
delivery at Bombay and Calcutta, India. However, due to a dispute between the to which the parties, i.e. M/S Oil and Natural Gas Commission and the Pacific Cement
shipowner and the private respondent, the cargo was held up in Bangkok and did not Co., Inc. can refer the dispute to the sole arbitration under the provision of the
reach its point destination. Notwithstanding the fact that the private respondent had Arbitration Act. 1940, do hereby award and direct as follows: -
already received payment and despite several demands made by the petitioner, the
private respondent failed to deliver the oil well cement. Thereafter, negotiations The Respondent will pay the following to the claimant: -
ensued between the parties and they agreed that the private respondent will replace
the entire 4,300 metric tons of oil well cement with Class "G" cement cost free at the
petitioner's designated port. However, upon inspection, the Class "G" cement did not 1. Amount received by the Respondent
conform to the petitioner's specifications. The petitioner then informed the private
respondent that it was referring its claim to an arbitrator pursuant to Clause 16 of their against the letter of credit No. 11/19
contract which stipulates:
dated 28.2.1983 US $ 477,300.00
Except where otherwise provided in the supply order/contract all questions and
disputes, relating to the meaning of the specification designs, drawings and 2. Re-imbursement of expenditure incurred
instructions herein before mentioned and as to quality of workmanship of the items
ordered or as to any other question, claim, right or thing whatsoever, in any way
arising out of or relating to the supply order/contract design, drawing, specification, by the claimant on the inspection team's
instruction or these conditions or otherwise concerning the materials or the execution
or failure to execute the same during stipulated/extended period or after the visit to Philippines in August 1985 US $ 3,881.00
completion/abandonment thereof shall be referred to the sole arbitration of the
persons appointed by Member of the Commission at the time of dispute. It will be no
3. L.C. Establishment charges incurred
objection to any such appointment that the arbitrator so appointed is a Commission
employer (sic) that he had to deal with the matter to which the supply or contract
by the claimant US $ 1,252.82 3. Kindly give us 15 days from receipt of your letter advising us how much to pay to
comply with the same.
4. Loss of interest suffered by claimant
Thank you for your kind consideration.
from 21.6.83 to 23.7.88 US $ 417,169.95
Pacific Cement Co., Inc.
Total amount of award US $ 899,603.77
By:
In addition to the above, the respondent would also be liable to pay to the claimant
the interest at the rate of 6% on the above amount, with effect from 24.7.1988 up to Jose Cortes, Jr.
the actual date of payment by the Respondent in full settlement of the claim as
awarded or the date of the decree, whichever is earlier. President 3

I determine the cost at Rs. 70,000/- equivalent to US $5,000 towards the expenses on Without responding to the above communication, the foreign court refused to admit
Arbitration, legal expenses, stamps duly incurred by the claimant. The cost will be the private respondent's objections for failure to pay the required filing fees, and
shared by the parties in equal proportion. thereafter issued an Order on February 7, 1990, to wit:

Pronounced at Dehra Dun to-day, the 23rd of July 1988. 2 ORDER

To enable the petitioner to execute the above award in its favor, it filed a Petition Since objections filed by defendant have been rejected through Misc. Suit No. 5 on
before the Court of the Civil Judge in Dehra Dun. India (hereinafter referred to as the 7.2.90, therefore, award should be made Rule of the Court.
foreign court for brevity), praying that the decision of the arbitrator be made "the Rule
of Court" in India. The foreign court issued notices to the private respondent for filing
objections to the petition. The private respondent complied and sent its objections ORDER
dated January 16, 1989. Subsequently, the said court directed the private respondent
to pay the filing fees in order that the latter's objections could be given consideration. Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of
Instead of paying the required filing fees, the private respondent sent the following conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the
communication addressed to the Civil judge of Dehra Dun: decree. The plaintiff shall also be entitled to get from defendant (US$ 899,603.77
(US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven
The Civil Judge only) along with 9% interest per annum till the last date of realisation. 4

Dehra Dun (U.P.) India Despite notice sent to the private respondent of the foregoing order and several
demands by the petitioner for compliance therewith, the private respondent refused to
pay the amount adjudged by the foreign court as owing to the petitioner. Accordingly,
Re: Misc. Case No. 5 of 1989 the petitioner filed a complaint with Branch 30 of the Regional Trial Court (RTC) of
Surigao City for the enforcement of the aforementioned judgment of the foreign court.
M/S Pacific Cement Co., The private respondent moved to dismiss the complaint on the following grounds: (1)
plaintiffs lack of legal capacity to sue; (2) lack of cause of action; and (3) plaintiffs
Inc. vs. ONGC Case claim or demand has been waived, abandoned, or otherwise extinguished. The
petitioner filed its opposition to the said motion to dismiss, and the private respondent,
its rejoinder thereto. On January 3, 1992, the RTC issued an order upholding the
Sir: petitioner's legal capacity to sue, albeit dismissing the complaint for lack of a valid
cause of action. The RTC held that the rule prohibiting foreign corporations
1. We received your letter dated 28 April 1989 only last 18 May 1989. transacting business in the Philippines without a license from maintaining a suit in
Philippine courts admits of an exception, that is, when the foreign corporation is suing
2. Please inform us how much is the court fee to be paid. Your letter did not mention on an isolated transaction as in this case. 5 Anent the issue of the sufficiency of the
the amount to be paid. petitioner's cause of action, however, the RTC found the referral of the dispute
between the parties to the arbitrator under Clause 16 of their contract erroneous.
According to the RTC,
[a] perusal of the shove-quoted clause (Clause 16) readily shows that the matter RESPONDENT COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
covered by its terms is limited to "ALL QUESTIONS AND DISPUTES, RELATING TO LOWER COURT'S ORDER OF DISMISSAL SINCE:
THE MEANING OF THE SPECIFICATION, DESIGNS, DRAWINGS AND
INSTRUCTIONS HEREIN BEFORE MENTIONED and as to the QUALITY OF A. THE NON-DELIVERY OF THE CARGO WAS A MATTER PROPERLY
WORKMANSHIP OF THE ITEMS ORDERED or as to any other questions, claim, COGNIZABLE BY THE PROVISIONS OF CLAUSE 16 OF THE CONTRACT;
right or thing whatsoever, but qualified to "IN ANY WAY ARISING OR RELATING TO
THE SUPPLY ORDER/CONTRACT, DESIGN, DRAWING, SPECIFICATION, etc.,"
repeating the enumeration in the opening sentence of the clause. B. THE JUDGMENT OF THE CIVIL COURT OF DEHRADUN, INDIA WAS AN
AFFIRMATION OF THE FACTUAL AND LEGAL FINDINGS OF THE ARBITRATOR
AND THEREFORE ENFORCEABLE IN THIS JURISDICTION;
The court is inclined to go along with the observation of the defendant that the
breach, consisting of the non-delivery of the purchased materials, should have been
properly litigated before a court of law, pursuant to Clause No. 15 of the C. EVIDENCE MUST BE RECEIVED TO REPEL THE EFFECT OF A
Contract/Supply Order, herein quoted, to wit: PRESUMPTIVE RIGHT UNDER A FOREIGN JUDGMENT. 10

"JURISDICTION The threshold issue is whether or not the arbitrator had jurisdiction over the dispute
between the petitioner and the private respondent under Clause 16 of the contract. To
reiterate, Clause 16 provides as follows:
All questions, disputes and differences, arising under out of or in connection with this
supply order, shall be subject to the EXCLUSIVE JURISDICTION OF THE COURT,
within the local limits of whose jurisdiction and the place from which this supply order Except where otherwise provided in the supply order/contract all questions and
is situated." 6 disputes, relating to the meaning of the specification designs, drawings and
instructions herein before mentioned and as to quality of workmanship of the items
ordered or as to any other question, claim, right or thing whatsoever, in any way
The RTC characterized the erroneous submission of the dispute to the arbitrator as a arising out of or relating to the supply order/contract design, drawing, specification,
"mistake of law or fact amounting to want of jurisdiction". Consequently, the instruction or these conditions or otherwise concerning the materials or the execution
proceedings had before the arbitrator were null and void and the foreign court had or failure to execute the same during stipulated/extended period or after the
therefore, adopted no legal award which could be the source of an enforceable right. 7 completion/abandonment thereof shall be referred to the sole arbitration of the
persons appointed by Member of the Commission at the time of dispute. It will be no
The petitioner then appealed to the respondent Court of Appeals which affirmed the objection to any such appointment that the arbitrator so appointed is a Commission
dismissal of the complaint. In its decision, the appellate court concurred with the employer (sic) that he had to deal with the matter to which the supply or contract
RTC's ruling that the arbitrator did not have jurisdiction over the dispute between the relates and that in the course of his duties as Commission's employee he had
parties, thus, the foreign court could not validly adopt the arbitrator's award. In expressed views on all or any of the matter in dispute or difference. 11
addition, the appellate court observed that the full text of the judgment of the foreign
court contains the dispositive portion only and indicates no findings of fact and law as The dispute between the parties had its origin in the non-delivery of the 4,300 metric
basis for the award. Hence, the said judgment cannot be enforced by any Philippine tons of oil well cement to the petitioner. The primary question that may be posed,
court as it would violate the constitutional provision that no decision shall be rendered therefore, is whether or not the non-delivery of the said cargo is a proper subject for
by any court without expressing therein clearly and distinctly the facts and the law on arbitration under the above-quoted Clause 16. The petitioner contends that the same
which it is based. 8 The appellate court ruled further that the dismissal of the private was a matter within the purview of Clause 16, particularly the phrase, ". . . or as to
respondent's objections for non-payment of the required legal fees, without the any other questions, claim, right or thing whatsoever, in any way arising or relating to
foreign court first replying to the private respondent's query as to the amount of legal the supply order/contract, design, drawing, specification, instruction . . .". 12 It is
fees to be paid, constituted want of notice or violation of due process. Lastly, it argued that the foregoing phrase allows considerable latitude so as to include non-
pointed out that the arbitration proceeding was defective because the arbitrator was delivery of the cargo which was a "claim, right or thing relating to the supply
appointed solely by the petitioner, and the fact that the arbitrator was a former order/contract". The contention is bereft of merit. First of all, the petitioner has
employee of the latter gives rise to a presumed bias on his part in favor of the misquoted the said phrase, shrewdly inserting a comma between the words "supply
petitioner. 9 order/contract" and "design" where none actually exists. An accurate reproduction of
the phrase reads, ". . . or as to any other question, claim, right or thing whatsoever, in
A subsequent motion for reconsideration by the petitioner of the appellate court's any way arising out of or relating to the supply order/contract design, drawing,
decision was denied, thus, this petition for review on certiorari citing the following as specification, instruction or these conditions . . .". The absence of a comma between
grounds in support thereof: the words "supply order/contract" and "design" indicates that the former cannot be
taken separately but should be viewed in conjunction with the words "design, drawing,
specification, instruction or these conditions". It is thus clear that to fall within the
purview of this phrase, the "claim, right or thing whatsoever" must arise out of or
relate to the design, drawing, specification, or instruction of the supply order/contract. All questions, disputes and differences, arising under out of or in connection with this
The petitioner also insists that the non-delivery of the cargo is not only covered by the supply order, shall be subject to the exclusive jurisdiction of the court, within the local
foregoing phrase but also by the phrase, ". . . or otherwise concerning the materials limits of whose jurisdiction and the place from which this supply order is situated. 14
or the execution or failure to execute the same during the stipulated/extended period
or after completion/abandonment thereof . . .". The following fundamental principles in the interpretation of contracts and other
instruments served as our guide in arriving at the foregoing conclusion:
The doctrine of noscitur a sociis, although a rule in the construction of statutes, is
equally applicable in the ascertainment of the meaning and scope of vague Art. 1373. If some stipulation of any contract should admit of several meanings, it
contractual stipulations, such as the aforementioned phrase. According to the shall be understood as bearing that import which is most adequate to render it
maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is effectual. 15
equally susceptible of various meanings, its correct construction may be made clear
and specific by considering the company of the words in which it is found or with
which it is associated, or stated differently, its obscurity or doubt may be reviewed by Art. 1374. The various stipulations of a contract shall be interpreted together,
reference to associated words. 13 A close examination of Clause 16 reveals that it attributing the doubtful ones that sense which may result from all of them taken
covers three matters which may be submitted to arbitration namely, jointly. 16

(1) all questions and disputes, relating to the meaning of the specification designs, Sec. 11. Instrument construed so as to give effect to all provisions. In the construction
drawings and instructions herein before mentioned and as to quality of workmanship of an instrument, where there are several provisions or particulars, such a
of the items ordered; or construction is, if possible, to be adopted as will give effect to all. 17

(2) any other question, claim, right or thing whatsoever, in any way arising out of or Thus, this Court has held that as in statutes, the provisions of a contract should not be
relating to the supply order/contract design, drawing, specification, instruction or read in isolation from the rest of the instrument but, on the contrary, interpreted in the
these conditions; or light of the other related provisions. 18 The whole and every part of a contract must be
considered in fixing the meaning of any of its harmonious whole. Equally applicable is
the canon of construction that in interpreting a statute (or a contract as in this case),
(3) otherwise concerning the materials or the execution or failure to execute the same care should be taken that every part thereof be given effect, on the theory that it was
during stipulated/extended period or after the completion/abandonment thereof. enacted as an integrated measure and not as a hodge-podge of conflicting
provisions. The rule is that a construction that would render a provision inoperative
The first and second categories unmistakably refer to questions and disputes relating should be avoided; instead, apparently inconsistent provisions should be reconciled
to the design, drawing, instructions, specifications or quality of the materials of the whenever possible as parts of a coordinated and harmonious whole. 19
supply/order contract. In the third category, the clause, "execution or failure to
execute the same", may be read as "execution or failure to execute the supply The petitioner's interpretation that Clause 16 is of such latitude as to contemplate
order/contract". But in accordance with the doctrine of noscitur a sociis, this reference even the non-delivery of the oil well cement would in effect render Clause 15 a mere
to the supply order/contract must be construed in the light of the preceding words with superfluity. A perusal of Clause 16 shows that the parties did not intend arbitration to
which it is associated, meaning to say, as being limited only to the design, drawing, be the sole means of settling disputes. This is manifest from Clause 16 itself which is
instructions, specifications or quality of the materials of the supply order/contract. The prefixed with the proviso, "Except where otherwise provided in the supply
non-delivery of the oil well cement is definitely not in the nature of a dispute arising order/contract . . .", thus indicating that the jurisdiction of the arbitrator is not all
from the failure to execute the supply order/contract design, drawing, instructions, encompassing, and admits of exceptions as may be provided elsewhere in the supply
specifications or quality of the materials. That Clause 16 should pertain only to order/contract. We believe that the correct interpretation to give effect to both
matters involving the technical aspects of the contract is but a logical inference stipulations in the contract is for Clause 16 to be confined to all claims or disputes
considering that the underlying purpose of a referral to arbitration is for such technical arising from or relating to the design, drawing, instructions, specifications or quality of
matters to be deliberated upon by a person possessed with the required skill and the materials of the supply order/contract, and for Clause 15 to cover all other claims
expertise which may be otherwise absent in the regular courts. or disputes.

This Court agrees with the appellate court in its ruling that the non-delivery of the oil The petitioner then asseverates that granting, for the sake of argument, that the non-
well cement is a matter properly cognizable by the regular courts as stipulated by the delivery of the oil well cement is not a proper subject for arbitration, the failure of the
parties in Clause 15 of their contract: replacement cement to conform to the specifications of the contract is a matter clearly
falling within the ambit of Clause 16. In this contention, we find merit. When the 4,300
metric tons of oil well cement were not delivered to the petitioner, an agreement was
forged between the latter and the private respondent that Class "G" cement would be
delivered to the petitioner as replacement. Upon inspection, however, the Award Paper. Award Paper No. 3/B-1, contains an exhaustive discussion of the
replacement cement was rejected as it did not conform to the specifications of the respective claims and defenses of the parties, and the arbitrator's evaluation of the
contract. Only after this latter circumstance was the matter brought before the same. Inasmuch as the foregoing is deemed to have been incorporated into the
arbitrator. Undoubtedly, what was referred to arbitration was no longer the mere non- foreign court's judgment the appellate court was in error when it described the latter to
delivery of the cargo at the first instance but also the failure of the replacement cargo be a "simplistic decision containing literally, only the dispositive portion". 25
to conform to the specifications of the contract, a matter clearly within the coverage of
Clause 16. The constitutional mandate that no decision shall be rendered by any court without
expressing therein dearly and distinctly the facts and the law on which it is based
The private respondent posits that it was under no legal obligation to make does not preclude the validity of "memorandum decisions" which adopt by reference
replacement and that it undertook the latter only "in the spirit of liberality and to foster the findings of fact and conclusions of law contained in the decisions of inferior
good business relationship". 20 Hence, the undertaking to deliver the replacement tribunals. In Francisco v. Permskul, 26 this Court held that the following memorandum
cement and its subsequent failure to conform to specifications are not anymore decision of the Regional Trial Court of Makati did not transgress the requirements of
subject of the supply order/contract or any of the provisions thereof. We disagree. Section 14, Article VIII of the Constitution:

As per Clause 7 of the supply order/contract, the private respondent undertook to MEMORANDUM DECISION
deliver the 4,300 metric tons of oil well cement at "BOMBAY (INDIA) 2181 MT and
CALCUTTA 2119 MT". 21 The failure of the private respondent to deliver the cargo to After a careful perusal, evaluation and study of the records of this case, this Court
the designated places remains undisputed. Likewise, the fact that the petitioner had hereby adopts by reference the findings of fact and conclusions of law contained in
already paid for the cost of the cement is not contested by the private respondent. the decision of the Metropolitan Trial Court of Makati, Metro Manila, Branch 63 and
The private respondent claims, however, that it never benefited from the transaction finds that there is no cogent reason to disturb the same.
as it was not able to recover the cargo that was unloaded at the port of
Bangkok. 22 First of all, whether or not the private respondent was able to recover the
cargo is immaterial to its subsisting duty to make good its promise to deliver the cargo WHEREFORE, judgment appealed from is hereby affirmed in toto. 27 (Emphasis
at the stipulated place of delivery. Secondly, we find it difficult to believe this supplied.)
representation. In its Memorandum filed before this Court, the private respondent
asserted that the Civil Court of Bangkok had already ruled that the non-delivery of the This Court had occasion to make a similar pronouncement in the earlier case
cargo was due solely to the fault of the carrier. 23 It is, therefore, but logical to assume of Romero v. Court of Appeals, 28 where the assailed decision of the Court of Appeals
that the necessary consequence of this finding is the eventual recovery by the private adopted the findings and disposition of the Court of Agrarian Relations in this wise:
respondent of the cargo or the value thereof. What inspires credulity is not that the
replacement was done in the spirit of liberality but that it was undertaken precisely We have, therefore, carefully reviewed the evidence and made a re-assessment of
because of the private respondent's recognition of its duty to do so under the supply the same, and We are persuaded, nay compelled, to affirm the correctness of the trial
order/contract, Clause 16 of which remains in force and effect until the full execution court's factual findings and the soundness of its conclusion. For judicial convenience
thereof. and expediency, therefore, We hereby adopt by way of reference, the findings of facts
and conclusions of the court a quo spread in its decision, as integral part of this Our
We now go to the issue of whether or not the judgment of the foreign court is decision. 29 (Emphasis supplied)
enforceable in this jurisdiction in view of the private respondent's allegation that it is
bereft of any statement of facts and law upon which the award in favor of the Hence, even in this jurisdiction, incorporation by reference is allowed if only to avoid
petitioner was based. The pertinent portion of the judgment of the foreign court reads: the cumbersome reproduction of the decision of the lower courts, or portions thereof,
in the decision of the higher court. 30 This is particularly true when the decision sought
ORDER to be incorporated is a lengthy and thorough discussion of the facts and conclusions
arrived at, as in this case, where Award Paper No. 3/B-1 consists of eighteen (18)
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of single spaced pages.
conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the
decree. The plaintiff shall also be entitled to get from defendant (US$ 899,603.77 Furthermore, the recognition to be accorded a foreign judgment is not necessarily
(US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven affected by the fact that the procedure in the courts of the country in which such
only) along with 9% interest per annum till the last date of realisation. 24 judgment was rendered differs from that of the courts of the country in which the
judgment is relied on. 31 This Court has held that matters of remedy and procedure
As specified in the order of the Civil Judge of Dehra Dun, "Award Paper No. 3/B-1 are governed by the lex fori or the internal law of the forum. 32 Thus, if under the
shall be a part of the decree". This is a categorical declaration that the foreign court procedural rules of the Civil Court of Dehra Dun, India, a valid judgment may be
adopted the findings of facts and law of the arbitrator as contained in the latter's rendered by adopting the arbitrator's findings, then the same must be accorded
respect. In the same vein, if the procedure in the foreign court mandates that an A foreign judgment is presumed to be valid and binding in the country from which it
Order of the Court becomes final and executory upon failure to pay the necessary comes, until the contrary is shown. It is also proper to presume the regularity of the
docket fees, then the courts in this jurisdiction cannot invalidate the order of the proceedings and the giving of due notice therein.
foreign court simply because our rules provide otherwise.
Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam
The private respondent claims that its right to due process had been blatantly of a tribunal of a foreign country having jurisdiction to pronounce the same is
violated, first by reason of the fact that the foreign court never answered its queries as presumptive evidence of a right as between the parties and their successors-in-
to the amount of docket fees to be paid then refused to admit its objections for failure interest by a subsequent title. The judgment may, however, be assailed by evidence
to pay the same, and second, because of the presumed bias on the part of the of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of
arbitrator who was a former employee of the petitioner. law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or
elsewhere, enjoys the presumption that it was acting in the lawful exercise of
Time and again this Court has held that the essence of due process is to be found in jurisdiction and has regularly performed its official duty. 39
the reasonable opportunity to be heard and submit any evidence one may have in
support of one's defense 33 or stated otherwise, what is repugnant to due process is Consequently, the party attacking a foreign judgment, the private respondent herein,
the denial of opportunity to be heard. 34 Thus, there is no violation of due process had the burden of overcoming the presumption of its validity which it failed to do in the
even if no hearing was conducted, where the party was given a chance to explain his instant case.
side of the controversy and he waived his right to do so. 35
The foreign judgment being valid, there is nothing else left to be done than to order its
In the instant case, the private respondent does not deny the fact that it was notified enforcement, despite the fact that the petitioner merely prays for the remand of the
by the foreign court to file its objections to the petition, and subsequently, to pay legal case to the RTC for further proceedings. As this Court has ruled on the validity and
fees in order for its objections to be given consideration. Instead of paying the legal enforceability of the said foreign judgment in this jurisdiction, further proceedings in
fees, however, the private respondent sent a communication to the foreign court the RTC for the reception of evidence to prove otherwise are no longer necessary.
inquiring about the correct amount of fees to be paid. On the pretext that it was yet
awaiting the foreign court's reply, almost a year passed without the private WHEREFORE, the instant petition is GRANTED, and the assailed decision of the
respondent paying the legal fees. Thus, on February 2, 1990, the foreign court Court of Appeals sustaining the trial court's dismissal of the OIL AND NATURAL GAS
rejected the objections of the private respondent and proceeded to adjudicate upon COMMISSION's complaint in Civil Case No. 4006 before Branch 30 of the RTC of
the petitioner's claims. We cannot subscribe to the private respondent's claim that the Surigao City is REVERSED, and another in its stead is hereby rendered ORDERING
foreign court violated its right to due process when it failed to reply to its queries nor private respondent PACIFIC CEMENT COMPANY, INC. to pay to petitioner the
when the latter rejected its objections for a clearly meritorious ground. The private amounts adjudged in the foreign judgment subject of said case.
respondent was afforded sufficient opportunity to be heard. It was not incumbent
upon the foreign court to reply to the private respondent's written communication. On
the contrary, a genuine concern for its cause should have prompted the private SO ORDERED.
respondent to ascertain with all due diligence the correct amount of legal fees to be
paid. The private respondent did not act with prudence and diligence thus its plea that Regalado, Melo and Puno, JJ., concur.
they were not accorded the right to procedural due process cannot elicit either
approval or sympathy from this Court. 36 Mendoza, J., took no part.

The private respondent bewails the presumed bias on the part of the arbitrator who
was a former employee of the petitioner. This point deserves scant consideration in
view of the following stipulation in the contract:

. . . . It will be no objection any such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter to which the supply or
contract relates and that in the course of his duties as Commission's employee he
had expressed views on all or any of the matter in dispute or difference. 37 (Emphasis
supplied.)

Finally, we reiterate hereunder our pronouncement in the case of Northwest Orient

Airlines, Inc. v. Court of Appeals 38that:
U.S. Supreme Court for several reasons. Because it is not unlikely that a mishap in a cruise could subject
a cruise line to litigation in several different fora, the line has a special interest in
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1990) limiting such fora. Moreover, a clause establishing ex ante the dispute resolution
forum has the salutary effect of dispelling confusion as to where suits may be brought
and defended, thereby sparing litigants time and expense and conserving judicial
Carnival Cruise Lines, Inc. v. Shute resources. Furthermore, it is likely that passengers purchasing tickets 

No. 89-1647 Page 499 U. S. 586

Argued Jan. 15, 1991 containing a forum clause like the one here at issue benefit in the form of reduced
fares reflecting the savings that the cruise line enjoys by limiting the fora in which it
Decided April 17, 1991 may be sued. Pp.  499 U. S. 590-594.

499 U.S. 585 (b) The Court of Appeals' conclusion that the clause here at issue should not be
enforced because the Shutes are incapable of pursuing this litigation in Florida is not
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR justified by The Bremen Court's statement that

THE NINTH CIRCUIT "the serious inconvenience of the contractual forum to one or both of the parties might
carry greater weight in determining the reasonableness of the forum clause."

Syllabus
Id. at  407 U. S. 17. That statement was made in the context of a hypothetical
"agreement between two Americans to resolve their essentially local disputes in a
After the respondents Shute, a Washington State couple, purchased passage on a remote alien forum."  Ibid. Here, in contrast, Florida is not such a forum, nor -- given
ship owned by petitioner, a Florida-based cruise line, petitioner sent them tickets the location of Mrs. Shute's accident -- is this dispute an essentially local one
containing a clause designating courts in Florida as the agreed-upon fora for the inherently more suited to resolution in Washington than in Florida. In light of these
resolution of disputes. The Shutes boarded the ship in Los Angeles, and, while in distinctions, and because the Shutes do not claim lack of notice of the forum clause,
international waters off the Mexican coast, Mrs. Shute suffered injuries when she they have not satisfied the "heavy burden of proof," ibid. required to set aside the
slipped on a deck mat. The Shutes filed suit in a Washington Federal District Court, clause on grounds of inconvenience. Pp.  499 U. S. 594-595.
which granted summary judgment for petitioner. The Court of Appeals reversed,
holding, inter alia, that the forum-selection clause should not be enforced under The
Bremen v. Zapata Off-Shore Co., 407 U. S. 1, because it was not "freely bargained (c) Although forum selection clauses contained in form passage contracts are subject
for," and because its enforcement would operate to deprive the Shutes of their day in to judicial scrutiny for fundamental fairness, there is no indication that petitioner
court in light of evidence indicating that they were physically and financially incapable selected Florida to discourage cruise passengers from pursuing legitimate claims or
of pursuing the litigation in Florida. obtained the Shutes' accession to the forum clause by fraud or overreaching. P.  499
U. S. 595.

Held: The Court of Appeals erred in refusing to enforce the forum-selection clause.

Pp.  499 U. S. 590-597. (d) By its plain language, the forum selection clause at issue does not violate 46
U.S.C. App. § 183c, which, inter alia, prohibits a vessel owner from inserting in any
contract a provision depriving a claimant of a trial "by court of competent jurisdiction"
(a) The Bremen Court's statement that a freely negotiated forum-selection clause, for loss of life or personal injury resulting from negligence. Pp.  499 U. S. 595-597.
such as the one there at issue, should be given full effect, 407 U.S. at  407 U. S. 12-
13, does not support the Court of Appeals' determination that a nonnegotiated forum
clause in a passage contract is never enforceable simply because it is not the subject 897 F.2d 377 (CA9 1990), reversed.
of bargaining. Whereas it was entirely reasonable for The Bremen Court to have
expected the parties to have negotiated with care in selecting a forum for the BLACKMUN, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and
resolution of disputes arising from their complicated international agreement, it would WHITE, O'CONNOR, SCALIA, KENNEDY, and SOUTER, JJ., joined. STEVENS, J.,
be entirely unreasonable to assume that a cruise passenger would or could negotiate filed a dissenting opinion, in which MARSHALL, J., joined, post,p.  499 U. S. 597. 
the terms of a forum clause in a routine commercial cruise ticket form. Nevertheless,
including a reasonable forum clause in such a form contract well may be permissible Page 499 U. S. 587
JUSTICE BLACKMUN delivered the opinion of the Court. Respondents boarded the TROPICALE in Los Angeles, Cal. The ship sailed to Puerto
Vallarta, Mexico, and then returned to Los Angeles. While the ship was in
In this admiralty case we primarily consider whether the United States Court of international waters off the Mexican coast, respondent Eulala Shute was injured when
Appeals for the Ninth Circuit correctly refused to enforce a forum selection clause she slipped on a deck mat during a guided tour of the ship's galley. Respondents filed
contained in tickets issued by petitioner Carnival Cruise Lines, Inc., to respondents suit against petitioner in the United States District Court for the Western District of
Eulala and Russel Shute. Washington, claiming that Mrs. Shute's injuries had been caused by the negligence of
Carnival Cruise Lines and its employees.  Id. at 4.
I
Petitioner moved for summary judgment, contending that the forum clause in
respondents' tickets required the Shutes to bring their suit against petitioner in a court
The Shutes, through an Arlington, Wash., travel agent, purchased passage for a 7- in the State of Florida. Petitioner contended, alternatively, that the District Court
day cruise on petitioner's ship, the TROPICALE. Respondents paid the fare to the lacked personal jurisdiction over petitioner because petitioner's contacts with the
agent, who forwarded the payment to petitioner's headquarters in Miami, Fla. State of Washington were insubstantial. The District Court granted the motion, holding
Petitioner then prepared the tickets and sent them to respondents in the State of that petitioner's contacts with Washington were constitutionally insufficient to support
Washington. The face of each ticket, at its left-hand lower corner, contained this the exercise of personal jurisdiction.  See App. to Pet. for Cert. 60a.
admonition:
The Court of Appeals reversed. Reasoning that, "but for" petitioner's solicitation of
"SUBJECT TO CONDITIONS OF CONTRACT ON LAST PAGES [bb]IMPORTANT! business in Washington, respondents would not have taken the cruise and Mrs.
[eb] PLEASE READ CONTRACT -- ON LAST PAGES 1, 2, 3" Shute would not have been injured, the court concluded that petitioner had sufficient
contacts with Washington to justify the District Court's exercise of personal
App. 15. The following appeared on "contract page 1" of each ticket: jurisdiction. 897 F.2d 377, 385-386 (CA9 1990). *

"TERMS AND CONDITIONS OF PASSAGE CONTRACT TICKET"  Page 499 U. S. 589

**** Turning to the forum selection clause, the Court of Appeals acknowledged that a
court concerned with the enforceability of such a clause must begin its analysis
"3. (a) The acceptance of this ticket by the person or persons named hereon as with The Bremen v. Zapata Off-Shore Co., 407 U. S. 1(1972), where this Court held
passengers shall be deemed to be an acceptance and agreement by each of them of that forum selection clauses, although not "historically . . . favored," are "prima
all of the terms and conditions of this Passage Contract Ticket." facie valid."  Id. at  407 U. S. 9-10.  See 897 F.2d at 388. The appellate court
concluded that the forum clause should not be enforced because it "was not freely
bargained for."  Id. at 389. As an "independent justification" for refusing to enforce the
**** clause, the Court of Appeals noted that there was evidence in the record to indicate
that "the Shutes are physically and financially incapable of pursuing this litigation in
"8. It is agreed by and between the passenger and the Carrier that all disputes and Florida," and that the enforcement of the clause would operate to deprive them of
matters whatsoever arising under, in connection with or incident to this Contract  their day in court, and thereby contravene this Court's holding in The Bremen. 897
F.2d at 389.
Page 499 U. S. 588
We granted certiorari to address the question whether the Court of Appeals was
correct in holding that the District Court should hear respondents' tort claim against
shall be litigated, if at all, in and before a Court located in the State of Florida, U.S.A.
petitioner. 498 U.S. 807-808 (1990). Because we find the forum selection clause to be
to the exclusion of the Courts of any other state or country."
dispositive of this question, we need not consider petitioner's constitutional argument
as to personal jurisdiction.  See Ashwander v. TVA, 297 U. S. 288,  297 U. S.
Id. at 16. 347 (1936) (Brandeis, J., concurring) ("It is not the habit of the Court to decide
questions of a constitutional nature unless 
The last quoted paragraph is the forum selection clause at issue.
Page 499 U. S. 590
II
absolutely necessary to a decision of the case,'" quoting Burton v. United States, 196
U. S. 283,  196 U. S. 295(1905)).
III sitting en banc on rehearing, and by a sharply divided vote, affirmed. 446 F.2d 907
(1971).
We begin by noting the boundaries of our inquiry. First, this is a case in admiralty, and
federal law governs the enforceability of the forum selection clause we This Court vacated and remanded, stating that, in general,
scrutinize.  See Archawski v. Nanioti, 350 U. S. 532,  350 U. S. 533 (1956); The
Moses Taylor, 4 Wall. 411,  71 U. S. 427 (1867); Tr. of Oral Arg. 36-37, 12, 47- "a freely negotiated private international agreement, unaffected by fraud, undue
48.  Cf. Stewart Organization, Inc. v. Ricoh Corp., 487 U. S. 22,  487 U. S. 28-29 influence, or overweening bargaining power, such as that involved here, should be
(1988). Second, we do not address the question whether respondents had sufficient given full effect."
notice of the forum clause before entering the contract for passage. Respondents
essentially have conceded that they had notice of the forum selection provision. Brief
for Respondent 26 ("The respondents do not contest the incorporation of the 407 U.S. at  407 U. S. 12-13 (footnote omitted). The Court further generalized that,
provisions nor [sic] that the forum selection clause was reasonably communicated to
the respondents, as much as three pages of fine print can be communicated."). "in the light of present-day commercial realities and expanding international trade, we
Additionally, the Court of Appeals evaluated the enforceability of the forum clause conclude that the forum clause should control absent a strong showing that it should
under the assumption, although "doubtful," that respondents could be deemed to be set aside."
have had knowledge of the clause.  See 897 F.2d at 389 and n. 11.
Id. at  407 U. S. 16. The Court did not define precisely the circumstances that would
Within this context, respondents urge that the forum clause should not be enforced make it unreasonable for a court to enforce a forum clause. Instead, the Court
because, contrary to this Court's teachings in The Bremen, the clause was not the discussed a number of factors that made it reasonable to enforce the clause at issue
product of negotiation, and enforcement effectively would deprive respondents of their in The Bremen and 
day in court. Additionally, respondents contend that the clause violates the Limitation
of Vessel Owner's Liability Act, 46 U.S.C. App. § 183c. We consider these arguments Page 499 U. S. 592
in turn.

that, presumably, would be pertinent in any determination whether to enforce a similar

IV clause.

A In this respect, the Court noted that there was

Both petitioner and respondents argue vigorously that the Court's opinion in The "strong evidence that the forum clause was a vital part of the agreement, and [that] it
Bremen governs this case, and each side purports to find ample support for its would be unrealistic to think that the parties did not conduct their negotiations,
position in that  including fixing the monetary terms, with the consequences of the forum clause
figuring prominently in their calculations."
Page 499 U. S. 591
Id. at  407 U. S. 14 (footnote omitted). Further, the Court observed that it was not
opinion's broad-ranging language. This seeming paradox derives in large part from "dealing with an agreement between two Americans to resolve their essentially local
key factual differences between this case and The Bremen, differences that preclude disputes in a remote alien forum," and that, in such a case,
an automatic and simple application of The Bremen's general principles to the facts
here. "the serious inconvenience of the contractual forum to one or both of the parties might
carry greater weight in determining the reasonableness of the forum clause."
In The Bremen, this Court addressed the enforceability of a forum selection clause in
a contract between two business corporations. An American corporation, Zapata, Id. at  407 U. S. 17. The Court stated that, even where the forum clause establishes a
made a contract with Unterweser, a German corporation, for the towage of Zapata's remote forum for resolution of conflicts, "the party claiming [unfairness] should bear a
ocean-going drilling rig from Louisiana to a point in the Adriatic Sea off the coast of heavy burden of proof."  Ibid.
Italy. The agreement provided that any dispute arising under the contract was to be
resolved in the London Court of Justice. After a storm in the Gulf of Mexico seriously
damaged the rig, Zapata ordered Unterweser's ship to tow the rig to Tampa, Fla., the In applying The Bremen, the Court of Appeals in the present litigation took note of the
nearest point of refuge. Thereafter, Zapata sued Unterweser in admiralty in federal foregoing "reasonableness" factors and rather automatically decided that the forum
court at Tampa. Citing the forum clause, Unterweser moved to dismiss. The District selection clause was unenforceable because, unlike the parties in The
Court denied Unterweser's motion, and the Court of Appeals for the Fifth Circuit, Bremen, respondents are not business persons, and did not negotiate the terms of
the clause with petitioner. Alternatively, the Court of Appeals ruled that the clause effect of dispelling any confusion about where suits arising from the contract must be
should not be enforced because enforcement effectively would deprive respondents brought and defended, sparing litigants the time and expense of pretrial motions to
of an opportunity to litigate their claim against petitioner. determine the correct forum, and conserving judicial resources that otherwise would
be devoted to deciding those motions.  See Stewart Organization, 487 U.S. at  487 U.
The Bremen concerned a S. 33 (concurring opinion). Finally, it stands to reason that passengers who purchase
tickets containing a forum clause like that at issue in this case benefit in the form of
reduced fares reflecting the savings that the cruise line enjoys by limiting the fora in
"far from routine transaction between companies of two different nations which it may be sued.  Cf. Northwestern Nat. Ins. Co. v. Donovan, 916 F.2d 372, 378
contemplating the tow of an extremely costly piece of equipment from Louisiana (CA7 1990).
across the Gulf of Mexico and the Atlantic Ocean, through the Mediterranean Sea to
its final destination in the Adriatic Sea."
We also do not accept the Court of Appeals' "independent justification" for its
conclusion that The Bremendictates that the clause should not be enforced because
407 U.S. at  407 U. S. 13. These facts suggest that, even apart from the evidence of "[t]here is evidence in the record to indicate that the Shutes are physically and
negotiation regarding the forum clause, it was entirely reasonable for the Court in The financially incapable of pursuing this litigation in Florida." 897 F.2d, at 389. We do not
defer to the Court of Appeals' findings of fact. In dismissing the case for lack of
Page 499 U. S. 593 personal jurisdiction over petitioner, the District Court made no finding regarding the
physical and financial impediments to the Shutes' pursuing their case in Florida. The
Bremen to have expected Unterweser and Zapata to have negotiated with care in Court of Appeals' conclusory reference to the record provides no basis for this Court
selecting a forum for the resolution of disputes arising from their special towing to validate the finding of inconvenience. Furthermore, the Court of Appeals did not
contract. place in proper context this Court's statement in The Bremen that

In contrast, respondents' passage contract was purely routine, and doubtless nearly "the serious inconvenience of the contractual forum to one or both of the parties might
identical to every commercial passage contract issued by petitioner and most other carry greater weight in determining the reasonableness of the forum clause."
cruise lines.  See, e.g., Hodes v. S.N.C. Achille Lauro ed Altri-Gestione, 858 F.2d
905, 910 (CA3 1988), cert. dism'd, 490 U.S. 1001 (1989). In this context, it would be 407 U.S. at  407 U. S. 17. The Court made this statement in evaluating a hypothetical
entirely unreasonable for us to assume that respondents -- or any other cruise "agreement between two Americans to resolve their essentially local disputes in a
passenger -- would negotiate with petitioner the terms of a forum-selection clause in remote alien forum."  Ibid. In the present case, Florida is not a "remote alien forum,"
an ordinary commercial cruise ticket. Common sense dictates that a ticket of this kind nor -- given the fact that Mrs. Shute's accident occurred off the coast of Mexico -- is
will be a form contract the terms of which are not subject to negotiation, and that an this dispute an essentially local one inherently more suited to resolution in the State of
individual purchasing the ticket will not have bargaining parity with the cruise line. But Washington than in Florida. In 
by ignoring the crucial differences in the business contexts in which the respective
contracts were executed, the Court of Appeals' analysis seems to us to have distorted Page 499 U. S. 595
somewhat this Court's holding in The Bremen.
light of these distinctions, and because respondents do not claim lack of notice of the
In evaluating the reasonableness of the forum clause at issue in this case, we must forum clause, we conclude that they have not satisfied the "heavy burden of
refine the analysis of The Bremen to account for the realities of form passage proof," ibid. required to set aside the clause on grounds of inconvenience.
contracts. As an initial matter, we do not adopt the Court of Appeals' determination
that a nonnegotiated forum selection clause in a form ticket contract is never
enforceable simply because it is not the subject of bargaining. Including a reasonable It bears emphasis that forum selection clauses contained in form passage contracts
forum clause in a form contract of this kind well may be permissible for several are subject to judicial scrutiny for fundamental fairness. In this case, there is no
reasons: first, a cruise line has a special interest in limiting the fora in which it indication that petitioner set Florida as the forum in which disputes were to be
potentially could be subject to suit. Because a cruise ship typically carries passengers resolved as a means of discouraging cruise passengers from pursuing legitimate
from many locales, it is not unlikely that a mishap on a cruise could subject the cruise claims. Any suggestion of such a bad faith motive is belied by two facts: petitioner has
line to litigation in several different fora.  See The Bremen, 407 U.S. at  407 U. S. its principal place of business in Florida, and many of its cruises depart from and
13 and n. 15. Additionally, a clause establishing ex ante the forum for dispute return to Florida ports. Similarly, there is no evidence that petitioner obtained
resolution has the salutary  respondents' accession to the forum clause by fraud or overreaching. Finally,
respondents have conceded that they were given notice of the forum provision and,
therefore, presumably retained the option of rejecting the contract with impunity. In
Page 499 U. S. 594 the case before us, therefore, we conclude that the Court of Appeals erred in refusing
to enforce the forum selection clause.
B The judgment of the Court of Appeals is reversed.

Respondents also contend that the forum selection clause at issue violates 46 U.S.C. It is so ordered
App. § 183c. That statute, enacted in 1936, see 49 Stat. 1480, provides:
* The Court of Appeals had filed an earlier opinion also reversing the District Court
"It shall be unlawful for the . . . owner of any vessel transporting passengers between and ruling that the District Court had personal jurisdiction over the cruise line, and that
ports of the United States or between any such port and a foreign port to insert in any the forum selection clause in the tickets was unreasonable, and was not to be
rule, regulation, contract, or agreement any provision or limitation (1) purporting, in enforced. 863 F.2d 1437 (CA9 1988). That opinion, however, was withdrawn when
the event of loss of life or bodily injury arising from the negligence or fault of such the court certified to the Supreme Court of Washington the question whether the
owner or his servants, to relieve such owner . . . from liability, or from liability beyond Washington long-arm statute, Wash.Rev.Code § 4.28.185 (1988), conferred personal
any stipulated amount, for such loss or injury, or (2) purporting in such event to jurisdiction over Carnival Cruise Lines for the claim asserted by the Shutes.  See 872
lessen, weaken, or avoid the right of any claimant to a trial by court of competent  F.2d 930 (CA9 1989). The Washington Supreme Court answered the certified
question in the affirmative on the ground that the Shutes' claim "arose from"
Page 499 U. S. 596 petitioner's advertisement in Washington and the promotion of its cruises there.  113
Wash. 2d 763, 783 P.2d 78 (1989). The Court of Appeals then "refiled" its opinion "as
modified herein."  See 897 F.2d at 380, n. 1.
jurisdiction on the question of liability for such loss or injury, or the measure of
damages therefor. All such provisions or limitations contained in any such rule,
regulation, contract, or agreement are declared to be against public policy and shall JUSTICE STEVENS, with whom JUSTICE MARSHALL joins, dissenting.
be null and void and of no effect."
The Court prefaces its legal analysis with a factual statement that implies that a
By its plain language, the forum selection clause before us does not take away purchaser of a Carnival Cruise Lines passenger ticket is fully and fairly notified about
respondents' right to "a trial by [a] court of competent jurisdiction," and thereby the existence of the choice of forum clause in the fine print on the back of the
contravene the explicit proscription of § 183c. Instead, the clause states specifically ticket.  See ante at  499 U. S. 587-588. Even if this implication were accurate, I would
that actions arising out of the passage contract shall be brought "if at all," in a court disagree with the Court's analysis. But, given the Court's preface, I begin my dissent
"located in the State of Florida," which, plainly, is a "court of competent jurisdiction" by noting that only the most meticulous passenger is likely to become aware of the
within the meaning of the statute. forum selection provision. I have therefore appended to this opinion a facsimile
[omitted] of the relevant text, using the type size that actually appears in the ticket
itself. A careful reader will find the forum selection clause in the eighth of the twenty-
Respondents appear to acknowledge this by asserting that, although the forum five numbered paragraphs.
clause does not directly prevent the determination of claims against the cruise line, it
causes plaintiffs unreasonable hardship in asserting their rights, and therefore
violates Congress' intended goal in enacting § 183c. Significantly, however, Of course, many passengers, like the respondents in this case, see ante at  499 U. S.
respondents cite no authority for their contention that Congress' intent in enacting § 587, will not have an opportunity to read paragraph 8 until they have actually
183c was to avoid having a plaintiff travel to a distant forum in order to litigate. The purchased their tickets. By this point, the passengers will already have accepted the
legislative history of § 183c suggests, instead, that this provision was enacted in condition set forth in paragraph 16(a), which provides that "[t]he Carrier shall not be
response to passenger ticket conditions purporting to limit the shipowner's liability for liable to make any refund to passengers in respect of . . . tickets wholly or partly not
negligence or to remove the issue of liability from the scrutiny of any court by means used by a passenger." Not knowing whether or not that provision is legally
of a clause providing that "the question of liability and the measure of damages shall enforceable, I assume that the average passenger would accept the risk of having to
be determined by arbitration."  See S.Rep. No. 2061, 74th Cong., 2d Sess. 6 (1936); file suit in Florida in the event of an injury, rather than canceling -- without a refund --
H.R.Rep. No. 2517, 74th Cong., 2d Sess., 6 (1936).  See also Safety of Life and a planned vacation at the last minute. The fact that the cruise line can reduce its
Property at Sea: Hearings Before the Committee on Merchant Marine and Fisheries, litigation costs, and therefore its liability insurance premiums, by forcing this choice on
74th Cong., 2d Sess., pt. 4, pp. 20, 36-37, 57, 109-110, 119 (1936). There was no its passengers does not, in my opinion, suffice to render the 
prohibition of a forum selection clause. Because the clause before us allows for
judicial resolution of claims against petitioner and does  Page 499 U. S. 598

Page 499 U. S. 597 provision reasonable.  Cf. Steven v. Fidelity Casualty Co. of New York, 58 Cal. 2d
862, 883, 27 Cal. Rptr. 172, 186, 377 P.2d 284, 298 (1962) (refusing to enforce
not purport to limit petitioner's liability for negligence, it does not violate § 183c. limitation on liability in insurance policy because insured "must purchase the policy
before he even knows its provisions").
V
Even if passengers received prominent notice of the forum selection clause before party generally enters into them without manifesting knowing and voluntary consent to
they committed the cost of the cruise, I would remain persuaded that the clause was all their terms.  See, e.g., Rakoff, Contracts of Adhesion: An Essay in Reconstruction,
unenforceable under traditional principles of federal admiralty law, and is "null and 96 Harv.L.Rev. 1173, 1179-1180 (1983); Slawson, Mass Contracts: Lawful Fraud in
void" under the terms of Limited Liability Act, 49 Stat. 1480, as amended, 46 U.S.C. California, 48 S.Cal.L.Rev. 1, 1213 (1974); K. Llewellyn, The Common Law Tradition
App. § 183c, which was enacted in 1936 to invalidate expressly stipulations limiting 370-371 (1960).
shipowners' liability for negligence.
The common law, recognizing that standardized form contracts account for a
Exculpatory clauses in passenger tickets have been around for a long time. These significant portion of all commercial agreements, has taken a less extreme position,
clauses are typically the product of disparate bargaining power between the carrier and instead subjects terms in contracts of adhesion to scrutiny for reasonableness.
and the passenger, and they undermine the strong public interest in deterring Judge J. Skelly Wright set out the state of the law succinctly in Williams v. Walker-
negligent conduct. For these reasons, courts long before the turn of the century Thomas Furniture Co., 121 U.S.App.D.C. 315, 319-320, 350 F.2d 445, 449-450
consistently held such clauses unenforceable under federal admiralty law. Thus, in a (1965) (footnotes omitted):
case involving a ticket provision purporting to limit the shipowner's liability for the
negligent handling of baggage, this Court wrote: "Ordinarily, one who signs an agreement without full knowledge of its terms might be
held to assume the risk that he has entered a one-sided bargain. But when a party of
"It is settled in the courts of the United States that exemptions limiting carriers from little bargaining power, and hence little real choice, signs a commercially
responsibility for the negligence of themselves or their servants are both unjust and unreasonable contract with little or no knowledge of its terms, it is hardly likely that his
unreasonable, and will be deemed as wanting in the element of voluntary assent; consent, or even an objective manifestation of his consent, 
and, besides, that such conditions are in conflict with public policy. This doctrine was
announced so long ago, and has been so frequently reiterated, that it is elementary. Page 499 U. S. 601
We content ourselves with referring to the cases of the Baltimore & Ohio &c. Railway
v. Voigt, 176 U. S. 498,  176 U. S. 505,  176 U. S. 507, and Knott v. Botany Mills, 179
U. S. 69,  179 U. S. 71 [(1900)], where the previously adjudged cases are referred to was ever given to all of the terms. In such a case, the usual rule that the terms of the
and the principles  agreement are not to be questioned should be abandoned and the court should
consider whether the terms of the contract are so unfair that enforcement should be
withheld."
Page 499 U. S. 599
See also Steven, 58 Cal. 2d at 879-883, 27 Cal. Rptr. at 183-185, 377 P.2d at 295-
by them expounded are restated." 297;  Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960).

The Kensington, 183 U. S. 263,  183 U. S. 268 (1902). The second doctrinal principle implicated by forum selection clauses is the traditional
rule that "contractual provisions, which seek to limit the place or court in which an
Clauses limiting a carrier's liability or weakening the passenger's right to recover for action may . . . be brought, are invalid as contrary to public policy."  See Dougherty,
the negligence of the carrier's employees come in a variety of forms. Complete Validity of Contractual Provision Limiting Place or Court in Which Action May Be
exemptions from liability for negligence or limitations on the amount of the potential Brought, 31 A.L.R.4th 404, 409, § 3 (1984).  See also Home Insurance Co. v.
damage recovery, [Footnote 1] requirements that notice of claims be filed within an Morse, 20 Wall. 445, 87 U. S. 451 (1874). Although adherence to this general rule
unreasonably short period of time, [Footnote 2] provisions mandating a choice of law has declined in recent years, particularly following our decision in The Bremen v.
that is favorable to the defendant in negligence cases, [Footnote 3] and forum Zapata Off-Shore Co., 407 U. S. 1 (1972), the prevailing rule is still that forum
selection clauses are all similarly designed to put a thumb on the carrier's side of the selection clauses are not enforceable if they were not freely bargained for, create
scale of justice. [Footnote 4]  additional expense for one party, or deny one party a remedy.  See 31 A.L.R.4th, at
409-438 (citing cases). A forum selection clause in a standardized passenger ticket
Page 499 U. S. 600 would clearly have been unenforceable under the common law before our decision
in The Bremen, see 407 U.S. at  407 U. S. 9, and n. 10, and, in my opinion, remains
unenforceable under the prevailing rule today.
Forum selection clauses in passenger tickets involve the intersection of two strands of
traditional contract law that qualify the general rule that courts will enforce the terms
of a contract as written. Pursuant to the first strand, courts traditionally have reviewed The Bremen, which the Court effectively treats as controlling this case, had nothing to
with heightened scrutiny the terms of contracts of adhesion, form contracts offered on say about stipulations printed on the back of passenger tickets. That case involved
a take-or-leave basis by a party with stronger bargaining power to a party with weaker the enforceability of a forum selection clause in a freely negotiated international
power. Some commentators have questioned whether contracts of adhesion can agreement between two large corporations providing for the towage of a vessel from
justifiably be enforced at all under traditional contract theory because the adhering
the Gulf of Mexico to the Adriatic Sea. The Court recognized that such towage west coast of Mexico during the cruise that originated and terminated in Los Angeles,
agreements had generally been held unenforceable in American  California. It is safe to assume that the witnesses -- whether other passengers or
members of the crew -- can be assembled with less expense and inconvenience at a
Page 499 U. S. 602 west coast forum than in a Florida court several thousand miles from the scene of the
accident.
courts, [Footnote 5] but held that the doctrine of those cases did not extend to
commercial arrangements between parties with equal bargaining power. The federal A liberal reading of the 1936 statute is supported by both its remedial purpose and by
statute that should control the disposition of the case before us today was enacted in the legislative history's general condemnation of "all such practices." Although the
1936, when the general rule denying enforcement of forum selection clauses was statute does not specifically mention forum selection clauses, its language is broad
indisputably widely accepted. The principal subject of the statute concerned the enough to encompass them. The absence of a 
limitation of shipowner liability, but, as the following excerpt from the House Report
explains, the section that is relevant to this case was added as a direct response to Page 499 U. S. 604
shipowners' ticketing practices.
specific reference is adequately explained by the fact that such clauses were already
"During the course of the hearings on the bill (H.R. 9969) there was also brought to unenforceable under common law, and would not often have been used by carriers,
the attention of the committee a practice of providing on the reverse side of steamship which were relying on stipulations that purported to exonerate them from liability
tickets that, in the event of damage or injury caused by the negligence or fault of the entirely.  Cf. Moskal v. United States, 498 U. S. 103,  498 U. S. 110-113 (1990).
owner or his servants, the liability of the owner shall be limited to a stipulated amount,
in some cases $5,000, and in others substantially lower amounts, or that in such The Courts of Appeals, construing an analogous provision of the Carriage of Goods
event the question of liability and the measure of damages shall be determined by by Sea Act, 46 U.S.C. App. § 1300 et seq., have unanimously held invalid as
arbitration. The amendment to chapter 6 of title 48 of the Revised Statutes proposed limitations on liability forum selection clauses requiring suit in foreign
to be made by section 2 of the committee amendment is intended to, and in the jurisdictions.  See, e.g., Hughes Drilling Fluids v. M/V Luo Fu Shan, 852 F.2d 840
opinion of the committee will, put a stop to all such practices and practices of a like (CA5 1988), cert. denied, 489 U.S. 1033 (1989); Union Ins. Soc. of Canton, Ltd. v.
character." S.S. Elikon, 642 F.2d 721, 724-25 (CA4 1981); Indussa Corp. v. S.S. Ranborg, 377
F.2d 200, 203-204 (CA2 1967). Commentators have also endorsed this view.  See,
H.R.Rep. No. 2517, 74th Cong., 2d Sess., 6-7 (1936) (emphasis added); see e.g., G. Gilmore & C. Black, The Law of Admiralty 145, and n. 23 (2nd ed.1975);
also S.Rep. No. 2061, 74th Cong., 2d Sess., 6-7 (1936).  Mendelsohn, Liberalism, Choice of Forum Clauses and the Hague Rules, 2 J. of
Maritime Law & Comm. 661, 663-666 (1971). The forum selection clause here does
Page 499 U. S. 603 not mandate suit in a foreign jurisdiction, and therefore arguably might have less of an
impact on a plaintiff's ability to recover.  See Fireman's Fund American Ins. Cos. v.
Puerto Rican Forwarding Co., 492 F.2d 1294 (CA1 1974). However, the plaintiffs in
The intent to "put a stop to all such practices and practices of a like character" was this case are not large corporations, but individuals, and the added burden on them of
effectuated in the second clause of the statute. It reads: conducting a trial at the opposite end of the country is likely proportional to the
additional cost to a large corporation of conducting a trial overseas. [Footnote 6]
"It shall be unlawful for the manager, agent, master, or owner of any vessel
transporting passengers between ports of the United States or between any such port Under these circumstances, the general prohibition against stipulations purporting "to
and a foreign port to insert in any rule, regulation, contract, or agreement any lessen, weaken, or avoid" the passenger's right to a trial certainly should be construed
provision or limitation (1) purporting, in the event of loss of life or bodily injury arising to apply to the manifestly unreasonable stipulation in these passengers' 
from the negligence or fault of such owner or his servants, to relieve such owner,
master, or agent from liability, or from liability beyond any stipulated amount, for such
loss or injury, or (2) purporting in such event to lessen, weaken, or avoid the right of Page 499 U. S. 605
any claimant to a trial by court of competent jurisdiction on the question of liability for
such loss or injury, or the measure of damages therefor. All such provisions or tickets. Even without the benefit of the statute, I would continue to apply the general
limitations contained in any such rule, regulation, contract, or agreement are declared rule that prevailed prior to our decision in The Bremen to forum selection clauses in
to be against public policy and shall be null and void and of no effect." passenger tickets.

46 U.S.C. App. § 183c (emphasis added). I respectfully dissent.

The stipulation in the ticket that Carnival Cruise sold to respondents certainly lessens [Footnote 1]
or weakens their ability to recover for the slip and fall incident that occurred off the
See 46 U.S.C. App. § 183c: The Bremen v. Zapata Off-Shore Co., 407 U. S. 1,  407 U. S. 6 (1972).

"It shall be unlawful for the . . . owner of any vessel transporting passengers between [Footnote 6]
ports of the United States or between any such port and a foreign port to insert in any
rule, regulation, contract, or agreement any provision or limitation (1) purporting, in The Court does not make clear whether the result in this case would also apply if the
the event of loss of life or bodily injury arising from the negligence or fault of such clause required Carnival passengers to sue in Panama, the country in which Carnival
owner or his servants, to relieve such owner . . . from liability, or from liability beyond is incorporated.
any stipulated amount, for such loss or injury. . . ."

[Footnote 2]

See 46 U.S.C. App. § 183b(a):

"It shall be unlawful for the manager, agent, master, or owner of any sea-going vessel
(other than tugs, barges, fishing vessels and their tenders) transporting passengers or
merchandise or property from or between ports of the United States and foreign ports
to provide by rule, contract, regulation, or otherwise a shorter period for giving notice
of, or filing claims for loss of life or bodily injury, than six months, and for the institution
of suits on such claims, than one year, such period for institution of suits to be
computed from the day when the death or injury occurred."

See also 49 U.S.C. § 11707(e) ("A carrier or freight forwarder may not provide by
rule, contract, or otherwise, a period of less than 9 months for filing a claim against it
under this section and a period of less than 2 years for bringing a civil action against it
under this section").

[Footnote 3]

See, e.g., The Kensington, 183 U. S. 263,  183 U. S. 269 (1902) (refusing to enforce

clause requiring that all disputes under contract for passage be governed by Belgian
law because such law would have favored the shipowner in violation of United States
public policy).

[Footnote 4]

All these clauses will provide passengers who purchase tickets containing them with a
"benefit in the form of reduced fares reflecting the savings that the cruise line enjoys
by limiting [its exposure to liability]."  See ante at  499 U. S. 594. Under the Court's
reasoning, all these clauses, including a complete waiver of liability, would be
enforceable, a result at odds with longstanding jurisprudence.

[Footnote 5]

"In [Carbon Black Export, Inc. v. The Monrosa, 254 F.2d 297 (CA5 1958), cert.
dismissed, 359 U. S. 180 (1959),] the Court of Appeals had held a forum selection
clause unenforceable, reiterating the traditional view of many American courts that
'agreements in advance of controversy whose object is to oust the jurisdiction of the
courts are contrary to public policy, and will not be enforced.' 254 F.2d at 300-301."
U.S. Supreme Court Court of Appeals reversed, holding that "[j]urisdiction under these circumstances
would offend the fundamental fairness which is the touchstone of due process."
Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)
Held: The District Court's exercise of jurisdiction pursuant to Florida's long-arm statute
Burger King Corp. v. Rudzewicz did not violate the Due Process Clause of the Fourteenth Amendment. Pp.  471 U. S.
471-487. 
No. 83-2097
Page 471 U. S. 463
Argued January 8, 1985
(a) A forum may assert specific jurisdiction over a nonresident defendant where an
alleged injury arises out of or relates to actions by the defendant himself that are
Decided May 20, 1985 purposeful directed toward forum residents, and where jurisdiction would not
otherwise offend "fair play and substantial justice." Jurisdiction in these circumstances
471 U.S. 462 may not be avoided merely because the defendant did not physically enter the forum.
Pp. 471 U. S. 471-478.
APPEAL FROM THE UNITED STATES COURT OF APPEALS FOR THE
(b) An individual's contract with an out-of-state party cannot alone automatically
ELEVENTH CIRCUIT establish sufficient minimum contacts in the other party's home forum. Instead, the
prior negotiations and contemplated future consequences, along with the terms of the
contract and the parties' actual course of dealing, must be evaluated to determine
Syllabus whether a defendant purposefully established minimum contacts within the forum.
Pp.  471 U. S. 478-479.
Appellant is a Florida corporation whose principal offices are in Miami. It conducts
most of its restaurant business through a franchise operation, under which (c) Here, appellee established a substantial and continuing relationship with
franchisees are licensed to use appellant's trademarks and service marks in leased appellant's Miami headquarters, and received fair notice from the contract documents
standardized restaurant facilities for a period of 20 years. The governing contracts and the course of dealings that he might be subject to suit in Florida. The District
provide that the franchise relationship is established in Miami and governed by Court found that appellee is an "experienced and sophisticated" businessman who did
Florida law, and call for payment of all required monthly fees and forwarding of all not act under economic duress or disadvantage imposed by appellant, and appellee
relevant notices to the Miami headquarters. The Miami headquarters sets policy and has pointed to no other factors that would establish the unconstitutionality of Florida's
works directly with the franchisees in attempting to resolve major problems. Day-to- assertion of jurisdiction. Pp.  471 U. S. 479-487.
day monitoring of franchisees, however, is conducted through district offices that, in
turn, report to the Miami headquarters. Appellee is a Michigan resident who, along
with another Michigan resident, entered into a 20-year franchise contract with 724 F.2d 1505, reversed and remanded.
appellant to operate a restaurant in Michigan. Subsequently, when the restaurant's
patronage declined, the franchisees fell behind in their monthly payments. After BRENNAN, J., delivered the opinion of the Court, in which BURGER, C.J., and
extended negotiations among the franchisees, the Michigan district office, and the MARSHALL, BLACKMUN, REHNQUIST, and O'CONNOR, JJ., joined. STEVENS, J.,
Miami headquarters proved unsuccessful in solving the problem, headquarters filed a dissenting opinion, in which WHITE, J., joined, post, p.  471 U. S. 487.
terminated the franchise and ordered the franchisees to vacate the premises. They POWELL, J., took no part in the consideration or decision of the case.
refused, and continued to operate the restaurant. Appellant then brought a diversity
action in Federal District Court in Florida, alleging that the franchisees had breached JUSTICE BRENNAN delivered the opinion of the Court.
their franchise obligations and requesting damages and injunctive relief. The
franchisees claimed that, because they were Michigan residents and because
appellant's claim did not "arise" within Florida, the District Court lacked personal The State of Florida's long-arm statute extends jurisdiction to "[a]ny person, whether
jurisdiction over them. But the court held that the franchisees were subject to personal or not a citizen or resident of this state," who, inter alia, "[b]reach[es] a contract in this
jurisdiction pursuant to Florida's long-arm statute, which extends jurisdiction to any state by failing to perform acts required by the contract to be performed in this state,"
person, whether or not a citizen or resident of the State, who breaches a contract in so long as the cause of action 
the State by failing to perform acts that the contract requires to be performed there.
Thereafter, the court entered judgment against the franchisees on the merits. The Page 471 U. S. 464
arises from the alleged contractual breach. Fla.Stat. § 48.193 (1)(g) (Supp.1984). The Page 471 U. S. 466
United States District Court for the Southern District of Florida, sitting in diversity,
relied on this provision in exercising personal jurisdiction over a Michigan resident provide that the franchise relationship is established in Miami and governed by
who allegedly had breached a franchise agreement with a Florida corporation by Florida law, and call for payment of all required fees and forwarding of all relevant
failing to make required payments in Florida. The question presented is whether this notices to the Miami headquarters. [Footnote 5] The Miami headquarters sets policy
exercise of long-arm jurisdiction offended "traditional conception[s] of fair play and and works directly with its franchisees in attempting to resolve major
substantial justice" embodied in the Due Process Clause of the Fourteenth problems.  See nn.  7  9 infra. Day-to-day monitoring of franchisees, however, is
Amendment.  International Shoe Co. v. Washington,326 U. S. 310, 320 (1945). conducted through a network of 10 district offices which, in turn, report to the Miami
headquarters.
I
The instant litigation grows out of Burger King's termination of one of its franchisees,
A and is aptly described by the franchisee as "a divorce proceeding among commercial
partners." 5 Record 4. The appellee John Rudzewicz, a Michigan citizen and resident,
Burger King Corporation is a Florida corporation whose principal offices are in Miami. is the senior partner in a Detroit accounting firm. In 1978, he was approached by
It is one of the world's largest restaurant organizations, with over 3,000 outlets in the Brian MacShara, the son of a business acquaintance, who suggested that they jointly
50 States, the Commonwealth of Puerto Rico, and 8 foreign nations. Burger King apply to Burger King for a franchise in the Detroit area. MacShara proposed to serve
conducts approximately 80% of its business through a franchise operation that the as the manager of the restaurant if Rudzewicz would put up the investment capital; in
company styles the "Burger King System" -- "a comprehensive restaurant format and exchange, the two would evenly share the profits. Believing that MacShara's idea
operating system for the sale of uniform and quality food products." App. 46. offered attractive investment and tax-deferral opportunities, Rudzewicz agreed to the
[Footnote 1] Burger King licenses its franchisees to use its trademarks and service venture. 6 id. at 438-439, 444, 460.
marks for a period of 20 years, and leases standardized restaurant facilities to them
for the same term. In addition, franchisees acquire a variety of proprietary information Rudzewicz and MacShara jointly applied for a franchise to Burger King's Birmingham,
concerning the "standards, specifications, procedures and methods for operating  Michigan, district office in the autumn of 1978. Their application was forwarded to
Burger King's Miami headquarters, which entered into a preliminary agreement with
Page 471 U. S. 465 them in February, 1979. During the ensuing four months, it was agreed that
Rudzewicz and MacShara would assume operation of an existing facility in Drayton
Plains, Michigan. MacShara attended the prescribed management courses in Miami
a Burger King Restaurant."  Id. at 52. They also receive market research and during this period, see n.  2supra, and the franchisees purchased $165,000 worth of
advertising assistance; ongoing training in restaurant management; [Footnote 2] and restaurant equipment from Burger King's Davmor Industries division in 
accounting, cost-control, and inventory-control guidance. By permitting franchisees to
tap into Burger King's established national reputation and to benefit from proven
procedures for dispensing standardized fare, this system enables them to go into the Page 471 U. S. 467
restaurant business with significantly lowered barriers to entry. [Footnote 3]
Miami. Even before the final agreements were signed, however, the parties began to
In exchange for these benefits, franchisees pay Burger King an initial $40,000 disagree over site-development fees, building design, computation of monthly rent,
franchise fee and commit themselves to payment of monthly royalties, advertising and and whether the franchisees would be able to assign their liabilities to a corporation
sales promotion fees, and rent computed in part from monthly gross sales. they had formed. [Footnote 6] During these disputes, Rudzewicz and MacShara
Franchisees also agree to submit to the national organization's exacting regulation of negotiated both with the Birmingham district office and with the Miami headquarters.
virtually every conceivable aspect of their operations. [Footnote 4] Burger King [Footnote 7] With some misgivings, Rudzewicz and MacShara finally obtained limited
imposes these standards and undertakes its rigid regulation out of conviction that concessions from the Miami headquarters, [Footnote 8] signed the final agreements,
and commenced operations in June, 1979. By signing the final agreements,
Rudzewicz obligated himself personally to payments exceeding $1 million over the
"[u]niformity of service, appearance, and quality of product is essential to the 20-year franchise relationship. 
preservation of the Burger King image and the benefits accruing therefrom to both
Franchisee and Franchisor."
Page 471 U. S. 468
Id. at 31.
The Drayton Plains facility apparently enjoyed steady business during the summer of
1979, but patronage declined after a recession began later that year. Rudzewicz and
Burger King oversees its franchise system through a two-tiered administrative MacShara soon fell far behind in their monthly payments to Miami. Headquarters sent
structure. The governing contracts  notices of default, and an extended period of negotiations began among the
franchisees, the Birmingham district office, and the Miami headquarters. After several Page 471 U. S. 470
Burger King officials in Miami had engaged in prolonged but ultimately unsuccessful
negotiations with the franchisees by mail and by telephone, [Footnote 9] headquarters judgment, concluding that the District Court could not properly exercise personal
terminated the franchise and ordered Rudzewicz and MacShara to vacate the jurisdiction over Rudzewicz pursuant to Fla.Stat. § 48.193(1)(g) (Supp.1984) because
premises. They refused, and continued to occupy and operate the facility as a Burger
King restaurant.
"the circumstances of the Drayton Plains franchise and the negotiations which led to it
left Rudzewicz bereft of reasonable notice and financially unprepared for the prospect
B of franchise litigation in Florida."

Burger King commenced the instant action in the United States District Court for the Burger King Corp. v. MacShara, 724 F.2d 1505, 1513 (1984). Accordingly, the panel
Southern District of Florida in May, 1981, invoking that court's diversity jurisdiction majority concluded that "[j]urisdiction under these circumstances would offend the
pursuant to 28 U.S.C. § 1332(a) and its original jurisdiction over federal trademark fundamental fairness which is the touchstone of due process."  Ibid. .
disputes pursuant to § 1338(a). [Footnote 10] Burger King alleged that Rudzewicz
and MacShara had breached their franchise obligations "within [the jurisdiction of] this
district court" by failing to make the required payments "at plaintiff's place of business Burger King appealed the Eleventh Circuit's judgment to this Court pursuant to 28
in Miami, Dade County, Florida," � 6, App. 121, and also charged that they were U.S.C. § 1254(2), and we postponed probable jurisdiction. 469 U.S. 814 (1984).
Because it is unclear whether the Eleventh Circuit actually held that Fla.Stat. §
tortiously infringing 
48.193(1)(g) (Supp.1984) itself is unconstitutional as applied to the circumstances of
this case, we conclude that jurisdiction by appeal does not properly lie, and therefore
Page 471 U. S. 469 dismiss the appeal. [Footnote 12] Treating the jurisdictional 

its trademarks and service marks through their continued, unauthorized operation as Page 471 U. S. 471
a Burger King restaurant, �� 35-53, App. 130-135. Burger King sought damages,
injunctive relief, and costs and attorney's fees. Rudzewicz and MacShara entered statement as a petition for a writ of certiorari, see 28 U.S.C. § 2103, we grant the
special appearances and argued, inter alia, that, because they were Michigan petition, and now reverse.
residents, and because Burger King's claim did not "arise" within the Southern District
of Florida, the District Court lacked personal jurisdiction over them. The District Court
denied their motions after a hearing, holding that, pursuant to Florida's long-arm II
statute,
A
"a nonresident Burger King franchisee is subject to the personal jurisdiction of this
Court in actions arising out of its franchise agreements." The Due Process Clause protects an individual's liberty interest in not being subject to
the binding judgments of a 
Id. at 138. Rudzewicz and MacShara then filed an answer and a counterclaim
seeking damages for alleged violations by Burger King of Michigan's Franchise Page 471 U. S. 472
Investment Law, Mich.Comp.Laws § 445.1501 et seq.(1979).
forum with which he has established no meaningful "contacts, ties, or
After a 3-day bench trial, the court again concluded that it had "jurisdiction over the relations."  International Shoe Co. v. Washington, 326 U.S. at  326 U. S. 319.
subject matter and the parties to this cause." App. 159. Finding that Rudzewicz and [Footnote 13] By requiring that individuals have "fair warning that a particular activity
MacShara had breached their franchise agreements with Burger King and had may subject [them] to the jurisdiction of foreign sovereign," Shaffer v. Heitner, 433 U.
infringed Burger King's trademarks and service marks, the court entered judgment S. 186,  433 U. S. 218 (1977) (STEVENS, J., concurring in judgment), the Due
against them, jointly and severally, for $228,875 in contract damages. The court also Process Clause
ordered them "to immediately close Burger King Restaurant Number 775 from
continued operation or to immediately give the keys and possession of said
"gives a degree of predictability to the legal system that allows potential defendants to
restaurant to Burger King Corporation," id. at 163, found that they had failed to prove
structure their primary conduct with some minimum assurance as to where that
any of the required elements of their counterclaim, and awarded costs and attorney's
conduct will and will not render them liable to suit,"
fees to Burger King.

World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286,  444 U. S. 297 (1980).

Rudzewicz appealed to the Court of Appeals for the Eleventh Circuit. [Footnote 11] A
divided panel of that Circuit reversed the 
Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who it usually will not be unfair to subject him to the burdens of litigating in another forum
has not consented to suit there, [Footnote 14] this "fair warning" requirement is for disputes relating to such activity.  McGee v. International Life Insurance Co.,
satisfied if the defendant has "purposefully directed" his activities at residents of the supra, at  355 U. S. 223.
forum, Keeton v. Hustler Magazine, Inc., 465 U. S. 770,  465 U. S. 774(1984), and the
litigation results from alleged injuries that "arise out of or relate to" those Notwithstanding these considerations, the constitutional touchstone remains whether
activities, Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U. S. 408,  466 U. the defendant purposefully established "minimum contacts" in the forum
S. 414 State.  International Shoe Co. v. Washington, supra,at  326 U. S. 316. Although it has
been argued that foreseeability of causing injury in another State should be sufficient
Page 471 U. S. 473 to establish such contacts there when policy considerations so require, [Footnote 16]
the Court has consistently held that this kind of foreseeability is not a "sufficient
(1984). [Footnote 15] Thus benchmark" for exercising personal jurisdiction.  World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. at  444 U. S. 295. Instead,
"[t]he forum State does not exceed its powers under the Due Process Clause if it
asserts personal jurisdiction over a corporation that delivers its products into the "the foreseeability that is critical to due process analysis . . . is that the defendant's
stream of commerce with the expectation that they will be purchased by consumers in conduct and connection with the forum State are such that he should reasonably
the forum State" anticipate being haled into court there."

and those products subsequently injure forum consumers.  World-Wide Volkswagen Id. at  444 U. S. 297. In defining when it is that a potential defendant should
Corp. v. Woodson, supra,at  444 U. S. 297-298. Similarly, a publisher who distributes "reasonably anticipate" out-of-state litigation, the Court frequently has drawn from the
magazines in a distant State may fairly be held accountable in that forum for reasoning of Hanson v. Denckla, 357 U. S. 235,  357 U.S. 253 (1958):
damages resulting there from an allegedly defamatory story.  Keeton v. Hustler
Magazine, Inc., supra; see also Calder v. Jones, 465 U. S. 783 (1984) (suit against "The unilateral activity of those who claim some relationship with a nonresident
author and editor). And with respect to interstate contractual obligations, we have defendant cannot satisfy the requirement of contact with the forum State. The
emphasized that parties who "reach out beyond one state and create continuing application 
relationships and obligations with citizens of another state" are subject to regulation
and sanctions in the other State for the consequences of their activities.  Travelers Page 471 U. S. 475
Health Assn. v. Virginia, 339 U. S. 643,  339 U. S. 647 (1950).  See also McGee v.
International Life Insurance Co., 355 U. S. 220, 355 U. S. 222-223 (1957).
of that rule will vary with the quality and nature of the defendant's activity, but it is
essential in each case that there be some act by which the defendant purposefully
We have noted several reasons why a forum legitimately may exercise personal avails itself of the privilege of conducting activities within the forum State, thus
jurisdiction over a nonresident who "purposefully directs" his activities toward forum invoking the benefits and protections of its laws."
residents. A State generally has a "manifest interest" in providing its residents with a
convenient forum for redressing injuries inflicted by out-of-state actors.  Id. at  355 U.
S. 223; see also Keeton v. Hustler Magazine, Inc., supra, at  465 U. S. 776. This "purposeful availment" requirement ensures that a defendant will not be haled
Moreover, where individuals "purposefully derive benefit" from their interstate into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated"
activities, Kulko v. California Superior Court, contacts, Keeton v. Hustler Magazine, Inc., 465 U.S. at 465 U. S. 774; World-Wide
Volkswagen Corp. v. Woodson, supra, at  444 U. S. 299, or of the "unilateral activity
of another party or a third person," Helicopteros Nacionales de Colombia, S.A. v.
Page 471 U. S. 474 Hall, supra, at  466 U. S. 417. [Footnote 17] Jurisdiction is proper, however, where the
contacts proximately result from actions by the defendant himself that create a
436 U. S. 84,  436 U. S. 96 (1978), it may well be unfair to allow them to escape "substantial connection" with the forum State.  McGee v. International Life Insurance
having to account in other States for consequences that arise proximately from such Co., supra, at  355 U. S. 223; see also Kulko v. California Superior Court,
activities; the Due Process Clause may not readily be wielded as a territorial shield to supra, at  436 U. S. 94 n. 7. [Footnote 18] Thus where the defendant "deliberately"
avoid interstate obligations that have been voluntarily assumed. And because has 

"modern transportation and communications have made it much less burdensome for Page 471 U. S. 476
a party sued to defend himself in a State where he engages in economic activity,"
engaged in significant activities within a State, Keeton v. Hustler Magazine, Inc.,
supra, at  465 U. S. 781, or has created "continuing obligations" between himself and
residents of the forum, Travelers Health Assn. v. Virginia, 339 U.S. at  339 U. S. 648,
he manifestly has availed himself of the privilege of conducting business there, and, justice" may defeat the reasonableness of jurisdiction even if the defendant has
because his activities are shielded by "the benefits and protections" of the forum's purposefully engaged in forum activities.  World-Wide Volkswagen Corp. v. Woodson,
laws, it is presumptively not unreasonable to require him to submit to the burdens of supra, at  444 U. S. 292; see also Restatement (Second) of Conflict of Laws §§ 36-37
litigation in that forum as well. (1971). As we previously have noted, jurisdictional rules may not be employed in such
a way as to make litigation "so gravely difficult and inconvenient" that a party unfairly
Jurisdiction in these circumstances may not be avoided merely because the is at a "severe disadvantage" in comparison to his opponent.  The Bremen v. Zapata
defendant did not physicallyenter the forum State. Although territorial presence Off-Shore Co., 407 U. S. 1,  407 U. S. 18 (1972) (re forum-selection
frequently will enhance a potential defendant's affiliation with a State and reinforce the provisions); McGee v. International Life Insurance Co., supra, at  355 U. S. 223-224.
reasonable foreseeability of suit there, it is an inescapable fact of modern commercial
life that a substantial amount of business is transacted solely by mail and wire B
communications across state lines, thus obviating the need for physical presence
within a State in which business is conducted. So long as a commercial actor's efforts (1)
are "purposefully directed" toward residents of another State, we have consistently
rejected the notion that an absence of physical contacts can defeat personal
jurisdiction there.  Keeton v. Hustler Magazine, Inc., supra, at  465 U. S. 774-775; see Applying these principles to the case at hand, we believe there is substantial record
also Calder v. Jones, 465 U.S. at  465 U. S. 788-790; McGee v. International Life evidence supporting the District Court's conclusion that the assertion of personal
Insurance Co., 355 U.S. at  355 U. S. 222-223.  Cf. Hoopeston Canning Co. v. jurisdiction over Rudzewicz in Florida for the alleged breach of his franchise
Cullen, 318 U. S. 313,  318 U. S. 317 (1943) agreement did not offend due process. At the outset, we note a continued division
among lower courts respecting whether and to what extent a contract can constitute a
"contact" for purposes of due process analysis. [Footnote 21] If the question is
Once it has been decided that a defendant purposefully established minimum whether an individual's contract with an out-of-state party alone can automatically
contacts within the forum State, these contacts may be considered in light of other establish sufficient minimum contacts in the other party's home forum, we believe the
factors to determine whether the assertion of personal jurisdiction would comport with answer clearly is that it cannot. The Court long ago rejected the notion that personal
"fair play and substantial justice."  International Shoe Co. v. Washington, 326 U.S. jurisdiction might turn on "mechanical" tests, International Shoe Co. v. Washington,
at  326 U. S. 320. Thus,  supra, at  326 U. S. 319, or on "conceptualistic . . . theories of the place of contracting
or of performance," Hoopeston Canning Co. v. Cullen,
Page 471 U. S. 477
Page 471 U. S. 479
courts in "appropriate case[s]" may evaluate "the burden on the defendant," "the
forum State's interest in adjudicating the dispute," "the plaintiff's interest in obtaining 318 U.S. at  318 U. S. 316. Instead, we have emphasized the need for a "highly
convenient and effective relief," "the interstate judicial system's interest in obtaining realistic" approach that recognizes that a "contract" is
the most efficient resolution of controversies," and the "shared interest of the several
States in furthering fundamental substantive social policies."  World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. at  444 U. S. 292. These considerations "ordinarily but an intermediate step serving to tie up prior business negotiations with
sometimes serve to establish the reasonableness of jurisdiction upon a lesser future consequences which themselves are the real object of the business
showing of minimum contacts than would otherwise be required.  See, e.g., Keeton v. transaction."
Hustler Magazine, Inc., supra, at  465 U. S. 780; Calder v. Jones, supra, at  465 U. S.
788-789; McGee v. International Life Insurance Co., supra, at  355 U. S. 223-224. On Id. at  318 U. S. 316-317. It is these factors -- prior negotiations and contemplated
the other hand, where a defendant who purposefully has directed his activities at future consequences, along with the terms of the contract and the parties' actual
forum residents seeks to defeat jurisdiction, he must present a compelling case that course of dealing -- that must be evaluated in determining whether the defendant
the presence of some other considerations would render jurisdiction unreasonable. purposefully established minimum contacts within the forum.
Most such considerations usually may be accommodated through means short of
finding jurisdiction unconstitutional. For example, the potential clash of the forum's law In this case, no physical ties to Florida can be attributed to Rudzewicz other than
with the "fundamental substantive social policies" of another State may be MacShara's brief training course in Miami. [Footnote 22] Rudzewicz did not maintain
accommodated through application of the forum's choice-of-law rules. [Footnote 19] offices in Florida and, for all that appears from the record, has never even visited
Similarly, a defendant claiming substantial inconvenience may seek a change of there. Yet this franchise dispute grew directly out of "a contract which had
venue. [Footnote 20] Nevertheless, minimum requirements inherent in the concept of a substantial connection with that State."  McGee v. International Life Insurance
"fair play and substantial  Co., 355 U.S. at  355 U. S. 223 (emphasis added). Eschewing the option of operating
an independent local enterprise, Rudzewicz deliberately "reach[ed] out beyond"
Page 471 U. S. 478 Michigan and negotiated with a Florida corporation for the purchase of a long-term
franchise and 
Page 471 U. S. 480 Florida. The choice of law designation does not require that all suits concerning this
Agreement be filed in Florida."
the manifold benefits that would derive from affiliation with a nationwide
organization.  Travelers Health Assn. v. Virginia, 339 U.S. at  339 U. S. 647. Upon App. 72.  See also  n 5, supra. The Court of Appeals reasoned that choice-of-law
approval, he entered into a carefully structured 20-year relationship that envisioned provisions are irrelevant to the question of personal jurisdiction, relying on Hanson v.
continuing and wide-reaching contacts with Burger King in Florida. In light of Denckla for the proposition that "the center of gravity for choice-of-law purposes does
Rudzewicz' voluntary acceptance of the long-term and exacting regulation of his not necessarily confer the sovereign prerogative to assert jurisdiction." 724 F.2d at
business from Burger King's Miami headquarters, the "quality and nature" of his 1511-1512, n. 10, citing 357 U.S. at  357 U. S. 254. This reasoning misperceives the
relationship to the company in Florida can in no sense be viewed as "random," import of the quoted proposition. The Court in Hanson and subsequent cases has
"fortuitous," or "attenuated."  Hanson v. Denckla, 357 U.S. at  357 U.S. 253; Keeton emphasized that choice-of-law analysis -- which focuses on all elements of a
v. Hustler Magazine, Inc., 465 U.S. at  465 U. S. 774; World-Wide Volkswagen Corp. transaction, and not simply on the defendant's conduct -- is distinct from minimum-
v. Woodson, 444 U.S. at 444 U. S. 299. Rudzewicz' refusal to make the contractually contacts jurisdictional analysis -- which focuses at the threshold 
required payments in Miami, and his continued use of Burger King's trademarks and
confidential business information after his termination, caused foreseeable injuries to Page 471 U. S. 482
the corporation in Florida. For these reasons it was, at the very least, presumptively
reasonable for Rudzewicz to be called to account there for such injuries.
solely on the defendant's purposeful connection to the forum. [Footnote 23] Nothing in
our cases, however, suggests that a choice-of-law provision should be ignored in
The Court of Appeals concluded, however, that, in light of the supervision emanating considering whether a defendant has "purposefully invoked the benefits and
from Burger King's district office in Birmingham, Rudzewicz reasonably believed that protections of a State's laws" for jurisdictional purposes. Although such a provision,
"the Michigan office was, for all intents and purposes, the embodiment of Burger standing alone, would be insufficient to confer jurisdiction, we believe that, when
King," and that he therefore had no "reason to anticipate a Burger King suit outside of combined with the 20-year interdependent relationship Rudzewicz established with
Michigan." 724 F.2d at 1511.  See also post at  471 U. S. 488-489 (STEVENS, J., Burger King's Miami headquarters, it reinforced his deliberate affiliation with the forum
dissenting). This reasoning overlooks substantial record evidence indicating that State and the reasonable foreseeability of possible litigation there. As Judge Johnson
Rudzewicz most certainly knew that he was affiliating himself with an enterprise argued in his dissent below, Rudzewicz "purposefully availed himself of the benefits
based primarily in Florida. The contract documents themselves emphasize that and protections of Florida's laws" by entering into contracts expressly providing that
Burger King's operations are conducted and supervised from the Miami headquarters, those laws would govern franchise disputes. 724 F.2d at 1513. [Footnote 24]
that all relevant notices and payments must be sent there, and that the agreements
were made in and enforced from Miami.  See  n 5, supra. Moreover, the parties'
actual course of dealing repeatedly confirmed that decisionmaking authority was (2)
vested in the Miami headquarters, 
Nor has Rudzewicz pointed to other factors that can be said persuasively to outweigh
Page 471 U. S. 481 the considerations discussed above, and to establish the unconstitutionality of
Florida's assertion of jurisdiction. We cannot conclude that Florida had no "legitimate
interest in holding [Rudzewicz] answerable 
and that the district office served largely as an intermediate link between the
headquarters and the franchisees. When problems arose over building design, site-
development fees, rent computation, and the defaulted payments, Rudzewicz and Page 471 U. S. 483
MacShara learned that the Michigan office was powerless to resolve their disputes,
and could only channel their communications to Miami. Throughout these disputes, on a claim related to" the contacts he had established in that State.  Keeton v. Hustler
the Miami headquarters and the Michigan franchisees carried on a continuous course Magazine, Inc., 465 U.S. at  465 U. S. 776; see also McGee v. International Life
of direct communications by mail and by telephone, and it was the Miami Insurance Co., 355 U.S. at  465 U. S. 223 (noting that State frequently will have a
headquarters that made the key negotiating decisions out of which the instant "manifest interest in providing effective means of redress for its residents"). [Footnote
litigation arose.  See nn.  7  9 supra. 25] Moreover, although Rudzewicz has argued at some length that Michigan's
Franchise Investment Law, Mich.Comp.Laws § 445.1501 et seq. (1979), governs
Moreover, we believe the Court of Appeals gave insufficient weight to provisions in many aspects of this franchise relationship, he has not demonstrated how Michigan's
the various franchise documents providing that all disputes would be governed by acknowledged interest might possibly render jurisdiction in
Florida law. The franchise agreement, for example, stated: Florida unconstitutional. [Footnote 26] Finally, the Court of Appeals' assertion that the
Florida litigation "severely impaired [Rudzewicz'] ability to call Michigan witnesses
who might be essential to his defense and counterclaim," 724 F.2d at 1512-1513, is
"This Agreement shall become valid when executed and accepted by BKC at Miami, wholly without support in the record. [Footnote 27] And even to the extent that it is
Florida; it shall be deemed made and entered into in the State of Florida and shall be inconvenient 
governed and construed under and in accordance with the laws of the State of
Page 471 U. S. 484 jurisdiction over "out-of-state consumers to collect payments due on modest personal
purchases" and would "sow the seeds of default judgments against franchisees owing
for a party who has minimum contacts with a forum to litigate there, such smaller debts." 724 F.2d at 1511. We share the Court of Appeals' broader concerns,
considerations most frequently can be accommodated through a change of and therefore reject any talismanic jurisdictional formulas; "the 
venue.  See  n 20, supra. Although the Court has suggested that inconvenience may
at some point become so substantial as to achieve constitutional magnitude, McGee Page 471 U. S. 486
v. International Life Insurance Co., supra, at  355 U. S. 223, this is not such a case.
facts of each case must [always] be weighed" in determining whether personal
The Court of Appeals also concluded, however, that the parties' dealings involved "a jurisdiction would comport with "fair play and substantial justice." [Footnote 28]  Kulko
characteristic disparity of bargaining power" and "elements of surprise," and that v. California Superior Court, 436 U.S. at  436 U. S. 92. [Footnote 29] The "quality and
Rudzewicz "lacked fair notice" of the potential for litigation in Florida because the nature" of an interstate transaction may sometimes be so "random," "fortuitous," or
contractual provisions suggesting to the contrary were merely "boilerplate "attenuated" [Footnote 30] that it cannot fairly be said that the potential defendant
declarations in a lengthy printed contract." 724 F.2d at 1511-1512, and n. 10.  See "should reasonably anticipate being haled into court" in another jurisdiction.  World-
also post at  471 U. S. 489-490 (STEVENS, J., dissenting). Rudzewicz presented Wide Volkswagen Corp. v. Woodson, 444 U.S. at  444 U. S. 297; see also 
many of these arguments to the District Court, contending that Burger King was guilty n 18, supra. We also have emphasized that jurisdiction may not be grounded on a
of misrepresentation, fraud, and duress; that it gave insufficient notice in its dealings contract whose terms have been obtained through "fraud, undue influence, or
with him; and that the contract was one of adhesion.  See 4 Record 687-691. After a overweening bargaining power," and whose application would render litigation "so
3-day bench trial, the District Court found that Burger King had made no gravely difficult and inconvenient that [a party] will for all practical purposes be
misrepresentations, that Rudzewicz and MacShara "were and are experienced and deprived of his day in court."  The Bremen v. Zapata Off-Shore Co., 407 U.S. at  407
sophisticated businessmen," and that "at no time" did they "ac[t] under economic U. S. 12,  407 U. S. 18.  Cf. Fuentes v. Shevin, 407 U. S. 67,  407 U. S. 94-96
duress or disadvantage imposed by" Burger King. App. 157-158.  See also 7 Record (1972); National Equipment Rental, Ltd. v. Szukhent, 375 U. S. 311,  375 U. S.
648-649. Federal Rule of Civil Procedure 52(a) requires that "[f]indings of fact shall 329 (1964) (Black, J., dissenting) (jurisdictional rules may not be employed against
not be set aside unless clearly erroneous," and neither Rudzewicz nor the Court of small consumers so as to "crippl[e] their defense"). Just as the Due Process Clause
Appeals has pointed to record evidence that would support a "definite and firm allows flexibility in ensuring that commercial actors are not effectively "judgment
conviction" that the District Court's findings are mistaken.  United States v. United proof" for the consequences of obligations they voluntarily assume in other
States Gypsum Co., 333 U. S. 364,  333 U. S. 395 (1948). See also  States, McGee v. International Life Insurance Co., 355 U.S. at  355 U. S. 223, so too
does it prevent rules that would unfairly enable them to obtain default judgments
Page 471 U. S. 485 against unwitting customers.  Cf. United States v. Rumely, 345 U. S. 41,  345 U. S.
44(1953) (courts must not be "blind'" to what "`[a]ll others can see and understand'"). 
Anderson v. Bessemer City, 470 U. S. 564,  470 U. S. 573-576 (1985). To the
contrary, Rudzewicz was represented by counsel throughout these complex Page 471 U. S. 487
transactions and, as Judge Johnson observed in dissent below, was himself an
experienced accountant For the reasons set forth above, however, these dangers are not present in the
instant case. Because Rudzewicz established a substantial and continuing
"who for five months conducted negotiations with Burger King over the terms of the relationship with Burger King's Miami headquarters, received fair notice from the
franchise and lease agreements, and who obligated himself personally to contracts contract documents and the course of dealing that he might be subject to suit in
requiring over time payments that exceeded $1 million." Florida, and has failed to demonstrate how jurisdiction in that forum would otherwise
be fundamentally unfair, we conclude that the District Court's exercise of jurisdiction
pursuant to Fla.Stat. § 48.193(1)(g) (Supp.1984) did not offend due process. The
724 F.2d at 1514. Rudzewicz was able to secure a modest reduction in rent and other judgment of the Court of Appeals is accordingly reversed, and the case is remanded
concessions from Miami headquarters, see nn.  8  9 supra; moreover, to the extent for further proceedings consistent with this opinion.
that Burger King's terms were inflexible, Rudzewicz presumably decided that the
advantages of affiliating with a national organization provided sufficient commercial
benefits to offset the detriments. It is so ordered.

III JUSTICE POWELL took no part in the consideration or decision of this case.

Notwithstanding these considerations, the Court of Appeals apparently believed that it [Footnote 1]
was necessary to reject jurisdiction in this case as a prophylactic measure, reasoning
that an affirmance of the District Court's judgment would result in the exercise of Burger King's standard Franchise Agreement further defines this system as
"a restaurant format and operating system, including a recognized design, decor, concerning assignment, the District Court found that, pursuant to the parol evidence
color scheme and style of building, uniform standards, specifications and procedures rule, any such assurances "even if they had been made and were misleading, were
of operation, quality and uniformity of products and services offered, and procedures joined and merged" into the final agreement. 7 Record 648.
for inventory and management control. . . ."
[Footnote 7]
App. 43.
Although Rudzewicz and MacShara dealt with the Birmingham district office on a
[Footnote 2] regular basis, they communicated directly with the Miami headquarters in forming the
contracts; moreover, they learned that the district office had "very little"
Mandatory training seminars are conducted at Burger King University in Miami and at decisionmaking authority, and accordingly turned directly to headquarters in seeking
Whopper College Regional Training Centers around the country.  See id. at 39; 6 to resolve their disputes. 5 id. at 292.  See generally App. 5-6; 5 Record 167-168,
Record 540-541. 174-179, 182-184, 198-199, 217-218, 264-265, 292-294; 6 id. at 314-316, 363, 373,
416, 463, 496.
[Footnote 3]
[Footnote 8]
See App. 43-44.  See generally H. Brown, Franchising Realities and Remedies 6-7,
16-17 (2d ed.1978). They were able to secure a $10,439 reduction in rent for the third year. App. 82; 5
Record 222-223; 6 id. at 500.
[Footnote 4]
[Footnote 9]
See, e.g., App. 24-25, 26 (range, "quality, appearance, size, taste, and processing" of
menu items), 31 ("standards of service and cleanliness"), 32 (hours of operation), 47 Miami's policy was to "deal directly" with franchisees when they began to encounter
("official mandatory restaurant operating standards, specifications and procedures"), financial difficulties, and to involve district office personnel only when necessary.
48-50 (building layout, displays, equipment, vending machines, service, hours of 5 id. at 95. In the instant case, for example, the Miami office handled all credit
operation, uniforms, advertising, and promotion), 53 (employee training), 55-56 problems, ordered cost-cutting measures, negotiated for a partial refinancing of the
(accounting and auditing requirements), 59 (insurance requirements). Burger King franchisees' debts, communicated directly with the franchisees in attempting to
also imposes extensive standards governing franchisee liability, assignments, resolve the dispute, and was responsible for all termination matters.  See 2 id. at 59-
defaults, and termination.  See id. at 61-74. 69; 5 id. at 84-89, 94-95, 97-98, 100-103, 116-128, 151-152, 158, 163; 6 id. at 395-
397, 436-438, 510-511, 524-525.
[Footnote 5]
[Footnote 10]
See id. at 10-11, 37, 43, 72-73, 113.  See infra at  471 U. S. 481.
Rudzewicz and MacShara were served in Michigan with summonses and copies of
the complaint pursuant to Federal Rule of Civil Procedure 4. 2 id. at 102-103.
[Footnote 6]
[Footnote 11]
The latter two matters were the major areas of disagreement. Notwithstanding that
Burger King's franchise offering advised that minimum rent would be based on a
percentage of "approximated capitalized site acquisition and construction costs," id. at MacShara did not appeal his judgment.  See Burger King Corp. v. MacShara, 724
23, Rudzewicz assumed that rent would be a function solely of renovation costs, and F.2d 1505, 1506, n. 1 (CA11 1984). In addition, Rudzewicz entered into a
he thereby underestimated the minimum monthly rent by more than $2,000. The compromise with Burger King and waived his right to appeal the District Court's
District Court found Rudzewicz' interpretation "incredible." 7 Record 649. finding of trademark infringement and its entry of injunctive relief.  See 4 Record 804-
816. Accordingly, we need not address the extent to which the tortious act provisions
of Florida's long-arm statute, see Fla.Stat. § 48.193(1)(b) (Supp.1984), may
With respect to assignment, Rudzewicz and MacShara had formed RMBK Corp. with constitutionally extend to out-of-state trademark infringement.  Cf. Calder v.
the intent of assigning to it all of their interest and liabilities in the franchise. Jones, 465 U. S. 783,  465 U. S. 788-789 (1984) (tortious out-of-state
Consistent with the contract documents, however, Burger King insisted that the two conduct); Keeton v. Hustler Magazine, Inc., 465 U. S. 770,  465 U. S. 776 (1984)
remain personally liable for their franchise obligations.  See App. 62, 109. Although (same).
the franchisees contended that Burger King officials had given them oral assurances
[Footnote 12] Although this protection operates to restrict state power, it "must be seen as ultimately
a function of the individual liberty interest preserved by the Due Process Clause,"
The District Court had found both that Rudzewicz fell within the reach of Florida's rather than as a function "of federalism concerns."  Insurance Corp. of Ireland v.
long-arm statute, and that the exercise of jurisdiction was constitutional. The Court of Compagnie des Bauxites de Guinee, 456 U. S. 694,  456 U. S. 702-703, n. 10 (1982).
Appeals did not consider the statutory question, however, because, as Burger King
acknowledged at argument, that court "accepted the parties' stipulation" that § 48.193 [Footnote 14]
reached Rudzewicz "in lieu of [making] a determination of what Florida law provides."
Tr. of Oral Arg. 12. Burger King contends that an appeal is proper "on the basis of the We have noted that, because the personal jurisdiction requirement is a waivable right,
Circuit Court's holding that, given that stipulation, the statute was unconstitutional as there are a "variety of legal arrangements" by which a litigant may give "express or
applied."  Id. at 13 (emphasis added). implied consent to the personal jurisdiction of the court."  Insurance Corp. of Ireland
v. Compagnie des Bauxites de Guinee, supra, at  456 U. S. 703. For example,
We disagree. Our particularly in the commercial context, parties frequently stipulate in advance to
submit their controversies for resolution within a particular jurisdiction.  See National
"overriding policy, historically encouraged by Congress, of minimizing the mandatory Equipment Rental, Ltd. v. Szukhent,375 U. S. 311 (1964). Where such forum-
docket of this Court in the interests of sound judicial administration," selection provisions have been obtained through "freely negotiated" agreements and
are not "unreasonable and unjust," The Bremen v. Zapata Off-Shore Co., 407 U. S.
1,  407 U. S. 15 (1972), their enforcement does not offend due process.
Gonzalez v. Automatic Employees Credit Union, 419 U. S. 90,  419 U. S. 98 (1974)
(construing 28 U.S.C. § 1253), would be threatened if litigants could obtain an appeal
through the expedient of stipulating to a particular construction of state law where [Footnote 15]
state law might, in fact, be in harmony with the Federal Constitution. Jurisdiction
under 28 U.S.C. § 1254(2) is properly invoked only where a court of "Specific" jurisdiction contrasts with "general" jurisdiction, pursuant to which
appeals squarely has "held" that a state statute is unconstitutional on its face or as
applied; jurisdiction does not lie if the decision might rest on other grounds.  Public "a State exercises personal jurisdiction over a defendant in a suit not arising out of or
Service Comm'n v. Batesville Telephone Co., 284 U. S. 6,  284 U. S. 7 (1931) (per related to the defendant's contacts with the forum."
curiam). Consistent with "our practice of strict construction" of § 1254(2), Fornaris v.
Ridge Tool Co., 400 U. S. 41,  400 U. S. 42, n. 1 (1970) (per curiam), we believe that
an appeal cannot lie where a court of appeals' judgment rests solely on the stipulated Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. at  466 U. S. 414, n.
applicability of state law. Rather, it must be reasonably clear that the court 9; see also Perkins v. Benguet Consolidated Mining Co., 342 U. S. 437 (1952).
independently concluded that the challenged statute governs the case, and held the
statute itself unconstitutional as so applied. The Court of Appeals did neither in this [Footnote 16]
case, concluding simply that "[j]urisdiction under these circumstances would offend
the fundamental fairness which is the touchstone of due process." 724 F.2d at 1513. See, e.g., World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286,  444 U. S.
299 (1980) (BRENNAN, J., dissenting); Shaffer v. Heitner, 433 U. S. 186,  433 U. S.
Of course, if it were clear under Florida law that § 48.193(1)(g) governed every 219 (1977) (BRENNAN, J., concurring in part and dissenting in part).
transaction falling within its literal terms, there could be no objection to a stipulation
that merely recognized this established construction. But the Florida Supreme Court [Footnote 17]
has not ruled on the breadth of § 48.193 (1)(g), and several state appellate courts
have held that the provision extends only to the limits of the Due Process
Clause.  See, e.g., Scordilis v. Drobnicki, 443 So. 2d 411, 412-414 Applying this principle, the Court has held that the Due Process Clause forbids the
(Fla.App.1984); Lakewood Pipe of Texas, Inc. v. Rubaii, 379 So. 2d 475, 477 exercise of personal jurisdiction over an out-of-state automobile distributor whose
(Fla.App.1979), appeal dism'd, 383 So. 2d 1201 (Fla.1980); Osborn v. University only tie to the forum resulted from a customer's decision to drive there, World-Wide
Society, Inc., 378 So. 2d 873, 874 (Fla.App.1979). If § 48.193(1)(g) is construed and Volkswagen Corp. v. Woodson, supra; over a divorced husband sued for child
applied in accordance with due process limitations as a matter of state law, then an support payments whose only affiliation with the forum was created by his former
appeal is improper, because the statute cannot be "invalid as repugnant to the spouse's decision to settle there, Kulko v. California Superior Court, 436 U. S.
Constitution . . . of the United States," 28 U.S.C. § 1254(2), since its boundaries are 84 (1978); and over a trustee whose only connection with the forum resulted from the
defined by, rather than being in excess of, the Due Process Clause.  See, e.g., settlor's decision to exercise her power of appointment there, Hanson v. Denckla, 357
Calder v. Jones, supra, at  465 U. S. 787-788, n. 7; Kulko v. California Superior U. S. 235 (1958). In such instances, the defendant has had no "clear notice that it is
Court, 436 U. S. 84,  436 U. S. 90, and n. 4 (1978). subject to suit" in the forum, and thus no opportunity to "alleviate the risk of
burdensome litigation" there. World-Wide Volkswagen Corp. v. Woodson,
supra, at  444 U. S. 297.
[Footnote 13]
[Footnote 18] Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 320 (1945), at least where he is a
"primary participan[t]" in the enterprise and has acted purposefully in directing those
So long as it creates a "substantial connection" with the forum, even a single act can activities, Calder v. Jones, 465 U.S. at  465 U. S. 790. Because MacShara's
support jurisdiction. McGee v. International Life Insurance Co., 355 U.S. at  355 U. S. matriculation at Burger King University is not pivotal to the disposition of this case, we
223. The Court has noted, however, that "some single or occasional acts" related to need not resolve the permissible bounds of such attribution.
the forum may not be sufficient to establish jurisdiction if "their nature and quality and
the circumstances of their commission" create only an "attenuated" affiliation with the [Footnote 23]
forum.  International Shoe Co. v. Washington, 326 U. S. 310,  326 U. S.
318 (1945); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at  444 U. S. 299. Hanson v. Denckla, 357 U.S. at  357 U.S. 253-254.  See also Keeton v. Hustler
This distinction derives from the belief that, with respect to this category of "isolated" Magazine, Inc., 465 U.S. at  465 U. S. 778; Kulko v. California Superior Court, 436
acts, id. at  444 U. S. 297, the reasonable foreseeability of litigation in the forum is U.S. at  436 U. S. 98; Shaffer v. Heitner, 433 U.S. at  433 U. S. 215.
substantially diminished.
[Footnote 24]
[Footnote 19]
In addition, the franchise agreement's disclaimer that the "choice of law designation
See Allstate Insurance Co. v. Hague, 449 U. S. 302,  449 U. S. 307-313 (1981) does not require that all suits concerning this Agreement be filed in Florida," App. 72
(opinion of BRENNAN, J.).  See generally Restatement (Second) of Conflict of Laws (emphasis added), reasonably should have suggested to Rudzewicz that, by negative
§§ 6, 9 (1971). implication, such suits could be filed there.

[Footnote 20] The lease also provided for binding arbitration in Miami of certain condemnation
disputes, id. at 113, and Rudzewicz conceded the validity of this provision at oral
See, e.g., 28 U.S.C. § 1404(a) ("For the convenience of parties and witnesses, in the argument, Tr. of Oral Arg. 37. Although it does not govern the instant dispute, this
interest of justice, a district court may transfer any civil action to any other district or provision also should have made it apparent to the franchisees that they were dealing
division where it might have been brought"). This provision embodies in an expanded directly with the Miami headquarters, and that the Birmingham district office
version the common law doctrine of forum non conveniens, under which a court in was not, "for all intents and purposes, the embodiment of Burger King." 724 F.2d at
appropriate circumstances may decline to exercise its jurisdiction in the interest of the 1511.
"easy, expeditious and inexpensive" resolution of a controversy in another
forum.  See Gulf Oil Corp. v. Gilbert, 330 U. S. 501,  330 U. S. 508-509 (1947). [Footnote 25]

[Footnote 21] Complaining that "when Burger King is the plaintiff, you won't have it your way,'
because it sues all franchisees in Miami," Brief for Appellee 19, Rudzewicz contends
See, e.g., Lakeside Bridge & Steel Co. v. Mountain State Construction Co., 445 U. S. that Florida's interest in providing a convenient forum is negligible, given the
907, 909-910 (1980) (WHITE, J., dissenting from denial of certiorari) (collecting company's size and ability to conduct litigation anywhere in the country. We disagree.
cases); Brewer, Jurisdiction in Single Contract Cases, 6 U.Ark.Little Rock L.J. 1, 7-11, Absent compelling considerations, cf. McGee v. International Life Insurance Co., 355
13 (1983); Note, Long-Arm Jurisdiction in Commercial Litigation: When is a Contract a U.S. at   355 U. S. 223, a defendant who has purposefully derived commercial benefit
Contact?, 61 B.U.L.Rev. 375, 384-388 (1981). from his affiliations in a forum may not defeat jurisdiction there simply because of his
adversary's greater net wealth.
[Footnote 22]
[Footnote 26]
The Eleventh Circuit held that MacShara's presence in Florida was irrelevant to the
question of Rudzewicz' minimum contacts with that forum, reasoning that "Rudzewicz Rudzewicz has failed to show how the District Court's exercise of jurisdiction in this
and MacShara never formed a partnership" and "signed the agreements in their case might have been at all inconsistent with Michigan's interests. To the contrary,
individual capacities." 724 F.2d at 1513, n. 14. The two did jointly form a corporation the court found that Burger King had fully complied with Michigan law, App. 159, and
through which they were seeking to conduct the franchise, however.  See  there is nothing in Michigan's franchise Act suggesting that Michigan would attempt to
n 6, supra. They were required to decide which one of them would travel to Florida to assert exclusive jurisdiction to resolve franchise disputes affecting its residents. In any
satisfy the training requirements so that they could commence business, and event, minimum-contacts analysis presupposes that two or more States may be
Rudzewicz participated in the decision that MacShara would go there. We have interested in the outcome of a dispute, and the process of resolving potentially
previously noted that, when commercial activities are "carried on in behalf of" an out- conflicting "fundamental substantive social policies," World-Wide Volkswagen Corp.
of-state party those activities may sometimes be ascribed to the party, International v. Woodson, 444 U.S. at  444 U. S. 292, can usually be accommodated through
choice-of-law rules, rather than through outright preclusion of jurisdiction in one only in Michigan, his business, property, and payroll taxes were payable in that State,
forum.  See  n19, supra. and he sold all of his products there.

[Footnote 27] Throughout the business relationship, appellee's principal contacts with appellant
were with its Michigan office. Notwithstanding its disclaimer, ante at  471 U. S. 478,
The only arguable instance of trial inconvenience occurred when Rudzewicz had the Court seems ultimately to rely on nothing more than standard boilerplate
difficulty in authenticating some corporate records; the court offered him as much time language contained in various documents, ante at  471 U. S. 481, 
as would be necessary to secure the requisite authentication from the Birmingham
district office, and Burger King ultimately stipulated to their authenticity rather than Page 471 U. S. 488
delay the trial. See 7 Record 574-575, 578-579, 582, 598-599.
to establish that appellee "purposefully availed himself of the benefits and protections
[Footnote 28] of Florida's laws.'"   Ante  at 471 U. S. 482. Such superficial analysis creates a
potential for unfairness not only in negotiations between franchisors and their
We do not mean to suggest that the jurisdictional outcome will always be the same in franchisees but, more significantly, in the resolution of the disputes that inevitably
franchise cases. Some franchises may be primarily intrastate in character or involve arise from time to time in such relationships.
different decisionmaking structures, such that a franchisee should not reasonably
anticipate out-of-state litigation. Moreover, commentators have argued that franchise Judge Vance's opinion for the Court of Appeals for the Eleventh Circuit adequately
relationships may sometimes involve unfair business practices in their inception and explains why I would affirm the judgment of that court. I particularly find the following
operation.  See H. Brown, Franchising Realities and Remedies 4-5 (2d ed.1978). For more persuasive than what this Court has written today:
these reasons, we reject Burger King's suggestion for "a general rule, or at least a
presumption, that participation in an interstate franchise relationship" represents "Nothing in the course of negotiations gave Rudzewicz reason to anticipate a Burger
consent to the jurisdiction of the franchisor's principal place of business. Brief for King suit outside of Michigan. The only face-to-face or even oral contact Rudzewicz
Appellant 46. had with Burger King throughout months of protracted negotiations was with
representatives of the Michigan office. Burger King had the Michigan office interview
[Footnote 29] Rudzewicz and MacShara, appraise their application, discuss price terms,
recommend the site which the defendants finally agreed to, and attend the final
This approach does, of course, preclude clear-cut jurisdictional rules. But any inquiry closing ceremony. There is no evidence that Rudzewicz ever negotiated with anyone
into "fair play and substantial justice" necessarily requires determinations "in which in Miami or even sent mail there during negotiations. He maintained no staff in the
few answers will be written in black and white. The greys are dominant, and, even state of Florida, and as far as the record reveals, he has never even visited the state."
among them, the shades are innumerable.'"   Kulko v. California Superior Court, 436
U.S. at   436 U. S. 92. "The contracts contemplated the startup of a local Michigan restaurant whose profits
would derive solely from food sales made to customers in Drayton Plains. The sale,
[Footnote 30] which involved the use of an intangible trademark in Michigan and occupancy of a
Burger King facility there, required no performance in the state of Florida. Under the
contract, the local Michigan district office was responsible for providing all of the
Hanson v. Denckla, 357 U.S. at  357 U.S. 253; Keeton v. Hustler Magazine, Inc., 465 services due Rudzewicz, including advertising and management consultation.
U.S. at  465 U. S. 774; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at  444 Supervision, moreover, emanated from that office alone. To Rudzewicz, the Michigan
U. S. 299. office was for all intents and purposes the embodiment 

JUSTICE STEVENS, with whom JUSTICE WHITE joins, dissenting. Page 471 U. S. 489

In my opinion, there is a significant element of unfairness in requiring a franchisee to of Burger King. He had reason to believe that his working relationship with Burger
defend a case of this kind in the forum chosen by the franchisor. It is undisputed that King began and ended in Michigan, not at the distant and anonymous Florida
appellee maintained no place of business in Florida, that he had no employees in that headquarters. . . ."
State, and that he was not licensed to do business there. Appellee did not prepare his
French fries, shakes, and hamburgers in Michigan, and then deliver them into the
stream of commerce "with the expectation that they [would] be purchased by "Given that the office in Rudzewicz' home state conducted all of the negotiations and
consumers in" Florida. Ante at  471 U. S. 473. To the contrary, appellee did business wholly supervised the contract, we believe that he had reason to assume that the
state of the supervisory office would be the same state in which Burger King would file
suit. Rudzewicz lacked fair notice that the distant corporate headquarters which
insulated itself from direct dealings with him would later seek to assert jurisdiction
over him in the courts of its own home state. . . ."

"Just as Rudzewicz lacked notice of the possibility of suit in Florida, he was financially
unprepared to meet its added costs. The franchise relationship in particular is fraught
with potential for financial surprise. The device of the franchise gives local retailers
the access to national trademark recognition which enables them to compete with
better-financed, more efficient chain stores. This national affiliation, however, does
not alter the fact that the typical franchise store is a local concern serving at best a
neighborhood or community. Neither the revenues of a local business nor the
geographical range of its market prepares the average franchise owner for the cost of
distant litigation. . . ."

"The particular distribution of bargaining power in the franchise relationship further

impairs the franchisee's financial preparedness. In a franchise contract, 'the franchisor
normally occupies [the] dominant role.' . . ."

"We discern a characteristic disparity of bargaining power in the facts of this case.
There is no indication that Rudzewicz had any latitude to negotiate a reduced rent or
franchise fee in exchange for the added risk of suit in Florida. He signed a standard
form contract whose terms were nonnegotiable and which appeared 

Page 471 U. S. 490

in some respects to vary from the more favorable terms agreed to in earlier
discussions. In fact, the final contract required a minimum monthly rent computed on
a base far in excess of that discussed in oral negotiations. Burger King resisted price
concessions, only to sue Rudzewicz far from home. In doing so, it severely impaired
his ability to call Michigan witnesses who might be essential to his defense and
counterclaim."

"In sum, we hold that the circumstances of the Drayton Plains franchise and the
negotiations which led to it left Rudzewicz bereft of reasonable notice and financially
unprepared for the prospect of franchise litigation in Florida. Jurisdiction under these
circumstances would offend the fundamental fairness which is the touchstone of due
process."

724 F.2d 1505, 1511-1513 (1984) (footnotes omitted).

Accordingly, I respectfully dissent.

G.R. No. L-37750 May 19, 1978 The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order
of denial, but no avail. 5 Hence, this instant petition for prohibition for preliminary
SWEET LINES, INC., petitioner,  injunction, 'alleging that the respondent judge has departed from the accepted and
vs. usual course of judicial preoceeding" and "had acted without or in excess or in error of
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, his jurisdicton or in gross abuse of discretion. 6
LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, respondents. 
In Our resolution of November 20, 1973, We restrained respondent Judge from
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.  proceeding further with the case and required respondent to comment. 7 On January
18, 1974, We gave due course to the petition and required respondent to
answer. 8 Thereafter, the parties submitted their respesctive memoranda in support of
Leovigildo Vallar for private respondents.  their respective contentions. 9

Presented thus for Our resolution is a question is aquestion which, to all

appearances, is one of first impression, to wit — Is Condition No. 14 printed at the
SANTOS, J.: back of the petitioner's passage tickets purchased by private respondents, which
limits the venue of actions arising from the contract of carriage to theCourt of First
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to Instance of Cebu, valid and enforceable? Otherwise stated, may a common carrier
restrain respondent Judge from proceeding further with Civil Case No. 4091, engaged in inter-island shipping stipulate thru condition printed at the back of
entitled Leovigildo D. Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc."  after he passage tickets to its vessels that any and all actions arising out of the ocntract of
denied petitioner's Motion to Dismiss the complaint, and the Motion for carriage should be filed only in a particular province or city, in this case the City of
Reconsideration of said order. 1 Cebu, to the exclusion of all others?

Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Petitioner contends thaty Condition No. 14 is valid and enforceable, since private
Rogelio Tiro, a contractor by professions, bought tickets Nos. 0011736 and 011737 respndents acceded to tit when they purchased passage tickets at its Cagayan de
for Voyage 90 on December 31, 1971 at the branch office of petitioner, a shipping Oro branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran,
company transporting inter-island passengers and cargoes, at Cagayan de Oro City. Bohol — that the condition of the venue of actions in the City of Cebu is proper since
Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for venue may be validly waived, citing cases; 10 that is an effective waiver of venue, valid
Tagbilaran City via the port of Cebu. Upon learning that the vessel was not and binding as such, since it is printed in bold and capital letters and not in fine print
proceeding to Bohol, since many passengers were bound for Surigao, private and merely assigns the place where the action sing from the contract is institution
respondents per advice, went to the branch office for proper relocation to M/S "Sweet likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory, the
Town". Because the said vessel was already filled to capacity, they were forced to words and phrases "any and all", "irrespective of where it is issued," and "shag" leave
agree "to hide at the cargo section to avoid inspection of the officers of the Philippine no doubt that the intention of Condition No. 14 is to fix the venue in the City of Cebu,
Coastguard." Private respondents alleged that they were, during the trip," "exposed to to the exclusion of other places; that the orders of the respondent Judge are an
the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," unwarranted departure from established jurisprudence governing the case; and that
and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not he acted without or in excess of his jurisdiction in is the orders complained of. 12
honored and they were constrained to pay for other tickets. In view thereof, private
respondents sued petitioner for damages and for breach of contract of carriage in the On the other hand, private respondents claim that Condition No. 14 is not valid, that
alleged sum of P10,000.00 before respondents Court of First Instance of Misamis the same is not an essential element of the contract of carriage, being in itself a
Oriental. 2 different agreement which requires the mutual consent of the parties to it; that they
had no say in its preparation, the existence of which they could not refuse, hence,
Petitioner moved to dismiss the complaint on the ground of improper venue. This they had no choice but to pay for the tickets and to avail of petitioner's shipping
motion was premised on the condition printed at the back of the tickets, i.e., Condition facilities out of necessity; that the carrier "has been exacting too much from the public
No. 14, which reads:  by inserting impositions in the passage tickets too burdensome to bear," that the
condition which was printed in fine letters is an imposition on the riding public and
does not bind respondents, citing cases; 13 that while venue 6f actions may be
14. It is hereby agreed and understood that any and all actions transferred from one province to another, such arrangement requires the "written
arising out of the conditions and provisions of this ticket, agreement of the parties", not to be imposed unilaterally; and that assuming that the
irrespective of where it is issued, shall be filed in the competent condition is valid, it is not exclusive and does not, therefore, exclude the filing of the
courts in the City of Cebu. 3 action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by part of the courts of justice with a view to protecting the weaker
petitioner and private respondents and that the passage tickets, upon which the latter party from abuses and imposition, and prevent their becoming traps
based their complaint, are the best evidence thereof. All the essential elements of a for the unwary. 
valid contract, i.e., consent, cause or consideration and object, are present. As held
in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15 To the same effect and import, and, in recognition of the character of contracts of this
kind, the protection of the disadvantaged is expressly enjoined by the New Civil Code
It is a matter of common knowledge that whenever a passenger — 
boards a ship for transportation from one place to another he is
issued a ticket by the shipper which has all the elements of a In all contractual property or other relations, when one of the parties
written contract, Namely: (1) the consent of the contracting parties is at a disadvantage on account of his moral dependence,
manifested by the fact that the passenger boards the ship and the ignorance indigence, mental weakness, tender age and other
shipper consents or accepts him in the ship for transportation; (2) handicap, the courts must be vigilant for his 
cause or consideration which is the fare paid by the passenger as protection. 19
stated in the ticket; (3) object, which is the transportation of the
passenger from the place of departure to the place of destination
which are stated in the ticket. Considered in the light Of the foregoing norms and in the context Of circumstances
Prevailing in the inter-island ship. ping industry in the country today, We find and hold
that Condition No. 14 printed at the back of the passage tickets should be held as
It should be borne in mind, however, that with respect to the fourteen (14) conditions void and unenforceable for the following reasons first, under circumstances obligation
— one of which is "Condition No. 14" which is in issue in this case — printed at the in the inter-island ship. ping industry, it is not just and fair to bind passengers to the
back of the passage tickets, these are commonly known as "contracts of adhesion," terms of the conditions printed at the back of the passage tickets, on which Condition
the validity and/or enforceability of which will have to be determined by the peculiar No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public
circumstances obtaining in each case and the nature of the conditions or terms policy on transfer of venue of proceedings of this nature, since the same will prejudice
sought to be enforced. For, "(W)hile generally, stipulations in a contract come about rights and interests of innumerable passengers in different s of the country who,
after deliberate drafting by the parties thereto, ... there are certain contracts almost all under Condition No. 14, will have to file suits against petitioner only in the City of
the provisions of which have been drafted only by one party, usually a corporation. Cebu. 
Such contracts are called contracts of adhesion,  because the only participation of the
party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills
of lading, contracts of make of lots on the installment plan fall into this category" 16 1. It is a matter of public knowledge, of which We can take judicial notice, that there is
a dearth of and acute shortage in inter- island vessels plying between the country's
several islands, and the facilities they offer leave much to be desired. Thus, even
By the peculiar circumstances under which contracts of adhesion are entered into — under ordinary circumstances, the piers are congested with passengers and their
namely, that it is drafted only by one party, usually the corporation, and is sought to cargo waiting to be transported. The conditions are even worse at peak and/or the
be accepted or adhered to by the other party, in this instance the passengers, private rainy seasons, when Passengers literally scramble to whatever accommodations may
respondents, who cannot change the same and who are thus made to adhere thereto be availed of, even through circuitous routes, and/or at the risk of their safety — their
on the "take it or leave it" basis — certain guidelines in the determination of their immediate concern, for the moment, being to be able to board vessels with the hope
validity and/or enforceability have been formulated in order to that justice and fan play of reaching their destinations. The schedules are — as often as not if not more so —
characterize the relationship of the contracting parties. Thus, this Court speaking delayed or altered. This was precisely the experience of private respondents when
through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance they were relocated to M/S "Sweet Town" from M/S "Sweet Hope" and then any to the
Co.,  17 and later through Justice Fernando in Fieldman Insurance v. Vargas, 18 held scorching heat of the sun and the dust coming from the ship's cargo of corn grits, "
—  because even the latter was filed to capacity. 

The courts cannot ignore that nowadays, monopolies, cartels and Under these circumstances, it is hardly just and proper to expect the passengers to
concentration of capital endowed with overwhelm economic power, examine their tickets received from crowded/congested counters, more often than not
manage to impose upon parties d with them y prepared during rush hours, for conditions that may be printed much charge them with having
'agreements' that the weaker party may not change one whit his consented to the conditions, so printed, especially if there are a number of such
participation in the 'agreement' being reduced to the alternative 'to conditions m fine print, as in this case. 20
take it or leave it,' labelled since Raymond Saleilles 'contracts by
adherence' (contracts d' adhesion) in contrast to those entered into
by parties bargaining on an equal footing. Such contracts (of which Again, it should be noted that Condition No. 14 was prepared solely at the ms of the
policies of insurance and international bill of lading are prime petitioner, respondents had no say in its preparation. Neither did the latter have the
examples) obviously cap for greater strictness and vigilance on the opportunity to take the into account prior to the purpose chase of their tickets. For,
unlike the small print provisions of contracts — the common example of contracts of
adherence — which are entered into by the insured in his awareness of said  
conditions, since the insured is afforded the op to and co the same, passengers of
inter-island v do not have the same chance, since their alleged adhesion is presumed  
only from the fact that they purpose chased the tickets. 
Separate Opinions
It should also be stressed that slapping companies are franchise holders of
certificates of public convenience and therefore, posses a virtual monopoly over the
business of transporting passengers between the ports covered by their franchise.  
This being so, shipping companies, like petitioner, engaged in inter-island shipping,
have a virtual monopoly of the business of transporting passengers and may thus BARREDO, J.,  concurring: 
dictate their terms of passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities. Finally, judicial notice may be taken of I concur in the dismissal of the instant petition. 
the fact that the bulk of those who board these inter-island vested come from the low-
income groups and are less literate, and who have little or no choice but to avail of
petitioner's vessels.  Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R.
No. L-44351, promulgated May 18, 1978, We made it clear that although generally,
agreements regarding change of venue are enforceable, there may be instances
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, where for equitable considerations and in the better interest of justice, a court may
although venue may be changed or transferred from one province to another by justify the laying of, the venue in the place fixed by the rules instead of following
agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court, such written stipulation of the parties. 
an agreement will not be held valid where it practically negates the action of the
claimants, such as the private respondents herein. The philosophy underlying the
provisions on transfer of venue of actions is the convenience of the plaintiffs as well In the particular case at bar, there is actually no written agreement as to venue
as his witnesses and to promote 21 the ends of justice. Considering the expense and between the parties in the sense contemplated in Section 3 of Rule 4, which governs
trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the matter. I take it that the importance that a stipulation regarding change of the
the City of Cebu, he would most probably decide not to file the action at all. The venue fixed by law entails is such that nothing less than mutually conscious
condition will thus defeat, instead of enhance, the ends of justice. Upon the other agreement as to it must be what the rule means. In the instant case, as well pointed
hand, petitioner has branches or offices in the respective ports of call of its vessels out in the main opinion, the ticket issued to private respondents by petitioner
and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI constitutes at best a "contract of adhesion". In other words, it is not that kind of a
of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, contract where the parties sit down to deliberate, discuss and agree specifically on all
much less prejudice, petitioner.  its terms, but rather, one which respondents took no part at all in preparing, since it
was just imposed upon them when they paid for the fare for the freight they wanted to
ship. It is common knowledge that individuals who avail of common carriers hardly
Public policy is ". . . that principle of the law which holds that no subject or citizen can read the fine prints on such tickets to note anything more than the price thereof and
lawfully do that which has a tendency to be injurious to the public or against the public the destination designated therein. 
good ... 22 Under this principle" ... freedom of contract or private dealing is restricted
by law for the good of the public. 23 Clearly, Condition No. 14, if enforced, will be
subversive of the public good or interest, since it will frustrate in meritorious cases, Under these circumstances, it would seem that, since this case is already in
actions of passenger cants outside of Cebu City, thus placing petitioner company at a respondent court and there is no showing that, with its more or less known resources
decided advantage over said persons, who may have perfectly legitimate claims as owner of several inter-island vessels plying between the different ports of the
against it. The said condition should, therefore, be declared void and unenforceable, Philippines for sometime already, petitioner would be greatly inconvenienced by
as contrary to public policy — to make the courts accessible to all who may have submitting to the jurisdiction of said respondent court, it is best to allow the
need of their services.  proceedings therein to continue. I cannot conceive of any juridical injury such a step
can cause to anyone concerned. I vote to dismiss the petition.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order
issued on November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against
petitioner. 

Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur. 

Antonio, J., reserves his vote.