G.R. No.

195580

April 21, 2014

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND

DEVELOPMENT, INC., and MCARTHUR MINING, INC., Petitioners, vs. REDMONT
CONSOLIDATED MINES CORP., Respondent.
FACTS:

Sometime in December 2006, respondent Redmont Consolidated Mines Corp.

(Redmont), a domestic corporation organized and existing under Philippine laws, took
interest in mining and exploring certain areas of the province of Palawan. After
inquiring with the Department of Environment and Natural Resources (DENR), it
learned that the areas where it wanted to undertake exploration and mining activities
where already covered by Mineral Production Sharing Agreement (MPSA) applications
of petitioners Narra, Tesoro and McArthur.
Petitioner McArthur Narra and Tesoro, filed an application for an MPSA and
Exploration Permit (EP) which was subsequently issued.
On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the
DENR three (3) separate petitions for the denial of petitioners applications for MPSA.
Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and
Narra are owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian
corporation. Redmont reasoned that since MBMI is a considerable stockholder of
petitioners, it was the driving force behind petitioners filing of the MPSAs over the
areas covered by applications since it knows that it can only participate in mining
activities through corporations which are deemed Filipino citizens. Redmont argued
that given that petitioners capital stocks were mostly owned by MBMI, they were
likewise disqualified from engaging in mining activities through MPSAs, which are
reserved only for Filipino citizens.
Petitioners averred that they were qualified persons under Section 3(aq) of
Republic Act No. (RA) 7942 or the Philippine Mining Act of 1995. They stated that
their nationality as applicants is immaterial because they also applied for Financial or
Technical Assistance Agreements (FTAA) denominated as AFTA-IVB-09 for McArthur,
AFTA-IVB-08 for Tesoro and AFTA-IVB-07 for Narra, which are granted to foreignowned corporations. Nevertheless, they claimed that the issue on nationality should
not be raised since McArthur, Tesoro and Narra are in fact Philippine Nationals as 60%
of their capital is owned by citizens of the Philippines.
On December 14, 2007, the POA issued a Resolution disqualifying petitioners
from gaining MPSAs. The POA considered petitioners as foreign corporations being
"effectively controlled" by MBMI, a 100% Canadian company and declared their
MPSAs null and void.
Pending the resolution of the appeal filed by petitioners with the MAB,
Redmont filed a Complaint with the Securities and Exchange Commission (SEC),
seeking the revocation of the certificates for registration of petitioners on the ground
that they are foreign-owned or controlled corporations engaged in mining in violation
of Philippine laws.
CA found that there was doubt as to the nationality of petitioners when it
realized that petitioners had a common major investor, MBMI, a corporation
composed of 100% Canadians. Pursuant to the first sentence of paragraph 7 of
Department of Justice (DOJ) Opinion No. 020, Series of 2005, adopting the 1967 SEC

Rules which implemented the requirement of the Constitution and other laws
pertaining to the exploitation of natural resources, the CA used the "grandfather rule"
to determine the nationality of petitioners.
In determining the nationality of petitioners, the CA looked into their corporate
structures and their corresponding common shareholders. Using the grandfather
rule, the CA discovered that MBMI in effect owned majority of the common
stocks of the petitioners as well as at least 60% equity interest of other
majority shareholders of petitioners through joint venture agreements. The
CA found that through a "web of corporate layering, it is clear that one
common controlling investor in all mining corporations involved x x x is
MBMI."Thus, it concluded that petitioners McArthur, Tesoro and Narra are
also in partnership with, or privies-in-interest of, MBMI.
ISSUE:
Whether or notthe Court of Appeals ruling that Narra, Tesoro and McArthur
are foreign corporations based on the "Grandfather Rule" is contrary to law,
particularly the express mandate of the Foreign Investments Act of 1991, as
amended, and the FIA Rules.
HELD:

No. There are two acknowledged tests in determining the nationality of a

corporation: the control test and the grandfather rule. Paragraph 7 of DOJ
Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which implemented
the requirement of the Constitution and other laws pertaining to the controlling
interests in enterprises engaged in the exploitation of natural resources owned by
Filipino citizens, provides:
Shares belonging to corporations or partnerships at least 60% of the
capital of which is owned by Filipino citizens shall be considered as of
Philippine nationality(CONTROL TEST), but if the percentage of Filipino
ownership in the corporation or partnership is less than 60%, only the number
of shares corresponding to such percentage shall be counted as of Philippine
nationality(GRANDFATHER RULE). Thus, if 100,000 shares are registered in
the name of a corporation or partnership at least 60% of the capital stock or
capital, respectively, of which belong to Filipino citizens, all of the shares shall
be recorded as owned by Filipinos. But if less than 60%, or say, 50% of the
capital stock or capital of the corporation or partnership, respectively, belongs
to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos
and the other 50,000 shall be recorded as belonging to aliens.
The grandfather rule, petitioners reasoned, has no leg to stand on in the
instant case since the definition of a "Philippine National" under Sec. 3 of the FIA
does not provide for it. They further claim that the grandfather rule "has been
abandoned and is no longer the applicable rule." They also opined that the last
portion of Sec. 3 of the FIA admits the application of a "corporate layering" scheme of
corporations. Petitioners claim that the clear and unambiguous wordings of the
statute preclude the court from construing it and prevent the courts use of discretion
in applying the law. They said that the plain, literal meaning of the statute meant the
application of the control test is obligatory.
SC disagreed. "Corporate layering" is admittedly allowed by the FIA; but if it is
used to circumvent the Constitution and pertinent laws, then it becomes illegal.
Further, the pronouncement of petitioners that the grandfather rule has already been
abandoned must be discredited for lack of basis.

Petitioners McArthur, Tesoro and Narra are not Filipino since MBMI, a 100%
Canadian corporation, owns 60% or more of their equity interests. Such conclusion is
derived from grandfathering petitioners corporate owners, namely: MMI, SMMI and
PLMDC. The "control test" is still the prevailing mode of determining whether or not a
corporation is a Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987
Constitution, entitled to undertake the exploration, development and utilization of the
natural resources of the Philippines. When in the mind of the Court there is doubt,
based on the attendant facts and circumstances of the case, in the 60-40 Filipinoequity ownership in the corporation, then it may apply the "grandfather rule."

Gamboa v. Teves, GR No. 176579, June 28, 2011

652 SCRA 690
definition of the term capital to satisfy the nationality requirement under Sec. 11, Art. XII
FACTS:
PLDT was granted a franchise to engage in the telecommunications business in 1928 through Act.
No. 3436. During Martial Law 26 percent of the outstanding common shares were sold by
General Telephone and Electronics Corporation (GTE) (an American company) to Philippine
Telecommunications Investment Corporation (PTIC), who in turn assigned 111,415 shares of
stock of PTIC (46 percent of outstanding capital stock) to Prime Holdings Inc. (PHI). These
shares of PTIC were later sequestered by PCGG and adjudged by the court to belong to the
Republic.
54 percent of PTIC shares were sold to Hong Kong-based firm First Pacific, and the remaining 46
percent was sold through public bidding by the Inter-Agency Privatization Council, and
eventually ended up being bought by First Pacific subsidiary Metro Pacific Asset Holdings Inc.
(MPAH) after the corporation exercised its right of first refusal. The transaction was an indirect
sale of 12 million shares or 6.3 percent of the outstanding common shares of PLDT, making First
Pacifics common shareholdings of PLDT to 37 percent and the total common shareholdings of
foreigners in PLDT to 81.47 percent. Japanese NTT DoCoMo owns 51.56 percent of the other
foreign shareholdings/equity.
Petitioner Gamboa, alleged that the sale of 111,415 shares to MPAH violates Sec. 11 of Art. XII
of the Constitution, which limits foreign ownership of the capital of a public utility to not more
than 40 percent.
ISSUE:
(1) Whether petitioners choice of remedy was proper?
(2) Whether the term capital under Sec. 11, Article XII of the Constitution refers only to the
total common shares or to the total outstanding stock of PLDT (public utility)?
HELD:
(1) NO. However, since the threshold and purely legal issue on the definition of the term capital
in Section 11, Article XII of the Constitution has far-reaching implications to the national
economy, the Court treats the petition for declaratory relief as one for mandamus. It is wellsettled that this Court may treat a petition for declaratory relief as one for mandamus if the issue
involved has far-reaching implications.
(2)The term capital in Section 11, Article XII of the Constitution refers only to shares of
stockentitled to vote in the election of directors, and thus in the present case only to common
shares, and not to the total outstanding capital stock comprising both common and non-voting
preferred shares.The SC directed the SEC to apply this definition in determining what was
the extent of allowable foreign ownership in PLDT, and in case of violation, impose the
appropriate penalty under the law.
Consistent with the constitutional mandate that the State shall develop a self-reliant and
independent national economy effectively controlled by Filipinos, the term "capital" means the

outstanding capital stock entitled to vote (voting stock), coupled with beneficial ownership, both
of which results to "effective control."
"Mere legal title is insufficient to meet the 60 percent Filipino owned capital required in the
Constitution for certain industries. Full beneficial ownership of 60 percent of the outstanding
capital stock, coupled with 60 percent of the voting rights, is required." In this case, such twin
requirements must apply uniformly and across the board to all classes of shares comprising the
capital. Thus, "the 60-40 ownership requirement in favor of Filipino citizens must apply
separately to each class of shares, whether common, preferred non-voting, preferred voting or any
other class of shares." This guarantees that the controlling interest in public utilities always lies
in the hands of Filipino citizens.
A broader definition would unjustifiably disregards who owns the all-important voting stock,
which necessarily equates to control of the public utility would be contrary to Sec. 11, Art. XII, a
self-executing provision of the Constitution.
A similar definition is found in Section 10, Article XII of the Constitution, the Foreign
Investments Act of 1991 and its IRR, Regulation of Award of Government Contracts or R.A. No.
5183, Philippine Inventors Incentives Act or R.A. No. 3850, Magna Carta for Micro, Small and
Medium Enterprises or R.A. No. 6977, Philippine Overseas Shipping Development Act or R.A.
No. 7471, Domestic Shipping Development Act of 2004 or R.A. No. 9295, Philippine Technology
Transfer Act of 2009 or R.A. No. 10055, and Ship Mortgage Decree or P.D. No. 1521.
Alternative Facts:
This is a petition to nullify the sale of shares of stock of Philippine Telecommunications Investment
Corporation (PTIC) by the government of the Republic of the Philippines, acting through the Inter-Agency
Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific
Company Limited (First Pacific), a Hong Kong-based investment management and holding company and a
shareholder of the Philippine Long Distance Telephone Company (PLDT).
The petitioner questioned the sale on the ground that it also involved an indirect sale of 12 million
shares (or about 6.3 percent of the outstanding common shares) of PLDT owned by PTIC to First
Pacific. With the this sale, First Pacifics common shareholdings in PLDT increased from 30.7 percent to 37
percent, thereby increasing the total common shareholdings of foreigners in PLDT to about 81.47%. This,
according to the petitioner, violates Section 11, Article XII of the 1987 Philippine Constitution which limits
foreign ownership of the capital of a public utility to not more than 40%
Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates
the Filipinization of public utilities, to wit:
Section 11. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines or
to corporations or associations organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such citizens; nor shall such franchise,
certificate, or authorization be exclusive in character or for a longer period than fifty years.
Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good so
requires. The State shall encourage equity participation in public utilities by the general public.
The participation of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive and managing
officers of such corporation or association must be citizens of the Philippines

Insular Government vs. Frank 13 Phil 236, G.R.No.2935. March 23, 1909.

FACTS:

In 1903 in the state of Illinois, Mr. Frank, a US citizen and a representative of the Insular Government of the
Philippines entered into a contract whereby the former shall serve as stenographer in the Philippines for a period of 2
years. The contract contained a provision that in case of violation of its terms, Mr. Frank shall be liable for the amount
incurred by the Philippine Government for his travel from Chicago to Manila and one-half salary paid during such period.
After serving for 6 months, defendant left the service and refused to make further compliance with the terms of the
contract, therefore the Government sued him to recover the amount of $269.23 plus damages. The lower court ruled in
favor of the plaintiff, hence the defendant appealed presenting minority as his special defense. By reason of the fact that
under the laws of the Philippines, contracts made by person who did not reach majority age of 23 are
unenforceable. Defendant claim that he is an adult when he left Chicago but was a minor when he arrived in Manila and at
the time the plaintiff attempted to enforce the contract.

ISSUE:

Whether or not the contract is valid.

RULING:

Mr. Frank being fully qualified to enter into a contract at the place and time the contract was made, he cannot
therefore plead infancy as a defense at the place where the contract is being enforced. Although Mr. Frank was still a
minor under Philippine laws, he was nevertheless considered an adult under the laws of the state of Illinois,the place
where the contract was made. No rule is better settled in law than that matters bearing upon the execution,
interpretation and validity of a contract are determined by the law of the place where the contract is mad e. Matters
connected to its performance are regulated by the law prevailing at the place of its performance. Matters respecting a
remedy, such as bringing of a suit, admissibility of evidence, and statutes of limitations, depend upon the law of the place
where the suit is brought.

Although generally, capacity of the parties to enter into a contract is governed by national law. This is one
case not involving real property which was decided by our Supreme Court, where instead of national law,
what should determine capacity to enter into a contract is the lex loci celebrationis. According to Conflict
of Laws writer Edgardo Paras, Franks capacity should be judged by his national law and not by the law of
the place where the contract was entered into. In the instant case whether it is the place where the
contract was made or Franks nationality, the result would be the same. However,as suggested by the
mentioned author, for the conflicts rule in capacity in general, national law of the parties is controlling.

TOLENTINO VS. THE SECRETARY OF FINANCE Case Digest

ARTURO M. TOLENTINO VS. THE SECRETARY OF FINANCE and THE COMMISSIONER
OF
INTERNAL
REVENUE
1994
Aug
25
G.R.
No.
115455
235
SCRA
630
FACTS:
FACTS: Herein various petitioners seek to declare RA 7166 as unconstitutional as it seeks to
widen the tax base of the existing VAT system and enhance its administration by amending
the National Internal Revenue Code. The value-added tax (VAT) is levied on the sale, barter
or exchange of goods and properties as well as on the sale or exchange of services. It is
equivalent to 10% of the gross selling price or gross value in money of goods or properties
sold, bartered or exchanged or of the gross receipts from the sale or exchange of services.
CREBA asserts that R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies
transactions as covered or exempt without reasonable basis and (3) violates the rule that
taxes should be uniform and equitable and that Congress shall "evolve a progressive system
of taxation."
With respect to the first contention, it is claimed that the application of the tax to existing
contracts of the sale of real property by installment or on deferred payment basis would
result in substantial increases in the monthly amortizations to be paid because of the 10%
VAT. The additional amount, it is pointed out, is something that the buyer did not anticipate at
the time he entered into the contract.
It is next pointed out that while Section 4 of R.A. No. 7716 exempts such transactions as the
sale of agricultural products, food items, petroleum, and medical and veterinary services, it
grants no exemption on the sale of real property which is equally essential. The sale of real
property for socialized and low-cost housing is exempted from the tax, but CREBA claims
that real estate transactions of "the less poor," i.e., the middle class, who are equally
homeless, should likewise be exempted.
Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art.
VI, Section 28(1) which provides that "The rule of taxation shall be uniform and equitable.
The Congress shall evolve a progressive system of taxation."

ISSUE: Whether R.A. No. 7716 is unconstitutional on ground that it violates the contract
clause
under
Art.
III,
sec
10
of
the
Bill
of
Rights.
RULING: No. The Supreme Court the contention of CREBA, that the imposition of the VAT
on the sales and leases of real estate by virtue of contracts entered into prior to the effectivity
of the law would violate the constitutional provision of non-impairment of contracts, is only
slightly less abstract but nonetheless hypothetical. It is enough to say that the parties to a
contract cannot, through the exercise of prophetic discernment, fetter the exercise of the
taxing power of the State. For not only are existing laws read into contracts in order to fix
obligations as between parties, but the reservation of essential attributes of sovereign power
is also read into contracts as a basic postulate of the legal order. The policy of protecting
contracts against impairment presupposes the maintenance of a government which retains
adequate authority to secure the peace and good order of society. In truth, the Contract
Clause has never been thought as a limitation on the exercise of the State's power of
taxation save only where a tax exemption has been granted for a valid consideration.
G.R. No. L-66006 February 28, 1985
BAGONG FILIPINAS OVERSEAS CORPORATION and GOLDEN STAR SHIPPING, LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION, DIRECTOR PATRICIA SANTO TOMAS and PROSERFINA PANCHO respondents.
Elizer A. Odulios for petitioners.
Pedro L. Linsangan for respondent P. Pancho.

AQUINO, J.:
The issue in this case is whether the shipboard employment contract or Hongkong law should govern the
amount of death compensation due to the wife of Guillermo Pancho who was employed by Golden Star
Shipping, Ltd., a Hongkong based firm.
The shipboard employment contract dated June 1, 1978 was executed in this country between Pancho and
Bagong Filipinas Overseas Corporation, the local agent of Golden Star Shipping. It was approved by the
defunct National Seamen Board. Pancho was hired as an oiler in the M/V Olivine for 12 months with a gross
monthly wage of US $195.
In October, 1978, he had a cerebral stroke. He was rushed to the hospital while the vessel was docked at Gothenberg, Sweden. He was
repatriated to the Philippines and confined at the San Juan de Dios Hospital. He died on December 13, 1979.

The National Seamen Board awarded his widow, Proserfina, P20,000 as disability compensation benefits pursuant to the above-mentioned
employment contract plus P2,000 as attorney's fees. Proserfina appealed to the National Labor Relations Commission which awarded her
$621 times 36 months or its equivalent in Philippine currency plus 10% of the benefits as attorney's fees. Golden Star Shipping assailed that
decision by certiorari.

We hold that the shipboard employment contract is controlling in this case. The contract provides that the beneficiaries of the seaman are
entitled to P20,000 "over and above the benefits" for which the Philippine Government is liable under Philippine law.

Hongkong law on workmen's compensation is not the applicable law. The case of Norse Management Co. vs. National Seamen Board, G. R.
No. 54204, September 30, 1982, 117 SCRA 486 cannot be a precedent because it was expressly stipulated in the employment contract in
that case that the workmen's compensation payable to the employee should be in accordance with Philippine Law or the Workmen's
Insurance Law of the country where the vessel is registered "whichever is greater".

The Solicitor General opines that the employment contract should be applied. For that reason, he refused to uphold the decision of the
NLRC.

WHEREFORE, the judgment of the National Labor Relations Commission is reversed and set aside. The decision of the National Seamen
Board dated February 26, 1981 is affirmed. No costs.

SO ORDERED.

PRIL - #73
Pakistan International Airline vs Ople (1990)
Doctrine: While parties to a contract may establish stipulations, terms and conditions
as they may deem convenient, they may not contract away applicable provisions of
law especially peremptory provisions dealing with matters heavily impressed with
public interest.
Facts:
1. Pakistan International Airline (PIA) is a foreign corporation licensed to do
business in the PH. 2 separate contracts of employment with Farrales and
Mamasig were entered into by PIA in Manila. The contracts became effective
in 1979. The contracts contained provisions
a. Providing for the term of 3 years extendible upon mutual consent of
the parties
b. That PIA reserves the right to terminate the employee either by giving
notice 1 month before the date of termination or one months salary
c. This agreement shall be construed and governed under and
by the laws of Pakistan, and only the Courts of Karachi,
Pakistan shall have the jurisdiction to consider any matter
arising out of or under this agreement.
2. After their training period, Farrales and Mamasig commenced their services as
flight attendants with base station in Manila.
3. 1 year and 4 months before the lapse of the 3-year period, counsel for the
local branch of PIA sent Farrales and Mamasig notices expressing that their
services will be terminated a month thereafter.
4. Farrales and Mamasig filed a joint complaint for illegal termination and nonpayment of company benefits before the then Ministry of Labor and
Employment (MOLE)
5. PIA submitted a position paper claiming that Farrales and Mamasig were
habitual absentees; that both were in the habit of bringing in from abroad
sizeable quantities of "personal effects"; and that PIA personnel at the Manila
International Airport had been discreetly warned by customs officials to advise
private respondents to discontinue that practice.
6. Regional Director ordered reinstatement and payment of full back wages or in
the alternative payment of their salaries for the remainder of the 3-year
period.
a. They have attained status of regular employees
b. The provision stipulating a three-year period of employment is null and
void for violating LAbor Code provisions on regular employment

c. Dismissal without clearance from MOLE entitles employees to

reinstatement
7. Deputy Minister affirmed the RDs order.
8. PIA filed a petition for certiorari before the SC.
a. PIAs relationship with Farrles and Mamasig was governed by the
provisions of its contract rather than by the general provisions of the
Labor Code
Issue/s:
What law governs the relationship of the parties to the contract?
Held/Ratio: PHILIPPINE LAW
1. Art 1306 of the Civil Code provides: The contracting parties may establish
such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy.
2. The governing principle is that parties may not contract away applicable
provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest. The law relating to labor and
employment is clearly such an area and parties are not at liberty to insulate
themselves and their relationships from the impact of labor laws and
regulations by simply contracting with each other. It is thus necessary to
appraise the contractual provisions invoked by petitioner PIA in terms of their
consistency with applicable Philippine law and regulations.
3. The employment contracts were inconsistent with Arts. 280-281 of the Labor
Code1
4. In the case of Brent School vs Zamora, the Court ruled that contracts of
employment providing for a fied period are not necessarily unlawful. The
presence or absence of a substantial indication that the period specified in an
employment agreement was designed to circumvent the security of tenure of
regular employees which is provided for in Articles 280 and 281 of the Labor
Code is crucial.

1 Art. 280. Security of Tenure. In cases of regular employment, the employer shall not

terminate the services of an employee except for a just cause or when authorized by this Title
An employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and to his backwages computed from the time his compensation was
withheld from him up to the time his reinstatement.Art. 281. Regular and Casual Employment.
The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or services to be performed is seasonal
in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
provided, that, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered as regular employee with respect to the
activity in which he is employed and his employment shall continue while such actually exists.
(Emphasis supplied)

10

5. The provision in the contracts with PIA allowing for termination of services
upon notice or payment of one months salary was intended to prevent any
security of tenure from accruing in favor of private respondents even during
the limited period of three (3) years, and thus to escape completely the thrust
of Articles 280 and 281 of the Labor Code by rendering their employment at
the pleasure of PIA.
6. PIA cannot take refuge in paragraph 10 of its employment agreement which
specifies, firstly, the law of Pakistan as the applicable law of the agreement
and, secondly, lays the venue for settlement of any dispute arising out of or in
connection with the agreement "only [in] courts of Karachi Pakistan".
a. The relationship is much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot be
rendered illusory by the parties agreeing upon some other law to
govern their relationship.
b. A cursory scrutiny of the relevant circumstances of this case will show
the multiple and substantive contacts between Philippine law and
Philippine courts, on the one hand, and the relationship between the
parties, upon the other:
i. the contract was not only executed in the Philippines, it was
also performed here, at least partially;
ii. private respondents are Philippine citizens and respondents,
while petitioner, although a foreign corporation, is licensed to
do business (and actually doing business) and hence resident in
the Philippines;
iii. private respondents were based in the Philippines in between
their assigned flights to the Middle East and Europe.
All the above contacts point to the Philippine courts and administrative
agencies as a proper forum for the resolution of contractual disputes
between the parties. Under these circumstances, paragraph 10 of the
employment agreement cannot be given effect so as to oust Philippine
agencies and courts of the jurisdiction vested upon them by Philippine
law.
c. Finally, and in any event, the petitioner PIA did not undertake to plead
and prove the contents of Pakistan law on the matter; it must therefore
be presumed that the applicable provisions of the law of Pakistan are
the same as the applicable provisions of Philippine law
Digested by: Rea (A2015)

TRIPLE EIGHT INTEGRATED SERVICES V. NLRC

G.R. No. 129584, December 3, 1998

LABOR LAW: Disease as Ground for Dismissal, requisites:

(1)
the
disease
must
be
such
that
employees
continued employment is prohibited by law or prejudicial to his
health as well as to the health of his co-employees; and (2) there
must be a certification by competent public authority that the
disease is of such nature or at such a stage that it cannot be
cured within a period of 6 months with proper medical treatment.

11

LABOR
LAW:
same; The
requirement
for
a medical
certificate under Article 284 of the Labor Code cannot be
dispensed with; otherwise, it would sanction the unilateral
and arbitrary determination by the employer of the gravity or
extent of the employees illness and thus defeat the public policy
on the protection of labor.
PRIVATE INTERNATIONAL LAW: Lex Loci Contractus: Established
is the rule that lex loci contractus (the law of the place where the
contract is made) governs in this jurisdiction. There is no
question that the contract ofemployment in this case was
perfected here in the Philippines.
PRIVATE INTERNATIONAL LAW: Law of the Forum vis-a-vis
Public Policy: Settled is the rule that the courts of the forum will
not enforce any foreign claim obnoxious to the forums public
policy. Here in the Philippines,employment agreements are more
than contractual in nature. The Constitution itself, in Article XIII
Section 3, guarantees the special protection of workers.

FACTS:
Osdana, a Filipino citizen, was recruited by Triple Eight
for employment with the latters principal, Gulf Catering Company
(GCC), a firm based in the Kingdom of Saudi Arabia.
The employment contract (originally as food server but later
changed to waitress) was executed in the Philippines but was to be
performed in Riyadh. Once in Riyadh, however, Osdana was made to
perform strenuous tasks (washing dishes, janitorial work), which were
not included in her designation as a waitress. Because of the long
hours and strenuous nature of her work, she suffered
from Carpal Tunnel Syndrome, for which she had to undergo surgery.
But during her weeks of confinement at the hospital for her recovery,
she was not given any salary. And after she was discharged from the
hospital, GCC suddenly dismissed her from work, allegedly on the
ground of illness. She was not given any separation pay nor was she
paid her salaries for the periods when she was not allowed to work.
Thus, upon her return to the Philippines, she filed a complaint against
Triple Eight, praying for unpaid and underpaid salaries, among others.
The LA ruled in her favour, which ruling NLRC affirmed. Hence, this
petition
for
certiorari.
ISSUE:

Whether or not Osdana was illegally dismissed

12

If so, whether or not she is entitled to award

for salaries for the unexpired portion of the contract

HELD:
The
Disease

petition
as

must
Ground

fail.
for

Dismissal

Under Article 284 of the Labor Code and the Omnibus Rules
Implementing the Labor Code, for disease to be a valid ground for
termination,
the
following
requisites
must be
present:

1. The
disease
must
be
such
that
employees
continued employment is prohibited by law or prejudicial to his
health as well as to the health of his co-employees
2. There must be a certification by competent public authority that
the disease is of such nature or at such a stage that it cannot be
cured within a period of 6 months with proper medical treatment
In the first place, Osdanas continued employment despite her illness
was not prohibited by law nor was it prejudicial to her health, as well
as that of her co-employees. In fact, the medical report issued after
her second operation stated that she had very good improvement of
the symptoms. Besides, Carpal Tunnel Syndrome is not a
contagious
disease.
On
the medical
certificate requirement,
petitioner
erroneously argues that private respondent was employed in Saudi
Arabia and not here in the Philippines. Hence, there was a physical
impossibility to secure from a Philippine public healthauthority the
alluded medical certificate that public respondents illness will not be
cured
within
a
period
of
six
months.
Petitioner entirely misses the point, as counsel for private respondent
states in the Comment. The rule simply prescribes a certification by a
competent public health authority and not a Philippine public
health authority.
If, indeed, Osdana was physically unfit to continue her employment,
13

her employer could have easily obtained a certification to that effect

from a competent public health authority in Saudi Arabia, thereby
heading
off
any
complaint
for
illegal
dismissal.
The requirement for a medical certificate under Article 284 of the Labor
Code cannot be dispensed with; otherwise, it would sanction the
unilateral and arbitrary determination by the employer of the gravity or
extent of the employees illness and thus defeat the public policy on
the protection of labor. As the Court observed in Prieto v. NLRC, The
Court is not unaware of the many abuses suffered by our overseas
workers in the foreign land where they have ventured, usually with
heavy hearts, in pursuit of a more fulfilling future. Breach of contract,
maltreatment, rape, insufficient nourishment, sub-human lodgings,
insults and other forms of debasement, are only a few of the inhumane
acts to which they are subjected by their foreign employers, who
probably feel they can do as they please in their country. While these
workers may indeed have relatively little defense against exploitation
while they are abroad, that disadvantage must not continue to burden
them when they return to their own territory to voice their muted
complaint. There is no reason why, in their own land, the protection of
our own laws cannot be extended to them in full measure for the
redress
of
their
grievances.
Which

law

should

apply: Lex

Loci

Contractus

Petitioner
likewise
attempts
to
sidestep
the medical
certificate requirement by contending that since Osdana was working
in Saudi Arabia, her employment was subject to the laws of the host
country. Apparently, petitioner hopes to make it appear that the labor
laws of Saudi Arabia do not require any certification by a competent
public health authority in the dismissal of employees due to illness.
Again,

petitioners

argument

is

without merit.

First, established is the rule that lex loci contractus (the law of the
place where the contract is made) governs in this jurisdiction. There is
no question that the contract of employment in this case was perfected
here in the Philippines. Therefore, the Labor Code, its implementing
rules and regulations, and other laws affecting labor apply in this case.
Furthermore, settled is the rule that the courts of the forum will not
enforce any foreign claim obnoxious to the forums public policy. Here
in the Philippines, employment agreements are more than contractual
in nature. The Constitution itself, in Article XIII Section 3, guarantees
the
special
protection
of
workers.
This public policy should be borne in mind in this case because
14

to allow foreign employers to determine for and by themselves

whether an overseas contract worker may be dismissed on the ground
of illness would encourage illegal orarbitrary pre-termination
of employment contracts.
Award

of Salaries granted

but

reduced

In the case at bar, while it would appear that the employment contract
approved by the POEA was only for a period of twelve months,
Osdanas actual stint with the foreign principal lasted for one year and
seven-and-a-half months. It may be inferred, therefore, that the
employer renewed her employment contract for another year. Thus,
the award for the unexpired portion of the contract should have been
US$1,260 (US$280 x 4 months) or its equivalent in Philippine pesos,
not US$2,499 as adjudged by the labor arbiter and affirmed by the
NLRC.
As for the award for unpaid salaries and differential amounting to
US$1,076 representing seven months unpaid salariesand one month
underpaid salary, the same is proper because, as correctly pointed out
by Osdana, the no work, no pay rule relied upon by petitioner does
not apply in this case. In the first place, the fact that she had not
worked from June 18 to August 22, 1993 and then from January 24 to
April 29, 1994, was due to her illness which was clearly work-related.
Second, from August 23 to October 5, 1993, Osdana actually worked as
food server and cook for seven days a week at the Hota Bani Tameem
Hospital, but was not paid any salary for the said period. Finally, from
October 6 to October 23, 1993, she was confined to quarters and was
not given any work for no reason at all.

15