Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-104776 December 5, 1994

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty. GERARDO A. DELMUNDO, petitioners,

vs.

PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR, NATIONALLABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIAINTERNATIONAL BUILDERS CORPORATION, respondents.

G.R. Nos. 104911-14 December 5, 1994

BIENVENIDO M. CADALIN, ET AL., petitioners,

vs.

HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC.and/or ASIA INTERNATIONAL BUILDERS CORPORATION, respondents.

G.R. Nos. 105029-32 December 5, 1994

ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT INTERNATIONAL, INC.,

petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN, ROLANDO M.AMUL, DONATO B. EVANGELISTA, ROMEO PATAG, RIZALINO REYES, IGNACIO DE VERA,SOLOMON B. REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO ACUPAN, ROMEOACUPAN, BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO, MARTIN AMISTAD, JR.,ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T. ANGLO, VICENTE ARLITA, HERBERTAYO, SILVERIO BALATAZO, ALFREDO BALOBO, FALCONERO BANAAG, RAMON BARBOSA,FELIX BARCENA, FERNANDO BAS, MARIO BATACLAN, ROBERTO S. BATICA, ENRICO BELEN,ARISTEO BICOL, LARRY C. BICOL, PETRONILLO BISCOCHO, FELIX M. BOBIER, DIONISIOBOBONGO, BAYANI S. BRACAMANTE, PABLITO BUSTILLO, GUILLERMO CABEZAS,BIENVENIDO CADALIN, RODOLFO CAGATAN, AMANTE CAILAO, IRENEO CANDOR, JOSECASTILLO, MANUEL CASTILLO, REMAR CASTROJERES, REYNALDO CAYAS, ROMEO CECILIO,TEODULO CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA CRUZ, FRANCISCODE GUZMAN, ONOFRE DE RAMA, IGNACIO DE VERA, MODESTO DIZON, REYNALDO DIZON,ANTONIO S. DOMINGUEZ, GILBERT EBRADA, RICARDO EBRADA, ANTONIO EJERCITO, JR.,EDUARTE ERIDAO, ELADIO ESCOTOTO, JOHN ESGUERRA, EDUARDO ESPIRITU, ERNESTOESPIRITU, RODOLFO ESPIRITU, NESTOR M. ESTEVA, BENJAMIN ESTRADA, VALERIOEVANGELISTA, OLIGARIO FRANCISCO, JESUS GABAWAN, ROLANDO GARCIA, ANGEL GUDA,PACITO HERNANDEZ, ANTONIO HILARIO, HENRY L. JACOB, HONESTO JARDINIANO,ANTONIO JOCSON, GERARDO LACSAMANA, EFREN U. LIRIO LORETO LONTOC, ISRAELLORENZO, ALEJANDRO LORINO, JOSE MABALAY, HERMIE MARANAN, LEOVIGILDOMARCIAL, NOEL MARTINEZ, DANTE MATREO, LUCIANO MELENDEZ, RENATO MELO,FRANCIS MEDIODIA, JOSE C. MILANES, RAYMUNDO C. MILAY, CRESENCIANO MIRANDA,ILDEFONSO C. MOLINA, ARMANDO B. MONDEJAR RESURRECCION D. NAZARENO, JUANOLINDO, FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIEPANCHO, JOSE PANCHO, GORGONIO P. PARALA, MODESTO PINPIN, JUANITO PAREA,ROMEO I. PATAG, FRANCISCO PINPIN, LEONARDO POBLETE, JAIME POLLOS, DOMINGOPONDALIS, EUGENIO RAMIREZ, LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR., TOMAS B.RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G. RICAZA,RODELIO RIETA, JR., BENITO RIVERA, JR., BERNARDO J. ROBILLOS, PABLO A. ROBLES,JOSE ROBLEZA, QUIRINO RONQUILLO, AVELINO M. ROQUE, MENANDRO L. SABINO, PEDROSALGATAR, EDGARDO SALONGA, NUMERIANO SAN MATEO, FELIZARDO DE LOS SANTOS,JR., GABRIEL SANTOS, JUANITO SANTOS, PAQUITO SOLANTE, CONRADO A. SOLIS, JR.,RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM TARUC, MENANDRO TEMPROSA,BIENVENIDO S. TOLENTINO, BENEDICTO TORRES, MAXIMIANO TORRES, FRANCISCO G.TRIAS, SERGIO A. URSOLINO, ROGELIO VALDEZ, LEGORIO E. VERGARA, DELFIN VICTORIA,GILBERT VICTORIA, HERNANE VICTORIANO, FRANCISCO VILLAFLORES, DOMINGOVILLAHERMOSA, ROLANDO VILLALOBOS, ANTONIO VILLAUZ, DANILO VILLANUEVA,ROGELIO VILLANUEVA, ANGEL VILLARBA, JUANITO VILLARINO, FRANCISCO ZARA,ROGELIO AALAGOS, NICANOR B. ABAD, ANDRES ABANES, REYNALDO ABANES, EDUARDOABANTE, JOSE ABARRO, JOSEFINO ABARRO, CELSO S. ABELANIO, HERMINIO ABELLA,

MIGUEL ABESTANO, RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE ACERES, REYNALDO S.ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO ACUPAN, REYNALDO ACUPAN,SOLANO ACUPAN, MANUEL P. ADANA, FLORENTINO R. AGNE, QUITERIO R. AGUDO,MANUEL P. AGUINALDO, DANTE AGUIRRE, HERMINIO AGUIRRE, GONZALO ALBERTO, JR.,CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA, MARIANITO J. ALCANTARA, BENCIOALDOVER, EULALIO V. ALEJANDRO, BENJAMIN ALEJANDRO, EDUARDO L. ALEJANDRO,MAXIMINO ALEJANDRO, ALBERTO ALMENAR, ARNALDO ALONZO, AMADO ALORIA, CAMILOALVAREZ, MANUEL C. ALVAREZ, BENJAMIN R. AMBROCIO, CARLOS AMORES, BERNARD P.ANCHETA, TIMOTEO O. ANCHETA, JEOFREY ANI, ELINO P. ANTILLON, ARMANDRO B.ANTIPONO, LARRY T. ANTONIO, ANTONIO APILADO, ARTURO P. APILADO, FRANCISCOAPOLINARIO, BARTOLOME M. AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M.AQUINO, ROBERTO ARANGORIN, BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIOARAULLO, ALEXANDER ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTOAREVALO, RAMON AREVALO, RODOLFO AREVALO, EULALIO ARGUELLES, WILFREDO P.ARICA, JOSE M. ADESILLO, ANTONIO ASUNCION, ARTEMIO M. ASUNCION, EDGARDOASUNCION, REXY M. ASUNCION, VICENTE AURELIO, ANGEL AUSTRIA, RICARDO P.AVERILLA, JR., VIRGILIO AVILA, BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMONBACAL, JOSE L. BACANI, ROMULO R. BALBIERAN, VICENTE BALBIERAN, RODOLFO BALITBIT,TEODORO Y. BALOBO, DANILO O. BARBA, BERNARDO BARRO, JUAN A. BASILAN, CEFERINOBATITIS, VIVENCIO C. BAUAN, GAUDENCIO S. BAUTISTA, LEONARDO BAUTISTA, JOSE D.BAUTISTA, ROSTICO BAUTISTA, RUPERTO B. BAUTISTA, TEODORO S. BAUTISTA, VIRGILIOBAUTISTA, JESUS R. BAYA, WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR, ERICB. BELTRAN, EMELIANO BENALES, JR., RAUL BENITEZ, PERFECTO BENSAN, IRENEOBERGONIO, ISABELO BERMUDEZ, ROLANDO I. BERMUDEZ, DANILO BERON, BENJAMINBERSAMIN, ANGELITO BICOL, ANSELMO BICOL, CELESTINO BICOL, JR., FRANCISCO BICOL,ROGELIO BICOL, ROMULO L. BICOL, ROGELIO BILLIONES, TEOFILO N. BITO, FERNANDOBLANCO, AUGUSTO BONDOC, DOMINGO BONDOC, PEPE S. BOOC, JAMES R. BORJA,WILFREDO BRACEROS, ANGELES C. BRECINO, EURECLYDON G. BRIONES, AMADO BRUGE,PABLITO BUDILLO, ARCHIMEDES BUENAVENTURA, BASILIO BUENAVENTURA, GUILLERMOBUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO BUTIONG, JR., HONESTO P. CABALLA,DELFIN CABALLERO, BENEDICTO CABANIGAN, MOISES CABATAY, HERMANELI CABRERA,PEDRO CAGATAN, JOVEN C. CAGAYAT, ROGELIO L. CALAGOS, REYNALDO V. CALDEJON,OSCAR C. CALDERON, NESTOR D. CALLEJA, RENATO R. CALMA, NELSON T. CAMACHO,SANTOS T. CAMACHO, ROBERTO CAMANA, FLORANTE C. CAMANAG EDGARDO M. CANDA,SEVERINO CANTOS, EPIFANIO A. CAPONPON, ELIAS D. CARILLO, JR., ARMANDO CARREON,MENANDRO M. CASTAÑEDA, BENIGNO A. CASTILLO, CORNELIO L. CASTILLO, JOSEPH B.CASTILLO, ANSELMO CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO, ROMEO P.CASTILLO, SESINANDO CATIBOG, DANILO CASTRO, PRUDENCIO A. CASTRO, RAMO CASTRO,JR., ROMEO A. DE CASTRO, JAIME B. CATLI, DURANA D. CEFERINO, RODOLFO B. CELIS,HERMINIGILDO CEREZO, VICTORIANO CELESTINO, BENJAMIN CHAN, ANTONIO C. CHUA,VIVENCIO B. CIABAL, RODRIGO CLARETE, AUGUSTO COLOMA, TURIANO CONCEPCION,TERESITO CONSTANTINO, ARMANDO CORALES, RENATO C. CORCUERA, APOLINARCORONADO, ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO CORPUZ, JESUS M.

CORRALES, CESAR CORTEMPRATO, FRANCISCO O. CORVERA, FRANCISCO COSTALES, SR.,CELEDONIO CREDITO, ALBERTO A. CREUS, ANACLETO V. CRUZ, DOMINGO DELA CRUZ,AMELIANO DELA CRUZ, JR., PANCHITO CRUZ, REYNALDO B. DELA CRUZ, ROBERTO P. CRUZ,TEODORO S. CRUZ, ZOSIMO DELA CRUZ, DIONISIO A. CUARESMA, FELIMON CUIZON,FERMIN DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO DANTINGUINOO,JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID, FAVIO DAVID, VICTORIANO S. DAVID,EDGARDO N. DAYACAP, JOSELITO T. DELOSO, CELERINO DE GUZMAN, ROMULO DEGUZMAN, LIBERATO DE GUZMAN, JOSE DE LEON, JOSELITO L. DE LUMBAN, NAPOLEON S.DE LUNA, RICARDO DE RAMA, GENEROSO DEL ROSARIO, ALBERTO DELA CRUZ, JOSE DELACRUZ, LEONARDO DELOS REYES, ERNESTO F. DIATA, EDUARDO A. DIAZ, FELIX DIAZ,MELCHOR DIAZ, NICANOR S. DIAZ, GERARDO C. DIGA, CLEMENTE DIMATULAC, ROLANDODIONISIO, PHILIPP G. DISMAYA, BENJAMIN DOCTOLERO, ALBERTO STO. DOMINGO,BENJAMIN E. DOZA, BENJAMIN DUPA, DANILO C. DURAN, GREGORIO D. DURAN, RENATO A.EDUARTE, GODOFREDO E. EISMA, ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO,REYNALDO ENCARNACION, EDGARDO ENGUANCIO, ELIAS EQUIPANO, FELIZARDOESCARMOSA, MIGUEL ESCARMOSA, ARMANDO ESCOBAR, ROMEO T. ESCUYOS, ANGELITOESPIRITU, EDUARDO S. ESPIRITU, REYNALDO ESPIRITU, ROLANDO ESPIRITU, JULIANESPREGANTE, IGMIDIO ESTANISLAO, ERNESTO M. ESTEBAN, MELANIO R. ESTRO, ERNESTOM. ESTEVA, CONRADO ESTUAR, CLYDE ESTUYE, ELISEO FAJARDO, PORFIRIO FALQUEZA,WILFREDO P. FAUSTINO, EMILIO E. FERNANDEZ, ARTEMIO FERRER, MISAEL M.FIGURACION, ARMANDO F. FLORES, BENJAMIN FLORES, EDGARDO C. FLORES,BUENAVENTURA FRANCISCO, MANUEL S. FRANCISCO, ROLANDO FRANCISCO, VALERIANOFRANCISCO, RODOLFO GABAWAN, ESMERALDO GAHUTAN, CESAR C. GALANG, SANTIAGON. GALOSO, GABRIEL GAMBOA, BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA,JR., ARMANDO M. GARCIA, EUGENIO GARCIA, MARCELO L. GARCIA, PATRICIO L. GARCIA,JR., PONCIANO G. GARCIA, PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO S.GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON, ROLANDO G. GATELA, AVELINOGAYETA, RAYMUNDO GERON, PLACIDO GONZALES, RUPERTO H. GONZALES, ROGELIO D.GUANIO, MARTIN V. GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO GUPIT,DENNIS J. GUTIERREZ, IGNACIO B. GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H.HABANA, RAUL G. HERNANDEZ, REYNALDO HERNANDEZ, JOVENIANO D. HILADO, JUSTOHILAPO, ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO HIPOLITO, RAUL L. IGNACIO,MANUEL L. ILAGAN, RENATO L. ILAGAN, CONRADO A. INSIONG, GRACIANO G. ISLA, ARNELL. JACOB, OSCAR J. JAPITENGA, CIRILO HICBAN, MAXIMIANO HONRADES, GENEROSOIGNACIO, FELIPE ILAGAN, EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO JAVIER,ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE JESUS, CARLOS A. JIMENEZ, DANILOE. JIMENEZ, PEDRO C. JOAQUIN, FELIPE W. JOCSON, FELINO M. JOCSON, PEDRO N.JOCSON, VALENTINO S. JOCSON, PEDRO B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE,RICARDO SAN JOSE, GERTRUDO KABIGTING, EDUARDO S. KOLIMLIM, SR., LAURO J. LABAY,EMMANUEL C. LABELLA, EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J. LADINES,RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M. LAMADRID, GUADENCIO LATANAN,VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO LAUREL, ALFREDO LAXAMANA,DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI, BENITO DE LEMOS, JR.,

PEDRO G. DE LEON, MANOLITO C. LILOC, GERARDO LIMUACO, ERNESTO S. LISING, RENATOLISING, WILFREDO S. LISING, CRISPULO LONTOC, PEDRO M. LOPERA, ROGELIO LOPERA,CARLITO M. LOPEZ, CLODY LOPEZ, GARLITO LOPEZ, GEORGE F. LOPEZ, VIRGILIO M. LOPEZ,BERNARDITO G. LOREJA, DOMINGO B. LORICO, DOMINGO LOYOLA, DANTE LUAGE,ANTONIO M. LUALHATI, EMMANUEL LUALHATI, JR., LEONIDEZ C. LUALHATI, SEBASTIANLUALHATI, FRANCISCO LUBAT, ARMANDO LUCERO, JOSELITO L. DE LUMBAN, THOMASVICENTE O. LUNA, NOLI MACALADLAD, ALFREDO MACALINO, RICARDO MACALINO,ARTURO V. MACARAIG, ERNESTO V. MACARAIG, RODOLFO V. MACARAIG, BENJAMINMACATANGAY, HERMOGENES MACATANGAY, RODEL MACATANGAY, ROMULOMACATANGAY, OSIAS Q. MADLANGBAYAN, NICOLAS P. MADRID, EDELBERTO G. MAGAT,EFREN C. MAGBANUA, BENJAMIN MAGBUHAT, ALFREDO C. MAGCALENG, ANTONIOMAGNAYE, ALFONSO MAGPANTAY, RICARDO C. MAGPANTAY, SIMEON M. MAGPANTAY,ARMANDO M. MAGSINO, MACARIO S. MAGSINO, ANTONIO MAGTIBAY, VICTOR V.MAGTIBAY, GERONIMO MAHILUM, MANUEL MALONZO, RICARDO MAMADIS, RODOLFOMANA, BERNARDO A. MANALILI, MANUEL MANALILI, ANGELO MANALO, AGUILES L.MANALO, LEOPOLDO MANGAHAS, BAYANI MANIGBAS, ROLANDO C. MANIMTIM, DANIELMANONSON, ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA, RAMONMAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN, WENCESLAO MARASIGAN,LEONARDO MARCELO, HENRY F. MARIANO, JOEL MARIDABLE, SANTOS E. MARINO,NARCISO A. MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO, AURELIO MATABERDE,RENATO MATILLA, VICTORIANO MATILLA, VIRGILIO MEDEL, LOLITO M. MELECIO, BENIGNOMELENDEZ, RENER J. MEMIJE, REYNALDO F. MEMIJE, RODEL MEMIJE, AVELINO MENDOZA,JR., CLARO MENDOZA, TIMOTEO MENDOZA, GREGORIO MERCADO, ERNANI DELA MERCED,RICARDO MERCENA, NEMESIO METRELLO, RODEL MEMIJE, GASPAR MINIMO, BENJAMINMIRANDA, FELIXBERTO D. MISA, CLAUDIO A. MODESTO, JR., OSCAR MONDEDO, GENEROSOMONTON, RENATO MORADA, RICARDO MORADA, RODOLFO MORADA, ROLANDO M.MORALES, FEDERICO M. MORENO, VICTORINO A. MORTEL, JR., ESPIRITU A. MUNOZ,IGNACIO MUNOZ, ILDEFONSO MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN, MARCELO A.NARCIZO, REYNALDO NATALIA, FERNANDO C. NAVARETTE, PACIFICO D. NAVARRO,FLORANTE NAZARENO, RIZAL B. NAZARIO, JOSUE NEGRITE, ALFREDO NEPUMUCENO,HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON, AVELINO NUQUI, NEMESIO D.OBA, DANILO OCAMPO, EDGARDO OCAMPO, RODRIGO E. OCAMPO, ANTONIO B. OCCIANO,REYNALDO P. OCSON, BENJAMIN ODESA, ANGEL OLASO, FRANCISCO OLIGARIO, ZOSIMOOLIMBO, BENJAMIN V. ORALLO, ROMEO S. ORIGINES, DANILO R. ORTANEZ, WILFREDOOSIAS, VIRGILIO PA-A, DAVID PAALAN, JESUS N. PACHECO, ALFONSO L. PADILLA, DANILOPAGSANJAN, NUMERIANO PAGSISIHAN, RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDROPALABRICA, QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO PAN,BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA, EDILBERTO PASIMIO, JR.,JOSE V. PASION, ANGELITO M. PENA, DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDOM. PERALTA, ANTONIO PEREZ, ANTOLIANO E. PEREZ, JUAN PEREZ, LEON PEREZ, ROMEO E.PEREZ, ROMULO PEREZ, WILLIAM PEREZ, FERNANDO G. PERINO, FLORENTINO DEL PILAR,DELMAR F. PINEDA, SALVADOR PINEDA, ELIZALDE PINPIN, WILFREDO PINPIN, ARTUROPOBLETE, DOMINADOR R. PRIELA, BUENAVENTURA PRUDENTE, CARMELITO PRUDENTE,

DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO O. PULIDO, ALEJANDRO PUNIO, FEDERICOQUIMAN, ALFREDO L. QUINTO, ROMEO QUINTOS, EDUARDO W. RACABO, RICARDO C. DERAMA, RICARDO L. DE RAMA, ROLANDO DE RAMA, FERNANDO A. RAMIREZ, LITO S.RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V. RAMIREZ, ALBERTO RAMOS, ANSELMO C.RAMOS, TOBIAS RAMOS, WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN, MANUEL F.RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO, ALBERTO REDAZA, ARTHURREJUSO, TORIBIO M. RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO, GERARDORENTOZA, REDENTOR C. REY, ALFREDO S. REYES, AMABLE S. REYES, BENEDICTO R. REYES,GREGORIO B. REYES, JOSE A. REYES, JOSE C. REYES, ROMULO M. REYES, SERGIO REYES,ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL RIETA, RICARDO RIETA, LEO B. ROBLES,RUBEN ROBLES, RODOLFO ROBLEZA, RODRIGO ROBLEZA, EDUARDO ROCABO, ANTONIO R.RODRIGUEZ, BERNARDO RODRIGUEZ, ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIASRONQUILLO, ELISE RONQUILLO, LUIS VAL B. RONQUILLO, REYNOSO P. RONQUILLO,RODOLFO RONQUILLO, ANGEL ROSALES, RAMON ROSALES, ALBERTO DEL ROSARIO,GENEROSO DEL ROSARIO, TEODORICO DEL ROSARIO, VIRGILIO L. ROSARIO, CARLITOSALVADOR, JOSE SAMPARADA, ERNESTO SAN PEDRO, ADRIANO V. SANCHA, GERONIMOM. SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ, APOLONIO P. SANTIAGO, JOSELITOS. SANTIAGO, SERGIO SANTIAGO, EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D.SANTOS, MIGUEL SAPUYOT, ALEX S. SERQUINA, DOMINADOR P. SERRA, ROMEO SIDRO,AMADO M. SILANG, FAUSTINO D. SILANG, RODOLFO B. DE SILOS, ANICETO G. SILVA,EDGARDO M. SILVA, ROLANDO C. SILVERTO, ARTHUR B. SIMBAHON, DOMINGO SOLANO,JOSELITO C. SOLANTE, CARLITO SOLIS, CONRADO SOLIS, III, EDGARDO SOLIS, ERNESTOSOLIS, ISAGANI M. SOLIS, EDUARDO L. SOTTO, ERNESTO G. STA. MARIA, VICENTE G.STELLA, FELIMON SUPANG, PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P.TALUSIK, FERMIN TARUC, JR., LEVY S. TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO,ARNEL TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA, JOVITO V. TORRES,LEONARDO DE TORRES, GAVINO U. TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO UMALI,SIMPLICIO UNIDA, WILFREDO V. UNTALAN, ANTONIO VALDERAMA, RAMON VALDERAMA,NILO VALENCIANO, EDGARDO C. VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE VERA,WILFREDO D. VERA, BIENVENIDO VERGARA, ALFREDO VERGARA, RAMON R. VERZOSA,FELICITO P. VICMUNDO, ALFREDO VICTORIANO, TEOFILO P. VIDALLO, SABINO N. VIERNEZ,JESUS J. VILLA, JOVEN VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO VILLAGERA,ALEX VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO VILLANUEVA, LEONARDO M.VILLANUEVA, MANUEL R. VILLANUEVA, NEPTHALI VILLAR, JOSE V. VILLAREAL, FELICISIMOVILLARINO, RAFAEL VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO, ROBERTO YABUT,VICENTE YNGENTE, AND ORO C. ZUNIGA, respondents.

Gerardo A. Del Mundo and Associates for petitioners.

Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for BRII/AIBC.

Florante M. De Castro for private respondents in 105029-32.

QUIASON, J.:

The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine OverseasEmployment Administration's Administrator, et. al.," was filed under Rule 65 of the RevisedRules of Court:

(1) to modify the Resolution dated September 2, 1991 of the National Labor RelationsCommission (NLRC) in POEA Cases Nos.

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 default; (ii) declaring the said labor cases as a class suit;(iii) ordering Asia International Builders Corporation (AIBC) and Brown and Root InternationalInc. (BRII) to pay the claims of the 1,767 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

(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion forreconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-288).

The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon. NationalLabor Relations Commission, et. al.," was filed under Rule 65 of the Revised Rules of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos.L-84-06-555, L-85-10-777, L-85-10-799 and

L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the Labor Code ofthe Philippines instead of the ten-year prescriptive period under the Civil Code of thePhilippines; and (ii) denied the

"three-hour daily average" formula in the computation of petitioners' overtime pay; and

(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion forreconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-25; 26-220).

The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation, et. al., v.National Labor Relations Commission, et. al." was filed under Rule 65 of the Revised Rules ofCourt:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos.L-84-06-555, L-85-10-777, L-85-10-779 and

L-86-05-460, insofar as it granted the claims of 149 claimants; and

(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied themotions for reconsideration of AIBC and BRII (Rollo, pp. 2-59; 61-230).

The Resolution dated September 2, 1991 of NLRC, which modified the decision of POEA in fourlabor cases: (1) awarded monetary benefits only to 149 claimants and (2) directed LaborArbiter Fatima J. Franco to conduct hearings and to receive evidence on the claims dismissedby the POEA for lack of substantial evidence or proof of employment.

Consolidation of Cases

G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos.104911-14 were raffled to the Second Division. In the Resolution dated July 26, 1993, theSecond Division referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos. 104911-14,Rollo, p. 895).

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. 104911-14, Rollo, pp. 986-1,107; G.R. Nos.105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated October 27, 1993, the First

Division granted the motion to 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).

I

On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista, in theirown behalf and on behalf of 728 other overseas contract workers (OCWs) instituted a classsuit by filing an "Amended Complaint" with the Philippine Overseas EmploymentAdministration (POEA) for money claims arising from their recruitment by AIBC andemployment by BRII (POEA Case No. L-84-06-555). The claimants were represented by Atty.Gerardo del Mundo.

BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged inconstruction; while AIBC is a domestic corporation licensed as a service contractor to recruit,mobilize and deploy Filipino workers for overseas employment on behalf of its foreignprincipals.

The amended complaint principally sought the payment of the unexpired portion of theemployment contracts, which was terminated prematurely, and secondarily, the payment ofthe interest of the earnings of the Travel and Reserved Fund, interest on all the unpaidbenefits; area wage and salary differential pay; fringe benefits; refund of SSS and premium notremitted to the SSS; refund of withholding tax not remitted to the BIR; penalties for committingprohibited practices; as well as the suspension of the license of AIBC and the accreditation ofBRII (G.R. No. 104776, Rollo, pp. 13-14).

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 July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants tofile a bill of particulars within ten days from receipt of the order and the movants to file theiranswers within ten days from receipt of the bill of particulars. The POEA Administrator alsoscheduled a pre-trial conference on July 25, 1984.

On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23,

1984, AIBC filed a "Motion to Strike Out of the Records", the "Complaint" and the "Complianceand 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 attendthe pre-trial conference on July 25, 1984. The claimants alleged that AIBC and BRII had waivedtheir right to present evidence and had defaulted by failing to file their answers and to attendthe pre-trial conference.

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 outin the order.

On October 10, 1984, claimants asked for time within which to comply with the Order ofOctober 2, 1984 and filed an "Urgent Manifestation," praying that the POEA Administratordirect the parties to submit simultaneously their position papers, after which the case shouldbe deemed submitted for decision. On the same day, Atty. Florante de Castro filed anothercomplaint for the same money claims and benefits in behalf of several claimants, some ofwhom were also claimants in POEA Case No. L-84-06-555 (POEA Case No. 85-10-779).

On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984and an "Urgent Manifestation," praying that the POEA direct the parties to submitsimultaneously their position papers after which the case would be deemed submitted fordecision. On the same day, AIBC asked for time to file its comment on the "Compliance" and"Urgent Manifestation" of claimants. On November 6, 1984, it filed a second motion forextension of time to file the comment.

On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension oftime was granted.

On November 14, 1984, claimants filed an opposition to the motions for extension of time andasked that AIBC and BRII be declared in default for failure to file their answers.

On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, thatclaimants should be ordered to amend their complaint.

On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to filetheir answers within ten days from receipt of the order.

On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said orderof the POEA Administrator. Claimants opposed the appeal, claiming that it was dilatory andpraying that AIBC and BRII be declared in default.

On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper"dated March 24, 1985, adding new demands: namely, the payment of overtime pay, extra nightwork pay, annual leave differential pay, leave indemnity pay, retirement and savings benefitsand their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, 1985, the POEAAdministrator directed AIBC to file its answer to the amended complaint (G.R. No. 104776,Rollo, p. 20).

On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the sameday, the POEA issued an order directing AIBC and BRII to file their answers to the "AmendedComplaint," otherwise, they would be deemed to have waived their right to present evidenceand the case would be resolved on the basis of complainant's evidence.

On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motionfor Bill of Particulars Re: Amended Complaint dated March 24, 1985." Claimants opposed themotions.

On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to filetheir answers in POEA Case No. L-84-06-555.

On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition forthe issuance of a writ of injunction. On September 19, 1985, NLRC enjoined the POEAAdministrator from hearing the labor cases and suspended the period for the filing of theanswers of AIBC and BRII.

On September 19, 1985, claimants asked the POEA Administrator to include additionalclaimants in the case and to investigate alleged wrongdoings of BRII, AIBC and theirrespective lawyers.

On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No.L-85-10-777) against AIBC and BRII with the POEA, demanding monetary claims similar tothose subject of POEA Case No. L-84-06-555. In the same month, Solomon Reyes also filed hisown complaint (POEA Case No. L-85-10-779) against AIBC and BRII.

On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for thesubstitution of the original counsel of record and the cancellation of the special powers ofattorney given the original counsel.

On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforceattorney's lien.

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 POEA CaseNo. 84-06-555.

On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, 1985 andSeptember 18, 1985 by AIBC and BRII.

In narrating the proceedings of the labor cases before the POEA Administrator, it is not amissto mention that two cases were filed in the Supreme Court by the claimants, namely — G.R. No.72132 on September 26, 1985 and Administrative Case No. 2858 on March 18, 1986. On May13, 1987, the Supreme Court issued a resolution in Administrative Case No. 2858 directing thePOEA Administrator to resolve the issues raised in the motions and oppositions filed in POEACases Nos. L-84-06-555 and L-86-05-460 and to decide the labor cases with deliberatedispatch.

AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order datedSeptember 4, 1985 of the POEA Administrator. Said order required BRII and AIBC to answerthe 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 all its technical objections mayproperly be resolved in the hearings before the POEA.

Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988by claimant Hermie Arguelles and 18 co-claimants against the POEA Administrator andseveral NLRC Commissioners. The Ombudsman merely referred the complaint to theSecretary 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 by claimants Emigdio P. Bautista andRolando R. Lobeta charging AIBC and BRII for violation of labor and social legislations. Thethird was filed by Jose R. Santos, Maximino N. Talibsao and Amado B. Bruce denouncing AIBCand BRII of violations of labor laws.

On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution datedDecember 12, 1986.

On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspensionof the period for filing an answer or motion for extension of time to file the same until theresolution of its motion for reconsideration of the order of the NLRC dismissing the twoappeals. On April 28, 1987, NLRC en banc denied the motion for reconsideration.

At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the samehearing, the parties were given a period of 15 days from said date within which to submit theirrespective position papers. On June 24, 1987 claimants filed their "Urgent Motion to Strike OutAnswer," alleging that the answer was filed out of time. 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, AIBC and BRII submitted their position paper. On March 4, 1988,claimants filed their "Ex-Parte Motion to Expunge from the Records" the position paper of AIBCand BRII, claiming that it was filed out of time.

On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandumin POEA Case No. L-86-05-460. On September 6, 1988, AIBC and BRII submitted theirSupplemental Memorandum. On September 12, 1988, BRII filed its "Reply to Complainant'sMemorandum." On October 26, 1988, claimants submitted their "Ex-Parte ManifestationalMotion and Counter-Supplemental Motion," together with 446 individual contracts ofemployments and service records. On October 27, 1988, AIBC and BRII filed a "ConsolidatedReply."

On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No.L-84-06-555 and the other consolidated cases, which awarded the amount of $824,652.44 infavor of only 324 complainants.

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 reconsiderationand/or appeal in addition to the "Notice of Appeal" filed earlier on February 6, 1989 by anothercounsel for AIBC.

On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of theappeal of AIBC and BRII.

On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum,"together with their "newly discovered evidence" consisting of payroll records.

On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among othermatters that there were only 728 named claimants. On April 20, 1989, the claimants filed their"Counter-Manifestation," alleging that there were 1,767 of them.

On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision datedJanuary 30, 1989 on the grounds that BRII had failed to appeal on time and AIBC had notposted the supersedeas bond in the amount of $824,652.44.

On December 23, 1989, claimants filed another motion to resolve the labor cases.

On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767claimants be awarded their monetary claims for failure of private respondents to file theiranswers within the reglamentary period required by law.

On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:

WHEREFORE, premises considered, the Decision of the POEA in these consolidated cases ismodified to the extent and in accordance with the following dispositions:

1. The claims of the 94 complainants identified and listed in Annex "A" hereof aredismissed for having prescribed;

2. Respondents AIBC and Brown & Root are hereby ordered, jointly and severally, to paythe 149 complainants, identified and listed in Annex "B" hereof, the peso equivalent, at the timeof payment, of the total amount in US dollars indicated opposite their respective names;

3. The awards given by the POEA to the 19 complainants classified and listed in Annex"C" hereof, who appear to have worked elsewhere than in Bahrain are hereby set aside.

4. All claims other than those indicated in Annex "B", including those for overtime workand favorably granted by the POEA, are hereby dismissed for lack of substantial evidence insupport thereof or are beyond the competence of this Commission to pass upon.

In addition, this Commission, in the exercise of its powers and authority under Article 218(c) ofthe Labor Code, as amended by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco ofthis Commission to summon parties, conduct hearings and receive evidence, as expeditiouslyas possible, and thereafter submit a written report to this Commission (First Division) of theproceedings taken, regarding the claims of the following:

(a) complainants identified and listed in Annex "D" attached and made an integral part ofthis Resolution, whose claims were dismissed by the POEA for lack of proof of employment inBahrain (these complainants numbering 683, are listed in pages 13 to 23 of the decision ofPOEA, subject of the appeals) and,

(b) complainants identified and listed in Annex "E" attached and made an integral part ofthis Resolution, whose awards decreed by the POEA, to Our mind, are not supported bysubstantial 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).

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 theSupreme Court (G.R. Nos. 120741-44). The petition was dismissed in a resolution dated

January 27, 1992.

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 the claimantsrepresented by Atty. De Castro; and the third, by AIBC and BRII.

In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.

Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No.104776), the claimants represented by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC andBRII (G.R. Nos. 105029-32).

II

Compromise Agreements

Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII havesubmitted, from time to time, compromise agreements for our approval and jointly moved forthe dismissal of their respective petitions insofar as the claimants-parties to the compromiseagreements were concerned (See Annex A for list of claimants who signed quitclaims).

Thus the following manifestations that the parties had arrived at a compromise agreement andthe corresponding motions for the approval of the agreements were filed by the parties andapproved by the Court:

1) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47co-claimants dated September 2, 1992 (G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos.105029-32, Rollo, pp.

470-615);

2) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82

co-petitioners dated September 3, 1992 (G.R. No. 104776, Rollo, pp. 364-507);

3) Joint Manifestation and Motion involving claimant Jose

M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos. 105029-32, Rollo, pp.613-722; G.R. No. 104776, Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516);

4) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17co-claimants dated October 14, 1992 (G.R. Nos.

105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713; G.R. Nos. 104911-14,Rollo, pp. 530-590);

5) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6co-claimants dated January 15, 1993 (G.R. No. 104776, Rollo, pp. 813-836; G.R. Nos.104911-14, Rollo, pp. 629-652);

6) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4co-claimants dated March 10, 1993 (G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No. 104776,Rollo, pp. 1815-1829);

7) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5co-claimants dated March 17, 1993 (G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos.104911-14, Rollo, pp. 655-675);

8) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15 otherco-claimants dated May 4, 1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos.104911-14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-1814);

9) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-claimants datedMay 10, 1993 (G.R. No. 104776, Rollo, pp. 1815-1829);

10) Joint Manifestation and Motion involving petitioner Quiterio R. 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. 748-864; G.R. No. 104776, Rollo, pp. 1066-1183);

11) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19co-claimants dated July 22, 1993 (G.R. No. 104776, Rollo, pp. 1173-1235; G.R. Nos.105029-32, Rollo, pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);

12) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-claimantsdated September 7, 1993 (G.R. Nos.

105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R. Nos. 104911-14,Rollo, pp. 972-984);

13) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37co-claimants dated September 8, 1993 (G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos.104911-14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);

14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants datedJanuary 10, 1994 (G.R. Nos. 105029-32, Rollo, Vol. II);

15) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimantsdated August 25, 1994 (G.R. Nos. 105029-32; G.R. No. 104776; G.R. Nos. 104911-14).

III

The facts as found by the NLRC are as follows:

We have taken painstaking efforts to sift over the more than fifty volumes now comprising therecords of these cases. From the records, it appears that the complainants-appellants allegethat they were recruited by respondent-appellant AIBC for its accredited foreign principal,Brown & Root, on various dates from 1975 to 1983. They were all deployed at various projectsundertaken by Brown & Root in several countries in the Middle East, such as Saudi Arabia,Libya, United Arab Emirates and Bahrain, as well as in Southeast Asia, in Indonesia and

Malaysia.

Having been officially processed as overseas contract workers by the Philippine Government,all the individual complainants signed standard overseas employment contracts (Records,Vols. 25-32. Hereafter, reference to the records would be sparingly made, considering theirchaotic arrangement) with AIBC before their departure from the Philippines. These overseasemployment contracts invariably contained the following relevant terms and conditions.

PART B —

(1) Employment Position Classification :—————————

(Code) :—————————

(2) Company Employment Status :—————————

(3) Date of Employment to Commence on :—————————

(4) Basic Working Hours Per Week :—————————

(5) Basic Working Hours Per Month :—————————

(6) Basic Hourly Rate :—————————

(7) Overtime Rate Per Hour :—————————

(8) Projected Period of Service

(Subject to C(1) of this [sic]) :—————————

Months and/or

Job Completion

xxx xxx xxx

3. HOURS OF WORK AND COMPENSATION

a) The Employee is employed at the hourly rate and overtime rate as set out in Part B ofthis Document.

b) The hours of work shall be those set forth by the Employer, and Employer may, at hissole option, change or adjust such hours as maybe deemed necessary from time to time.

4. TERMINATION

a) Notwithstanding any other terms and conditions of this agreement, the Employer may,at his sole discretion, terminate employee's service with cause, under this agreement at anytime. If the Employer terminates the services of the Employee under this Agreement becauseof the completion or termination, or suspension of the work on which the Employee's serviceswere being utilized, or because of a reduction in force due to a decrease in scope of such work,or by change in the type of construction of such work. The Employer will be responsible for hisreturn transportation to his country of origin. Normally on the most expeditious air route,economy class accommodation.

xxx xxx xxx

10. VACATION/SICK LEAVE BENEFITS

a) After one (1) year of continuous service and/or satisfactory completion of contract,employee shall be entitled to 12-days vacation leave with pay. This shall be computed at thebasic wage rate. Fractions of a year's service will be computed on a pro-rata basis.

b) Sick leave of 15-days shall be granted to the employee for every year of service fornon-work connected injuries or illness. If the employee failed to avail of such leave benefits,the same shall be forfeited at the end of the year in which said sick leave is granted.

11. BONUS

A bonus of 20% (for offshore work) of gross income will be accrued and payable only uponsatisfactory completion of this contract.

12. OFFDAY PAY

The seventh day of the week shall be observed as a day of rest with 8 hours regular pay. Ifwork is performed on this day, all hours work shall be paid at the premium rate. However, thisoffday pay provision is applicable only when the laws of the Host Country require paymentsfor rest day.

In the State of Bahrain, where some of the individual complainants were deployed, His MajestyIsa Bin Salman Al Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1976,otherwise known as the Labour Law for the Private Sector (Records, Vol. 18). This decree tookeffect on August 16, 1976. Some of the provisions of Amiri Decree No. 23 that are relevant tothe claims of the complainants-appellants are as follows (italics supplied only for emphasis):

Art. 79:. . . A worker shall receive payment for each extra hour equivalent to his wageentitlement increased by a minimum of twenty-five per centum thereof for hours workedduring the day; and by a minimum of fifty per centum thereof for hours worked during the nightwhich shall be deemed to being from seven o'clock in the evening until seven o'clock in themorning. . . .

Art. 80:Friday shall be deemed to be a weekly day of rest on full pay.

. . . an employer may require a worker, with his consent, to work on his weekly day of rest ifcircumstances so require and in respect of which an additional sum equivalent to 150% of hisnormal wage shall be paid to him. . . .

Art. 81:. . . When conditions of work require the worker to work on any official holiday, he shallbe paid an additional sum equivalent to 150% of his normal wage.

Art. 84:Every worker who has completed one year's continuous service with his employer shallbe entitled to leave on full pay for a period of not less than 21 days for each year increased to

a period not less than 28 days after five continuous years of service.

A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion ofhis service in that year.

Art. 107: A contract of employment made for a period of indefinite duration may beterminated by either party thereto after giving the other party thirty days' prior notice beforesuch termination, in writing, in respect of monthly paid workers and fifteen days' notice inrespect of other workers. The party terminating a contract without giving the required noticeshall pay to the other party compensation equivalent to the amount of wages payable to theworker for the period of such notice or the unexpired portion thereof.

Art. 111: . . . the employer concerned shall pay to such worker, upon termination ofemployment, a leaving indemnity for the period of his employment calculated on the basis offifteen days' wages for each year of the first three years of service and of one month's wagesfor each year of service thereafter. Such worker shall be entitled to payment of leavingindemnity upon a quantum meruit in proportion to the period of his service completed within ayear.

All the individual complainants-appellants have already been repatriated to the Philippines atthe time of the filing of these cases (R.R. No. 104776, Rollo, pp. 59-65).

IV

The issues raised before and resolved by the NLRC were:

First: — Whether or not complainants are entitled to the benefits provided by Amiri Decree No.23 of Bahrain;

(a) Whether or not the complainants who have worked in Bahrain are entitled to theabove-mentioned benefits.

(b) Whether or not Art. 44 of the same Decree (allegedly prescribing a more favorabletreatment of alien employees) bars complainants from enjoying its benefits.

Second: — Assuming that Amiri Decree No. 23 of Bahrain is applicable in these cases, whetheror not complainants' claim for the benefits provided therein have prescribed.

Third: — Whether or not the instant cases qualify as a class suit.

Fourth: — Whether or not the proceedings conducted by the POEA, as well as the decision thatis the subject of these appeals, conformed with the requirements of due process;

(a) Whether or not the respondent-appellant was denied its right to due process;

(b) Whether or not the admission of evidence by the POEA after these cases weresubmitted for decision was valid;

(c) Whether or not the POEA acquired jurisdiction over Brown & Root International, Inc.;

(d) Whether or not the judgment awards are supported by substantial evidence;

(e) Whether or not the awards based on the averages and formula presented by thecomplainants-appellants are supported by substantial evidence;

(f) Whether or not the POEA awarded sums beyond what the complainants-appellantsprayed for; and, if so, whether or not these awards are valid.

Fifth: — Whether or not the POEA erred in holding respondents AIBC and Brown & Root jointlyare severally liable for the judgment awards despite the alleged finding that the former was theemployer of the complainants;

(a) Whether or not the POEA has acquired jurisdiction over Brown & Root;

(b) Whether or not the undisputed fact that AIBC was a licensed construction contractorprecludes a finding that Brown & Root is liable for complainants claims.

Sixth: — Whether or not the POEA Administrator's failure to hold respondents in defaultconstitutes a reversible error.

Seventh: — Whether or not the POEA Administrator erred in dismissing the following claims:

a. Unexpired portion of contract;

b. Interest earnings of Travel and Reserve Fund;

c. Retirement and Savings Plan benefits;

d. War Zone bonus or premium pay of at least 100% of basic pay;

e. Area Differential Pay;

f. Accrued interests on all the unpaid benefits;

g. Salary differential pay;

h. Wage differential pay;

i. Refund of SSS premiums not remitted to SSS;

j. Refund of withholding tax not remitted to BIR;

k. Fringe benefits under B & R's "A Summary of Employee Benefits" (Annex "Q" ofAmended Complaint);

l. Moral and exemplary damages;

m. Attorney's fees of at least ten percent of the judgment award;

n. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and theaccreditation of B & R issued by POEA;

o. Penalty for violations of Article 34 (prohibited practices), not excluding reportorialrequirements thereof.

Eighth: — Whether or not the POEA Administrator erred in not dismissing POEA Case No. (L)86-65-460 on the ground of multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).

Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules onEvidence governing the pleading and proof of a foreign law and admitted in evidence a simplecopy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRCinvoked Article 221 of the Labor Code of the Philippines, vesting on the Commission amplediscretion to use every and all reasonable means to ascertain the facts in each case withoutregard to the technicalities of law or procedure. NLRC agreed with the POEA Administrator thatthe Amiri Decree No. 23, being more favorable and beneficial to the workers, should form partof the overseas employment contract of the complainants.

NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked inBahrain, and set aside awards of the POEA Administrator in favor of the claimants, who

worked elsewhere.

On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of thecomplainants 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 yearas provided in the Amiri Decree No. 23 of 1976.

On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot betreated as a class suit for the simple reason that not all the complainants worked in Bahrainand therefore, the subject matter of the action, the claims arising from the Bahrain law, is notof common or general interest to all the complainants.

On the fourth issue, NLRC found at least three infractions of the cardinal rules ofadministrative due process: namely, (1) the failure of the POEA Administrator to consider theevidence presented by AIBC and BRII; (2) some findings of fact were not supported bysubstantial evidence; and (3) some of the evidence upon which the decision was based werenot disclosed to AIBC and BRII during the hearing.

On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC aresolidarily liable for the claims of the complainants and held that BRII was the actual employerof the complainants, or at the very least, the indirect employer, with AIBC as the laborcontractor.

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

On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motionto Declare AIBC in default.

On the seventh issue, which involved other money claims not based on the Amiri Decree No.23, NLRC ruled:

(1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS

premiums and refund of withholding taxes and the claimants should file their claims for saidrefund with the appropriate government agencies;

(2) the claimants failed to establish that they are entitled to the claims which are not basedon the overseas employment contracts nor the Amiri Decree No. 23 of 1976;

(3) that the POEA Administrator has no jurisdiction over claims for moral and exemplarydamages and nonetheless, the basis for granting said damages was not established;

(4) that the claims for salaries corresponding to the unexpired portion of their contractmay be allowed if filed within the three-year prescriptive period;

(5) that the allegation that complainants were prematurely repatriated prior to theexpiration of their overseas contract was not established; and

(6) that the POEA Administrator has no jurisdiction over the complaint for the suspensionor cancellation of the AIBC's recruitment license and the cancellation of the accreditation ofBRII.

NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 shouldhave been dismissed on the ground that the claimants in said case were also claimants inPOEA Case No. (L) 84-06-555. Instead of dismissing POEA Case No. (L) 86-65-460, the POEAjust resolved the corresponding claims in POEA Case No. (L) 84-06-555. In other words, thePOEA did not pass upon the same claims twice.

V

G.R. No. 104776

Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:

(1) that they were deprived by NLRC and the POEA of their right to a speedy disposition oftheir cases as guaranteed by Section 16, Article III of the 1987 Constitution. The POEAAdministrator allowed private respondents to file their answers in two years (on June 19,1987) after the filing of the original complaint (on April 2, 1985) and NLRC, in total disregard ofits own rules, affirmed the action of the POEA Administrator;

(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in defaultand should have rendered summary judgment on the basis of the pleadings and evidencesubmitted by claimants;

(3) the NLRC and POEA Administrator erred in not holding that the labor cases filed byAIBC and BRII cannot be considered a class suit;

(4) that the prescriptive period for the filing of the claims is ten years; and

(5) that NLRC and the POEA Administrator should have dismissed POEA Case No.L-86-05-460, the case filed by Atty. Florante de Castro (Rollo, pp. 31-40).

AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:

(1) that they were not responsible for the delay in the disposition of the labor cases,considering the great difficulty of getting all the records of the more than 1,500 claimants, thepiece-meal filing of the complaints and the addition of hundreds of new claimants bypetitioners;

(2) that considering the number of complaints and claimants, it was impossible to preparethe answers within the ten-day period provided in the NLRC Rules, that when the motion todeclare AIBC in default was filed on July 19, 1987, said party had already filed its answer, andthat considering the staggering amount of the claims (more than US$50,000,000.00) and thecomplicated issues raised by the parties, the ten-day rule to answer was not fair andreasonable;

(3) that the claimants failed to refute NLRC's finding that

there was no common or general interest in the subject matter of the controversy — which wasthe applicability of the Amiri Decree No. 23. Likewise, the nature of the claims varied, somebeing based on salaries pertaining to the unexpired portion of the contracts while others beingfor pure money claims. Each claimant demanded separate claims peculiar only to himself anddepending upon the particular circumstances obtaining in his case;

(4) that the prescriptive period for filing the claims is that prescribed by Article 291 of theLabor Code of the Philippines (three years) and not the one prescribed by Article 1144 of theCivil Code of the Philippines (ten years); and

(5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460should be dismissed, this being a private quarrel between the two labor lawyers (Rollo, pp.292-305).

Attorney's Lien

On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the jointmanifestations and motions of AIBC and BRII dated September 2 and 11, 1992, claiming thatall the claimants who entered into the compromise agreements subject of said manifestationsand motions were his clients and that Atty. Florante M. de Castro had no right to representthem in said agreements. He also claimed that the claimants were paid less than the awardgiven them by NLRC; that Atty. De Castro collected additional attorney's fees on top of the 25%which he was entitled to receive; and that the consent of the claimants to the compromiseagreements and quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). Inthe Resolution dated November 23, 1992, the Court denied the motion to strike out the JointManifestations and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp.608-609).

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 withthe assistance of Atty. De Castro, had all signed a retainer agreement with his law firm (G.R.No. 104776, Rollo, pp. 623-624; 838-1535).

Contempt of Court

On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castroand Atty. Katz Tierra for contempt of court and for violation of Canons 1, 15 and 16 of theCode of Professional Responsibility. The said lawyers allegedly misled this Court, by making itappear that the claimants who entered into the compromise agreements were represented byAtty. De Castro, when in fact they were represented by Atty. Del Mundo (G.R. No. 104776,Rollo, pp. 1560-1614).

On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro forunethical practices and moved for the voiding of the quitclaims submitted by some of theclaimants.

G.R. Nos. 104911-14

The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds thatNLRC gravely abused its discretion when it: (1) applied the three-year prescriptive period underthe Labor Code of the Philippines; and (2) it denied the claimant's formula based on anaverage overtime pay of three hours a day (Rollo, pp. 18-22).

The claimants argue that said method was proposed by BRII itself during the negotiation foran amicable settlement of their money claims in Bahrain as shown in the Memorandum datedApril 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22).

BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that theprescriptive period in the Labor Code of the Philippines, a special law, prevails over thatprovided in the Civil Code of the Philippines, a general law.

As to the memorandum of the Ministry of Labor of Bahrain on the method of computing theovertime pay, BRII and AIBC claimed that they were not bound by what appeared therein,because such memorandum was proposed by a subordinate Bahrain official and there was noshowing that it was approved by the Bahrain Minister of Labor. Likewise, they claimed that theaveraging method was discussed in the course of the negotiation for the amicable settlementof the dispute and any offer made by a party therein could not be used as an admission by him(Rollo, pp. 228-236).

G.R. Nos. 105029-32

In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it:(1) enforced the provisions of the Amiri Decree No. 23 of 1976 and not the terms of theemployment contracts; (2) granted claims for holiday, overtime and leave indemnity pay andother benefits, on evidence admitted in contravention of petitioner's constitutional right to dueprocess; and (3) ordered the POEA Administrator to hold new hearings for the 683 claimantswhose claims had been dismissed for lack of proof by the POEA Administrator or NLRC itself.Lastly, they allege that assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRCerred when it did not apply the one-year prescription provided in said law (Rollo, pp. 29-30).

VI

G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32

All the petitions raise the common issue of prescription although they disagreed as to the timethat should be embraced within the prescriptive period.

To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of theCivil Code of the Philippines. NLRC believed otherwise, fixing the prescriptive period at threeyears as provided in Article 291 of the Labor Code of the Philippines.

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 claims wasthree years, instead of ten years, as found by the POEA Administrator.

The Solicitor General expressed his personal view that the prescriptive period was one year asprescribed by the Amiri Decree No. 23 of 1976 but he deferred to the ruling of NLRC thatArticle 291 of the Labor Code of the Philippines was the operative law.

The POEA Administrator held the view that:

These money claims (under Article 291 of the Labor Code) refer to those arising from theemployer's violation of the employee's right as provided by the Labor Code.

In the instant case, what the respondents violated are not the rights of the workers as providedby the Labor Code, but the provisions of the Amiri Decree No. 23 issued in Bahrain, which ipsofacto amended the worker's contracts of employment. Respondents consciously failed toconform to these provisions which specifically provide for the increase of the worker's rate. Itwas only after June 30, 1983, four months after the brown builders brought a suit against B &R in Bahrain for this same claim, when respondent AIBC's contracts have undergoneamendments in Bahrain for the new hires/renewals (Respondent's Exhibit 7).

Hence, premises considered, the applicable law of prescription to this instant case is Article1144 of the Civil Code of the Philippines, which provides:

Art. 1144. The following actions may be brought within ten years from the time the causeof action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

Thus, herein money claims of the complainants against the respondents shall prescribe in tenyears from August 16, 1976. Inasmuch as all claims were filed within the ten-year prescriptiveperiod, no claim suffered the infirmity of being prescribed (G.R. No. 104776, Rollo, 89-90).

In overruling the POEA Administrator, and holding that the prescriptive period is three years asprovided in Article 291 of the Labor Code of the Philippines, the NLRC argued as follows:

The Labor Code provides that "all money claims arising from employer-employee relations . . .shall be filed within three years from the time the cause of action accrued; otherwise they shallbe forever barred" (Art. 291, Labor Code, as amended). This three-year prescriptive period shallbe the one applied here and which should be reckoned from the date of repatriation of eachindividual complainant, considering the fact that the case is having (sic) filed in this country.

We do not agree with the POEA Administrator that this three-year prescriptive period appliesonly to money claims specifically recoverable under the Philippine Labor Code. Article 291gives no such indication. Likewise, We can not consider complainants' cause/s of action tohave accrued from a violation of their employment contracts. There was no violation; theclaims arise from the benefits of the law of the country where they worked. (G.R. No. 104776,Rollo, pp.

90-91).

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 characterization, i.e.,whether to characterize the foreign law on prescription or statute of limitation as "substantive"or "procedural." NLRC cited the decision in Bournias v. Atlantic Maritime Company (220 F. 2d.152, 2d Cir. [1955], where the issue was the applicability of the Panama Labor Code in a casefiled in the State of New York for claims arising from said Code. In said case, the claims wouldhave prescribed under the Panamanian Law but not under the Statute of Limitations of NewYork. The U.S. Circuit Court of Appeals held that the Panamanian Law was procedural as itwas not "specifically intended to be substantive," hence, the prescriptive period provided in thelaw of the forum should apply. The Court observed:

. . . And where, as here, we are dealing with a statute of limitations of a foreign country, and itis not clear on the face of the statute that its purpose was to limit the enforceability, outside aswell as within the foreign country concerned, of the substantive rights to which the statutepertains, we think that as a yardstick for determining whether that was the purpose this test isthe most satisfactory one. It does not lead American courts into the necessity of examininginto the unfamiliar peculiarities and refinements of different foreign legal systems. . .

The court further noted:

xxx xxx xxx

Applying that test here it appears to us that the libelant is entitled to succeed, for therespondents have failed to satisfy us that the Panamanian period of limitation in question wasspecifically aimed against the particular rights which the libelant seeks to enforce. ThePanama Labor Code is a statute having broad objectives, viz: "The present Code regulates therelations between capital and labor, placing them on a basis of social justice, so that, withoutinjuring 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 investment." In pursuance of theseobjectives the Code gives laborers various rights against their employers. Article 623establishes the period of limitation for all such rights, except certain ones which areenumerated in Article 621. And there is nothing in the record to indicate that the Panamanianlegislature gave special consideration to the impact of Article 623 upon the particular rightssought to be enforced here, as distinguished from the other rights to which that Article is alsoapplicable. Were we confronted with the question of whether the limitation period of Article621 (which carves out particular rights to be governed by a shorter limitation period) is to beregarded as "substantive" or "procedural" under the rule of "specifity" we might have a differentcase; but here on the surface of things we appear to be dealing with a "broad," and not a"specific," statute of limitations (G.R. No. 104776, Rollo, pp.

92-94).

Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of thePhilippines, which was applied by NLRC, refers only to claims "arising from the employer'sviolation of the employee's right as provided by the Labor Code." They assert that their claimsare based on the violation of their employment contracts, as amended by the Amiri Decree No.23 of 1976 and therefore the claims may be brought within ten years as provided by Article1144 of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp.

18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA 244(1976).

AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri DecreeNo. 23 of 1976, argue that there is in force in the Philippines a "borrowing law," which isSection 48 of the Code of Civil Procedure and that where such kind of law exists, it takesprecedence over the common-law conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).

First to be determined is whether it is the Bahrain law on prescription of action based on theAmiri Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing law.

Article 156 of the Amiri Decree No. 23 of 1976 provides:

A claim arising out of a contract of employment shall not be actionable after the lapse of oneyear from the date of the expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226).

As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters,such as service of process, joinder of actions, period and requisites for appeal, and so forth,are governed by the laws of the forum. This is true even if the action is based upon a foreignsubstantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga, Private InternationalLaw, 131 [1979]).

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may beviewed either as procedural or substantive, depending on the characterization given such alaw.

Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statuteof limitations of New York, instead of the Panamanian law, after finding that there was noshowing that the Panamanian law on prescription was intended to be substantive. Beingconsidered merely a procedural law even in Panama, it has to give way to the law of the forumon prescription of actions.

However, the characterization of a statute into a procedural or substantive law becomesirrelevant when the country of the forum has a "borrowing statute." Said statute has thepractical effect of treating the foreign statute of limitation as one of substance (Goodrich,Conflict of Laws 152-153 [1938]). A "borrowing statute" directs the state of the forum to applythe foreign statute of limitations to the pending claims based on a foreign law (Siegel,Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes," one form providesthat an action barred by the laws of the place where it accrued, will not be enforced in theforum even though the local statute has not run against it (Goodrich and Scoles, Conflict ofLaws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind. Said Sectionprovides:

If by the laws of the state or country where the cause of action arose, the action is barred, it isalso barred in the Philippines Islands.

Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270of said Code repealed only those provisions of the Code of Civil Procedures as to which wereinconsistent with it. There is no provision in the Civil Code of the Philippines, which isinconsistent with or contradictory to Section 48 of the Code of Civil Procedure (Paras,Philippine Conflict of Laws 104 [7th ed.]).

In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigoreinsofar as it ordains the application in this jurisdiction of Section 156 of the Amiri Decree No.23 of 1976.

The courts of the forum will not enforce any foreign claim obnoxious to the forum's publicpolicy (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 No. 23 of 1976 asregards the claims in question would contravene the public policy on the protection to labor.

In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:

The state shall promote social justice in all phases of national development. (Sec. 10).

The state affirms labor as a primary social economic force. It shall protect the rights ofworkers and promote their welfare (Sec. 18).

In article XIII on Social Justice and Human Rights, the 1987 Constitution provides:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized andunorganized, and promote full employment and equality of employment opportunities for all.

Having determined that the applicable law on prescription is the Philippine law, the nextquestion is whether the prescriptive period governing the filing of the claims is three years, asprovided by the Labor Code or ten years, as provided by the Civil Code of the Philippines.

The claimants are of the view that the applicable provision is Article 1144 of the Civil Code ofthe Philippines, which provides:

The following actions must be brought within ten years from the time the right of actionaccrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Codeof the Philippines, which in pertinent part provides:

Money claims-all money claims arising from employer-employee relations accruing during theeffectivity of this Code shall be filed within three (3) years from the time the cause of actionaccrued, otherwise they shall be forever barred.

xxx xxx xxx

The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to the cases atbench (Rollo, p. 21). The said case involved the correct computation of overtime pay asprovided in the collective bargaining agreements and not the Eight-Hour Labor Law.

As noted by the Court: "That is precisely why petitioners did not make any reference as to thecomputation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494)and instead insisted that work computation provided in the collective bargaining agreementsbetween the parties be observed. Since the claim for pay differentials is primarily anchored onthe written contracts between the litigants, the ten-year prescriptive period provided by Art.1144(1) of the New Civil Code should govern."

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 commenced within threeyears after the cause of action accrued otherwise such action shall be forever barred, . . . .

The court further explained:

The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as amended)will apply, if the claim for differentials for overtime work is solely based on said law, and not ona collective bargaining agreement or any other contract. In the instant case, the claim forovertime compensation is not so much because of Commonwealth Act No. 444, as amendedbut because the claim is demandable right of the employees, by reason of theabove-mentioned collective bargaining agreement.

Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions toenforce any cause of action under said law." On the other hand, Article 291 of the Labor Codeof the Philippines provides the prescriptive period for filing "money claims arising fromemployer-employee relations." The claims in the cases at bench all arose from theemployer-employee relations, which is broader in scope than claims arising from a specificlaw or from the collective bargaining agreement.

The contention of the POEA Administrator, that the three-year prescriptive period under Article291 of the Labor Code of the Philippines applies only to money claims specifically recoverableunder said Code, does not find support in the plain language of the provision. Neither is thecontention of the claimants in G.R. Nos. 104911-14 that said Article refers only to claims"arising from the employer's violation of the employee's right," as provided by the Labor Codesupported by the facial reading of the provision.

VII

G.R. No. 104776

A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) thatwhile their complaints were filed on June 6, 1984 with POEA, the case was decided only onJanuary 30, 1989, a clear denial of their right to a speedy disposition of the case; and (2) thatNLRC and the POEA Administrator should have declared AIBC and BRII in default (Rollo, pp.

31-35).

Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:

Sec. 16. All persons shall have the right to a speedy disposition of their cases before alljudicial, quasi-judicial, or administrative bodies.

It is true that the constitutional right to "a speedy disposition of cases" is not limited to theaccused in criminal proceedings but extends to all parties in all cases, including civil andadministrative cases, and in all proceedings, including judicial and quasi-judicial hearings.Hence, under the Constitution, any party to a case may demand expeditious action on allofficials who are tasked with the administration of justice.

However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition ofcases" is a relative term. Just like the constitutional guarantee of "speedy trial" accorded to theaccused in all criminal proceedings, "speedy disposition of cases" is a flexible concept. It isconsistent with delays and depends upon the circumstances of each case. What theConstitution prohibits are unreasonable, arbitrary and oppressive delays which render rightsnugatory.

Caballero laid down the factors that may be taken into consideration in determining whether ornot the right to a "speedy disposition of cases" has been violated, thus:

In the determination of whether or not the right to a "speedy trial" has been violated, certainfactors may be considered and balanced against each other. These are length of delay, reasonfor the delay, assertion of the right or failure to assert it, and prejudice caused by the delay.The same factors may also be considered in answering judicial inquiry whether or not aperson officially charged with the administration of justice has violated the speedy dispositionof cases.

Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:

It must be here emphasized that the right to a speedy disposition of a case, like the right tospeedy trial, is deemed violated only when the proceeding is attended by vexatious, capricious,

and oppressive delays; or when unjustified postponements of the trial are asked for andsecured, or when without cause or justified motive a long period of time is allowed to elapsewithout the party having his case tried.

Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amendedcomplaint, claimants had been asking that AIBC and BRII be declared in default for failure tofile their answers within the ten-day period provided in Section 1, Rule III of Book VI of theRules and Regulations of the POEA. At that time, there was a pending motion of AIBC and BRIIto strike out of the records the amended complaint and the "Compliance" of claimants to theorder of the POEA, requiring them to submit a bill of particulars.

The cases at bench are not of the run-of-the-mill variety, such that their final disposition in theadministrative level after seven years from their inception, cannot be said to be attended byunreasonable, arbitrary and oppressive delays as to violate the constitutional rights to aspeedy disposition of the cases of complainants.

The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Saidcomplaint had undergone several amendments, the first being on April 3, 1985.

The claimants were hired on various dates from 1975 to 1983. They were deployed in differentareas, one group in and the other groups outside of, Bahrain. The monetary claims totallingmore than US$65 million according to Atty. Del Mundo, included:

1. Unexpired portion of contract;

2. Interest earnings of Travel and Fund;

3. Retirement and Savings Plan benefit;

4. War Zone bonus or premium pay of at least 100% of basic pay;

5. Area Differential pay;

6. Accrued Interest of all the unpaid benefits;

7. Salary differential pay;

8. Wage Differential pay;

9. Refund of SSS premiums not remitted to Social Security System;

10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.);

11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits consisting of43 pages (Annex "Q" of Amended Complaint);

12. Moral and Exemplary Damages;

13. Attorney's fees of at least ten percent of amounts;

14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC andissued by the POEA; and

15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorialrequirements thereof (NLRC Resolution, September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo,pp. 73-74).

Inasmuch as the complaint did not allege with sufficient definiteness and clarity of somefacts, the claimants were ordered to comply with the motion of AIBC for a bill of particulars.

When claimants filed their "Compliance and Manifestation," AIBC moved to strike out thecomplaint from the records for failure of claimants to submit a proper bill of particulars. Whilethe POEA Administrator denied the motion to strike out the complaint, he ordered theclaimants "to correct the deficiencies" pointed out by AIBC.

Before an intelligent answer could be filed in response to the complaint, the records ofemployment of the more than 1,700 claimants had to be retrieved from various countries in theMiddle East. Some of the records dated as far back as 1975.

The hearings on the merits of the claims before the POEA Administrator were interruptedseveral times by the various appeals, first to NLRC and then to the Supreme Court.

Aside from the inclusion of additional claimants, two new cases were filed against AIBC andBRII on October 10, 1985 (POEA Cases Nos.

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 claimants had never beencompletely established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p. 57). All the threenew cases were consolidated with POEA Case No. L-84-06-555.

NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus:

These cases could have been spared the long and arduous route towards resolution had theparties and their counsel been more interested in pursuing the truth and the merits of theclaims rather than exhibiting a fanatical reliance on technicalities. Parties and counsel havemade these cases a litigation of emotion. The intransigence of parties and counsel isremarkable. As late as last month, this Commission made a last and final attempt to bring thecounsel of all the parties (this Commission issued a special order directing respondent Brown& Root's resident agent/s to appear) to come to a more conciliatory stance. Even this failed(Rollo,

p. 58).

The squabble between the lawyers of claimants added to the delay in the disposition of thecases, to the lament of NLRC, which complained:

It is very evident from the records that the protagonists in these consolidated cases appear tobe not only the individual complainants, on the one hand, and AIBC and Brown & Root, on theother hand. The two lawyers for the complainants, Atty. Gerardo Del Mundo and Atty. FloranteDe Castro, have yet to settle the right of representation, each one persistently claiming toappear in behalf of most of the complainants. As a result, there are two appeals by thecomplainants. Attempts by this Commission to resolve counsels' conflicting claims of theirrespective authority to represent the complainants prove futile. The bickerings by these twocounsels are reflected in their pleadings. In the charges and countercharges of falsification ofdocuments and signatures, and in the disbarment proceedings by one against the other. Allthese have, to a large extent, abetted in confounding the issues raised in these cases, jumblethe presentation of evidence, and even derailed the prospects of an amicable settlement. Itwould not be far-fetched to imagine that both counsel, unwittingly, perhaps, painted a rainbowfor the complainants, with the proverbial pot of gold at its end containing more than US$100million, the aggregate of the claims in these cases. It is, likewise, not improbable that theirmisplaced zeal and exuberance caused them to throw all caution to the wind in the matter ofelementary rules of procedure and evidence (Rollo, pp. 58-59).

Adding to the confusion in the proceedings before NLRC, is the listing of some of thecomplainants in both petitions filed by the two lawyers. As noted by NLRC, "the problemcreated by this situation is that if one of the two petitions is dismissed, then the parties and thepublic respondents would not know which claim of which petitioner was dismissed and whichwas not."

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 soughtirrespective of whether they worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya orin any part of the Middle East" (Rollo, pp. 35-38).

A class suit is proper where the subject matter of the controversy is one of common or generalinterest to many and the parties are so numerous that it is impracticable to bring them allbefore the court (Revised Rules of Court, Rule 3, Sec. 12).

While all the claims are for benefits granted under the Bahrain Law, many of the claimantsworked outside Bahrain. Some of the claimants were deployed in Indonesia and Malaysiaunder different terms and conditions of employment.

NLRC and the POEA Administrator are correct in their stance that inasmuch as the firstrequirement of a class suit is not present (common or general interest based on the AmiriDecree of the State of Bahrain), it is only logical that only those who worked in Bahrain shall beentitled to file their claims in a class suit.

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 some claims arebased on the Amiri Law of Bahrain, many of the claimants never worked in that country, butwere deployed elsewhere. Thus, each claimant is interested only in his own demand and not inthe claims of the other employees of defendants. The named claimants have a special orparticular interest in specific benefits completely different from the benefits in which the othernamed claimants 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 collectinghis own claims. A claimants has no concern in protecting the interests of the other claimantsas shown by the fact, that hundreds of them have abandoned their co-claimants and haveentered into separate compromise settlements of their respective claims. A principle basic tothe concept of "class suit" is that plaintiffs brought on the record must fairly represent andprotect the interests of the others (Dimayuga v. Court of Industrial Relations, 101 Phil. 590[1957]). For this matter, the claimants who worked in Bahrain can not be allowed to sue in aclass suit in a judicial proceeding. The most that can be accorded to them under the Rules ofCourt is to be allowed to join as plaintiffs in one complaint (Revised Rules of Court, Rule 3,Sec. 6).

The Court is extra-cautious in allowing class suits because they are the exceptions to thecondition sine qua non, requiring the joinder of all indispensable parties.

In an improperly instituted class suit, there would be no problem if the decision secured isfavorable to the plaintiffs. The problem arises when the decision is adverse to them, in whichcase the others who were impleaded by their self-appointed representatives, would surelyclaim denial of due process.

C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRCshould have declared Atty. Florante De Castro guilty of "forum shopping, ambulance chasingactivities, falsification, duplicity and other unprofessional activities" and his appearances ascounsel for some of the claimants as illegal (Rollo, pp. 38-40).

The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop 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 the Court of Appeals. It isentitled "Additional Requirements For Petitions Filed with the Supreme Court and the Court ofAppeals To Prevent Forum Shopping or Multiple Filing of Petitioners and Complainants." Thefirst sentence of the circular expressly states that said circular applies to an governs the filingof petitions in the Supreme Court and the Court of Appeals.

While Administrative Circular No. 04-94 extended the application of the anti-forum shoppingrule to the lower courts and administrative agencies, said circular took effect only on April 1,1994.

POEA and NLRC could not have entertained the complaint for unethical conduct against Atty.De Castro because NLRC and POEA have no jurisdiction to investigate charges of unethicalconduct of lawyers.

Attorney's Lien

The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty.Gerardo A. Del Mundo to protect his claim for attorney's fees for legal services rendered infavor of the claimants (G.R. No. 104776, Rollo, pp. 841-844).

A statement of a claim for a charging lien shall be filed with the court or administrative agencywhich renders and executes the money judgment secured by the lawyer for his clients. Thelawyer shall cause written notice thereof to be delivered to his clients and to the adverse party(Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim for the charging lien ofAtty. Del Mundo should have been filed with the administrative agency that rendered andexecuted the judgment.

Contempt of Court

The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. KatzTierra for violation of the Code of Professional Responsibility should be filed in a separate andappropriate proceeding.

G.R. No. 104911-14

Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "ThreeHours Average Daily Overtime" in computing the overtime payments. They claim that it wasBRII itself which proposed the formula during the negotiations for the settlement of theirclaims in Bahrain and therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-22).

Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983,which in pertinent part states:

After the perusal of the memorandum of the Vice President and the Area Manager, MiddleEast, of Brown & Root Co. and the Summary of the compensation offered by the Company tothe employees in respect of the difference of pay of the wages of the overtime and thedifference of vacation leave and the perusal of the documents attached thereto i.e., minutes ofthe meetings between the Representative of the employees and the management of theCompany, the complaint filed by the employees on 14/2/83 where they have claimed ashereinabove stated, sample of the Service Contract executed between one of the employeesand the company through its agent in (sic) Philippines, Asia International Builders Corporationwhere it has been provided for 48 hours of work per week and an annual leave of 12 days andan overtime wage of 1 & 1/4 of the normal hourly wage.

xxx xxx xxx

The Company in its computation reached the following averages:

A. 1. The average duration of the actual service of the employee is 35 months for thePhilippino (sic) employees . . . .

2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . .

3. The average hours for the overtime is 3 hours plus in all public holidays and weekends.

4. Payment of US$8.72 per months (sic) of service as compensation for the difference ofthe wages of the overtime done for each Philippino (sic) employee . . . (Rollo, p.22).

BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by asubordinate official in the Bahrain Department of Labor; (2) that there was no showing that theBahrain Minister of Labor had approved said memorandum; and (3) that the offer was made inthe course of the negotiation for an amicable settlement of the claims and therefore it was notadmissible in evidence to prove that anything is due to the claimants.

While said document was presented to the POEA without observing the rule on presentingofficial documents of a foreign government as provided in Section 24, Rule 132 of the 1989Revised Rules on Evidence, it can be admitted in evidence in proceedings before anadministrative body. The opposing parties have a copy of the said memorandum, and theycould easily verify its authenticity and accuracy.

The admissibility of the offer of compromise made by BRII as contained in the memorandumis another matter. Under Section 27, Rule 130 of the 1989 Revised Rules on Evidence, an offerto settle a claim is not an admission that anything is due.

Said Rule provides:

Offer of compromise not admissible. — In civil cases, an offer of compromise is not anadmission of any liability, and is not admissible in evidence against the offeror.

This Rule is not only a rule of procedure to avoid the cluttering of the record with unwantedevidence but a statement of public policy. There is great public interest in having theprotagonists settle their differences amicable before these ripen into litigation. Every effortmust be taken to encourage them to arrive at a settlement. The submission of offers andcounter-offers in the negotiation table is a step in the right direction. But to bind a party to hisoffers, as what claimants would make this Court do, would defeat the salutary purpose of theRule.

G.R. Nos. 105029-32

A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits thanthose stipulated in the overseas-employment contracts of the claimants. It was of the beliefthat "where the laws of the host country are more favorable and beneficial to the workers, thenthe laws of the host country shall form part of the overseas employment contract." It quotedwith approval the observation of the POEA Administrator that ". . . in labor proceedings, alldoubts in the implementation of the provisions of the Labor Code and its implementingregulations shall be resolved in favor of labor" (Rollo, pp. 90-94).

AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforcethe overseas-employment contracts, which became the law of the parties. They contend thatthe principle that a law is deemed to be a part of a contract applies only to provisions ofPhilippine law in relation to contracts executed in the Philippines.

The overseas-employment contracts, which were prepared by AIBC and BRII themselves,provided that the laws of the host country became applicable to said contracts if they offerterms and conditions more favorable that those stipulated therein. It was stipulated in saidcontracts that:

The Employee agrees that while in the employ of the Employer, he will not engage in any otherbusiness or occupation, nor seek employment with anyone other than the Employer; that heshall devote his entire time and attention and his best energies, and abilities to theperformance of such duties as may be assigned to him by the Employer; that he shall at alltimes be subject to the direction and control of the Employer; and that the benefits provided toEmployee hereunder are substituted for and in lieu of all other benefits provided by anyapplicable law, provided of course, that total remuneration and benefits do not fall below thatof the host country regulation or custom, it being understood that should applicable lawsestablish that fringe benefits, or other such benefits additional to the compensation hereinagreed cannot be waived, Employee agrees that such compensation will be adjusteddownward so that the total compensation hereunder, plus the non-waivable benefits shall beequivalent to the compensation herein agreed (Rollo, pp. 352-353).

The overseas-employment contracts could have been drafted more felicitously. While a partthereof provides that the compensation to the employee may be "adjusted downward so thatthe total computation (thereunder) plus the non-waivable benefits shall be equivalent to thecompensation" therein agreed, another part of the same provision categorically states "that

total remuneration and benefits do not fall below that of the host country regulation andcustom."

Any ambiguity in the overseas-employment contracts should be interpreted against AIBC andBRII, the parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93SCRA 257 [1979]).

Article 1377 of the Civil Code of the Philippines provides:

The interpretation of obscure words or stipulations in a contract shall not favor the party whocaused the obscurity.

Said rule of interpretation is applicable to contracts of adhesion where there is already aprepared form containing the stipulations of the employment contract and the employeesmerely "take it or leave it." The presumption is that there was an imposition by one partyagainst the other and that the employees signed the contracts out of necessity that reducedtheir bargaining power (Fieldmen's Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]).

Applying the said legal precepts, we read the overseas-employment contracts in question asadopting the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof.

The parties to a contract may select the law by which it is to be governed (Cheshire, PrivateInternational Law, 187 [7th ed.]). In such a case, the foreign law is adopted as a "system" toregulate the relations of the parties, including questions of their capacity to enter into thecontract, the formalities to be observed by them, matters of performance, and so forth (16 AmJur 2d,

150-161).

Instead of adopting the entire mass of the foreign law, the parties may just agree that specificprovisions of a foreign statute shall be deemed incorporated into their contract "as a set ofterms." By such reference to the provisions of the foreign law, the contract does not become aforeign contract to be governed by the foreign law. The said law does not operate as a statutebut as a set of contractual terms deemed written in the contract (Anton, Private International

Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]).

A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law inTorts and Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]). Such partyexpectation is protected by giving effect to the parties' own choice of the applicable law(Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must,however, bear some relationship to the parties or their transaction (Scoles and Hayes, Conflictof Law 644-647 [1982]). There is no question that the contracts sought to be enforced byclaimants have a direct connection with the Bahrain law because the services were rendered inthat country.

In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the"Employment Agreement," between Norse Management Co. and the late husband of the privaterespondent, expressly provided that in the event of illness or injury to the employee arising outof and in the course of his employment and not due to his own misconduct, "compensationshall be paid to employee in accordance with and subject to the limitation of the Workmen'sCompensation Act of the Republic of the Philippines or the Worker's Insurance Act of registryof the vessel, whichever is greater." Since the laws of Singapore, the place of registry of thevessel in which the late husband of private respondent served at the time of his death, granteda better compensation package, we applied said foreign law in preference to the terms of thecontract.

The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission,135 SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to the facts of the cases atbench. The issue in that case was whether the amount of the death compensation of a Filipinoseaman should be determined under the shipboard employment contract executed in thePhilippines or the Hongkong law. Holding that the shipboard employment contract wascontrolling, the court differentiated said case from Norse Management Co. in that in the lattercase there was an express stipulation in the employment contract that the foreign law wouldbe applicable if it afforded greater compensation.

B. AIBC and BRII claim that they were denied by NLRC of their right to due process whensaid administrative agency granted Friday-pay differential, holiday-pay differential,annual-leave differential and leave indemnity pay to the claimants listed in Annex B of theResolution. At first, NLRC reversed the resolution of the POEA Administrator granting thesebenefits on a finding that the POEA Administrator failed to consider the evidence presented byAIBC and BRII, that some findings of fact of the POEA Administrator were not supported by theevidence, and that some of the evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36;

106-107). But 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 thevalidity of the claims itself. It is this procedure that AIBC and BRII complain of as beingirregular and a "reversible error."

They pointed out that NLRC took into consideration evidence submitted on appeal, the sameevidence which NLRC found to have been "unilaterally submitted by the claimants and notdisclosed to the adverse parties" (Rollo, pp. 37-39).

NLRC noted that so many pieces of evidentiary matters were submitted to the POEAadministrator by the claimants after the cases were deemed submitted for resolution andwhich were taken cognizance of by the POEA Administrator in resolving the cases. While AIBCand BRII had no opportunity to refute said evidence of the claimants before the POEAAdministrator, 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 able topresent before NLRC additional evidence which they failed to present before the POEAAdministrator.

Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and allreasonable means to ascertain the facts in each case speedily and objectively and withoutregard to technicalities of law or procedure, all in the interest of due process."

In deciding to resolve the validity of certain claims on the basis of the evidence of both partiessubmitted before the POEA Administrator and NLRC, the latter considered that it was notexpedient to remand the cases to the POEA Administrator for that would only prolong thealready protracted legal controversies.

Even the Supreme Court has decided appealed cases on the merits instead of remanding themto the trial court for the reception of evidence, where the same can be readily determined fromthe uncontroverted facts on record (Development Bank of the Philippines v. IntermediateAppellate 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 POEAAdministrator 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 ofproof" and for 69 claimants listed in Annex E of the same Resolution, whose claims had beenfound by NLRC itself as not "supported by evidence" (Rollo, pp. 41-45).

NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which empowersit "[to] conduct investigation for the determination of a question, matter or controversy, withinits jurisdiction, . . . ."

It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand acase involving claims which had already been dismissed because such provisioncontemplates only situations where there is still a question or controversy to be resolved(Rollo, pp. 41-42).

A principle well embedded in Administrative Law is that the technical rules of procedure andevidence do not apply to the proceedings conducted by administrative agencies (First AsianTransport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing House,Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in Article 221 of the Labor Codeof the Philippines and is now the bedrock of proceedings before NLRC.

Notwithstanding the non-applicability of technical rules of procedure and evidence inadministrative proceedings, there are cardinal rules which must be observed by the hearingofficers in order to comply with the due process requirements of the Constitution. Thesecardinal rules are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).

VIII

The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds thatNLRC had committed grave abuse of discretion amounting to lack of jurisdiction in issuing thequestioned orders. We find no such abuse of discretion.

WHEREFORE, all the three petitions are DISMISSED.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

ANNEX A

LIST OF CLAIMANTS WHO SIGNED QUITCLAIMS

Bienvenido Cadalin Ardon Ello

Antonio Acupan Josefino R. Enano

Benjamin Alejandre Rolando E. Espiritu

Wilfredo Aligada Patricio L. Garcia Jr.

Robert Batica Felino M. Jocson

Enrico Belen Eduardo S. Kolimlim

Guillermo Cabeza Emmanuel C. Labella

Rodolfo Cagatan Ernesto S. Lising

Francisco De Guzman Edilberto G. Magat

Ignacio De Vera Victoriano L. Matilla

Ernesto De la Cruz Renato V. Morada

Reynaldo Dizon Ildefonso C. Muñoz

Ricardo Ebrada Herbert G. Ng

Antonio Ejercito Reynado Oczon

Eduardo Espiritu Romeo Orial

Ernesto Espiritu Ricardo Paguio

Rodolfo Espiritu Emilio Pakingan

Oligario Francisco Ernesto S. Pangan

Antonio Jocson Albert L. Quinto

Alejandro Olorino Romulo M. Reyes

Efren Lirio Leonilo Tiposo

Noel Martinez Manual P. Villanueva

Francis Mediodia Arnaldo J. Alonzo

Luciano Melendez Pastor M. Aquino

Reymundo Milay Ramon Castro

Jose Pancho Graciano Isla

Modesto Pin Pin Renato Matilla

Gaudencio Retana Ricardo B. Morada

Rodelio Rieta, Jr. Pacifico D. Navarro

Jose Robleza Eugenio A. Remonquillo

Nemeriano San Mateo Felix Barcena

Juanito Santos Eliseo Fajardo

Paquito Solanto Sergio S. Santiago

Conrado Solis, Jr. Antonio R. Rodriquez

Menandro Temprosa Luis Val B. Ronquillo

Maximiano Torres Teodorico C. Del Rosario

Francisco Trias Joselito C. Solante

Delfin Victoria Ricardo C. Dayrit

Gilbert Victoria Antonio P. Hilario

Domingo Villahermosa Edgardo O. Salonga

Rogelio Villanueva Dante C. Aceres

Jose M. Aban Reynaldo S. Acojido

Amorsolo S. Anading Esidro M. Aquino

Alfredo S. Balogo Rosendo M. Aquino

Ramon T. Barboza Rodolfo D. Arevalo

Felix M. Bobier Rexy De Leon Ascuncion

Jose H. Castillo Basilio Buenaventura

Emmanuel H. CastilloAlexander Bustamante

Remar R. Castrojerez Virgilio V. Butiong, Jr.

Romeo O. Cecilio Delfin Caballero

Bayani M. Dayrit Danilo M. Castro

Felizardo S. Delos Santos Franscisco O. Corvera

Nestor N. Estava Edgardo N. Dayacap

Rolando M. Garcia Napoleon S. De Luna

Angel D. GudaBenjamin E. Doza

Henry L. Jacob Renato A. Eduarte

Dante A. Matreo Clyde C. Estuye

Renato S. Melo Buenaventura M. Francisco

Resurrecion D. Nazareno Rogelio D. Guanio

Jaime C. Pollos Arnel L. Jacob

Domingo Pondales Renato S. Lising

Eugenio Ramirez Wilfredo S. Lising

Lucien M. Respall Rogelio S. Lopena

Alvin C. ReyesBernardito G. Loreja

Rizalina R. Reyes Ignacio E. Muñoz

Quirino Ronquillo Romeo C. Quintos

Avelino M. Roque Willafredo Dayrit Raymundo

Pedro L. Salgatar Virgilio L. Rosario

Rodolfo T. Sultan Joselito Santiago

Benedicto E. Torres Ernesto G. Sta. Maria

Sergio A. Ursolino Gavino U. Tuazon

Rogelio R. Valdez Elito S. Villanueva

Dionisio Bobongo Lamberto Q. Alcantara

Crisenciano Miranda Arturo P. Apilado

Ildefonso C. Molina Turiano V. Concepcion

Gorgonio C. Parala Domingo V. Dela Cruz

Virgilio RicazaEduardo R. Enguancho

Palconeri D. Banaag Melanio R. Esteron

Bayani S. Bracamante Santiago N. Galoso

Onofre De Rama Joveniano Hilado

Jose C. Melanes Eduardo Hipolito

Romeo I. Patag Romero M. Javier

Valerio A. EvangelistaValentino S. Jocson

Gilbert E. Ebrada Jose B. Lacson

Juanito P. Villarino Armando M. Magsino

Aristeo M. Bicol Avelino O. Nuqui

Quiterio R. Agudo Delmar F. Pineda

Marianito J. Alcantara Federico T. Quiman

Jose Arevalo Alberto M. Redaza

Ramon A. Arevalo Renosa Ronquillo

Jesus Baya Rodolfo Ronquillo

Guillermo Buenconsejo Antonio T. Valderama

Teresito A. Constantino Ramon Valderama

Eduardo A. Diaz Benigno N. Melendez

Emigdio Abarquez Claudio A. Modesto

Herbert Ayo Solomon Reyes

Mario Bataclan Isaias Talactac

Ricardo Ordonez William G. Taruc

Bernardino Robillos Oscar C. Calderon

Francisco Villaflores Pacifico P. Campano

Angel Villarba Eulalio G. Arguelles

Honesto Jardiniano Ben G. Belir

Juan Y. Olindo Cornelio L. Castillo

Hernani T. Victoriano Valeriano B. Francisco

Ubed B. Ello, Sr. Jaime L. Relosa

Ernesto V. Macaraig Alex Q. Villahermosa

Espiritu A. Munoz, Sr. Vivencio V. Abello, Jr.

Rodrigo E. Ocampo Renato C. Corcuera

Rodolfo V. Ramirez Emiliano B. Dela Cruz, Jr.

Ceferino Batitis Esteban B. Jose, Jr.

Augusto R. Bondoc Ricardo B. Martinez

Jaime C. Catli Bienvenido Vergara

Gerardo B. Limuaco, Jr. Pedro G. Cagatan

Macario S. Magsino Francisco Apolinario

Domingo B. Solano Miguel Abestano

Ricardo De Rama Prudencio Araullo

Arturo V. Araullo

The Lawphil Project - Arellano Law Foundation

Home Insurance Co. v. Dick, 281 U.S. 397 (1930)

Home Insurance Co. v. Dick

No. 232

Argued February 27, 1930

Decided May 5, 1930

281 U.S. 397

APPEAL FROM THE SUPREME COURT OF TEXAS

Syllabus

A contract of fire insurance issued by a Mexican company, made and to be performed inMexico, and covered in part by reinsurance effected there or in New York with New Yorkcompanies licensed to do business in Texas, was assigned by the insured to a citizen of Texaswho was present in Mexico when the policy issued and continued to reside there until after aloss had occurred. He then returned to Texas and sued on the policy in a Texas Court namingthe Mexican company, which was never present in Texas and did not appear, as principaldefendant, and the two New York companies, because of their reinsurance liability, asgarnishees. The policy stipulated that no suit should be brought under it unless within oneyear of the loss, but a defense based on this was overruled by the Texas Supreme Court, andrecovery against the garnishees affirmed, by applying a Texas statute which forbade anyagreement limiting the time for suit to a shorter period than two years

Page 281 U. S. 398

and declared that no agreement for such shorter limitation should ever be valid in that state.

Held:

1. The objection that, as applied to contracts made and to be performed outside of Texas, thestatute violates the federal Constitution, raises federal questions of substance, and theexistence of the federal claim is not disproved by saying that the statute, or the one-yearprovision in the policy, relates to the remedy, and not to the substance. P. 281 U. S. 405.

2. That the federal questions were not raised in the trial court is immaterial, since the Court ofCivil Appeals and the supreme court of the state considered them as properly raised in theappellate proceedings and passed on them adversely to the federal claim. P. 281 U. S. 407.

3. The case is properly here on appeal, and petition for certiorari is therefore denied. Id.

4. The statute as construed and applied deprives the garnishees of property without dueprocess of law, since the state was without power, under the circumstances, to affect theterms of the insurance contract by imposing a greater obligation than that agreed upon and toseize property in payment of the imposed obligation. Id.

5. When the parties to a contract have expressly agreed upon a time limit on their obligation, astatute which invalidates the agreement and directs enforcement of the contract after thattime has expired increases their obligation and imposes a burden not contracted for. P. 281 U.S. 408.

6. The statute, as here involved, is not one dealing with remedies and procedure merely; itpurports to create rights and obligations. P. 281 U. S. 409.

7. Assuming that a state may properly refuse to recognize foreign rights that violate itsdeclared policy, or restrict the conduct of persons within its limits, this does not mean that itmay abrogate the rights of parties beyond its borders having no relation to anything done or to

be done within them. P. 281 U. S. 410.

15 S.W.2d 1028 reversed.

Appeal from a judgment of the Supreme Court of Texas affirming a judgment of the Court ofCivil Appeals, 8 S.W. 2d 354, which affirmed recoveries against the appellants in garnishmentproceedings ancillary to an action on a fire insurance policy.

Page 281 U. S. 402

MR. JUSTICE BRANDEIS delivered the opinion of the Court.

Dick, a citizen of Texas, brought this action in a court of that state against Compania GeneralAnglo-Mexicana de Seguros S.A. a Mexican corporation, to recover on a policy of fireinsurance for the total loss of a tug. Jurisdiction was asserted in rem through garnishment, byancillary writs issued against the Home Insurance Company and Franklin Fire InsuranceCompany, which reinsured, by contracts with the Mexican corporation, parts of the risk whichit had assumed. The garnishees are New York corporations. Upon them, service was effectedby serving their local agents in Texas appointed pursuant to Texas statutes, which require theappointment of local agents by foreign corporations seeking permits to do business within thestate.

The controversy here is wholly between Dick and the garnishees. The defendant has neverbeen admitted to do business in Texas, has not done any business there, and has notauthorized anyone to receive service of process or enter an appearance for it in this cause. Itwas cited by publication, in accordance with a Texas statute, attorneys were appointed for it bythe trial court, and they filed on its behalf an answer which denied liability. But there is nocontention that thereby jurisdiction in personam over it was acquired. Dick's claim is that,since the obligation of a reinsurer to pay the original insurer arises upon the happening of theloss, and is not conditional upon prior payment of the loss by the insurer, Allemannia FireInsurance Co. v. Firemen's Insurance Co., 209 U. S. 326; Hicks v. Poe, 269 U. S. 118, the NewYork companies are indebted to the Mexican company, and these debts are subject togarnishment in a proceeding against the latter quasi in rem, even though it is not suable inpersonam. The garnishees concede that inability to sue the

Page 281 U. S. 403

Mexican corporation in Texas in personam is not material if a cause of action against itexisted at the time of garnishment and there was within the state a res belonging to it. But theydeny the existence of the cause of action or of the res.

Their defense rests upon the following facts: this suit was not commenced till more than oneyear after the date of the loss. The policy provided:

"It is understood and agreed that no judicial suit or demand shall be entered before anytribunal for the collection of any claim under this policy unless such suits or demands are filedwithin one year counted as from the date on which such damage occurs."

This provision was in accord with the Mexican law to which the policy was expressly madesubject. [Footnote 1] It was issued by the Mexican company in Mexico to one Bonner, ofTampico, Mexico, and was there duly assigned to Dick prior to the loss. It covered the vesselonly in certain Mexican waters. The premium was paid in Mexico, and the loss was "payable inthe City of Mexico in current funds of the United States of Mexico, or their equivalentelsewhere." [Footnote 2] At the time the policy was issued,

Page 281 U. S. 404

when it was assigned to him, and, until after the loss, Dick actually resided in Mexico, althoughhis permanent residence was in Texas. The contracts of reinsurance were effected bycorrespondence between the Mexican company in Mexico and the New York companies inNew York. Nothing thereunder was to be done, or was in fact done, in Texas.

In the trial court, the garnishees contended that, since the insurance contract was made andwas to be performed in Mexico, and the one-year provision was valid by its laws, Dick's failureto sue within one year after accrual of the alleged cause of action was a complete defense tothe suit on the policy; that this failure also relieved the garnishees of any obligation asreinsurers, the same defense being open to them, New York state Marine Ins. Co. v. ProtectionIns. Co., 1 Story, 458, 460, and that they consequently owed no debt to the Mexican companysubject to garnishment. [Footnote 3] To this defense, Dick demurred on the ground that Article

5545 of the Texas Revised Civil Statutes (1925) provides:

"No person, firm, corporation, association or combination of whatsoever kind shall enter intoany stipulation, contract, or agreement,

Page 281 U. S. 405

by reason whereof the time in which to sue thereon is limited to a shorter period than twoyears. And no stipulation, contract, or agreement for any such shorter limitation in which tosue shall ever be valid in this state."

The trial court sustained Dick's contention and entered judgment against the garnishees. Onappeal, both in the Court of Civil Appeals (8 S.W.2d 354) and in the supreme court of the state(15 S.W.2d 1028), the garnishees asserted that, as construed and applied, the Texas statuteviolated the due process clause of the Fourteenth Amendment and the contract clause. Bothcourts treated the policy provision as equivalent to a foreign statute of limitation; held thatArticle 5545 related to the remedy available in Texas courts; concluded that it was validlyapplicable to the case at bar, and affirmed the judgment of the trial court. The garnisheesappealed to this Court on the ground that the statute, as construed and applied, violated theirrights under the federal Constitution. Dick moved to dismiss the appeal for want ofjurisdiction. Then the garnishees filed also a petition for a writ of certiorari. Consideration ofthe jurisdiction of this Court on the appeal and of the petition for certiorari was postponed tothe hearing of the case on the merits.

First. Dick contends that this Court lacks jurisdiction of the action, because the errorsassigned involve only questions of local law and of conflict of laws. The argument is that,while a provision requiring notice of loss within a fixed period is substantive because it is acondition precedent to the existence of the cause of action, the provision for liability only incase suit is brought within the year is not substantive, because it relates only to the remedyafter accrual of the cause of action; that, while the validity, interpretation, and performance ofthe substantive provisions of a contract are determined by

Page 281 U. S. 406

the law of the place where it is made and is to be performed, matters which relate only to theremedy are unquestionably governed by the lex fori, and that, even if the Texas court erred inholding the statute applicable to this contract, the error is one of state law or of theinterpretation of the contract, and is not reviewable here.

The contention is unsound. There is no dispute as to the meaning of the provision in thepolicy. It is that the insurer shall not be liable unless suit is brought within one year of the loss.Whether the provision be interpreted as making the commencement of a suit within the year acondition precedent to the existence of a cause of action, or as making failure to sue within theyear a breach of a condition subsequent which extinguishes the cause of action, is not of legalsignificance here. [Footnote 4] Nor are we concerned with the question whether the provisionis properly described as relating to remedy or to substance. However characterized, it is anexpress term in the contract of the parties by which the right of the insurer and the correlativeobligation of the insurer are defined. If effect is given to the clause, Dick cannot recover fromthe Mexican corporation, and the garnishees cannot be compelled to pay. If, on the other hand,the statute is applied to the contract, it admittedly abrogates a contractual right

Page 281 U. S. 407

and imposes liability, although the parties have agreed that there should be none.

The statute is not simply one of limitation. It does not merely fix the time in which the aid ofthe Texas courts may be invoked. Nor does it govern only the remedies available in the Texascourts. It deals with the powers and capacities of persons and corporations. It expresslyprohibits the making of certain contracts. As construed, it also directs the disregard in Texasof contractual rights and obligations wherever created and assumed, and it commands theenforcement of obligations in excess of those contracted for. Therefore, the objection that, asapplied to contracts made and to be performed outside of Texas, the statute violates thefederal Constitution raises federal questions of substance, and the existence of the federalclaim is not disproved by saying that the statute, or the one-year provision in the policy, relatesto the remedy and not to the substance.

That the federal questions were not raised in the trial court is immaterial. For the Court of CivilAppeals and the supreme court of the state considered the questions as properly raised in theappellate proceedings, and passed on them adversely to the federal claim. Chicago, RockIsland & Pacific Ry. Co. v. Perry, 259 U. S. 548, 259 U. S. 551; Sully v. American National Bank,178 U. S. 289, 178 U. S. 298. The case is properly here on appeal. The motion to dismiss the

appeal is overruled, and the petition for certiorari is therefore denied.

Second. The Texas statute as here construed and applied deprives the garnishees of propertywithout due process of law. A state may, of course, prohibit and declare invalid the making ofcertain contracts within its borders. Ordinarily, it may prohibit performance within its borders.even of contracts validly made elsewhere, if they are required to be performed within the stateand their performance would violate its laws. But, in the

Page 281 U. S. 408

case at bar, nothing in any way relating to the policy sued on, or to the contracts ofreinsurance, was ever done or required to be done in Texas. All acts relating to the making ofthe policy were done in Mexico. All in relation to the making of the contracts of reinsurancewere done there or in New York. And likewise, all things in regard to performance were to bedone outside of Texas. Neither the Texas laws nor the Texas courts were invoked for anypurpose except by Dick in the bringing of this suit. The fact that Dick's permanent residencewas in Texas is without significance. At all times here material, he was physically present andacting in Mexico. Texas was therefore without power to affect the terms of contracts so made.Its attempt to impose a greater obligation than that agreed upon and to seize property inpayment of the imposed obligation violates the guaranty against deprivation of propertywithout due process of law. Compania General De Tabacos v. Collector of Internal Revenue,275 U. S. 87; Aetna Life Ins. Co. v. Dunken, 266 U. S. 389; New York Life Ins. Co. v. Dodge, 246U. S. 357. Compare Modern Woodmen of America v. Mixer, 267 U. S. 544, 267 U. S. 551.[Footnote 5]

The cases relied upon, in which it was held that a state may lengthen its statute of limitations,are not in point.

Page 281 U. S. 409

See Atchafalaya Land Co. v. Williams Cypress Co., 258 U. S. 190; National Surety Co. v.Architectural Decorating Co., 226 U. S. 276; Vance v. Vance, 108 U. S. 514. In those cases, theparties had not stipulated a time limit for the enforcement of their obligations. It is true that astate may extend the time within which suit may be brought in its own courts if, in doing so, itviolates no agreement of the parties. [Footnote 6] And, in the absence of a contractual

provision, the local statute of limitation may be applied to a right created in another jurisdictioneven where the remedy in the latter is barred. [Footnote 7] In such cases, the rights andobligations of the parties are not varied. When, however, the parties have expressly agreedupon a time limit on their obligation, a statute which invalidates the agreement and directsenforcement of the contract after the time has expired increases their obligation and imposesa burden not contracted for.

It is true also that a state is not bound to provide remedies and procedure to suit the wishes ofindividual litigants. It may prescribe the kind of remedies to be available in its courts anddictate the practice and procedure to be followed in pursuing those remedies. Contractual

Page 281 U. S. 410

provisions relating to these matters, even if valid where made, are often disregarded by thecourt of the forum, pursuant to statute or otherwise. But the Texas statute deals neither withthe kind of remedy available nor with the mode in which it is to be pursued. It purports tocreate rights and obligations. It may not validly affect contracts which are neither made norare to be performed in Texas.

Third. Dick urges that Article 5545 of the Texas law is a declaration of its public policy, andthat a state may properly refuse to recognize foreign rights which violate its declared policy.Doubtless a state may prohibit the enjoyment by persons within its borders of rights acquiredelsewhere which violate its laws or public policy, and, under some circumstances, it mayrefuse to aid in the enforcement of such rights. Bothwell v. Buckbee, Mears Co., 275 U. S. 274,275 U. S. 277-279; Union Trust Co. v. Grosman, 245 U. S. 412; compare Fauntleroy v. Lum, 210U. S. 230. But the Mexican corporation never was in Texas, and neither it nor the garnisheesinvoked the aid of the Texas courts or the Texas laws. The Mexican corporation was notbefore the court. The garnishees were brought in by compulsory process. Neither has askedfavors. They ask only to be let alone. We need not consider how far the state may go inimposing restrictions on the conduct of its own residents, and of foreign corporations whichhave received permission to do business within its borders, or how far it may go in refusing tolend the aid of its courts to the enforcement of rights acquired outside its borders. It may notabrogate the rights of parties beyond its borders having no relation to anything done or to bedone within them.

Fourth. Finally, it is urged that the federal Constitution does not require the states to recognizeand protect rights derived from the laws of foreign countries -- that as to them the full faith and

credit clause has no application.

Page 281 U. S. 411

See Aetna Life Ins. Co. v. Tremblay, 223 U. S. 185. The claims here asserted are not basedupon the full faith and credit clause. Compare Royal Arcanum v. Green, 237 U. S. 531. ModernWoodmen of America v. Mixer, 267 U. S. 544. They rest upon the Fourteenth Amendment. Itsprotection extends to aliens. Moreover, the parties in interest here are American companies.The defense asserted is based on the provision of the policy and on their contracts ofreinsurance. The courts of the state confused this defense with that based on the MexicanCode. They held that, even if the effect of the foreign statute was to extinguish the right, Dick'sremoval to Texas prior to the bar of the foreign statute removed the cause of action fromMexico, and subjected it to the Texas statute of limitation. And they applied the same rule tothe provision in the policy. Whether or not that is a sufficient answer to the defense based onthe foreign law we may not consider, for no issue under the full faith and credit clause wasraised. But, in Texas, as elsewhere, the contract was subject to its own limitations.

Fifth. The garnishees contend that the guaranty of the contract clause relates not to the dateof enactment of a statute, but to the date of its effect on contracts; that, when issued, thepolicy of the Mexican corporation was concededly not subject to Texas law; that, although thestatute relied upon by Dick was passed prior to the making of the contract, it did not operateupon the contract until this suit was brought in the Texas court, and that hence the statuteviolates the contract clause. Since we hold that the Texas statute, as construed and applied,violates the due process clause, we have no occasion to consider this contention. Nor have weconsidered their further contention, in reliance upon Morris & Co. v. Skandinavia Ins. Co., 279U. S. 405, that there was lack of jurisdiction over them for purposes of garnishment, becausethe authorization of service upon their local agents is limited

Page 281 U. S. 412

to suits brought against them as defendants. For this objection was not made or consideredbelow on constitutional grounds.

Reversed.

[Footnote 1]

The policy contained also the provision:

"The present policy is subjected to the disposition of the Commercial Code in that it does notalter or modify the stipulations which that same contains."

The dispositions of the Commercial Code thus incorporated are:

"Article 1038. The rights of action derived from commercial acts shall be subject toprescription in accordance with the provisions of this Code."

"Article 1039. The periods fixed for the enforcement of rights of action arising out ofcommercial acts shall be fatal except restitution against same is given."

"* * * *"

"Article 1043. One year shall prescribe actions derived from contracts of life insurance, seaand land."

[Footnote 2]

The loss was made payable to Dick and the Texas & Gulf Steamship Company as theirinterests might appear. The steamship company and Suderman & Young, Inc., assignee of partof the cause of action, intervened as plaintiffs, and are joined with Dick as appellees. As thereare no rights peculiar to them, they need not be further referred to. Dick contends that, sincethe policy was payable to the Texas & Gulf Steamship Company, the contract was performablein Texas. The contention is in conflict with the quoted language of the policy, and there is noprovision otherwise lending support to the argument. Texas is nowhere mentioned in thepolicy. Moreover, there is nothing in the record to show that the steamship company's soleplace of business was in Texas. The state courts made no findings on this claim.

[Footnote 3]

Besides the defense here discussed, the answers both of the Mexican corporation and of thegarnishees alleged: (2) that the suit was not brought within the period provided by theCommercial Code of Mexico, and that thereby the right of action was completely barred uponthe expiration of one year; (3) that the policy was void because of plaintiff'smisrepresentations as to the value of the vessel; (4) that the vessel was not a total loss, andwas abandoned in violation of the terms of the policy. None of these defense needs to beconsidered.

[Footnote 4]

That a provision requiring notice of loss within a fixed period and one requiring the bringing ofsuit stand upon the same footing was held in Riddlesbarger v. Hartford Insurance Co., 7 Wall.386, 74 U. S. 390. Compare 74 U. S. Hartford Insurance Co., 13 Wall. 158, 80 U. S. 161. Thevalidity and effectiveness of a clause limiting the time for suit, in the absence of a controllingstatute, was recognized also in Texas, Suggs v. Travelers' Insurance Co., 71 Tex. 579. In thatcase, decided before the enactment of article 5545, the Texas court upheld a similar provisionin an insurance policy against the claim of an infant without capacity to sue. The courtdescribed the nature of the provision thus (p. 581):

"It is said to differ from the statutory limitation in this: that it does not merely deny the remedy,but forfeits the liability, when the suit is not brought within the stipulated time."

[Footnote 5]

The division of this Court in the Tabacos and Dodge cases was not on the principle herestated, but on the question of fact whether there were in those cases things done within thestate of which the state could property lay hold as the basis of the regulations there imposed.Compare Bothwell v. Buckabee, Mears Co., 275 U. S. 274; Palmetto Fire Ins. Co. v. Conn, 272U. S. 295. In the absence of any such things, as in this case, the Court was agreed that a stateis without power to impose either public or private obligations on contracts made outside ofthe state and not to be performed there. Compare Mutual Life Insurance Co. v. Liebing, 259 U.S. 209; E. Merick Dodd, Jr., "The Power of the Supreme Court to Review state Decisions in the

Field of Conflict of Laws," 39 Harv.L.Rev. (1926) 533, 548.

[Footnote 6]

The state courts placed some reliance on Campbell v. Holt, 115 U. S. 620. Whether, as thereheld, a statute of limitations may also be lengthened so as to affect liabilities already barred isnot here pertinent. There is a clear difference between the revival of a liability which isunenforceable only because a statute has barred the remedy regardless of the will of theparties, and the extension of a liability beyond the limit expressly agreed upon by the parties.Compare National Surety Co. v. Architectural Decorating Co., 226 U. S. 276, 226 U. S. 282;William Danzer & Co. v. Gulf Island R. Co., 268 U. S. 633, 268 U. S. 636.

[Footnote 7]

Whether a distinction is to be drawn between statutes of limitation which extinguish or limitthe right and those which merely bar the remedy we need not now determine. Compare Davisv. Mills, 194 U. S. 451, and Texas Portland Cement Co. v. McCord, 233 U. S. 157, with CanadianP. Ry. Co. v. Johnston, 61 F. 738.

Allstate Ins. Co. v. Hague, 449 U.S. 302 (1980)

Allstate Ins. Co. v. Hague

No. 79938

Argued October 6, 1980

Decided January 13, 1981

449 U.S. 302

CERTIORARI TO THE SUPREME COURT OF MINNESOTA

Syllabus

Respondent's husband died of injuries suffered when a motorcycle on which he was apassenger was struck by an automobile. The accident occurred in Wisconsin near theMinnesota border. The operators of both vehicles were Wisconsin residents, as was thedecedent, who, however, had been employed in Minnesota and had commuted daily to workfrom Wisconsin. Neither vehicle operator carried valid insurance, but the decedent held apolicy issued by petitioner covering three automobiles owned by him and containing anuninsured motorist clause insuring him against loss incurred from accidents with uninsuredmotorists, but limiting such coverage to $15,000 for each automobile. After the accident,respondent moved to and became a resident of Minnesota, and was subsequently appointedin that State as personal representative of her husband's estate. She then brought an action ina Minnesota court seeking a declaration under Minnesota law that the $15,000 uninsuredmotorist coverage on each of her late husband's three automobiles could be "stacked" toprovide total coverage of $45,000. Petitioner defended on the ground that whether the threeuninsured motorist coverages could be stacked should be determined by Wisconsin law, sincethe insurance policy was delivered in Wisconsin, the accident occurred there, and all persons

involved were Wisconsin residents at the time of the accident. The trial court, interpretingWisconsin law to disallow stacking, concluded that Minnesota's choice of law rules requiredthe application of Minnesota law permitting stacking, and granted summary judgment forrespondent. The Minnesota Supreme Court affirmed.

Held: The judgment is affirmed. Pp. 449 U. S. 307-320; 449 U. S. 322-331.

289 N.W.2d 43, affirmed.

JUSTICE BRENNAN, joined by JUSTICE WHITE, JUSTICE MARSHALL, and JUSTICEBLACKMUN, concluded that Minnesota has a significant aggregation of contacts with theparties and the occurrence, creating state interests, such that application of its law is neitherarbitrary nor fundamentally unfair, and, accordingly, the choice of law by the MinnesotaSupreme Court does not violate the Due Process Clause of the Fourteenth Amendment or theFull Faith and Credit Clause. Pp. 449 U. S. 307-320.

Page 449 U. S. 303

(a) Respondent's decedent was a member of Minnesota's workforce. The State of employmenthas police power responsibilities towards nonresident employees that are analogous to thoseit has towards residents, as such employees use state services and amenities and may callupon state facilities in appropriate circumstances. Also, the State's interest in its commutingnonresident employees, such as respondent's decedent, reflects a state concern for the safetyand wellbeing of its workforce and the concomitant effect on Minnesota employers. That thedecedent was not killed while commuting to work or while in Minnesota does not dictate adifferent result, since vindication of the rights of the estate of a Minnesota employee is animportant state concern. Nor does the decedent's residence in Wisconsin constitutionallymandate application of Wisconsin law to the exclusion of forum law. Employment status is nota sufficiently less important status than residence, when combined with the decedent's dailycommute across state lines and the other Minnesota contacts present, to prohibit the choiceof law result in this case on constitutional grounds. Pp. 449 U. S. 313-317.

(b) Petitioner was at all times present and doing business in Minnesota. By virtue of suchpresence, petitioner can hardly claim unfamiliarity with the laws of the host jurisdiction andsurprise that the state courts might apply forum law to litigation in which the company is

involved. Moreover, such presence gave Minnesota an interest in regulating the company'sinsurance obligations insofar as they affected both a Minnesota resident and court-appointedrepresentative (respondent) and a longstanding member of Minnesota's workforce(respondent's decedent). Pp. 449 U. S. 317-318.

(c) Respondent became a Minnesota resident prior to institution of the instant litigation. Suchresidence and subsequent appointment in Minnesota as personal representative of her latehusband's estate constitute a Minnesota contact which gives Minnesota an interest inrespondent's recovery. Pp. 449 U. S. 318-319.

JUSTICE STEVENS concluded:

1. The Full Faith and Credit Clause did not require Minnesota, the forum State, to applyWisconsin law to the contract interpretation question presented. Although the Minnesotacourts' decision to apply Minnesota law was unsound as a matter of conflicts law, no threat toWisconsin's sovereignty ensued from allowing the substantive question as to the meaning ofthe insurance contract to be determined by the law of another State. Pp. 449 U. S. 322-326.

2. The Due Process Clause of the Fourteenth Amendment did not prevent Minnesota fromapplying its own law. Neither the "stacking" rule itself nor Minnesota's application of it to theselitigants raised any

Page 449 U. S. 304

serious question of fairness. Nor did the Minnesota courts' decision to apply this rule violatedue process because that decision frustrated the contracting parties' reasonable expectations.The decision was consistent with due process because it did not result unfairness to eitherlitigant, not because Minnesota had an interest in the plaintiff as resident or the decedent asemployee. Pp. 449 U. S. 326-331.

BRENNAN, J., announced the judgment of the Court and delivered an opinion, in which WHITE,MARSHALL, and BLACKMUN, JJ., joined. STEVENS, J., filed an opinion concurring in thejudgment, post, p. 449 U. S. 320. POWELL, J., filed a dissenting opinion, in which BURGER, C.J.,and REHNQUIST, J., joined, post, p. 449 U. S. 332. STEWART, J., took no part in the

consideration or decision of the case.

JUSTICE BRENNAN announced the judgment of the Court and delivered an opinion, in whichJUSTICE WHITE, JUSTICE MARSHALL, and JUSTICE BLACKMUN joined.

This Court granted certiorari to determine whether the Due Process Clause of the FourteenthAmendment [Footnote 1] or the Full Faith and Credit Clause of Art. IV, § 1, [Footnote 2] of theUnited States Constitution bars the Minnesota Supreme Court's choice of substantiveMinnesota law to govern the effect of a provision in an insurance policy issued to respondent'sdecedent. 44 U.S. 1070 (1980).

Page 449 U. S. 305

I

Respondent's late husband, Ralph Hague, died of injuries suffered when a motorcycle onwhich he was a passenger was struck from behind by an automobile. The accident occurred inPierce County, Wis., which is immediately across the Minnesota border from Red Wing, Minn.The operators of both vehicles were Wisconsin residents, as was the decedent, who, at thetime of the accident, resided with respondent in Hager City, Wis., which is one and one-halfmiles from Red Wing. Mr. Hague had been employed in Red Wing for the 15 years immediatelypreceding his death and had commuted daily from Wisconsin to his place of employment.

Neither the operator of the motorcycle nor the operator of the automobile carried validinsurance. However, the decedent held a policy issued by petitioner Allstate Insurance Co.covering three automobiles owned by him and containing an uninsured motorist clauseinsuring him against loss incurred from accidents with uninsured motorists. The uninsuredmotorist coverage was limited to §15,000 for each automobile. [Footnote 3]

After the accident, but prior to the initiation of this lawsuit, respondent moved to Red Wing.Subsequently, she married a Minnesota resident and established residence with her newhusband in Savage, Minn. At approximately the same time, a Minnesota Registrar of Probateappointed respondent personal representative of her deceased husband's estate. Followingher appointment, she brought this action in Minnesota District Court seeking a declaration

under Minnesota law that the $15,000 uninsured motorist coverage on each of her latehusband's three automobiles could be "stacked" to provide total coverage of $45,000.Petitioner defended on the ground that whether the three uninsured motorist

Page 449 U. S. 306

coverages could be stacked should be determined by Wisconsin law, since the insurancepolicy was delivered in Wisconsin, the accident occurred in Wisconsin, and all personsinvolved were Wisconsin residents at the time of the accident.

The Minnesota District Court disagreed. Interpreting Wisconsin law to disallow stacking, thecourt concluded that Minnesota's choice of law rules required the application of Minnesotalaw permitting stacking. The court refused to apply Wisconsin law as "inimical to the publicpolicy of Minnesota," and granted summary judgment for respondent. [Footnote 4]

The Minnesota Supreme Court, sitting en banc, affirmed the District Court. [Footnote 5] Thecourt, also interpreting Wisconsin law to prohibit stacking, [Footnote 6] applied Minnesota lawafter analyzing the relevant Minnesota contacts and interests within the analytical frameworkdeveloped by Professor Leflar. [Footnote 7] See Leflar, Choice-Influencing Considerations inConflicts Law, 41 N.Y.U.L.Rev. 267 (1966). The state court, therefore, examined the conflict oflaws issue in terms of (1) predictability of result, (2) maintenance of interstate order, (3)simplification of the judicial task, (4) advancement of the forum's governmental interests, and(5) application of the better rule of law. Although stating that the Minnesota contacts might notbe, "in themselves, sufficient to mandate application of [Minnesota] law," [Footnote 8] 289N.W.2d 43, 49

Page 449 U. S. 307

(1978), under the first four factors, the court concluded that the fifth factor -- application of thebetter rule of law -- favored selection of Minnesota law. The court emphasized that a majorityof States allow stacking, and that legal decisions allowing stacking "are fairly recent and wellconsidered in light of current uses of automobiles." Ibid. In addition, the court found theMinnesota rule superior to Wisconsin's "because it requires the cost of accidents withuninsured motorists to be spread more broadly through insurance premiums than does theWisconsin rule." Ibid. Finally, after rehearing en banc, [Footnote 9] the court buttressed its

initial opinion by indicating "that contracts of insurance on motor vehicles are in a class bythemselves," since an insurance company "knows the automobile is a movable item which willbe driven from state to state." 289 N.W.2d at 50 (1979). From this premise, the courtconcluded that application of Minnesota law was "not so arbitrary and unreasonable as toviolate due process." Ibid.

II

It is not for this Court to say whether the choice of law analysis suggested by Professor Leflaris to be preferred or whether we would make the same choice of law decision if sitting as theMinnesota Supreme Court. Our sole function is to determine whether the Minnesota SupremeCourt's choice of its own substantive law in this case exceeded federal constitutionallimitations. Implicit in this inquiry is the recognition, long accepted by this Court, that a set offacts giving rise to a lawsuit, or a particular issue within a lawsuit, may justify, in constitutionalterms, application of the law of more than one jurisdiction. See, e.g., Watson v. EmployersLiability Assurance Corp., 348 U. S. 66, 348 U. S. 72-73 (1954); n. 11, infra. See generally Clayv. Sun Insurance Office, Ltd., 377 U.S.

Page 449 U. S. 308

179, 377 U. S. 181-182 (1964) (hereinafter cited as Clay II). As a result, the forum State mayhave to select one law from among the laws of several jurisdictions having some contact withthe controversy.

In deciding constitutional choice of law questions, whether under the Due Process Clause orthe Full Faith and Credit Clause, [Footnote 10] this Court has traditionally examined thecontacts of the State, whose law was applied, with the parties and with the occurrence ortransaction giving rise to the litigation. See Clay II, supra at 377 U. S. 183. In order to ensurethat the choice of law is neither arbitrary nor fundamentally unfair, see Alaska Packers Assn. v.Industrial Accident Comm'n, 294 U. S. 532, 294 U. S. 542 (1935), the Court has invalidated thechoice of law of a State which has had no significant contact or significant aggregation ofcontacts, creating state interests, with the parties and the occurrence or transaction. [Footnote11]

Page 449 U. S. 309

Two instructive examples of such invalidation are Home Ins. Co. v. Dick, 281 U. S. 397 (1930),and John Hancock Mutual Life Ins. Co. v. Yates, 299 U. S. 178 (1936). In both cases, theselection of forum law rested exclusively on the presence of one nonsignificant forum contact.

Home Ins. Co. v. Dick involved interpretation of an insurance policy which had been issued inMexico, by a Mexican insurer, to a Mexican citizen, covering a Mexican risk. The policy wassubsequently assigned to Mr. Dick, who was domiciled in Mexico and "physically present andacting in Mexico," 281 U.S. at 281 U. S. 408, although he remained a nominal permanentresident of Texas. The policy restricted coverage to losses occurring in certain Mexican watersand, indeed, the loss occurred in those waters. Dick brought suit

Page 449 U. S. 310

in Texas against a New York reinsurer. Neither the Mexican insurer nor the New York reinsurerhad any connection to Texas. [Footnote 12] The Court held that application of Texas law tovoid the insurance contract's limitation' of actions clause violated due process. [Footnote 13]

The relationship of the forum State to the parties and the transaction was similarly attenuatedin John Hancock Mutual Life Ins. Co. v. Yates. There, the insurer, a Massachusettscorporation, issued a contract of insurance on the life of a New York resident. The contractwas applied for, issued, and delivered in New York, where the insured and his spouse resided.After the insured died in New York, his spouse moved to Georgia and brought suit on the policyin Georgia. Under Georgia law, the jury was permitted to take into account oral modificationswhen deciding whether an insurance policy application contained material misrepresentations.Under New York law, however, such misrepresentations were to be evaluated solely on thebasis of the written application. The Georgia court applied Georgia law. This Court reversed,finding application of Georgia law to be unconstitutional.

Dick and Yates stand for the proposition that, if a State has only an insignificant contact withthe parties and the

Page 449 U. S. 311

occurrence or transaction, application of its law is unconstitutional. [Footnote 14] Dickconcluded that nominal residence -- standing alone -- was inadequate; Yates held that apost-occurrence change of residence to the forum State -- standing alone -- was insufficient tojustify application of forum law. Although instructive as extreme examples of selection offorum law, neither Dick nor Yates governs this case. For, in contrast to those decisions, here,the Minnesota contacts with the parties and the occurrence are obviously significant. Thus,this case is like Alaska Packers, Cardillo v. Liberty Mutual Ins. Co., 330 U. S. 469 (1947), andClay II -- cases where this Court sustained choice of law decisions based on the contacts ofthe State, whose law was applied, with the parties and occurrence.

In Alaska Packers, the Court upheld California's application of its Workmen's CompensationAct, where the most significant contact of the worker with California was his execution of anemployment contract in California. The worker, a nonresident alien from Mexico, was hired inCalifornia for seasonal work in a salmon canning factory in Alaska. As part of the employmentcontract, the employer, who was doing business in California, agreed to transport the worker toAlaska and to return him to California when the work was completed. Even though theemployee contracted to be bound by the Alaska Workmen's Compensation Law and wasinjured in Alaska, he sought an award under the California Workmen's Compensation Act. TheCourt held that the choice of California law was not "so arbitrary or unreasonable as to amountto a denial of due process," 294 U.S. at 249 U. S. 542, because "[w]ithout a remedy inCalifornia, [he] would be remediless," ibid., and because of California's interest that the workernot become a public charge, ibid. [Footnote 15]

Page 449 U. S. 312

In Cardillo v. Liberty Mutual Ins. Co., supra, a District of Columbia resident, employed by aDistrict of Columbia employer and assigned by the employer for the three years prior to hisdeath to work in Virginia, was killed in an automobile crash in Virginia in the course of his dailycommute home from work. The Court found the District's contacts with the parties and theoccurrence sufficient to satisfy constitutional requirements, based on the employee'sresidence in the District, his commute between home and the Virginia workplace, and hisstatus as an employee of a company "engaged in electrical construction work in the District ofColumbia and surrounding areas." Id. at 330 U. S. 471. [Footnote 16]

Similarly, Clay II upheld the constitutionality of the application of forum law. There, a policy ofinsurance had issued in Illinois to an Illinois resident. Subsequently the insured moved toFlorida and suffered a property loss in Florida. Relying explicitly on the nationwide coverage ofthe policy and the presence of the insurance company in Florida and implicitly on the plaintiff's

Florida residence and the occurrence of the property loss in Florida, the Court sustained theFlorida court's choice of Florida law.

The lesson from Dick and Yates, which found insufficient forum contacts to apply forum law,and from Alaska Packers, Cardillo, and Clay II, which found adequate contacts to sustain thechoice of forum law, [Footnote 17] is that for a State's substantive

Page 449 U. S. 313

law to be selected in a constitutionally permissible manner, that State must have a significantcontact or significant aggregation of contacts, creating state interests, such that choice of itslaw is neither arbitrary nor fundamentally unfair. Application of this principle to the facts ofthis case persuades us that the Minnesota Supreme Court's choice of its own law did notoffend the Federal Constitution.

III

Minnesota has three contacts with the parties and the occurrence giving rise to the litigation.In the aggregate, these contacts permit selection by the Minnesota Supreme Court ofMinnesota law allowing the stacking of Mr. Hague's uninsured motorist coverages.

First, and, for our purposes, a very important contact, Mr. Hague was a member of Minnesota'sworkforce, having been employed by a Red Wing, Minn., enterprise for the 15

Page 449 U. S. 314

years preceding his death. While employment status may implicate a state interest lesssubstantial than does resident status, that interest is nevertheless important. The State ofemployment has police power responsibilities towards the nonresident employee that areanalogous, if somewhat less profound, than towards residents. Thus, such employees usestate services and amenities and may call upon state facilities in appropriate circumstances.

In addition, Mr. Hague commuted to work in Minnesota, a contact which was important inCardillo v. Liberty Mutual Ins. Co., 330 U.S. at 330 U. S. 475-476 (daily commute betweenresidence in District of Columbia and workplace in Virginia), and was presumably covered byhis uninsured motorist coverage during the commute. [Footnote 18] The State's interest in itscommuting nonresident employees reflects a state concern for the safety and wellbeing of itsworkforce and the concomitant effect on Minnesota employers.

That Mr. Hague was not killed while commuting to work or while in Minnesota does not dictatea different result. To hold that the Minnesota Supreme Court's choice of Minnesota lawviolated the Constitution for that reason would require too narrow a view of Minnesota'srelationship with the parties and the occurrence giving rise to the litigation. An automobileaccident need not occur within a particular jurisdiction for that jurisdiction to be connected tothe occurrence. [Footnote 19]

Page 449 U. S. 315

Similarly, the occurrence of a crash fatal to a Minnesota employee in another State is aMinnesota contact. [Footnote 20] If Mr. Hague had only been injured and missed work for afew weeks, the effect on the Minnesota employer would have been palpable, and Minnesota'sinterest in having its employee made whole would be evident. Mr. Hague's death affectsMinnesota's interest still more acutely, even though Mr. Hague will not return to the Minnesotaworkforce. Minnesota's workforce is surely affected by the level of protection the Stateextends to it, either directly or indirectly. Vindication of the rights of the estate of a Minnesotaemployee, therefore, is an important state concern.

Mr. Hague's residence in Wisconsin does not -- as Allstate seems to argue -- constitutionallymandate application of Wisconsin law to the exclusion of forum law. [Footnote 21] If, in theinstant

Page 449 U. S. 316

case, the accident had occurred in Minnesota between Mr. Hague and an uninsured Minnesotamotorist, if the insurance contract had been executed in Minnesota covering a Minnesotaregistered company automobile which Mr.Hague was permitted to drive, and if a Wisconsincourt sought to apply Wisconsin law, certainly Mr. Hague's residence in Wisconsin, his

commute between Wisconsin and Minnesota, and the insurer's presence in Wisconsin shouldbe adequate to apply Wisconsin's law. [Footnote 22] See generally Cardillo v. Liberty

Page 449 U. S. 317

Mutual Ins. Co., supra; Alaska Packers Assn. v. Industrial Accident Comm'n, 294 U. S. 532(1935); Home Ins. Co. v. Dick, 281 U.S. at 281 U. S. 408, n. 5. Employment status is not asufficiently less important status than residence, see generally Carroll v. Lanza, 349 U. S. 408(1955); Alaska Packers Assn. v. Industrial Accident Comm'n, supra, when combined with Mr.Hague's daily commute across state lines and the other Minnesota contacts present, toprohibit the choice of law result in this case on constitutional grounds.

Second, Allstate was at all times present and doing business in Minnesota. [Footnote 23] Byvirtue of its presence, Allstate can hardly claim unfamiliarity with the laws of the hostjurisdiction and surprise that the state courts might apply forum law to litigation

Page 449 U. S. 318

in which the company is involved.

"Particularly since the company was licensed to do business in [the forum], it must haveknown it might be sued there, and that [the forum] courts would feel bound by [forum] law.[Footnote 24]"

Clay v. Sun Insurance Office, Ltd., 363 U. S. 207, 363 U. S. 221 (1960) (Black, J., dissenting).[Footnote 25] Moreover, Allstate's presence in Minnesota gave Minnesota an interest inregulating the company's insurance obligations insofar as they affected both a Minnesotaresident and court-appointed representative -- respondent -- and a longstanding member ofMinnesota's workforce -- Mr. Hague. See Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 318U. S. 316 (1943).

Third, respondent became a Minnesota resident prior to institution of this litigation. Thestipulated facts reveal that she first settled in Red Wing, Minn., the town in which

Page 449 U. S. 319

her late husband had worked. [Footnote 26] She subsequently moved to Savage, Minn., aftermarrying a Minnesota resident who operated an automobile service station in Bloomington,Minn. Her move to Savage occurred "almost concurrently," 289 N.W.2d at 45, with the initiationof the instant case. [Footnote 27] There is no suggestion that Mrs. Hague moved to Minnesotain anticipation of this litigation or for the purpose of finding a legal climate especiallyhospitable to her claim. [Footnote 28] The stipulated facts, sparse as they are, negate any suchinference.

While John Hancock Mutual Life Ins. Co. v. Yates, 299 U. S. 178 (1936), held that apost-occurrence change of residence to the forum State was insufficient, in and of itself, toconfer power on the forum State to choose its law, that case did not hold that such a changeof residence was irrelevant. Here, of course, respondent's bona fide residence in Minnesotawas not the sole contact Minnesota had with this litigation. And in connection with herresidence in Minnesota, respondent was appointed personal representative of Mr. Hague'sestate by the Registrar of Probate for the County of Goodhue, Minn. Respondent's residenceand subsequent appointment in Minnesota as personal representative of her late husband'sestate constitute a Minnesota contact which gives Minnesota an interest in respondent'srecovery, an interest which the court below identified as full compensation for "residentaccident victims" to keep them "off welfare rolls" and able "to meet financial obligations." 289N.W.2d at 49.

Page 449 U. S. 320

In sum, Minnesota had a significant aggregation [Footnote 29] of contacts with the parties andthe occurrence, creating state interests, such that application of its law was neither arbitrarynor fundamentally unfair. Accordingly, the choice of Minnesota law by the Minnesota SupremeCourt did not violate the Due Process Clause or the Full Faith and Credit Clause. Affirmed.

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

[Footnote 1]

The Due Process Clause of the Fourteenth Amendment provides that no State "shall . . .deprive any person of life, liberty, or property, without due process of law. . . ."

[Footnote 2]

The Full Faith and Credit Clause, Art. IV, §1, provides:

"Full Faith and Credit shall be given in each State to the public Acts, Records, and judicialProceedings of every other State. And the Congress may by general Laws prescribe theManner in which such Acts, Records, and Proceedings shall be proved, and the Effect thereof."

[Footnote 3]

Ralph Hague paid a separate premium for each automobile including an additional separatepremium for each uninsured motorist coverage.

[Footnote 4]

App. C to Pet. for Cert. A-29.

[Footnote 5]

289 N.W.2d 43 (1978) .

[Footnote 6]

Respondent has suggested that this case presents a "false conflict." The court below rejected

this contention and applied Minnesota law. Even though the Minnesota Supreme Court'schoice of Minnesota law followed a discussion of whether this case presents a false conflict,the fact is that the court chose to apply Minnesota law. Thus, the only question before thisCourt is whether that choice was constitutional.

[Footnote 7]

Minnesota had previously adopted the conceptual model developed by Professor Leflar inMilkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408 (1973).

[Footnote 8]

The court apparently was referring to sufficiency as a matter of choice of law, and not as amatter of constitutional limitation on its choice of law decision .

[Footnote 9]

289 N.W.2d at 50 (1979).

[Footnote 10]

This Court has taken a similar approach in deciding choice of law cases under both the DueProcess Clause and the Full Faith and Credit Clause. In each instance, the Court has examinedthe relevant contacts and resulting interests of the State whose law was applied. See, e.g.,Nevada v. Hall, 440 U. S. 410, 440 U. S. 424 (1979). Although at one time the Court required amore exacting standard under the Full Faith and Credit Clause than under the Due ProcessClause for evaluating the constitutionality of choice of law decisions, see Alaska PackersAssn. v. Industrial Accident Comm'n, 294 U. S. 532, 294 U. S. 549-550 (1935) (interest of Statewhose law was applied was no less than interest of State whose law was rejected), the Courthas since abandoned the weighing of interests requirement. Carroll v. Lanza, 349 U. S. 408(1955); see Nevada v. Hall, supra; Weintraub, Due Process and Full Faith and CreditLimitations on a State's Choice of Law, 44 Iowa L.Rev. 449 (1959). Different considerationsare, of course, at issue when full faith and credit is to be accorded to acts, records, and

proceedings outside the choice of law area, such as in the case of sister state courtjudgments.

[Footnote 11]

Prior to the advent of interest analysis in the state courts as the "dominant mode of analysis inmodern choice of law theory," Silberman, Shaffer v. Heitner: The End of an Era, 53 N.Y.U.L.Rev.33, 80, n. 259 (1978); cf. Richards v. United States, 369 U. S. 1, 369 U. S. 11-13, and nn. 26-27(1962) (discussing trend toward interest analysis in state courts), the prevailing choice of lawmethodology focused on the jurisdiction where a particular event occurred. See, e.g.,Restatement of Conflict of Laws (1934). For example, in cases characterized as contractcases, the law of the place of contracting controlled the determination of such issues ascapacity, fraud, consideration, duty, performance, and the like. Id. § 332; see Beale, What LawGoverns the Validity of a Contract, 23 Harv.L.Rev. 260, 270-271 (1910). In the tort context, thelaw of the place of the wrong usually governed traditional choice of law analysis. Restatement,supra, § 378; see Richards v. United States, supra at 369 U. S. 11-12.

Hartford Accident & Indemnity Co. v. Delta & Pine Land Co., 292 U. S. 143 (1934), can, perhaps,best be explained as an example of that period. In that case, the Court struck down applicationby the Mississippi courts of Mississippi law which voided the limitations provision in a fidelitybond written in Tennessee between a Connecticut insurer and Delta, both of which were doingbusiness in Tennessee and Mississippi. By its terms, the bond covered misapplication offunds "by any employee in any position, anywhere. . . .'" Id. at 293 U. S. 145. After Deltadiscovered defalcations by one of its Mississippi-based employees, a lawsuit was commencedin Mississippi.

That case, however, has scant relevance for today. It implied a choice of law analysis which,for all intents and purposes, gave an isolated event -- the writing of the bond in Tennessee --controlling constitutional significance, even though there might have been contacts withanother State (there Mississippi) which would make application of its law neither unfair norunexpected. See Martin, Personal Jurisdiction and Choice of Law, 78 Mich.L.Rev. 872, 874,and n. 11 (1980).

[Footnote 12]

Dick sought to obtain quasi-in-rem jurisdiction by garnishing the reinsurance obligation of theNew York reinsurer. The reinsurer had never transacted business in Texas, but it

"was cited by publication, in accordance with a Texas statute; attorneys were appointed for itby the trial court; and they filed on its behalf an answer which denied liability."

281 U.S. at 281 U. S. 402. There would be no jurisdiction in the Texas courts to entertain sucha lawsuit today. See Rush v. Savchuk, 444 U. S. 320 (1980); Shaffer v. Heitner, 433 U. S. 186(1977); Silberman, supra at 62-65.

[Footnote 13]

The Court noted that the result might have been different if there had been some connection toTexas upon "which the State could properly lay hold as the basis of the regulations thereimposed." 281 U.S. at 281 U. S. 408, n. 5; see Watson v. Employers Liability Assurance Corp.,348 U. S. 66, 348 U. S. 71 (1954).

[Footnote 14]

See generally Weintraub, supra, n. 10, at 455-457.

[Footnote 15]

The Court found no violation of the Full Faith and Credit Clause, since California's interest wasconsidered to be no less than Alaska's, 294 U.S. at 294 U. S. 547-548, 294 U. S. 549-550, eventhough the injury occurred in Alaska while the employee was performing his contractobligations there. While Alaska Packers balanced the interests of California and Alaska todetermine the full faith and credit issue, such balancing is no longer required. See Nevada v.Hall, 440 U.S. at 440 U. S. 424; n 10, supra.

[Footnote 16]

The precise question raised was whether the Virginia Compensation Commission "had solejurisdiction over the claim." 330 U.S. at 330 U. S. 472-473. In finding that application of theDistrict's law did not violate either due process or full faith and credit requirements, the Courtin effect treated the question as a constitutional choice of law issue.

[Footnote 17]

The Court has upheld choice of law decisions challenged on constitutional grounds innumerous other decisions. See Nevada v. Hall, supra (upholding California's application ofCalifornia law to automobile accident in California between two California residents and aNevada official driving car owned by State of Nevada while engaged in official business inCalifornia); Carroll v. Lanza, 349 U. S. 408 (1955) (upholding Arkansas' choice of Arkansas lawwhere Missouri employee executed employment contract with Missouri employer and wasinjured on job in Arkansas but was removed immediately to a Missouri hospital); Watson v.Employers Liability Assurance Corp., 348 U. S. 66 (1954) (allowing application of Louisianadirect action statute by Louisiana resident against insurer even though policy was written anddelivered in another State, where plaintiff was injured in Louisiana); Pacific Employers Ins. Co.v. Industrial Accident Comm'n, 306 U. S. 493 (1939) (holding Full Faith and Credit Clause notviolated where California applied own Workmen's Compensation Act in case of injury sufferedby Massachusetts employee temporarily in California in course of employment). Thus, Nevadav. Hall, supra, and Watson v. Employers Liability Assurance Corp., supra, upheld application offorum law where the relevant contacts consisted of plaintiff's residence and the place of theinjury. Pacific Employers Ins. Co. v. Industrial Accident Comm'n, supra, and Carroll v. Lanza,supra, relied on the place of the injury arising from the respective employee's temporarypresence in the forum State in connection with his employment.

[Footnote 18]

The policy issued to Mr. Hague provided that Allstate would pay to the insured, or his legalrepresentative, damages "sustained by the insured, caused by accident and arising out of theownership, maintenance or use of [an] uninsured automobile. . . ." No suggestion has beenmade that Mr. Hague's uninsured motorist protection is unavailable because he was not killedwhile driving one of his insured automobiles.

[Footnote 19]

Numerous cases have applied the law of a jurisdiction other than the situs of the injury wherethere existed some other link between that jurisdiction and the occurrence. See, e.g., Cardillo v.Liberty Mutual Ins. Co., 330 U. S. 469 (1947); Alaska Packers Assn. v. Industrial AccidentComm'n, 294 U. S. 532 (1935); Rosenthal v. Warren, 475 F.2d 438 (CA2), cert. denied, 414 U.S.856 (1973); Clark v. Clark, 107 N.H. 351, 222 A.2d 205 (1966); Tooker v. Lopez, 24 N.Y.2d 569,249 N.E.2d 394 (1969); Babcock v. Jackson, 12 N.Y.2d 473, 191 N.E.2d 279 (1963).

[Footnote 20]

The injury or death of a resident of State A in State B is a contact of State A with theoccurrence in State B. See cases cited in n19, supra.

[Footnote 21]

Petitioner's statement that the instant dispute involves the interpretation of insurancecontracts which were "underwritten, applied for, and paid for by Wisconsin residents andissued covering cars garaged in Wisconsin," Brief for Petitioner 6, is simply another way ofstating that Mr. Hague was a Wisconsin resident. Respondent could have replied that theinsurance contract was underwritten, applied for and paid for by a Minnesota worker, andissued covering cars that were driven to work in Minnesota and garaged there for a substantialportion of the day. The former statement is hardly more significant than the latter, since theaccident, in any event, did not involve any of the automobiles which were covered under Mr.Hague's policy. Recovery is sought pursuant to the uninsured motorist coverage.

In addition, petitioner's statement that the contracts were "underwritten . . . by Wisconsinresidents" is not supported by the stipulated facts if petitioner means to include itself withinthat phrase. Indeed, the policy, which is part of the record, recites that Allstate signed thepolicy in Northbrook, Ill. Under some versions of the hoary rule of lex loci contracts, anddepending on the precise sequence of events, a sequence which is unclear from the recordbefore us, the law of Illinois arguably might apply to govern contract construction, even thoughIllinois would have less contact with the parties and the occurrence than either Wisconsin orMinnesota. No party sought application of Illinois law on that basis in the court below.

[Footnote 22]

Of course, Allstate could not be certain that Wisconsin law would necessarily govern anyaccident which occurred in Wisconsin, whether brought in the Wisconsin courts or elsewhere.Such an expectation would give controlling significance to the wooden lex loci delicti doctrine.While the place of the accident is a factor to be considered in choice of law analysis, to applyblindly the traditional, but now largely abandoned, doctrine, Silberman, supra, n 11, at 80, n.259; see n 11, supra, would fail to distinguish between the relative importance of various legalissues involved in a lawsuit, as well as the relationship of other jurisdictions to the parties andthe occurrence or transaction. If, for example, Mr. Hague had been a Wisconsin resident andemployee who was injured in Wisconsin and was then taken by ambulance to a hospital in RedWing, Minn., where he languished for several weeks before dying, Minnesota's interest inensuring that its medical creditors were paid would be obvious. Moreover, under suchcircumstances, the accident itself might be reasonably characterized as a bi-state occurrencebeginning in Wisconsin and ending in Minnesota. Thus, reliance by the insurer that Wisconsinlaw would necessarily govern any accident that occurred in Wisconsin, or that the law ofanother jurisdiction would necessarily govern any accident that did not occur in Wisconsin,would be unwarranted. See n. 11 supra; cf. Rosenthal v. Warren, supra, (Massachusettshospital could not have purchased insurance with expectation that Massachusetts law wouldgovern damages recovery as to New York patient who died in hospital and whose widowbrought suit in New York).

If the law of a jurisdiction other than Wisconsin did govern, there was a substantial likelihood,with respect to uninsured motorist coverage, that stacking would be allowed. Stacking was therule in most States at the time the policy was issued. Indeed, the Wisconsin Supreme Court, inNelson v. Employers Mutual Casualty Co., 63 Wis.2d 558, 563-566, and nn. 2, 3, 217 N.W.2d670, 672, 674, and nn. 2, 3 (1974), identified 29 States, including Minnesota, whose law itinterpreted to allow stacking, and only 9 States whose law it interpreted to prohibit stacking.Clearly then, Allstate could not have expected that an anti-stacking rule would govern anyparticular accident in which the insured might be involved, and thus cannot claim unfairsurprise from the Minnesota Supreme Court's choice of forum law.

[Footnote 23]

The Court has recognized that examination of a State's contacts may result in divergentconclusions for jurisdiction and choice of law purposes. See Kulko v. California Superior Court,436 U. S. 84, 436 U. S. 98 (1978) (no jurisdiction in California but California law "arguablymight" apply); Shaffer v. Heitner, 433 U.S. at 433 U. S. 215 (no jurisdiction in Delaware,although Delaware interest "may support the application of Delaware law"); cf. Hanson v.Denckla, 357 U. S. 235, 357 U. S. 254, and n. 27 (1958) (no jurisdiction in Florida; the "issue is

personal jurisdiction, not choice of law," an issue which the Court found no need to decide).Nevertheless, "both inquiries are often closely related, and to a substantial degree dependupon, similar considerations.'" Shaffner, 433 U.S. at 433 U. S. 224-225 (BRENNAN, J.,concurring in part and dissenting in part). Here, of course, jurisdiction in the Minnesota courtsis unquestioned, a factor not without significance in assessing the constitutionality ofMinnesota's choice of its own substantive law. Cf. id. at 433 U. S. 225 ("the decision that it isfair to bind a defendant by a State's laws and rules should prove to be highly relevant to thefairness of permitting that same State to accept jurisdiction for adjudicating the controversy").

[Footnote 24]

There is no element of unfair surprise or frustration of legitimate expectations as a result ofMinnesota's choice of its law. Because Allstate was doing business in Minnesota and wasundoubtedly aware that Mr. Hague was a Minnesota employee, it had to have anticipated thatMinnesota law might apply to an accident in which Mr. Hague was involved. See Clay II, 377 U.S. 179, 377 U. S. 182 (1964); Watson v. Employers Liability Assurance Corp., 348 U.S. at 348 U.S. 72-73; Alaska Packers Assn. v. Industrial Accident Comm'n, 294 U.S. at 294 U. S. 538-543;cf. Home Ins. Co. v. Dick, 281 U.S. at 281 U. S. 404 (neither insurer nor reinsurer present inforum State). Indeed, Allstate specifically anticipated that Mr. Hague might suffer an accidenteither in Minnesota or elsewhere in the United States, outside of Wisconsin, since the policy itissued offered continental coverage. Cf. id. at 281 U. S. 403 (coverage limited to lossesoccurring in certain Mexican waters which were outside of jurisdiction whose law wasapplied). At the same time, Allstate did not seek to control construction of the contract, sincethe policy contained no choice of law clause dictating application of Wisconsin law. See ClayII, supra at 377 U. S. 182 (nationwide coverage of policy and lack of choice of law clause).

[Footnote 25]

Justice Black's dissent in the first Clay decision, a decision which vacated and remanded alower court determination to obtain an authoritative construction of state law that might mootthe constitutional question, subsequently commanded majority support in the second Claydecision. Clay II, supra at 377 U. S. 180-183.

[Footnote 26]

The stipulated facts do not reveal the date on which Mrs. Hague first moved to Red Wing.

[Footnote 27]

These proceedings began on May 28, 1976. Mrs. Hague was remarried on June 19, 1976.

[Footnote 28]

The dissent suggests that considering respondent's post-occurrence change of residence asone of the Minnesota contacts will encourage forum shopping. Post at 449 U. S. 337. Thisoverlooks the fact that her change of residence was bona fide, and not motivated by litigationconsiderations.

[Footnote 29]

We express no view whether the first two contacts, either together or separately, would havesufficed to sustain the choice of Minnesota law made by the Minnesota Supreme Court.

JUSTICE STEVENS, concurring in the judgment.

As I view this unusual case -- in which neither precedent nor constitutional language providessure guidance -- two separate questions must be answered. First, does the Full Faith andCredit Clause [Footnote 2/1] require Minnesota, the forum State, to apply Wisconsin law?Second, does the Due Process Clause [Footnote 2/2] of the Fourteenth Amendment preventMinnesota from applying its own law? The first inquiry implicates the federal interest inensuring that Minnesota respect the sovereignty of the State of Wisconsin; the secondimplicates the litigants' interest in a fair adjudication of their rights. [Footnote 2/3]

Page 449 U. S. 321

I realize that both this Court's analysis of choice of law questions [Footnote 2/4] and scholarlycriticism of those decisions [Footnote 2/5] have treated these two inquiries as though theywere indistinguishable. [Footnote 2/6]

Page 449 U. S. 322

Nevertheless, I am persuaded that the two constitutional provisions protect different interests,and that proper analysis requires separate consideration of each,

I

The Full Faith and Credit Clause is one of several provisions in the Federal Constitutiondesigned to transform the several States from independent sovereignties into a single, unifiedNation. See Thomas v. Washington Gas Light Co., 448 U. S. 261, 448 U. S. 271-272 (1980)(plurality opinion); Milwaukee County v. M. E. White Co., 296 U. S. 268, 296 U. S. 276-277(1935). [Footnote 2/7] The Full Faith and Credit Clause implements this design by directingthat a State, when acting as the forum for litigation having multistate aspects or implications,respect the legitimate interests of other States and avoid infringement upon their sovereignty.The Clause does not, however, rigidly

Page 449 U. S. 323

require the forum State to apply foreign law whenever another State has a valid interest in thelitigation. See Nevada v. Hall, 440 U. S. 410, 440 U. S. 424 (1979); Alaska Packers Assn. v.Industrial Accident Comm'n, 294 U. S. 532, 294 U. S. 546-548 (1935); Pacific Employers Ins.Co. v. Industrial Accident Comm'n, 306 U. S. 493, 306 U. S. 501-502 (1939). [Footnote 2/8] Onthe contrary, in view of the fact that the forum State is also a sovereign in its own right, inappropriate cases, it may attach paramount importance to its own legitimate interests.[Footnote 2/9] Accordingly, the fact that a choice of law decision may be unsound as a matterof conflicts law does not necessarily implicate the federal concerns embodied in the Full Faithand Credit Clause. Rather, in my opinion, the Clause should not invalidate a state court'schoice of forum law unless that choice threatens the federal interest in national unity byunjustifiably infringing upon the legitimate interests of another State. [Footnote 2/10]

Page 449 U. S. 324

In this case, I think the Minnesota courts' decision to apply Minnesota law was plainlyunsound as a matter of normal conflicts law. Both the execution of the insurance contract andthe accident giving rise to the litigation took place in Wisconsin. Moreover, when both of thoseevents occurred, the plaintiff, the decedent, and the operators of both vehicles were allresidents of Wisconsin. Nevertheless, I do not believe that any threat to national unity orWisconsin's sovereignty ensues from allowing the substantive question presented by this caseto be determined by the law of another State.

The question on the merits is one of interpreting the meaning of the insurance contract.Neither the contract itself nor anything else in the record reflects any express understandingof the parties with respect to what law would be applied or with respect to whether theseparate uninsured motorist coverage for each of the decedent's three cars could be"stacked." Since the policy provided coverage for accidents that might occur in other States, itwas obvious to the parties at the time of contracting that it might give rise to the application ofthe law of States other than Wisconsin. Therefore, while Wisconsin may have an interest inensuring that contracts formed in Wisconsin in reliance upon Wisconsin law are interpreted inaccordance with that law, that interest is not implicated in this case. [Footnote 2/11]

Page 449 U. S. 325

Petitioner has filed to establish that Minnesota's refusal to apply Wisconsin law poses anydirect [Footnote 2/12] or indirect threat to Wisconsin's sovereignty. [Footnote 2/13] In theabsence of any such

Page 449 U. S. 326

threat, I find it unnecessary to evaluate the forum State's interest in the litigation in order toreach the conclusion that the Full Faith and Credit Clause does not require the Minnesotacourts to apply Wisconsin law to the question of contract interpretation presented in this case.

II

It may be assumed that a choice of law decision would violate the Due Process Clause if itwere totally arbitrary or if it were fundamentally unfair to either litigant. I question whether ajudge's decision to apply the law of his own State could ever be described as wholly irrational.For judges are presumably familiar with their own state law, and may find it difficult and timeconsuming to discover and apply correctly the law of another State. [Footnote 2/14] The forumState's interest in the fair and efficient administration of justice is therefore sufficient, in myjudgment, to attach a presumption of validity to a forum State's decision to apply its own lawto a dispute over which it has jurisdiction.

The forum State's interest in the efficient operation of its judicial system is clearly notsufficient, however, to justify the application of a rule of law that is fundamentally unfair to oneof the litigants. Arguably, a litigant could demonstrate such unfairness in a variety of ways.Concern about the fairness of the forum's choice of its own rule might arise

Page 449 U. S. 327

if that rule favored residents over nonresidents, if it represented a dramatic departure from therule that obtains in most American jurisdictions, or if the rule itself was unfair on its face or asapplied. [Footnote 2/15]

The application of an otherwise acceptable rule of law may result in unfairness to the litigantsif, in engaging in the activity which is the subject of the litigation, they could not reasonablyhave anticipated that their actions would later be judged by this rule of law. A choice of lawdecision that frustrates the justifiable expectations of the parties can be fundamentally unfair.This desire to prevent unfair surprise to a litigant has been the central concern in this Court'sreview of choice of law decisions under the Due Process Clause. [Footnote 2/16]

Neither the "stacking" rule itself nor Minnesota's application of that rule to these litigantsraises any serious question of fairness. As the plurality observes, "[s]tacking was

Page 449 U. S. 328

the rule in most States at the time the policy was issued." Ante at 449 U. S. 316, n. 22.[Footnote 2/17] Moreover, the rule is consistent with the economics of a contractualrelationship in which the policyholder paid three separate premiums for insurance coveragefor three automobiles, including a separate premium for each uninsured motorist coverage.[Footnote 2/18] Nor am I persuaded that the decision of the Minnesota courts to apply the"stacking" rule in this case can be said to violate due process because that decision frustratesthe reasonable expectations of the contracting parties.

Contracting parties can, of course, make their expectations explicit by providing in theircontract either that the law of a particular jurisdiction shall govern questions of contractinterpretation [Footnote 2/19] or that a particular substantive rule, for instance "stacking," shallor shall not apply. [Footnote 2/20] In the absence

Page 449 U. S. 329

of such express provisions, the contract nonetheless may implicitly reveal the expectations ofthe parties. For example, if a liability insurance policy issued by a resident of a particular Stateprovides coverage only with respect to accidents within that State, it is reasonable to infer thatthe contracting parties expected that their obligations under the policy would be governed bythat State's law. [Footnote 2/21]

In this case, no express indication of the parties' expectations is available. The insurancepolicy provided coverage for accidents throughout the United States; thus, at the time ofcontracting, the parties certainly could have anticipated that the law of States other thanWisconsin would govern particular claims arising under the policy. [Footnote 2/22] By virtue ofdoing business

Page 449 U. S. 330

in Minnesota, Allstate was aware that it could be sued in the Minnesota courts; Allstate alsopresumably was aware that Minnesota law, as well as the law of most States, permitted"stacking." Nothing in the record requires that a different inference be drawn. Therefore, thedecision of the Minnesota courts to apply the law of the forum in this case does not frustratethe reasonable expectations of the contracting parties, and I can find no fundamentalunfairness in that decision requiring the attention of this Court. [Footnote 2/23]

Page 449 U. S. 331

In terms of fundamental fairness, it seems to me that two factors relied upon by the plurality --the plaintiff's post-accident move to Minnesota and the decedent's Minnesota employment --are either irrelevant to or possibly even tend to undermine the plurality's conclusion. When theexpectations of the parties at the time of contracting are the central due process concern, asthey are in this case, an unanticipated post-accident occurrence is clearly irrelevant for dueprocess purposes. The fact that the plaintiff became a resident of the forum State after theaccident surely cannot justify a ruling in her favor that would not be made if the plaintiff were anonresident. Similarly, while the fact that the decedent regularly drove into Minnesota might berelevant to the expectations of the contracting parties, [Footnote 2/24] the fact that he did sobecause he was employed in Minnesota adds nothing to the due process analysis. The choiceof law decision of the Minnesota courts is consistent with due process because it does notresult in unfairness to either litigant, not because Minnesota now has an interest in the plaintiffas resident or formerly had an interest in the decedent as employee.

III

Although I regard the Minnesota courts' decision to apply forum law as unsound as a matter ofconflicts law, and there

Page 449 U. S. 332

is little in this record other than the presumption in favor of the forum's own law to supportthat decision, I concur in the plurality's judgment. It is not this Court's function to establish andimpose upon state courts a federal choice of law rule, nor is it our function to ensure that statecourts correctly apply whatever choice of law rules they have themselves adopted. [Footnote2/25] Our authority may be exercised in the choice of law area only to prevent a violation of theFull Faith and Credit or the Due Process Clause. For the reasons stated above, I find no suchviolation in this case.

[Footnote 2/1]

Article IV, § 1, provides:

"Full Faith and Credit shall be given in each State to the public Acts, Records, and JudicialProceedings of every other State. And the Congress may by general Laws prescribe theManner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof."

[Footnote 2/2]

Section 1 of the Fourteenth Amendment provides, in part:

"No State shall . . . deprive any person of life, liberty, or property, without due process of law. . .."

[Footnote 2/3]

The two questions presented by the choice of law issue arise only after it is assumed orestablished that the defendant's contacts with the forum State are sufficient to supportpersonal jurisdiction. Although the choice of law concerns -- respect for another sovereign andfairness to the litigants -- are similar to the two functions performed by the jurisdictionalinquiry, they are not identical. In World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286, 444U. S. 291-292 (1980), we stated:

"The concept of minimum contacts, in turn, can be seen to perform two related, butdistinguishable, functions. It protects the defendant against the burdens of litigating in adistant or inconvenient forum. And it acts to ensure that the States, through their courts, do notreach out beyond the limits imposed on them by their status as coequal sovereigns in afederal system."

See also Reese, Legislative Jurisdiction, 78 Colum.L.Rev. 1587, 1589-1590 (1978). While it hasbeen suggested that this same minimum contacts analysis be used to define theconstitutional limitations on choice of law, see, e.g., Martin, Personal Jurisdiction and Choiceof Law, 78 Mich.L.Rev. 872 (1980), the Court has made it clear over the years that the personaljurisdiction and choice of law inquiries are not the same. See Kulko v. California Superior

Court, 436 U. S. 84, 436 U. S. 98 (1978); Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 215 (1977);id. at 433 U. S. 224-226 (BRENNAN, J., dissenting in part); Hanson v. Denckla, 357 U. S. 235,357 U. S. 253-254 (1958); id. at 357 U. S. 258 (Black, J., dissenting).

[Footnote 2/4]

Although the Court has struck down a state court's choice of forum law on both due process,see, e.g., Home Ins. Co. v. Dick, 281 U. S. 397 (1930), and full faith and credit grounds, see, e.g.,John Hancock Mutual Life Ins. Co. v. Yates, 299 U. S. 178 (1936), no clear analyticaldistinction between the two constitutional provisions has emerged. The Full Faith and CreditClause, of course, was inapplicable in Home Ins. Co. because the law of a foreign nation,rather than of a sister State, was at issue; a similarly clear explanation for the Court's relianceupon the Full Faith and Credit Clause in John Hancock Mutual Life Ins. cannot be found.Indeed, John Hancock Mutual Life Ins. is probably best understood as a due process case.See Reese, supra at 1589, and n. 17; Weintraub, Due Process and Full Faith and CreditLimitations on a State's Choice of Law, 44 Iowa L.Rev. 449, 457-458 (1959).

[Footnote 2/5]

See R. Leflar, American Conflicts Law § 5, p. 7, § 55, pp. 106-107 (3d ed.1977). The Court'sfrequent failure to distinguish between the two Clauses in the choice of law context mayunderlie the suggestions of various commentators that either the Full Faith and Credit Clauseor the Due Process Clause be recognized as the single appropriate source for constitutionallimitations on choice of law. Compare Martin, Constitutional Limitations on Choice of Law, 61Cornell L.Rev. 185 (1976) (full faith and credit), with Reese, supra, (due process); see alsoKirgis, The Roles of Due Process and Full Faith and Credit in Choice of Law, 62 Cornell L.Rev.94 (1976).

[Footnote 2/6]

Even when the Court has explicitly considered both provisions in a single case, therequirements of the Due Process and Full Faith and Credit Clauses have been measured byessentially the same standard. For example, in Watson v. Employers Liability Assurance Corp.,348 U. S. 66 (1954), the Court separately considered the due process and full faith and creditquestions. See id. at 348 U. S. 70-73. However, in concluding that the Full Faith and Credit

Clause did not bar the Louisiana courts from applying Louisiana law in that case, the Courtsubstantially relied upon its preceding analysis of the requirements of due process. Id. at 348U. S. 73. By way of contrast, in Alaska Packers Assn. v. Industrial Accident Comm'n, 294 U. S.532, 294 U. S. 544-550 (1935), the Court's full faith and credit analysis differed significantlyfrom its due process analysis. However, as noted in the plurality opinion, ante at 449 U. S. 308,n. 10, the Court has since abandoned the full faith and credit standard represented by AlaskaPackers.

[Footnote 2/7]

See also Sumner, The Full Faith and Credit Clause -- Its History and Purpose, 34 Or.L.Rev. 224,242 (1955); Weintraub, supra at 477; R. Leflar, supra, § 73, P. 143.

[Footnote 2/8]

As the Court observed in Alaska Packers, supra, an overly rigid application of the Full Faith andCredit Clause would produce anomalous results:

"A rigid and literal enforcement of the full faith and credit clause, without regard to the statuteof the forum, would lead to the absurd result that, wherever the conflict arises, the statute ofeach state must be enforced in the courts of the other, but cannot be in its own."

294 U.S. at 294 U. S. 547.

[Footnote 2/9]

For example, it is well established that "the Full Faith and Credit Clause does not require aState to apply another State's law in violation of its own legitimate public policy." . Nevada v.Hall, 440 U. S. 410, 440 U. S. 422 (1979) (footnote omitted).

[Footnote 2/10]

The kind of state action the Full Faith and Credit Clause was designed to prevent has beendescribed in a variety of ways by this Court. In Carroll v. Lanza, 349 U. S. 408, 349 U. S. 413(1955), the Court indicated that the Clause would be invoked to restrain "any policy of hostilityto the public Acts" of another State. In Nevada v. Hall, supra at 440 U. S. 424, n. 24, weapproved action which "pose[d] no substantial threat to our constitutional system ofcooperative federalism." And in Thomas v. Washington Gas Light Co., 448 U. S. 261, 448 U. S.272 (1980), the plurality opinion described the purpose of the Full Faith and Credit Clause asthe prevention of "parochial entrenchment on the interests of other State."

[Footnote 2/11]

While the justifiable expectations of the litigants are a major concern for purposes of dueprocess scrutiny of choice of law decisions, see 449 U. S. infra, the decision in John HancockMutual Life Ins. Co. v. Yates, 299 U. S. 178 (1936), suggests that this concern may alsoimplicate state interests cognizable under the Full Faith and Credit Clause. In John HancockMutual Life Ins., the Court struck down on full faith and credit grounds a Georgia court's choiceof Georgia law over a conflicting New York statute in a suit on a New York life insurancecontract brought after the insured's death in New York. Central to the decision in that case wasthe Court's apparent concern that application of Georgia law would result in unfair surprise toone of the contracting parties. The Court found that the New York statute was "a rule ofsubstantive law which became a term of the contract, as much so as the amount of thepremium to be paid or the time for its payment." Id. at 299 U. S. 182 (footnote omitted). Thisstatute "determine[d] the substantive rights of the parties as fully as if a provision to that effecthad been embodied in writing in the policy." Id. at 299 U. S. 182-183. The insurer had noreason to expect that the New York statute would not control all claims arising under the lifeinsurance policy. The parties to a life insurance contract normally would not expect the placeof death to have any bearing upon the proper construction of the policy; by way of contrast, inthe case of a liability policy, the place of the tort might well be relevant. For that reason, in a lifeinsurance contract relationship, it is likely that neither party would expect the law of any Stateother than the place of contracting to have any relevance in possible subsequent litigation. Seegenerally C. Carnahan, Conflict of Laws and Life Insurance Contracts § 15, pp. 51-52, § 47, pp.264-265, 267-268, § 60, pp. 325-327 (2d ed.1958) .

Paul Freund has aptly characterized John Hancock Mutual Life Ins. as perhaps this Court's"most ambitious application of the full faith and credit clause." Freund, Chief Justice Stone andthe Conflict of Laws, 59 Harv.L.Rev. 1210, 1233 (1946). Like Bradford Electric Light Co. v.Clapper, 286 U. S. 145 (1932), on which the Court relied, see 299 U.S. at 299 U. S. 183, JohnHancock Mutual Life Ins. was one of a series of constitutional decisions in the 1930's that

have been limited by subsequent cases. See Carroll v. Lanza, 349 U.S. at 349 U. S. 412;Thomas v. Washington Gas Light Co., supra at 448 U. S. 272-273, n. 18 (plurality opinion). Seealso Traynor, Is This Conflict Really Necessary?, 37 Texas L.Rev. 657, 675 (1959).

[Footnote 2/12]

Compare Nevada v. Hall, supra, in which the Court permitted a California court to disregardNevada's statutory limitation on damages available against the State. The Court found thisdirect intrusion upon Nevada's sovereignty justified because the Nevada statute was"obnoxious" to California's public policy. Id. at 424.

[Footnote 2/13]

It is clear that a litigant challenging the forum's application of its own law to a lawsuit properlybrought in its courts bears the burden of establishing that this choice of law infringes uponinterests protected by the Full Faith and Credit Clause. See Alaska Packers Assn. v. IndustrialAccident Comm'n, 294 U.S. at 294 U. S. 547-548.

It is equally clear that a state court's decision to apply its own law cannot violate the Full Faithand Credit Clause where the application of forum law does not impinge at all upon theinterests of other States. Cf. Reese, supra, n. 3, at 1601.

[Footnote 2/14]

This task can be particularly difficult for a trial judge who does not have ready access to a lawlibrary containing the statutes and decisions of all 50 States. If that judge is able to apply lawwith which he is thoroughly familiar or can easily discover, substantial savings can accrue tothe State's judicial system. Moreover, an erroneous interpretation of the governing rule is lesslikely when the judge is applying a familiar rule. Cf. Shaffer v. Heitner, 433 U.S. at 433 U. S.225-226 (BRENNAN, J., dissenting in part) (such concerns indicate that a State's ability toapply its own law to a transaction should be relevant for purposes of evaluating its power toexercise jurisdiction over the parties to that transaction).

[Footnote 2/15]

Discrimination against nonresidents would be constitutionally suspect even if the Due ProcessClause were not a check upon a State's choice of law decisions. See Currie & Schreter,Unconstitutional Discrimination in the Conflict of Laws: Equal Protection, 28 U.Chi.L.Rev. 1(1960); Currie & Schreter, Unconstitutional Discrimination in the Conflict of Laws: Privilegesand Immunities, 69 Yale L.J. 1323 (1980); Note, Unconstitutional Discrimination in Choice ofLaw, 77 Colum.L.Rev. 272 (1977). Moreover, both discriminatory and substantively unfair rulesof law may be detected and remedied without any special choice of law analysis; familiarconstitutional principles are available to deal with both varieties of unfairness. See, e.g.,Martin, supra, n. 5, at 199.

[Footnote 2/16]

Upon careful analysis, most of the decisions of this Court that struck down on due processgrounds a state court's choice of forum law can be explained as attempts to prevent a Statewith a minimal contact with the litigation from materially enlarging the contractual obligationsof one of the parties where that party had no reason to anticipate the possibility of suchenlargement. See, e.g., Home Ins. Co. v. Dick, 281 U. S. 397 (1930); Hartford Accident &Indemnity Co. v. Delta & Pine Land Co., 292 U. S. 143 (1934); cf. John Hancock Mutual Life Ins.Co. v. Yates, 299 U. S. 178 (1936) (similar concern under Full Faith and Credit Clause, see n.11, supra). See generally Weintraub, supra, n. 4, at 457-460.

[Footnote 2/17]

See also Nelson v. Employers Mutual Casualty Co., 63 Wis.2d 558, 563-566, and nn. 2, 3, 217N.W.2d 670, 672-674, and nn. 2, 3 (1974), discussed ante at 449 U. S. 316-317, n. 22.

[Footnote 2/18]

The "stacking" rule provides that all of the uninsured motorist coverage purchased by aninsured party may be aggregated, or "stacked," to create a fund available to provide a recoveryfor a single accident.

[Footnote 2/19]

For example, in Home Ins. Co. v. Dick, supra at 281 U. S. 403, and n. 1, the insurance policywas subject, by its express terms, to Mexican law.

[Footnote 2/20]

Home Ins. Co., supra, again provides a useful example. In that case, the insurance policyexpressly provided a l-year limitations period for claims arising thereunder. Id. at 281 U. S.403. Similarly, the insurance policy at issue in Hartford Accident & Indemnity Co. v. Delta &Pine Land Co., supra at 292 U. S. 146, also prescribed a specific limitations period.

While such express provisions are obviously relevant, they are not always dispositive. In Clayv. Sun Insurance Office, Ltd., 377 U. S. 179 (1964), the Court allowed the lower court's choiceof forum law to override an express contractual limitations period. The Court emphasized thefact that the insurer had issued the insurance policy with the knowledge that it would cover theinsured property wherever it was taken. Id. at 377 U. S. 181-182. The Court also noted that theinsurer had not attempted to provide in the policy that the law of another State would control.Id. at 377 U. S. 182.

In Watson v. Employers Liability Assurance Corp., 348 U.S. at 348 U. S. 68, the insurancepolicy expressly provided that an injured party could not maintain a direct action against theinsurer until after the insured's liability had been determined. The Court found that neither theDue Process Clause nor the Full Faith and Credit Clause prevented the Louisiana courts fromapplying forum law to permit a direct action against the insurer prior to determination of theinsured's liability. As in Clay, the Court noted that the policy provided coverage for injuriesanywhere in the United States. 348 U.S. at 348 U. S. 71-72. An additional, althoughunarticulated, factor in Watson was the fact that the litigant urging that forum law be appliedwas not a party to the insurance contract. While contracting parties may be able to provide inadvance that a particular rule of law will govern disputes between them, their expectations areclearly entitled to less weight when the rights of third-party litigants are at issue.

[Footnote 2/21]

In Home Ins. Co., supra, the insurance policy was issued in Mexico by a Mexican corporationand covered the insured vessel only in certain Mexican waters. Id. at 281 U. S. 403.

[Footnote 2/22]

In Clay v. Sun Insurance Office, Ltd., supra at 377 U. S. 182, and Watson v. Employers LiabilityAssurance Corp., supra at 348 U. S. 71-72, the Court considered it significant, in upholding thelower courts' choice of forum law, that the insurance policies provided coverage throughoutthe United States. See n. 20, supra. Of course, in both Clay and Watson, the loss to which theinsurance applied actually occurred in the forum State, whereas the accident in this caseoccurred in Wisconsin, not Minnesota. However, as the dissent recognizes, post at 449 U. S.336-337, because the question on the merits is one of contract interpretation, rather than tortliability, the actual site of the accident is not dispositive with respect to the due processinquiry. More relevant is the fact that the parties, at the time of contracting, anticipated that anaccident covered by the policy could occur in a "stacking" State. The fact that this particularaccident did not occur in Minnesota does not undercut the expectations formed by the partiesat the time of contracting.

In Hartford Accident & Indemnity Co. v. Delta & Pine Land Co., supra, the Court struck down astate court's choice of forum law despite the fact that the insurance contract's coverage wasnot limited by state boundaries. While Hartford Accident may indeed have "scant relevance fortoday," ante at 449 U. S. 309, n. 11, it is nonetheless consistent with a due process analysisbased upon fundamental fairness to the parties. One of the statutes applied by the Mississippicourts in Hartford Accident was offensively broad, providing that "[a]ll contracts of insuranceon property, lives or interests in this state shall be deemed to be made therein." 292 U.S. at 292U. S. 148. No similar statute is involved in this case. In addition, the Mississippi courts appliedthe law of the forum to override an express contractual provision, and thus frustrated theexpectations of the contracting parties. In the present case, the insurance contract contains nosimilar declaration of the intent of the parties.

[Footnote 2/23]

Comparison of this case with Home Ins. Co. v. Dick, 281 U. S. 397 (1930), confirms myconclusion that the application of Minnesota law in this case does not offend the Due ProcessClause. In Home Ins. Co., the contract expressly provided that a particular limitations period

would govern claims arising under the insurance contract, and that Mexican law was to beapplied in interpreting the contract; in addition, the contract was limited in effect to certainMexican waters. The parties could hardly have made their expectations with respect to theapplicable law more plain. In this case, by way of contrast, nothing in the contract suggeststhat Wisconsin law should be applied or that Minnesota's "stacking" rule should not be applied.In this case, unlike Home Ins. Co., the court's choice of forum law results in no unfair surpriseto the insurer.

[Footnote 2/24]

Even this factor may not be of substantial significance. At the time of contracting, the partieswere aware that the insurance policy was effective throughout the United States, and that thelaw of any State, including Minnesota, might be applicable to particular claims. The fact thatthe decedent regularly drove to Minnesota, for whatever purpose, is relevant only to the extentthat it affected the parties' evaluation, at the time of contracting, of the likelihood thatMinnesota law would actually be applied at some point in the future. However, because theapplicability of Minnesota law was perceived as possible at the time of contracting, it does notseem especially significant for due process purposes that the parties may also haveconsidered it likely that Minnesota law would be applied. This factor merely reinforces theexpectation revealed by the policy's national coverage.

[Footnote 2/25]

In Kryger v. Wilson, 24 U. S. 171, 24 U. S. 176 (1916), after rejecting a due process challenge toa state court's choice of law, the Court stated:

"The most that the plaintiff in error can say is that the state court made a mistaken applicationof doctrines of the conflict of laws in deciding that the cancellation of a land contact isgoverned by the law of the situs, instead of the place of making and performance. But that,being purely a question of local common law, is a matter with which this court is notconcerned."

JUSTICE POWELL, with whom THE CHIEF JUSTICE and JUSTICE REHNQUIST Join,dissenting.

My disagreement with the plurality is narrow. I accept with few reservations 449 U. S. whichsets forth the basic principles that guide us in reviewing state choice of law decisions underthe Constitution. The Court should invalidate a forum State's decision to apply its own law onlywhen there are no significant contacts between the State and the litigation. This modest checkon state power is mandated by the Due Process Clause of the Fourteenth Amendment and theFull Faith and Credit Clause of Art. IV, § 1. I do not believe, however, that the pluralityadequately analyzes the policies such review must serve. In consequence, it has foundsignificant what appear to me to be trivial contacts between the forum State and the litigation.

Page 449 U. S. 333

I

At least since Carroll v. Lanza, 349 U. S. 408 (1955), the Court has recognized that both theDue Process and the Full Faith and Credit Clauses are satisfied if the forum has suchsignificant contacts with the litigation that it has a legitimate state interest in applying its ownlaw. The significance of asserted contacts must be evaluated in light of the constitutionalpolicies that oversight by this Court should serve. Two enduring policies emerge from ourcases.

First, the contacts between the forum State and the litigation should not be so "slight andcasual" that it would be fundamentally unfair to a litigant for the forum to apply its own State'slaw. Clay v. Sun Ins. Office, Ltd., 377 U. S. 179, 377 U. S. 182 (1964). The touchstone here isthe reasonable expectation of the parties. See Weintraub, Due Process and Full Faith andCredit Limitations on a State's Choice of Law, 44 Iowa L.Rev. 449, 445-457 (1959) (Weintraub).Thus, in Clay, the insurer sold a policy to Clay "with knowledge that he could take his propertyanywhere in the world he saw fit without losing the protection of his insurance.'" 377 U.S. at182, quoting Clay v. Sun Ins. Office, Ltd., 363 U. S. 207, 363 U. S. 221 (1960) (Black, J.,dissenting). When the insured moved to Florida with the knowledge of the insurer, and a lossoccurred in that State, this Court found no unfairness in Florida's applying its own rule ofdecision to permit recovery on the policy. The insurer "must have known it might be suedthere." Ibid. See also Watson v. Employers Liability Assurance Corp., 348 U. S. 66 (1954).[Footnote 3/1]

Page 449 U. S. 334

Second, the forum State must have a legitimate interest in the outcome of the litigation beforeit. Pacific Ins. Co. v. Industrial Accident Comm'n, 306 U. S. 493 (1939). The Full Faith andCredit Clause addresses the accommodation of sovereign power among the various States.Under limited circumstances, it requires one State to give effect to the statutory law of anotherState. Nevada v. Hall, 440 U. S. 410, 440 U. S. 423 (1979). To be sure, a forum State need notgive effect to another State's law if that law is in "violation of its own legitimate public policy."Id. at 440 U. S. 422. Nonetheless, for a forum State to further its legitimate public policy byapplying its own law to a controversy, there must be some connection between the factsgiving rise to the litigation and the scope of the State's lawmaking jurisdiction.

Both the Due Process and Full Faith and Credit Clauses ensure that the States do not "reachout beyond the limits imposed on them by their status as coequal sovereigns in a federalsystem." World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286, 444 U. S. 292 (1980)(addressing Fourteenth Amendment limitation on state court jurisdiction). As the Court statedin Pacific Ins. Co., supra:

"[T]he full faith and credit clause does not require one state to substitute for its own statute,applicable to persons and events within it, the conflicting statute of another state."

Id. at 306 U. S. 502 (emphasis added). The State has a legitimate interest in applying a rule ofdecision to the litigation only if the facts to which the rule will be applied have created effectswithin the State, toward which the State's public policy is directed. To assess the sufficiency ofasserted contacts between the forum and the litigation, the court must determine if thecontacts form a reasonable link between the litigation and a state policy. In short, examinationof contacts addresses whether "the state

Page 449 U. S. 335

has an interest in the application of its policy in this instance." Currie, The Constitution and theChoice of Law: Governmental Interests and the Judicial Function, in B. Currie Selected Essayson the Conflict of Laws 188, 189 (1963) (Currie). If it does, the Constitution is satisfied.

John Hancock Mut. Life Ins. Co. v. Yates, 299 U. S. 178 (1936), illustrates this principle. A lifeinsurance policy was executed in New York, on a New York insured with a New York

beneficiary. The insured died in New York; his beneficiary moved to Georgia and sued torecover on the policy. The insurance company defended on the ground that the insured, in theapplication for the policy, had made materially false statements that rendered it void underNew York law. This Court reversed the Georgia court's application of its contrary rule that allquestions of the policy's validity must be determined by the jury. The Court found a violation ofthe Full Faith and Credit Clause, because, "[i]n respect to the accrual of the right assertedunder the contract . . . , there was no occurrence, nothing done, to which the law of Georgiacould apply." Id. at 299 U. S. 182. In other words, the Court determined that Georgia had nolegitimate interest in applying its own law to the legal issue of liability. Georgia's contacts withthe contract of insurance were nonexistent. [Footnote 3/2] See Home Ins. Co. v. Dick, 281 U. S.397, 281 U. S. 408 (1930).

In summary, the significance of the contacts between a forum State and the litigation must beassessed in light of

Page 449 U. S. 336

these two important constitutional policies. [Footnote 3/3] A contact, or a pattern of contacts,satisfies the Constitution when it protects the litigants from being unfairly surprised if theforum State applies its own law, and when the application of the forum's law reasonably canbe understood to further a legitimate public policy of the forum State.

II

Recognition of the complexity of the constitutional inquiry requires that this Court apply theseprinciples with restraint. Applying these principles to the facts of this case, I do not believe,however, that Minnesota had sufficient contacts with the "persons and events" in this litigationto apply its rule permitting stacking. I would agree that no reasonable expectations of theparties were frustrated. The risk insured by petitioner was not geographically limited. See Clayv. Sun Ins. Office, Ltd., 377 U.S. at 377 U. S. 182. The close proximity of Hager City, Wis., toMinnesota, and the fact that Hague commuted daily to Red Wing, Minn., for many years,should have led the insurer to realize that there was a reasonable probability that the riskwould materialize in Minnesota. Under our precedents, it is plain that Minnesota could haveapplied its own law to an accident occurring within its borders. See ante at 449 U. S. 318, n. 24.The fact that the accident did not, in fact, occur in Minnesota is not controlling, because theexpectations of the litigants before the cause of

Page 449 U. S. 337

action accrues provide the pertinent perspective. See Weintraub 455; n. 1, supra.

The more doubtful question in this case is whether application of Minnesota's substantive lawreasonably furthers a legitimate state interest. The plurality attempts to give substance to thetenuous contacts between Minnesota and this litigation. Upon examination, however, thesecontacts are either trivial or irrelevant to the furthering of any public policy of Minnesota.

First, the post-accident residence of the plaintiff beneficiary is constitutionally irrelevant to thechoice of law question. John Hancock Mut. Life Ins. Co. v. Yates, supra. The plurality todayinsists that Yates only held that a post-occurrence move to the forum State could not, "in andof itself," confer power on the forum to apply its own law, but did not establish that such achange of residence was irrelevant. Ante at 449 U. S. 319. What the Yates Court held, however,was that "there was no occurrence, nothing done, to which the law of Georgia could apply." 299U.S. at 299 U. S. 182 (emphasis added). Any possible ambiguity in the Court's view of thesignificance of a post-occurrence change of residence is dispelled by Home Ins. Co. v. Dick,supra, cited by the Yates Court, where it was held squarely that Dick's post-accident move tothe forum State was "without significance." 281 U.S. at 281 U. S. 408.

This rule is sound. If a plaintiff could choose the substantive rules to be applied to an action bymoving to a hospitable forum, the invitation to forum shopping would be irresistible. Moreover,it would permit the defendant's reasonable expectations at the time the cause of actionaccrues to be frustrated, because it would permit the choice of law question to turn on apost-accrual circumstance. Finally, post-accrual residence has nothing to do with facts towhich the forum State proposes to apply its rule; it is unrelated to the substantive legal issuespresented by the litigation.

Second, the plurality finds it significant that the insurer does business in the forum State. Anteat 449 U. S. 317-318. The State

Page 449 U. S. 338

does have a legitimate interest in regulating the practices of such an insurer. But thisargument proves too much. The insurer here does business in all 50 States. The forum Statehas no interest in regulating that conduct of the insurer unrelated to property, persons, orcontracts executed within the forum State. [Footnote 3/4] See Hoopeston Canning Co. v.Cullen, 318 U. S. 313, 318 U. S. 319 (1943). The plurality recognizes this flaw, and attempts tobolster the significance of the local presence of the insurer by combining it with the otherfactors deemed significant: the presence of the plaintiff and the fact that the deceased workedin the forum State. This merely restates the basic question in the case.

Third, the plurality emphasizes particularly that the insured worked in the forum State.[Footnote 3/5] Ante at 449 U. S. 313-317. The fact that the insured was a nonresidentemployee in the forum

Page 449 U. S. 339

State provides a significant contact for the furtherance of some local policies. See, e.g., PacificIns. Co. v. Industrial Accident Comm'n, 306 U. S. 493 (1939) (forum State's interest incompensating workers for employment-related injuries occurring within the State); AlaskaPackers Assn. v. Industrial Accident Comm'n, 294 U. S. 532, 294 U. S. 549 (1935) (forumState's interest in compensating the employment-related injuries of a worker hired in theState). The insured's place of employment is not, however, significant in this case. Neither thenature of the insurance policy, the events related to the accident, nor the immediate questionof stacking coverage is in any way affected or implicated by the insured's employment status.The plurality's opinion is understandably vague in explaining how trebling the benefits to bepaid to the estate of a nonresident employee furthers any substantial state interest relating toemployment. Minnesota does not wish its workers to die in automobile accidents, butpermitting stacking will not further this interest. The substantive issue here is solely one ofcompensation, and whether the compensation provided by this policy is increased or not willhave no relation to the State's employment policies or police power. See n. 5, supra.

Neither taken separately nor in the aggregate do the contacts asserted by the plurality todayindicate that Minnesota's application of its substantive rule in this case will further anylegitimate state interest. [Footnote 3/6] The plurality focuses

Page 449 U. S. 340

only on physical contacts vel non, and, in doing, so pays scant attention to the morefundamental reasons why our precedents require reasonable policy-related contacts in choiceof law cases. Therefore, I dissent.

[Footnote 3/1]

Home Ins. Co. v. Dick, 281 U. S. 397 (1930), is a case where the reasonable expectations of alitigant were frustrated. The insurance contract confined the risk to Mexico, where the lossoccurred and where both the insurer and the insured resided until the claim accrued. ThisCourt found a violation of the Due Process Clause when Texas, the forum State, applied a localrule to allow the insured to gain a recovery unavailable under Mexican law. Because of thegeographic limitation on the risk, and because there were no contacts with the forum Stateuntil the claim accrued, the insurer could have had no reasonable expectation that Texas lawwould be applied to interpret its obligations under the contract. See Weintraub 455.

[Footnote 3/2]

"It is manifest that Georgia had no interest in the application to this case of any policy to befound in its laws. When the contract was entered into, and at all times until the insured died,the parties and the transaction were beyond the legitimate reach of whatever policy Georgiamay have had. Any interest asserted by Georgia must relate to the circumstance that theaction is tried there, and must arise not from any policy directed to the business of lifeinsurance but from some policy having to do with the business of the courts. This wasapparently recognized even by the Georgia court; hence the disingenuous characterization ofthe matter as one of 'procedure,' rather than of 'substance.'"

Currie 236. See also id. at 232-233.

[Footnote 3/3]

The plurality today apparently recognizes that the significance of the contacts must beevaluated in light of the policies our review serves. It acknowledges that the sufficiency of thesame contacts sometimes will differ in jurisdiction and choice of law questions. Ante at 449 U.S. 317, n. 23. The plurality, however, pursues the rationale for the requirement of sufficient

contacts in choice of law cases no further than to observe that the forum's application of itsown law must be "neither arbitrary nor fundamentally unfair." Ante at 449 U. S. 313. But thisgeneral prohibition does not distinguish questions of choice of law from those of jurisdiction,or from much of the jurisprudence of the Fourteenth Amendment.

[Footnote 3/4]

The petitioner in John Hancock Mut. Life Ins. Co. v. Yates, 299 U. S. 178 (1936), did businessin Georgia, the forum State, at the time of that case. See The Insurance Almanac 715 (1935).Also, Georgia extensively regulated insurance practices within the State at that time. SeeGa.Code § 56-101 et seq. (1933). This Court did not hint in Yates that this fact was of theslightest significance to the choice of law question, although it would have been crucial for theexercise of in personam jurisdiction.

[Footnote 3/5]

The plurality exacts double service from this fact, by finding a separate contact in that theinsured commuted daily to his job. Ante at 449 U. S. 314-315. This is merely a repetition of thefacts that the insured lived in Wisconsin and worked in Minnesota. The State does have aninterest in the safety of motorists who use its roads. This interest is not limited to employees,but extends to all nonresident motorists on its highways. This safety interest, however, cannotencompass, either in logic or in any practical sense, the determination whether a nonresident'sestate can stack benefit coverage in a policy written in another State regarding an accidentthat occurred on another State's roads.

Cardillo v. Liberty Mutual Ins. Co., 330 U. S. 469 (1947), hardly establishes commutation as anindependent contact; the case merely approved the application of a forum State's law to anindustrial accident occurring in a neighboring State when the employer and the employee bothresided in the forum State.

[Footnote 3/6]

The opinion of JUSTICE STEVENS concurring in the judgment supports my view that theforum State's application of its own law to this case cannot be justified by the existence of

relevant minimum contacts. As JUSTICE STEVENS observes, the principal factors relied on bythe plurality are "either irrelevant to or possibly even tend to undermine the [plurality's]conclusion." Ante at 449 U. S. 331. The interesting analysis he proposes to uphold the State'sjudgment is, however, difficult to reconcile with our prior decisions, and may create moreproblems than it solves. For example, it seems questionable to measure the interest of a Statein a controversy by the degree of conscious reliance on that State's law by private parties to acontract. Ante at 449 U. S. 324. Moreover, scrutinizing the strength of the interests of anonforum State may draw this Court back into the discredited practice of weighing the relativeinterests of various States in a particular controversy. See ante at 449 U. S. 308, n. 10 (pluralityopinion).