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Topic: Carry Out the Agency

British Airways vs. Court of Appeals


G.R. No. 121824, January 29, 1998
Romero, J

Petitioner: BRITISH AIRWAYS (BA)


Respondents: COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES (PAL)

FACTS:

 In April 1989, private respondent Mahtani went to India. He obtained the services of Mr. Gumar who
bought his tickets from British Airways. Since BA had no direct flights from Manila to Bombay, BA
endorsed the Manila to Hong Kong leg of Mahtani’s trip to PAL. Thus, Mahtani had to take a flight from
Manila to Hong Kong via PAL, and upon arrival in Hong Kong he had to take a connecting flight to
Bombay on board petitioner BA.

Where did the problem arise:

 When Mahtani arrived at Bombay, he discovered that his luggage was missing and that upon inquiry
from the BA representatives, he was told that the same might have been diverted to London. After
patiently waiting for his luggage for one week, BA finally advised him to file a claim.

 In June 1990, in the Philippines, Mahtani filed his complaint for damages and attorney’s fees against
BA. In its Answer, BA filed a counter-claim that Mahtani had no cause of action to file the complaint for
damages since the non-transfer of Mahtani’s luggage to their aircraft was not BA’s fault.

 Moreover, BA filed a third-party complaint against PAL. BA alleged that PAL’s late arrival in Hong Kong
was the reason for the non-transfer of the luggage. The late arrival left hardly any time for the proper
transfer of Mahtani’s luggage to the BA aircraft bound for Bombay.

 PAL then contended that the non-transfer of the luggage was not their fault because although their
aircraft arrived late, there was enough time to transfer Mahtani’s luggage to BA’s aircraft.

 RTC decided in favor of Mahtani and ordered BA to pay damages. With regard to BA’s third-party
complaint against PAL, the RTC dismissed the complaint for lack of cause of action. BA then appealed
before the CA but the appellate court affirmed the RTC ruling.

 CA ruled that the contract of air transportation in this case pursuant to the ticket issued by appellant to
plaintiff-appellee was exclusively between the plaintiff Mahtani and defendant-appellant BA. When
plaintiff boarded the PAL plane from Manila to Hong Kong, PAL was merely acting as a subcontractor or
agent of BA. Thus, PAL cannot be liable since it was only an agent in the contract.

o The agency is shown by the fact that in the ticket, a condition was stipulated that the carriage
by plane although performed by successive carriers is regarded as a single operation. And it is a
well-settled rule that in this type of agency, the carrier issuing the ticket is the principal while
all the other carriers are subcontractors or agents.

ISSUES: (1) Whether BA is liable to pay damages to Mahtani?

(2) Whether the dismissal of the third-party complaint of BA against PAL was valid?

RULINGS:

1. Yes. BA is liable to pay damages to petitioner Mahtani.

One nature of an airline’s contract of carriage is the contract to deliver a cargo or merchandise to its
destination. A business intended to serve the travelling public primarily, it is imbued with public
interest, hence, the law governing common carriers imposes an exacting standard. Neglect or malfeasance by
the carrier’s employees could predictably furnish bases for an action for damages.
In the instant case, it is apparent that the contract of carriage was between Mahtani and BA as the
issuing airline. Moreover, it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a
number of cases, the SC has assessed the airlines’ culpability in the form of damages for breach of contract
involving misplaced luggage.

Thus, in view of their contract of carriage Mahtani is entitled of damages from BA.

2. No. PAL, as BA’s subcontractor or agent, can be liable for the damages if it can be shown that PAL
incurred any negligence in the performance of its agency.

SC agreed with CA’s conclusion and explanation with regard to PAL being BA’s agent.
However, the SC ruled that CA was wrong when it absolved PAL from any liability, by dismissing the third-party
complaint against PAL, because it was only a mere agent of BA and that BA, as the principal, should bear the
damages alone.

It is a well-settled rule that an agent is also responsible for any negligence in the performance
of its function and is liable for damages which the principal may suffer by reason of its negligent act. Thus,
the Court of Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its
agent or sub-contractor.

Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone,
and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved
from any liability due to any of its negligent acts.

It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is proven that the
latter’s negligence was the proximate cause of Mahtani’s unfortunate experience, instead of
totally absolving PAL from any liability.

Therefore, the CA erred when it affirmed the RTC decision dismissing the third-party complaint by BA
against PAL.

Doctrine:

An agent is also responsible for any negligence in the performance of its function and is liable for damages
which the principal may suffer by reason of its negligent act.