APPLICATION OF WARSAW CONVENTION

G.R. No. 92501 March 6, 1992

PHILIPPINE AIR LINES, petitioner,

vs.
HON. COURT OF APPEALS and ISIDRO CO, respondents.

GRIÑO-AQUINO, J.:

This is a petition for review of the decision dated July 19, 1989 of the Court of Appeals affirming the decision of the
Regional Trial Court of Pasay City which awarded P72,766.02 as damages and attorney's fees to private respondent
Isidro Co for the loss of his checked-in baggage as a passenger of petitioner airline.

The findings of the trial court, which were adopted by the appellate court, are:

"At about 5:30 a.m. on April 17, 1985, plaintiff [Co], accompanied by his wife and son, arrived at the
Manila International Airport aboard defendant airline's PAL Flight No. 107 from San Francisco, California,
U.S.A. Soon after his embarking (sic), plaintiff proceeded to the baggage retrieval area to claim his
checks in his possession. Plaintiff found eight of his luggage, but despite diligent search, he failed to
locate ninth luggage, with claim check number 729113 which is the one in question in this case.

"Plaintiff then immediately notified defendant company through its employee, Willy Guevarra, who was
then in charge of the PAL claim counter at the airport. Willy Guevarra, who testified during the trial court
on April 11, 1986, filled up the printed form known as a Property Irregularity Report (Exh. "A"),
acknowledging one of the plaintiff's luggages to be missing (Exh. "A-1"), and signed after asking plaintiff
himself to sign the same document (Exh. "A-2"). In accordance with this procedure in cases of this nature,
Willy Guevarra asked plaintiff to surrender to him the nine claim checks corresponding to the nine
luggages, i.e., including the one that was missing.

The incontestable evidence further shows that plaintiff lost luggage was a Samsonite suitcase measuring
about 62 inches in length, worth about US$200.00 and containing various personal effects purchased by
plaintiff and his wife during their stay in the United States and similar other items sent by their friends
abroad to be given as presents to relatives in the Philippines. Plaintiff's invoices evidencing their
purchases show their missing personal effects to be worth US$1,243.01, in addition to the presents
entrusted to them by their friends which plaintiffs testified to be worth about US$500.00 to US$600.00
(Exhs. "D", "D-1", to "D-17"; tsn, p. 4, July 11, 1985; pp. 5-14, March 7, 1986).

Plaintiff on several occasions unrelentingly called at defendant's office in order to pursue his complaint
about his missing luggage but no avail. Thus, on April 15, 1985, plaintiff through his lawyer wrote a
demand letter to defendant company though Rebecca V. Santos, its manager, Central Baggage Services
(Exhs. "B" & "B-1"). On April 17, 1985, Rebecca Santos replied to the demand letter (Exh. "B")
acknowledging "that to date we have been unable to locate your client's (plaintiff's) baggage despite our
careful search" and requesting plaintiff's counsel to "please extend to him our sincere apologies for the
inconvenience he was caused by this unfortunate incident" (Exh. "C"). Despite the letter (Exh. "C"),
however, defendants never found plaintiff's missing luggage or paid its corresponding value.
Consequently, on May 3, 1985, plaintiff filed his present complaint against said defendants. (pp. 38-
40, Rollo.)

Co sued the airline for damages. The Regional Trial Court of Pasay City found the defendant airline (now petitioner) liable,
and rendered judgment on June 3, 1986, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered sentencing defendant Philippine Airlines, Inc. to pay plaintiff
Isidro Co:

1) P42,766.02 by way of actual damages;

2) P20,000.00 by way of exemplary damages;

 3) P10,000.00 as attorney's fees;

all in addition to the costs of the suit.

"Defendants' counterclaim is hereby dismissed for lack of merit."

(p. 40, Rollo.)

On appeal, the Court of Appeals affirmed in toto the trial court's award.

In his petition for review of the Court of Appeal's decision, petitioner alleges that the appellate court erred:

1. in affirming the conclusion of the trial court that the petitioner's retrieval baggage report was a
fabrication;

2. in not applying the limit of liability under the Warsaw Convention which limits the liability of an air carrier
of loss, delay or damage to checked-in baggage to US$20.00 based on weight; and

3. in awarding private respondent Isidro Co actual and exemplary damages, attorney's fees, and costs.

The first and third assignments of error raise purely factual issues which are not reviewable by this Court (Sec. 2, Rule 45,
Rules of Court). The Court reviews only questions of law which must be distinctly set forth in the petition. (Hodges vs.
People, 68 Phil. 178.) The probative value of petitioner's retrieval report was passed upon by the Regional Trial Court of
Pasay City, whose finding was affirmed by the Court of Appeals as follows:

In this respect, it is further argued that appellee should produce his claim tag if he had not surrendered it
because there was no baggage received. It appeared, however, that appellee surrendered all the nine
claim checks corresponding to the nine luggages, including the one that was missing, to the PAL officer
after accomplishing the Property, Irregularity Report. Therefore, it could not be possible for appellee to
produce the same in court. It is now for appellant airlines to produce the veracity of their Baggage
Retrieval Report by corroborating evidence other than testimonies of their employees. Such document is
within the control of appellant and necessarily requires other corroborative evidence. Since there is no
compelling reason to reverse the factual findings of the lower court, this Court resolves not to disturb the
same. (p. 41, Rollo.)

Whether or not the lost luggage was ever retrieved by the passenger, and whether or not the actual and exemplary
damages awarded by the court to him are reasonable, are factual issues which we may not pass upon in the absence of
special circumstances requiring a review of the evidence.

In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World Airways, Inc. vs. IAC 164 SCRA 268), the Warsaw
Convention limiting the carrier's liability was applied because of a simple loss of baggage without any improper conduct on
the part of the officials or employees of the airline, or other special injury sustained by the passengers. The petitioner
therein did not declare a higher value for his luggage, much less did he pay an additional transportation charge.

Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00 based on weight as
private respondent Co did not declare the contents of his baggage nor pay traditional charges before the flight (p. 3, tsn,
July 18, 1985).

We find no merit in that contention. In Samar Mining Company, Inc. vs. Nordeutscher Lloyd (132 SCRA 529), this Court
ruled:

The liability of the common carrier for the loss, destruction or deterioration of goods transported from a
foreign country to the Philippines is governed primarily by the New Civil Code. In all matters not regulated
by said Code, the rights and obligations of common carriers shall be governed by the Code of Commerce
and by Special Laws.

The provisions of the New Civil Code on common carriers are Articles 1733, 1735 and 1753 which provide:
 Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound
to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as required in article
1733.

Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of the
common carrier for their loss, destruction or deterioration.

Since the passenger's destination in this case was the Philippines, Philippine law governs the liability of the carrier for the
loss of the passenger's luggage.

In this case, the petitioner failed to overcome, not only the presumption, but more importantly, the private respondent's
evidence, proving that the carrier's negligence was the proximate cause of the loss of his baggage. Furthermore,
petitioner acted in bad faith in faking a retrieval receipt to bail itself out of having to pay Co's claim.

The Court of Appeals therefore did not err in disregarding the limits of liability under the Warsaw Convention.

The award of exemplary damages and attorney's fees to the private respondent was justified. In the cases of Imperial
Insurance, Inc. vs. Simon, 122 Phil. 189 and Bert Osmeña and Associates vs. CA, 120 SCRA 396, the appellant was
awarded attorney's fees because of appellee's failure to satisfy the former's just and valid demandable claim which forced
the appellant to litigate. Likewise, in the case of Phil. Surety Ins. Co., Inc. vs. Royal Oil Products, 102 Phil. 326, this Court
justified the grant of exemplary damages and attorney's fees to the petitioner's failure, even refusal, to pay the private
respondent's valid claim.

WHEREFORE, the petition for review is DENIED for lack of merit. Costs against the petitioner.

SO ORDERED.

Narvasa, C.J. and Medialdea, JJ., concur.

Cruz, J., took no part.

PAN AMERICAN AIRWAYS INC V. JOSE K. RAPADAS, G.R. NO 60673 (1992)

FACTS:

Private respondent Jose Rapadas purchased a plane ticket from Pan American Airways bound for Manila from
Guam.
1. On January 16, 1975, while Rapadas was waiting to check in at the Guam Airport, he was ordered by
Pan American’s hand carry control agent to check-in his Samsonite attaché case. Rapadas protested;
arguing that other co-passengers were allowed to hand carry bulkier baggage
2. As such, he went to the end of line hoping that he would not have to register his luggage. However, the
same man in charge of hand carry control ordered him to register his bag
3. Fearing that he would miss his flight, he agreed to check it in. He then gave his bag to his brother who
happened to be around and who checked it in for him, without declaring its contents or the value thereof
4. Upon arrival in Manila, Rapadas claimed and was given all his checked-in luggage without the exception
of the Samsonite attaché case. As such, Rapadas filed a claim with petitioner’s Manila Baggage Service.
However, Pan American was unable to locate the lost bag.
5. As such, Pan Am Airways offered to settle the lost for $160 representing the airline’s limit of liability for
loss or damage to a passenger’s personal property under the contract of carriage between Rapadas and
Pan Am.
6. Rapadas refused and filed an action for damages against Pan Am. He alleged that Pan Am singled him
out in ordering his luggage to be checked in and that the airlines neglected in its duty in handling and
safekeeping his luggage. He alleged that the value of the lost bag and its contents was $42,403.90, the
loss resulted in his failure to pay certain monetary obligations, failure to remit money sent through him to
relatives, inability to enjoy the fruits of his retirement and vacation pay earned from working in Tonga
Construction Co
7. In its answer, Pan Am acknowledged responsibility for the loss of the suitcase but asserted that the claim
was subject to the notice of baggage liability limitations printed at the back of the plane ticket and posted
in its offices
8. The trial court held in favor of Rapadas, rejecting Pan Am’s claim that its liability under the passenger
ticket is only up to $160. CA affirmed the same

ISSUE: WON a passenger is bound by the terms of a passenger ticket declaring the limitations of liability set
forth in the Warsaw Convention

HELD: Yes. The Convention governs the availment of the liability limitations where the baggage check is
combined with or incorporated in the passenger ticket which complies with the provisions of Article 3, par. 1(c).
(Article 4, par. 2) In the case at bar, the baggage check is combined with the passenger ticket in one document
of carriage.

The provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage.
The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant
insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he
cannot avoid the application of the liability limitations.
The facts show that the private respondent actually refused to register the attaché case and chose to take it with
him despite having been ordered by the PAN AM agent to check it in. In attempting to avoid registering the
luggage by going back to the line, private respondent manifested a disregard of airline rules on allowable hand-
carried baggage. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed
from checked-in-luggage and placed in one's pockets or in a hand-carried Manila-paper or plastic envelope.
The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding
supplementary charges cannot justify his failure to comply with the requirement that will exclude the application
of limited liability. Had he not wavered in his decision to register his luggage, he could have had enough time to
disclose the true worth of the articles in it and to pay the extra charges or remove them from the checked-in-
luggage. Moreover, an airplane will not depart meantime that its own employee is asking a passenger to comply
with a safety regulation.

Passengers are also allowed one hand-carried bag each provided it conforms to certain prescribed dimensions.
If Mr. Rapadas was not allowed to hand-carry the lost attaché case, it can only mean that he was carrying more
than the allowable weight for all his luggage or more than the allowable number of hand-carried items or more
than the prescribed dimensions for the bag or valise. The evidence on any arbitrary behavior of a Pan Am
employee or inexcusable negligence on the part of the carrier is not clear from the petition. Absent such proof,
we cannot hold the carrier liable because of arbitrariness, discrimination, or mistreatment.
It does not mean, however, that passengers are always bound to the stipulated amounts printed on a ticket,
found in a contract of adhesion, or printed elsewhere but referred to in handouts or forms. The reasons behind
stipulations on liability limitations arise from the difficulty, if not impossibility, of establishing with a clear
preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are declared, it will
always be the word of a passenger against that of the airline. If the loss of life or property is caused by the gross
negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by satisfactory evidence
other than the self-serving declarations of one party, the Court will not hesitate to disregard the fine print in a
contract of adhesion. Otherwise, the Court is constrained to rule on the basis of the provisions of the contract.

1. COMMERCIAL LAW; COMMON CARRIER; WARSAW CONVENTION; INTERNATIONAL CARRIAGE;

DEFINED. — The Warsaw Convention, as amended, specifically provides that it is applicable to international
carriage which it defines in Article 1, par. 2 as follows: "(2) For the purposes of this Convention, the expression
'international carriage' means any carriage in which, according to the agreement between the parties, the place
of departure and the place of destination, whether or not there be a breach in the carriage or a transhipment, are
situated either within the territories of two High Contracting Parties or within the territory of a single High
Contracting Party if there is an agreed stopping place within the territory of another State, even if that State is
not a High Contracting Party. Carriage between two points within the territory of a single High Contracting Party
without an agreed stopping place within the territory of another State is not international carriage for the purposes
of this Convention." ("High Contracting Party" refers to a state which has ratified or adhered to the Convention,
or which has not effectively denounced the Convention [Article 40A(1)]).
2. ID.; ID.; ID.; ID.; PLANE TICKETS; BEING A CONTRACT OF ADHESION THOUGH NOT ENTIRELY
PROHIBITED; BLIND RELIANCE THEREON, NOT ENCOURAGED. — The Convention governs the availment
of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket which
complies with the provisions of Article 3, Par. 1 (c). (Article 4, Par. 2) In the case at bar, the baggage check is
combined with the passenger ticket in one document of carriage. We have held in the case of Ong Yiu v. Court
of Appeals, supra, and reiterated in a similar case where herein petitioner was also sued for damages, Pan
American World Airways v. Intermediate Appellate Court (164 SCRA 268 [1988]) that: "It (plane ticket) is what is
known as a contract of 'adhesion', in regards which it has been said that contracts of adhesion wherein one party
imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he
gives his consent. (Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's
Journal, January 31, 1951, p. 49) And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E.
2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, 'a contract limiting liability upon an agreed
valuation does not offend against the policy of the law forbidding one from contracting against his own
negligence.' "Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he
cannot be permitted a recovery in excess of P100.00 . . ." (91 SCRA 223 at page 231)" We hasten to add that
while contracts of adhesion are not entirely prohibited, neither is a blind reliance on them encouraged. In the
face of facts and circumstances showing they should be ignored because of their basically one sided nature, the
Court does not hesitate to rule out blind adherence to their terms. (See Sweet Lines, Inc. v. Teves, 83 SCRA
361, 368-369 [1978])
3. ID.; ID.; ID.; ID.; ID.; RECEIPT THEREOF BY PASSENGER WILL BIND HIM FROM STIPULATIONS
THEREIN; CASE AT BAR. — The arguments of the petitioner do not belie the fact that it was indeed accountable
for the loss of the attaché case. What the petitioner is concerned about is whether or not the notice, which it did
not fail to state in the plane ticket and which it deemed to have been read and accepted by the private respondent
will be considered by this Court as adequate under the circumstances of this case. As earlier stated, the Court
finds the provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of
luggage. The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be
vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the
stipulations, he cannot avoid the application of the liability limitations.
4. ID.; ID.; ID.; ID.; ID.; STIPULATION ON LIABILITY LIMITATION; APPLICATION. — We are not by any
means suggesting that passengers are always bound to the stipulated amounts printed on a ticket, found in a
contract of adhesion, or printed elsewhere but referred to in handouts or forms. We simply recognize that the
reasons behind stipulations on liability limitations arise from the difficulty, if not impossibility, of establishing with
a clear preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are declared,
it will always be the word of a passenger against that of the airline. If the loss of life or property is caused by the
gross negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by satisfactory
evidence other than the self-serving declarations of one party, the Court will not hesitate to disregard the fine
print in a contract of adhesion. (See Sweet Lines Inc. v. Teves, supra) Otherwise, we are constrained to rule
that we have to enforce the contract as it is the only reasonable basis to arrive at a just award.
5. ID.; ID.; ID. ; ID.; LIABILITY ON LOST UNCHECKED LUGGAGE; RULE; CASE AT BAR. — The attaché
case was originally handcarried does not beg the conclusion that the amount of $4,750.00 in cash could have
been placed inside. It may be noted that out of a claim for US$42,403.90 as the amount lost, the trial court found
for only US$5,228.90 and 100 paengs. The court had doubts as to the total claim. The lost luggage was declared
as weighing around 18 pounds or approximately 8 kilograms. At $20.00 per kilogram, the petitioner offered to
pay $160.00 as a higher value was not declared in advance and additional charges were not paid. We note,
however, that an amount of $400.00 per passenger is allowed for unchecked luggage. Since the checking-in
was against the will of the respondent, we treat the lost bag as partaking of involuntarily and hurriedly checked-
in luggage and continuing its earlier status as unchecked luggage. The fair liability under the petitioner's own
printed terms is $400.00. Since the trial court ruled out discriminatory acts or bad faith on the part of Pan Am or
other reasons warranting damages, there is no factual basis for the grant of P20,000.00 damages.
6. ID.; ID.; ID.; AWARD OF ATTORNEY'S FEES; NOT PRECLUDED THEREFROM. — As to the question
of whether or not private respondent should be paid attorney's fees, the Court sustains the finding of the trial
court and the respondent appellate court that it is just and equitable for the private respondent to recover
expenses for litigation in the amount of P5,000.00. Article 22(4) of the Warsaw Convention, as amended does
not preclude an award of attorney's fees. That provision states that the limits of liability prescribed in the
instrument "shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or
part of the court costs and other expenses of litigation incurred by the plaintiff." We, however, raise the award
to P10,000.00 considering the resort to the Court of Appeals and this Court.
7. ID.; ID.; CANNOT BE HELD LIABLE IN THE ABSENCE OF ARBITRARINESS, DISCRIMINATION OR
MISTREATMENT ON THE PART OF ITS PERSONNEL. — Passengers are also allowed one handcarried bag
each provided it conforms to certain prescribed dimensions. If Mr. Rapadas was not allowed to handcarry the
lost attaché case, it can only mean that he was carrying more than the allowable weight for all his luggages or
more than the allowable number of handcarried items or more than the prescribed dimensions for the bag or
valise. The evidence on any arbitrary behavior of a Pan Am employee or inexcusable negligence on the part of
the carrier is not clear from the petition. Absent such proof, we cannot hold the carrier liable because of
arbitrariness, discrimination, or mistreatment.
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto Santos vs.
NORTHWEST ORIENT AIRLINES and CA

FACTS: The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is
a foreign corporation with principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch office in
the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight from
San Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date
was specified for his return to San Francisco.
On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled
departure to Manila. Despite a previous confirmation and re-confirmation, he was informed that he had no reservation for
his flight from Tokyo to Manila. He therefore had to be wait-listed.

On March 12, 1987, the petitioner sued NOA for damages in the RTC of Makati. On April 13, 1987, NOA moved to
dismiss the complaint on the ground of lack of jurisdiction, citing Article 28(1) of the Warsaw Convention, reading as
follows:

Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he
has a place of business through which the contract has been made, or before the court at the place of destination.

The private respondent contended that the Philippines was not its domicile nor was this its principal place of business.
Neither was the petitioner’s ticket issued in this country nor was his destination Manila but San Francisco in the United
States.
Lower court granted the dismissal, CA affirmed.

ISSUE: WON the Philippines has jurisdiction over the case. (Issue raised by the party is WON the provision of the
Warsaw convention was constitutional)
HELD: No jurisdiction (the provision is constitutional)
The Convention is a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and
effect of law in this country. The petitioner’s allegations are not convincing enough to overcome this presumption.
Apparently, the Convention considered the four places designated in Article 28 the most convenient forums for the
litigation of any claim that may arise between the airline and its passenger, as distinguished from all other places.

NOTES:
WON Warsaw convention applies.
Convention applies to all international transportation of persons performed by aircraft for hire. Whether the transportation
is “international” is determined by the contract of the parties, which in the case of passengers is the ticket. When the
contract of carriage provides for the transportation of the passenger between certain designated terminals “within the
territories of two High Contracting Parties,” the provisions of the Convention automatically apply and exclusively govern
the rights and liabilities of the airline and its passenger.

WON MNL or SFO was the destination.

The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract of
carriage or, specifically in this case, the ticket between the passenger and the carrier. Examination of the petitioner’s ticket
shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of
carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila.
Manila should therefore be considered merely an agreed stopping place and not the destination.

WON Northwest has domicile in the Philippines

Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article 28(1).
By specifying the three other places, to wit, the principal place of business of the carrier, its place of business where the
contract was made, and the place of destination, the article clearly meant that these three other places were not
comprehended in the term “domicile.”