G.R. No.
L-5897 April 23, 1954 The plaintiff claims that for that sale he is entitled under the agency contract dated
KING MAU WU, plaintiff-appellee, vs. FRANCISCO SYCIP, defendant-
appellant.
PADILLA, J.:
This is an action to collect P59,082.92, together with lawful interests from 14
October 1947, the date of the written demand for payment, and costs. The claim
arises out of a shipment of 1,000 tons of coconut oil emulsion sold by the plaintiff,
as agent of the defendant, to Jas. Maxwell Fassett, who in turn assigned it to
Fortrade Corporation. Under an agency agreement set forth in a letter dated 7
November 1946 in New York addressed to the defendant and accepted by the
latter on the 22nd day of the same month, the plaintiff was made the exclusive
agent of the defendant in the sale of coconut oil and its derivatives outside the
Philippines and was to be paid 2 1/2 per cent on the total actual sale price of sales
obtained through his efforts in addition thereto 50 per cent of the difference
between the authorized sale price and the actual sale price.
After the trial where the depositions of the plaintiff and of Jas. Maxwell Fassett and
several letters in connection therewith were introduced and the testimony of the
defendant was heard, the Court rendered judgment as prayed for in the complaint.
A motion for reconsideration was denied. A motion for a new trial was filed,
supported by the defendant's affidavit, based on newly discovered evidence which
consists of a duplicate original of a letter dated 16 October 1946 covering the sale
of 1,000 tons of coconut oil soap emulsion signed by Jas. Maxwell Fassett
assigned by the latter to the defendant; the letter of credit No. 20122 of the
Chemical Bank & Trust Company in favor of Jas. Maxwell Fassett assigned by the
latter to the defendant; and a letter dated 16 December 1946 by the Fortrade
Corporation to Jas. Maxwell Fassett accepted it on 24 December 1946, all of which
documents, according to the defendant, could not be produced at the trial, despite
the use of reasonable diligence, and if produced they would alter the result of the
controversy. The motion for new trial was denied. The defendant is appealing from
said judgment.
Both parties agreed that the only transaction or sale made by the plaintiff, as agent
of the defendant, was that of 1,000 metric tons of coconut oil emulsion f.o.b. in
Manila, Philippines, to Jas. Maxwell Fassett, in whose favor letter of credit No.
20112 of the Chemical Bank & Trust Company for a sum not to exceed $400,000
was established and who assigned to Fortrade Corporation his fight to the 1,000
metric tons of coconut oil emulsion and in the defendant the letter of credit referred
to for a sum not to exceed $400,000.
7 November 1946 and accepted by the defendant on 22 November of the same
year to a commission of 2 1/2 per cent on the total actual sale price of 1,000 tons
of coconut oil emulsion, part of which has been paid by the defendant, there being
only a balance of $3,794.94 for commission due and unpaid on the last shipment
of 379.494 tons and 50 per cent of the difference between the authorized sale
price of $350 per ton and the actual selling price of $400 per ton, which amounts to
$25,000 due and unpaid, and $746.52 for interest from 14 October 1947, the date
of the written demand.
The defendant, on the other hand, contends that the transaction for the sale of
1,000 metric tons of coconut oil emulsion was not covered by the agency contract
of 22 November 1946 because it was agreed upon on 16 October 1946; that it was
an independent and separate transaction for which the plaintiff has been duly
compensated. The contention is not borne out by the evidence. The plaintiff and
his witness depose that there were several drafts of documents or letter prepared
by Jas. Maxwell Fassett preparatory or leading to the execution of the agency
agreement of 7 November 1946, which was accepted by the defendant on 22
November 1946, and that the letter, on which the defendant bases his contention
that the transaction on the 1,000 metric tons of coconut oil emulsion was not
covered by the agency agreement, was one of those letters. That is believable.
The letter upon which defendant relies for his defense does not stipulate on the
commission to be paid to the plaintiff as agent, and yet if he paid the plaintiff a 2
1/2 per cent commission on the first three coconut oil emulsion shipments, there is
no reason why he should not pay him the same commission on the last shipment
amounting to $3,794.94. There can be no doubt that the sale of 1,000 metric tons
of coconut oil emulsion was not a separate and independent contract from that of
the agency agreement on 7 November and accepted on 22 November 1946 by the
defendant, because in a letter dated 2 January 1947 addressed to the plaintiff,
referring to the transaction of 1,000 metric tons of coconut oil emulsion, the
defendant says —
. . . I am doing everything possible to fulfill these 1,000 tons of emulsion, and until
such time that we completed this order I do not feel it very sensible on my part to
accept any more orders. I want to prove to Fortrade, yourself and other people that
we deliver our goods. Regarding your commission, it is understood to be 2 1/2 per
cent of all prices quoted by me plus 50-50 on over price. (Schedule B.)
In another letter dated 16 January 1957 to the plaintiff, speaking of the same
transaction, the defendant says —
As per our understanding when I was in the States the overprice is subject to any
increase in the cost of production. I am not trying to make things difficult for you
and I shall give you your 2 1/2 per cent commission plus our overprice provided
you can give me substantial order in order for me to amortize my loss on this first
deal. Unless such could be arranged I shall remit to you for the present your
commission upon collection from the bank. (Schedule C.)

In a telegram sent by the defendant to the plaintiff the former says —

. . . Your money pending stop understand you authorized some local attorneys and
my relatives to intervene your behalf. (Schedule D.)

The defendant's claim that the agreement for the sale of the 1,000 metric tons of
coconut oil emulsion was agreed upon in a document, referring to the letter of 16
October 1946, is again disproved by his letter dated 2 December 1946 to Fortrade
Corporation where he says:

The purpose of this letter is to confirm in final form the oral agreement which we
have heretofore reached, as between ourselves, during the course of various
conversations between us and our respective representatives upon the subject
matter of this letter.

It is understood that I am to sell to you, and you are to purchase from me, 1,000
tons of coconut oil soap emulsion at a price of $400. per metric ton, i.e. 2,204.6
pounds, F.O.B. shipboard, Manila, P.I. (Exhibit S, Special. Emphasis supplied.)

The contention that as the contract was executed in New York, the Court of First
Instance of Manila has no jurisdiction over this case, is without merit, because a
non-resident may sue a resident in the courts of this country1 where the defendant
may be summoned and his property leviable upon execution in the case of a
favorable, final and executory judgment. It is a personal action for the collection of
a sum of money which the Courts of First Instance have jurisdiction to try and
decide. There is no conflict of laws involved in the case, because it is only a
question of enforcing an obligation created by or arising from contract; and unless
the enforcement of the contract be against public policy of the forum, it must be
enforced.

The plaintiff is entitled to collect P7,589.88 for commission and P50,000 for one-
half of the overprice, or a total of P57,589.88, lawful interests thereon from the
date of the filing of the complaint, and costs in both instances.

As thus modified the judgment appealed from is affirmed, with costs against the
appellant.
G.R. No. L-9403 November 4, 1914
ALLAN A. BRYAN, ET AL., plaintiffs-appellees, vs. EASTERN AND
AUSTRALIAN S. S. CO., LTD., defendant-appellant.
MORELAND, J.:
This is an action to recover P1,915.30 damages alleged to have been caused by
the negligence of the defendant in handling the plaintiffs' baggage, whereby it fell
into the sea and was injured or destroyed.
The plaintiffs were passengers on the steamer St. Albans, which, at the time
herein complained of, was the property of the defendant corporation and was
engaged in carrying freight and passengers between Shanghai, China, and Manila,
Philippine Islands. It arrived in Manila on the morning of the 7th of January, 1913.
Shortly after its arrival plaintiffs' baggage was taken out of hold of the ship for the
purpose of being placed on the dock alongside of which the vessel was berthed.
The baggage was placed in a sling, consisting of a single rope wound once around
the trunks, and was swung from the side of the vessel. While still several feet
above the wharf, the employee of the defendant company who was operating the
winch, by some act or other, permitted the baggage to drop with great rapidity. In
its passage downward it struck the side of the ship with such force as to release it
from the sling and it dropped into the water alongside of the ship. The damages
are stipulated at P1,188.
The defendant, while admitting the damage caused to plaintiffs' baggage, denied
that it was the result of the company's negligence and set up as a special defense
the limitation of liability established by the contract under which the defendant
undertook to transport the plaintiffs from the city of Hongkong to Manila.
The record shows that on or about the end of December, 1912, the plaintiffs
bought of the defendant's agent in Shanghai two first-class tickets for Manila,
which entitled them to travel from Hongkong to Manila by the defendant's
steamship St. Albans. The tickets delivered to them were in English, which
language plaintiffs read with ease and understand perfectly, and bore on their face,
in large print, a statement that they were issued subject to the conditions printed
on the back. One of these conditions, printed in legible type, was as follows:
This ticket is issued by the company and accepted by the passenger subject to the
following conditions:
The company will not hold itself responsible for any loss or damage passengers
may sustain from the following causes: From advance in or delays after advertised
date of sailing, either through the performance of His Majesty's mail service or any
other cause, from detention on the voyage, or at any of the intermediate ports, or
through steamers not meeting, or delays from accident, from perils of the sea, or
from machinery, boilers or steam, or from any at, neglect or default whatsoever of
the pilot, masters, or mariners. nor from any consequences arising from any
sanitary regulations or precautions which the company's officers or local
government authorities may deem necessary.
Personal baggage. — In order to insure as far as possible the safe custody of
luggage, passengers should personally see their luggage delivered on board. Each
adult saloon passenger may carry, free of charge, but at his own risk, 20 cubic feet
of luggage; and each steerage passenger 10 cubic feet, under similar conditions
(all in excess of these quantities must be paid for at the current rate of freight); but
the company will not hold itself responsible for any loss, or damage to or detention
or overcarriage of luggage, under any circumstances whatsoever unless it has
been booked and paid for as freight.
At the time the tickets were delivered to plaintiffs in Shanghai their attention was
not especially drawn to the provisions on the back of the ticket. The plaintiffs put
their baggage on the St. Albans without paying for its transportation as freight and
traveled with such baggage to Manila.
The trial court's finding as to the negligence of defendant is based particularly on
the testimony of J. S. Stanley, Deputy Collector of Customs, and I.V. Chapman,
chief wharfinger in charge of per No. 5.
Mr. Stanley testified: "While standing at the extreme end of Pier No. 5, I witnessed
a number of trunks being lifted from the deck of the steamship St. Albans to an
elevation of about 10 per from the deck and practically the same being above the
pier. The winchman was instructed to let go. The sling dropped suddenly and was
not checked at the proper time, and the sling of trunks strucks the side of the
wharf, with the result that the trunks were forced from the sling and fell into the
water. It is customary to use a rope sling or a cargo chute running from the deck to
the pier. The slings vary in size but are sufficiently large to contain a large number
of trunks and are formed of ropes running in opposite directions forming a rope
net. If these trunks had been in rope sling they would not have fallen in the water."
Mr. Chapman testified: "When the steamship St. Albans came alongside the pier I
took all her lines and berthed her in a position for the gangway and hatchways to
work. Immediately after the ship was made fast I requested to be informed from
the chief officer where the baggage would be discharged from; he told me hatch
No. 4; I went to No. 4 hatch and asked the second officer who was there in charge
of the hatch where the baggage was to be discharged from; he said, 'Right here,'
indicating No. 4 hatch. I then told him I would have a chute there for him right away
and he answered: 'All right.' I immediately went into the pier and ordered one of the
foremen and the men to take a chute to No. 4 hatch. I was following with the
foreman and behind the chute when Mr. Stanley informed me that the baggage
was over the side. The chute at this time was just through the door about 75 feet
from the hatch. On arriving there I saw that the sling and these trunks were all lying
in the water. The stevedore had a lot of his men over the side picking up the trunks
with the men from the pier helping."lawph!1.net
It is the contention of the defendant company that it is exempt from liability by
virtue of the contract appearing on the tickets already referred to and quoted; as
that contract was valid in the place where made, namely, the Colony of Hongkong,
and that being the case, it will be enforced according to its terms in the Philippine
Islands. It is also urged that it was not necessary specifically to direct the attention
of the passengers to the stipulations on the back of the ticket introduced in
evidence.
The evidence relative to the law governing these contracts in Hongkong consists of
the testimony of a Hongkong barrister, learned in the law of England and her
colonies, and is to the effect that, under the law in force at the place where the
contract was made, the contract was valid and enforceable, and that it is not
necessary that the attention of persons purchasing tickets from common carriers
be drawn specially to the terms thereof when printed upon a ticket which on its
face shows that it is issued subject to such conditions. The barrister also testified
that under the law of England and her colonies everything was done which was
necessary to make the terms printed on the back of the tickets a part of the
contract between the parties.
It is our conclusion that the judgment must be affirmed.
It is undoubted that the contract found upon the back of the tickets is a contract
found upon the back of the tickets is a contract perfectly valid in England and her
colonies and one which would be enforced according to its terms? It will be
remembered that the contract provides "the company will not hold itself
responsible for any loss, or damage to or detention, or overcarriage of luggage,
under any circumstances whatsoever, unless it has been booked and paid for a
freight." Ordinarily this language would seems to be broad enough to cover every
possible contingency, including the negligent act of defendant's servant. To so
hold, however, would run counter to the established law of England and the United
States on that subject. In the case of Prince and Company vs. Union Lighterage
Company (King's Bench Division, 1903, Vol. 1, pp. 750, 754), the court said:
An exemption in general words not expressly relating to negligence, even though
the words are wide enough to include loss by negligence or default of carriers'
servants, must be construed as limiting the liability of the carrier as assurer, and
not as relieving him from the duty of exercising reasonable skill and care.
The result of this decision seems to be that unless the contract of exemption
specifically refers to exemption for negligence, it will be construed as simply
exempting the carrier from his liability as insurer, in other words, from his common
law liability as carrier. This decision of the King's Bench Division is supported by
many authorities and apparently has never been questioned. Among other
references made in that case is that of Compania de Navegacion La Flecha vs.
Brauer (168 U.S., 104), in which the opinion was rendered by Mr. Justice Gray,
who reviews with great thoroughness, many of which contain exemptions quite as
comprehensive as those contained in the condition under which plaintiffs' baggage
was accepted by the defendant in this case, such as that the baggage "was to be
carried at the risk of the owner" and that the "Carrier is not to be responsible for
any loss under any circumstances whatsoever." (See also Wheeler vs. O. S. N.
Co., 125 N. Y., 155; Nicholas vs. N. Y. & H. R. R .R. Co. 89 N. Y., 370.)
The reasonableness of the strict rule of construction that the courts of England and
of the State of New York apply to contracts restricting the liability of carriers with
respect to their negligence is apparent when one considers that such contracts are
held to be contrary to public policy and invalid in the Federal courts and in most of
the State courts of the Union. (The Kensington, 183 U. S., 263.)
In this connection, it may not be amiss to state that a critical examination of the
deposition of Mr. Ernet Hamilton Sharpe, Master of Arts and Bachelor of Civil Law
of the University of Oxford, Barrister at Law of London, Shanghai and Hongkong,
and King's Counsel at the latter colony, does not disclose anything contradictory to
the rule just stated. Mr. Sharpe's examination was confined to the question of the
validity of the contract indorsed upon plaintiffs' ticket exempting the defendant
company from liability for damage to their baggage. In view of the accurate
answers of the learned witness to the questions put to him as to the validity of the
condition in question under English law, there is no reason to suppose that he
would not have stated correctly the rule as to the construction of the condition had
his attention been directed to that point. In any event, this court is not, by reason of
the opinion expressed by an expert witness, precluded from advising itself as to
the common law of England. (Sec. 302, Code of Civil Procedure.)
The judgment is affirmed, with costs against the appellant.
G.R. No. L-20099 July 7, 1966
PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE AIR LINES,
INC., defendant and appellant.
ZALDIVAR, J.:
Before the municipal court of Zamboanga City, plaintiff-appellee Parmanand
Shewaram instituted an action to recover damages suffered by him due to the
alleged failure of defendant-appellant Philippines Air Lines, Inc. to observe
extraordinary diligence in the vigilance and carriage of his luggage. After trial the
municipal court of Zamboanga City rendered judgment ordering the appellant to
pay appellee P373.00 as actual damages, P100.00 as exemplary damages,
P150.00 as attorney's fees, and the costs of the action.
Appellant Philippine Air Lines appealed to the Court of First Instance of
Zamboanga City. After hearing the Court of First Instance of Zamboanga City
modified the judgment of the inferior court by ordering the appellant to pay the
appellee only the sum of P373.00 as actual damages, with legal interest from May
6, 1960 and the sum of P150.00 as attorney's fees, eliminating the award of
exemplary damages.
From the decision of the Court of First Instance of Zamboanga City, appellant
appeals to this Court on a question of law, assigning two errors allegedly
committed by the lower court a quo, to wit:
1. The lower court erred in not holding that plaintiff-appellee was bound by the
provisions of the tariff regulations filed by defendant-appellant with the civil
aeronautics board and the conditions of carriage printed at the back of the plane
ticket stub.
2. The lower court erred in not dismissing this case or limiting the liability of the
defendant-appellant to P100.00.
The facts of this case, as found by the trial court, quoted from the decision
appealed from, are as follows:
That Parmanand Shewaram, the plaintiff herein, was on November 23, 1959, a
paying passenger with ticket No. 4-30976, on defendant's aircraft flight No.
976/910 from Zamboanga City bound for Manila; that defendant is a common
carrier engaged in air line transportation in the Philippines, offering its services to
the public to carry and transport passengers and cargoes from and to different
points in the Philippines; that on the above-mentioned date of November 23, 1959,
he checked in three (3) pieces of baggages — a suitcase and two (2) other pieces;
that the suitcase was mistagged by defendant's personnel in Zamboanga City, as
I.G.N. (for Iligan) with claim check No. B-3883, instead of MNL (for Manila). When
plaintiff Parmanand Shewaram arrived in Manila on the date of November 23,
1959, his suitcase did not arrive with his flight because it was sent to Iligan. So, he
made a claim with defendant's personnel in Manila airport and another suitcase
similar to his own which was the only baggage left for that flight, the rest having
been claimed and released to the other passengers of said flight, was given to the
plaintiff for him to take delivery but he did not and refused to take delivery of the
same on the ground that it was not his, alleging that all his clothes were white and
the National transistor 7 and a Rollflex camera were not found inside the suitcase,
and moreover, it contained a pistol which he did not have nor placed inside his
suitcase; that after inquiries made by defendant's personnel in Manila from
different airports where the suitcase in question must have been sent, it was found
to have reached Iligan and the station agent of the PAL in Iligan caused the same
to be sent to Manila for delivery to Mr. Shewaram and which suitcase belonging to
the plaintiff herein arrived in Manila airport on November 24, 1959; that it was also
found out that the suitcase shown to and given to the plaintiff for delivery which he
refused to take delivery belonged to a certain Del Rosario who was bound for
Iligan in the same flight with Mr. Shewaram; that when the plaintiff's suitcase
arrived in Manila as stated above on November 24, 1959, he was informed by Mr.
Tomas Blanco, Jr., the acting station agent of the Manila airport of the arrival of his
suitcase but of course minus his Transistor Radio 7 and the Rollflex Camera; that
Shewaram made demand for these two (2) items or for the value thereof but the
same was not complied with by defendant.
xxx xxx xxx
It is admitted by defendant that there was mistake in tagging the suitcase of
plaintiff as IGN. The tampering of the suitcase is more apparent when on
November 24, 1959, when the suitcase arrived in Manila, defendant's personnel
could open the same in spite of the fact that plaintiff had it under key when he
delivered the suitcase to defendant's personnel in Zamboanga City. Moreover, it
was established during the hearing that there was space in the suitcase where the
two items in question could have been placed. It was also shown that as early as
November 24, 1959, when plaintiff was notified by phone of the arrival of the
suitcase, plaintiff asked that check of the things inside his suitcase be made and
defendant admitted that the two items could not be found inside the suitcase.
There was no evidence on record sufficient to show that plaintiff's suitcase was
never opened during the time it was placed in defendant's possession and prior to
its recovery by the plaintiff. However, defendant had presented evidence that it had
authority to open passengers' baggage to verify and find its ownership or identity.
Exhibit "1" of the defendant would show that the baggage that was offered to
plaintiff as his own was opened and the plaintiff denied ownership of the contents
of the baggage. This proven fact that baggage may and could be opened without
the necessary authorization and presence of its owner, applied too, to the suitcase
of plaintiff which was mis-sent to Iligan City because of mistagging. The possibility
of what happened in the baggage of Mr. Del Rosario at the Manila Airport in his
absence could have also happened to plaintiffs suitcase at Iligan City in the
absence of plaintiff. Hence, the Court believes that these two items were really in
plaintiff's suitcase and defendant should be held liable for the same by virtue of its
contract of carriage.
It is clear from the above-quoted portions of the decision of the trial court that said
court had found that the suitcase of the appellee was tampered, and the transistor
radio and the camera contained therein were lost, and that the loss of those
articles was due to the negligence of the employees of the appellant. The evidence
shows that the transistor radio cost P197.00 and the camera cost P176.00, so the
total value of the two articles was P373.00.
There is no question that the appellant is a common carrier.1 As such common
carrier the appellant, from the nature of its business and for reasons of public
policy, is bound to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by it according to the
circumstances of each case. 2 It having been shown that the loss of the transistor
radio and the camera of the appellee, costing P373.00, was due to the negligence
of the employees of the appellant, it is clear that the appellant should be held liable
for the payment of said loss.3
It is, however, contended by the appellant that its liability should be limited to the
amount stated in the conditions of carriage printed at the back of the plane ticket
stub which was issued to the appellee, which conditions are embodied in Domestic
Tariff Regulations No. 2 which was filed with the Civil Aeronautics Board. One of
those conditions, which is pertinent to the issue raised by the appellant in this case
provides as follows:
The liability, if any, for loss or damage to checked baggage or for delay in the
delivery thereof is limited to its value and, unless the passenger declares in
advance a higher valuation and pay an additional charge therefor, the value shall
be conclusively deemed not to exceed P100.00 for each ticket.
The appellant maintains that in view of the failure of the appellee to declare a
higher value for his luggage, and pay the freight on the basis of said declared
value when he checked such luggage at the Zamboanga City airport, pursuant to
the abovequoted condition, appellee can not demand payment from the appellant
of an amount in excess of P100.00.
The law that may be invoked, in this connection is Article 1750 of the New Civil
Code which provides as follows:
A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely agreed upon.
In accordance with the above-quoted provision of Article 1750 of the New Civil
Code, the pecuniary liability of a common carrier may, by contract, be limited to a
fixed amount. It is required, however, that the contract must be "reasonable and
just under the circumstances and has been fairly and freely agreed upon."
The requirements provided in Article 1750 of the New Civil Code must be complied
with before a common carrier can claim a limitation of its pecuniary liability in case
of loss, destruction or deterioration of the goods it has undertaken to transport. In
the case before us We believe that the requirements of said article have not been
met. It can not be said that the appellee had actually entered into a contract with
the appellant, embodying the conditions as printed at the back of the ticket stub
that was issued by the appellant to the appellee. The fact that those conditions are
printed at the back of the ticket stub in letters so small that they are hard to read
would not warrant the presumption that the appellee was aware of those conditions
such that he had "fairly and freely agreed" to those conditions. The trial court has
categorically stated in its decision that the "Defendant admits that passengers do
not sign the ticket, much less did plaintiff herein sign his ticket when he made the
flight on November 23, 1959." We hold, therefore, that the appellee is not, and can
not be, bound by the conditions of carriage found at the back of the ticket stub
issued to him when he made the flight on appellant's plane on November 23, 1959.
The liability of the appellant in the present case should be governed by the
provisions of Articles 1734 and 1735 of the New Civil Code, which We quote as
follows:
ART. 1734. Common carries are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
(1) Flood, storm, earthquake, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.1äwphï1.ñët
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.
It having been clearly found by the trial court that the transistor radio and the own negligence or misfeasance, or that of its servants; and it has been specifically
camera of the appellee were lost as a result of the negligence of the appellant as a decided in many cases that no contract limitation will relieve the carrier from
common carrier, the liability of the appellant is clear — it must pay the appellee the responsibility for the negligence, unskillfulness, or carelessness of its employer."
value of those two articles. (Cited in Ysmael and Co. vs. Barreto, 51 Phil. 90, 98, 99).

In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in In view of the foregoing, the decision appealed from is affirmed, with costs against
support of its decision, this Court had laid down the rule that the carrier can not the appellant.
limit its liability for injury to or loss of goods shipped where such injury or loss was
caused by its own negligence.

Corpus Juris, volume 10, p. 154, says:

"Par. 194, 6. Reasonableness of Limitations. — The validity of stipulations limiting

the carrier's liability is to be determined by their reasonableness and their
conformity to the sound public policy, in accordance with which the obligations of
the carrier to the public are settled. It cannot lawfully stipulate for exemption from
liability, unless such exemption is just and reasonable, and unless the contract is
freely and fairly made. No contractual limitation is reasonable which is subversive
of public policy.

"Par. 195. 7. What Limitations of Liability Permissible. — a. Negligence — (1) Rule

in America — (a) In Absence of Organic or Statutory Provisions Regulating Subject
— aa. Majority Rule. — In the absence of statute, it is settled by the weight of
authority in the United States, that whatever limitations against its common-law
liability are permissible to a carrier, it cannot limit its liability for injury to or loss of
goods shipped, where such injury or loss is caused by its own negligence. This is
the common law doctrine and it makes no difference that there is no statutory
prohibition against contracts of this character.

"Par. 196. bb. Considerations on which Rule Based. — The rule, it is said, rests on
considerations of public policy. The undertaking is to carry the goods, and to
relieve the shipper from all liability for loss or damage arising from negligence in
performing its contract is to ignore the contract itself. The natural effect of a
limitation of liability against negligence is to induce want of care on the part of the
carrier in the performance of its duty. The shipper and the common carrier are not
on equal terms; the shipper must send his freight by the common carrier, or not at
all; he is therefore entirely at the mercy of the carrier unless protected by the
higher power of the law against being forced into contracts limiting the carrier's
liability. Such contracts are wanting in the element of voluntary assent.

"Par. 197. cc. Application and Extent of Rule — (aa) Negligence of Servants. —
The rule prohibiting limitation of liability for negligence is often stated as a
prohibition of any contract relieving the carrier from loss or damage caused by its
G.R. No. L-31150 July 22, 1975
KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., otherwise known as KLM
ROYAL DUTCH AIRLINES, petitioner, vs. THE HONORABLE COURT OF
APPEALS, CONSUELO T. MENDOZA and RUFINO T. MENDOZA,
respondents.
CASTRO, J.:
In this appeal by way of certiorari the Koninklijke Luchtvaart Maatschappij N.V.,
otherwise known as the KLM Royal Dutch Airlines (hereinafter referred to as the
KLM) assails the award of damages made by the Court of Appeals in CA-G.R.
40620 in favor of the spouses Rufino T. Mendoza and Consuelo T. Mendoza
(hereinafter referred to as the respondents).1äwphï1.ñët
Sometime in March 1965 the respondents approached Tirso Reyes, manager of a
branch of the Philippine Travel Bureau, a travel agency, for consultations about a
world tour which they were intending to make with their daughter and a niece.
Reyes submitted to them, after preliminary discussions, a tentative itinerary which
prescribed a trip of thirty-five legs; the respondents would fly on different airlines.
Three segments of the trip, the longest, would be via KLM. The respondents
expressed a desire to visit Lourdes, France, and discussed with Reyes two
alternate routes, namely, Paris to Lourdes and Barcelona to Lourdes. The
respondents decided on the Barcelona-Lourdes route with knowledge that only
one airline, Aer Lingus, serviced it.
The Philippine Travel Bureau to which Reyes was accredited was an agent for
international air carriers which are members of the International Air Transport
Association, popularly known as the "IATA," of which both the KLM and the Aer
Lingus are members.
After about two weeks, the respondents approved the itinerary prepared for them,
and asked Reyes to make the necessary plane reservations. Reyes went to the
KLM, for which the respondents had expressed preference. The KLM thereafter
secured seat reservations for the respondents and their two companions from the
carriers which would ferry them throughout their trip, with the exception of Aer
Lingus. When the respondents left the Philippines (without their young wards who
had enplaned much earlier), they were issued KLM tickets for their entire trip.
However, their coupon for the Aer Lingus portion (Flight 861 for June 22, 1965)
was marked "RQ" which meant "on request".
After sightseeing in American and European cities (they were in the meantime
joined by their two young companions), the respondents arrived in Frankfurt,
Germany. They went to a KLM office there and obtained a confirmation from Aer
Lingus of seat reservations on flight 861. After meandering in London, Paris and
Lisbon, the foursome finally took wing to Barcelona for their trip to Lourdes,
France.
In the afternoon of June 22, 1965 the respondents with their wards went to the
Barcelona airport to take their plane which arrived at 4:00 o'clock. At the airport,
the manager of Aer Lingus directed the respondents to check in. They did so as
instructed and were accepted for passage. However, although their daughter and
niece were allowed to take the plane, the respondents were off-loaded on orders of
the Aer Lingus manager who brusquely shoved them aside with the aid of a
policeman and who shouted at them, "Conos! Ignorantes Filipinos!"
Mrs. Mendoza later called up the manager of Aer Lingus and requested that they
provide her and her husband means to get to Lourdes, but the request was denied.
A stranger, however, advised them to take a train, which the two did; despite the
third class accommodations and lack of food service, they reached Lourdes the
following morning. During the train trip the respondents had to suffer draft winds as
they wore only minimum clothing, their luggage having gone ahead with the Aer
Lingus plane. They spent $50 for that train trip; their plane passage was worth
$43.35.
On March 17, 1966 the respondents, referring to KLM as the principal of Aer
Lingus, filed a complaint for damages with the Court of First Instance of Manila
arising from breach of contract of carriage and for the humiliating treatment
received by them at the hands of the Aer Lingus manager in Barcelona. After due
hearing, the trial court awarded damages to the respondents as follows: $43.35 or
its peso equivalent as actual damages, P10,000 as moral damages, P5,000 as
exemplary damages, and P5,000 as attorney's fees, and expenses of litigation.
Both parties appealed to the Court of Appeals. The KLM sought complete
exoneration; the respondents prayed for an increase in the award of damages. In
its decision of August 14, 1969 the Court of Appeals decreed as follows: "Appellant
KLM is condemned to pay unto the plaintiffs the sum of $43.35 as actual damages;
P50,000 as moral damages; and P6,000 as attorney's fees and costs."
Hence, the present recourse by the KLM.
The KLM prays for exculpation from damages on the strength of the following
particulars which were advanced to but rejected by the Court of Appeals:
(a) The air tickets issued to the respondents stipulate that carriage thereunder is
subject to the "Convention for the Unification of Certain Rules Relating to
International Transportation by Air," otherwise known as the "Warsaw Convention,"
to which the Philippine Government is a party by adherence, and which pertinently
provides.1
ART. 30. (1) In the case of transportation to be performed by various successive
carriers and failing within the definition set out in the third paragraph of Article I,
each carrier who accepts passengers, baggage, or goods shall be subject to the
rules set out in the convention, and shall be deemed to be one of the contracting
parties to the contract of transportation insofar as the contract deals with that part
of transportation which is performed under his supervision.2
(2) In the case of transportation of this nature, the passenger or his representative
can take action only against the carrier who performed the transportation during
which the accident or the delay occured, save in the case where, by express
agreement, the first carrier has assumed liability for the whole journey. (emphasis
supplied)
(b) On the inside front cover of each ticket the following appears under the heading
"Conditions of Contract":
1 ... (a) Liability of carrier for damages shall be limited to occurrences on its own
line, except in the case of checked baggage as to which the passenger also has a
right of action against the first or last carrier. A carrier issuing a ticket or checking
baggage for carriage over the lines of others does so only as agent..
(c) All that the KLM did after the respondents completed their arrangements with
the travel agency was to request for seat reservations among the airlines called for
by the itinerary submitted to the KLM and to issue tickets for the entire flight as a
ticket-issuing agent.
The respondents rebut the foregoing arguments, thus:
(a) Article 30 of the Warsaw Convention has no application in the case at bar
which involves, not an accident or delay, but a willful misconduct on the part of the
KLM's agent, the Aer Lingus. Under article 25 of the same Convention the
following is prescribed:
ART. 25. (1) The carrier shall not be entitled to avail himself of the provisions of
this convention which exclude or limit his liability, if the damage is caused by his
willful misconduct or by such default on his part as, in accordance with the law of
the court to which the case is submitted, is considered to be equivalent to willful
misconduct.3
(2) Similarly, the carrier shall not be entitled to avail himself of the said provisions,
if the damage is caused under the same circumstances by any agent of the carrier
acting within the scope of his employment. (emphasis by respondents)
(b) The condition in their tickets which purportedly excuse the KLM from liability
appears in very small print, to read which, as found by the Court of Appeals, one
has practically to use a magnifying glass.
(c) The first paragraph of the "Conditions of Contract" appearing identically on the
KLM tickets issued to them idubitably shows that their contract was one of
continuous air transportation around the world:
1 ... "carriage" includes the air carrier issuing this ticket and all carriers that carry or
undertake to carry the passenger or his baggage hereunder or perform any other
service incidental to such air carriage... Carriage to be performed hereunder by
several successive carrier is regarded as a single operation.
(d) The contract of air transportation was exclusively between the respondents and
the KLM, the latter merely endorsing its performance to other carriers, like Aer
Lingus, as its subcontractors or agents, as evidenced by the passage tickets
themselves which on their face disclose that they are KLM tickets. Moreover, the
respondents dealt only with KLM through the travel agency.
1. The applicability insisted upon by the KLM of article 30 of the Warsaw
Convention cannot be sustained. That article presupposes the occurrence of either
an accident or a delay, neither of which took place at the Barcelona airport; what is
here manifest, instead, is that the Aer Lingus, through its manager there, refused
to transport the respondents to their planned and contracted destination.
2. The argument that the KLM should not be held accountable for the tortious
conduct of Aer Lingus because of the provision printed on the respondents' tickets
expressly limiting the KLM's liability for damages only to occurrences on its own
lines is unacceptable. As noted by the Court of Appeals that condition was printed
in letters so small that one would have to use a magnifying glass to read the
words. Under the circumstances, it would be unfair and inequitable to charge the
respondents with automatic knowledge or notice of the said condition so as to
preclude any doubt that it was fairly and freely agreed upon by the respondents
when they accepted the passage tickets issued to them by the KLM. As the airline
which issued those tickets with the knowledge that the respondents would be flown
on the various legs of their journey by different air carriers, the KLM was
chargeable with the duty and responsibility of specifically informing the
respondents of conditions prescribed in their tickets or, in the very least, to
ascertain that the respondents read them before they accepted their passage
tickets. A thorough search of the record, however, inexplicably fails to show that
any effort was exerted by the KLM officials or employees to discharge in a proper
manner this responsibility to the respondents. Consequently, we hold that the
respondents cannot be bound by the provision in question by which KLM
unilaterally assumed the role of a mere ticket-issuing agent for other airlines and
limited its liability only to untoward occurrences on its own lines.

3. Moreover, as maintained by the respondents and the Court of Appeals, the

passage tickets of the respondents provide that the carriage to be performed
thereunder by several successive carriers "is to be regarded as a single
operation," which is diametrically incompatible with the theory of the KLM that the
respondents entered into a series of independent contracts with the carriers which
took them on the various segments of their trip. This position of KLM we reject.
The respondents dealt exclusively with the KLM which issued them tickets for their
entire trip and which in effect guaranteed to them that they would have sure space
in Aer Lingus flight 861. The respondents, under that assurance of the
internationally prestigious KLM, naturally had the right to expect that their tickets
would be honored by Aer Lingus to which, in the legal sense, the KLM had
indorsed and in effect guaranteed the performance of its principal engagement to
carry out the respondents' scheduled itinerary previously and mutually agreed
upon between the parties.

4. The breach of that guarantee was aggravated by the discourteous and highly
arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to
transport the respondents on the Barcelona-Lourdes segment of their itinerary. It is
but just and in full accord with the policy expressly embodied in our civil law which
enjoins courts to be more vigilant for the protection of a contracting party who
occupies an inferior position with respect to the other contracting party, that the
KLM should be held responsible for the abuse, injury and embarrassment suffered
by the respondents at the hands of a supercilious boor of the Aer Lingus.

ACCORDINGLY, the judgment of the Court of Appeals dated August 14, 1969 is
affirmed, at KLM's cost.
G.R. No. 60673 May 19, 1992
PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs. JOSE K. RAPADAS
and THE COURT OF APPEALS, respondents.
GUTIERREZ, JR., J.:
This is a petition for review assailing the decision of the respondent Court of
Appeals which affirmed in toto the trial court decision on the liability of petitioner
Pan American World Airways for damages due to private respondent. The trial
court ruled that the petitioner can not avail of a limitation of liabilities for lost
baggages of a passenger. The dispositive portion of the trial court decision reads:
WHEREFORE, in view of the foregoing considerations, judgment is hereby
rendered ordering defendant to pay plaintiff by way of actual damages the
equivalent peso value of the amount of $5,228.90 and 100 paengs, nominal
damages in the amount of P20,000.00 and attorney's fees of P5,000.00, and the
costs of the suit. Defendant's counterclaim is dismissed. (Rollo, p. 13)
On January 16, 1975, private respondent Jose K. Rapadas held Passenger Ticket
and Baggage Claim Check No. 026-394830084-5 for petitioner's Flight No. 841
with the route from Guam to Manila. While standing in line to board the flight at the
Guam airport, Rapadas was ordered by petitioner's handcarry control agent to
check-in his Samsonite attache case. Rapadas protested pointing to the fact that
other co-passengers were permitted to handcarry bulkier baggages. He stepped
out of the line only to go back again at the end of it to try if he can get through
without having to register his attache case. However, the same man in charge of
handcarry control did not fail to notice him and ordered him again to register his
baggage. For fear that he would miss the plane if he insisted and argued on
personally taking the valise with him, he acceded to checking it in. He then gave
his attache case to his brother who happened to be around and who checked it in
for him, but without declaring its contents or the value of its contents. He was given
a Baggage Claim Tag No. P-749-713. (Exhibit "B" for the plaintiff-respondent)
Upon arriving in Manila on the same date, January 16, 1975, Rapadas claimed
and was given all his checked-in baggages except the attache case. Since
Rapadas felt ill on his arrival, he sent his son, Jorge Rapadas to request for the
search of the missing luggage. The petitioner exerted efforts to locate the luggage
through the Pan American World Airways-Manila International Airport (PAN AM-
MIA) Baggage Service.
On January 30, 1975, the petitioner required the private respondent to put the
request in writing. The respondent filled in a Baggage Claim Blank Form.
Thereafter, Rapadas personally followed up his claim. For several times, he called
up Mr. Panuelos, the head of the Baggage Section of PAN AM. He also sent
letters demanding and reminding the petitioner of his claim.
Rapadas received a letter from the petitioner's counsel dated August 2, 1975
offering to settle the claim for the sum of one hundred sixty dollars ($160.00)
representing the petitioner's alleged limit of liability for loss or damage to a
passenger's personal property under the contract of carriage between Rapadas
and PAN AM. Refusing to accept this kind of settlement, Rapadas filed the instant
action for damages on October 1, 1975. Rapadas alleged that PAN AM
discriminated or singled him out in ordering that his luggage be checked in. He
also alleged that PAN AM neglected its duty in the handling and safekeeping of his
attache case from the point of embarkation in Guam to his destination in Manila.
He placed the value of the lost attache case and its contents at US$42,403.90.
According to him, 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 Company (he retired in August 1974) and inability to return to Tonga
to comply with then existing contracts.
In its answer, petitioner-defendant PAN AM acknowledged responsibility for the
loss of the attache case but asserted that the claim was subject to the "Notice of
Baggage Liability Limitations" allegedly attached to and forming part of the
passenger ticket. The petitioner argued that the same notice was also
conspicuously posted in its offices for the guidance of the passengers.
At the trial, private respondent showed proof of his retirement award and vacation
pay amounting to $4,750.00. He claimed that the attache case also contained
other money consisting of $1,400 allegedly given to him by his son, Jaime, as a
round trip fare of his (plaintiff-respondent) wife, but which amount was later found
to be actually intended by Jaime as payment for arrears of a lot purchased from
Tropical Homes, Inc.; $3,000 allegedly given by his brothers for payment of taxes
and for constructing improvements on the Rapadas estates; and $300.00 birthday
present of the spouses Mr. and Mrs. Ruben Canonizado to plaintiff-respondent's
wife. He also claimed having kept several items in the attache case, namely –– (1)
contracts and records of employment, letters of commendation, testimonials and
newspaper clippings on his achievement for 13 years in Tonga, New Zealand and
Australia, drafts of manuscripts, photographs and drivers license alleged to be
worth $20,000.00; a Polaroid camera, films, calculator, and other personal items
worth $403.90; memorabilia, autographs personally acquired from Charles
Lindberg, Lawrence Rockefeller and Ryoichi Sasakawa, a commemorative
palladium coin worth Tongan 100 paengs and unused Tongan stamps, all totalling
$7,500.00; and a plan worth $5,000.00 drawn by his son Jaime, who is an
architect, for the construction of a residential house and a 6-story commercial
building. Rapadas claimed the amount of the attache case itself to be $25.50. (See
Decision in Civil Case No. 99564 in Amended Record on Appeal, pp. 61-85)
The lower court ruled in favor of complainant Rapadas after finding no stipulation
giving notice to the baggage liability limitation. The court rejected the claim of
defendant PANAM that its liability under the terms of the passenger ticket is only
up to $160.00. However, it scrutinized all the claims of the plaintiff. It discredited
insufficient evidence to show discriminatory acts or bad faith on the part of
petitioner PANAM.
On appeal, the Court of Appeals affirmed the trial court decision. Hence, this
petition.
The main issue raised in the case at bar is whether or not a passenger is bound by
the terms of a passenger ticket declaring that the limitations of liability set forth in
the Warsaw Convention (October 12, 1929; 137 League of Nations Treaty Series
II; See Proclamation No. 201 [1955], 51 O.G. 4933 [October, 1955]) as amended
by the Hague Protocol (September 28, 1955; 478 UNTS 373; III PTS 515), shall
apply in case of loss, damage or destruction to a registered luggage of a
passenger.
The petitioner maintains that its liability for the lost baggage of respondent
Rapadas was limited to $160.00 since the latter did not declare a higher value for
his baggage and did not pay the corresponding additional charges.
The private respondent, on the other hand, insists that he is entitled to as much
damages as those awarded by the court and affirmed by the respondent appellate
court.
After a review of the various arguments of the opposing parties as well as the
records of the case, the Court finds sufficient basis under the particular facts of this
case for the availment of the liability limitations under the Warsaw Convention.
There is no dispute, and the courts below admit, that there was such a Notice
appearing on page two (2) of the airline ticket stating that the Warsaw Convention
governs in case of death or injury to a passenger or of loss, damage or destruction
to a passenger's luggage.
The Notice states:
If the passenger's journey involves an ultimate destination or stop in a country
other than the country of departure the Warsaw Convention may be applicable and
the Convention governs and in most cases limits the liability of carriers for death or
personal injury and in respect of loss of or damage to baggage. See also notice
headed "Advice to International Passengers on Limitation of Liability." (The latter
notice refers to limited liability for death or personal injury to passengers with
proven damages not exceeding US $75,000 per passenger; Exhibit "K" for plaintiff
respondent, Table of Exhibits, p. 19)
Furthermore, paragraph 2 of the "Conditions of Contract" also appearing on page 2
of the ticket states:
2. Carriage hereunder is subject to the rules and limitations relating to liability
established by the Warsaw Convention unless such carriage is not "international
carriage" as defined by that Convention. (Exhibit "K", supra)
We note that plaintiff-respondent Rapadas presented as proof of the Passenger
Ticket and Baggage Check No. 026-394830084-5 a xerox copy of its page 2 which
contains the Notice and Conditions of Contract, and also page 3 which recites the
Advice to International Passengers on Limitation of Liability. He also presented two
xerox copies of Flight Coupon No. 3 of the same passenger ticket showing the
fares paid for the trips Honolulu to Guam, Guam to Manila, and Manila to Honolulu
to prove his obligations which remained unpaid because of the unexpected loss of
money allegedly placed inside the missing attache case. Rapadas explained
during the trial that the same passenger ticket was returned by him to one Mr. S.L.
Faupula of the Union Steam Ship Company of New Zealand, Ltd., Tonga who
demanded the payment of the fares or otherwise, the return of the unused plane
tickets (including the subject Passenger Ticket & Baggage Check No. 026-
394830084-5). The issuance of these tickets was facilitated by Mr. Faupula on
credit.
Meanwhile, the petitioner offered as evidence Exhibit "1" also showing page 2 of
the passenger ticket to prove the notice and the conditions of the contract of
carriage. It likewise offered Exhibit "1-A", a xerox copy of a "Notice of Baggage
Liability Limitations" which the trial court disregarded and held to be non-existent.
The same Exhibit "1-A" contained the following stipulations:
NOTICE OF BAGGAGE LIABILITY LIMITATIONS –– Liability for loss, delay, or
damage to baggage is limited as follows unless a higher value is declared in
advance and additional charges are paid: (1) for most international travel (including
domestic portions of international journeys) to approximately $8.16 per pound
($18.00 per kilo; now $20.00 per Exhibit "13") for checked baggage and $360 (now
$400 per Exhibit "13") per passenger for unchecked baggage; (2) for travel wholly
between U.S. points, to $500 per passenger on most carriers (a few have lower
limits). Excess valuation may not be declared on certain types of valuable articles.
Carriers assume no liability for fragile or perishable articles. Further information
may be obtained from the carrier. (Table of Exhibits, p. 45)
The original of the Passenger Ticket and Baggage Check No. 026-394830084-5
itself was not presented as evidence as it was among those returned to Mr.
Faupula. Thus, apart from the evidence offered by the defendant airline, the lower
court had no other basis for determining whether or not there was actually a
stipulation on the specific amounts the petitioner had expressed itself to be liable
for loss of baggage.
Although the trial court rejected the evidence of the defendant-petitioner of a
stipulation particularly specifying what amounts it had bound itself to pay for loss of
luggage, the Notice and paragraph 2 of the "Conditions of Contract" should be
sufficient notice showing the applicability of the Warsaw limitations.
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(l)]).
Nowhere in the Warsaw Convention, as amended, is such a detailed notice of
baggage liability limitations required. Nevertheless, it should become a common,
safe and practical custom among air carriers to indicate beforehand the precise
sums equivalent to those fixed by Article 22 (2) of the Convention.
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. l (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 passenger ticket complies with Article 3, par. l (c) which provides:
(l) In respect of the carriage of passengers a ticket shall be delivered containing:
(a) . . .
(b) . . .
(c) a notice to the effect that, if the passenger's journey involves an ultimate
destination or stop in a country other than the country of departure, the Warsaw
Convention may be applicable and that the Convention governs and in most cases
limits the liability of carriers for death or personal injury and in respect of loss of or
damage to baggage.
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])
The arguments of the petitioner do not belie the fact that it was indeed accountable
for the loss of the attache 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.
The facts show that the private respondent actually refused to register the attache
case and chose to take it with him despite having been ordered by the PANAM
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
handcarried baggages. 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 handcarried 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 handcarried bag each provided it conforms to
certain prescribed dimensions. If Mr. Rapadas was not allowed to handcarry the
lost attache 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.
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.
We note that the finding on the amount lost is more of a probability than a proved
conclusion.
The trial court stated:
xxx xxx xxx
We come now to the actual loss of $4,750.00 which the plaintiff claims was the
amount of his retirement award and vacation pay. According to the plaintiff, this
was in cash of $100 denominations and was placed in an envelope separate from
the other money he was carrying. Plaintiff presented the memorandum award,
Exhibit T-1 and the vouchers of payment, Exhibits T-2 and T-3. Under the
circumstances, recited by the plaintiff in which the loss occurred, the Court
believes that plaintiff could really have placed this amount in the attache case
considering that he was originally handcarrying said attache case and the same
was looked, and he did not expect that he would be required to check it in. . . .
(Amended Record on Appeal, p. 75; Emphasis ours)
The above conclusion of the trial court does not arise from the facts. That the
attache 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.
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.

WHEREFORE, the petition is hereby GRANTED and the decision of the

respondent Court of Appeals is REVERSED and SET ASIDE. The petitioner is
ordered to pay the private respondent damages in the amount of US$400.00 or its
equivalent in Philippine Currency at the time of actual payment, P10,000.00 in
attorney's fees, and costs of the suit.

SO ORDERED.
G.R. No. 103338 January 4, 1994
FEDERICO SERRA, petitioner, vs. THE HON. COURT OF APPEALS AND
RIZAL COMMERCIAL BANKING CORPORATION, respondents.
NOCON, J.:
A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable. An accepted unilateral promise to buy and sell a determinate thing
for a price certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price. (Article 1479, New Civil Code) The first is the
mutual promise and each has the right to demand from the other the fulfillment of
the obligation. While the second is merely an offer of one to another, which if
accepted, would create an obligation to the offeror to make good his promise,
provided the acceptance is supported by a consideration distinct from the price.
Disputed in the present case is the efficacy of a "Contract of Lease with Option to
Buy", entered into between petitioner Federico Serra and private respondent Rizal
Commercial Banking Corporation. (RCBC).
Petitioner is the owner of a 374 square meter parcel of land located at Quezon St.,
Masbate, Masbate. Sometime in 1975, respondent bank, in its desire to put up a
branch in Masbate, Masbate, negotiated with petitioner for the purchase of the
then unregistered property. On May 20, 1975, a contract of LEASE WITH OPTION
TO BUY was instead forged by the parties, the pertinent portion of which reads:
1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in
lease, the parcel of land described in the first WHEREAS clause, to have and to
hold the same for a period of twenty-five (25) years commencing from June 1,
1975 to June 1, 2000. The LESSEE, however, shall have the option to purchase
said parcel of land within a period of ten (10) years from the date of the signing of
this Contract at a price not greater than TWO HUNDRED TEN PESOS (P210.00)
per square meter. For this purpose, the LESSOR undertakes, within such ten-year
period, to register said parcel of land under the TORRENS SYSTEM and all
expenses appurtenant thereto shall be for his sole account.
If, for any reason, said parcel of land is not registered under the TORRENS
SYSTEM within the aforementioned ten-year period, the LESSEE shall have the
right, upon termination of the lease to be paid by the LESSOR the market value of
the building and improvements constructed on said parcel of land.
The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register said
parcel of land under the TORRENS SYSTEM in case the LESSOR, for any
reason, fails to comply with his obligation to effect said registration within
reasonable time after the signing of this Agreement, and all expenses appurtenant
to such registration shall be charged by the LESSEE against the rentals due to the
LESSOR.
2. During the period of the lease, the LESSEE covenants to pay the LESSOR, at
the latter's residence, a monthly rental of SEVEN HUNDRED PESOS (P700.00),
Philippine Currency, payable in advance on or before the fifth (5th) day of every
calendar month, provided that the rentals for the first four (4) months shall be paid
by the LESSEE in advance upon the signing of this Contract.
3. The LESSEE is hereby authorized to construct as its sole expense a building
and such other improvements on said parcel of land, which it may need in
pursuance of its business and/or operations; provided, that if for any reason the
LESSEE shall fail to exercise its option mentioned in paragraph (1) above in case
the parcel of land is registered under the TORRENS SYSTEM within the ten-year
period mentioned therein, said building and/or improvements, shall become the
property of the LESSOR after the expiration of the 25-year lease period without the
right of reimbursement on the part of the LESSEE. The authority herein granted
does not, however, extend to the making or allowing any unlawful, improper or
offensive used of the leased premises, or any use thereof, other than banking and
office purposes. The maintenance and upkeep of such building, structure and
improvements shall likewise be for the sole account of the LESSEE. 1
The foregoing agreement was subscribed before Notary Public Romeo F.
Natividad.
Pursuant to said contract, a building and other improvements were constructed on
the land which housed the branch office of RCBC in Masbate, Masbate. Within
three years from the signing of the contract, petitioner complied with his part of the
agreement by having the property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-
232 was issued by the Register of Deeds of the Province of Masbate.
Petitioner alleges that as soon as he had the property registered, he kept on
pursuing the manager of the branch to effect the sale of the lot as per their
agreement. It was not until September 4, 1984, however, when the respondent
bank decided to exercise its option and informed petitioner, through a letter, 2 of its
intention to buy the property at the agreed price of not greater than P210.00 per
square meter or a total of P78,430.00. But much to the surprise of the respondent,
petitioner replied that he is no longer selling the property.3
Hence, on March 14, 1985, a complaint for specific performance and damages
were filed by respondent against petitioner. In the complaint, respondent alleged
that during the negotiations it made clear to petitioner that it intends to stay
permanently on property once its branch office is opened unless the exigencies of
the business requires otherwise. Aside from its prayer for specific performance, it
likewise asked for an award of P50,000.00 for attorney's fees P100,000.00 as
exemplary damages and the cost of the suit.4
A special and affirmative defenses, petitioner contended:
1. That the contract having been prepared and drawn by RCBC, it took undue
advantage on him when it set in lopsided terms.
2. That the option was not supported by any consideration distinct from the price
and hence not binding upon him.
3. That as a condition for the validity and/or efficacy of the option, it should have
been exercised within the reasonable time after the registration of the land under
the Torrens System; that its delayed action on the option have forfeited whatever
its claim to the same.
4. That extraordinary inflation supervened resulting in the unusual decrease in the
purchasing power of the currency that could not reasonably be forseen or was
manifestly beyond the contemplation of the parties at the time of the establishment
of the obligation, thus, rendering the terms of the contract unenforceable,
inequitable and to the undue enrichment of RCBC.
and as counterclaim petitioner alleged that:
1. The rental of P700.00 has become unrealistic and unreasonable, that justice
and equity will require its adjustment.
2. By the institution of the complaint he suffered moral damages which may be
assessed at P100,000.00 and award of attorney's fee of P25,000.00 and
exemplary damages at P100,000.00.6
Initially, after trial on the merits, the court dismissed the complaint. Although it
found the contract to be valid, the court nonetheless ruled that the option to buy in
unenforceable because it lacked a consideration distinct from the price and RCBC
did not exercise its option within reasonable time. The prayer for readjustment of
rental was denied, as well as that for moral and exemplary damages.7
Nevertheless, upon motion for reconsideration of respondent, the court in the order
of January 9, 1989, reversed itself, the dispositive portion reads:
WHEREFORE, the Court reconsiders its decision dated June 6, 1988, and hereby
renders judgment as follows:
1. The defendant is hereby ordered to execute and deliver the proper deed of sale
in favor of plaintiff selling, transferring and
conveying the property covered by and described in the Original Certificate of Title
0-232 of the Registry of Deeds of Masbate for the sum of Seventy Eight Thousand
Five Hundred Forty Pesos (P78,540,00), Philippine Currency;
2. Defendant is ordered to pay plaintiff the sum of Five Thousand (P5,000.00)
Pesos as attorney's fees;
3. The counter claim of defendant is hereby dismissed; and
4. Defendants shall pay the costs of suit.8
In a decision promulgated on September 19, 1991,9 the Court of Appeals affirmed
the findings of the trial court that:
1. The contract is valid and that the parties perfectly understood the contents
thereof;
2. The option is supported by a distinct and separate consideration as embodied in
the agreement;
3. There is no basis in granting an adjustment in rental.
Assailing the judgment of the appellate court, petitioner would like us to consider
mainly the following:
1. The disputed contract is a contract of adhesion.
2. There was no consideration to support the option, distinct from the price, hence
the option cannot be exercised.
3. Respondent court gravely abused its discretion in not granting currency
adjustment on the already eroded value of the stipulated rentals for twenty-five
years.
The petition is devoid of merit.
There is no dispute that the contract is valid and existing between the parties, as
found by both the trial court and the appellate court. Neither do we find the terms
of the contract unfairly lopsided to have it ignored.
A contract of adhesion is one wherein a party, usually a corporation, prepares the
stipulations in the contract, while the other party merely affixes his signature or his
"adhesion" thereto. These types of contracts are as binding as ordinary contracts.
Because in reality, the party who adheres to the contract is free to reject it entirely.
Although, this Court will not hesitate to rule out blind adherence to terms where
facts and circumstances will show that it is basically one-sided. 10
We do not find the situation in the present case to be inequitable. Petitioner is a
highly educated man, who, at the time of the trial was already a CPA-Lawyer, and
when he entered into the contract, was already a CPA, holding a respectable
position with the Metropolitan Manila Commission. It is evident that a man of his
stature should have been more cautious in transactions he enters into, particularly
where it concerns valuable properties. He is amply equipped to drive a hard
bargain if he would be so minded to.
Petitioner contends that the doctrines laid down in the cases of
Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v.
Palarca 13 were misapplied in the present case, because 1) the option given to the
respondent bank was not supported by a consideration distinct from the price; and
2) that the stipulated price of "not greater than P210.00 per square meter" is not
certain or definite.
Article 1324 of the Civil Code provides that when an offeror has allowed the
offeree a certain period to accept, the offer maybe withdrawn at anytime before
acceptance by communicating such withdrawal, except when the option is founded
upon consideration, as something paid or promised. On the other hand, Article
1479 of the Code provides that an accepted unilateral promise to buy and sell a
determinate thing for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price.
In a unilateral promise to sell, where the debtor fails to withdraw the promise
before the acceptance by the creditor, the transaction becomes a bilateral contract
to sell and to buy, because upon acceptance by the creditor of the offer to sell by
the debtor, there is already a meeting of the minds of the parties as to the thing
which is determinate and the price which is certain. 14 In which case, the parties
may then reciprocally demand performance.
Jurisprudence has taught us that an optional contract is a privilege existing only in
one party — the buyer. For a separate consideration paid, he is given the right to
decide to purchase or not, a certain merchandise or property, at any time within
the agreed period, at a fixed price. This being his prerogative, he may not be
compelled to exercise the option to buy before the time
expires. 15
On the other hand, what may be regarded as a consideration separate from the
price is discussed in the case of Vda. de Quirino v. Palarca 16 wherein the facts
are almost on all fours with the case at bar. The said case also involved a lease
contract with option to buy where we had occasion to say that "the consideration
for the lessor's obligation to sell the leased premises to the lessee, should he
choose to exercise his option to purchase the same, is the obligation of the lessee
to sell to the lessor the building and/or improvements constructed and/or made by
the former, if he fails to exercise his option to buy leased premises." 17
In the present case, the consideration is even more onerous on the part of the
lessee since it entails transferring of the building and/or improvements on the
property to petitioner, should respondent bank fail to exercise its option within the
period stipulated. 18
The bugging question then is whether the price "not greater than TWO HUNDRED
PESOS" is certain or definite. A price is considered certain if it is so with reference
to another thing certain or when the determination thereof is left to the judgment of
a specified person or persons. 19 And generally, gross inadequacy of price does
not affect a contract of sale. 20
Contracts are to be construed according to the sense and meaning of the terms
which the parties themselves have used. In the present dispute, there is evidence
to show that the intention of the parties is to peg the price at P210 per square
meter. This was confirmed by petitioner himself in his testimony, as follows:
Q. Will you please tell this Court what was the offer?
A. It was an offer to buy the property that I have in Quezon City (sic).
Q. And did they give you a specific amount?
xxx xxx xxx
A. Well, there was an offer to buy the property at P210 per square meters (sic).
Q. And that was in what year?
A . 1975, sir.
Q. And did you accept the offer?
A. Yes, sir.
Moreover, by his subsequent acts of having the land titled under the Torrens
System, and in pursuing the bank manager to effect the sale immediately, means
that he understood perfectly the terms of the contract. He even had the same
property mortgaged to the respondent bank sometime in 1979, without the
slightest hint of wanting to abandon his offer to sell the property at the agreed price
of P210 per square meter.
Finally, we agree with the courts a quo that there is no basis, legal or factual, in
adjusting the amount of the rent. The contract is the law between the parties and if
there is indeed reason to adjust the rent, the parties could by themselves negotiate
for the amendment of the contract. Neither could we consider the decline of the
purchasing power of the Philippine peso from 1983 to the time of the
commencement of the present case in 1985, to be so great as to result in an
extraordinary inflation. Extraordinary inflation exists when there in an unimaginable
increase or decrease of the purchasing power of the Philippine currency, or
fluctuation in the value of pesos manifestly beyond the contemplation of the parties
at the time of the establishment of the obligation. 23

Premises considered, we find that the contract of "LEASE WITH OPTION TO

BUY" between petitioner and respondent bank is valid, effective and enforceable,
the price being certain and that there was consideration distinct from the price to
support the option given to the lessee.

WHEREFORE, this petition is hereby DISMISSED, and the decision of the

appellate court is hereby AFFIRMED.

SO ORDERED.
G.R. No. L-37750 May 19, 1978
SWEET LINES, INC., petitioner, vs. HON. BERNARDO TEVES, Presiding
Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO TANDOG, JR., and
ROGELIO TIRO, respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to
restrain respondent Judge from proceeding further with Civil Case No. 4091,
entitled Leovigildo D. Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he
denied petitioner's Motion to Dismiss the complaint, and the Motion for
Reconsideration of said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and
Rogelio Tiro, a contractor by professions, bought tickets Nos. 0011736 and
011737 for Voyage 90 on December 31, 1971 at the branch office of petitioner, a
shipping company transporting inter-island passengers and cargoes, at Cagayan
de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope"
bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was
not proceeding to Bohol, since many passengers were bound for Surigao, private
respondents per advice, went to the branch office for proper relocation to M/S
"Sweet Town". Because the said vessel was already filled to capacity, they were
forced to agree "to hide at the cargo section to avoid inspection of the officers of
the Philippine Coastguard." Private respondents alleged that they were, during the
trip," "exposed to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for
Tagbilaran were not honored and they were constrained to pay for other tickets. In
view thereof, private respondents sued petitioner for damages and for breach of
contract of carriage in the alleged sum of P10,000.00 before respondents Court of
First Instance of Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This
motion was premised on the condition printed at the back of the tickets, i.e.,
Condition No. 14, which reads:
14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be
filed in the competent courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the
order of denial, but no avail. 5 Hence, this instant petition for prohibition for
preliminary injunction, 'alleging that the respondent judge has departed from the
accepted and usual course of judicial preoceeding" and "had acted without or in
excess or in error of his jurisdicton or in gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from
proceeding further with the case and required respondent to comment. 7 On
January 18, 1974, We gave due course to the petition and required respondent to
answer. 8 Thereafter, the parties submitted their respesctive memoranda in
support of their respective contentions.
Presented thus for Our resolution is a question is aquestion which, to all
appearances, is one of first impression, to wit — Is Condition No. 14 printed at the
back of the petitioner's passage tickets purchased by private respondents, which
limits the venue of actions arising from the contract of carriage to theCourt of First
Instance of Cebu, valid and enforceable? Otherwise stated, may a common carrier
engaged in inter-island shipping stipulate thru condition printed at the back of
passage tickets to its vessels that any and all actions arising out of the ocntract of
carriage should be filed only in a particular province or city, in this case the City of
Cebu, to the exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private
respndents acceded to tit when they purchased passage tickets at its Cagayan de
Oro branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran,
Bohol — that the condition of the venue of actions in the City of Cebu is proper
since venue may be validly waived, citing cases; 10 that is an effective waiver of
venue, valid and binding as such, since it is printed in bold and capital letters and
not in fine print and merely assigns the place where the action sing from the
contract is institution likewise citing cases; 11 and that condition No. 14 is
unequivocal and mandatory, the words and phrases "any and all", "irrespective of
where it is issued," and "shag" leave no doubt that the intention of Condition No.
14 is to fix the venue in the City of Cebu, to the exclusion of other places; that the
orders of the respondent Judge are an unwarranted departure from established
jurisprudence governing the case; and that he acted without or in excess of his
jurisdiction in is the orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid,
that the same is not an essential element of the contract of carriage, being in itself
a different agreement which requires the mutual consent of the parties to it; that
they had no say in its preparation, the existence of which they could not refuse,
hence, they had no choice but to pay for the tickets and to avail of petitioner's
shipping facilities out of necessity; that the carrier "has been exacting too much
from the public by inserting impositions in the passage tickets too burdensome to
bear," that the condition which was printed in fine letters is an imposition on the
riding public and does not bind respondents, citing cases; 13 that while venue 6f
actions may be transferred from one province to another, such arrangement
requires the "written agreement of the parties", not to be imposed unilaterally; and
that assuming that the condition is valid, it is not exclusive and does not, therefore,
exclude the filing of the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by
petitioner and private respondents and that the passage tickets, upon which the
latter based their complaint, are the best evidence thereof. All the essential
elements of a valid contract, i.e., consent, cause or consideration and object, are
present. As held in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a passenger boards a ship for
transportation from one place to another he is issued a ticket by the shipper which
has all the elements of a written contract, Namely: (1) the consent of the
contracting parties manifested by the fact that the passenger boards the ship and
the shipper consents or accepts him in the ship for transportation; (2) cause or
consideration which is the fare paid by the passenger as stated in the ticket; (3)
object, which is the transportation of the passenger from the place of departure to
the place of destination which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14)
conditions — one of which is "Condition No. 14" which is in issue in this case —
printed at the back of the passage tickets, these are commonly known as
"contracts of adhesion," the validity and/or enforceability of which will have to be
determined by the peculiar circumstances obtaining in each case and the nature of
the conditions or terms sought to be enforced. For, "(W)hile generally, stipulations
in a contract come about after deliberate drafting by the parties thereto, ... there
are certain contracts almost all the provisions of which have been drafted only by
one party, usually a corporation. Such contracts are called contracts of adhesion,
because the only participation of the party is the signing of his signature or his
'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on
the installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into
— namely, that it is drafted only by one party, usually the corporation, and is
sought to be accepted or adhered to by the other party, in this instance the
passengers, private respondents, who cannot change the same and who are thus
made to adhere thereto on the "take it or leave it" basis — certain guidelines in the
determination of their validity and/or enforceability have been formulated in order
to that justice and fan play characterize the relationship of the contracting parties.
Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law
Union and Rock Insurance Co., 17 and later through Justice Fernando in Fieldman
Insurance v. Vargas, 18 held —
The courts cannot ignore that nowadays, monopolies, cartels and concentration of
capital endowed with overwhelm economic power, manage to impose upon parties
d with them y prepared 'agreements' that the weaker party may not change one
whit his participation in the 'agreement' being reduced to the alternative 'to take it
or leave it,' labelled since Raymond Saleilles 'contracts by adherence' (contracts d'
adhesion) in contrast to those entered into by parties bargaining on an equal
footing. Such contracts (of which policies of insurance and international bill of
lading are prime examples) obviously cap for greater strictness and vigilance on
the part of the courts of justice with a view to protecting the weaker party from
abuses and imposition, and prevent their becoming traps for the unwary.
To the same effect and import, and, in recognition of the character of contracts of
this kind, the protection of the disadvantaged is expressly enjoined by the New
Civil Code —
In all contractual property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection.
Considered in the light Of the foregoing norms and in the context Of circumstances
Prevailing in the inter-island ship. ping industry in the country today, We find and
hold that Condition No. 14 printed at the back of the passage tickets should be
held as void and unenforceable for the following reasons first, under circumstances
obligation in the inter-island ship. ping industry, it is not just and fair to bind
passengers to the terms of the conditions printed at the back of the passage
tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition
No. 14 subverts the public policy on transfer of venue of proceedings of this
nature, since the same will prejudice rights and interests of innumerable
passengers in different s of the country who, under Condition No. 14, will have to
file suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that
there is a dearth of and acute shortage in inter- island vessels plying between the
country's several islands, and the facilities they offer leave much to be desired.
Thus, even under ordinary circumstances, the piers are congested with
passengers and their cargo waiting to be transported. The conditions are even
worse at peak and/or the rainy seasons, when Passengers literally scramble to
whatever accommodations may be availed of, even through circuitous routes,
and/or at the risk of their safety — their immediate concern, for the moment, being
to be able to board vessels with the hope of reaching their destinations. The
schedules are — as often as not if not more so — delayed or altered. This was
precisely the experience of private respondents when they were relocated to M/S
"Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of the
sun and the dust coming from the ship's cargo of corn grits, " because even the
latter was filed to capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to
examine their tickets received from crowded/congested counters, more often than
not during rush hours, for conditions that may be printed much charge them with
having consented to the conditions, so printed, especially if there are a number of
such conditions m fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the ms of
the petitioner, respondents had no say in its preparation. Neither did the latter have
the opportunity to take the into account prior to the purpose chase of their tickets.
For, unlike the small print provisions of contracts — the common example of
contracts of adherence — which are entered into by the insured in his awareness
of said conditions, since the insured is afforded the op to and co the same,
passengers of inter-island v do not have the same chance, since their alleged
adhesion is presumed only from the fact that they purpose chased the tickets.
of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not
cause inconvenience to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen
can lawfully do that which has a tendency to be injurious to the public or against
the public good ... 22 Under this principle" ... freedom of contract or private dealing
is restricted by law for the good of the public. 23 Clearly, Condition No. 14, if
enforced, will be subversive of the public good or interest, since it will frustrate in
meritorious cases, actions of passenger cants outside of Cebu City, thus placing
petitioner company at a decided advantage over said persons, who may have
perfectly legitimate claims against it. The said condition should, therefore, be
declared void and unenforceable, as contrary to public policy — to make the courts
accessible to all who may have need of their services.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order
issued on November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against
petitioner.

It should also be stressed that slapping companies are franchise holders of

certificates of public convenience and therefore, posses a virtual monopoly over
the business of transporting passengers between the ports covered by their
franchise. This being so, shipping companies, like petitioner, engaged in inter-
island shipping, have a virtual monopoly of the business of transporting
passengers and may thus dictate their terms of passage, leaving passengers with
no choice but to buy their tickets and avail of their vessels and facilities. Finally,
judicial notice may be taken of the fact that the bulk of those who board these
inter-island vested come from the low-income groups and are less literate, and
who have little or no choice but to avail of petitioner's vessels.

2. Condition No. 14 is subversive of public policy on transfers of venue of actions.

For, although venue may be changed or transferred from one province to another
by agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court,
such an agreement will not be held valid where it practically negates the action of
the claimants, such as the private respondents herein. The philosophy underlying
the provisions on transfer of venue of actions is the convenience of the plaintiffs as
well as his witnesses and to promote 21 the ends of justice. Considering the
expense and trouble a passenger residing outside of Cebu City would incur to
prosecute a claim in the City of Cebu, he would most probably decide not to file the
action at all. The condition will thus defeat, instead of enhance, the ends of justice.
Upon the other hand, petitioner has branches or offices in the respective ports of
call of its vessels and can afford to litigate in any of these places. Hence, the filing
G.R. No. L-58011 & L-58012 November 18, 1983
VIR-JEN SHIPPING AND MARINE SERVICES, INC., petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION, ROGELIO BISULA RUBEN ARROZA
JUAN GACUTNO LEONILO ATOK, NILO CRUZ, ALVARO ANDRADA,
NEMESIO ADUG SIMPLICIO BAUTISTA, ROMEO ACOSTA, and JOSE
ENCABO respondents.
RESOLUTION
GUTIERREZ, JR., J.:
Before the Court en banc is a motion to reconsider the decision promulgated on
July 20, 1982 which set aside the decision of respondent National Labor Relations
Commission and reinstated the decision of the National Seamen Board.
To better understand the issues raised in the motion for reconsideration, we
reiterate the background facts of the case, Taken from the decision of the National
Labor Relations Commission: têñ.£îhqwâ£
It appears that on different dates in December, 1978 and January, 1979, the
Seamen entered into separate contracts of employment with the Company,
engaging them to work on board M/T' Jannu for a period of twelve (12) months.
After verification and approval of their contracts by the NSB, the Seamen boarded
their vessel in Japan.
On 10 January 1919, the master of the vessel complainant Rogelio H. Bisula,
received a cable from the Company advising him of the possibility that the vessel
might be directed to call at ITF-controlled ports said at the same time informing him
of the procedure to be followed in the computation of the special or additional
compensation of crew members while in said ports. ITF is the acronym for the
International Transport Workers Federation, a militant international labor
organization with affiliates in different ports of the world, which reputedly can tie
down a vessel in a port by preventing its loading or unloading, This is a sanction
resorted to by ITF to enforce the payment of its wages rates for seafarers the so-
called ITF rates, if the wages of the crew members of a vessel who have affiliated
with it are below its prescribed rates.) In the same cable of the Company, the
expressed its regrets for hot clarifying earlier the procedure in computing the
special compensation as it thought that the vessel would 'trade in Caribbean ports
only.
On 22 March 1979, the Company sent another cable to complainant Bisula, this
time informing him of the respective amounts each of the officers and crew
members would receive as special compensation when the vessel called at the
port of Kwinana Australia, an ITF-controlled port. This was followed by another
cable on 23 March 1979, informing him that the officers and crew members had
been enrolled as members of the ITF in Sidney, Australia, and that the
membership fee for the 28 personnel complement of the vessel had already been
paid.
In answer to the Company's cable last mentioned, complainant Bisula, in
representation of the other officers and crew members, sent on 24 March 1979 a
cable informing the Company that the officers and crew members were not
agreeable to its 'suggestion'; that they were not contented with their present
salaries 'based on the volume of works, type of ship with hazardous cargo and
registered in a world wide trade': that the 'officers and crew (were) not interested in
ITF membership if not actually paid with ITF rate that their 'demand is only 50%
increase based on present basic salary and that the proposed wage increase is
the 'best and only solution to solve ITF problem' since the Company's salary rates
'especially in tankers (are) very far in comparison with other shipping agencies in
Manila ...
In reply, the Company proposed a 25% increase in the basic pay of the
complainant crew members, although it claimed, that it would "suffer and absorb
considerable amount of losses." The proposal was accepted by the Seamen with
certain conditions which were accepted by the Company. Conformably with the
agreement of the parties which was effected through the cables abovementioned,
the Seamen were paid their new salary rates.
Subsequently, the Company sought authority from the NSB to cancel the contracts
of employment of the Seamen, claiming that its principals had terminated their
manning agreement because of the actuations of the Seamen. The request was
granted by the NSB Executive Director in a letter dated 10 April 1979. Soon
thereafter, the Company cabled the Seamen informing them that their contracts
would be terminated upon the vessel's arrival in Japan. On 19 April 1979 they
Arere asked to disembark from the vessel, their contracts were terminated, and
they were repatriated to Manila. There is no showing that the Seamen were given
the opportunity to at least comment on the Company's request for the cancellation
of their contracts, although they had served only three (3) out of the twelve (12)
months' duration of their contracts.
The private respondents filed a complaint for illegal dismissal and non-payment of
earned wages with the National Seamen Board. The Vir-jen Shipping and Marine
Services Inc. in turn filed a complaint for breach of contract and recovery of excess
salaries and overtime pay against the private respondents. On July 2, 1980, the
NSB rendered a decision declaring that the seamen breached their employment
contracts when they demanded and received from Vir-jen Shipping wages over
and above their contracted rates. The dismissal of the seamen was declared legal
and the seamen were ordered suspended.
The seamen appealed the decision to the NLRC which reversed the decision of
the NSB and required the petitioner to pay the wages and other monetary benefits
corresponding to the unexpired portion of the manning contract on the ground that
the termination of the contract by the petitioner was without valid cause. Vir-jen
Shipping filed the present petition.
The private respondents submit the following issues in their motion for
reconsideration: têñ.£îhqwâ£
A. THIS HONORABLE COURT DID VIOLENCE TO LAW AND JURISPRUDENCE
WHEN IT HELD THAT THE FINDING OF FACT OF THE NATIONAL SEAMEN
BOARD THAT THE SEAMEN VIOLATED THEIR CONTRACTS IS MORE
CREDIBLE THAN THE FINDING OF FACT OF THE NATIONAL LABOR
RELATIONS COMMISSION THAT THE SEAMEN DID NOT VIOLATE THEIR
CONTRACT.
B. THIS HONORABLE COURT ERRED IN FINDING THAT VIR-JEN'S HAVING
AGREED TO A 25% INCREASE OF THE SEAMEN'S BASIC WAGE WAS NOT
VOLUNTARY BUT WAS DUE TO THREATS.
C. THIS HONORABLE COURT ERRED WHEN IT TOOK COGNIZANCE OF THE
ADDENDUM AGREEMENT; ASSUMING THAT THE ADDENDUM AGREEMENT
COULD BE TAKEN COGNIZANCE OF, THIS HONORABLE COURT ERRED
WHEN' IT FOUND THAT PRIVATE RESPONDENTS HAD VIOLATED THE
SAME.
D, THIS HONORABLE COURT ERRED WHEN IT DID NOT FIND PETITIONER
VIRJEN LIABLE FOR HAVING TERMINATED BEFORE EXPIRY DATE THE
EMPLOYMENT CONTRACTS OF PRIVATE RESPONDENTS, THERE BEING
NO LEGAL AND JUSTIFIABLE GROUND FOR SUCH TERMINATION.
E. THIS HONORABLE COURT ERRED IN FINDING THAT THE PREPARATION
BY PETITIONER OF THE TWO PAYROLLS AND THE EXECUTION OF THE
SIDE CONTRACT WERE NOT MADE IN BAD FAITH.
F. THIS HONORABLE COURT INADVERTENTLY DISCRIMINATED AGAINST
PRIVATE RESPONDENTS.
At the outset, we are faced with the question whether or not the Court en banc
should give due course to the motion for reconsideration inspite of its having been
denied twice by the Court's Second Division. The case was referred to and
accepted by the Court en banc because of the movants' contention that the
decision in this case by the Second Division deviated from Wallem Phil. Shipping
Inc. v. Minister of Labor (L-50734-37, February 20, 1981), a First Division case
with the same facts and issues. We are constrained to answer the initial question
in the affirmative.
A fundamental postulate of Philippine Constitutional Law is the fact, that there is
only one Supreme Court from whose decisions all other courts are required to take
their bearings. (Albert v. Court of First Instance, 23 SCRA 948; Barrera v. Barrera,
34 SCRA 98; Tugade v. Court of Appeals, 85 SCRA 226). The majority of the
Court's work is now performed by its two Divisions, but the Court remains one
court, single, unitary, complete, and supreme. Flowing from this nature of the
Supreme Court is the fact that, while ' individual Justices may dissent or partially
concur with one another, when the Court states what the law is, it speaks with only
one voice. And that voice being authoritative should be a clear as possible.
Any doctrine or principle of law laid down by the Court, whether en banc or in
Division, may be modified or reversed only by the Court en banc. (Section 2(3),
Article X, Constitution.) In the rare instances when one Division disagrees in its
views with the other Division, or the necessary votes on an issue cannot be had in
a Division, the case is brought to the Court en banc to reconcile any seeming
conflict, to reverse or modify an earlier decision, and to declare the Court's
doctrine. This is what has happened in this case.
The decision sought to be reconsidered appears to be a deviation from the Court's
decision, speaking through the First Division, in Wallem Shipping, Inc. v. Hon.
Minister of Labor (102 SCRA 835). Faced with two seemingly conflicting
resolutions of basically the same issue by its two Divisions, the Court. therefore,
resolved to transfer the case to the Court en banc. Parenthetically, the petitioner's
comment on the third motion for reconsideration states that the resolution of the
motion might be the needed vehicle to make the ruling in the Wallem case clearer
and more in time with the underlying principles of the Labor Code. We agree with
the petitioner.
After an exhaustive, painstaking, and perspicacious consideration of the motions
for reconsideration and the comments, replies, and other pleadings related thereto,
the Court en banc is constrained to grant the motions. To grant the motion is to
keep faith with the constitutional mandate to afford protection to labor and to
assure the rights of workers to self-organization and to just and humane conditions
of work. We sustain the decision of the respondent National labor Relations
Commission.
There are various arguments raised by the petitioners but the common thread
running through all of them is the contention, if not the dismal prophecy, that if the
respondent seamen are sustained by this Court, we would in effect "kill the en that
lays the golden egg." In other words, Filipino seamen, admittedly among the best
in the world, should remain satisfied with relatively lower if not the lowest,
international rates of compensation, should not agitate for higher wages while their
contracts of employment are subsisting, should accept as sacred, iron clad, and
immutable the side contracts which require them to falsely pretend to be members
of international labor federations, pretend to receive higher salaries at certain
foreign ports only to return the increased pay once the ship leaves that port, should
stifle not only their right to ask for improved terms of employment but their freedom
of speech and expression, and should suffer instant termination of employment at
the slightest sign of dissatisfaction with no protection from their Government and
their courts. Otherwise, the petitioners contend that Filipinos would no longer be
accepted as seamen, those employed would lose their jobs, and the still
unemployed would be left hopeless.
This is not the first time and it will not be the last where the threat of unemployment
and loss of jobs would be used to argue against the interests of labor; where
efforts by workingmen to better their terms of employment would be characterized
as prejudicing the interests of labor as a whole.
In 1867 or one hundred sixteen years ago. Chief Justice Beasley of the Supreme
Court of New Jersey was ponente of the court's opinion declaring as a conspiracy
the threat of workingmen to strike in connection with their efforts to promote
unionism, têñ.£îhqwâ£
It is difficult to believe that a right exists in law which we can scarcely conceive can
produce, in any posture of affairs, other than injuriois results. It is simply the right
of workmen, by concert of action, and by taking advantage of their position, to
control the business of another, I am unwilling to hold that a right which cannot, in
any, event, be advantageous to the employee, and which must always be hurtful to
the employer, exists in law. In my opinion this indictment sufficiently shows that the
force of the confederates was brought to bear upon their employer for the purpose
of oppression and mischief and that this amounts to a conspiracy, (State v.
Donaldson, 32 NJL 151, 1867. Cited in Chamberlain, Sourcebook on Labor, p. 13.
Emphasis supplied)
The same arguments have greeted every major advance in the rights of the
workingman. And they have invariably been proved unfounded and false.
Unionism, employers' liability acts, minimum wages, workmen's compensation,
social security and collective bargaining to name a few were all initially opposed by
employers and even well meaning leaders of government and society as "killing
the hen or goose which lays the golden eggs." The claims of workingmen were
described as outrageously injurious not only to the employer but more so to the
employees themselves before these claims or demands were established by law
and jurisprudence as "rights" and before these were proved beneficial to
management, labor, and the nation as a whole beyond reasonable doubt.
The case before us does not represent any major advance in the rights of labor
and the workingmen. The private respondents merely sought rights already
established. No matter how much the petitioner-employer tries to present itself as
speaking for the entire industry, there is no evidence that it is typical of employers
hiring Filipino seamen or that it can speak for them.
The contention that manning industries in the Philippines would not survive if the
instant case is not decided in favor of the petitioner is not supported by evidence.
The Wallem case was decided on February 20, 1981. There have been no severe
repercussions, no drying up of employment opportunities for seamen, and none of
the dire consequences repeatedly emphasized by the petitioner. Why should Vir-
jen be all exception?
The wages of seamen engaged in international shipping are shouldered by the
foreign principal. The local manning office is an agent whose primary function is
recruitment and who .usually gets a lump sum from the shipowner to defray the
salaries of the crew. The hiring of seamen and the determination of their
compensation is subject to the interplay of various market factors and one key
factor is how much in terms of profits the local manning office and the foreign
shipowner may realize after the costs of the voyage are met. And costs include
salaries of officers and crew members.
Filipino seamen are admittedly as competent and reliable as seamen from any
other country in the world. Otherwise, there would not be so many of them in the
vessels sailing in every ocean and sea on this globe. It is competence and
reliability, not cheap labor that makes our seamen so greatly in demand. Filipino
seamen have never demanded the same high salaries as seamen from the United
States, the United Kingdom, Japan and other developed nations. But certainly they
are entitled to government protection when they ask for fair and decent treatment
by their employer.-, and when they exercise the right to petition for improved terms
of employment, especially when they feel that these are sub-standard or are
capable of improvement according to internationally accepted rules. In the
domestic scene, there are marginal employers who prepare two sets of payrolls for
their employees — one in keeping with minimum wages and the other recording
the sub-standard wages that the employees really receive, The reliable employers,
however, not only meet the minimums required by fair labor standards legislation
but even go way above the minimums while earning reasonable profits and
prospering. The same is true of international employment. There is no reason why
this Court and the Ministry of Labor and. Employment or its agencies and
commissions should come out with pronouncements based on the standards and
practices of unscrupulous or inefficient shipowners, who claim they cannot survive
without resorting to tricky and deceptive schemes, instead of Government
maintaining labor law and jurisprudence according to the practices of honorable,
competent, and law-abiding employers, domestic or foreign.
If any minor advantages given to Filipino seamen may somehow cut into the profits
of local manning agencies and foreign shipowners, that is not sufficient reason why
the NSB or the ILRC should not stand by the former instead of listening to
unsubstantiated fears that they would be killing the hen which lays the golden
eggs.
Prescinding from the above, we now hold that neither the National Seamen Board
nor the National Labor Relations Commission should, as a matter of official policy,
legitimize and enforce cubious arrangements where shipowners and seamen enter
into fictitious contracts similar to the addendum agreements or side contracts in
this case whose purpose is to deceive. The Republic of the Philippines and its
ministries and agencies should present a more honorable and proper posture in
official acts to the whole world, notwithstanding our desire to have as many job
openings both here and abroad for our workers. At the very least, such as
sensitive matter involving no less than our dignity as a people and the welfare of
our workingmen must proceed from the Batasang Pambansa in the form of policy
legislation, not from administrative rule making or adjudication
Another issue raised by the movants is whether or not the seamen violated their
contracts of employment.
The form contracts approved by the National Seamen Board are designed to
protect Filipino seamen not foreign shipowners who can take care of themselves.
The standard forms embody' the basic minimums which must be incorporated as
parts of the employment contract. (Section 15, Rule V, Rules and Regulations
Implementing the Labor Code.) They are not collective bargaining agreements or
immutable contracts which the parties cannot improve upon or modify in the
course of the agreed period of time. To state, therefore, that the affected seamen
cannot petition their employer for higher salaries during the 12 months duration of
the contract runs counter to established principles of labor legislation. The National
Labor Relations Commission, as the appellate tribunal from decisions of the
National Seamen Board, correctly ruled that the seamen did not violate their
contracts to warrant their dismissal.
The respondent Commission ruled:
In the light of all the foregoing facts, we find that the cable of the seamen
proposing an increase in their wage rates was not and could not have been
intended as a threat to comp el the Company to accede to their proposals. But
even assuming, if only for the sake of argument, that the demand or — proposal
for a wage increase was accompanied by a threat that they would report to ITF if
the Company did not accede to the contract revision - although there really was no
such threat as pointed out earlier — the Seamen should not be held at fault for
asking such a demand. In the same case cited above, the Supreme Court held:
Petitioner claims that the dismissal of private respondents was justified because
the latter threatened the ship authorities in acceding to their demands, and this
constitutes serious misconduct as contemplated by the Labor Code. This
contention is not well-taken. But even if there had been such a threat, respondents'
behavior should not be censured because it is but natural for them to employ some
means of pressing their demands for petitioner, the refusal to abide with the terms
of the Special Agreement, to honor and respect the same, They were only acting in
the exercise of their rights, and to deprive them of their freedom of expression is
contrary to law and public policy. There is no serious misconduct to speak of in the
case at bar which would justify respondents' dismissal just because of their
firmness in their demand for the fulfillment by petitioner of its obligation it entered
into without any coercion, specially on the part of private respondents. (Emphasis
supplied).
The above citation is from Wallem.
The facts show that when the respondents boarded the M/T Jannu there was no
intention to send their ship to Australia. On January 10, 1979, the petitioner sent a
cable to respondent shipmaster Bisula informing him of the procedure to be
followed in the computation of special compensation of crewmembers while in ITF
controlled ports and expressed regrets for not having earlier clarified the procedure
as it thought that the vessel would trade in Carribean ports only.
On March 22, 1979, the petitioner sent another cable informing Bisula of the
special compensation when the ship would call at Kwinana Australia.
The following day, shipmaster Bisula cabled Vir-jen stating that the officers and
crews were not interested in ITF membership if not paid ITF rates and that their
only demand was a 50 percent increase based on their then salaries. Bisula also
pointed out that Vir-jen rates were "very far in comparison with other shipping evidence on record, and fundamental State policy all dictate that the motions for
agencies in Manila." reconsideration should be granted.

In reply, Vir-jen counter proposed a 25 percent increase. Only after Kyoei Tanker WHEREFORE, the motions for reconsideration are hereby GRANTED. The
Co., Ltd., declined to increase the lumps sum amount given monthly to Vir-jen was petition is DISMISSED for lack of merit. The decision of the National Labor
the decision to terminate the respondents' employment formulated. Relations Commission is AFFIRMED. No costs.

The facts show that Virjen Initiated the discussions which led to the demand for SO ORDERED.
increased . The seamen made a proposal and the petitioner organized with a
counter-proposal. The ship had not vet gone to Australia or any ITF controlled port.
There was absolutely no mention of any strike. much less a threat to strike. The
seamen had done in act which under Philippine law or any other civilized law
would be termed illegal, oppressive, or malicious. Whatever pressure existed, it
was mild compared to accepted valid modes of labor activity.

We reiterate our ruling in Wallem.

Petitioner claims that the dismissal of private respondents was justified because
the latter threatened the ship authorities in acceding to their demands, and this
constitutes serious misconduct as contemplated by the Labor Code. This
contention is not well-taken. The records fail to establish clearly the commission of
any threat, But even if there had been such a threat, respondents' behavior should
not be censured because it is but natural for them to employ some means of
pressing their demands for petitioner, who refused to abide with the terms of the
Special Agreement, to honor and respect the same, They were only acting in the
exercise of their rights, and to deprive them of their form of expression is contrary
to law and public policy. ...

Our dismissing the petition is premised on the assumption that the Ministry of
Labor and Employment and all its agencies exist primarily for the workinginan's
interests and, of course, the nation as a whole. The points raised by the Solicitor-
General in his comments refer to the issue of allowing what the petitioner
importunes under the argument of "killing the hen which lays the golden eggs."
This is one of policy which should perhaps be directed to the Batasang Pambansa
and to our country's other policy makers for more specific legislation on the matter,
subject to the constitutional provisions protecting labor, promoting social justice,
and guaranteeing non-abridgement of the freedom of speech, press, peaceable
assembly and petition. We agree with the movants that there is no showing of any
cause, which under the Labor Code or any current applicable law, would warrant
the termination of the respondents' services before the expiration of their contracts.
The Constitution guarantees State assurance of the rights of workers to security of
tenure. (Sec. 9, Article II, Constitution). Presumptions and provisions of law, the
G.R. Nos. L-57999, 58143-53 August 15, 1989
RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO MENDOZA,
ANTONIO TANEDO, AMORSOLO CABRERA, DOMINADOR SANTOS, ISIDRO
BRACIA, RAMON DE BELEN, ERNESTO SABADO, MARTIN MALABANAN,
ROMEO HUERTO and VITALIANO PANGUE, petitioners, vs. THE HON.
JUDGE ALFREDO L. BENIPAYO and MAGSAYSAY LINES, INC., respondents.
GUTIERREZ, JR., J.:
These petitions ask for a re-examination of this Court's precedent — setting
decision in Vir-Jen Shipping and Marine Services Inc. v. National Labor Relations
Commission, et al. (125 SCRA 577 [1983]). On constitutional, statutory, and
factual grounds, we find no reason to disturb the doctrine in Vir-Jen Shipping and
to turn back the clock of progress for sea-based overseas workers. The experience
gained in the past few years shows that, following said doctrine, we should neither
deny nor diminish the enjoyment by Filipino seamen of the same rights and
freedoms taken for granted by other working-men here and abroad.
The cases at bar involve a group of Filipino seamen who were declared by the
defunct National Seamen Board (NSB) guilty of breaching their employment
contracts with the private respondent because they demanded, upon the
intervention and assistance of a third party, the International Transport Worker's
Federation (ITF), the payment of wages over and above their contracted rates
without the approval of the NSB. The petitioners were ordered to reimburse the
total amount of US$91,348.44 or its equivalent in Philippine Currency representing
the said over-payments and to be suspended from the NSB registry for a period of
three years. The National Labor Relations Commission (NLRC) affirmed the
decision of the NSB.
In a corollary development, the private respondent, for failure of the petitioners to
return the overpayments made to them upon demand by the former, filed estafa
charges against some of the petitioners. The criminal cases were eventually
consolidated in the sala of then respondent Judge Alfredo Benipayo. Hence, these
consolidated petitions, G.R. No. 64781-99 and G.R. Nos. 57999 and 58143-53,
which respectively pray for the nullification of the decisions of the NLRC and the
NSB, and the dismissal of the criminal cases against the petitioners.
The facts are found in the questioned decision of the NSB in G.R. No. 64781-99.
From the records of this case it appears that the facts established and/or admitted
by the parties are the following: that on different dates in 1977 and 1978
respondents entered into separate contracts of employment (Exhs. "B" to "B-17",
inclusive) with complainant (private respondent) to work aboard vessels
owned/operated/manned by the latter for a period of 12 calendar months and with
different rating/position, salary, overtime pay and allowance, hereinbelow
specified: ...; that aforesaid employment contracts were verified and approved by
this Board; that on different dates in April 1978 respondents (petitioners) joined the
M/V "GRACE RIVER"; that on or about October 30, 1978 aforesaid vessel, with
the respondents on board, arrived at the port of Vancouver, Canada; that at this
port respondent received additional wages under rates prescribed by the
Intemational Transport Worker's Federation (ITF) in the total amount of
US$98,261.70; that the respondents received the amounts appearing opposite
their names, to wit: ...; that aforesaid amounts were over and above the rates of
pay of respondents as appearing in their employment contracts approved by this
Board; that on November 10, 1978, aforesaid vessel, with respondent on board,
left Vancouver, Canada for Yokohama, Japan; that on December 14, 1978, while
aforesaid vessel, was at Yura, Japan, they were made to disembark. (pp. 64-66,
Rollo)
Furthermore, according to the petitioners, while the vessel was docked at Nagoya,
Japan, a certain Atty. Oscar Torres of the NSB Legal Department boarded the
vessel and called a meeting of the seamen including the petitioners, telling them
that for their own good and safety they should sign an agreement prepared by him
on board the vessel and that if they do, the cases filed against them with NSB on
November 17, 1978 would be dismissed. Thus, the petitioners signed the.
"Agreement" dated December 5, 1978. (Annex C of Petition) However, when they
were later furnished xerox copies of what they had signed, they noticed that the
line "which amount(s) was/were received and held by CREWMEMBERS in trust for
SHIPOWNERS" was inserted therein, thereby making it appear that the amounts
given to the petitioners representing the increase in their wages based on ITF
rates were only received by them in trust for the private respondent.
When the vessel reached Manila, the private respondent demanded from the
petitioners the "overpayments" made to them in Canada. As the petitioners refused
to give back the said amounts, charges were filed against some of them with the
NSB and the Professional Regulations Commission. Estafa charges were also filed
before different branches of the then Court of First Instance of Manila which, as
earlier stated, were subsequently consolidated in the sala of the respondent Judge
Alfredo Benipayo and which eventually led to G.R. Nos. 57999 and 58143-53.
In G.R. Nos. 64781-99, the petitioners claimed before the NSB that contrary to the
private respondent's allegations, they did not commit any illegal act nor stage a
strike while they were on board the vessel; that the "Special Agreement" entered
into in Vancouver to pay their salary differentials is valid, having been executed
after peaceful negotiations. Petitioners further argued that the amounts they
received were in accordance with the provision of law, citing among others,
Section 18, Rule VI, Book I of the Rules and Regulations Implementing the Labor
Code which provides that "the basic minimum salary of seamen shall not be less
than the prevailing minimum rates established by the International Labor
Organization (ILO) or those prevailing in the country whose flag the employing
vessel carries, whichever is higher ..."; and that the "Agreement" executed in
Nagoya, Japan had been forced upon them and that intercalations were made to
make it appear that they were merely trustees of the amounts they received in
Vancouver.
On the other hand, the private respondent alleged that the petitioners breached
their employment contracts when they, acting in concert and with the active
participations of the ITF while the vessel was in Vancouver, staged an illegal strike
and by means of threats, coercion and intimidation compelled the owners of the
vessel to pay to them various sums totalling US$104,244.35; that the respondent
entered into the "Special Agreement" to pay the petitioners' wage differentials
because it was under duress as the vessel would not be allowed to leave
Vancouver unless the said agreement was signed, and to prevent the shipowner
from incurring further delay in the shipment of goods; and that in view of
petitioners' breach of contract, the latter's names must be removed from the NSB's
Registry and that they should be ordered to return the amounts they received over
and above their contracted rates.
The respondent NSB ruled that the petitioners were guilty of breach of contract
because despite subsisting and valid NSB-approved employment contracts, the
petitioners sought the assistance of a third party (ITF) to demand from the private
respondent wages in accordance with the ITF rates, which rates are over and
above their rates of pay as appearing in their NSB-approved contracts. As bases
for this conclusion, the NSB stated:
1) The fact that respondents sought the aid of a third party (ITF) and demanded for
wages and overtime pay based on ITF rates is shown in the entries of their
respective Pay-Off Clearance Slips which were marked as their Exhs. "1" to "18",
and we quote "DEMANDED ITF WAGES, OVERTIME, DIFFERENTIALS APRIL
TO OCTOBER 1978". Respondent Suzara admitted that the entries in his Pay-Off
Clearance Slip (Exh. "1") are correct (TSN., p. 16, Dec. 6, 1979).lâwphî1.ñèt
Moreover, it is the policy (reiterated very often) by the ITF that it does not interfere
in the affairs of the crewmembers and masters and/or owners of a vessel unless its
assistance is sought by the crewmembers themselves. Under this pronounced
policy of the ITF, it is reasonable to assume that the representatives of the ITF in
Vancouver, Canada assisted and intervened by reason of the assistance sought
by the latter.
2) The fact that the ITF assisted and intervened for and in behalf of the
respondents in the latter's demand for higher wages could be gleaned from the
answer of the respondents when they admitted that the ITF acted in their behalf in
the negotiations for increase of wages. Moreover, respondent Cesar Dimaandal
admitted that the ITF differential pay was computed by the ITF representative
(TSN, p. 7, Dec. 12, 1979)
3) The fact that complainant and the owner/operator of the vessel were compelled
to sign the Special Agreement (Exh. "20") and to pay ITF differentials to
respondents in order not to delay the departure of the vessel and to prevent further
losses is shown in the "Agreement" (Exhs. "R-21") ... (pp. 69-70, Rollo)
The NSB further said:
While the Board recognizes the rights of the respondents to demand for higher
wages, provided the means are peaceful and legal, it could not, however, sanction
the same if the means employed are violent and illegal. In the case at bar, the
means employed are violent and illegal for in demanding higher wages the
respondents sought the aid of a third party and in turn the latter intervened in their
behalf and prohibited the vessel from sailing unless the owner and/or operator of
the vessel acceded to respondents' demand for higher wages. To avoid suffering
further incalculable losses, the owner and/or operator of the vessel had no
altemative but to pay respondents' wages in accordance with the ITF scale. The
Board condemns the act of a party who enters into a contract and with the use of
force/or intimidation causes the other party to modify said contract. If the
respondents believe that they have a valid ground to demand from the complainant
a revision of the terms of their contracts, the same should have been done in
accordance with law and not thru illegal means. (at p. 72, Rollo).
Although the respondent NSB found that the petitioners were entitled to the
payment of earned wages and overtime pay/allowance from November 1, 1978 to
December 14, 1978, it nevertheless ruled that the computation should be based on
the rates of pay as appearing in the petitioners' NSB-approved contracts. It
ordered that the amounts to which the petitioners are entitled under the said
computation should be deducted from the amounts that the petitioners must return
to the private respondent.
On appeal, the NLRC affirmed the NSB's findings. Hence, the petition in G.R. Nos.
64781-99.
Meanwhile, the petitioners in G.R. Nos. 57999 and 58143-53 moved to quash the
criminal cases of estafa filed against them on the ground that the alleged crimes
were committed, if at all, in Vancouver, Canada and, therefore, Philippine courts
have no jurisdiction. The respondent judge denied the motion. Hence, the second
petition.
The principal issue in these consolidated petitions is whether or not the petitioners
are entitled to the amounts they received from the private respondent representing
additional wages as determined in the special agreement. If they are, then the
decision of the NLRC and NSB must be reversed. Similarly, the criminal cases of
estafa must be dismissed because it follows as a consequence that the amounts
received by the petitioners belong to them and not to the private respondent.
In arriving at the questioned decision, the NSB ruled that the petitioners are not
entitled to the wage differentials as determined by the ITF because the means
employed by them in obtaining the same were violent and illegal and because in
demanding higher wages the petitioners sought the aid of a third party, which, in
turn, intervened in their behalf and prohibited the vessel from sailing unless the
owner and/or operator of the vessel acceded to respondents' demand for higher
wages. And as proof of this conclusion, the NSB cited the following: (a) the entries
in the petitioners Pay-Off Clearance Slip which contained the phrase "DEMANDED
ITF WAGES ..."; (b) the alleged policy of the ITF in not interfering with
crewmembers of a vessel unless its intervention is sought by the crewmembers
themselves; (c), the petitioners' admission that ITF acted in their behalf; and (d) the
fact that the private respondent was compelled to sign the special agreement at
Vancouver, Canada.
There is nothing in the public and private respondents' pleadings, to support the
allegations that the petitioners used force and violence to secure the special
agreement signed in Vancouver. British Columbia. There was no need for any form
of intimidation coming from the Filipino seamen because the Canadian
Brotherhood of Railways and Transport Workers (CBRT), a strong Canadian labor
union, backed by an international labor federation was actually doing all the
influencing not only on the ship-owners and employers but also against third world
seamen themselves who, by receiving lower wages and cheaper accommodations,
were threatening the employment and livelihood of seamen from developed
nations.
The bases used by the respondent NSB to support its decision do not prove that
the petitioners initiated a conspiracy with the ITF or deliberately sought its
assistance in order to receive higher wages. They only prove that when ITF acted
in petitioners' behalf for an increase in wages, the latter manifested their support.
This would be a logical and natural reaction for any worker in whose benefit the
ITF or any other labor group had intervened. The petitioners admit that while they
expressed their conformity to and their sentiments for higher wages by means of
placards, they, nevertheless, continued working and going about their usual
chores. In other words, all they did was to exercise their freedom of speech in a
most peaceful way. The ITF people, in turn, did not employ any violent means to
force the private respondent to accede to their demands. Instead, they simply
applied effective pressure when they intimated the possibility of interdiction should
the shipowner fail to heed the call for an upward adjustment of the rates of the
Filipino seamen. Interdiction is nothing more than a refusal of ITF members to
render service for the ship, such as to load or unload its cargo, to provision it or to
perform such other chores ordinarily incident to the docking of the ship at a certain
port. It was the fear of ITF interdiction, not any action taken by the seamen on
board the vessel which led the shipowners to yield.
The NSB's contusion that it is ITF's policy not to intervene with the plight of
crewmembers of a vessel unless its intervention was sought is without basis. This
Court is cognizant of the fact that during the period covered by the labor
controversies in Wallem Philippines Shipping, Inc. v. Minister of Labor (102 SCRA
835 [1981]; Vir-Jen Shipping and Marine Services, Inc. v. NLRC (supra) and these
consolidated petitions, the ITF was militant worldwide especially in Canada,
Australia, Scandinavia, and various European countries, interdicting foreign
vessels and demanding wage increases for third world seamen. There was no
need for Filipino or other seamen to seek ITF intervention. The ITF was waiting on
its own volition in all Canadian ports, not particularly for the petitioners' vessel but
for all ships similarly situated. As earlier stated, the ITF was not really acting for the
petitioners out of pure altruism. The ITF was merely protecting the interests of its
own members. The petitioners happened to be pawns in a higher and broader
struggle between the ITF on one hand and shipowners and third world seamen, on
the other. To subject our seamen to criminal prosecution and punishment for
having been caught in such a struggle is out of the question.
As stated in Vir-Jen Shipping (supra):
The seamen had done no act which under Philippine law or any other civilized law
would be termed illegal, oppressive, or malicious. Whatever pressure existed, it
was mild compared to accepted and valid modes of labor activity. (at page 591)
Given these factual situations, therefore, we cannot affirm the NSB and NLRC's
finding that there was violence, physical or otherwise employed by the petitioners
in demanding for additional wages. The fact that the petitioners placed placards on
the gangway of their ship to show support for ITF's demands for wage differentials
for their own benefit and the resulting ITF's threatened interdiction do not
constitute violence. The petitioners were exercising their freedom of speech and
expressing sentiments in their hearts when they placed the placard We Want ITF
Rates." Under the facts and circumstances of these petitions, we see no reason to
deprive the seamen of their right to freedom of expression guaranteed by the
Philippine Constitution and the fundamental law of Canada where they happened
to exercise it.
As we have ruled in Wallem Phil. Shipping Inc. v. Minister of Labor, et al. supra:
Petitioner claims that the dismissal of private respondents was justified because
the latter threatened the ship authorities in acceding to their demands, and this
constitutes serious misconduct as contemplated by the Labor Code. This
contention is now well-taken. The records fail to establish clearly the commission
of any threat. But even if there had been such a threat, respondents' behavior
should not be censured because it is but natural for them to employ some means
of pressing their demands for petitioner, who refused to abide with the terms of the
Special Agreement, to honor and respect the same. They were only acting in the
exercise of their rights, and to deprive them of their freedom of expression is
contrary to law and public policy. ... (at page 843)
We likewise, find the public respondents' conclusions that the acts of the
petitioners in demanding and receiving wages over and above the rates appearing
in their NSB-approved contracts is in effect an alteration of their valid and
subsisting contracts because the same were not obtained through. mutual consent
and without the prior approval of the NSB to be without basis, not only because the
private respondent's consent to pay additional wages was not vitiated by any
violence or intimidation on the part of the petitioners but because the said NSB-
approved form contracts are not unalterable contracts that can have no room for
improvement during their effectivity or which ban any amendments during their
term.
For one thing, the employer can always improve the working conditions without
violating any law or stipulation.
We stated in the Vir-Jen case (supra) that:
The form contracts approved by the National Seamen Board are designed to
protect Filipino seamen not foreign shipowners who can take care of themselves.
The standard forms embody the basic minimums which must be incorporated as
parts of the employment contract. (Section 15, Rule V, Rules and Regulations
Implementing the Labor Code).lâwphî1.ñèt They are not collective bargaining
agreements or immutable contracts which the parties cannot improve upon or
modify in the course of the agreed period of time. To state, therefore, that the
affected seamen cannot petition their employer for higher salaries during the 12
months duration of the contract runs counter to estabhshed principles of labor
legislation. The National Labor Relations Commission, as the appellate tribunal
from the decisions of the National Seamen Board, correctly ruled that the seamen
did not violate their contracts to warrant their dismissal. (at page 589)
It is impractical for the NSB to require the petitioners, caught in the middle of a
labor struggle between the ITF and owners of ocean going vessels halfway around
the world in Vancouver, British Columbia to first secure the approval of the NSB in
Manila before signing an agreement which the employer was willing to sign. It is
also totally unrealistic to expect the petitioners while in Canada to exhibit the will
and strength to oppose the ITF's demand for an increase in their wages, assuming
they were so minded.
An examination of Annex C of the petition, the agreement signed in Japan by the
crewmembers of the M/V Grace River and a certain M. Tabei, representative of the
Japanese shipowner lends credence to the petitioners' claim that the clause "which
amount(s) was received and held by CREWMEMBERS in trust for SHIPOWNER"
was an intercalation added after the execution of the agreement. The clause
appears too closely typed below the names of the 19 crewmen and their wages
with no similar intervening space as that which appears between all the
paragraphs and the triple space which appears between the list of crewmembers
and their wages on one hand and the paragraph above which introduces the list,
on the other. The verb "were" was also inserted above the verb "was" to make the
clause grammatically correct but the insertion of "were" is already on the same line
as "Antonio Miranda and 5,221.06" where it clearly does not belong. There is no
other space where the word "were" could be intercalated. (See Rollo, page 80).
At any rate, the proposition that the petitioners should have pretended to accept
the increased wages while in Vancouver but returned them to the shipowner when
they reached its country, Japan, has already been answered earlier by the Court:
Filipino seamen are admittedly as competent and reliable as seamen from any
other country in the world. Otherwise, there would not be so many of them in the
vessels sailing in every ocean and sea on this globe. It is competence and
reliability, not cheap labor that makes our seamen so greatly in demand. Filipino
seamen have never demanded the same high salaries as seamen from the United
States, the United Kingdom, Japan and other developed nations. But certainly they
are entitled to government protection when they ask for fair and decent treatment
by their employer and when they exercise the right to petition for improved terms of
employment, especially when they feel that these are sub-standard or are capable
of improvement according to internationally accepted rules. In the domestic scene,
there are marginal employers who prepare two sets of payrolls for their employees
— one in keeping with minimum wages and the other recording the sub-standard
wages that the employees really receive. The reliable employers, however, not
only meet the minimums required by fair labor standards legislation but even go
away above the minimums while earning reasonable profits and prospering. The
same is true of international employment. There is no reason why this court and
the Ministry of Labor and Employment or its agencies and commissions should
come out with pronouncements based on the standards and practices of
unscrupulous or inefficient shipowners, who claim they cannot survive without
resorting to tricky and deceptive schemes, instead of Government maintaining
labor law and jurisprudence according to the practices of honorable, competent,
and law-abiding employers, domestic or foreign. (Vir-Jen Shipping, supra, pp. 587-
588)
It is noteworthy to emphasize that while the Intemational Labor Organization (ILO)
set the minimum basic wage of able seamen at US$187.00 as early as October
1976, it was only in 1979 that the respondent NSB issued Memo Circular No. 45,
enjoining all shipping companies to adopt the said minimum basic wage. It was
correct for the respondent NSB to state in its decision that when the petitioners
entered into separate contracts between 1977-1978, the monthly minimum basic
wage for able seamen ordered by NSB was still fixed at US$130.00. However, it is
not the fault of the petitioners that the NSB not only violated the Labor Code which
created it and the Rules and Regulations Implementing the Labor Code but also
seeks to punish the seamen for a shortcoming of NSB itself.
Article 21(c) of the Labor Code, when it created the NSB, mandated the Board to
"(O)btain the best possible terms and conditions of employment for seamen."
Section 15, Rule V of Book I of the Rules and Regulations Implementing the Labor
Code provides:
Sec. 15. Model contract of employment. — The NSB shall devise a model contract
of employment which shall embody all the requirements of pertinent labor and
social legislations and the prevailing standards set by applicable International
Labor Organization Conventions. The model contract shall set the minimum
standards of the terms and conditions to govern the employment of Filipinos on
board vessels engaged in overseas trade. All employers of Filipinos shall adopt the
model contract in connection with the hiring and engagement of the services of
Filipino seafarers, and in no case shall a shipboard employment contract be
allowed where the same provides for benefits less than those enumerated in the
model employment contract, or in any way conflicts with any other provisions
embodied in the model contract.
Section 18 of Rule VI of the same Rules and Regulations provides:
Sec. 18. Basic minimum salary of able-seamen. — The basic minimum salary of
seamen shall be not less than the prevailing minimxun rates established by the
International Labor Organization or those prevailing in the country whose flag the
employing vessel carries, whichever is higher. However, this provision shall not
apply if any shipping company pays its crew members salaries above the minimum
herein provided.
Section 8, Rule X, Book I of the Omnibus Rules provides:
Section 8. Use of standard format of service agreement. — The Board shall adopt
a standard format of service agreement in accordance with pertinent labor and
social legislation and prevailing standards set by applicable International Labor
Organization Conventions. The standard format shall set the minimum standard of
the terms and conditions to govern the employment of Filipino seafarers but in no
case shall a shipboard employment contract (sic), or in any way conflict with any
other provision embodied in the standard format.
It took three years for the NSB to implement requirements which, under the law,
they were obliged to follow and execute immediately. During those three years, the
incident in Vancouver happened. The terms and conditions agreed upon in
Vancouver were well within ILO rates even if they were above NSB standards at
the time.
The sanctions applied by NSB and affirmed by NLRC are moreover not in keeping
with the basic premise that this Court stressed in the Vir-Jen Shipping case (supra)
that the Ministry now the Department of Labor and Employment and all its
agencies exist primarily for the workingman's interest and the nation's as a whole.
Implicit in these petitions and the only reason for the NSB to take the side of
foreign shipowners against Filipino seamen is the "killing the goose which lays the
golden eggs" argument. We reiterate the ruling of the Court in Vir-Jen Shipping
(supra)
There are various arguments raised by the petitioners but the common thread
running through all of them is the contention, if not the dismal prophecy, that if the
respondent seamen are sustained by this Court, we would in effect "kill the hen
that lays the golden egg." In other words, Filipino seamen, admittedly among the
best in the world, should remain satisfied with relatively lower if not the lowest,
international rates of compensation, should not agitate for higher wages while their
contracts of employment are subsisting, should accept as sacred, iron clad, and
immutable the side contracts which require: them to falsely pretend to be members
of international labor federations, pretend to receive higher salaries at certain
foreign ports only to return the increased pay once the ship leaves that port, should
stifle not only their right to ask for improved terms of employment but their freedom
of speech and expression, and should suffer instant termination of employment at
the slightest sign of dissatisfaction with no protection from their Government and
their courts. Otherwise, the petitioners contend that Filipinos would no longer be
accepted as seamen, those employed would lose their jobs, and the still
unemployed would be left hopeless.
This is not the first time and it will not be the last where the threat of unemployment
and loss of jobs would be used to argue against the interests of labor; where
efforts by workingmen to better their terms of employment would be characterized
as prejudicing the interests of labor as a whole.
xxx xxx xxx
Unionism, employers' liability acts, minimum wages, workmen's compensation,
social security and collective bargaining to name a few were all initially opposed by
employers and even well meaning leaders of government and society as "killing
the hen or goose which lays the golden eggs." The claims of workingmen were
described as outrageously injurious not only to the employer but more so to the
employees themselves before these claims or demands were established by law
and jurisprudence as "rights" and before these were proved beneficial to
management, labor, and the national as a whole beyond reasonable doubt.
The case before us does not represent any major advance in the rights of labor
and the workingmen. The private respondents merely sought rights already
established. No matter how much the petitioner-employer tries to present itself as
speaking for the entire industry, there is no evidence that it is typical of employers
hiring Filipino seamen or that it can speak for them.
The contention that manning industries in the Philippines would not survive if the
instant case is not decided in favor of the petitioner is not supported by evidence.
The Wallem case was decided on February 20, 1981. There have been no severe
repercussions, no drying up of employment opportunities for seamen, and none of
the dire consequences repeatedly emphasized by the petitioner. Why should Vir-
Jen be an exception?
The wages of seamen engaged in international shipping are shouldered by the
foreign principal. The local manning office is an agent whose primary function is
recruitment and who usually gets a lump sum from the shipowner to defray the
salaries of the crew. The hiring of seamen and the determination of their
compensation is subject to the interplay of various market factors and one key
factor is how much in terms of profits the local manning office and the foreign
shipowner may realize after the costs of the voyage are met. And costs include
salaries of officers and crew members. (at pp. 585-586)
The Wallem Shipping case, was decided in 1981. Vir-Jen Shipping was decided in
1983. It is now 1989. There has'been no drying up of employment opportunities for
Filipino seamen. Not only have their wages improved thus leading ITF to be placid
and quiet all these years insofar as Filipinos are concerned but the hiring of
Philippine seamen is at its highest level ever.
Reporting its activities for the year 1988, the Philippine Overseas Employment
Administration (POEA) stated that there will be an increase in demand for seamen
based overseas in 1989 boosting the number to as high as 105,000. This will
represent a 9.5 percent increase from the 1988 aggregate. (Business World, News
Briefs, January 11, 1989 at page 2) According to the POEA, seabased workers
numbering 95,913 in 1988 exceeded by a wide margin of 28.15 percent the year
end total in 1987. The report shows that sea-based workers posted bigger monthly
increments compared to those of landbased workers. (The Business Star,
Indicators, January 11, 1988 at page 2)
Augmenting this optimistic report of POEA Administrator Tomas Achacoso is the
statement of Secretary of Labor Franklin M. Drilon that the Philippines has a big
jump over other crewing nations because of the Filipinos' abilities compared with
any European or westem crewing country. Drilon added that cruise shipping is also
a growing market for Filipino seafarers because of their flexibility in handling odd
jobs and their expertise in handling almost all types of ships, including luxury
liners. (Manila Bulletin, More Filipino Seamen Expected Development, December
27, 1988 at page 29).lâwphî1.ñèt Parenthetically, the minimum monthly salary of
able bodied seamen set by the ILO and adhered to by the Philippines is now
$276.00 (id.) more than double the $130.00 sought to be enforced by the public
respondents in these petitions.
The experience from 1981 to the present vindicates the finding in Vir-Jen Shipping
that a decision in favor of the seamen would not necessarily mean severe
repercussions, drying up of employment opportunities for seamen, and other dire
consequences predicted by manning agencies and recruiters in the Philippines.
From the foregoing, we find that the NSB and NLRC committed grave abuse of
discretion in finding the petitioners guilty of using intimidation and illegal means in
breaching their contracts of employment and punishing them for these alleged
offenses. Consequently, the criminal prosecutions for estafa in G.R. Nos. 57999
and 58143-53 should be dismissed.
WHEREFORE, the petitions are hereby GRANTED. The decisions of the National
Seamen Board and National Labor Relations Commission in G. R. Nos. 64781-99
are REVERSED and SET ASIDE and a new one is entered holding the petitioners
not guilty of the offenses for which they were charged. The petitioners' suspension
from the National Seamen Board's Registry for three (3) years is LIFTED. The
private respondent is ordered to pay the petitioners their earned but unpaid wages
and overtime pay/allowance from November 1, 1978 to December 14, 1978
according to the rates in the Special Agreement that the parties entered into in
Vancouver, Canada.

The criminal cases for estafa, subject matter of G. R. Nos. 57999 and 58143-53,
are ordered DISMISSED.

SO ORDERED.
G.R. No. 152122 July 30, 2003
CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent.
PANGANIBAN, J.:
A common carrier has a peculiar relationship with and an exacting responsibility to
its passengers. For reasons of public interest and policy, the ticket-issuing airline
acts as principal in a contract of carriage and is thus liable for the acts and the
omissions of any errant carrier to which it may have endorsed any sector of the
entire, continuous trip.
The Case
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules
of Court, seeking to reverse the August 7, 2001 Decision2 and the February 7,
2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 45832. The
challenged Decision disposed as follows:
"WHEREFORE, premises considered, the assailed Decision dated July 5, 1991 of
Branch 31, Regional Trial Court, National Capital Judicial Region, Manila, in Civil
Case No. 82-13690, is hereby MODIFIED by deleting that portion regarding
defendants-appellants’ liabilities for the payment of the actual damages amounting
to HK$14,128.80 and US$2,000.00 while all other respects are AFFIRMED. Costs
against defendants-appellants."4
The assailed Resolution denied Petitioner’s Motion for Partial Reconsideration.
The Facts
The facts are narrated by the CA5 as follows:
"On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok) purchased
from China Airlines, Ltd. (CAL for brevity) airline passenger ticket number
297:4402:004:278:5 for air transportation covering Manila-Taipei-Hongkong-
Manila. Said ticket was exclusively endorseable to Philippine Airlines, Ltd. (PAL for
brevity).
"Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei
using [the] CAL ticket. Before he left for said trip, the trips covered by the ticket
were pre-scheduled and confirmed by the former. When he arrived in Taipei, he
went to the CAL office and confirmed his Hongkong to Manila trip on board PAL
Flight No. PR 311. The CAL office attached a yellow sticker appropriately
indicating that his flight status was OK.
"When Chiok reached Hongkong, he went to the PAL office and sought to
reconfirm his flight back to Manila. The PAL office confirmed his return trip on
board Flight No. PR 311 and attached its own sticker. On November 24, 1981,
Chiok proceeded to Hongkong International Airport for his return trip to Manila.
However, upon reaching the PAL counter, Chiok saw a poster stating that PAL
Flight No. PR 311 was cancelled because of a typhoon in Manila. He was then
informed that all the confirmed ticket holders of PAL Flight No. PR 311 were
automatically booked for its next flight, which was to leave the next day. He then
informed PAL personnel that, being the founding director of the Philippine
Polysterene Paper Corporation, he ha[d] to reach Manila on November 25, 1981
because of a business option which he ha[d] to execute on said date.
"On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok
Chan (hereafter referred to as Lok) ha[d] taken and received Chiok’s plane ticket
and his luggage. Lok called the attention of Carmen Chan (hereafter referred to as
Carmen), PAL’s terminal supervisor, and informed the latter that Chiok’s name was
not in the computer list of passengers. Subsequently, Carmen informed Chiok that
his name did not appear in PAL’s computer list of passengers and therefore could
not be permitted to board PAL Flight No. PR 307.
"Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he
was not allowed to take his flight. The latter then wrote the following, to wit: ‘PAL
STAFF CARMEN CHAN CHKD WITH R/C KENNY AT 1005H NO SUCH NAME IN
COMPUTER FOR 311/24 NOV AND 307/25 NOV.’ The latter sought to recover his
luggage but found only 2 which were placed at the end of the passengers line.
Realizing that his new Samsonite luggage was missing, which contained
cosmetics worth HK$14,128.80, he complained to Carmen.
"Thereafter, Chiok proceeded to PAL’s Hongkong office and confronted PAL’s
reservation officer, Carie Chao (hereafter referred to as Chao), who previously
confirmed his flight back to Manila. Chao told Chiok that his name was on the list
and pointed to the latter his computer number listed on the PAL confirmation
sticker attached to his plane ticket, which number was ‘R/MN62’.
"Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5 and
asked Chao if this ticket could be used to book him for the said flight. The latter,
once again, booked and confirmed the former’s trip, this time on board PAL Flight
No. PR 311 scheduled to depart that evening. Later, Chiok went to the PAL check-
in counter and it was Carmen who attended to him. As this juncture, Chiok had
already placed his travel documents, including his clutch bag, on top of the PAL
check-in counter.
"Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing
commotion, Chiok lost his clutch bag containing the following, to wit: (a) $2,000.00;
(b) HK$2,000.00; (c) Taipei $8,000.00; (d) P2,000.00; (e) a three-piece set of gold
(18 carats) cross pens valued at P3,500; (f) a Cartier watch worth about
P7,500.00; (g) a tie clip with a garnet birthstone and diamond worth P1,800.00;
and (h) a [pair of] Christian Dior reading glasses. Subsequently, he was placed on
stand-by and at around 7:30 p.m., PAL personnel informed him that he could now
check-in.
"Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for
damages, against PAL and CAL, as defendants, docketed as Civil Case No. 82-
13690, with Branch 31, Regional Trial Court, National Capital Judicial Region,
Manila.
"He alleged therein that despite several confirmations of his flight, defendant PAL
refused to accommodate him in Flight No. 307, for which reason he lost the
business option aforementioned. He also alleged that PAL’s personnel, specifically
Carmen, ridiculed and humiliated him in the presence of so many people. Further,
he alleged that defendants are solidarily liable for the damages he suffered, since
one is the agent of the other."6
The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally
liable to respondent. It did not, however, rule on their respective cross-claims. It
disposed as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the
defendants to jointly and severally pay:
1. Actual damages in the amount of HK$14,128.80 or its equivalent in Philippine
Currency at the time of the loss of the luggage consisting of cosmetic products;
2. US$2,000.00 or its equivalent at the time of the loss of the clutch bag containing
the money;
3. P200,000.00 by way of moral damages;
4. P50,000.00 by way of exemplary damages or corrective damages;
5. Attorney[’]s fees equivalent to 10% of the amounts due and demandable and
awarded in favor of the plaintiff; and
6. The costs of this proceedings."
The two carriers appealed the RTC Decision to the CA.
Ruling of the Court of Appeals
Affirming the RTC, the Court of Appeals debunked petitioner’s claim that it had
merely acted as an issuing agent for the ticket covering the Hong Kong-Manila leg
of respondent’s journey. In support of its Decision, the CA quoted a purported
ruling of this Court in KLM Royal Dutch Airlines v. Court of Appeals8 as follows:
"Article 30 of the Warsaw providing that in case of transportation to be performed
by various successive carriers, the passenger can take action only against the
carrier who performed the transportation during which the accident or the delay
occurred presupposes the occurrence of either an accident or delay in the course
of the air trip, and does not apply if the damage is caused by the willful misconduct
on the part of the carrier’s employee or agent acting within the scope of his
employment.
"It would be unfair and inequitable to charge a passenger with automatic
knowledge or notice of a condition which purportedly would excuse the carrier from
liability, where the notice is written at the back of the ticket in letters so small that
one has to use a magnifying glass to read the words. To preclude any doubt that
the contract was fairly and freely agreed upon when the passenger accepted the
passage ticket, the carrier who issued the ticket must inform the passenger of the
conditions prescribed in the ticket or, in the very least, ascertain that the passenger
read them before he accepted the passage ticket. Absent any showing that the
carrier’s officials or employees discharged this responsibility to the passenger, the
latter cannot be bound by the conditions by which the carrier assumed the role of a
mere ticket-issuing agent for other airlines and limited its liability only to untoward
occurrences in its own lines.
"Where the passage tickets provide that the carriage to be performed thereunder
by several successive carriers ‘is to be regarded as a single operation,’ the carrier
which issued the tickets for the entire trip in effect guaranteed to the passenger
that the latter shall have sure space in the various carriers which would ferry him
through the various segments of the trip, and the ticket-issuing carrier assumes full
responsibility for the entire trip and shall be held accountable for the breach of that
guaranty whether the breach occurred in its own lines or in those of the other
carriers."9
On PAL’s appeal, the appellate court held that the carrier had reneged on its
obligation to transport respondent when, in spite of the confirmations he had
secured for Flight PR 311, his name did not appear in the computerized list of
passengers. Ruling that the airline’s negligence was the proximate cause of his
excoriating experience, the appellate court sustained the award of moral and
exemplary damages.
The CA, however, deleted the RTC’s award of actual damages amounting to
HK$14,128.80 and US$2,000.00, because the lost piece of luggage and clutch bag
had not actually been "checked in" or delivered to PAL for transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial Reconsideration,
contending that the appellate court had erroneously relied on a mere syllabus of
KLM v. CA, not on the actual ruling therein. Moreover, it argued that respondent
was fully aware that the booking for the PAL sector had been made only upon his
request; and that only PAL, not CAL, was liable for the actual carriage of that
segment. Petitioner likewise prayed for a ruling on its cross-claim against PAL,
inasmuch as the latter’s employees had acted negligently, as found by the trial
court.
Denying the Motion, the appellate court ruled that petitioner had failed to raise any
new matter or issue that would warrant a modification or a reversal of the Decision.
As to the alleged misquotation, the CA held that while the portion it had cited
appeared to be different from the wording of the actual ruling, the variance was
"more apparent than real since the difference [was] only in form and not in
substance."10
CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3,
2001 Resolution, this Court denied PAL’s appeal, docketed as GR No. 149544, for
failure to serve the CA a copy of the Petition as required by Section 3, Rule 45, in
relation to Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No. 1-88 of
this Court. PAL’s Motion for Reconsideration was denied with finality on January
21, 2002.
Only the appeal of CAL11 remains in this Court.
Issues
In its Memorandum, petitioner raises the following issues for the Court’s
consideration:
"1. The Court of Appeals committed judicial misconduct in finding liability against
the petitioner on the basis of a misquotation from KLM Royal Dutch Airlines vs.
Court of Appeals, et al., 65 SCRA 237 and in magnifying its misconduct by denying
the petitioner’s Motion for Reconsideration on a mere syllabus, unofficial at that.
"2. The Court of Appeals committed an error of law when it did not apply applicable
precedents on the case before it.
"3. The Court of Appeals committed a non sequitur when it did not rule on the
cross-claim of the petitioner."12
The Court’s Ruling
The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for quoting from and basing its
ruling against the two airlines on an unofficial syllabus of this Court’s ruling in KLM
v. CA. Moreover, such misconduct was allegedly aggravated when the CA, in an
attempt to justify its action, held that the difference between the actual ruling and
the syllabus was "more apparent than real."13
We agree with petitioner that the CA committed a lapse when it relied merely on
the unofficial syllabus of our ruling in KLM v. CA. Indeed, lawyers and litigants are
mandated to quote decisions of this Court accurately.14 By the same token,
judges should do no less by strictly abiding by this rule when they quote cases that
support their judgments and decisions. Canon 3 of the Code of Judicial Conduct
enjoins them to perform official duties diligently by being faithful to the law and
maintaining their professional competence.
However, since this case is not administrative in nature, we cannot rule on the CA
justices’ administrative liability, if any, for this lapse. First, due process requires
that in administrative proceedings, the respondents must first be given an
opportunity to be heard before sanctions can be imposed. Second, the present
action is an appeal from the CA’s Decision, not an administrative case against the
magistrates concerned. These two suits are independent of and separate from
each other and cannot be mixed in the same proceedings.
By merely including the lapse as an assigned error here without any adequate and
proper administrative case therefor, petitioner cannot expect the imposition of an
administrative sanction.
In the case at bar, we can only determine whether the error in quotation would be
sufficient to reverse or modify the CA Decision.
Applicability of KLM v. CA
In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for their
world tour. The tour included a Barcelona-Lourdes route, which was serviced by
the Irish airline Aer Lingus. At the KLM office in Frankfurt, Germany, they obtained
a confirmation from Aer Lingus of their seat reservations on its Flight 861. On the
day of their departure, however, the airline rudely off-loaded them.
When sued for breach of contract, KLM sought to be excused for the wrongful
conduct of Aer Lingus by arguing that its liability for damages was limited only to
occurrences on its own sectors. To support its argument, it cited Article 30 of the
Warsaw Convention, stating that when transportation was to be performed by
various successive carriers, the passenger could take action only against the
carrier that had performed the transportation when the accident or delay occurred.
In holding KLM liable for damages, we ruled as follows:
"1. The applicability insisted upon by the KLM of article 30 of the Warsaw
Convention cannot be sustained. That article presupposes the occurrence of either
an accident or a delay, neither of which took place at the Barcelona airport; what is
here manifest, instead, is that the Aer Lingus, through its manager there, refused
to transport the respondents to their planned and contracted destination.
"2. The argument that the KLM should not be held accountable for the tortious
conduct of Aer Lingus because of the provision printed on the respondents' tickets
expressly limiting the KLM's liability for damages only to occurrences on its own
lines is unacceptable. As noted by the Court of Appeals that condition was printed
in letters so small that one would have to use a magnifying glass to read the
words. Under the circumstances, it would be unfair and inequitable to charge the
respondents with automatic knowledge or notice of the said condition so as to
preclude any doubt that it was fairly and freely agreed upon by the respondents
when they accepted the passage tickets issued to them by the KLM. As the airline
which issued those tickets with the knowledge that the respondents would be flown
on the various legs of their journey by different air carriers, the KLM was
chargeable with the duty and responsibility of specifically informing the
respondents of conditions prescribed in their tickets or, in the very least, to
ascertain that the respondents read them before they accepted their passage
tickets. A thorough search of the record, however, inexplicably fails to show that
any effort was exerted by the KLM officials or employees to discharge in a proper
manner this responsibility to the respondents. Consequently, we hold that the
respondents cannot be bound by the provision in question by which KLM
unilaterally assumed the role of a mere ticket-issuing agent for other airlines and
limited its liability only to untoward occurrences on its own lines.
"3. Moreover, as maintained by the respondents and the Court of Appeals, the
passage tickets of the respondents provide that the carriage to be performed
thereunder by several successive carriers ‘is to be regarded as a single operation,’
which is diametrically incompatible with the theory of the KLM that the respondents
entered into a series of independent contracts with the carriers which took them on
the various segments of their trip. This position of KLM we reject. The respondents
dealt exclusively with the KLM which issued them tickets for their entire trip and
which in effect guaranteed to them that they would have sure space in Aer Lingus
flight 861. The respondents, under that assurance of the internationally prestigious
KLM, naturally had the right to expect that their tickets would be honored by Aer
Lingus to which, in the legal sense, the KLM had indorsed and in effect guaranteed
the performance of its principal engagement to carry out the respondents'
scheduled itinerary previously and mutually agreed upon between the parties.
"4. The breach of that guarantee was aggravated by the discourteous and highly
arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to
transport the respondents on the Barcelona-Lourdes segment of their itinerary. It is
but just and in full accord with the policy expressly embodied in our civil law which
enjoins courts to be more vigilant for the protection of a contracting party who
occupies an inferior position with respect to the other contracting party, that the
KLM should be held responsible for the abuse, injury and embarrassment suffered
by the respondents at the hands of a supercilious boor of the Aer Lingus."15
In the instant case, the CA ruled that under the contract of transportation, petitioner
-- as the ticket-issuing carrier (like KLM) -- was liable regardless of the fact that
PAL was to perform or had performed the actual carriage. It elucidated on this
point as follows:
"By the very nature of their contract, defendant-appellant CAL is clearly liable
under the contract of carriage with [respondent] and remains to be so, regardless
of those instances when actual carriage was to be performed by another carrier.
The issuance of a confirmed CAL ticket in favor of [respondent] covering his entire
trip abroad concretely attests to this. This also serves as proof that defendant-
appellant CAL, in effect guaranteed that the carrier, such as defendant-appellant
PAL would honor his ticket, assure him of a space therein and transport him on a
particular segment of his trip."16
Notwithstanding the errant quotation, we have found after careful deliberation that
the assailed Decision is supported in substance by KLM v. CA. The misquotation
by the CA cannot serve as basis for the reversal of its ruling.
Nonetheless, to avert similar incidents in the future, this Court hereby exhorts
members of the bar and the bench to refer to and quote from the official repository
of our decisions, the Philippine Reports, whenever practicable.17 In the absence of
this primary source, which is still being updated, they may resort to unofficial
sources like the SCRA.18 We remind them that the Court’s ponencia, when used
to support a judgment or ruling, should be quoted accurately.19
Second Issue:
Liability of the Ticket-Issuing Airline
We now come to the main issue of whether CAL is liable for damages. Petitioner
posits that the CA Decision must be annulled, not only because it was rooted on
an erroneous quotation, but also because it disregarded jurisprudence, notably
China Airlines v. Intermediate Appellate Court20 and China Airlines v. Court of
Appeals.21
Jurisprudence Supports CA Decision
It is significant to note that the contract of air transportation was between petitioner
and respondent, with the former endorsing to PAL the Hong Kong-to-Manila
segment of the journey. Such contract of carriage has always been treated in this
jurisdiction as a single operation. This jurisprudential rule is supported by the
Warsaw Convention,22 to which the Philippines is a party, and by the existing
practices of the International Air Transport Association (IATA).
Article 1, Section 3 of the Warsaw Convention states:
"Transportation to be performed by several successive air carriers shall be
deemed, for the purposes of this Convention, to be one undivided transportation, if
it has been regarded by the parties as a single operation, whether it has been
agreed upon under the form of a single contract or of a series of contracts, and it
shall not lose its international character merely because one contract or a series of
contracts is to be performed entirely within a territory subject to the sovereignty,
suzerainty, mandate, or authority of the same High Contracting Party."23
Article 15 of IATA-Recommended Practice similarly provides:
"Carriage to be performed by several successive carriers under one ticket, or
under a ticket and any conjunction ticket issued therewith, is regarded as a single
operation."
In American Airlines v. Court of Appeals,24 we have noted that under a general
pool partnership agreement, the ticket-issuing airline is the principal in a contract of
carriage, while the endorsee-airline is the agent.
"x x x Members of the IATA are under a general pool partnership agreement
wherein they act as agent of each other in the issuance of tickets to contracted
passengers to boost ticket sales worldwide and at the same time provide
passengers easy access to airlines which are otherwise inaccessible in some parts
of the world. Booking and reservation among airline members are allowed even by
telephone and it has become an accepted practice among them. A member airline
which enters into a contract of carriage consisting of a series of trips to be
performed by different carriers is authorized to receive the fare for the whole trip
and through the required process of interline settlement of accounts by way of the
IATA clearing house an airline is duly compensated for the segment of the trip
serviced. Thus, when the petitioner accepted the unused portion of the conjunction
tickets, entered it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the conjunction tickets,
i.e., Geneva to New York, the petitioner tacitly recognized its commitment under
the IATA pool arrangement to act as agent of the principal contracting airline,
Singapore Airlines, as to the segment of the trip the petitioner agreed to undertake.
As such, the petitioner thereby assumed the obligation to take the place of the
carrier originally designated in the original conjunction ticket. The petitioner’s
argument that it is not a designated carrier in the original conjunction tickets and
that it issued its own ticket is not decisive of its liability. The new ticket was simply
a replacement for the unused portion of the conjunction ticket, both tickets being
for the same amount of US$ 2,760 and having the same points of departure and
destination. By constituting itself as an agent of the principal carrier the petitioner’s
undertaking should be taken as part of a single operation under the contract of
carriage executed by the private respondent and Singapore Airlines in Manila."25
Likewise, as the principal in the contract of carriage, the petitioner in British
Airways v. Court of Appeals26 was held liable, even when the breach of contract
had occurred, not on its own flight, but on that of another airline. The Decision
followed our ruling in Lufthansa German Airlines v. Court of Appeals,27 in which
we had held that the obligation of the ticket-issuing airline remained and did not
cease, regardless of the fact that another airline had undertaken to carry the
passengers to one of their destinations.
In the instant case, following the jurisprudence cited above, PAL acted as the
carrying agent of CAL. In the same way that we ruled against British Airways and
Lufthansa in the aforementioned cases, we also rule that CAL cannot evade
liability to respondent, even though it may have been only a ticket issuer for the
Hong Kong-Manila sector.
Moral and Exemplary Damages
Both the trial and the appellate courts found that respondent had satisfactorily
proven the existence of the factual basis for the damages adjudged against
petitioner and PAL. As a rule, the findings of fact of the CA affirming those of the
RTC will not be disturbed by this Court.28 Indeed, the Supreme Court is not a trier
of facts. As a rule also, only questions of law -- as in the present recourse -- may
be raised in petitions for review under Rule 45.
Moral damages cannot be awarded in breaches of carriage contracts, except in the
two instances contemplated in Articles 1764 and 2220 of the Civil Code, which we
quote:
"Article 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall
also apply to the death of a passenger caused by the breach of contract by a
common carrier.
xxx xxx xxx
"Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are
justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith." (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We must therefore
determine if CAL or its agent (PAL) is guilty of bad faith that would entitle
respondent to moral damages.
In Lopez v. Pan American World Airways,29 we defined bad faith as a breach of a
known duty through some motive of interest or ill will.
In the case at bar, the known duty of PAL was to transport herein respondent from
Hong Kong to Manila. That duty arose when its agent confirmed his reservation for
Flight PR 311,30 and it became demandable when he presented himself for the
trip on November 24, 1981.
It is true that due to a typhoon, PAL was unable to transport respondent on Flight
PR 311 on November 24, 1981. This fact, however, did not terminate the carrier’s
responsibility to its passengers. PAL voluntarily obligated itself to automatically
transfer all confirmed passengers of PR 311 to the next available flight, PR 307, on
the following day.31 That responsibility was subsisting when respondent, holding a
confirmed ticket for the former flight, presented himself for the latter.
The records amply establish that he secured repeated confirmations of his PR 311
flight on November 24, 1981. Hence, he had every reason to expect that he would
be put on the replacement flight as a confirmed passenger. Instead, he was
harangued and prevented from boarding the original and the replacement flights.
Thus, PAL breached its duty to transport him. After he had been directed to pay
the terminal fee, his pieces of luggage were removed from the weighing-in counter
despite his protestations.32
It is relevant to point out that the employees of PAL were utterly insensitive to his
need to be in Manila on November 25, 1981, and to the likelihood that his business
affairs in the city would be jeopardized because of a mistake on their part. It was
that mistake that had caused the omission of his name from the passenger list
despite his confirmed flight ticket. By merely looking at his ticket and validation
sticker, it is evident that the glitch was the airline’s fault. However, no serious
attempt was made by PAL to secure the all-important transportation of respondent
to Manila on the following day. To make matters worse, PAL allowed a group of
non-revenue passengers, who had no confirmed tickets or reservations, to board
Flight PR 307.33
Time and time again, this Court has stressed that the business of common carriers
is imbued with public interest and duty; therefore, the law governing them imposes
an exacting standard.34 In Singson v. Court of Appeals,35 we said:
"x x x [T]he carrier's utter lack of care and sensitivity to the needs of its
passengers, clearly constitutive of gross negligence, recklessness and wanton
disregard of the rights of the latter, [are] acts evidently indistinguishable or no
different from fraud, malice and bad faith. As the rule now stands, where in
breaching the contract of carriage the defendant airline is shown to have acted
fraudulently, with malice or in bad faith, the award of moral and exemplary
damages, in addition to actual damages, is proper."36 (Italics supplied)
In Saludo v. Court of Appeals,37 the Court reminded airline companies that due to
the nature of their business, they must not merely give cursory instructions to their
personnel to be more accommodating towards customers, passengers and the
general public; they must require them to be so.
The acts of PAL’s employees, particularly Chan, clearly fell short of the
extraordinary standard of care that the law requires of common carriers.38 As
narrated in Chan’s oral deposition,39 the manner in which the airline discharged its
responsibility to respondent and its other passengers manifested a lack of the
requisite diligence and due regard for their welfare. The pertinent portions of the
Oral Deposition are reproduced as follows:
"Q Now you said that flight PR 311 on 24th November was cancelled due to
[a] typhoon and naturally the passengers on said flight had to be accommodated
on the first flight the following day or the first flight subsequently. [W]ill you tell the
Honorable Deposition Officer the procedure followed by Philippine Airlines in the
handling of passengers of cancelled flight[s] like that of PR 311 which was
cancelled due to [a] typhoon?
A The procedure will be: all the confirmed passengers from [PR] 311 24th
November [are] automatically transfer[red] to [PR] 307, 25th November[,] as a
protection for all disconfirmed passengers.
Q Aside from this procedure[,] what do you do with the passengers on the
cancelled flight who are expected to check-in on the flights if this flight is cancelled
or not operating due to typhoon or other reasons[?] In other words, are they not
notified of the cancellation?
A I think all these passengers were not notified because of a typhoon and
Philippine Airlines Reservation were [sic] not able to call every passenger by
phone.
Atty. Fruto:
Q Did you say ‘were not notified?’
A I believe they were not, but believe me, I was on day-off.
Atty. Calica:
Q Per procedure, what should have been done by Reservations Office when
a flight is cancelled for one reason or another?
A If there is enough time, of course, Reservations Office x x x call[s] up all the
passengers and tell[s] them the reason. But if there [is] no time[,] then the
Reservations Office will not be able to do that."40
xxx xxx xxx
"Q I see. Miss Chan, I [will] show you a ticket which has been marked as Exh.
A and A-1. Will you please go over this ticket and tell the court whether this is the
ticket that was used precisely by Mr. Chiok when he checked-in at [F]light 307, 25
November ‘81?
A [Are you] now asking me whether he used this ticket with this sticker?
Q No, no, no. That was the ticket he used.
A Yes, [are you] asking me whether I saw this ticket?
Atty. Fruto: Yes.
A I believe I saw it.
Q You saw it, O.K. Now of course you will agree with me Miss Chan that this
yellow stub here which has been marked as Exh. A-1-A, show[s] that the status on
flight 311, 24th November, is O.K., correct?
A Yes.
Q You agree with me. And you will also agree with me that in this ticket of
flight 311, on this, another sticker Exh. A-1-B for 24 November is O.K.?
A May I x x x look at them. Yes, it says O.K. x x x, but [there is] no validation.
Q O.K. Miss Chan what do you understand by these entries here R bar M N 6
V?41
A This is what we call a computer reference.
Q I see. This is a computer reference showing that the name of Mr. Chiok has
been entered in Philippine Airline’s computer, and this is his computer number.
A Yes.
Q Now you stated in your answer to the procedure taken, that all confirmed
passengers on flight 311, 24 November[,] were automatically transferred to 307 as
a protection for the passengers, correct?
A Correct.
Q So that since following the O.K. status of Mr. Chiok’s reservation [on] flight
311, [he] was also automatically transferred to flight 307 the following day?
A Should be.
Q Should be. O.K. Now do you remember how many passengers x x x were
transferred from flight 311, 24 November to flight 307, 25 November 81?
A I can only give you a very brief idea because that was supposed to be air
bus so it should be able to accommodate 246 people; but how many [exactly], I
don’t know."
xxx xxx xxx
"Q So, between six and eight o’clock in the evening of 25 November ‘81, Mr.
Chiok already told you that he just [came] from the Swire Building where Philippine
Airlines had [its] offices and that he told you that his space for 311 25 November
81 was confirmed?
A Yes.
Q That is what he told you. He insisted on that flight?
A Yes.
Q And did you not try to call up Swire Building-- Philippine Airlines and verify
indeed if Mr. Chiok was there?
A Swire House building is not directly under Philippine Airlines. it is just an
agency for selling Philippine Airlines ticket. And besides around six o’ clock they’re
close[d] in Central.
Q So this Swire Building is an agency authorized by Philippine Airlines to
issue tickets for and on behalf of Philippine Airlines and also...
A Yes.
Q And also to confirm spaces for and on behalf of Philippine Airlines.
A Yes."
Under the foregoing circumstances, we cannot apply our 1989 ruling in China
Airlines v. Intermediate Appellate Court,44 which petitioner urges us to adopt. In
that case, the breach of contract and the negligence of the carrier in effecting the
immediate flight connection for therein private respondent was incurred in good
faith.45 Having found no gross negligence or recklessness, we thereby deleted the
award of moral and exemplary damages against it.46
This Court’s 1992 ruling in China Airlines v. Court of Appeals47 is likewise
inapplicable. In that case, we found no bad faith or malice in the airline’s breach of
its contractual obligation.48 We held that, as shown by the flow of telexes from one
of the airline’s offices to the others, petitioner therein had exercised diligent efforts
in assisting the private respondent change his flight schedule. In the instant case,
petitioner failed to exhibit the same care and sensitivity to respondent’s needs.
In Singson v. Court of Appeals,49 we said:
"x x x Although the rule is that moral damages predicated upon a breach of
contract of carriage may only be recoverable in instances where the mishap results
in the death of a passenger, or where the carrier is guilty of fraud or bad faith,
there are situations where the negligence of the carrier is so gross and reckless as
to virtually amount to bad faith, in which case, the passenger likewise becomes
entitled to recover moral damages."
In the present case, we stress that respondent had repeatedly secured
confirmations of his PR 311 flight on November 24, 1981 -- initially from CAL and
subsequently from the PAL office in Hong Kong. The status of this flight was
marked "OK" on a validating sticker placed on his ticket. That sticker also
contained the entry "RMN6V." Ms Chan explicitly acknowledged that such entry
was a computer reference that meant that respondent’s name had been entered in
PAL’s computer.
Since the status of respondent on Flight PR 311 was "OK," as a matter of right
testified to by PAL’s witness, he should have been automatically transferred to and
allowed to board Flight 307 the following day. Clearly resulting from negligence on
the part of PAL was its claim that his name was not included in its list of
passengers for the November 24, 1981 PR 311 flight and, consequently, in the list
of the replacement flight PR 307. Since he had secured confirmation of his flight --
not only once, but twice -- by personally going to the carrier’s offices where he was
consistently assured of a seat thereon -- PAL’s negligence was so gross and
reckless that it amounted to bad faith.
In view of the foregoing, we rule that moral and exemplary50 damages were
properly awarded by the lower courts.51
Third Issue:
Propriety of the Cross-Claim
We now look into the propriety of the ruling on CAL’s cross-claim against PAL.
Petitioner submits that the CA should have ruled on the cross-claim, considering
that the RTC had found that it was PAL’s employees who had acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:
"Sec. 8. Cross-claim. - A cross claim is any claim by one party against a co-party
arising out of the transaction or occurrence that is the subject matter either of the
original action or of a counterclaim therein. Such cross-claim may include a claim
that the party against whom it is asserted is or may be liable to the cross-claimant
for all or part of a claim asserted in the action against the cross-claimant."
For purposes of a ruling on the cross-claim, PAL is an indispensable party. In BA
Finance Corporation v. CA,52 the Court stated:
"x x x. An indispensable party is one whose interest will be affected by the court’s
action in the litigation, and without whom no final determination of the case can be
had. The party’s interest in the subject matter of the suit and in the relief sought
are so inextricably intertwined with the other parties that his legal presence as a
party to the proceeding is an absolute necessity. In his absence there cannot be a
resolution of the dispute of the parties before the court which is effective, complete,
or equitable.
xxx xxx xxx
"Without the presence of indispensable parties to a suit or proceeding, judgment of
a court cannot attain real finality."
PAL’s interest may be affected by any ruling of this Court on CAL’s cross-claim.
Hence, it is imperative and in accordance with due process and fair play that PAL
should have been impleaded as a party in the present proceedings, before this
Court can make a final ruling on this matter.
Although PAL was petitioner’s co-party in the case before the RTC and the CA,
petitioner failed to include the airline in the present recourse. Hence, the Court has
no jurisdiction over it. Consequently, to make any ruling on the cross-claim in the
present Petition would not be legally feasible because PAL, not being a party in the
present case, cannot be bound thereby.53
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.
G.R. No. 60501. March 5, 1993.
CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and
TOMAS L. ALCANTARA, respondents.
SYLLABUS
1. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF; PETITIONER
BREACHED ITS CONTRACT OF CARRIAGE WITH PRIVATE RESPONDENT
WHEN IT FAILED TO DELIVER HIS LUGGAGE AT THE DESIGNATED PLACE
AND TIME. — Petitioner breached its contract of carriage with private respondent
when it failed to deliver his luggage at the designated place and time, it being the
obligation of a common carrier to carry its passengers and their luggage safely to
their destination, which includes the duty not to delay their transportation, and the
evidence shows that petitioner acted fraudulently or in bad faith.
2. DAMAGES; MORAL AND EXEMPLARY DAMAGES PREDICATED UPON A
BREACH OF CONTRACT OF CARRIAGE; RECOVERABLE ONLY IN
INSTANCES WHERE THE MISHAP RESULTS IN DEATH OF A PASSENGER,
OR WHERE THE CARRIER IS GUILTY OF FRAUD OR BAD FAITH; THE
CONDUCT OF PETITIONER'S REPRESENTATIVE TOWARDS RESPONDENT
JUSTIFIES THE GRANT OF MORAL AND EXEMPLARY DAMAGES IN CASE
AT BAR. — Moral damages predicated upon a breach of contract of carriage may
only be recoverable in instances where the mishap results in death of a passenger,
or where the carrier is guilty of fraud or bad faith. The language and conduct of
petitioner's representative towards respondent Alcantara was discourteous or
arbitrary to justify the grant of moral damages. The CATHAY representative was
not only indifferent and impatient; he was also rude and insulting. He simply
advised Alcantara to buy anything he wanted. But even that was not sincere
because the representative knew that the passenger was limited only to $20.00
which, certainly, was not enough to purchase comfortable clothings appropriate for
an executive conference. Considering that Alcantara was not only a revenue
passenger but even paid for a first class airline accommodation and accompanied
at the time by the Commercial Attache of the Philippine Embassy who was
assisting him in his problem, petitioner or its agents should have been more
courteous and accommodating to private respondent, instead of giving him a curt
reply, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow,
you can buy anything you need, charged to Cathay Pacific." Where in breaching
the contract of carriage the defendant airline is not shown to have acted
fraudulently or in bad faith, liability for damages is limited to the natural and
probable consequences of the breach of obligation which the parties had foreseen
or could have reasonably foreseen. In that case, such liability does not include
moral and exemplary damages. Conversely, if the defendant airline is shown to
have acted fraudulently or in bad faith, the award of moral and exemplary
damages is proper.
3. TEMPERATE DAMAGES; RECOVERABLE ONLY UPON PROOF THAT THE
CLAIMANT SUSTAINED SOME PECUNIARY LOSS. — However, respondent
Alcantara is not entitled to temperate damages, contrary to the ruling of the court a
quo, in the absence of any showing that he sustained some pecuniary loss. It
cannot be gainsaid that respondent's luggage was ultimately delivered to him
without serious or appreciable damage.
4. WARSAW CONVENTION; DOES NOT OPERATE AS AN EXCLUSIVE
ENUMERATION OF THE INSTANCES FOR DECLARING A CARRIER LIABLE
FOR BREACH OF CONTRACT OF CARRIAGE OR AS AN ABSOLUTE LIMIT
OF THE EXTENT OF THAT LIABILITY; DOES NOT PRECLUDE THE
OPERATION OF THE CIVIL CODE AND OTHER PERTINENT LAWS. — As We
have repeatedly held, although the Warsaw Convention has the force and effect of
law in this country, being a treaty commitment assumed by the Philippine
government, said convention does not operate as an exclusive enumeration of the
instances for declaring a carrier liable for breach of contract of carriage or as an
absolute limit of the extent of that liability. The Warsaw Convention declares the
carrier liable for damages in the enumerated cases and under certain limitations.
However, it must not be construed to preclude the operation of the Civil Code and
other pertinent laws. It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the contract of
carriage, especially if wilfull misconduct on the part of the carrier's employees is
found or established, which is clearly the case before Us.
DECISION
BELLOSILLO, J p:
This is a petition for review on certiorari of the decision of the Court of Appeals
which affirmed with modification that of the trial court by increasing the award of
damages in favor of private respondent Tomas L. Alcantara.
The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara
was a first class passenger of petitioner Cathay Pacific Airways, Ltd. (CATHAY for
brevity) on its Flight No. CX-900 from Manila to Hongkong and onward from
Hongkong to Jakarta on Flight No. CX-711. The purpose of his trip was to attend
the following day, 20 October 1975, a conference with the Director General of
Trade of Indonesia, Alcantara being the Executive Vice-President and General
Manager of Iligan Cement Corporation, Chairman of the Export Committee of the
Philippine Cement Corporation, and representative of the Cement Industry
Authority and the Philippine Cement Corporation. He checked in his luggage which
contained not only his clothing and articles for personal use but also papers and
documents he needed for the conference.
Upon his arrival in Jakarta, respondent discovered that his luggage was missing.
When he inquired about his luggage from CATHAY's representative in Jakarta,
private respondent was told that his luggage was left behind in Hongkong. For this,
respondent Alcantara was offered $20.00 as "inconvenience money" to buy his
immediate personal needs until the luggage could be delivered to him.
His luggage finally reached Jakarta more than twenty four (24) hours after his
arrival. However, it was not delivered to him at his hotel but was required by
petitioner to be picked up by an official of the Philippine Embassy.
On 1 March 1976, respondent filed his complaint against petitioner with the Court
of First Instance (now Regional Trial Court) of Lanao del Norte praying for
temperate, moral and exemplary damages, plus attorney's fees.
On 18 April 1976, the trial court rendered its decision ordering CATHAY to pay
Plaintiff P20,000.00 for moral damages, P5,000.00 for temperate damages,
P10,000.00 for exemplary damages, and P25,000.00 for attorney's fees, and the
costs. 1
Both parties appealed to the Court of Appeals. CATHAY assailed the conclusion of
the trial court that it was accountable for breach of contract and questioned the
non-application by the court of the Warsaw Convention as well as the excessive
damages awarded on the basis of its finding that respondent Alcantara was rudely
treated by petitioner's employees during the time that his luggage could not be
found. For his part, respondent Alcantara assigned as error the failure of the trial
court to grant the full amount of damages sought in his complaint.
On 11 November 1981, respondent Court of Appeals rendered its decision
affirming the findings of fact of the trial court but modifying its award by increasing
the moral damages to P80,000.00, exemplary damages to P20,000.00 and
temperate or moderate damages to P10,000.00. The award of P25,000.00 for
attorney's fees was maintained.
The same grounds raised by petitioner in the Court of Appeals are reiterated
before Us. CATHAY contends that: (1) the Court of Appeals erred in holding
petitioner liable to respondent Alcantara for moral, exemplary and temperate
damages as well as attorney's fees; and, (2) the Court of Appeals erred in failing to
apply the Warsaw Convention on the liability of a carrier to its passengers.
On its first assigned error, CATHAY argues that although it failed to transport
respondent Alcantara's luggage on time, the one-day delay was not made in bad
faith so as to justify moral, exemplary and temperate damages. It submits that the
conclusion of respondent appellate court that private respondent was treated
rudely and arrogantly when he sought assistance from CATHAY's employees has
no factual basis, hence, the award of moral damages has no leg to stand on.
Petitioner's first assigned error involves findings of fact which are not reviewable
by this Court. 2 At any rate, it is not impressed with merit. Petitioner breached its
contract of carriage with private respondent when it failed to deliver his luggage at
the designated place and time, it being the obligation of a common carrier to carry
its passengers and their luggage safely to their destination, which includes the duty
not to delay their transportation, 3 and the evidence shows that petitioner acted
fraudulently or in bad faith.
Moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the mishap results in death of a passenger, 4 or
where the carrier is guilty of fraud or bad faith. 5
In the case at bar, both the trial court and the appellate court found that CATHAY
was grossly negligent and reckless when it failed to deliver the luggage of
petitioner at the appointed place and time. We agree. CATHAY alleges that as a
result of mechanical trouble, all pieces of luggage on board the first aircraft bound
for Jakarta were unloaded and transferred to the second aircraft which departed an
hour and a half later. Yet, as the Court of Appeals noted, petitioner was not even
aware that it left behind private respondent's luggage until its attention was called
by the Hongkong Customs authorities. More, bad faith or otherwise improper
conduct may be attributed to the employees of petitioner. While the mere failure of
CATHAY to deliver respondent's luggage at the agreed place and time did not ipso
facto amount to willful misconduct since the luggage was eventually delivered to
private respondent, albeit belatedly, 6 We are persuaded that the employees of
CATHAY acted in bad faith. We refer to the deposition of Romulo Palma,
Commercial Attache of the Philippine Embassy at Jakarta, who was with
respondent Alcantara when the latter sought assistance from the employees of
CATHAY. This deposition was the basis of the findings of the lower courts when
both awarded moral damages to private respondent. Hereunder is part of Palma's
testimony —
"Q: What did Mr. Alcantara say, if any?
A. Mr. Alcantara was of course . . . . I could understand his position. He was
furious for the experience because probably he was thinking he was going to meet
the Director-General the following day and, well, he was with no change of proper
clothes and so, I would say, he was not happy about the situation.
Q: What did Mr. Alcantara say?
A: He was trying to press the fellow to make the report and if possible make the
delivery of his baggage as soon as possible.
Q: And what did the agent or duty officer say, if any?
A: The duty officer, of course, answered back saying 'What can we do, the
baggage is missing. I cannot do anything.' something like it. 'Anyhow you can buy
anything you need, charged to Cathay Pacific.'
Q: What was the demeanor or comportment of the duty officer of Cathay Pacific
when he said to Mr. Alcantara 'You can buy anything chargeable to Cathay
Pacific'?
A: If I had to look at it objectively, the duty officer would like to dismiss the affair as
soon as possible by saying indifferently 'Don't worry. It can be found.'" 7
Indeed, the aforequoted testimony shows that the language and conduct of
petitioner's representative towards respondent Alcantara was discourteous or
arbitrary to justify the grant of moral damages. The CATHAY representative was
not only indifferent and impatient; he was also rude and insulting. He simply
advised Alcantara to buy anything he wanted. But even that was not sincere
because the representative knew that the passenger was limited only to $20.00
which, certainly, was not enough to purchase comfortable clothings appropriate for
an executive conference. Considering that Alcantara was not only a revenue
passenger but even paid for a first class airline accommodation and accompanied
at the time by the Commercial Attache of the Philippine Embassy who was
assisting him in his problem, petitioner or its agents should have been more
courteous and accommodating to private respondent, instead of giving him a curt
reply, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow,
you can buy anything you need, charged to Cathay Pacific." CATHAY's employees
should have been more solicitous to a passenger in distress and assuaged his
anxieties and apprehensions. To compound matters, CATHAY refused to have the
luggage of Alcantara delivered to him at his hotel; instead, he was required to pick
it up himself and an official of the Philippine Embassy. Under the circumstances, it
is evident that petitioner was remiss in its duty to provide proper and adequate
assistance to a paying passenger, more so one with first class accommodation.
Where in breaching the contract of carriage the defendant airline is not shown to
have acted fraudulently or in bad faith, liability for damages is limited to the natural
and probable consequences of the breach of obligation which the parties had
foreseen or could have reasonably foreseen. In that case, such liability does not
include moral and exemplary damages. 8 Conversely, if the defendant airline is
shown to have acted fraudulently or in bad faith, the award of moral and exemplary
damages is proper.
However, respondent Alcantara is not entitled to temperate damages, contrary to
the ruling of the court a quo, in the absence of any showing that he sustained
some pecuniary loss. 9 It cannot be gainsaid that respondent's luggage was
ultimately delivered to him without serious or appreciable damage.
As regards its second assigned error, petitioner airline contends that the extent of
its liability for breach of contract should be limited absolutely to that set forth in the
Warsaw Convention. We do not agree. As We have repeatedly held, although the
Warsaw Convention has the force and effect of law in this country, being a treaty
commitment assumed by the Philippine government, said convention does not
operate as an exclusive enumeration of the instances for declaring a carrier liable
for breach of contract of carriage or as an absolute limit of the extent of that
liability. 10 The Warsaw Convention declares the carrier liable for damages in the
enumerated cases and under certain limitations. 11 However, it must not be
construed to preclude the operation of the Civil Code and other pertinent laws. It
does not regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, 12 especially if
wilfull misconduct on the part of the carrier's employees is found or established,
which is clearly the case before Us. For, the Warsaw Convention itself provides in
Art. 25 that —
"(1) The carrier shall not be entitled to avail himself of the provisions of this
convention which exclude or limit his liability, if the damage is caused by his wilfull
misconduct or by such default on his part as, in accordance with the law of the
court to which the case is submitted, is considered to be equivalent to wilfull
misconduct."
(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if
the damage is caused under the same circumstances by any agent of the carrier
acting within the scope of his employment."
When petitioner airline misplaced respondent's luggage and failed to deliver it to its
passenger at the appointed place and time, some special species of injury must
have been caused to him. For sure, the latter underwent profound distress and
anxiety, and the fear of losing the opportunity to fulfill the purpose of his trip. In
fact, for want of appropriate clothings for the occasion brought about by the delay
of the arrival of his luggage, to his embarrassment and consternation respondent
Alcantara had to seek postponement of his pre-arranged conference with the
Director General of Trade of the host country.
In one case, 13 this Court observed that a traveller would naturally suffer mental
anguish, anxiety and shock when he finds that his luggage did not travel with him
and he finds himself in a foreign land without any article of clothing other than what
he has on.

Thus, respondent is entitled to moral and exemplary damages. We however find

the award by the Court of Appeals of P80,000.00 for moral damages excessive,
hence, We reduce the amount to P30,000.00. The exemplary damages of
P20,000.00 being reasonable is maintained, as well as the attorney's fees of
P25,000.00 considering that petitioner's act or omission has compelled Alcantara
to litigate with third persons or to incur expenses to protect his interest. 14

WHEREFORE, the assailed decision of respondent Court of Appeals is

AFFIRMED with the exception of the award of temperate damages of P10,000.00
which is deleted, while the award of moral damages of P80,000.00 is reduced to
P30,000.00. The award of P20,000.00 for exemplary damages is maintained as
reasonable together with the attorney's fees of P25,000.00. The moral and
exemplary damages shall earn interest at the legal rate from 1 March 1976 when
the complaint was filed until full payment.

SO ORDERED.
[G.R. No. 71929 : December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E.
PABLO, Respondents.
DECISION
NARVASA, J.:
Dr. Felipa Pablo — an associate professor in the University of the Philippines, 1
and a research grantee of the Philippine Atomic Energy Agency — was invited to
take part at a meeting of the Department of Research and Isotopes of the Joint
FAO-IAEA Division of Atomic Energy in Food and Agriculture of the United Nations
in Ispra, Italy. 2 She was invited in view of her specialized knowledge in "foreign
substances in food and the agriculture environment." She accepted the invitation,
and was then scheduled by the organizers, to read a paper on "The Fate of
Radioactive Fusion Products Contaminating Vegetable Crops." 3 The program
announced that she would be the second speaker on the first day of the meeting. 4
To fulfill this engagement, Dr. Pablo booked passage on petitioner airline,
ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the itinerary
and time table set for her by ALITALIA. She was however told by the ALITALIA
personnel there at Milan that her luggage was "delayed inasmuch as the same . . .
(was) in one of the succeeding flights from Rome to Milan." 5 Her luggage
consisted of two (2) suitcases: one contained her clothing and other personal
items; the other, her scientific papers, slides and other research material. But the
other flights arriving from Rome did not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags herself.
There, she inquired about her suitcases in the domestic and international airports,
and filled out the forms prescribed by ALITALIA for people in her predicament.
However, her baggage could not be found. Completely distraught and
discouraged, she returned to Manila without attending the meeting in Ispra, Italy. :
nad
Once back in Manila she demanded that ALITALIA make reparation for the
damages thus suffered by her. ALITALIA offered her "free airline tickets to
compensate her for any alleged damages. . . ." She rejected the offer, and
forthwith commenced the action 6 which has given rise to the present appellate
proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to
Ispra, 7 Italy, but only on the day after her scheduled appearance and participation
at the U.N. meeting there. 8 Of course Dr. Pablo was no longer there to accept
delivery; she was already on her way home to Manila. And for some reason or
other, the suitcases were not actually restored to Prof. Pablo by ALITALIA until
eleven (11) months later, and four (4) months after institution of her action. 9
After appropriate proceedings and trial, the Court of First Instance rendered
judgment in Dr. Pablo's favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY
THOUSAND PESOS (P20,000.00), Philippine Currency, by way of nominal
damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND PESOS
(P5,000.00), Philippine Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a
reversal of the judgment. 11 Indeed, the Appellate Court not only affirmed the Trial
Court's decision but also increased the award of nominal damages payable by
ALITALIA to P40,000.00. 12 That increase it justified as follows: 13
"Considering the circumstances, as found by the Trial Court and the negligence
committed by defendant, the amount of P20,000.00 under present inflationary
conditions as awarded . . . to the plaintiff as nominal damages, is too little to make
up for the plaintiff's frustration and disappointment in not being able to appear at
said conference; and for the embarrassment and humiliation she suffered from the
academic community for failure to carry out an official mission for which she was
singled out by the faculty to represent her institution and the country. After
weighing carefully all the considerations, the amount awarded to the plaintiff for
nominal damages and attorney's fees should be increased to the cost of her round
trip air fare or at the present rate of peso to the dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make basically
the same points it tried to make before the Trial Court and the Intermediate
Appellate Court, i.e.:
1) that the Warsaw Convention should have been applied to limit ALITALIA'S
liability; and
2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal
damages and attorney's fees.
In addition, ALITALIA postulates that it was error for the Intermediate Appellate
Court to have refused to pass on all the assigned errors and in not stating the facts
and the law on which its decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made liable for damages for:
1) the death, wounding or other bodily injury of a passenger if the accident causing
it took place on board the aircraft or in the course of its operations of embarking or
disembarking;
2) the destruction or loss of, or damage to, any registered luggage or goods, if the
occurrence causing it took place during the carriage by air;" and
3) delay in the transportation by air of passengers, luggage or goods.
In these cases, it is provided in the Convention that the "action for damages,
however, founded, can only be brought subject to conditions and limits set out"
therein.
The Convention also purports to limit the liability of the carriers in the following
manner:
1. In the carriage of passengers the liability of the carrier for each passenger is
limited to the sum of 250,000 francs . . . Nevertheless, by special contract, the
carrier and the passenger may agree to a higher limit of liability.: nad
2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is
limited to a sum of 250 francs per kilogramme, unless the passenger or consignor
has made, at the time when the package was handed over to the carrier, a special
declaration of interest in delivery at destination and has paid a supplementary sum
if the case so requires. In that case the carrier will be liable to pay a sum not
exceeding the declared sum, unless he proves that sum is greater than the actual
value to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered baggage or cargo, or
of any object contained therein, the weight to be taken into consideration in
determining the amount to which the carrier's liability is limited shall be only the
total weight of the package or packages concerned. Nevertheless, when the loss,
damage or delay of a part of the registered baggage or cargo, or of an object
contained therein, affects the value of other packages covered by the same
baggage check or the same air way bill, the total weight of such package or
packages shall also be taken into consideration in determining the limit of liability.
3. As regards objects of which the passenger takes charge himself the liability of
the carrier is limited to 5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding, in accordance
with its own law, in addition, the whole or part of the court costs and of the other
expenses of litigation incurred by the plaintiff. The foregoing provision shall not
apply if the amount of the damages awarded, excluding court costs and other
expenses of the litigation, does not exceed the sum which the carrier has offered in
writing to the plaintiff within a period of six months from the date of the occurrence
causing the damage, or before the commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the provisions
which exclude or limit his liability, if the damage is caused by his wilful misconduct
or by such default on his part as, in accordance with the law of the court seized of
the case, is considered to be equivalent to wilful misconduct," or "if the damage is
(similarly) caused . . by any agent of the carrier acting within the scope of his
employment." 22 The Hague Protocol amended the Warsaw Convention by
removing the provision that if the airline took all necessary steps to avoid the
damage, it could exculpate itself completely, 23 and declaring the stated limits of
liability not applicable "if it is proved that the damage resulted from an act or
omission of the carrier, its servants or agents, done with intent to cause damage or
recklessly and with knowledge that damage would probably result." The same
deletion was effected by the Montreal Agreement of 1966, with the result that a
passenger could recover unlimited damages upon proof of wilful misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the
instances of an airline's liability, or as an absolute limit of the extent of that liability.
Such a proposition is not borne out by the language of the Convention, as this
Court has now, and at an earlier time, pointed out. 25 Moreover, slight reflection
readily leads to the conclusion that it should be deemed a limit of liability only in
those cases where the cause of the death or injury to person, or destruction, loss
or damage to property or delay in its transport is not attributable to or attended by
any wilful misconduct, bad faith, recklessness, or otherwise improper conduct on
the part of any official or employee for which the carrier is responsible, and there is
otherwise no special or extraordinary form of resulting injury. The Convention's
provisions, in short, do not "regulate or exclude liability for other breaches of
contract by the carrier" 26 or misconduct of its officers and employees, or for
some particular or exceptional type of damage. Otherwise, "an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in bad
faith, to comply with a contract of carriage, which is absurd." 27 Nor may it for a
moment be supposed that if a member of the aircraft complement should inflict
some physical injury on a passenger, or maliciously destroy or damage the latter's
property, the Convention might successfully be pleaded as the sole gauge to
determine the carrier's liability to the passenger. Neither may the Convention be
invoked to justify the disregard of some extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond the limits set by said
Convention. It is in this sense that the Convention has been applied, or ignored,
depending on the peculiar facts presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw
Convention was applied as regards the limitation on the carrier's liability, there
being a simple loss of baggage without any otherwise improper conduct on the
part of the officials or employees of the airline or other special injury sustained by
the passenger.
On the other hand, the Warsaw Convention has invariably been held inapplicable,
or as not restrictive of the carrier's liability, where there was satisfactory evidence
of malice or bad faith attributable to its officers and employees. 29 Thus, an air
carrier was sentenced to pay not only compensatory but also moral and exemplary
damages, and attorney's fees, for instance, where its employees rudely put a
passenger holding a first-class ticket in the tourist or economy section, 30 or
ousted a brown Asiatic from the plane to give his seat to a white man, 31 or gave
the seat of a passenger with a confirmed reservation to another, 32 or subjected a
passenger to extremely rude, even barbaric treatment, as by calling him a
"monkey." 33
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to
the employees of petitioner airline; and Dr. Pablo's luggage was eventually
returned to her, belatedly, it is true, but without appreciable damage. The fact is,
nevertheless, that some special species of injury was caused to Dr. Pablo because
petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the
time appointed — a breach of its contract of carriage, to be sure — with the result
that she was unable to read the paper and make the scientific presentation
(consisting of slides, autoradiograms or films, tables and tabulations) that she had
painstakingly labored over, at the prestigious international conference, to attend
which she had traveled hundreds of miles, to her chagrin and embarrassment and
the disappointment and annoyance of the organizers. She felt, not unreasonably,
that the invitation for her to participate at the conference, extended by the Joint
FAO/IAEA Division of Atomic Energy in Food and Agriculture of the United
Nations, was a singular honor not only to herself, but to the University of the
Philippines and the country as well, an opportunity to make some sort of
impression among her colleagues in that field of scientific activity. The opportunity
to claim this honor or distinction was irretrievably lost to her because of Alitalia's
breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress
and anxiety, which gradually turned to panic and finally despair, from the time she
learned that her suitcases were missing up to the time when, having gone to
Rome, she finally realized that she would no longer be able to take part in the
conference. As she herself put it, she "was really shocked and distraught and
confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for delay
in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her
luggage. As already mentioned, her baggage was ultimately delivered to her in
Manila, tardily but safely. She is however entitled to nominal damages — which, as
the law says, is adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated and recognized, and not
for the purpose of indemnifying the plaintiff for any loss suffered — and this Court
agrees that the respondent Court of Appeals correctly set the amount thereof at
P40,000.00. As to the purely technical argument that the award to her of such
nominal damages is precluded by her omission to include a specific claim therefor
in her complaint, it suffices to draw attention to her general prayer, following her
plea for moral and exemplary damages and attorney's fees, "for such other and
further just and equitable relief in the premises," which certainly is broad enough to
comprehend an application as well for nominal damages. Besides, petitioner
should have realized that the explicit assertion, and proof, that Dr. Pablo's right
had been violated or invaded by it — absent any claim for actual or compensatory
damages, the prayer thereof having been voluntarily deleted by Dr. Pablo upon the
return to her of her baggage — necessarily raised the issue of nominal damages.:
rd
This Court also agrees that respondent Court of Appeals correctly awarded
attorney's fees to Dr. Pablo, and the amount of P5,000.00 set by it is reasonable in
the premises. The law authorizes recovery of attorney's fees inter alia where, as
here, "the defendant's act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest," 34 or "where the court
deems it just and equitable." 35
WHEREFORE, no error being perceived in the challenged decision of the Court of
Appeals, it appearing on the contrary to be entirely in accord with the facts and the
law, said decision is hereby AFFIRMED, with costs against the petitioner.
SO ORDERED.
[G.R. No. L-61418. September 24, 1987.]
KOREAN AIRLINES CO., LTD., Petitioner, v. HON. COURT OF APPEALS, THE
HON. EDUARDO C. TUTAAN, Presiding Judge, Court of First Instance of
Rizal, Branch V. Quezon City, AZUCENA and JANUARIO TOMAS,
Respondents.
DECISION
CRUZ, J.:
This is one of the many cases that have unnecessarily clogged the dockets of this
Court because they should not have been brought to us in the first
place.chanrobles.com : virtual law library
The issues are mainly factual. They have been resolved by the trial court, which
has been affirmed by the respondent court, except as to the award of damages,
which has been reduced. We see no reason why the decision had to be elevated
to us.
Time and again we have stressed that this Court is not a trier of facts. 1 We leave
these matters to the lower courts, which have more opportunity and facilities to
examine these matters. We have no jurisdiction as a rule to reverse their findings.
2 The exception invoked is that there is a clear showing of a grave abuse of
discretion on their part, but we do not see it here.
We are satisfied from the findings of the respondent court (and of the trial court)
that the private respondent was, in the language of the airline industry, "bumped
off." She had a confirmed ticket. She arrived at the airport on time. However, she
was not allowed to board because her seat had already been given to another
passenger. As a result, she suffered damages for which the petitioner should be
held liable.
Specifically, petitioner Korean Airlines (herein after called KAL) issued to Azucena
Tomas a plane ticket to Los Angeles, California, U.S.A., on Flight No. KE 612
departing from the Manila International Airport on July 29, 1977, at 2:20 p.m. She
paid the fare of P2,587.88 3 She and her husband arrived at the KAL check-in
counter at 1:50 p.m. of that date 4 and presented her ticket to Augusto Torres, Jr.,
who was in charge. Torres refused to check her in, saying that the Immigration
Office was already closed. 5 Januario Tomas, her husband, rushed to the said
office, which was still open, and was told by the immigration officer on duty that his
wife could still be cleared for departure. Januario rushed back to Torres to convey
this information and asked that his wife be checked in. Torres said this was no
longer possible because her seat had already been given to another passenger.
His reason was that Azucena had arrived late and had not checked in within forty
minutes before departure time.
There is no evidence in the record of any rule requiring passengers to check in at
least forty minutes before departure time, as invoked by Torres. KAL admits that it
has not been able to cite any statutory or administrative requirement to this effect.
7 In fact, the alleged rule is not even a condition of the plane ticket purchased by
Azucena.
At the same time, KAL invokes the memorandum-circular of February 24, 1975,
issued by the Commission on Immigration and Deportation which says that "all
passengers authorized to leave for abroad shall be required to check in with the
Immigration Departure Control Officer at least thirty minutes before the scheduled
departure." The record shows that Azucena was ready to comply.
If, as Torres said, he gave Azucena’s seat to a chance passenger thirty-eight
minutes before departure time 8 instead of waiting for Azucena, then he was
intentionally violating the said circular. Significantly, it was proved he was not
telling the truth when he said the Immigration Office was already closed although it
was in fact still open at the time the private respondents arrived. Moreover, the
immigration officer on duty expressed his willingness to clear Azucena Tomas for
departure, thus indicating that she was well within the provisions of the
memorandum-circular. Torres’ refusal to check her in was clearly unjustified.
As it appeared later, the real reason why she could not be checked in was not her
supposed tardiness but the circumstance that Torres had prematurely given her
seat to a chance passenger. That person certainly had less right to prior
accommodation than the private respondent herself.
The claim that the real party in interest is the Gold N. Apparel Manufacturing
Corporation and not the private respondent 9 is also untenable. Counsel for
Azucena Tomas declared at the trial that she was suing in her personal capacity.
10 In testifying about her participation in the said corporation, she was only
stressing her status as a respected and well-connected businesswoman to show
the extent of the prejudice caused to her interests by the unjustified acts of the
petitioner.
It is clear that the petitioner acted in bad faith in violating the private respondent’s
rights under their contract of carriage and is therefore liable for the injuries she has
sustained as a result. We agree with the Court of Appeals, however, that the
award should be reduced to P50,000.00 for actual and compensatory damages,
P30,000.00 for moral damages, and P20,000.00 for attorney’s fees, the exemplary
damages to be eliminated altogether.
WHEREFORE, the appealed decision of the respondent court is AFFIRMED in
toto, with costs against the petitioner.
SO ORDERED.
G.R. No. 78656 August 30, 1988
TRANS WORLD AIRLINES, petitioner, vs. COURT OF APPEALS and
ROGELIO A. VINLUAN, respondents.
GANCAYCO, J.:
Rogelio A. Vinluan is a practicing lawyer who had to travel in April, 1979 to several
cities in Europe and the U.S. to attend to some matters involving several clients.
He entered into a contract for air carriage for valuable consideration with Japan
Airlines first class from Manila to Tokyo, Moscow, Paris, Hamburg, Zurich, New
York, Los Angeles, Honolulu and back to Manila thru the same airline and other
airlines it represents for which he was issued the corresponding first class tickets
for the entire trip.
On April 18, 1979, while in Paris, he went to the office of Trans World Airlines
(TWA) at the De Gaulle Airport and secured therefrom confirmed reservation for
first class accommodation on board its Flight No. 41 from New York to San
Francisco which was scheduled to depart on April 20, 1979. A validated stub was
attached to the New York-Los Angeles portion of his ticket evidencing his
confirmed reservation for said flight with the mark "OK " 1 On April 20, 1979, at
about 8:00 o'clock A.M., Vinluan reconfirrred his reservation for first class
accommodation on board TWA Flight No. 41 with its New York office. He was
advised that his reservation was confirmed. He was even requested to indicate his
seat preference on said flight on said scheduled date of departure of TWA Flight
No. 41. Vinluan presented his ticket for check-in at the counter of TWA at JFK
International Airport at about 9:45 o'clock A.M., the scheduled time of the
departure being 11:00 o'clock A.M. He was informed that there was no first class
seat available for him on the flight. He asked for an explanation but TWA
employees on duty declined to give any reason. When he began to protest, one of
the TWA employees, a certain Mr. Braam, rudely threatened him with the words
"Don't argue with me, I have a very bad temper."
To be able to keep his schedule, Vinluan was compelled to take the economy seat
offered to him and he was issued a refund application" as he was downgraded
from first class to economy class.
While waiting for the departure of Flight No. 41. Vinluan noticed that other
passengers who were white Caucasians and who had checked-in later than him
were given preference in some first class seats which became available due to "no
show" passengers.
On February 15, 1980, Vinluan filed an action for damages against the TWA in the
Court of First Instance of Rizal alleging breach of contract and bad faith. After trial
on the merits, a decision was rendered the dispositive part of which reads as
follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant holding the latter liable to the for-mer for the amount representing the
difference in fare between first class and economy class accommodations on
board Flight No. 6041 from New York to San Francisco, the amount of
P500,000.00 as moral damages, the amount of P300,000.00 as exemplary
damages, and the amount of P100,000.00 as and for attorney's fees, all such
amounts to earn interest at the rate of twelve (12%) percent per annum from
February 15, 1980 when the complainant was filed until fully paid.
Correspondingly, defendant's counterclaim is dismissed. Costs against the
defendant.
SO ORDERED.
Not satisfied therewith, the TWA appealed to the Court of Appeals wherein in due
course a decision was rendered on May 27, 1987, 2 the dispositive part of which
reads as follows:
WHEREFORE, the decision dated March 8, 1984 is hereby modified by (1) fixing
the interest which appellant must pay on the awards of moral and exemplary
damages at six per cent (6%) per annum from the date of the decision a quo,
March 8, 1984 until date of full payment and (2) reducing the attorne's fees to
P50,000.00 without interest, the rest of the decision is affirmed. Cost against
appellant.
SO ORDERED.
Hence, the herein petition for review.
The theory of the petitioner is that because of maintenance problems of the aircraft
on the day of the flight, TWA Flight No. 41 was cancelled and a special Flight No.
6041 was organized to operate in lieu of Flight No. 41. 3 Flight No. 41 was to have
utilized a Lockheed 1011 with 34 first class seats, but instead, a smaller Boeing
707 with only 16 first class seats was substituted for use in Flight No. 6041. Hence,
passengers who had first class reservations on Flight No. 41 had to be
accommodated on Flight No. 6041 on a first-come, first-served basis. An
announcement was allegedly made to all passengers in the entire terminal of the
airport advising them to get boarding cards for Flight No. 6041 to San Francisco
and that the first ones getting them would get first preference as to seats in the
aircraft. It denied declining to give any explanation for the downgrading of private
respondent as well as the discourteous attitude of Mr. Braam.
On the other hand, private respondent asserts that he did not hear such embarrassment that he suffered and to serve as an example to discourage the
announcement at the terminal and that he was among the early passengers to repetition of similar oppressive and discriminatory acts.
present his ticket for check-in only to be informed that there was no first class seat
available for him and that he had to be downgraded. WHEREFORE, with the above modification reducing the moral and exemplary
damages as above-stated, the decision subject of the petition for review is
The petitioner contends that the respondent Court of Appeals committed a grave AFFIRMED in all other respects, without pronouncement as to costs in this
abuse of discretion in finding that petitioner acted maliciously and discriminatorily, instance.
and in granting excessive moral and exemplary damages and attorney's fees.
SO ORDERED.
The contention is devoid of merit. Private respondent had a first class ticket for
Flight No. 41 of petitioner from New York to San Francisco on April 20, 1979. It
was twice confirmed and yet respondent unceremoniously told him that there was
no first class seat available for him and that he had to be downgraded to the
economy class. As he protested, he was arrogantly threatened by one Mr. Braam.
Worst still, while he was waiting for the flight, he saw that several Caucasians who
arrived much later were accommodated in first class seats when the other
passengers did not show up.

The discrimination is obvious and the humiliation to which private respondent was
subjected is undeniable. Consequently, the award of moral and exemplary
damages by the respondent court is in order. 4

Indeed, private respondent had shown that the alleged switch of planes from a
Lockheed 1011 to a smaller Boeing 707 was because there were only 138
confirmed economy class passengers who could very well be accommodated in
the smaller plane and not because of maintenance problems.

Petitioner sacrificed the comfort of its first class passengers including private
respondent Vinluan for the sake of econonmy. Such inattention and lack of care for
the interest of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles the
passenger to the award of moral damages.5 More so in this case where instead of
courteously informing private respondent of his being downgraded under the
circumstances, he was angrily rebuffed by an employee of petitioner.

At the time of this unfortunate incident, the private respondent was a practicing
lawyer, a senior partner of a big law firm in Manila. He was a director of several
companies and was active in civic and social organizations in the Philippines.
Considering the circumstances of this case and the social standing of private
respondent in the community, he is entitled to the award of moral and exemplary
damages. However, the moral damages should be reduced to P300,000.00, and
the exemplary damages should be reduced to P200,000.00. This award should be
reasonably sufficient to indemnify private respondent for the humiliation and
G.R. No. 150843 March 14, 2003
CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. SPOUSES DANIEL
VAZQUEZ and MARIA LUISA MADRIGAL VAZQUEZ, respondents.
DAVIDE, JR., C.J.:
Is an involuntary upgrading of an airline passenger’s accommodation from one
class to a more superior class at no extra cost a breach of contract of carriage that
would entitle the passenger to an award of damages? This is a novel question that
has to be resolved in this case.
The facts in this case, as found by the Court of Appeals and adopted by petitioner
Cathay Pacific Airways, Ltd., (hereinafter Cathay) are as follows:
Cathay is a common carrier engaged in the business of transporting passengers
and goods by air. Among the many routes it services is the Manila-Hongkong-
Manila course. As part of its marketing strategy, Cathay accords its frequent flyers
membership in its Marco Polo Club. The members enjoy several privileges, such
as priority for upgrading of booking without any extra charge whenever an
opportunity arises. Thus, a frequent flyer booked in the Business Class has priority
for upgrading to First Class if the Business Class Section is fully booked.
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal
Vazquez are frequent flyers of Cathay and are Gold Card members of its Marco
Polo Club. On 24 September 1996, the Vazquezes, together with their maid and
two friends Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for
pleasure and business.
For their return flight to Manila on 28 September 1996, they were booked on
Cathay’s Flight CX-905, with departure time at 9:20 p.m. Two hours before their
time of departure, the Vazquezes and their companions checked in their luggage
at Cathay’s check-in counter at Kai Tak Airport and were given their respective
boarding passes, to wit, Business Class boarding passes for the Vazquezes and
their two friends, and Economy Class for their maid. They then proceeded to the
Business Class passenger lounge.
When boarding time was announced, the Vazquezes and their two friends went to
Departure Gate No. 28, which was designated for Business Class passengers. Dr.
Vazquez presented his boarding pass to the ground stewardess, who in turn
inserted it into an electronic machine reader or computer at the gate. The ground
stewardess was assisted by a ground attendant by the name of Clara Lai Han
Chiu. When Ms. Chiu glanced at the computer monitor, she saw a message that
there was a "seat change" from Business Class to First Class for the Vazquezes.
Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’
accommodations were upgraded to First Class. Dr. Vazquez refused the upgrade,
reasoning that it would not look nice for them as hosts to travel in First Class and
their guests, in the Business Class; and moreover, they were going to discuss
business matters during the flight. He also told Ms. Chiu that she could have other
passengers instead transferred to the First Class Section. Taken aback by the
refusal for upgrading, Ms. Chiu consulted her supervisor, who told her to handle
the situation and convince the Vazquezes to accept the upgrading. Ms. Chiu
informed the latter that the Business Class was fully booked, and that since they
were Marco Polo Club members they had the priority to be upgraded to the First
Class. Dr. Vazquez continued to refuse, so Ms. Chiu told them that if they would
not avail themselves of the privilege, they would not be allowed to take the flight.
Eventually, after talking to his two friends, Dr. Vazquez gave in. He and Mrs.
Vazquez then proceeded to the First Class Cabin.
Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996
addressed to Cathay’s Country Manager, demanded that they be indemnified in
the amount of P1million for the "humiliation and embarrassment" caused by its
employees. They also demanded "a written apology from the management of
Cathay, preferably a responsible person with a rank of no less than the Country
Manager, as well as the apology from Ms. Chiu" within fifteen days from receipt of
the letter.
In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s Country
Manager Argus Guy Robson, informed the Vazquezes that Cathay would
investigate the incident and get back to them within a week’s time.
On 8 November 1996, after Cathay’s failure to give them any feedback within its
self-imposed deadline, the Vazquezes instituted before the Regional Trial Court of
Makati City an action for damages against Cathay, praying for the payment to each
of them the amounts of P250,000 as temperate damages; P500,000 as moral
damages; P500,000 as exemplary or corrective damages; and P250,000 as
attorney’s fees.
In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that
they preferred to stay in Business Class, Ms. Chiu "obstinately, uncompromisingly
and in a loud, discourteous and harsh voice threatened" that they could not board
and leave with the flight unless they go to First Class, since the Business Class
was overbooked. Ms. Chiu’s loud and stringent shouting annoyed, embarrassed,
and humiliated them because the incident was witnessed by all the other
passengers waiting for boarding. They also claimed that they were unjustifiably
delayed to board the plane, and when they were finally permitted to get into the
aircraft, the forward storage compartment was already full. A flight stewardess
instructed Dr. Vazquez to put his roll-on luggage in the overhead storage
compartment. Because he was not assisted by any of the crew in putting up his
luggage, his bilateral carpal tunnel syndrome was aggravated, causing him
extreme pain on his arm and wrist. The Vazquezes also averred that they "belong
to the uppermost and absolutely top elite of both Philippine Society and the
Philippine financial community, [and that] they were among the wealthiest persons
in the Philippine[s]."
In its answer, Cathay alleged that it is a practice among commercial airlines to
upgrade passengers to the next better class of accommodation, whenever an
opportunity arises, such as when a certain section is fully booked. Priority in
upgrading is given to its frequent flyers, who are considered favored passengers
like the Vazquezes. Thus, when the Business Class Section of Flight CX-905 was
fully booked, Cathay’s computer sorted out the names of favored passengers for
involuntary upgrading to First Class. When Ms. Chiu informed the Vazquezes that
they were upgraded to First Class, Dr. Vazquez refused. He then stood at the
entrance of the boarding apron, blocking the queue of passengers from boarding
the plane, which inconvenienced other passengers. He shouted that it was
impossible for him and his wife to be upgraded without his two friends who were
traveling with them. Because of Dr. Vazquez’s outburst, Ms. Chiu thought of
upgrading the traveling companions of the Vazquezes. But when she checked the
computer, she learned that the Vazquezes’ companions did not have priority for
upgrading. She then tried to book the Vazquezes again to their original seats.
However, since the Business Class Section was already fully booked, she politely
informed Dr. Vazquez of such fact and explained that the upgrading was in
recognition of their status as Cathay’s valued passengers. Finally, after talking to
their guests, the Vazquezes eventually decided to take the First Class
accommodation.
Cathay also asserted that its employees at the Hong Kong airport acted in good
faith in dealing with the Vazquezes; none of them shouted, humiliated,
embarrassed, or committed any act of disrespect against them (the Vazquezes).
Assuming that there was indeed a breach of contractual obligation, Cathay acted
in good faith, which negates any basis for their claim for temperate, moral, and
exemplary damages and attorney’s fees. Hence, it prayed for the dismissal of the
complaint and for payment of P100,000 for exemplary damages and P300,000 as
attorney’s fees and litigation expenses.
During the trial, Dr. Vazquez testified to support the allegations in the complaint.
His testimony was corroborated by his two friends who were with him at the time of
the incident, namely, Pacita G. Cruz and Josefina Vergel de Dios.
For its part, Cathay presented documentary evidence and the testimonies of Mr.
Yuen; Ms. Chiu; Norma Barrientos, Comptroller of its retained counsel; and Mr.
Robson. Yuen and Robson testified on Cathay’s policy of upgrading the seat
accommodation of its Marco Polo Club members when an opportunity arises. The
upgrading of the Vazquezes to First Class was done in good faith; in fact, the First
Class Section is definitely much better than the Business Class in terms of
comfort, quality of food, and service from the cabin crew. They also testified that
overbooking is a widely accepted practice in the airline industry and is in
accordance with the International Air Transport Association (IATA) regulations.
Airlines overbook because a lot of passengers do not show up for their flight. With
respect to Flight CX-905, there was no overall overbooking to a degree that a
passenger was bumped off or downgraded. Yuen and Robson also stated that the
demand letter of the Vazquezes was immediately acted upon. Reports were
gathered from their office in Hong Kong and immediately forwarded to their
counsel Atty. Remollo for legal advice. However, Atty. Remollo begged off
because his services were likewise retained by the Vazquezes; nonetheless, he
undertook to solve the problem in behalf of Cathay. But nothing happened until
Cathay received a copy of the complaint in this case. For her part, Ms. Chiu denied
that she shouted or used foul or impolite language against the Vazquezes. Ms.
Barrientos testified on the amount of attorney’s fees and other litigation expenses,
such as those for the taking of the depositions of Yuen and Chiu.
In its decision1 of 19 October 1998, the trial court found for the Vazquezes and
decreed as follows:
WHEREFORE, finding preponderance of evidence to sustain the instant complaint,
judgment is hereby rendered in favor of plaintiffs Vazquez spouses and against
defendant Cathay Pacific Airways, Ltd., ordering the latter to pay each plaintiff the
following:
a) Nominal damages in the amount of P100,000.00 for each plaintiff;
b) Moral damages in the amount of P2,000,000.00 for each plaintiff;
c) Exemplary damages in the amount of P5,000,000.00 for each plaintiff;
d) Attorney’s fees and expenses of litigation in the amount of P1,000,000.00 for
each plaintiff; and
e) Costs of suit.
SO ORDERED.
According to the trial court, Cathay offers various classes of seats from which
passengers are allowed to choose regardless of their reasons or motives, whether
it be due to budgetary constraints or whim. The choice imposes a clear obligation
on Cathay to transport the passengers in the class chosen by them. The carrier
cannot, without exposing itself to liability, force a passenger to involuntarily change
his choice. The upgrading of the Vazquezes’ accommodation over and above their
vehement objections was due to the overbooking of the Business Class. It was a
pretext to pack as many passengers as possible into the plane to maximize
Cathay’s revenues. Cathay’s actuations in this case displayed deceit, gross
negligence, and bad faith, which entitled the Vazquezes to awards for damages.
On appeal by the petitioners, the Court of Appeals, in its decision of 24 July 2001,2
deleted the award for exemplary damages; and it reduced the awards for moral
and nominal damages for each of the Vazquezes to P250,000 and P50,000,
respectively, and the attorney’s fees and litigation expenses to P50,000 for both of
them.
The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class,
Cathay novated the contract of carriage without the former’s consent. There was a
breach of contract not because Cathay overbooked the Business Class Section of
Flight CX-905 but because the latter pushed through with the upgrading despite
the objections of the Vazquezes.
However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or
meant to be discourteous to, Dr. Vazquez, although it might seemed that way to
the latter, who was a member of the elite in Philippine society and was not
therefore used to being harangued by anybody. Ms. Chiu was a Hong Kong
Chinese whose fractured Chinese was difficult to understand and whose manner
of speaking might sound harsh or shrill to Filipinos because of cultural differences.
But the Court of Appeals did not find her to have acted with deliberate malice,
deceit, gross negligence, or bad faith. If at all, she was negligent in not offering the
First Class accommodations to other passengers. Neither can the flight
stewardess in the First Class Cabin be said to have been in bad faith when she
failed to assist Dr. Vazquez in lifting his baggage into the overhead storage bin.
There is no proof that he asked for help and was refused even after saying that he
was suffering from "bilateral carpal tunnel syndrome." Anent the delay of Yuen in
responding to the demand letter of the Vazquezes, the Court of Appeals found it to
have been sufficiently explained.
The Vazquezes and Cathay separately filed motions for a reconsideration of the
decision, both of which were denied by the Court of Appeals.
Cathay seasonably filed with us this petition in this case. Cathay maintains that the
award for moral damages has no basis, since the Court of Appeals found that
there was no "wanton, fraudulent, reckless and oppressive" display of manners on
the part of its personnel; and that the breach of contract was not attended by fraud,
malice, or bad faith. If any damage had been suffered by the Vazquezes, it was
damnum absque injuria, which is damage without injury, damage or injury inflicted
without injustice, loss or damage without violation of a legal right, or a wrong done
to a man for which the law provides no remedy. Cathay also invokes our decision
in United Airlines, Inc. v. Court of Appeals3 where we recognized that, in
accordance with the Civil Aeronautics Board’s Economic Regulation No. 7, as
amended, an overbooking that does not exceed ten percent cannot be considered
deliberate and done in bad faith. We thus deleted in that case the awards for moral
and exemplary damages, as well as attorney’s fees, for lack of proof of
overbooking exceeding ten percent or of bad faith on the part of the airline carrier.
On the other hand, the Vazquezes assert that the Court of Appeals was correct in
granting awards for moral and nominal damages and attorney’s fees in view of the
breach of contract committed by Cathay for transferring them from the Business
Class to First Class Section without prior notice or consent and over their vigorous
objection. They likewise argue that the issuance of passenger tickets more than
the seating capacity of each section of the plane is in itself fraudulent, malicious
and tainted with bad faith.
The key issues for our consideration are whether (1) by upgrading the seat
accommodation of the Vazquezes from Business Class to First Class Cathay
breached its contract of carriage with the Vazquezes; (2) the upgrading was
tainted with fraud or bad faith; and (3) the Vazquezes are entitled to damages.
We resolve the first issue in the affirmative.
A contract is a meeting of minds between two persons whereby one agrees to give
something or render some service to another for a consideration. There is no
contract unless the following requisites concur: (1) consent of the contracting
parties; (2) an object certain which is the subject of the contract; and (3) the cause
of the obligation which is established.4 Undoubtedly, a contract of carriage existed
between Cathay and the Vazquezes. They voluntarily and freely gave their
consent to an agreement whose object was the transportation of the Vazquezes
from Manila to Hong Kong and back to Manila, with seats in the Business Class
Section of the aircraft, and whose cause or consideration was the fare paid by the
Vazquezes to Cathay.
The only problem is the legal effect of the upgrading of the seat accommodation of
the Vazquezes. Did it constitute a breach of contract?
Breach of contract is defined as the "failure without legal reason to comply with the
terms of a contract."5 It is also defined as the "[f]ailure, without legal excuse, to
perform any promise which forms the whole or part of the contract."6
In previous cases, the breach of contract of carriage consisted in either the
bumping off of a passenger with confirmed reservation or the downgrading of a
passenger’s seat accommodation from one class to a lower class. In this case,
what happened was the reverse. The contract between the parties was for Cathay
to transport the Vazquezes to Manila on a Business Class accommodation in
Flight CX-905. After checking-in their luggage at the Kai Tak Airport in Hong Kong,
the Vazquezes were given boarding cards indicating their seat assignments in the
Business Class Section. However, during the boarding time, when the Vazquezes
presented their boarding passes, they were informed that they had a seat change
from Business Class to First Class. It turned out that the Business Class was
overbooked in that there were more passengers than the number of seats. Thus,
the seat assignments of the Vazquezes were given to waitlisted passengers, and
the Vazquezes, being members of the Marco Polo Club, were upgraded from
Business Class to First Class.
We note that in all their pleadings, the Vazquezes never denied that they were
members of Cathay’s Marco Polo Club. They knew that as members of the Club,
they had priority for upgrading of their seat accommodation at no extra cost when
an opportunity arises. But, just like other privileges, such priority could be waived.
The Vazquezes should have been consulted first whether they wanted to avail
themselves of the privilege or would consent to a change of seat accommodation
before their seat assignments were given to other passengers. Normally, one
would appreciate and accept an upgrading, for it would mean a better
accommodation. But, whatever their reason was and however odd it might be, the
Vazquezes had every right to decline the upgrade and insist on the Business Class
accommodation they had booked for and which was designated in their boarding
passes. They clearly waived their priority or preference when they asked that other
passengers be given the upgrade. It should not have been imposed on them over
their vehement objection. By insisting on the upgrade, Cathay breached its
contract of carriage with the Vazquezes.
We are not, however, convinced that the upgrading or the breach of contract was
attended by fraud or bad faith. Thus, we resolve the second issue in the negative.
Bad faith and fraud are allegations of fact that demand clear and convincing proof.
They are serious accusations that can be so conveniently and casually invoked,
and that is why they are never presumed. They amount to mere slogans or
mudslinging unless convincingly substantiated by whoever is alleging them.
Fraud has been defined to include an inducement through insidious machination.
Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to deceive, conceals or omits to
state material facts and, by reason of such omission or concealment, the other
party was induced to give consent that would not otherwise have been given.7
Bad faith does not simply connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong, a
breach of a known duty through some motive or interest or ill will that partakes of
the nature of fraud.8
We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were
not induced to agree to the upgrading through insidious words or deceitful
machination or through willful concealment of material facts. Upon boarding, Ms.
Chiu told the Vazquezes that their accommodations were upgraded to First Class
in view of their being Gold Card members of Cathay’s Marco Polo Club. She was
honest in telling them that their seats were already given to other passengers and
the Business Class Section was fully booked. Ms. Chiu might have failed to
consider the remedy of offering the First Class seats to other passengers. But, we
find no bad faith in her failure to do so, even if that amounted to an exercise of
poor judgment.
Neither was the transfer of the Vazquezes effected for some evil or devious
purpose. As testified to by Mr. Robson, the First Class Section is better than the
Business Class Section in terms of comfort, quality of food, and service from the
cabin crew; thus, the difference in fare between the First Class and Business Class
at that time was $250.9 Needless to state, an upgrading is for the better condition
and, definitely, for the benefit of the passenger.
We are not persuaded by the Vazquezes’ argument that the overbooking of the
Business Class Section constituted bad faith on the part of Cathay. Section 3 of
the Economic Regulation No. 7 of the Civil Aeronautics Board, as amended,
provides:
Sec 3. Scope. – This regulation shall apply to every Philippine and foreign air
carrier with respect to its operation of flights or portions of flights originating from or
terminating at, or serving a point within the territory of the Republic of the
Philippines insofar as it denies boarding to a passenger on a flight, or portion of a
flight inside or outside the Philippines, for which he holds confirmed reserved
space. Furthermore, this Regulation is designed to cover only honest mistakes on
the part of the carriers and excludes deliberate and willful acts of non-
accommodation. Provided, however, that overbooking not exceeding 10% of the
seating capacity of the aircraft shall not be considered as a deliberate and willful
act of non-accommodation.
It is clear from this section that an overbooking that does not exceed ten percent is
not considered deliberate and therefore does not amount to bad faith.10 Here,
while there was admittedly an overbooking of the Business Class, there was no
evidence of overbooking of the plane beyond ten percent, and no passenger was
ever bumped off or was refused to board the aircraft.
Now we come to the third issue on damages.
The Court of Appeals awarded each of the Vazquezes moral damages in the
amount of P250,000. Article 2220 of the Civil Code provides:
Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are
justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith.
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury. Although incapable of pecuniary computation, moral damages may
be recovered if they are the proximate result of the defendant’s wrongful act or
omission.11 Thus, case law establishes the following requisites for the award of
moral damages: (1) there must be an injury clearly sustained by the claimant,
whether physical, mental or psychological; (2) there must be a culpable act or
omission factually established; (3) the wrongful act or omission of the defendant is
the proximate cause of the injury sustained by the claimant; and (4) the award for
damages is predicated on any of the cases stated in Article 2219 of the Civil
Code.12
Moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the carrier is guilty of fraud or bad faith or where
the mishap resulted in the death of a passenger.13 Where in breaching the
contract of carriage the airline is not shown to have acted fraudulently or in bad
faith, liability for damages is limited to the natural and probable consequences of
the breach of the obligation which the parties had foreseen or could have
reasonably foreseen. In such a case the liability does not include moral and
exemplary damages.14
In this case, we have ruled that the breach of contract of carriage, which consisted
in the involuntary upgrading of the Vazquezes’ seat accommodation, was not
attended by fraud or bad faith. The Court of Appeals’ award of moral damages
has, therefore, no leg to stand on.
The deletion of the award for exemplary damages by the Court of Appeals is
correct. It is a requisite in the grant of exemplary damages that the act of the
offender must be accompanied by bad faith or done in wanton, fraudulent or
malevolent manner.15 Such requisite is absent in this case. Moreover, to be
entitled thereto the claimant must first establish his right to moral, temperate, or
compensatory damages.16 Since the Vazquezes are not entitled to any of these
damages, the award for exemplary damages has no legal basis. And where the
awards for moral and exemplary damages are eliminated, so must the award for
attorney’s fees.17
The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of
contract is an award for nominal damages under Article 2221 of the Civil Code,
which reads as follows:
Article 2221 of the Civil Code provides:
Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.
Worth noting is the fact that in Cathay’s Memorandum filed with this Court, it
prayed only for the deletion of the award for moral damages. It deferred to the
Court of Appeals’ discretion in awarding nominal damages; thus:
As far as the award of nominal damages is concerned, petitioner respectfully
defers to the Honorable Court of Appeals’ discretion. Aware as it is that somehow,
due to the resistance of respondents-spouses to the normally-appreciated gesture
of petitioner to upgrade their accommodations, petitioner may have disturbed the
respondents-spouses’ wish to be with their companions (who traveled to Hong
Kong with them) at the Business Class on their flight to Manila. Petitioner regrets
that in its desire to provide the respondents-spouses with additional amenities for
the one and one-half (1 1/2) hour flight to Manila, unintended tension ensued.18
Nonetheless, considering that the breach was intended to give more benefit and
advantage to the Vazquezes by upgrading their Business Class accommodation to
First Class because of their valued status as Marco Polo members, we reduce the
award for nominal damages to P5,000.
Before writing finis to this decision, we find it well-worth to quote the apt
observation of the Court of Appeals regarding the awards adjudged by the trial
court:
We are not amused but alarmed at the lower court’s unbelievable alacrity,
bordering on the scandalous, to award excessive amounts as damages. In their
complaint, appellees asked for P1 million as moral damages but the lower court
awarded P4 million; they asked for P500,000.00 as exemplary damages but the
lower court cavalierly awarded a whooping P10 million; they asked for
P250,000.00 as attorney’s fees but were awarded P2 million; they did not ask for
nominal damages but were awarded P200,000.00. It is as if the lower court went
on a rampage, and why it acted that way is beyond all tests of reason. In fact the
excessiveness of the total award invites the suspicion that it was the result of
"prejudice or corruption on the part of the trial court."

The presiding judge of the lower court is enjoined to hearken to the Supreme
Court’s admonition in Singson vs. CA (282 SCRA 149 [1997]), where it said:

The well-entrenched principle is that the grant of moral damages depends upon
the discretion of the court based on the circumstances of each case. This
discretion is limited by the principle that the amount awarded should not be
palpably and scandalously excessive as to indicate that it was the result of
prejudice or corruption on the part of the trial court….

and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held:

Nonetheless, we agree with the injunction expressed by the Court of Appeals that
passengers must not prey on international airlines for damage awards, like
"trophies in a safari." After all neither the social standing nor prestige of the
passenger should determine the extent to which he would suffer because of a
wrong done, since the dignity affronted in the individual is a quality inherent in him
and not conferred by these social indicators. 19

We adopt as our own this observation of the Court of Appeals.

WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the
Court of Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED,
and as modified, the awards for moral damages and attorney’s fees are set aside
and deleted, and the award for nominal damages is reduced to P5,000.

No pronouncement on costs.

SO ORDERED.
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal
guardian, Augusto Benedicto Santos, petitioner, vs. NORTHWEST ORIENT
AIRLINES and COURT OF APPEALS, respondents.
CRUZ, J.:
This case involves the Proper interpretation of 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 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. 1
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 Regional Trial
Court of Makati. On April 13, 1987, NOA moved to dismiss the complaint on the
ground of lack of jurisdiction. Citing the above-quoted article, it contended that the
complaint could be instituted only in the territory of one of the High Contracting
Parties, before:
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
3. the court where it has a place of business through which the contract had been
made;
4. the court of 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.
On February 1, 1988, the lower court granted the motion and dismissed the case.
2 The petitioner appealed to the Court of Appeals, which affirmed the decision of
the lower court. 3 On June 26, 1991, the petitioner filed a motion for
reconsideration, but the same was denied. 4 The petitioner then came to this
Court, raising substantially the same issues it submitted in the Court of Appeals.
The assignment of errors may be grouped into two major issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the protection of minors.
I
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of
the Warsaw Convention violates the constitutional guarantees of due process and
equal protection.
The Republic of the Philippines is a party to the Convention for the Unification of
Certain Rules Relating to International Transportation by Air, otherwise known as
the Warsaw Convention. It took effect on February 13, 1933. The Convention was
concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The
Philippine instrument of accession was signed by President Elpidio Quirino on
October 13, 1950, and was deposited with the Polish government on November 9,
1950. The Convention became applicable to the Philippines on February 9, 1951.
On September 23, 1955, President Ramon Magsaysay issued Proclamation No.
201, declaring our formal adherence thereto. "to the end that the same and every
article and clause thereof may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof." 5
The Convention is thus a treaty commitment voluntarily assumed by the Philippine
government and, as such, has the force and effect of law in this country.
The petitioner contends that Article 28(1) cannot be applied in the present case
because it is unconstitutional. He argues that there is no substantial distinction
between a person who purchases a ticket in Manila and a person who purchases
his ticket in San Francisco. The classification of the places in which actions for
damages may be brought is arbitrary and irrational and thus violates the due
process and equal protection clauses.
It is well-settled that courts will assume jurisdiction over a constitutional question
only if it is shown that the essential requisites of a judicial inquiry into such a
question are first satisfied. Thus, there must be an actual case or controversy
involving a conflict of legal rights susceptible of judicial determination; the
constitutional question must have been opportunely raised by the proper party; and
the resolution of the question is unavoidably necessary to the decision of the case
itself. 6
Courts generally avoid having to decide a constitutional question. This attitude is
based on the doctrine of separation of powers, which enjoins upon the
departments of the government a becoming respect for each other's acts.
The treaty which is the subject matter of this petition was a joint legislative-
executive act. The presumption is that it was first carefully studied and determined
to be constitutional before it was adopted and given the force 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. At
any rate, we agree with the respondent court that this case can be decided on
other grounds without the necessity of resolving the constitutional issue.
B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the
Warsaw Convention is inapplicable because of a fundamental change in the
circumstances that served as its basis.
The petitioner goes at great lengths to show that the provisions in the Convention
were intended to protect airline companies under "the conditions prevailing then
and which have long ceased to exist." He argues that in view of the significant
developments in the airline industry through the years, the treaty has become
irrelevant. Hence, to the extent that it has lost its basis for approval, it has become
unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup,
"this doctrine constitutes an attempt to formulate a legal principle which would
justify non-performance of a treaty obligation if the conditions with relation to which
the parties contracted have changed so materially and so unexpectedly as to
create a situation in which the exaction of performance would be unreasonable." 7
The key element of this doctrine is the vital change in the condition of the
contracting parties that they could not have foreseen at the time the treaty was
concluded.
The Court notes in this connection the following observation made in Day v. Trans
World Airlines, Inc.: 8
The Warsaw drafters wished to create a system of liability rules that would cover
all the hazards of air travel . . . The Warsaw delegates knew that, in the years to
come, civil aviation would change in ways that they could not foresee. They wished
to design a system of air law that would be both durable and flexible enough to
keep pace with these changes . . . The ever-changing needs of the system of civil
aviation can be served within the framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline industry
was still in its infancy. However, that circumstance alone is not sufficient
justification for the rejection of the treaty at this time. The changes recited by the
petitioner were, realistically, not entirely unforeseen although they were expected
in a general sense only. In fact, the Convention itself, anticipating such
developments, contains the following significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier than two years
after the coming into force of this convention to call for the assembling of a new
international conference in order to consider any improvements which may be
made in this convention. To this end, it will communicate with the Government of
the French Republic which will take the necessary measures to make preparations
for such conference.
But the more important consideration is that the treaty has not been rejected by the
Philippine government. The doctrine of rebus sic stantibus does not operate
automatically to render the treaty inoperative. There is a necessity for a formal act
of rejection, usually made by the head of State, with a statement of the reasons
why compliance with the treaty is no longer required.
In lieu thereof, the treaty may be denounced even without an expressed
justification for this action. Such denunciation is authorized under its Article 39, viz:
Article 39. (1) Any one of the High Contracting Parties may denounce this
convention by a notification addressed to the Government of the Republic of
Poland, which shall at once inform the Government of each of the High Contracting
Parties.
(2) Denunciation shall take effect six months after the notification of denunciation,
and shall operate only as regards the party which shall have proceeded to
denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or
pursuant to Article 39, is not a function of the courts but of the other branches of
government. This is a political act. The conclusion and renunciation of treaties is
the prerogative of the political departments and may not be usurped by the
judiciary. The courts are concerned only with the interpretation and application of
laws and treaties in force and not with their wisdom or efficacy.
C. The petitioner claims that the lower court erred in ruling that the plaintiff must
sue in the United States, because this would deny him the right to access to our
courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a suit
in the United States would constitute a constructive denial of his right to access to
our courts for the protection of his rights. He would consequently be deprived of
this vital guaranty as embodied in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers only to courts with
appropriate jurisdiction as defined by law. It does not mean that a person can go to
any court for redress of his grievances regardless of the nature or value of his
claim. If the petitioner is barred from filing his complaint before our courts, it is
because they are not vested with the appropriate jurisdiction under the Warsaw
Convention, which is part of the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of
the Warsaw Convention is a rule merely of venue and was waived by defendant
when it did not move to dismiss on the ground of improper venue.
By its own terms, the Convention applies to all international transportation of
persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:
(2) For the purposes of this convention, the expression "international
transportation" shall mean any transportation in which, according to the contract
made by the parties, the place of departure and the place of destination, whether
or not there be a break in the transportation or a transshipment, are situated
[either] within the territories of two High Contracting Parties . . .
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.
Since the flight involved in the case at bar is international, the same being from the
United States to the Philippines and back to the United States, it is subject to the
provisions of the Warsaw Convention, including Article 28(1), which enumerates
the four places where an action for damages may be brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a question over
which authorities are sharply divided. While the petitioner cites several cases
holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are later
cases cited by the private respondent supporting the conclusion that the provision
is jurisdictional. 10
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be
conferred by consent or waiver upon d court which otherwise would have no
jurisdiction over the subject-matter of an action; but the venue of an action as fixed
by statute may be changed by the consent of the parties and an objection that the
plaintiff brought his suit in the wrong county may be waived by the failure of the
defendant to make a timely objection. In either case, the court may render a valid
judgment. Rules as to jurisdiction can never be left to the consent or agreement of
the parties, whether or not a prohibition exists against their alteration. 11
A number of reasons tends to support the characterization of Article 28(1) as a
jurisdiction and not a venue provision. First, the wording of Article 32, which
indicates the places where the action for damages "must" be brought, underscores
the mandatory nature of Article 28(1). Second, this characterization is consistent
with one of the objectives of the Convention, which is to "regulate in a uniform
manner the conditions of international transportation by air." Third, the Convention
does not contain any provision prescribing rules of jurisdiction other than Article
28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must
refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals
with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such,
cannot be left to the will of the parties regardless of the time when the damage
occurred.
This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways,
Ltd., 12 where it was held:
. . . Of more, but still incomplete, assistance is the wording of Article 28(2),
especially when considered in the light of Article 32. Article 28(2) provides that
"questions of procedure shall be governed by the law of the court to which the
case is submitted" (Emphasis supplied). Section (2) thus may be read to leave for
domestic decision questions regarding the suitability and location of a particular
Warsaw Convention case.
In other words, where the matter is governed by the Warsaw Convention,
jurisdiction takes on a dual concept. Jurisdiction in the international sense must be
established in accordance with Article 28(1) of the Warsaw Convention, following
which the jurisdiction of a particular court must be established pursuant to the
applicable domestic law. Only after the question of which court has jurisdiction is
determined will the issue of venue be taken up. This second question shall be
governed by the law of the court to which the case is submitted.
The petitioner submits that since Article 32 states that the parties are precluded
"before the damages occurred" from amending the rules of Article 28(1) as to the
place where the action may be brought, it would follow that the Warsaw
Convention was not intended to preclude them from doing so "after the damages
occurred."
Article 32 provides:
Art. 32. Any clause contained in the contract and all special agreements entered
into before the damage occurred by which the parties purport to infringe the rules
laid down by this convention, whether by deciding the law to be applied, or by
altering the rules as to jurisdiction, shall be null and void. Nevertheless for the
transportation of goods, arbitration clauses shall be allowed, subject to this
convention, if the arbitration is to take place within one of the jurisdictions referred
to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be waived "after the
damages (shall have) occurred," the article should be regarded as possessing the
character of a "venue" and not of a "jurisdiction" provision. Hence, in moving to
dismiss on the ground of lack of jurisdiction, the private respondent has waived
improper venue as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to Article 32 does not support
this conclusion. In any event, we agree that even granting arguendo that Article
28(1) is a venue and not a jurisdictional provision, dismissal of the case was still in
order. The respondent court was correct in affirming the ruling of the trial court on
this matter, thus:
Santos' claim that NOA waived venue as a ground of its motion to dismiss is not
correct. True it is that NOA averred in its MOTION TO DISMISS that the ground
thereof is "the Court has no subject matter jurisdiction to entertain the Complaint"
which SANTOS considers as equivalent to "lack of jurisdiction over the subject
matter . . ." However, the gist of NOA's argument in its motion is that the
Philippines is not the proper place where SANTOS could file the action — meaning
that the venue of the action is improperly laid. Even assuming then that the
specified ground of the motion is erroneous, the fact is the proper ground of the
motion — improper venue — has been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of
non-waiver if there are special circumstances justifying this conclusion, as in the
petition at bar. As we observed in Javier vs. Intermediate Court of Appeals: 13
Legally, of course, the lack of proper venue was deemed waived by the petitioners
when they failed to invoke it in their original motion to dismiss. Even so, the
motivation of the private respondent should have been taken into account by both
the trial judge and the respondent court in arriving at their decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our
Court of Appeals, where it was held that Article 28(1) is a venue provision.
However, the private respondent avers that this was in effect reversed by the case
of Aranas v. United Airlines, 15 where the same court held that Article 28(1) is a
jurisdictional provision. Neither of these cases is binding on this Court, of course,
nor was either of them appealed to us. Nevertheless, we here express our own
preference for the later case of Aranas insofar as its pronouncements on
jurisdiction conform to the judgment we now make in this petition.
B. The petitioner claims that the lower court erred in not ruling that under Article
28(1) of the Warsaw Convention, this case was properly filed in the Philippines,
because Manila was the destination of the plaintiff.
The Petitioner contends that the facts of this case are analogous to those in
Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg purchased a round-trip
ticket from Montreal to Los Angeles and back to Montreal. The date and time of
departure were specified but not of the return flight. The plane crashed while on
route from Montreal to Los Angeles, killing Mrs. Silverberg. Her administratrix filed
an action for damages against Air Canada in the U.S. District Court of California.
The defendant moved to dismiss for lack of jurisdiction but the motion was denied
thus:
. . . It is evident that the contract entered into between Air Canada and Mrs.
Silverberg as evidenced by the ticket booklets and the Flight Coupon No. 1, was a
contract for Air Canada to carry Mrs. Silverberg to Los Angeles on a certain flight,
a certain time and a certain class, but that the time for her to return remained
completely in her power. Coupon No. 2 was only a continuing offer by Air Canada
to give her a ticket to return to Montreal between certain dates. . . .
The only conclusion that can be reached then, is that "the place of destination" as
used in the Warsaw Convention is considered by both the Canadian C.T.C. and
the United States C.A.B. to describe at least two "places of destination," viz., the
"place of destination" of a particular flight either an "outward destination" from the
"point of origin" or from the "outward point of destination" to any place in Canada.
Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of
the flight on which Mrs. Silverberg was killed, was Los Angeles according to the
ticket, which was the contract between the parties and the suit is properly filed in
this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling
because the date and time of his return flight to San Francisco were, as in the
Aanestad case, also left open. Consequently, Manila and not San Francisco
should be considered the petitioner's destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17
where the United States District Court (Eastern District of Pennsylvania) said:
. . . Although the authorities which addressed this precise issue are not extensive,
both the cases and the commentators are almost unanimous in concluding that the
"place of destination" referred to in the Warsaw Convention "in a trip consisting of
several parts . . . is the ultimate destination that is accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with the Court's analysis
in Aanestad; whether the return portion of the ticket is characterized as an option
or a contract, the carrier was legally bound to transport the passenger back to the
place of origin within the prescribed time and. the passenger for her part agreed to
pay the fare and, in fact, did pay the fare. Thus there was mutuality of obligation
and a binding contract of carriage, The fact that the passenger could forego her
rights under the contract does not make it any less a binding contract. Certainly, if
the parties did not contemplate the return leg of the journey, the passenger would
not have paid for it and the carrier would not have issued a round trip ticket.
We agree with the latter case. 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.
The petitioner submits that the Butz case could not have overruled the Aanestad
case because these decisions are from different jurisdictions. But that is neither
here nor there. In fact, neither of these cases is controlling on this Court. If we
have preferred the Butz case, it is because, exercising our own freedom of choice,
we have decided that it represents the better, and correct, interpretation of Article
28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed
stopping place." It is the "destination" and not an "agreed stopping place" that
controls for purposes of ascertaining jurisdiction under the Convention.
The contract is a single undivided operation, beginning with the place of departure
and ending with the ultimate destination. The use of the singular in this expression
indicates the understanding of the parties to the Convention that every contract of
carriage has one place of departure and one place of destination. An intermediate
place where the carriage may be broken is not regarded as a "place of
destination."
C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1)
of the Warsaw Convention, this case was properly filed in the Philippines because
the defendant has its domicile in the Philippines.
The petitioner argues that the Warsaw Convention was originally written in French
and that in interpreting its provisions, American courts have taken the broad view
that the French legal meaning must govern. 18 In French, he says, the "domicile"
of the carrier means every place where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air France
vs. Giliberto, 19 it was held:
The plaintiffs' first contention is that Air France is domiciled in the United States.
They say that the domicile of a corporation includes any country where the airline
carries on its business on "a regular and substantial basis," and that the United
States qualifies under such definition. The meaning of domicile cannot, however,
be so extended. The domicile of a corporation is customarily regarded as the place
where it is incorporated, and the courts have given the meaning to the term as it is
used in article 28(1) of the Convention. (See Smith v. Canadian Pacific Airways,
Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v. Societe Anonyme Belge d'
Exploitation de la Navigation Aerienne Sabena Belgian World Airlines (E.D. pa.
1962). 207 F. Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y.
1977), 427 F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as
a whole, is also incompatible with the plaintiffs' claim. The article, in stating that
places of business are among the bases of the jurisdiction, sets out two places
where an action for damages may be brought; the country where the carrier's
principal place of business is located, and the country in which it has a place of
business through which the particular contract in question was made, that is,
where the ticket was bought, Adopting the plaintiffs' theory would at a minimum
blur these carefully drawn distinctions by creating a third intermediate category. It
would obviously introduce uncertainty into litigation under the article because of
the necessity of having to determine, and without standards or criteria, whether the
amount of business done by a carrier in a particular country was "regular" and
"substantial." The plaintiff's request to adopt this basis of jurisdiction is in effect a
request to create a new jurisdictional standard for the Convention.
Furthermore, it was argued in another case 20 that:
. . . In arriving at an interpretation of a treaty whose sole official language is
French, are we bound to apply French law? . . . We think this question and the
underlying choice of law issue warrant some discussion
. . . We do not think this statement can be regarded as a conclusion that internal
French law is to be "applied" in the choice of law sense, to determine the meaning
and scope of the Convention's terms. Of course, French legal usage must be
considered in arriving at an accurate English translation of the French. But when
an accurate English translation is made and agreed upon, as here, the inquiry into
meaning does not then revert to a quest for a past or present French law to be
"applied" for revelation of the proper scope of the terms. It does not follow from the
fact that the treaty is written in French that in interpreting it, we are forever chained
to French law, either as it existed when the treaty was written or in its present state
of development. There is no suggestion in the treaty that French law was intended
to govern the meaning of Warsaw's terms, nor have we found any indication to this
effect in its legislative history or from our study of its application and interpretation
by other courts. Indeed, analysis of the cases indicates that the courts, in
interpreting and applying the Warsaw Convention, have, not considered
themselves bound to apply French law simply because the Convention is written in
French. . . .
We agree with these rulings.
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."
D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the
Warsaw Convention does not apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private
respondent acted arbitrarily and in bad faith, discriminated against the petitioner,
and committed a willful misconduct because it canceled his confirmed reservation
and gave his reserved seat to someone who had no better right to it. In short. the
private respondent committed a tort.
Such allegation, he submits, removes the present case from the coverage of the
Warsaw Convention. He argues that in at least two American cases, 21 it was held
that Article 28(1) of the Warsaw Convention does not apply if the action is based
on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where the
article in question was interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article
24 clearly excludes any relief not provided for in the Convention as modified by the
Montreal Agreement. It does not, however, limit the kind of cause of action on
which the relief may be founded; rather it provides that any action based on the
injuries specified in Article 17 "however founded," i.e., regardless of the type of
action on which relief is founded, can only be brought subject to the conditions and
limitations established by the Warsaw System. Presumably, the reason for the use
of the phrase "however founded," in two-fold: to accommodate all of the
multifarious bases on which a claim might be founded in different countries,
whether under code law or common law, whether under contract or tort, etc.; and
to include all bases on which a claim seeking relief for an injury might be founded
in any one country. In other words, if the injury occurs as described in Article 17,
any relief available is subject to the conditions and limitations established by the
Warsaw System, regardless of the particular cause of action which forms the basis
on which a plaintiff could seek
relief . . .
The private respondent correctly contends that the allegation of willful misconduct
resulting in a tort is insufficient to exclude the case from the comprehension of the
Warsaw Convention. The petitioner has apparently misconstrued the import of
Article 25(l) of the Convention, which reads as follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this
Convention which exclude or limit his liability. if the damage is caused by his willful
misconduct or by such default on his part as, in accordance with the law of the
court to which the case is submitted, is considered to be equivalent to willful
misconduct.
It is understood under this article that the court called upon to determine the
applicability of the limitation provision must first be vested with the appropriate
jurisdiction. Article 28(1) is the provision in the Convention which defines that
jurisdiction. Article 22 23 merely fixes the monetary ceiling for the liability of the
carrier in cases covered by the Convention. If the carrier is indeed guilty of willful
misconduct, it can avail itself of the limitations set forth in this article. But this can
be done only if the action has first been commenced properly under the rules on
jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code, which states:
Art. 24. In all contractual property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental
weakness, tender age or other handicap, the courts must be vigilant for his
protection.
Application of this article to the present case is misplaced. The above provision
assumes that the court is vested with jurisdiction to rule in favor of the
disadvantaged minor, As already explained, such jurisdiction is absent in the case
at bar.
CONCLUSION
A number of countries have signified their concern over the problem of citizens
being denied access to their own courts because of the restrictive provision of
Article 28(1) of the Warsaw Convention. Among these is the United States, which
has proposed an amendment that would enable the passenger to sue in his own
domicile if the carrier does business in that jurisdiction. The reason for this
proposal is explained thus:
In the event a US citizen temporarily residing abroad purchases a Rome to New
York to Rome ticket on a foreign air carrier which is generally subject to the
jurisdiction of the US, Article 28 would prevent that person from suing the carrier in
the US in a "Warsaw Case" even though such a suit could be brought in the
absence of the Convention.
The proposal was incorporated in the Guatemala Protocol amending the Warsaw
Convention, which was adopted at Guatemala City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required
minimum number of contracting parties. Pending such ratification, the petitioner
will still have to file his complaint only in any of the four places designated by
Article 28(1) of the Warsaw Convention.
The proposed amendment bolsters the ruling of this Court that a citizen does not
necessarily have the right to sue in his own courts simply because the defendant
airline has a place of business in his country.
The Court can only sympathize with the petitioner, who must prosecute his claims
in the United States rather than in his own country at least inconvenience. But we
are unable to grant him the relief he seeks because we are limited by the
provisions of the Warsaw Convention which continues to bind us. It may not be
amiss to observe at this point that the mere fact that he will have to litigate in the
American courts does not necessarily mean he will litigate in vain. The judicial
system of that country in known for its sense of fairness and, generally, its strict
adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so
ordered.