China Airlines vs Daniel Chiok Memorandum For Partial Appeal” from the decision of the POEA.
emorandum For Partial Appeal” from the decision of the POEA. AIBC also filed its
FACTS:
This is a consolidation of 3 cases of SPECIAL CIVIL ACTIONS in the Supreme Court
for Certiorari.
On June 6, 1984, Cadalin, Amul and Evangelista, in their own behalf and on behalf of
728 other OCWs instituted a class suit by filing an “Amended Complaint” with the
POEA for money claims arising from their recruitment by ASIA INTERNATIONAL
BUILDERS CORPORATION (AIBC) and employment by BROWN & ROOT
INTERNATIONAL, INC (BRI) which is a foreign corporation with headquarters in
Houston, Texas, and is engaged in construction; while AIBC is a domestic corporation
licensed as a service contractor to recruit, mobilize and deploy Filipino workers for
overseas employment on behalf of its foreign principals.
The amended complaint sought the payment of the unexpired portion of the
employment contracts, which was terminated prematurely, and secondarily, the
payment of the interest of the earnings of the Travel and Reserved Fund; interest on
all the unpaid benefits; area wage and salary differential pay; fringe benefits;
reimbursement of SSS and premium not remitted to the SSS; refund of withholding
tax not remitted to the BIR; penalties for committing prohibited practices; as well as
the suspension of the license of AIBC and the accreditation of BRII
On October 2, 1984, the POEA Administrator denied the “Motion to Strike Out of the
Records” filed by AIBC but required the claimants to correct the deficiencies in the
complaint pointed out.
AIB and BRII kept on filing Motion for Extension of Time to file their answer. The
POEA kept on granting such motions.
On November 14, 1984, claimants filed an opposition to the motions for extension of
time and asked that AIBC and BRII declared in default for failure to file their answers.
On December 27, 1984, the POEA Administrator issued an order directing AIBC and
BRII to file their answers within ten days from receipt of the order.
(at madami pang motions ang na-file, new complainants joined the case, ang daming
inavail na remedies ng both parties)
On June 19, 1987, AIBC finally submitted its answer to the complaint. At the same
hearing, the parties were given a period of 15 days from said date within which to
submit their respective position papers. On February 24, 1988, AIBC and BRII
submitted position paper. On October 27, 1988, AIBC and BRII filed a “Consolidated
Reply,” POEA Adminitartor rendered his decision which awarded the amount of $824,
652.44 in favor of only 324 complainants. Claimants submitted their “Appeal
MR and/or appeal in addition to the “Notice of Appeal” filed earlier.
NLRC promulgated its Resolution, modifying the decision of the POEA. The resolution
removed some of the benefits awarded in favor of the claimants. NLRC denied all the
MRs. Hence, these petitions filed by the claimants and by AlBC and BRII.
The case rooted from the Labor Law enacted by Bahrain where most of the
complainants were deployed. His Majesty Ise Bin Selman Al Kaifa, Amir of Bahrain,
issued his Amiri Decree No. 23 on June 16, 1176, otherwise known re the Labour
Law for the Private Sector. Some of the provision of Amiri Decree No. 23 that are
relevant to the claims of the complainants-appellants are as follows:
“Art. 79: x x x A worker shall receive payment for each extra hour equivalent to his
wage entitlement increased by a minimum of twenty-rive per centurn thereof for hours
worked during the day; and by a minimum off fifty per centurn thereof for hours
worked during the night which shall be deemed to being from seven o’clock in the
evening until seven o’clock in the morning .”
Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.
If employee worked, 150% of his normal wage shall be paid to him x x x.”
Art. 81; x x x When conditions of work require the worker to work on any official
holiday, he shall be paid an additional sum equivalent to 150% of his normal wage.”
Art. 84: Every worker who has completed one year’s continuous service with his
employer shall be entitled to Laos on full pay for a period of not less than 21 days for
each year increased to a period not less than 28 days after five continuous years of
service.”
A worker shall be entitled to such leave upon a quantum meruit in respect of the
proportion of his service in that year.”
Art. 107: A contract of employment made for a period of indefinite duration may be
terminated by either party thereto after giving the other party prior notice before such
termination, in writing, in respect of monthly paid workers and fifteen days’ notice in
respect of other workers. The party terminating a contract without the required notice
shall pay to the other party compensation equivalent to the amount of wages payable
to the worker for the period of such notice or the unexpired portion thereof.”
Art. Ill: x x x the employer concerned shall pay to such worker, upon termination of
employment, a leaving indemnity for the period of his employment calculated on the
basis of fifteen days’ wages for each year of the first three years of service and of one
month’s wages for each year of service thereafter. Such worker shall be entitled to
payment of leaving indemnity upon a quantum meruit in proportion to the period of his
service completed within a year.”
ISSUE:
1. WON the foreign law should govern or the contract of the parties.(WON the
complainants who have worked in Bahrain are entitled to the above-mentioned
benefits provided by Amiri Decree No. 23 of Bahrain).
2. WON the Bahrain Law should apply in the case. (Assuming it is applicable WON
complainants’ claim for the benefits provided therein have prescribed.)
3. Whether or not the instant cases qualify as; a class suit (siningit ko nalang)
(the rest of the issues in the full text of the case refer to Labor Law)
RULING:
1. NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence
governing the pleading and proof of a foreign law and admitted in evidence a simple
copy of the Bahrain’s Amiri Decree No. 23 of 1976 (Labour Law for the Private
Sector).
NLRC applied the Amiri Deere, No. 23 of 1976, which provides for greater benefits
than those stipulated in the overseas-employment contracts of the claimants. It was of
the belief that where the laws of the host country are more favorable and beneficial to
the workers, then the laws of the host country shall form part of the overseas
employment contract. It approved the observation of the POEA Administrator that in
labor proceedings, all doubts in the implementation of the provisions of the Labor
Code and its implementing regulations shall be resolved in favor of labor.
The overseas-employment contracts, which were prepared by AIBC and BRII
themselves, provided that the laws of the host country became applicable to said
contracts if they offer terms and conditions more favorable than those stipulated
therein. However there was a part of the employment contract which provides that the
compensation of the employee may be “adjusted downward so that the total
computation plus the non-waivable benefits shall be equivalent to the compensation”
therein agree,’ another part of the same provision categorically states “that total
remuneration and benefits do not fall below that of the host country regulation and
custom.”
Any ambiguity in the overseas-employment contracts should be interpreted against
AIBC and BRII, the parties that drafted it. Article 1377 of the Civil Code of the
Philippines provides:
‘The interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.”
Said rule of interpretation is applicable to contracts of adhesion where there is already
a prepared form containing the stipulations of the employment contract and the
employees merely “take it or leave it.” The presumption is that there was an
imposition by one party against the other and that the employees signed the contracts
out of necessity that reduced their bargaining power.
We read the overseas employment contracts in question as adopting the provisions of
the Amiri Decree No. 23 of 1976 as part and parcel thereof. The parties to a contract
may select the law by which it is to be governed. In such a case, the foreign law is
adopted as a “system” to regulate the relations of the parties, including questions of
their capacity to enter into the contract, the formalities to be observed by them,
matters of performance, and so forth. Instead of adopting the entire mass of the
foreign law, the parties may just agree that specific provisions of a foreign statute
shall be deemed incorporated into their contract “as a set of terms.” By such
reference to the provisions of the foreign law, the contract does not become a foreign
contract to be governed by the foreign law. The said law does not operate as a
statute but as a set of contractual terms deemed written in the contract.
A basic policy of contract is to protect the expectation of the parties. Such party
expectation is protected by giving effect to the parties’ own choice of the applicable
law. The choice of law must, however, bear some relationship the parties or their
transaction. There is no question that the contracts sought to be enforced by
claimants have a direct connection with the Bahrain law because the services were
rendered in that country.
2. NLRC ruled that the prescriptive period for the filing of the claims of the
complainants was 3 years, as provided in Article 291 of the Labor Code of the
Philippines, and not ten years as provided in Article 1144 of the Civil Code of the
Philippines nor one year as provided in the Amiri Decree No. 23 of 1976.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
“A claim arising out of a contract of employment shall not actionable after the lapse of
one year from the date of the expiry of the Contract”.
As a general rule, a foreign procedural law will not be applied in the forum (local
court), Procedural matters, such as service of process, joinder of actions, period and
requisites for appeal, and so forth, are governed by the laws of the forum. This is true
even if the action is based upon a foreign substantive law.
A law on prescription of actions is sui generis in Conflict of Laws in the sense that it
may be viewed either as procedural or substantive, depending on the characterization
given such a law. In Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir.
[1955]), where the issue was the applicability of the Panama Labor Code in a case
filed in the State of New York for claims arising from said Code, the claims would
have prescribed under the Panamanian Law but not under the Statute of Limitations
of New York. The U.S. Circuit Court of Appeals held that the Panamanian Law was
procedural as it was not “specifically intended to be substantive,” hence, the
prescriptive period provided in the law of the forum should apply. The Court observed:
“. . . we are dealing with a statute of limitations of a foreign country, and it is not clear
on the face of the statute that its purpose was to limit the enforceability, outside as
well as within the foreign country concerned, of the substantive rights to which the
statute pertains. We think that as a yardstick for determining whether that was the
purpose, this test is the most satisfactory one.
The Court further noted: “Applying that test here it appears to us that the libellant is
entitled to succeed, for the respondents have failed to satisfy us that the Panamanian
period of limitation in question was specifically aimed against the particular rights
which the libellant seeks to enforce. The Panama Labor Code is a statute having
broad objectives.” The American court applied the statute of limitations of New York,
instead of the Panamanian law, after finding that there was no showing that the
Panamanian law on prescription was intended to be substantive. Being considered
merely a procedural law even in Panama, it has to give way to the law of the forum
(local Court) on prescription of actions.
However the characterization of a statute into a procedural or substantive law
becomes irrelevant when the country of the forum (local Court) has a “borrowing
statute.” Said statute has the practical effect of treating the foreign statute of limitation
as one of substance. A “borrowing statute” directs the state of the forum (local Court)
to apply the foreign statute of limitations to the pending claims based on a foreign law.
While there are several kinds of “borrowing statutes,” one form provides that an action
barred by the laws of the place where it accrued will not be enforced in the forum
even though the local statute was not run against it.
Section 48 of Code of Civil Procedure is of this kind. It provides: “If by the laws of the
state or country where the cause of action arose, the action is barred, it is also barred
in the Philippine Islands.”
Section 48 has not been repealed or amended by the Civil Code of the Philippines. In
the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio
vigore insofar as it ordains the application in this jurisdiction of Section 156 of the
Amiri Decree No. 23 of 1976.
The courts of the forum (local Court) will not enforce any foreign claim obnoxious to
the forum’s public policy. To enforce the one-year prescriptive period of the Amiri
Decree No. 23 of 1976 as regards the claims in question would contravene the public
policy on the protection to labor.
In the Declaration of Principles and State Policies, the 1987 Constitution emphasized
that:“The state shall promote social justice in all phases of national development”
(Sec. 10).
‘The state affirms labor as a primary social economic force. It shall protect the rights
of workers and promote their welfare” (Sec. 18).
In Article XIII on Social Justice and Human Rights, the 1987 Constitution provides:
“Sec. 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment
opportunities for all.”
Thus, the applicable law on prescription is the Philippine law.
The next question is whether the prescriptive period governing the filing of the claims
is 3 years, as provided by the Labor Code or 10 years, as provided by the Civil Code
of the Philippines.
Article 1144 of the Civil Code of the Philippines provides:
“The following actions must be brought within ten years from the time the right of
action accross:
(1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a
judgment”
In this case, the claim for pay differentials is primarily anchored on the written
contracts between the litigants, the ten-year prescriptive period provided by Art.
1144(l) of the New Civil Code should govern.
3. NO. A class suit is proper where the subject matter of the controversy is one of
common or general interest to many and the parties are so numerous that it is
impracticable to bring them all before the court. When all the claims are for benefits
granted under the Bahrain law many of the claimants worked outside Bahrain. Some
of the claimants were deployed in Indonesia under different terms and condition of
employment.
Inasmuch as the First requirement of a class suit is not present (common or general
interest based on the Amiri Decree of the State of Bahrain), it is only logical that only
those who worked in Bahrain shall be entitled to rile their claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature of the claims is
the same (for employee’s benefits), there is no common question of law or fact. While
some claims are based on the Amiri Law of Bahrain, many of the claimants never
worked in that country, but were deployed elsewhere. Thus, each claimant is
interested only in his own demand and not in the claims of the other employees of
defendants. A claimant has no concern in protecting the interests of the other
claimants as shown by the fact, that hundreds of them have abandoned their co-
claimants and have entered into separate compromise settlements of their respective
claims. The claimants who worked in Bahrain can not be allowed to sue in a class suit
in a judicial proceeding.
WHEREFORE, all the three petitioners are DISMISSED.
ISSUE
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 v. 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.
RULING
The Petition is not meritorious.
First Issue:chanrob1es virtual 1aw library
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  instead, is that the Aer Lingus, through its manager there, refused to transport the
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:jgc:chanrobles.com.ph
"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,
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  Article 1, Section 3 of the Warsaw Convention states:jgc:chanrobles.com.ph
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:jgc:chanrobles.com.ph
"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  operation."cralaw virtua1aw library
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:chanrob1es virtual 1aw library
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 Court 20 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).
"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:jgc:chanrobles.com.ph
"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
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.
". . . 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
and 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."25cralaw:red
Likewise, as the principal in the contract of carriage, the petitioner in British Airways v.
Court of Appeals 26 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.
Cathay Pacific Airways vs CA
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.
Xxx
Nature: 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.
Facts: On 19 October 1975, respondent Tomas L. Alcantara was a first class
passenger of petitioner Cathay Pacific Airways from Manila to Hongkong and onward
from Hongkong to Jakarta. The purpose of his trip was to attend the following day,
October 20, 1975, a conference with the Director General of Trade of Indonesia. 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.
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. The
respondent, as a result of the incident had to seek postponement of his pre-arranged
conference.
When his luggage finally reached Jakarta more than twenty four hours later, 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.
Respondent filed a case for damages in the CFI of Lanao del Norte which ruled in his
favour.
Both parties appealed to the Court of Appeals. Court of Appeals rendered its decision
affirming the decision of the CFI but by modifying its awards by increasing the
damages.
Issue: Whether or not the Court of Appeals erred in not applying the Warsaw
Convention to limit the liability of the respondent airline.
Ruling: No.
xxx… 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. 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, his 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.
Alitalia vs IAC (Dec. 1990)
Facts:
Dr. Felipa Pablo, an associate professor in the University of the Philippines 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 in Italy in view of her
specialized knowledge in “foreign substances in food and the agriculture
environment”. She would be the second speaker on the first day of the meeting. Dr.
Pablo booked passage on petitioner Alitalia. She arrived in Milan on the day before
the meeting, but was told that her luggage was delayed and was in a succeeding
flight from Rome to Milan. The luggage included her materials for the presentation.
The succeeding flights did not carry her luggage. Desperate, she went to Rome to try
to locate the luggage herself, but to no avail. She returned to Manila without attending
the meeting. She demanded reparation for the damages. She rejected Alitalia’s offer
of free airline tickets and commenced an action for damages. As it turned out, the
luggage was actually forwarded to Ispra, but only a day after the scheduled
appearance. It was returned to her after 11 months. The trial court ruled in favor of Dr.
Pablo, and this was affirmed by the Court of Appeals.
Issues:
(1) Whether the Warsaw Convention should be applied to limit Alitalia’s liability
(2) Whether Dr. Pablo is entitled to nominal damages
Held:
(1) Under the Warsaw Convention, an air carrier is made liable for damages for:
a. The death, wounding or other bodily injury of a passenger if the accident
causing it took place on board the aircraft or I the course of its operations of
embarking or disembarking;
b. 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
c. Delay in the transportation by air of passengers, luggage or goods.
The 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 is considered to be equivalent to wilful misconduct. 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. 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.
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 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. 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.
(2) She is not, of course, entitled to be compensated for loss or damage to her
luggage. 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 that for any loss suffered and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at PhP 40,000.00.
The Court also agrees that respondent Court of Appeals correctly awarded attorney’s
fees to Dr. Pablo and the amount of PhP 5,000.00 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 or where the court deems it just and
equitable.
FIRST DIVISION
[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. 6  FIRST DIVISION
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.chanrobles lawlibrary : rednad
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.chanrobles.com:cralaw:red
WHEREFORE, the appealed decision of the respondent court is AFFIRMED in toto,
with costs against the petitioner.
SO ORDERED.
Teehankee (C.J.), Narvasa and Paras, JJ., concur.
Gancayco, J., is on leave.
[G.R. No. 78656. August 30, 1988.]
TRANS WORLD AIRLINES, Petitioner, v. COURT OF APPEALS and ROGELIO A.
VINLUAN, Respondents.
Guerrero & Torres Law Offices for Petitioner.
Angara, Abello, Concepcion, Regala & Cruz for Private Respondent.
The Solicitor General for public Respondent.
SYLLABUS
1. CIVIL LAW; DAMAGES; MORAL AND EXEMPLARY DAMAGES; BASIS FOR THE
AWARD THEREOF IN THE CASE AT BAR. — 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. 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
embarrassment that he suffered and to serve as an example to discourage the repetition of
similar oppressive and discriminatory acts.
2. ID.; ID.; MORAL DAMAGES; PRESENCE OF BAD FAITH JUSTIFIES AWARD
THEREOF. — Petitioner sacrificed the comfort of its first class passengers including
private respondent Vinluan for the sake of economy. 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. 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.
DECISION
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 reconfirmed 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 Cauns 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: jgc:chanroble s.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant holding the latter liable to the former 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 complaint was filed until fully paid.
Correspondingly, defendant’s counterclaim is dismissed.
Costs against the defendant.
SO ORDERED." cralaw virtua1aw library
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:
jgc:chanroble s.com.ph
"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 attorney’s fees to P50,000.00 without interest, the rest of
the decision is affirmed. Costs against Appellant.
SO ORDERED." cralaw virtua1aw library
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.
cralaw virtua1aw library
On the other hand, private respondent asserts that he did not hear such announcement at
the terminal and that he was among the early passengers to 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.
The petitioner contends that the respondent Court of Appeals committed a grave abuse of
discretion in finding that petitioner acted maliciously and discriminatorily, and in granting
excessive moral and exemplary damages and attorney’s fees.
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 Cauns 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 economy. 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 embarrassment that he suffered and to serve as an example to discourage
the repetition of similar oppressive and discriminatory acts.
WHEREFORE, with the above modification reducing the moral and exemplary damages as
above-stated, the decision subject of the petition for review is AFFIRMED in all other
respects, without pronouncement as to costs in this instance.
SO ORDERED.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.
Cathay Pacific vs Vasquez (2003)
Spouses V are frequent flyers of Cathay Pacific (“Cathay”). They, together with their
maid and 2 friends went to Hong Kong. On their flight back to Manila, they and their 2
friends were booked on the Business Class. But prior to departure, Sps. V were
informed that they would be upgraded to First Class. Sps. V 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; plus, they were going to discuss business matters
during the flight. They asked that other passengers be instead transferred to First
Class.
However, Cathay personnel insisted saying the Business Class was already
overbooked and if Sps. V continued to refuse, they would not be allowed to take the
flight. Sps. V had to agree. But upon their arrival, Sps. V demanded from Cathay that
they be indemnified for the “humiliation and embarrassment” regarding the upgrade
incident.
In upholding the spouses’ claim of breach of contract of carriage, the Supreme Court
held that priority upgrading is a privilege which, like all privileges, can be waived. So
when the spouses declined to accept the upgrade and Cathay still insisted on the
same, Cathay breached its contract of carriage. However, the Court found that
although Cathay may have exercised poor judgment, there was no evidence of bad
faith nor fraud, neither in Cathay’s insistence on the upgrade nor in the act of
overbooking (as the latter did not exceed 10% of seating capacity pursuant to law).
Thus, the Court denied the claim for moral and exemplary damages both of which
required the existence of bad faith or fraud. Attorney’s fees in favor of the spouses
were also denied. But the Court granted nominal damages at P5,000.00 pursuant to
Article 2221 of the Civil Code which provides: “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”.[6] At P5,000.00, the Court obviously thought the
upgrade was not much of a damage.
Northwest Orient Airlines v. CA 241 SCRA 192 [1995]
FACTS
[In 1974, an International Passenger Sales Agency Agreement was entered into by plaintiff
Northwest Orient Airlines (Northwest) and defendant C.F. Sharp & Co. (Sharp), through its
Japan branch, whereby Northwest authorized Sharp to sell the former's airlines tickets.
Sharp failed to remit the proceeds of the ticket sales it made on behalf of Northwest under the
agreement which led the latter to sue in Tokyo for collection of the unremitted amount, with claim
for damages.
The Tokyo District Court of Japan issued a writ of summons against Sharp at its office in
Yokohama, Japan but the bailiff failed twice to serve the writs. Finally, the Tokyo District Court
decided to have the writs of summons served at Sharp's head office in Manila. Sharp accepted
the writs but despite such receipt, it failed to appear at the hearings. The District Court
proceeded to hear the complaint and rendered judgment ordering Sharp to pay Northwest the
sum of 83,158,195 Yen plus damages. Sharp failed to appeal and the judgment became final
and executory.
Northwest failed to execute the decision in Japan, hence, it filed a suit for enforcement of the
judgment before the Regional Trial Court of Manila. Sharp filed its answer averring that the
judgment of the Japanese court is null and void and unenforceable in this jurisdiction having
been rendered without due and proper notice to Sharp.
The case for enforcement of judgment was tried on the merits. Sharp filed a Motion for
Judgment on a Demurrer to Evidence. The trial court granted the demurrer motion, holding that
the foreign judgment in the Japanese court sought to be enforced is null and void for want of
jurisdiction over the person of the defendant. Northwest appealed but the Court of Appeals
sustained the trial court, holding that the process of the court has no extraterritorial effect and no
jurisdiction was acquired over the person of the defendant by serving him beyond the
boundaries of the state. Hence, this appeal by Northwest.
RULING
"A foreign judgment is presumed to be valid and binding in the country from which it comes, until
the contrary is shown. It is also proper to presume the regularity of the proceedings and the
giving of due notice therein.
Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a
tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence
of a right as between the parties and their successors-in-interest by a subsequent title. The
judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court,
whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful
exercise of jurisdiction and has regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden of overcoming the
presumption of its validity. Being the party challenging the judgment rendered by the Japanese
court, SHARP had the duty to demonstrate the invalidity of such judgment. In an attempt to
discharge that burden, it contends that the extraterritorial service of summons effected as its
home office in the Philippines was not only ineffectual but also void, and the Japanese Court did
not, therefore, acquire jurisdiction over it.
It is settled that matters of remedy and procedure such as those relating to the service of
process upon a defendant are governed by the lex fori or the internal law of the forum. In this
case, it is the procedural law of Japan where the judgment was rendered that determines the
validity of the extraterritorial service'of process on SHARP. As to what this law is is a question of
fact, not of law. It may not be taken judicial notice of and must be pleaded and proved like any
other fact. Sections 24 and 25, Rule 132 of the Rules of Court provide that it may be evidenced
by an official publication or by a duly attested or authenticated copy thereof. It was then
incumbent upon SHARP to present evidence as to what that Japanese procedural law is and to
show taat under it, the assailed extraterritorial service is invalid. It did not. Accordingly, the
presumption of validity and regularity of the service of summons and the decision thereafter
rendered by the Japanese court must stand.
Alternatively, in the light of the absence of proof regarding Japanese law, the presumption of
identity or similarity or the so-called processual presumpcion may be invoked. Applying it, the
Japanese law on the matter is presumed to be similar with the Philippine law on service of
summons on a private foreign corporation doing business ir, the Philippines. Section 14 of the
Rules of Court provides that if the defendant is a foreign corporation doing business in the
Philippines, service may be made: 1) on its resident agent designated in accordance with law for
that purpose, or 2) if there is no such resident agent, on the government official designated by
law to that effect, or 3) on any of its officers or agents within the Philippines.
If the foreign corporation has designated an agent to receive summons, the designation is
exclusive, and service of summons is without force and gives the court no jurisdiction unless
made upon him.
Where the corporation has no such great agent, service shall be made on the government
official designated by law, to wit: (a) the Insurance Commissioner, in the case of a foreign
insurance company; (b) the Superintendent of Banks, in the case of a foreign banking
corporation; and (c) the Securities and Exchange Commission, in the case of other foreign
corporations duly licensed to do business in the Philippines. Whenever service of process is so
made, the government office or official served shall transmit by mail a copy of the summons or
other legal process to the corporation at its home or principal office. The sending of such copy is
a necessary part of the service.
Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to
receive court processes in Japan. This silence could only mean, or at least create an
impression, that it had none. Hence, service on the designated government official or any of its
officers or agents in Japan could be availed of.
As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons
for SHARP be served at its head office in the Philippines after the two attempts of service had
failed. The Tokyo District Court requested the Supreme Court of Japan to cause the delivery of
the summons and other legal documents to the Philippines. Acting on that request, the Supreme
Court of Japan sent the summons together with the other legal documents to the Ministry of
Foreign Affairs of Japan, which in turn, forwarded the same to the Japanese Embassy in Manila.
Thereafter, the court processes were delivered to the Ministry (now Department) of Foreign
Affairs of the Philippines then to the Executive Judge of the Court of First Instance (now
Regional Trial Court) of Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve
the same on SHARP at its principal office in Manila. This service is equivalent to service on the
proper government official under Section 14, Rule 14 of the Rules of Court, in relation to Section
128 of the Corporation Code. Hence, SHARP's contention that such manner of service is not
valid under Philippine law holds no water.
Inasmuch as SHARP was admittedly doing business in Japan through its four registered
branches at the time the collection suit against it was filed, then in the light of the processual
presumption, SHARP may be deemed a resident of JAPAN, and, as such, was amenable to the
jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful
methods of serving process.
Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not
only under the processual presumption but also because of the presumption of regularity of
performance of official duty.