Air Transportation (Warsaw Convention)
domicile nor was this its principal place of business. Neither was the petitioner's
[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.
DECISION
CRUZ, J p:
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
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 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. here 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: cdrep
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 a 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 damage "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 state 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:
Article 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 finding 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 en 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 Log Angeles on a certain flight, a
certain tine 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 he 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 Conventio'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 not
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," is 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 . . .
 
xxx xxx xxx
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(1) of the Convention, which reads as
follows:
Article 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 required minimum number of contracting parties. Pending such ratification, the
such default on his part as, in accordance which the law of the petitioner will still have to file his complaint only in any of the four places
court to which the case is submitted, is considered to be designated by Article 28(1) of the Warsaw Convention.
equivalent to willful misconduct.
The proposed amendment bolsters the ruling of this Court that a citizen
It is understood under this article that the court called upon to does not necessarily have the right to sue in his own courts simply because the
determine the applicability of the limitation provision must first be vested with defendant airline has a place of business in his country. LibLex
the appropriate jurisdiction. Article 28(1) is the provision in the Convention The Court can only sympathize with the petitioner, who must prosecute
which defines that jurisdiction. Article 22 23 merely fixes the monetary ceiling his claims in the United States rather than in his own country at less
for the liability of the carrier in cases covered by the Convention. If the carrier is inconvenience. But we are unable to grant him the relief he seeks because we
indeed guilty of willful misconduct, it can avail itself of the limitations set forth are limited by the provisions of the Warsaw Convention which continues to bind
in this article. But this can be done only if the action has first been commenced us. It may not be amiss to observe at this point that the mere fact that he will
properly under the rules on jurisdiction set forth in Article 28 (1). have to litigate in the American courts does not necessarily mean he will litigate
III. in vain. The judicial system of that country is known for its sense of fairness
and, generally, its strict adherence to the rule of law.
THE ISSUE OF PROTECTION TO MINORS
WHEREFORE, the petition is DENIED, with costs against the
The petitioner calls our attention to Article 24 of the Civil Code, which petitioner. It is so ordered.
states:
||| (Santos III v. Northwest Orient Airlines, G.R. No. 101538, [June 23, 1992], 285
Art. 24. In all contractual property or other relations, when one PHIL 734-758)
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

[G.R. No. 60501. March 5, 1993.]
CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF
APPEALS and TOMAS L. ALCANTARA, respondents.
Siguion-Reyna, Montecillo & Ongsiako and Tomacruz, Manguiat & Associates for
petitioner.
Tanjuatco, Oreta, Tanjuatco, Berenger & Corpus for private respondent.
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. (Cathay Pacific Airways, Ltd. v. Court of Appeals, G.R. No. 60501,
[March 5, 1993])
[G.R. No. 119641. May 17, 1996.]
PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS,
DR. JOSEFINO MIRANDA and LUISA MIRANDA, respondents.
Siguion Reyna Montecillo & Ongsiako for petitioner.
Noel P. Catre for private respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF
AIR CARRIAGE; A RELATION ATTENDED WITH PUBLIC DUTY;
DISCOURTEOUS CONDUCT TOWARDS A PASSENGER GIVES RISE FOR
AN ACTION FOR DAMAGES. — The Court has time and again ruled, and it
cannot be over-emphasized, that a contract of air carriage generates a relation
attended with a public duty and any discourteous conduct on the part of a carrier's
employee toward a passenger gives the latter an action for damages and, more so,
where there is bad faith. While it may be true that there was no direct evidence on
record of blatant rudeness on the part of PAL employees towards the Mirandas, the
fact that private respondents were practically compelled to haggle for
accommodations, a situation unbefitting persons of their stature, is rather demeaning
and it partakes of discourtesy magnified by PAL's condescending attitude. Moreover,
it cannot be denied that the PAL employees herein concerned were definitely less
than candid, to put it mildly, when they withheld information from private
respondents that they could actually be accommodated in a hotel of their choice.
2. REMEDIAL LAW; EVIDENCE; FINDINGS OF THE TRIAL AND
APPELLATE COURT ON THE EXISTENCE OF BAD FAITH ON THE PART OF
THE CARRIER, GENERALLY NOT DISTURBED ON APPEAL. — It is settled
that bad faith must be duly proved and not merely presumed. The existence of bad
faith, being a factual question, and the Supreme Court not being a trier of facts, the
findings thereon of the trial court as well as of the Court of Appeals shall not be
disturbed on appeal and are entitled to great weight and respect. Said findings are
final and conclusive upon the Supreme Court except, inter alia, where the findings of
the Court of Appeals and the trial court are contrary to each other.
3. ID.; ID.; ID.; CASE AT BAR. — It is evident that the issues raised in
this petition are the correctness of the factual findings of the Court of Appeals of bad
faith on the part of petitioner and the award of damages against it. This Court has
consistently held that the findings of the Court of Appeals and the other lower courts
are as a rule binding upon it, subject to certain exceptions created by case law. As
nothing in the record indicates any of such exceptions, the factual conclusions of the
appellate court must be affirmed.
4. CIVIL LAW; DAMAGES; MORAL DAMAGES; RECOVERABLE IN
A BREACH OF CONTRACT ATTENDED WITH FRAUD OR BAD FAITH;
INATTENTION TO AND LACK OF CARE FOR INTERESTS OF PASSENGERS
AMOUNTS TO BAD FAITH. — It is now firmly settled that moral damages are
recoverable in suits predicated on breach of a contract of carriage where it is proved
that the carrier was guilty of fraud or bad faith. Inattention to and lack of care for the
interests of its passengers who are entitled to its utmost consideration, particularly as
to their convenience, amount to bad faith which entitles the passenger to an award of
moral damages. What the law considers as bad faith which may furnish the ground
for an award of moral damages would be bad faith in securing the contract and in the
execution thereof, as well as in the enforcement of its terms, or any other kind of
deceit. Such unprofessional and prescribed conduct is attributable to petitioner airline
in the case at bar and the adverse doctrinal rule is accordingly applicable to it.
5. ID.; ID.; ID.; AWARDED TO COMPENSATE PLAINTIFF'S
INJURIES. — It must, of course, be borne in mind that moral damages are not
awarded to penalize the defendant but to compensate the plaintiff for the injuries he
may have suffered.
6. ID.; ID.; EXEMPLARY DAMAGES; AWARDED WHERE
DEFENDANT ACTED IN WANTON, FRAUDULENT AND OPPRESSIVE
MANNER. — In a contractual or quasi-contractual relationship, exemplary
damages, on the other hand, may be awarded only if the defendant had acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.
7. ID.; ID.; ATTORNEY'S FEES; AWARDED WHERE THERE IS A
FINDING OF BAD FAITH; CASE AT BAR. — Attorney's fees in the concept of
damages may be awarded where there is a finding of bad faith. The evidence on
record amply sustains, and we correspondingly find, that the awards assessed against
petitioner on the aforestated items of damages are justified and reasonable.
8. ID.; OBLIGATIONS AND CONTRACTS; CONTRACT OF AIR
CARRIAGE; LIABILITY OF CARRIER NOT LIMITED BY THE PROVISIONS
OF WARSAW CONVENTION. — 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 in the enumerated cases and under certain
limitations. However, it must not be construed to preclude the operation of the Civil
Code and 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 willful misconduct on the part of the carrier's employees is
found or established. (Cathay Pacific Airways, Ltd. vs. Court of Appeals, et
al., G.R. No. 60501, March 5, 1993)
DECISION
REGALADO, J p:
In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) assails
the decision of respondent Court of Appeals in CA-G.R. CV No. 29147 1 which
affirmed the judgment of the trial court finding herein petitioner liable as follows:
"Wherefore, premises considered, judgment is hereby
rendered ordering the defendant, Philippine Airlines or PAL, to
pay to the plaintiffs, Dr. Josefino Miranda and Luisa Miranda,
the sum of P100,000.00 as moral damages; P30,000.00 as
exemplary or corrective damages; P10,000.00 as attorney's fees;
and the costs." 2
The factual antecedents of the present petition reveal that sometime in May,
1988, Dr. Josefino Miranda and his wife, Luisa, who were residents of Surigao City,
went to the United States of America on a regular flight of Philippine Airlines, Inc.
(PAL). On June 19, 1988, after a stay of over a month there, they obtained confirmed
bookings from PAL's San Francisco Office for PAL Flight PR 101 from San
Francisco to Manila via Honolulu on June 21, 1988; PAL Flight PR 851 from Manila
to Cebu on June 24, 1988; and PAL Flight PR 905 from Cebu to Surigao also on
June 24, 1988.
Accordingly, on June 21, 1988, private respondents boarded PAL Flight PR
101 in San Francisco with five (5) pieces of baggage. After a stopover at Honolulu,
and upon arrival in Manila on June 23, 1988, they were told by the PAL personnel
that their baggage consisting of two balikbayan boxes, two pieces of luggage and
one fishing rod case were off-loaded at Honolulu, Hawaii due to weight limitations.
Consequently, private respondents missed their connecting flight from Manila to
Cebu City, as originally scheduled, since they had to wait for their baggage which
arrived the following day, June 24, 1988, after their pre-scheduled connecting flight
had left. They consequently also missed their other scheduled connecting flight from
Cebu City to Surigao City.
On June 25, 1988, they departed for Cebu City and therefrom private
respondents had to transfer to PAL Flight 471 for Surigao City. On the way to
Surigao City, the pilot announced that they had to return to Mactan Airport due
to some mechanical problem. While at Mactan Airport, the passengers were
provided by PAL with lunch and were booked for the afternoon flight to Surigao
City. However, said flight was also canceled.
Since there were no more flights for Surigao City that day, private
respondents asked to be billeted at the Cebu Plaza Hotel where they usually stay
whenever they happen to be in Cebu City. They were, however, told by the PAL
employees that they could not be accommodated at said hotel supposedly
because it was fully booked. Contrarily, when Dr. Miranda called the hotel, he
was informed that he and his wife could be accommodated there. Although
reluctant at first, PAL eventually agreed to private respondents' overnight stay at
said hotel. Oscar Jereza, PAL duty manager, approved the corresponding hotel
authority with standard meals. It was only after private respondents' insistence
that their meals be ordered a la carte that they were allowed to do so by PAL
provided that they sign for their orders.
Inasmuch as the shuttle bus had already left by the time private
respondents were ready to go to the hotel, PAL offered them P150.00 to include
the fare for the return trip to the airport. Dr. Miranda asked for P150.00 more as
he and his wife, along with all of their baggage, could not be accommodated in
just one taxi, aside from the need for tipping money for hotel boys. Upon refusal
of this simple request, Dr. Miranda then declared that he would forego the
amenities offered by PAL. Thus, the voucher for P150.00 and the authority for
the hotel accommodations prepared by PAL were voided due to private
respondents' decision not to avail themselves thereof.
To aggravate the muddled situation, when private respondents tried to
retrieve their baggage, they were told this time that the same were loaded on
another earlier PAL flight to Surigao City. Thus, private respondents proceeded
to the hotel sans their baggage and of which they were deprived for the
remainder of their trip. Private respondents were finally able to leave on board
the first PAL flight to Surigao City only on June 26, 1988. Thereafter, they
instituted an action for damages which, after trial as well as on appeal, was
decided in their favor.
Petitioner PAL has come to us via the instant petition for review on
certiorari, wherein it challenges the affirmatory decision of respondent Court of
Appeals 3 (1) for applying Articles 2220, 2232 and 2208 of the Civil Code when
it sustained the award of the court a quo for moral and exemplary damages and
attorney's fees despite absence of bad faith on its part; and (2) for not applying
the express provisions of the contract of carriage and pertinent provisions of the
Warsaw Convention limiting its liability to US$20.00 per kilo of baggage.
1. Anent the first issue, petitioner argues that there was no bad faith on its
part for while there was admittedly a delay in fulfilling its obligation under the
contract of carriage with respect to the transport of passengers and the delivery of
their baggage, such delay was justified by the paramount consideration of ensuring
the safety of its passengers. It likewise maintains that its employees treated private
respondents fairly and with courtesy to the extent of acceding to most of their
demands in order to mitigate the inconvenience occasioned by the measures
undertaken by the airline to ensure passenger safety. 4
It reiterated its position that the off-loading of private respondents' baggage
was due to "weight limitations," as lengthily explained by petitioner from an
aeronautically technical viewpoint, 5 taking into consideration such variable factors
as flight distance, weather, air resistance, runway condition and fuel requirement.
Given the variable weather conditions, it claimed that the weight limitation for each
flight can only be ascertained shortly before take-off. While admittedly there would
be a resulting inconvenience in the accommodations of the passengers and the
handling of their cargo, the same is outweighed by the paramount concern for the
safety of the flight.
 Petitioner moreover impugns the Court of Appeal's allegedly improper
reliance on the inaccurate interpretation of the testimony of PAL's baggage
service representative, Edgar Mondejar, * that private respondents' baggage
were off-loaded to give preference to baggage and/or cargo originating from
Honolulu. PAL argues that Mondejar's knowledge of what transpired in
Honolulu was merely based on the telex report forwarded to PAL's Manila
station stating that the off-loading was due to weight limitations. 6
Petitioner enumerates the following incidents as indicative of its good
faith in dealing with private respondents: (1) The cancellation of the flight to
Surigao City due to mechanical/engine trouble was to ensure the safety of
passengers and cargo; (2) PAL offered to shoulder private respondents' preferred
accommodations, meals and transportation while in Cebu City with more than
the usual amenities given in cases of flight disruption, and gave them priority in
the following day's flight to Surigao City; (3) PAL employees did not act rudely
towards private respondents and its managerial personnel even gave them
special attention; (4) It was reasonable for PAL to limit the transportation
expense to P150.00, considering that the fare between the airport and the hotel
was only P75.00, and they would be picked up by the shuttle bus from the hotel
to the airport, while the request for money for tips could not be justified; and (5)
The inadvertent loading of private respondents' baggage on the replacement
flight to Surigao City was at most simple and excusable negligence due to the
numerous flight disruptions and large number of baggages on that day.
Petitioner strenuously, and understandably, insists that its employees
did not lie to private respondents regarding the want of accommodations at the
latter's hotel of preference. The only reason why Cebu Plaza Hotel was not
initially offered to them by PAL was because of the earlier advice of the hotel
personnel that not all the stranded PAL passengers could be accommodated
therein. It claimed that it was in accordance with the airline's policy of housing
all affected passengers in one location for easy communication and
transportation, which accommodations in this instance could be provided by
Magellan Hotel. However, upon insistence of the Mirandas on their preference
for Cebu Plaza Hotel, Jeremias Tumulak, PAL's passenger relations officer, told
them that they could use the office phone and that if they could arrange for such
accommodation PAL would shoulder the expenses. This concession, so
petitioner avers, negates any malicious intent on its part.
Crucial to the determination of the propriety of the award of damages
in this case is the lower court's findings on the matter of bad faith, which
deserves to be quoted at length:
"These claims were reasonable and appeared to be
supported by the evidence. Thus it cannot be denied that
plaintiffs had to undergo some personal inconveniences in
Manila for lack of their baggage. It is also highly probable that
plaintiffs' scheduled return to Surigao City was upset because of
their having to wait for one day for their missing things.
Consequently, it was quite evident that the off-loading of
plaintiffs' baggage in Honolulu was the proximate cause of
plaintiffs' subsequent inconveniences for which they claimed to
have suffered social humiliation, wounded feelings, frustration
and mental anguish.
xxx xxx xxx
"In the present case there was a breach of contract
committed in bad faith by the defendant airlines. As previously
noted, plaintiffs had a confirmed booking on PAL Flight PR 101
from San Francisco to Manila. Therefore plaintiffs were entitled
to an assured passage not only for themselves but for their
baggage as well. They had a legal right to rely on this.
"The evidence showed that plaintiffs' baggage were
properly loaded and stowed in the plane when it left San
Francisco for Honolulu. The off-loading or bumping off by
defendant airlines of plaintiffs' baggage to give way to other
passengers or cargo was an arbitrary and oppressive act which
clearly amounted to a breach of contract committed in bad faith
and with malice. In the aforecited case, the Supreme Court
defined bad faith as a breach of a known duty through some
motive of interest or ill will. Self-enrichment or fraternal
interest, and not personal ill will, may have been the motive, but
it is malice nevertheless (infra).
"As correctly pointed out in the Memorandum for
Plaintiffs dated June 18, 1990 (pp. 4-5), the following excerpt
from the testimony of Edgar Mondejar clearly demonstrated the
act of discrimination perpetrated by defendant on the herein
plaintiffs (TSN, Edgar Mondejar, Feb. 28, 1990, pp. 26-28),
thus:
Q: Before a plane departs, your office will see to it the
plane loads the exact weight limitation insofar
as the cargoes (sic) and passengers are
concerned, is that correct?
A: Yes.
Q: And so with the PR 101 flight starting mainland
USA, it complied with the weight limitation,
passengers and baggages (sic) limitation, is
that correct?
A: Yes.
Q: In other words the trip from the mainland USA
started in Hawaii to off-load cargoes (sic), you
complied with the weight limitation and so on?
A: Yes.
 Q: But you are saying upon arriving in Honolulu certain
containers were off-loaded?
A: Yes.
Q: That would be therefore some containers were off-
loaded to give way to some other containers
starting from Honolulu towards Manila?
A: Yes.
Q: In other words Mr. Mondejar, preference was given
to cargoes (sic) newly loaded at Honolulu
instead of the cargoes (sic) already from
mainland USA, is that correct?
A: Yes.
"The aforesaid testimony constituted a clear admission
in defendant's evidence of facts amounting to a breach of
contract in bad faith. This being so, defendant must be held
liable in damages for the consequences of its
action." 7 (Corrections indicated in original text.)
The trial court further found that the situation was aggravated by the
following incidents: the poor treatment of the Mirandas by the PAL employees
during the stopover at Mactan Airport in Cebu; the cavalier and dubious
response of petitioner's personnel to the Miranda spouses' request to be billeted
at the Cebu Plaza Hotel by denying the same allegedly because it was fully
booked, which claim was belied by the fact that Dr. Miranda was easily able to
arrange for accommodations thereat; and, the PAL employees' negligent, almost
malicious, act of sending off the baggage of private respondents to Surigao City,
while they were still in Cebu, without any explanation for this gross oversight. 8
The Court of Appeals affirmed these findings of the trial court by
stating that —
"While we recognize an airline's prerogative to off-load
baggag(e) to conform with weight limitations for the purpose of
ensuring the safety of passengers, We, however, cannot sanction
the motion (sic) and manner it was carried out in this case.
"It is uncontroverted that appellees' baggag(e) were
properly weighed and loaded in the plane when it left San
Francisco for Honolulu. When they reached Honolulu, they were
not informed that their baggag(e) would be off-loaded.
Ironically, if the purpose of the off-loading was to conform with
the weight limitations, why were other containers loaded in
Honolulu? The real reason was revealed by Edgar Mondejar,
baggage service representative of the appellant. . . . 9
xxx xxx xxx
"As earlier noted, the off-loading of appellees'
baggag(e) was done in bad faith because it was not really for the
purpose of complying with weight limitations but to give undue
preference to newly-loaded baggag(e) in Honolulu. This was
followed by another mishandling of said baggag(e) in the twice-
cancelled connecting flight from Cebu to Surigao. Appellees' sad
experience was further aggravated by the misconduct of
appellant's personnel in Cebu, who lied to appellees in denying
their request to be billeted at Cebu Plaza Hotel.'' 10
The Court has time and again ruled, and it cannot be over-emphasized,
that a contract of air carriage generates a relation attended with a public duty and
any discourteous conduct on the part of a carrier's employee toward a passenger
gives the latter an action for damages and, more so, where there is bad faith. 11
It is settled that bad faith must be duly proved and not merely
presumed. The existence of bad faith, being a factual question, and the Supreme
Court not being a trier of facts, the findings thereon of the trial court as well as
of the Court of Appeals shall not be disturbed on appeal and are entitled to great
weight and respect. 12 Said findings are final and conclusive upon the Supreme
Court except, inter alia, where the findings of the Court of Appeals and the trial
court are contrary to each other. 13
 
It is evident that the issues raised in this petition are the correctness of
the factual findings of the Court of Appeals of bad faith on the part of petitioner
and the award of damages against it. This Court has consistently held that the
findings of the Court of Appeals and the other lower courts are as a rule binding
upon it, subject to certain exceptions created by case law. As nothing in the
record indicates any of such exceptions, the factual conclusions of the appellate
court must be affirmed. 14
It is now firmly settled that moral damages are recoverable in suits
predicated on breach of a contract of carriage where it is proved that the carrier
was guilty of fraud or bad faith. 15 Inattention to and lack of care for the
interests of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles the
passenger to an award of moral damages. What the law considers as bad faith
which may furnish the ground for an award of moral damages would be bad
faith in securing the contract and in the execution thereof, as well as in the
enforcement of its terms, or any other kind of deceit. 16 Such unprofessional
and proscribed conduct is attributable to petitioner airline in the case at bar and
the adverse doctrinal rule is accordingly applicable to it.
In Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., 17 a case
which is virtually on all fours with the present controversy, we stated:
"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. . . . .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, We are persuaded that the employees of
CATHAY acted in bad faith. . . .
". . . if the defendant airline is shown to have acted
fraudulently or in bad faith, the award of moral and exemplary
damages is proper."
It must, of course, be borne in mind that moral damages are not
awarded to penalize the defendant but to compensate the plaintiff for the injuries
he may have suffered. 18 In a contractual or quasi-contractual relationship,
exemplary damages, on the other hand, may be awarded only if the defendant
had acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner. 19 Attorney's fees in the concept of damages may be awarded where
there is a finding of bad faith. 20 The evidence on record amply sustains, and we
correspondingly find, that the awards assessed against petitioner on the
aforestated items of damages are justified and reasonable.
At this juncture, it may also be pointed out that it is PAL's duty to
provide assistance to private respondents and, for that matter, any other
passenger similarly inconvenienced due to delay in the completion of the
transport and the receipt of their baggage. Therefore, its unilateral and voluntary
act of providing cash assistance is deemed part of its obligation as an air carrier,
and is hardly anything to rave about. Likewise, arrangements for and
verification of requested hotel accommodations for private respondents could
and should have been done by PAL employees themselves, and not by Dr.
Miranda. It was rather patronizing of PAL to make much of the fact that they
allowed Dr. Miranda to use its office telephone in order to get a hotel room.
While it may be true that there was no direct evidence on record of
blatant rudeness on the part of PAL employees towards the Mirandas, the fact
that private respondents were practically compelled to haggle for
accommodations, a situation unbefitting persons of their stature, is rather
demeaning and it partakes of discourtesy magnified by PAL's condescending
attitude. Moreover, it cannot be denied that the PAL employees herein
concerned were definitely less than candid, to put it mildly, when they withheld
information from private respondents that they could actually be accommodated
in a hotel of their choice.
Indeed, the flamboyant testimony of Oscar Jereza, * as PAL's duty
manager, merely pays lip-service to, without putting into reality, the avowed
company policy of invariably making available and always granting the requests
for the kind and standard of accommodations demanded by and appropriate for
its passengers. 21 Certainly, a more efficient service, and not a lackadaisical and
disorganized system, is expected of the nations's flag carrier, especially on an
international flight.
For, on the picayune matter of transportation expenses, PAL was
obviously and unduly scrimping even on the small amount to be given to the
Mirandas. PAL failed to consider that they were making arrangements for two
paying round-trip passengers, not penny-ante freeloaders, who had been
inconvenienced by the numerous delays in flight services and careless handling
of their belongings by PAL. The niggardly attitude of its personnel in this
unfortunate incident, as well as their hair-splitting attempts at justification, is a
disservice to the image which our national airline seeks to project in its costly
advertisements.
We agree with the findings of the lower court that the request of private
respondents for monetary assistance of P300.00 for taxi fare was indeed justified,
considering that there were two of them and they had several pieces of luggage
which had to be ferried between the airport and the hotel. Also, the request for a
small additional sum for tips is equally reasonable since tipping, especially in a first-
rate hotel, is an accepted practice, of which the Court can take judicial notice. This is
aside from the fact that private respondents, having just arrived from an extended trip
abroad, had already run out of Philippine currency, which predicament was
exacerbated by their additional stay in Manila due to the off-loading of their
baggage. All these inconveniences should have warranted a commonsensical and
more understanding treatment from PAL, considering that private respondents found
themselves in this unpleasant situation through no fault of theirs.
2. On its second issue, petitioner avers that the express provisions on private
respondents' tickets stipulating that liability for delay in delivery of baggage shall be
limited to US$20.00 per kilo of baggage delayed, unless the passenger declares a
higher valuation, constitutes the contract of carriage between PAL and private
respondents.
It further contends that these express provisions are in compliance with
the provisions of the Warsaw Convention for the Unification of Rules Relating
to International Carrier by Air, to which the Philippines is a signatory.
Thereunder, it is asserted that PAL flight PR 101 from San Francisco, U.S.A. to
Manila, Philippines is an "international transportation" well within the coverage
of the Warsaw Convention.
Petitioner obstinately insists on the applicability of the provisions of the
Warsaw Convention regarding the carrier's limited liability since the off-loading
was supposedly justified and not attended by bad faith. Neither was there any
claim for loss of baggage as in fact private respondents' baggage were, albeit
delayed, received by them in good condition. 22
The court a quo debunked petitioner's arguments by this holding:
"The defense raised by defendant airlines that it can be
held liable only under the terms of the Warsaw Convention
(Answer, Special and Affirmative Defenses, dated October 26,
 1988) is of no moment. For it has also been held that Articles 17,
18 and 19 of the Warsaw Convention of 1929 merely declare the
air carriers liable for damages in the cases enumerated therein, if
the conditions specified are present. Neither the provisions of
said articles nor others regulate or exclude liability for other
breaches of contract by air carriers (Northwest Airlines, Inc. vs.
Nicolas Cuenca, et al., 14 SCRA 1063)." 23
This ruling of the trial court was affirmed by respondent Court of
Appeals, thus:
"We are not persuaded. Appellees do not seek payment
for loss of any baggage. They are claiming damages arising from
the discriminatory off-loading of their baggag(e). That cannot be
limited by the printed conditions in the tickets and baggage
checks. Neither can the Warsaw Convention exclude nor
regulate the liability for other breaches of contract by air
carriers. A recognition of the Warsaw Convention does not
preclude the operation of our Civil Code and related laws in
determining the extent of liability of common carriers in breach
of contract of carriage, particularly for willful misconduct of
their employees." 24
The congruent finding of both the trial court and respondent court that there
was discriminatory off-loading being a factual question is, as stated earlier, binding
upon and can no longer be passed upon by this Court, especially in view of and in
deference to the affirmance of the same by respondent appellate court.
There was no error on the part of the Court of Appeals when it refused to
apply the provisions of the Warsaw Convention, for in the words of this Court in the
aforequoted Cathay Pacific case:
". . . 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 in the enumerated cases and under
certain limitations. However, it must not be construed to
preclude the operation of the Civil Code and 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 willful misconduct on the part
of the carrier's employees is found or established, which is the
case before Us. . . ."
ACCORDINGLY, finding no reversible error, the challenged judgment of
respondent Court of Appeals is hereby AFFIRMED in toto.
SO ORDERED.
||| (Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 119641, [May 17, 1996],
326 PHIL 823-841)
[G.R. No. 122308. July 8, 1997.]
PURITA S. MAPA, CARMINA S. MAPA and CORNELIO
P. MAPA, petitioners, vs. COURT OF APPEALS AND TRANS-WORLD
AIRLINES INC., respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioners.
Quisumbing, Torres & Evangelista for private respondent.
SYNOPSIS
Petitioners purchased two (2) TWA tickers in Bangkok, Thailand. Said
tickers are for Los Angeles — New York — Boston — St. Louis-Chicago. On
August 27, 1990 petitioners Purita and Carmina S. Mapa departed for Boston, taking
a connecting flight on TWA's carrier TW 0901 from JFK Airport, checking in seven
(7) pieces of luggage at the TWA counter in the JFK Airport. Upon arriving in
Boston petitioners Purita and Carmina proceeded to the carousel to claim their
baggages and found only three (3) out of the seven they checked in. Despite TWA's
assurance that their luggages would be located within 48 hours, the same were never
found. The total value of the lost items amounted to $11,283.79. TWA offered to
settle the case by giving petitioners two options; (a) transportation credit for future
TWA travel or (b) cash settlement. Petitioners chose the first option, however, TWA
disregarded petitioners' option and unilaterally declared the payment of $2,560.00 as
constituting full satisfaction of petitioners' claim. Petitioners accepted the check for
$2,560 as partial payment for the actual cost of their lost baggages. Despite demands
by petitioners respondent TWA failed and refused without just cause to indemnify
and redress petitioners for grave injury and damages they have suffered.
Petitioners filed with the trial court a complaint for damages. The
trial court dismissed the case for lack of jurisdiction in light of Article
28(1) of the Warsaw Convention. The trial court held that the Warsaw Convention is
applicable in case at bar, since the Philippines and the United States are parties to the
convention, the contracts of transportation come within the meaning of "International
Transportation." The trial court also held that the Philippines, not being one of the
places specified in Art. 28 (1) of the Warsaw Convention where the complaint may
be instituted then it has no jurisdiction over the present case. On appeal to
the Court of Appeals, the appellate court affirmed the ruling of the trial court. Hence,
the present petition. The Supreme Court ruled that the contracts does not fall under
the category of international transportation as provided by the Warsaw Convention.
The only way to bring the contracts between petitioners Purita and Carmina Mapa on
the one hand, and TWA on the other, within the category of international
transportation is to link them or to make them an integral part of the Manila — Los
Angeles travel of Purita and Carmina through Pal aircraft. However, the alleged
international tickets issued by TWA were not presented in evidence, clearly then;
there is at all no factual basis of the finding that the TWA tickets were issued in
conjunction with the international tickets.
Petition granted and the challenged decision of the Court of Appeals is
reversed and set aside.
SYLLABUS
1. CIVIL LAW; CONTRACT OF TRANSPORTATION; WARSAW
CONVENTION; "INTERNATIONAL TRANSPORTATION," DEFINED. — As
provided in Article I(2) of the Warsaw Convention, a contract is one of international
transportation only if 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, or within the territory of a single High Contracting Party, if
there is an agreed stopping place within a territory subject to the sovereignty,
mandate or authority of another power, even though that power is not a party to this
convention. There are then two categories of international transportation, viz., (1)
that where the place of departure and the place of destination are situated within the
territories of two High Contracting Parties regardless of whether or not there be a
break in the transportation or a transshipment; and (2) that where the
place of departure and the place of destination are within the territory of a single
High Contracting Party if there is an agreed stopping place within a territory subject
to the sovereignty, mandate, or authority of another power, even though the power is
not a party to the Convention. The High Contracting Parties referred to in the
Convention are the signatories thereto and those which subsequently adhered to it.
2. ID.; ID.; ID.; ADHERED TO BY THE REPUBLIC OF THE
PHILIPPINES. — In the case of the Philippines, the Convention was concurred in by
the Senate, through Resolution No. 19, on 16 May 1950. The Philippines
instrument of accession was signed by President Elpidio Quirino on 13 October 1950
and was deposited with the Polish Government on 9 November 1950. The
Convention became applicable to the Philippines on 9 February 1951. Then, on 23
September 1955, President Ramon Magsaysay issued Proclamation No. 201,
declaring the Philippines' formal adherence thereto, "to the end that the same and
every article and clause thereof maybe observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof.
3. ID.; ID.; ID.; WHEN CONTRACT IS NOT OF INTERNATIONAL
TRANSPORTATION; CASE AT BAR. — The contracts of transportation in this
case are evidence by the two TWA tickets, No. 015:9475:153:304 and No.
015:9475:153:305, both purchased and issued in Bangkok, Thailand. On the basis
alone of the provisions therein, it is obvious that the place of departure and the
place of destination are all in the territory of the United States, or of a single High
Contracting Party. The contracts, therefore, cannot come within the purview of the
first category of international transportation. Neither can it be under the second
category since there was NO agreed stopping place within a territory subject to the
sovereignty, mandate, or authority of another power. It must be underscored that the
first category of international transportation under the Warsaw Convention is based
on "the contract made by the parties." TWA does not claim that the Manila-Los
Angeles contracts of transportation which brought Purita and Carmina to Los
Angeles were also its contracts. It does not deny the assertion of the petitioners that
those contracts were independent of the TWA tickets issued in Bangkok, Thailand.
No evidence was offered that TWA and PAL had an agreement concerning
transportation of passengers from points of departures not served with
aircrafts of one or the other. There could have been no difficulty for such agreement,
since TWA admitted without qualification in paragraph 1 of its Answer to the second
Amended Complaint the allegation in paragraph 1.1 of the latter that TWA "is a
foreign corporation licensed to do business in the Philippines with office address at
Ground Floor, Saville Building, Sen. Gil J. Puyat Avenue, corner Paseo de Roxas,
Makati, Metro Manila."
4. REMEDIAL LAW; ACTIONS; MOTION TO DISMISS; EVIDENCE
SHOULD HAVE BEEN OFFERED AT THE PRELIMINARY HEARING. —
TWA should have offered evidence for its affirmative defenses at the preliminary
hearing therefor. Section 5 of Rule 16 of the Rules of Court expressly provides: SEC.
5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal
provided for in this rule, except improper venue, may be pleaded as an affirmative
defense, and a preliminary hearing may be had thereon as if a motion to dismiss had
been filed. Without any further evidence as earlier discussed, the trial court should
have denied the affirmative defense of lack of jurisdiction because it did not appear
to be indubitable. Section 3 of Rule 16 of the Rules of Court provides: SEC.
3. Hearing and order. — After hearing the court may deny or grant the motion or
allow amendment of pleading, or may defer the hearing and determination of the
motion until the trial if the ground alleged therein does not appear to be indubitable.
DECISION
DAVIDE, JR., J p:
The main issue in this petition for review under Rule
45 of the Rules of Court is the applicability of Article 28(1) of the Warsaw
Convention; 1 which provides as follows:
ARTICLE 28.(1) An action for damages 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.
We are urged by the petitioners to reverse the 31 May 1995
Decision of the Court of Appeals in CA-G.R. CV No. 39896 2 affirming the 24 July
1992 Order of the Regional Trial Court of Quezon City Branch 102, which dismissed
Civil Case No. Q-91-9620 3 on the ground of lack of jurisdiction in view of the
aforementioned Article 28(1) of the Warsaw Convention.
 The antecedent facts, as summarized by the Court of Appeals, are as
follows:
Plaintiffs Cornelio P. Mapa and Purita S. Mapa are
respectable members of the society. Mr. Mapa is an established
businessman and currently the Regional General
Manager of Akerlund and Rausing, a multinational packaging
material manufacturer based in Manila. He was previously the
Senior Vice President of Phimco Industries, an affiliate
company of Swedish Match Company. Mrs. Mapa is a
successful businesswoman engaged in the commercial
transactions of high value antique and oriental arts decor items
originating from Asian countries. Carmina S. Mapa is the
daughter of plaintiffs Purita and Cornelio and is a graduate of the
International School in Bangkok, Thailand, now presently
enrolled at the Boston University where she is majoring in
communication. cdasia
Plaintiffs Mapa entered into contract of air
transportation with defendant TWA as evidenced by TWA ticket
Nos. 015:9475:153:304 and 015:9475:153:305, purchased in
Bangkok, Thailand. Said TWA tickets are for Los Angeles-New
York-Boston-St. Louis-Chicago. . .
Domicile of carrier TWA is Kansas City, Missouri,
USA. Its principal place of business is Kansas City, Missouri,
USA. TWA's place of business through which the contracts were
made is Bangkok, Thailand. The place of destination is Chicago,
USA.
On August 10, 1990, plaintiffs Carmina and Purita left
Manila on board PAL flight NO. 104 for Los Angeles. Carmina
was to commence schooling and thus was accompanied by
Purita to assist her in settling down at the University.
They arrived in Los Angeles on the same date and
stayed there until August 14, 1990 when they left for New York
City.
On August 14, 1990, plaintiffs Purita and Carmina
S. Mapa arrived at the John F. Kennedy (JFK) Airport, New
York, on TWA Flight No. 904.
On August 27, 1990, plaintiffs Purita and Carmina
S. Mapa departed for Boston, taking a connecting flight on
TWA's carrier, TW 0901, from JFK Airport, New York, to
Boston's Logan Airport, checking in seven (7) pieces of luggage
at the TWA counter in the JFK Airport. The seven baggages
were received by a porter who issued seven TWA baggage
receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor.
From the entrance gate of the terminal building,
plaintiffs Purita and Carmina proceeded to TWA's ticket counter
and presented their confirmed TWA tickets numbered
015:9475:153:304 and 015:9475:153:305 with a 3:00 p.m.
departure time. They were issued their boarding passes and were
instructed to proceed to gate 35 for boarding. At about 2:40 p.m.,
plaintiffs noticed that there was still no instruction to board the
aircraft so they made inquiries. The TWA ground stewardess
informed plaintiffs that they were at the wrong gate because
their flight was boarding at gate 1. Upon hearing this, plaintiffs
rushed to gate 1 which was in another building terminal. At gate
1, they were told by a TWA ground stewardess that flight 901
had just departed. However, they were consoled that another
TWA flight was leaving for Boston after 30 minutes and
plaintiffs could use the same boarding pass for the next flight. At
around 3:15 p.m., plaintiffs Purita and Carmina were able to
board the next flight. However, the plane was not immediately
cleared for take off on account of a thunderstorm. The
passengers were instructed to stay inside the aircraft until 6:00
p.m. when the plane finally left for Boston.
Upon arriving in Boston, plaintiffs Purita and Carmina
proceeded to the carousel to claim their baggages and found only
three out of the seven they checked in, to wit: one Samsonite on
the carousel, another Samsonite lying on the floor near the
carousel and a third baggage, an American Tourister, inside the
unclaimed baggage office. Plaintiffs immediately reported the
loss of their four baggages to the TWA Baggage Office at Logan
Airport. TWA's representative confidently assured them that
their baggages would be located within 24 hours and not more
than 48 hours.
On September 2, 1990, plaintiffs received a letter from
TWA, signed by Mr. J.A. Butler, Customer Relations-Baggage
Service, apologizing for TWA's failure to locate the missing
luggage and requesting plaintiffs to accomplish a passenger
property questionnaire to facilitate a further intensive and
computerized search for the lost luggage. Plaintiffs duly
accomplished the passenger property questionnaire, taking pains
to write down in detail the contents of each missing baggage.
The total value of the lost items amounted to $11,283.79
On September 20, 1990, plaintiffs' counsel wrote TWA
thru its General Sales Manager in the Philippines, Daniel
Tuason, with office address at Ground Floor, Saville Building,
 Sen. Gil J. Puyat Avenue corner Paseo de Roxas, Makati, Metro
Manila demanding indemnification for the grave damage and
injury suffered by the plaintiffs.
TWA again assured plaintiffs that intensive search was
being conducted.
On October 8, 1990, TWA offered to amicably settle
the case by giving plaintiffs-appellants two options: (a)
transportation credit for future TWA travel or (b) cash
settlement. Five months lapsed without any result on TWA's
intensive search.
On January 3, 1991, plaintiffs-appellants opted for
transportation credit for future TWA travel
On January 11, 1991, TWA disregarded plaintiffs'
option and unilaterally declared the payment of $2,560.00 as
constituting full satisfaction of the plaintiffs' claim.
On July 19, 1991, plaintiffs accepted the check for
$2,560.00 as partial payment for the actual cost of their lost
baggages and their contents.
Despite demands by plaintiffs, TWA failed and refused
without just cause to indemnify and redress plaintiffs for the
grave injury and damages they have suffered. 4
Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein
petitioners) then filed with the trial court on 1 August 1991 a complaint 5 for
damages, 6 which was docketed as Civil Case No. Q-91-9620. Before a responsive
pleading was filed, the petitioners filed an Amended Complaint. 7 They prayed that
after due trial private respondent Trans-World Airlines, Inc. (hereafter, TWA), be
ordered to pay them the following amounts: (1) US$8,723.79, or its equivalent in
Philippine currency, representing the cost of the lost luggage and its contents; (2)
US$2,949.50, or its equivalent in Philippine currency, representing the cost of hotel,
board and lodging, and communication expenses; (3) P1 million, by way of moral
damages; (4) P1 million, by way of exemplary damages, with legal interest on said
amounts from the date of extrajudicial demand thereof; and (5) P500,000.00 as
attorney's fees, cost of the suit, and other expenses of litigation. 8
On 26 February 1992, TWA filed its Answer to the Amended Complaint
raising, as special and affirmative defense, lack of jurisdiction of Philippine courts
over the action for damages in that pursuant to Article 28(1) of the Warsaw
Convention, the action could only be brought either in Bangkok where the contract
was entered into, or in Boston which was the place of destination, or in Kansas City
which is the carrier's domicile and principal place of business.
TWA further alleged that pursuant to the Warsaw Convention and the
Notice of Baggage Limitations at the back of the tickets, its liability to the petitioners
is limited to US$9.07 per pound, or US$20.00 per kilo, which is in lieu of actual and
compensatory damages. Even assuming that petitioners' bag weighed the maximum
acceptable weight of 70 pounds, TWA's maximum liability is $640.00 per bag or
$2,560.00 for the four pieces of baggage, which the petitioners have been offered
and have accepted. TWA also submitted that it could not be liable for moral and
exemplary damages and attorney's fees because it did not act in a wanton, fraudulent,
reckless, oppressive, or malevolent manner. 9
On 7 February 1992, the petitioners filed their second Amended
Complaint 10 to include a claim of US$2,500, or its equivalent in Philippine
Currency, representing the additional replacement cost of the items and personal
effects contained in their lost luggage; and US$4,500 representing the travel
expenses, hotel, lodging, food and other expenses of petitioner Cornelio Mapa, who
was constrained to join his family in Boston to extend the necessary assistance in
connection with the lost luggage.
After the filing of TWA's Answer to the second Amended
Complaint, 11 and petitioners' Reply thereto, the trial court gave TWA ten days
within which to submit a memorandum in support of its affirmative defenses; after
which the incident would be deemed submitted for resolution. 1 2 However, after
TWA filed its Memorandum, 13 the trial court gave the petitioners five days within
which to file a reply memorandum; and TWA, two days from receipt of the latter to
file its comment thereon. 14 The petitioners then filed their Opposition (by
way of Reply Memorandum) 15 to which TWA filed a Reply. 16 Thereafter, the
petitioners submitted a Rejoinder 17 ; TWA, a Surrejoinder. 18
On 24 July 1992, the trial court issued an Order 19 dismissing the case for
lack of jurisdiction in light of Article 28(1) of the Warsaw Convention. Thus:
It is plaintiffs' theory that the Warsaw Convention does
not apply to the instant case because plaintiffs'
contract of transportation does not constitute "international
transportation" as defined in said convention. This however is
belied by the Passenger Property Questionnaire which is Annex
C of plaintiffs' amended complaint. Page two of said
questionnaire accomplished by plaintiffs under the heading
"Your Complete Itinerary" shows that the TWA tickets issued to
the plaintiffs form part of the contract of transportation to be
performed from Manila to the United States. Since the
Philippines and the United States are parties to the convention,
plaintiffs' contracts of transportation come within the
meaning of International Transportation.
xxx xxx xxx
 On the basis of the foregoing, the Court holds that
the Warsaw Convention is applicable to the case at bar, even if
the basis of plaintiffs' present action is
breach of contract of carriage under the New Civil Code.
The next question to be resolved is whether or not
the Court has jurisdiction to try the present case in the
light of the provision Art. 28(1) above-quoted.
Under Art. 28(1) supra, a complaint for damages
against an air carrier can be instituted only in any of the
following places/courts:
(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.
In interpreting the provision of Art.
28(1) of the Warsaw Convention, the Supreme Court in the same
case of Augusto Benedicto Santos vs. Northwest Airlines held:
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 that
jurisdiction, there are later cases cited by the private
respondent supporting the conclusion that the provision
is jurisdictional.
Venue and jurisdiction are entirely distinct
matters. Jurisdiction may not be conferred by consent
or waiver upon a court which otherwise would have no
jurisdiction over the subject-matter of an action; but the
venue of an action is fixed by statute may be changed
by the consent of the parties and an objection that the
plaintiff brought his suit in the wrong country 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.
A number of reasons tends to support the
characterization of Article 28(1) as 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 "jurisdiction," which, as such, cannot
be left to the will of the parties regardless of the time
when the damage occurred."
It has been shown by the defendant that the
domicile of the defendant Trans World Airlines, Inc. is Kansas
City, Missouri, its principal place of business is also in Kansas
City, Missouri, the carrier's place of business through which the
contracts were made is Bangkok (Annexes A and A-1, Amended
Complaint), and the place of destination was Boston.
The Philippines not being one of the places specified in
Art. 28(1) abovequoted where the complaint may be instituted,
this Court therefore, does not have jurisdiction over the present
case.
Evidently discontented with the trial court's order, the petitioners appealed
to the Court of Appeals, contending that the lower court erred in not holding that (1)
it has jurisdiction over the instant case and (2) the Warsaw Convention is
inapplicable in the instant case because the subject matter of the case is not included
within the coverage of the said convention. 20 They claimed that their
cause of action could be based on breach of contract of air carriage founded on
Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code governing
common carriers or Article 2176 of the same Code governing tort or quasi-delict.
The appellate court disagreed with the petitioners and affirmed the
order of the trial court. It held that the Warsaw Convention is the law which governs
the dispute between the petitioners and TWA because what is involved
in international transportation defined by said Convention in Article I(2). This
holding is founded on its determination that the two TWA tickets for Los Angeles-
New York-Boston-St. Louis-Chicago purchased in Bangkok, Thailand, were issued
in conjunction with, and therefore formed part of, the contract of transportation
performed from Manila, Philippines, to the United States.
The respondent court further held that the cause of action of the petitioners
arose from the loss of the four checked pieces of baggage, which then falls
under Article 18(1), Chapter III (Liability of the Carrier) of the Warsaw
Convention. 21 Pursuant to Article 24(1) of the Convention, all actions for damages,
whether based on tort, code law of common law, arising from loss of baggage under
Article 18 of the Warsaw Convention, can only be brought subject to the conditions
and limits set forth in the Warsaw Convention. Article 28(1) thereof sets forth
conditions and limits in that the action for damages may be instituted only in the
territory of one of the High Contracting Parties, before the court of (1) the
domicile of the carrier, (2) the carrier's principal place of business, (3) the
place of business through which the contract has been made, or (4) the
place of destination. Since the Philippines is not one of these places, a
Philippine Court, like the RTC, has no jurisdiction over the complaint for damages.
Respondent Court of Appeals likewise held that the petitioners could not
claim application of Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil
code on common carriers without taking into consideration Article 1753 of the
same Code, which provides that the law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss, destruction,
or deterioration. Since the country of ultimate destination is Chicago, the
law of Chicago shall govern the liability of TWA for the loss of the four
pieces of baggage. Neither is Article 2176 of the New Civil code on torts or quasi-
delicts applicable in view of the private international law principle of lex loci delicti
commissi. 22 In addition, comformably with Santos III v. Northwest Orient
Airlines, 23 mere allegation of willful misconduct resulting in a tort is insufficient to
exclude the case from the comprehension of the Warsaw Convention.
Failing in their bid to reconsider the decision, the petitioners filed this
petition. They aver that respondent Court of Appeals gravely erred (1) in holding that
the Warsaw Convention is applicable to this case and (2) in applying Article
1753 of the Civil Code and the principle of lex loci delicti commissi. 24
We resolved to give due course to the petition after the filing by TWA of its
Comment on the petition and noted without action for the reasons stated in the
resolution of 25 September 1996 petitioners' Reply and Rejoinder. We then required
the parties to submit their respective memoranda. They did in due time.
The petitioners insist that the Warsaw Convention is not applicable to their
case because the contracts they had with TWA did not involve an international
transportation. Whether the contracts were of international transportation is to be
solely determined from the TWA tickets issued to them in Bangkok, Thailand, which
showed that their itinerary was Los Angeles-New-York-Boston-St. Louis-Chicago.
Accordingly, since the place of departure (Los Angeles) and the place of destination
(Chicago) are both within the territory of one High Contracting Party, with no agreed
stopping place in a territory subject to the sovereignty, mandate, suzerainty or
authority of another Power, the contracts did not constitute 'international
transportation' as defined by the convention. They also claim to be without legal
basis the contention of TWA that their transportation contracts were of international
character because of the handwritten notations in the tickets re "INT'L TKT #079-
4402956821-2" and INT'L TKT #079-4402956819." Notwithstanding such
notations, the TWA tickets, viz., (a) No. 015:9475:153:304 and (b) No.
015:9475:153:305 did not cease to be for the itinerary therein designated. Besides, it
is a fact that petitioners Purita and Carmina Mapa traveled from Manila to Los
Angeles via Philippine Airlines (PAL) by virtue of PAL tickets issued
independently of the TWA tickets.
The pith issue to be resolved under the petitioners' first assigned error is
whether the contracts of transportation between Purita and Carmina Mapa, on the
one hand, and TWA, on the other, were contracts of "international transportation"
under the Warsaw Convention. If they were, then we should sustain the
trial court and the Court of Appeals in light of our ruling in Santos v. Northwest
Orient Airlines. 25 It appears clear to us that TWA itself, the trial court, and
the Court of Appeals, impliedly admit that if the sole basis were the two TWA
tickets for Los Angeles-New-York-Boston-St. Louis-Chicago, the contracts cannot be
brought within the term "international transportation," as defined in Article
I(2) of the Warsaw Convention. As provided therein, a contract is
one of international transportation only if
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, or within the territory of a single High Contracting
Party, if there is an agreed stopping place within a territory
subject to the sovereignty, mandate or authority of another
power, even though that power is not a party to this convention.
There are then two categories of international transportation, viz., (1) that
where the place of departure and the place of destination are situated within the
territories of two High Contracting Parties regardless of whether or not there be a
break in the transportation or a transshipment; and (2) that where the
place of departure and the place of destination are within the territory of a single
High Contracting Party if there is an agreed stopping place within a territory subject
to the sovereignty, mandate, or authority of another power, even though the power is
not a party to the Convention.
The High Contracting Parties referred to in the Convention are the
signatories thereto and those which subsequently adhered to it. In the case of the
Philippines, the Convention was concurred in by the Senate, through Resolution No.
19, on 16 May 1950. The Philippine instrument of accession was signed by President
Elpidio Quirino on 13 October 1950 and was deposited with the Polish Government
on 9 November 1950. The Convention became applicable to the Philippines on 9
February 1951. Then, on 23 September 1955, President Ramon Magsaysay
issued Proclamation No. 201, declaring the Philippines' 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. 26
 The contracts of transportation in this case are evidenced by the two TWA
tickets, No. 015:9475:153:304 and No. 015:9475:153:305, both purchased and issued
in Bangkok, Thailand. On the basis alone of the provisions therein, it is obvious that
the place of departure and the place of destination are all in the territory of the
United States, or of a single High Contracting Party. The contracts, therefore, cannot
come within the purview of the first category of international transportation. Neither
can it be under the second category since there was NO agreed stopping place within
a territory subject to the sovereignty, mandate, or authority of another power.
The only way to bring the contracts between Purita and Carmina Mapa, on
the one hand, and TWA, on the other, within the first category of "international
transportation" is to link them with, or to make them an integral part of, the Manila-
Los Angeles travel of Purita and Carmina through PAL aircraft. The "linkages"
which have been pointed out by the TWA, the trial court, and
the Court of Appeals are (1) the handwritten notations, viz., INT'L TKT #079-
4402956821-2 and INT'L TKT #079-4402956819, on the two TWA tickets; and (2)
the entries made by petitioners Purita and Carmina Mapa in column YOUR
COMPLETE ITINERARY in TWA's Passenger Property Questionnaire, wherein
they mentioned their travel from Manila to Los Angeles in flight PR 102.
The alleged "international tickets" mentioned in the notations in conjunction
with which the two TWA tickets were issued were not presented.. Clearly then, there
is at all no factual basis of the finding that the TWA tickets were issued in
conjunction with the international tickets, which are even, at least as of now, non-
existent.
As regards the petitioner's entry in YOUR COMPLETE ITINERARY
column of the Passenger Property Questionnaire wherein they included the Manila-
Los Angeles travel, it must be pointed out that this was made on 4 September
1990 27 by petitioners Purita and Carmina Mapa, and only in connection with their
claim for their lost pieces of baggage. The loss occurred much earlier, or on 27
August 1990. The entry can by no means be considered as a part of, or supplement
to, their contracts of transportation evidenced by the TWA tickets which covered
transportation within the United States only.
It must be underscored that the first category of international
transportation under the Warsaw Convention is based on "the contract made by the
parties." TWA does not claim that the Manila-Los Angeles
contracts of transportation which brought Purita and Carmina to Los Angeles were
also its contracts. It does not deny the assertion of the petitioners that those contracts
were independent of the TWA tickets issued in Bangkok, Thailand. No evidence was
offered that TWA and PAL had an agreement concerning
transportation of passengers from points of departures not served with
aircrafts of one or the other. There could have been no difficulty for such agreement,
since TWA admitted without qualification in paragraph 1 of its Answer 28 to the
second Amended Complaint the allegation in paragraph 1.1 of the latter 29 that
TWA "is a foreign corporation licensed to do business in the Philippines with office
address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue, corner Paseo
de Roxas, Makati, Metro Manila."
TWA relies on Article I(3) of the Convention, which provides as follows:
3. A carriage to be performed by several successive air
carriers is deemed, for the purposes of this Convention, to be one
undivided carriage, if it has been regarded by the parties as a
single operation, whether it had been agreed upon under the
form of a single contract or 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.
It also points to Article 15 of the IATA Recommend Practice 1724, which
provides: Carriage to be performed by several successive carriers under one ticket, or
under a ticket and any conjunction ticket issued in connection therewith, is regarded
as a single operation." 30
The flaw of respondents' position is the presumption that the parties have
"regarded" as an "undivided carriage" or as a "single operation" the carriage from
Manila to Los Angeles through PAL then to New York-Boston-St. Louis-Chicago
through TWA. The dismissal then of the second Amended Complaint by the
trial court and the Court of Appeals' affirmance of the dismissal were not based on
indubitable facts or grounds, but on inferences without established factual basis.
TWA should have offered evidence for its affirmative defenses at the
preliminary hearing therefor. Section 5 of Rule 16 of the Rules of Court expressly
provides:
SEC. 5. Pleading grounds as affirmative defenses. —
Any of the grounds for dismissal provided for in this rule, except
improper venue, may be pleaded as an affirmative defense, and a
preliminary hearing may be had thereon as if a motion to dismiss
had been filed.
Without any further evidence as earlier discussed, the trial court should
have denied the affirmative defense of lack of jurisdiction because it did not appear
to be indubitable. Section 3 of Rule 16 of the Rules of Court provides:
SEC. 3. Hearing and order. — After hearing
the court may deny or grant the motion or allow
amendment of pleading, or may defer the hearing and
determination of the motion until the trial if the ground alleged
therein does not appear to be indubitable. cda
WHEREFORE, the instant petition is GRANTED and the challenged
decision of 31 May 1995 of respondent Court of Appeals in CA-G.R. CV No. 39896,
as well as the Order of 24 July 1992 of the Regional Trial Court of Quezon City,
Branch 102, in Civil Case No. Q-91-9620, is REVERSED and SET ASIDE.
The Regional Trial Court of Quezon City, Branch 102, is hereby
DIRECTED to proceed with the pre-trial, if it has not been terminated, and with the
trial on the merits of the case and then to render judgment thereon, taking into
account the foregoing observations on the issue of jurisdiction.
SO ORDERED.
||| (Mapa v. Court of Appeals, G.R. No. 122308, [July 8, 1997], 341 PHIL 281-299)
[G.R. No. 104685. March 14, 1996.]
SABENA BELGIAN WORLD AIRLINES, petitioner, vs. HON.
COURT OF APPEALS and MA. PAULA SAN AGUSTIN, respondents.
Saturnino M . Basconcillo for petitioner.
F.S. De Guzman and Associates for private respondent.
SYLLABUS
1. CIVIL LAW, OBLIGATIONS AND CONTRACTS; FAULT OR
NEGLIGENCE CONSISTS IN THE OMISSION OF DILIGENCE DEMANDED
BY THE NATURE OF AN OBLIGATION. — Fault or negligence consists in the
omission of that diligence which is demanded by the nature of an obligation and
corresponds with the circumstances of the person, of the time, and of the place.
2. ID.; ID.; ID.; PRESUMPTION OF FAULT ARISES UPON BREACH
OR NON-FULFILLMENT OF THE PRESTATION. — When the source of an
obligation is derived from a contract, the mere breach or non-fulfillment of the
prestation gives rise to the presumption of fault on the part of the obligor.
3. ID.; ID.; COMMON CARRIERS; BOUND TO OBSERVE
EXTRAORDINARY CARE IN THE VIGILANCE OVER THE GOODS. — This
rule is no different in the case of common carriers in the carriage of goods which,
indeed are bound to observe not just the due diligence of a good father of a family
but that of "extraordinary" care in the vigilance over the goods.
4. ID.; ID.; TORT; PROXIMATE CAUSE, CONSTRUED. — Proximate
cause is that which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces injury and without which the result would not have
occurred. The exemplification by the Court in one case is simple and explicit; viz:
"(T)he proximate legal cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a natural and
continuous chain of events, each having a close causal connection with its immediate
predecessor, the final event in the chain immediately affecting the injury as a natural
and probable result of the cause which first acted under such circumstances that the
person responsible for the first event should, as an ordinarily prudent and intelligent
person, have reasonable ground to expect at the moment of his act or default that an
injury to some person might probably result therefrom."
5. ID.; ID.; COMMON CARRIERS; LOSS OF PASSENGER'S
BAGGAGE NOT ONLY ONCE BUT TWICE CONSTITUTES GROSS
NEGLIGENCE; CASE AT BAR. — It remained undisputed that private
respondent's luggage was lost while it was in the custody of petitioner. It was
supposed to arrive on the same flight that private respondent took in returning to
Manila on 02 September 1987. When she discovered that the luggage was missing,
she promptly accomplished and filed a Property Irregularity Report. She followed up
her claim on 14 September 1987, and filed, on the following day, a formal letter-
complaint with petitioner. She felt relieved when, on 23 October 1987, she was
advised that her luggage had finally been found, with its contents intact when
examined, and that she could expect it to arrive on 27 October 1987. She then waited
anxiously only to be told later that her luggage had been lost for the second time.
Thus, the appellate court, given all the facts before it, sustained the trial court in
finding petitioner ultimately guilty of "gross negligence" in the handling of private
respondent's luggage. The "loss of said baggage not only once but twice," said the
appellate court, "underscores the wanton negligence and lack of care" on the part of
the carrier. The above findings, which certainly cannot be said to be without basis,
foreclose whatever rights petitioner might have had to the possible limitation of
liabilities enjoyed by international air carriers under the Warsaw Convention
(Convention for the Unification of Certain Rules Relating to International Carriage
by Air, as amended by the Hague Protocol of 1955, the Montreal Agreement of
1966, the Guatemala Protocol of 1971 and the Montreal Protocols of 1975). The
Court thus sees no error in the preponderant application to the instant case by the
appellate court, as well as by the trial court, of the usual rules on the extent of
recoverable damages beyond the Warsaw limitations. Under domestic law and
jurisprudence (the Philippines being the country of destination), the attendance of
gross negligence (given the equivalent of fraud or bad faith) holds the common
carrier liable for all damages which can be reasonably attributed, although
unforeseen, to the non-performance of the obligation, including moral and exemplary
damages.
DECISION
VITUG, J p:
The appeal before the Court involves the issue of an airline's liability for
lost luggage. The petition for review assails the decision of the Court
Appeals, 1 dated 27 February 1992, affirming an award of damages made by the trial
court in a complaint filed by private respondent against petitioner.
The factual background of the case, narrated by the trial court and
reproduced at length by the appellate court, is hereunder quoted:
"On August 21, 1987, plaintiff was a passenger on
board flight SN 284 of defendant airline originating from
Casablanca to Brussels, Belgium on her way back to Manila.
Plaintiff checked in her luggage which contained her valuables,
namely: jewelries valued at $2,350.00; clothes $1,500.00;
shoes/bag $150; accessories $75; luggage itself $10.00; or a total
of $4,265.00, for which she was issued Tag No. 71423. She
stayed overnight in Brussels and her luggage was left on board
Flight SN 284.
"Plaintiff arrived at Manila International Airport on
September 2, 1987 and immediately submitted her Tag No.
71423 to facilitate the release of her luggage but the luggage was
missing. She was advised to accomplish and submit a property
Irregularity Report which she submitted and filed on the same
day.
"She followed up her claim on September 14, 1987 but
the luggage remained to be missing.
"On September 15, 1987, she filed her formal
complaint with the office of Ferge Massed, defendant's Local
Manager, demanding immediate attention (Exh. 'A').
"On September 30, 1987, on the occasion of plaintiff's
following up of her luggage claim, she was furnished copies of
defendant's telexes with an information that the Brussel's Office
of defendant found the luggage and that they have broken the
locks for identification (Exhibit 'B'). Plaintiff was assured by the
defendant that it has notified its Manila Office that the luggage
will be shipped to Manila on October 27, 1987. But
unfortunately plaintiff was informed that the luggage was lost
for the second time (Exhibits 'C' and 'C-1').
"At the time of the filing of the complaint, the luggage
with its content has not been found.
"Plaintiff demanded from the defendant the money
value of the luggage and its contents amounting to $4,265.00 or
its exchange value, but defendant refused to settle the claim.
"Defendant asserts in its Answer and its evidence tend
to show that while it admits that the plaintiff was a passenger on
board Flight No. SN 284 with a piece of checked in luggage
bearing Tag No. 71423, the loss of the luggage was due to
plaintiff's sole if not contributory negligence; that she did not
declare the valuable items in her checked-in luggage at the flight
counter when she checked in for her flight from Casablanca to
Brussels so that either the representative of the defendant at the
counter would have advised her to secure an insurance on the
alleged valuable items and required her to pay additional
charges, or would have refused acceptance of her baggage as
required by the generally accepted practices of international
carriers; that Section 9(a), Article IX of General Conditions of
carriage requiring passengers to collect their checked baggage at
the place of stopover, plaintiff neglected to claim her baggage at
the Brussels Airport; that plaintiff should have retrieved her
undeclared valuables from her baggage at the Brussels Airport
since her flight from Brussels to Manila will still have to visit for
confirmation inasmuch as only her flight from Casablaca to
Brussels was confirmed; that defendant incorporated in all
Sabena Plane Tickets, including Sabena Ticket No. 082422-
72502241 issued to plaintiff in Manila on August 21, 1987, a
warning that 'Items of value should be carried on your person'
and that some carriers assume no liability for fragile, valuable or
perishable articles and that further information may be obtained
from the carrier for guidance'; that granting without conceding
that defendant is liable, its liability is limited only to US $20.00
per kilo due to plaintiff's failure to declare a higher value on the
contents of her checked in luggage and pay additional charges
thereon." 2
The trial court rendered judgment ordering petitioner Sabena Belgian World
Airlines to pay private respondent Ma. Paula San Agustin —
"(a) . . . US$4,265.00 or its legal exchange in Philippine
pesos;
"(b) . . . P30,000.00 as moral damages;
"(c) . . . P10,000.00 as exemplary damages;
"(d) . . . P10,000.00 attorney's fees; and
"(e) (t)he costs of the suit." 3
Sabena appealed the decision of the Regional Trial Court to the Court of
Appeals. The appellate court, in its decision of 27 February 1992, affirmed in
toto the trial court's judgment.
Petitioner airline company, in contending that the alleged negligence of
private respondent should be considered the primary cause for the loss of her
luggage, avers that, despite her awareness that the flight ticket had been confirmed
only for Casablanca and Brussels, and that her flight from Brussels to Manila had yet
to be confirmed, she did not retrieve the luggage upon arrival in Brussels. Petitioner
insists that private respondent, being a seasoned international traveler, must have
likewise been familiar with the standard provisions contained in her flight ticket that
items of value are required to be hand-carried by the passenger and that the liability
of the airlines for loss, delay or damage to baggage would be limited, in any event, to
only US$20.00 per kilo unless a higher value is declared in advance and
corresponding additional charge are paid thereon. At the Casablanca International
Airport, private respondent, in checking in her luggage, evidently did not declare its
contents or value. Petitioner cites Section 5(c), Article IX, of the General Conditions
of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the
Hague Protocol of 1955, generally observed by International carriers, stating among
other things, that:
"Passengers shall not include in his checked baggage,
and the carrier may refuse to carry as checked baggage, fragile
or perishable articles, money, jewelry, precious metals,
negotiable papers, securities or other valuables." 4
Fault or negligence consists in the omission of that diligence which is
demanded by the nature of an obligation and corresponds with the circumstances of
the person, of the time, and of the place. When the source of an obligation is derived
from a contract, the mere breach or non-fulfillment of the prestation gives rise to the
presumption of fault on the part of the obligor. This rule is not different in the case of
common carriers in the carriage of goods which, indeed, are bound to observe not
just the due diligence of a good father of a family but that of "extraordinary" care in
the vigilance over the goods. The appellate court has aptly observe:
". . . Art. 1733 of the [Civil] Code provides that from
the very nature of their business and by reason of public policy,
common carriers are bound to observe extraordinary diligence in
the vigilance over the goods transported by them. This
extraordinary responsibility, according to Art. 1736, lasts from
the time the goods are unconditionally placed in the possession
of and received by the carrier until they are delivered actually or
constructively to the consignee or person who has the right to
receive them. Art. 1737 states that the common carrier's duty to
observe extraordinary diligence in the vigilance over the goods
transported by them 'remains in full force and effect even when
they are temporarily unloaded or stored in transit.' And Art. 1735
establishes the presumption that 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
had observed extraordinary diligence as required in Article 1733.
"The only exceptions to the foregoing extraordinary
responsibility of the common carrier is when the loss,
destruction, or deterioration of the goods is due to any of the
following causes:
"(1) Flood, storm, earthquake, lightning, 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.'
"Not one of the above excepted causes obtains in this
case." 5
The above rules remain basically unchanged even when the contract is
breached by tort 6 although noncontradictory principles on quasi-delict may then be
assimilated as also forming part of the governing law. Petitioner is not thus entirely
off track when it has likewise raised in its defense the tort doctrine of proximate
cause. Unfortunately for petitioner, however, the doctrine cannot, in this particular
instance, support its case. Proximate cause is that which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces injury and without
which the result would not have occurred. The exemplification by the Court in one
case 7 is simple and explicit; viz:
"(T)he proximate legal cause is that acting first and
producing the injury, either immediately or by setting other
events in motion, all constituting a natural and continuous chain
of events, each having a close causal connection with its
immediate predecessor, the final event in the chain immediately
affecting the injury as a natural and probable result of the cause
which first acted, under such circumstances that the person
responsible for the first event should, as an ordinarily prudent
and intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might
probably result therefrom."
It remained undisputed that private respondent's luggage was lost while it
was in the custody of petitioner. It was supposed to arrive on the same flight that
private respondent took in returning to Manila on 02 September 1987. When she
discovered that the luggage was missing, she promptly accomplished and filed a
Property Irregularity Report. She followed up her claim on 14 September 1987, and
filed, on the following day, a formal letter-complaint with petitioner. She felt
relieved when, on 23 October 1987, she was advised that her luggage had finally
been found, with its contents intact when examined, and that she could expect it to
arrive on 27 October 1987. She then waited anxiously only to be told later that her
luggage had been lost for the second time. Thus, the appellate court, given all the
facts before it, sustained the trial court in finding petitioner ultimately guilty of
"gross negligence" in the handling of private respondent's luggage. The "loss of said
baggage not only once but twice," said the appellate court, "underscores the wanton
negligence and lack of care" on the part of the carrier.
 The above findings, which certainly cannot be said to be without basis, aircraft complement should inflict some physical injury on a
foreclose whatever rights petitioner might have had to the possible limitation of passenger, or maliciously destroy or damage the latter's property,
liabilities enjoyed by international air carriers under the Warsaw Convention the Convention might successfully be pleaded as the sole gauge
(Convention for the Unification of Certain Rules Relating to International Carriage to determine the carrier's liability to the passenger. Neither may
by Air, as amended by the Hague Protocol of 1955, the Montreal Agreement of the Convention be invoke to justify the disregard of some
1966, the Guatemala Protocol of 1971 and the Montreal Protocols of 1975). extraordinary sort of damage resulting to a passenger and
In Alitalia vs. Intermediate Appellate Court, 8 now Chief Justice Andres R. Narvasa, preclude recovery therefor beyond the limits set by said
speaking for the Court, has explained it well; he said: Convention. It is in this sense that the Convention has been
applied, or ignored, depending on the peculiar facts presented by
"The Warsaw Convention however denies to the carrier each case."
availment 'of the provisions which exclude or limit his liability,
if the damage is caused by his wilful misconduct or by such The Court thus sees no error in the preponderant application to the instant
default on his part as, in accordance with the law of the court case by the appellate court, as well as by the trial court, of the usual rules on the
seized of the case, is considered to be equivalent to wilful extent of recoverable damages beyond the Warsaw limitations. Under domestic law
misconduct,' or 'if the damage is (similarly) caused . . . by any and jurisprudence (the Philippines being the country of destination), the attendance
agent of the carrier acting within the scope of his employment.' of gross negligence (given the equivalent of fraud or bad faith) holds the common
The Hague Protocol amended the Warsaw Convention by carrier liable for all damages which can be reasonably attributed, although
removing the provision that if the airline took all necessary steps unforeseen, to the non-performance of the obligation, 9 including moral and
to avoid the damage, it could exculpate itself completely, and exemplary damages. 10
declaring the stated limits of liability not applicable 'if it is
proved that the damage resulted from an act or omission of the WHEREFORE, the decision appealed from is AFFIRMED. Costs against
carrier, its servants or agents, done with intent to cause damage petitioner.
or recklessly and with knowledge that damage would probably SO ORDERED.
result.' The same deletion was effected by the Montreal
Agreement of 1966, with the result that a passenger could ||| (Sabena Belgian World Airlines v. Court of Appeals, G.R. No. 104685, [March 14,
recover unlimited damages upon proof of wilful misconduct. 1996], 325 PHIL 291-303)
"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. 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' 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.'
Nor may it for a moment be supposed that if a member of the

[G.R. No. 119706. March 14, 1996.]
PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS
and GILDA C. MEJIA, respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
Emmanuel G. Vinco for private respondent.
SYLLABUS
1. COMMERCIAL LAW; COMMON CARRIERS; BILLS OF LADING;
PROVISION LIMITING LIABILITY; VALIDITY UPHELD BUT WITH
CAUTION. — Contracts of adhesion are not invalid per se. The Court has on
numerous occasions upheld the binding effect thereof. The peculiar nature of such
contracts behooves the Court to closely scrutinize the factual milieu to which the
provisions are intended to apply. Thus, just as consistently and unhesitatingly, but
without categorically invalidating such contracts, the Court has construed obscurities
and ambiguities in the restrictive provisions of contracts of adhesion strictly albeit
not unreasonably against the drafter thereof when justified in light of the operative
facts and surrounding circumstances. The validity of provisions limiting the liability
of carriers contained in bills of lading have been consistently upheld for the
following reason: ". . . The stipulation in the bill of lading limiting the common
carrier's liability to the value of goods appearing in the bill, unless the shipper or
owner declares a greater value, is valid and binding. The limitation of the carrier's
liability is sanctioned by the freedom of the contracting parties to establish such
stipulations, clauses, terms, or conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs and public policy. . . . ."
However, the Court has likewise cautioned against blind reliance on adhesion
contracts where the facts and circumstances warrant that they should be disregarded.
2. ID.; ID.; OBLIGATION UPON CARGOES; ACCEPTANCE OF
CARGO AS PACKED WITH ADVICE AGAINST THE NEED TO DECLARE ITS
ACTUAL VALUE DOES NOT PRECLUDE RECOVERY OF HIGHER AMOUNT
OF DAMAGES. — There is no absolute obligation on the part of a carrier to accept
a cargo. Where a common carrier accepts a cargo for shipment for valuable
consideration, it takes the risk of delivering it in good condition as when it was
loaded. And if the fact of improper packing is known to the carrier or its personnel,
or apparent upon observation but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. The
acceptance in due course by PAL of private respondent's cargo as packed and its
advice against the need for declaration of its actual value operated as an assurance to
private respondent that in fact there was no need for such a declaration. Petitioner,
therefore, is estopped from blaming private respondent for not declaring the value of
the cargo shipped and which would have otherwise entitled her to recover a higher
amount of damages.
3. ID.; ID.; FORMAL CLAIM FOR DAMAGES; REQUIREMENT OF
ITS IMMEDIATE FILING DEEMED COMPLIED WITH WHEN DELAY WAS
CAUSED BY COMMON CARRIER ITSELF. — Private respondent complied with
the requirement for the immediate filing of a formal claim for damages as required in
the air waybill or, at least, we find that there was substantial compliance therewith. If
there was any failure at all to file the formal claim within the prescriptive period
contemplated in the air waybill, this was largely because of PAL'S own doing, the
consequences of which cannot, in all fairness, be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal claim,
under Article 1186 of the Civil Code that condition was deemed fulfilled,
considering that the collective action of PAL'S personnel in tossing around the claim
and leaving it unresolved for an indefinite period of time was tantamount to
"voluntarily preventing its fulfillment." On grounds of equity, the filing of the
baggage freight claim, which sufficiently informed PAL of the damage sustained by
private respondent's cargo, constituted substantial compliance with the requirement
in the contract for the filing of a formal claim.
4. ID.; ID.; LIABILITY; WARSAW CONVENTION; RECOGNITION
THEREOF DOES NOT PRECLUDE APPLICATION OF LOCAL LAWS. —
While the facts and circumstances of this case do not call for the direct application of
the provisions of the Warsaw Convention, indeed, recognition of the Warsaw
Convention does not preclude the operation of the Civil Code and other pertinent
laws in the determination of the extent of liability of the common carrier. The
Warsaw Convention, being a treaty to which the Philippines is a signatory, is as
much a part of Philippine law as the Civil Code, Code of Commerce and other
municipal special laws. The provisions therein contained, specifically on the
limitation of carrier's liability, are operative in the Philippines but only in
appropriate situations.
5. ID.; ID.; PRESUMPTION OF NEGLIGENCE PRESENT WHEN ITEM
RECEIVED IN GOOD CONDITION AND DELIVERED WITH DAMAGE
WITHOUT EXPLANATION AS TO CAUSE; BAD FAITH PRESUMED FOR
THE UNEXPLAINED DELAY IN ACTING ON CLAIM FOR DAMAGES. —
Inasmuch as the subject item was received in apparent good condition, no contrary
notation or exception having been made on the air waybill upon its acceptance for
shipment, the fact that it was delivered with a broken glass door raises the
presumption that PAL's personnel were negligent in the carriage and handling of the
cargo. Furthermore, there was glaringly no attempt whatsoever on the part of
petitioner to explain the cause of the damage to the oven. The unexplained cause of
damage to private respondent's cargo constitutes gross carelessness or negligence
which by itself justifies the present award of damages. The equally unexplained and
inordinate delay in acting on the claim upon referral thereof to the claims officer,
Atty. Paco, and the noncommittal responses to private respondent's entreaties for
settlement of her claim for damages belies petitioner's pretension that there
was no bad faith on its part. This unprofessional indifference of PAL's personnel
despite full and actual knowledge of the damage to private respondent's cargo, just to
be exculpated from liability on pure technicality and bureaucratic subterfuge, smacks
of willful misconduct and insensitivity to a passenger's plight tantamount to bad faith
and renders unquestionable petitioner's liability for damages.
DECISION
REGALADO, J p:
This is definitely not a case of first impression. The incident which
eventuated in the present controversy is a drama of common contentious occurrence
between passengers and carriers whenever loss is sustained by the former. Withal,
the exposition of the factual ambiance and the legal precepts in this adjudication may
hopefully channel the assertiveness of passengers and the intransigence of carriers
into the realization that at times a bad extrajudicial compromise could be better than
a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of
Appeals in CA-G.R. CV No. 42744 1 which affirmed the decision of the lower
court 2 finding petitioner Philippine Air Lines, Inc. (PAL) liable as follows:
"ACCORDINGLY, judgment is hereby rendered
ordering defendant Philippine Air Lines, Inc., to pay plaintiff
Gilda C. Mejia:
(1) P30,000.00 by way of actual damages of the
microwave oven;
(2) P10,000.00 by way of moral damages;
(3) P20,000.00 by way of exemplary damages;
(4) P10,000.00 as attorney's fee;
all in addition to the costs of the suit.
Defendant's counterclaim is hereby dismissed for lack
of merit." 3
The facts as found by respondent Court of Appeals are as follows:
"On January 27, 1990, plaintiff Gilda C. Mejia shipped
thru defendant, Philippine Airlines, one (1) unit microwave
oven, with a gross weight of 33 kilograms from San Francisco,
U.S.A. to Manila, Philippines. Upon arrival, however, of said
article in Manila, Philippines, plaintiff discovered that its front
glass door was broken and the damage rendered it unserviceable.
Demands both oral and written were made by plaintiff against
the defendant for the reimbursement of the value of the damaged
microwave oven, and transportation charges paid by plaintiff to
defendant company. But these demands fell on deaf ears.
"On September 25, 1990, plaintiff Gilda C. Mejia filed
the instant action for damages against defendant in the lower
court.
"In its answer, defendant Airlines alleged inter alia, by
way of special and affirmative defenses, that the court
has no jurisdiction over the case; that plaintiff has no valid cause
of action against defendant since it acted only in good faith and
in compliance with the requirements of the law, regulations,
conventions and contractual commitments; and that defendant
had always exercised the required diligence in the selection,
hiring and supervision of its employees." 4
What had therefore transpired at the trial in the court a quo is narrated as
follows:
"Plaintiff Gilda Mejia testified that sometime on
January 27, 1990, she took defendant's plane from San
Francisco, U.S.A. for Manila, Philippines (Exh. 'F'). Amongst
her baggages (sic) was a slightly used microwave oven with the
brand name 'Sharp' under PAL Air Waybill No. 0-79-1013008-3
(Exh. 'A'). When shipped, defendant's office at San Francisco
inspected it. It was in good condition with its front glass intact.
She did not declare its value upon the advice of defendant's
personnel at San Francisco.
"When she arrived in Manila, she gave her sister
Concepcion C. Diño authority to claim her baggag(e) (Exh. 'G')
and took a connecting flight for Bacolod City.
"When Concepcion C. Dino claimed the baggag(e)
(Exh. 'B') with defendant, then with the Bureau of Customs, the
front glass of the microwave oven was already broken and
cannot be repaired because of the danger of radiation. They
demanded from defendant thru Atty. Paco P30,000.00 for the
damages although a brand new one costs P40,000.00, but
defendant refused to pay.
 "Hence, plaintiff engaged the services of counsel.
Despite demand (Exh. 'E') by counsel, defendant still refused to
pay.
"The damaged oven is still with defendant. Plaintiff is
engaged in (the) catering and restaurant business. Hence, the
necessity of the oven. Plaintiff suffered sleepless nights when
defendant refused to pay her (for) the broken oven and claims
P10,000.00 moral damages, P20,000.00 exemplary damages,
P10,000.00 attorney's fees plus P300.00 per court appearance
and P15,000.00 monthly loss of income in her business
beginning February, 1990.
"Defendant Philippine Airlines thru its employees
Rodolfo Pandes and Vicente Villaruz posited that plaintiff's
claim was not investigated until after the filing of the formal
claim on August 13, 1990 (Exh. '6' also Exh. 'E'). During the
investigations, plaintiff failed to submit positive proof on the
value of the cargo. Hence her claim was denied.
"Also plaintiff's claim was filed out of time under
paragraph 12, a(1) of the Air Waybill (Exh. 'A', also Exh. '1')
which provides: '(a) the person entitled to delivery must make a
complaint to the carrier in writing in case: (1) of visible damage
to the goods, immediately after discovery of the damage and at
the latest within 14 days from the receipt of the goods." 5
As stated at the outset, respondent Court of Appeals similarly ruled in favor
of private respondent by affirming in full the trial court's judgment in Civil Case No.
6210, with costs against petitioner. 6 Consequently, petitioner now impugns
respondent appellate court's ruling insofar as it agrees with (1) the conclusions of the
trial court that since the air waybill is a contract of adhesion, its provisions should be
strictly construed against herein petitioner; (2) the finding of the trial court that
herein petitioner's liability is not limited by the provisions of the air waybill; and (3)
the award by the trial court to private respondent of moral and exemplary damages,
attorney's fees and litigation expenses.
The trial court relied on the ruling in the case of Fieldmen's Insurance Co.,
Inc. vs. Vda. De Songco, et al. 7 in finding that the provisions of the air waybill
should be strictly construed against petitioner. More particularly, the court below
stated its findings thus:
"In this case, it is seriously doubted whether plaintiff
had read the printed conditions at the back of the Air Waybill
(Exh. '1'), or even if she had, if she was given a chance to
negotiate on the conditions for loading her microwave oven.
Instead she was advised by defendant's employee at San
Francisco, U.S.A., that there is no need to declare the value of
her oven since it is not brand new. Further, plaintiff testified that
she immediately submitted a formal claim for P30,000.00 with
defendant. But their claim was referred from one employee to
another th(e)n told to come back the next day, and the next day,
until she was referred to a certain Atty. Paco. When they got
tired and frustrated of coming without a settlement of their claim
in sight, they consulted a lawyer who demanded from defendant
on August 13, 1990 (Exh. 'E", an[d] Exh. '6').
"The conclusion that inescapably emerges from the
above findings of fact is to concede it with credence . . . ." 8
Respondent appellate court approved said findings of the trial court in this
manner:
"We cannot agree with defendant-appellant's above
contention. Under our jurisprudence, the Air Waybill is a
contract of adhesion considering that all the provisions thereof
are prepared and drafted only by the carrier (Sweet Lines vs.
Teves, 83 SCRA 361). The only participation left of the other
party is to affix his signature thereto (BPI Credit Corporation vs.
Court of Appeals, 204 SCRA 601; Saludo, Jr. vs. C.A., 207
SCRA 498; Maersk vs. Court of Appeals, 222 SCRA 108,
among the recent cases). In the earlier case of Angeles
v. Calasanz, 135 SCRA 323, the Supreme Court ruled that 'the
terms of a contract (of adhesion) must be interpreted against the
party who drafted the same.' . . ." 9
Petitioner airlines argues that the legal principle enunciated
in Fieldmen's Insurance does not apply to the present case because the provisions of
the contract involved here are neither ambiguous nor obscure. The front portion of
the air waybill contains a simple warning that the shipment is subject to the
conditions of the contract on the dorsal portion thereof regarding the limited liability
of the carrier unless a higher valuation is declared, as well as the reglementary period
within which to submit a written claim to the carrier in case of damage or loss to the
cargo. Granting that the air waybill is a contract of adhesion, it has been ruled by the
Court that such contracts are not entirely prohibited and are in fact binding regardless
of whether or not respondent herein read the provisions thereof. Having contracted
the services of petitioner carrier instead of other airlines, private respondent in effect
negotiated the terms of the contract and thus became bound thereby. 10
Counsel for private respondent refutes these arguments by saying that due
to her eagerness to ship the microwave oven to Manila, private respondent assented
to the terms and conditions of the contract without any opportunity to question or
change its terms which are practically on a "take-it-or-leave-it" basis, her only
participation therein being the affixation of her signature. Further, reliance on
the Fieldmen's Insurance case is misplaced since it is not the ambiguity or obscurity
of the stipulation that renders necessary the strict interpretation of a contract of
adhesion against the drafter, but the peculiarity of the transaction wherein one party,
normally a corporation, drafts all the provisions of the contract without any
participation whatsoever on the part of the other party other than affixment of
signature. 11
A review of jurisprudence on the matter reveals the consistent holding of
the Court that contracts of adhesion are not invalid per se and that it has on
numerous occasions upheld the binding effect thereof. 12 As explained in Ong Yiu
vs. Court of Appeals, et al., supra:
". . . . Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the
regulation. It 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 . . . , 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."
As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:
". . . , it should be borne in mind that a contract of
adhesion may be struck down as void and unenforceable, for
being subversive of public policy, only when the weaker party is
imposed upon in dealing with the dominant bargaining party and
is reduced to the alternative of taking it or leaving it, completely
deprived of the opportunity to bargain on equal footing . . . ."
but subject to the caveat that —
". . . Just because we have said that Condition No. 5 of
the airway bill is binding upon the parties to and fully operative
in this transaction, it does not mean, and let this serve as fair
warning to respondent carriers, that they can at all times
whimsically seek refuge from liability in the exculpatory
sanctuary of said Condition No. 5 . . . ."
The peculiar nature of such contracts behooves the Court to closely
scrutinize the factual milieu to which the provisions are intended to apply. Thus, just
as consistently and unhesitatingly, but without categorically invalidating such
contracts, the Court has construed obscurities and ambiguities in the restrictive
provisions of contracts of adhesion strictly albeit not unreasonably against the drafter
thereof when justified in light of the operative facts and surrounding
circumstances. 13
We find nothing objectionable about the lower court's reliance upon
the Fieldmen's Insurance case, the principles wherein squarely apply to the present
petition. The parallelism between the aforementioned case and this one is readily
apparent for, just as in the instant case, it is the binding effect of the provisions in a
contract of adhesion (an insurance policy in Fieldmen's Insurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the
judgment of liability against petitioner insurance company therein, and necessarily
interpreting the provisions of the insurance policy as ineffective, was the finding that
the representations made by he agent of the insurance company rendered it
impossible to comply with the conditions of the contract in question, rather than the
mere ambiguity of its terms. The extended pronouncements regarding strict
construction of ambiguous provisions in an adhesion contract against its drafter,
which although made by the Court as an aside but has perforce evolved into a
judicial tenet over time, was actually an incidental statement intended to emphasize
the duty of the court to protect the weaker, as against the more dominant, party to a
contract, as well as to prevent the iniquitous situation wherein the will of one party is
imposed upon the other in the course of negotiation.
Thus, there can be no further question as to the validity of the terms of the
air waybill, even if the same constitutes a contract of adhesion. Whether or not the
provisions thereof particularly on the limited liability of the carrier are binding on
private respondent in this instance must be determined from the facts and
circumstances involved vis-a-vis the nature of the provisions sought to be enforced,
taking care that equity and fair play should characterize the transaction under review.
On petitioner's insistence that its liability for the damage to private
respondent's microwave oven, if any, should be limited by the provisions of the air
waybill, the lower court had this to say:
"By and large, defendant's evidence is anchored
principally on plaintiff's alleged failure to comply with
paragraph 12, a(1) (Exh. '1-C-2') of the Air waybill (Exh. 'A,'
also Exh. '1'), by filing a formal claim immediately after
discovery of the damage. Plaintiff filed her formal claim only on
August 13, 1990 (Exh. '6', also Exh. 'E'). And, failed to present
positive proof on the value of the damaged microwave oven.
Hence, the denial of her claim.
"This Court has misgivings about these pretensions of
defendant.
xxx xxx xxx
"Finally, the Court finds no merit to defendant's
contention that under the Warsaw Convention, its liability if any,
cannot exceed U.S. $20.00 based on weight as plaintiff did not
declare the contents of her baggage nor pay additional charges
before the flight." 14
 The appellate court declared correct the non-application by the trial court of
the limited liability of therein defendant-appellant under the "Conditions of the
Contract" contained in the air waybill, based on the ruling in Cathay Pacific
Airways, Ltd. vs. Court of Appeals, et al., 15 which substantially enunciates the rule
that while the Warsaw Convention has the force and effect of law in the Philippines,
being a treaty commitment by the government and as a signatory thereto, the same
does not operate as an exclusive enumeration of the instances when a carrier shall be
liable for breach of contract or as an absolute limit of the extent of liability, nor does
it preclude the operation of the Civil Code or other pertinent laws.
Petitioner insists that both respondent court and the trial court erred in
finding that petitioner's liability, if any, is not limited by the provisions of the air
waybill, for, as evidence of the contract of carriage between petitioner and private
respondent, it substantially states that the shipper certifies to the correctness of the
entries contained therein and accepts that the carrier's liability is limited to US$20
per kilogram of goods lost, damaged or destroyed unless a value is declared and a
supplementary charge paid. Inasmuch as no such declaration was made by private
respondent, as she admitted during cross-examination, the liability of petitioner, if
any, should be limited to 28 kilograms multiplied by US$20, or $560. Moreover, the
validity of these conditions has been upheld in the leading case of Ong Yiu vs. Court
of Appeals, et al., supra, and subsequent cases, for being a mere reiteration of the
limitation of liability under the Warsaw Convention, which treaty has the force and
effect of law. 16
It is additionally averred that since private respondent was merely advised,
not ordered, that she need not declare a higher value for her cargo, the final decision
of refraining from making such a declaration fell on private respondent and should
not put the petitioner in estoppel from invoking its limited liability. 17
In refutation, private respondent explains that the reason for the absence of
a declaration of a higher value was precisely because petitioner's personnel in San
Francisco, U.S.A. advised her not to declare the value of her cargo, which testimony
has not at all been rebutted by petitioner. This being so, petitioner is estopped from
faulting private respondent for her failure to declare the value of the microwave
oven. 18
The validity of provisions limiting the liability of carriers contained in
bills of lading have been consistently upheld for the following reason:
". . . . The stipulation in the bill of lading limiting the
common carrier's liability to the value of goods appearing in the
bill, unless the shipper or owner declares a greater value, is valid
and binding. The limitation of the carrier's liability is sanctioned
by the freedom of the contracting parties to establish such
stipulations, clauses, terms, or conditions as they may deem
convenient, provided they are not contrary to law, morals, good
customs and public policy. . . ." 19
However, the Court has likewise cautioned against blind reliance on adhesion
contracts where the facts and circumstances warrant that they should be
disregarded. 20
In the case at bar, it will be noted that private respondent signified an
intention to declare the value of the microwave oven prior to shipment, but was
explicitly advised against doing so by PAL's personnel in San Francisco, U.S.A., as
borne out by her testimony in court:
xxx xxx xxx
"Q Did you declare the value of the shipment?
A No. I was advised not to.
Q Who advised you?
A At the PAL Air Cargo." 21
It cannot be denied that the attention of PAL through its personnel in San
Francisco was sufficiently called to the fact that private respondent's cargo was
highly susceptible to breakage as would necessitate the declaration of its actual
value. Petitioner had all the opportunity to check the condition and manner of
packing prior to acceptance for shipment, 22 as well as during the preparation of the
air waybill by PAL's Acceptance Personnel based on information supplied by the
shipper, 23 and to reject the cargo if the contents or the packing did not meet the
company's required specifications. Certainly, PAL could not have been otherwise
prevailed upon to merely accept the cargo.
While Vicente Villaruz, officer-in-charge of the PAL Import Section at the
time of incident, posited that there may have been inadequate and improper packing
of the cargo, 24 which by itself could be a ground for refusing carriage of the goods
presented for shipment, he nonetheless admitted on cross-examination that private
respondent's cargo was accepted by PAL in its San Francisco office:
"ATTY. VINCO
 So that, be that as it may, my particular concern is that, it is the
PAL personnel that accepts the baggage?
WITNESS
 Yes, sir.
ATTY. VINCO
 Also, if he comes from abroad like in this particular case, it is
the PAL personnel who accepts the baggage?
WITNESS
 Yes, sir.
 ATTY. VINCO cargo it accepts for carriage. He further opined that the microwave oven was only a
general, not a fragile, cargo which did not require any special handling. 26
 And the PAL personnel may or may not accept the baggage?
There is no absolute obligation on the part of a carrier to accept a cargo.
WITNESS Where a common carrier accepts a cargo for shipment for valuable consideration, it
 Yes, sir. takes the risk of delivering it in good condition as when it was loaded. And if the fact
of improper packing is known to the carrier or its personnel, or apparent upon
ATTY. VINCO observation but it accepts the goods notwithstanding such condition, it is not relieved
of liability for loss or injury resulting therefrom. 27
 According to what is stated as in the acceptance of the cargo, it
is to the best interest of the airlines, that is, he want(s) The acceptance in due course by PAL of private respondent's cargo as
also that the airlines would be free from any liability. packed and its advice against the need for declaration of its actual value operated as
Could that be one of the grounds for not admitting a an assurance to private respondent that in fact the was no need for such a declaration.
baggage? Petitioner can hardly be faulted for relying on the representations of PAL's own
personnel.
WITNESS
In other words, private respondent Mejia could and would have complied
 Safety is number one (1) with the conditions stated in the air waybill, i.e., declaration of a higher value and
xxx xxx xxx payment of supplemental transportation charges, entitling her to recovery of damages
beyond the stipulated limit of US$20 per kilogram of cargo in the event of loss or
ATTY. VINCO damage, had she not been effectively prevented from doing so upon the advice of
PAL's personnel for reasons best known to themselves.
 So, this baggage was accepted and admitted in San Francisco?
As pointed out by private respondent, the aforestated facts were not denied
WITNESS
by PAL in any of its pleadings nor rebutted by way of evidence presented in the
 Yes, sir. course of the trial, and thus in effect it judicially admitted that such an advice was
given by its personnel in San Francisco, U.S.A. Petitioner, therefore, is estopped
ATTY. VINCO from blaming private respondent for not declaring the value of the cargo shipped and
which would have otherwise entitled her to recover a higher amount of damages. The
 And you could not show any document to the Court that would
Court's bidding in the Fieldmen's Insurance case once again rings true:
suggest that this baggage was denied admittance by
your office at San Francisco? ". . . As estoppel is primarily based on the doctrine of
good faith and the avoidance of harm that will befall an innocent
WITNESS
party due to its injurious reliance, the failure to apply it in this
 No, I cannot show. case would result in gross travesty of justice."

ATTY. VINCO
 Now, can you show any document that would suggest that there
was insufficient pac(k)aging on this particular baggage
from abroad?
WITNESS
 No, sir." 25
In response to the trial court's questions during the trial, he also stated that
while the passenger's declaration regarding the general or fragile character of the
cargo is to a certain extent determinative of its classification, PAL nevertheless has
and exercises discretion as to the manner of handling required by the nature of the
We likewise uphold the lower court's finding that private respondent
complied with the requirement for the immediate filing of a formal claim for
damages as required in the air waybill or, at least, we find that there was substantial
compliance therewith.
Private respondent testified that she authorized her sister, Concepcion Diño,
to claim her cargo consisting of a microwave oven since the former had to take a
connecting flight to Bacolod City on the very same afternoon of the day of her
arrival. 28 As instructed, Concepcion Diño promptly proceeded to PAL's Import
Section the next day to claim the oven. Upon discovering that the glass door was
broken, she immediately filed a claim by way of the baggage freight claim 29 on
which was duly annotated the damage sustained by the oven. 30
 Her testimony relates what took place thereafter:  So, what did you do, did you make a report or did you tell Atty.
Paco of your scouting around for a possible
"ATTY. VINCO replacement?
 So, after that inspection, what did you do? WITNESS
WITNESS  I did call him back at his office. I made a telephone call.
 After that annotation placed by Mr. Villaruz, I went home and I ATTY. VINCO
followed it up the next day with the Clerk of PAL cargo
office.  And what answer did Atty. Paco make after you have reported
back to him?
ATTY. VINCO
WITNESS
 What did the clerk tell you?
 They told me that they were going to process the claim based on
WITNESS the price that I gave them but there was no definite
 She told me that the claim was being processed and I made result.
several phone calls after that. I started my follow-ups ATTY. VINCO
February up to June 1990.
 How many times did you go and see Atty. Paco regarding the
ATTY. VINCO claim of your sister?
 And what results did those follow-ups produce? WITNESS
WITNESS  I made one personal visit and several follow-up calls. With
 All they said (was) that the document was being processed, that Atty. Paco, I made one phone call but I made several
they were waiting for Atty. Paco to report to the office phone calls with his secretary or the clerk at PAL cargo
and they could refer the matter to Atty. Paco. office and I was trying to locate him but unfortunately,
he was always out of his office." 31
ATTY. VINCO
PAL claims processor, Rodolfo Pandes, * confirmed having received the
 Who is this Atty. Paco? baggage freight claim on January 30, 1990 32 and the referral to and extended
pendency of the private respondent's claim with the office of Atty. Paco, to wit:
WITNESS
"ATTY. VINCO:
 He was the one in-charge of approving our claim.
Q And you did instruct the claimant to see the Claim Officer of
ATTY. VINCO the company, right?
 Were you able to see Atty. Paco? WITNESS:
WITNESS A Yes, sir.
 Yes, sir. I personally visited Atty. Paco together with my auntie ATTY. VINCO:
who was a former PAL employee.
Q And the Claim Officer happened to be Atty. Paco?
xxx xxx xxx
WITNESS:
ATTY. VINCO
A Yes, sir.
 ATTY. VINCO:
Q And you know that the plaintiff thru her authorized
representative Concepcion Diño, who is her sister had
many times gone to Atty. Paco, in connection with this
claim of her sister?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q As a matter of fact even when the complaint was already filed
here in Court the claimant had continued to call about
the settlement of her claim with Atty. Paco, is that
correct?
xxx xxx xxx
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q You know this fact because a personnel saw you in one of the
pre-trial here when this case was heard before the sala
of Judge Moscardon, is that correct?
WITNESS:
A Yes.
ATTY. VINCO:
Q In other words, the plaintiff rather had never stop(ped) in her
desire for your company to settle this claim, right?
WITNESS
A Yes, sir." 33
Considering the abovementioned incidents and private respondent Mejia's
own zealous efforts in following up the claim, 34 it was clearly not her fault that the
letter of demand for damages could only be filed, after months of exasperating
follow-up of the claim, on August 13, 1990. 35 If there was any failure at all to file
the formal claim within the prescriptive period contemplated in the air waybill, this
was largely because of PAL's own doing, the consequences of which cannot, in all
fairness, be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a
formal claim, under Article 1186 of the Civil Code that condition was deemed
fulfilled, considering that the collective action of PAL's personnel in tossing around
the claim and leaving it unresolved for an indefinite period of time was tantamount
to "voluntarily preventing its fulfillment." On grounds of equity, the filing of the
baggage freight claim, which sufficiently informed PAL of the damage sustained by
private respondent's cargo, constituted substantial compliance with the requirement
in the contract for the filing of a formal claim.
All told, therefore, respondent appellate court did not err in ruling that the
provision on limited liability is not applicable in this case. We, however, note in
passing that while the facts and circumstances of this case do not call for the direct
application of the provisions of the Warsaw Convention, it should be stressed that,
indeed, recognition of the Warsaw Convention does not preclude the operation of
the Civil Code and other pertinent laws in the determination of the extent of liability
of the common carrier. 36
The Warsaw Convention, being a treaty to which the Philippines is a
signatory, is as much a part of Philippine law as the Civil Code, Code of Commerce
and other municipal special laws. 37 The provisions therein contained, specifically
on the limitation of carrier's liability, are operative in the Philippines but only in
appropriate situations.
Petitioner ascribes ultimate error in the award of moral exemplary damages
and attorney's fees in favor of private respondent in that other than the statement of
the trial court that petitioner acted in bad faith in denying private respondent's claim,
which was affirmed by the Court of Appeals, there is no evidence on record that the
same is true. The denial of private respondent's claim was supposedly in the honest
belief that the same had prescribed, there being no timely formal claim filed, and
despite having been given an opportunity to submit positive proof of the value of the
damaged microwave oven, no such proof was submitted. Petitioner insists that its
failure to deliver the oven in the condition in which it was shipped could hardly be
considered as amounting to bad faith. 38
Private respondent counters that petitioner's failure to deliver the microwave
oven in the condition in which it was received can be described as gross negligence
amounting to bad faith; on the further consideration that it failed to prove that it
exercised the extraordinary diligence required by law, and that no explanation
whatsoever was given as to why the front glass of the oven was broken. 39
The trial court justified its award of actual, moral and exemplary damages,
and attorney's fees in favor of private respondent in this wise:
"Since the plaintiff's baggage destination was the
Philippines, Philippine law governs the liability of the defendant
for damages for the microwave oven.
"The provisions of the New Civil Code on common
carriers are Article(s) 1733, 1735 and 1753 . . . .
xxx xxx xxx
 "In this case, defendant failed to overcome, not only the
presumption but more importantly, plaintiff's evidence that
defendant's negligence was the proximate cause of the damages
of the microwave oven. Further, plaintiff has established that
defendant acted in bad faith when it denied the former's claim on
the ground that the formal claim was filed beyond the period as
provided in paragraph 12 (a-1) (Exh. '1-C-2') of the Air Waybill
(Exh. '1', also Exh 'A'), when actually, Concepcion Diño, sister
of plaintiff has immediately filed the formal claim upon
discovery of the damage." 40
Respondent appellate court was in full agreement with the trial court's
finding of bad faith on the part of petitioner as a basis for the award of the
aforestated damages, declaring that:
"As to the last assigned error, a perusal of the facts and
law of the case reveals that the lower court's award of moral and
exemplary damages, attorney's fees and costs of suit to plaintiff-
appellee is in accordance with current laws and jurisprudence on
the matter. Indeed, aside from the fact that defendant-appellant
acted in bad faith in breaching the contract and in denying
plaintiff's valid claim for damages, plaintiff-appellee underwent
profound distress, sleepless nights, and anxiety upon knowledge
of her damaged microwave oven in possession of defendant-
appellant, entitling her to the award of moral and exemplary
damages (Cathay Pacific Airways, Ltd. vs. C.A., supra; Arts.
2219 & 2221, New Civil Code), and certainly plaintiff-
appellant's unjust refusal to comply with her valid demand for
payment, thereby also entitling her to reasonable attorney's fees
[Art. 2208 (2) and (11), id.]." 41
It will be noted that petitioner never denied that the damage to the
microwave oven was sustained while the same was in its custody. The possibility
that said damage was due to causes beyond the control of PAL has effectively been
ruled out since the entire process in handling of the cargo — from the unloading
thereof from the plane, the towing and transfer to the PAL warehouse, the transfer to
the Customs examination area, and its release thereafter to the shipper — was done
almost exclusively by, and with the intervention or, at the very least, under the direct
supervision of a responsible PAL personnel. 42
The very admissions of PAL, through Vicente Villaruz of its Import
Section, as follows:
"ATTY. VINCO
 So that, you now claim, Mr. Witness, that from the time the
cargo was unloaded from the plane until the time it
reaches the Customs counter where it was inspected, all
the way, it was the PAL personnel who did all these
things?
WITNESS
 Yes, however, there is also what we call the Customs
storekeeper and the Customs guard along with the
cargo.
ATTY. VINCO
 You made mention about a locator?
WITNESS
 Yes, sir.
ATTY. VINCO
 This locator, is he an employee of the PAL or the Customs?
WITNESS
 He is a PAL employee." 4 3
lead to the inevitable conclusion that whatever damage may have been sustained
by the cargo is due to causes attributable to PAL's personnel or, at all events,
under their responsibility.
Moreover, the trial court underscored the fact that petitioner was not able to
overcome the statutory presumption of negligence in Article 1735 which, as a
common carrier, it was laboring under in case of loss, destruction or deterioration of
goods, through proper showing of the exercise of extraordinary diligence. Neither
did it prove that the damage to the microwave oven was because of any of the
excepting causes under Article 1734, all of the same Code. Inasmuch as the subject
item was received in apparent good condition, no contrary notation or exception
having been made on the air waybill upon its acceptance for shipment, the fact that it
was delivered with a broken glass door raises the presumption that PAL's personnel
were negligent in the carriage and handling of the cargo. 44
Furthermore, there was glaringly no attempt what so ever on the part of
petitioner to explain the cause of the damage to the oven. The unexplained cause of
damage to private respondent's cargo constitutes gross carelessness or negligence
which by itself justifies the present award of damages. 45 The equally unexplained
and inordinate delay in acting on the claim upon referral thereof to the claims officer,
Atty. Paco, and the noncommittal responses to private respondent's entreaties for
settlement of her claim for damages belies petitioner's pretension that there
was no bad faith on its part. This unprofessional indifference of PAL's personnel
despite full and actual knowledge of the damage to private respondent's cargo, just to
be exculpated from liability on pure technicality and bureaucratic subterfuge, smacks
of willful misconduct and insensitivity to a passenger's plight tantamount to bad
faith 46 and renders unquestionable petitioner's liability for damages. In sum, there
is no reason to disturb the findings of the trial court in this case, especially with its
full affirmance by respondent Court of Appeals.
On this note, the case at bar goes into the annals of our jurisprudence after
six years and recedes into the memories of our legal experience as just another
inexplicable inevitability. We will never know exactly how many man-hours went
into the preparation, litigation and adjudication of this simple dispute over an oven,
which the parties will no doubt insist they contested as a matter of principle. One
thing, however, is certain. As long as the first letter in "principle" is somehow
outplaced by the peso sign, the courts will always have to resolve similar
controversies although mutual goodwill could have dispensed with judicial recourse.
IN VIEW OF ALL THE FOREGOING, the assailed judgment of
respondent Court of Appeals is AFFIRMED in toto.
SO ORDERED.
||| (Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 119706, [March 14, 1996],
325 PHIL 303-334)
[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.
Picazo, Agcaoili, Santayana, Reyes & Tayao for petitioner.
Bengzon, Villegas, Zarraga, Narciso & Cudala for respondents.
SYNOPSIS
The KLM Dutch Airlines secured seat reservation for respondents and
their two companions from carriers that would ferry them through their world
tour. Their itinerary included the Barcelona-Lourdes route, serviced by only one
airline, the Aer Lingus. They were issued KLM tickets for their entire trip, but
their coupon for the Aer Lingus portion (Flight 861, June 22, 1965) was marked
"RQ" which means "on request." At the KLM office in Frankfurt, Germany,
respondents obtained a confirmation from Aer Lingus of seat reservations on
flight 861. In the afternoon of June 22, 1965, the Aer Lingus manager at
Barcelona Airport directed respondents to check in. They did as instructed and
were accepted for passage. However, although their companions were allowed
to take the plane, respondents were brusquely off-loaded and shoved aside on
orders of the Aer Lingus manager with the aid of policeman who shouted at
them "Coños! Ignorantes Filipinos." As a result they had to take a train to
Lourdes.
Respondents sued petitioner for damages arising from breach of
carriage and for humiliating treatment received by them in the hands of Aer
Lingus. After the hearing, the trial court awarded damages to respondents. On
appeal, the KLM sought exoneration, but the Court of Appeals sustained the trial
court and increased the award of damages.
Petitioner assailed the decision of the Court of Appeals, and prayed for
exculpation. It argued that its liability for damages is limited only to occurrence
on its own lines citing. Art. 30 of the Warsaw Convention which provides that in
the 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 delay occurred.
The Supreme Court affirmed the judgment of the Court of Appeals.
SYLLABUS
1. AIR CARRIER; DAMAGES; ARTICLE 30 OF WARSAW
CONVENTION DOES NOT APPLY TO DAMAGE RESULTING FROM
WILLFUL MISCONDUCT. — 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 strip, 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.
2. ID.; DUTY OF CARRIER TO INFORM PASSENGER OF TERMS
AND CONDITIONS OF A CONTRACT. — 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.
3. ID.; LIABILITY OF TICKET ISSUING CARRIER IN
CONTRACT OF CARRIAGE TO BE PERFORMED BY SUCCESSIVE
CARRIERS. — 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.
4. COURTS; DUTY OF COURTS TO ASSIST THE AGGRIEVED
PARTY. — It is but 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.
DECISION
CASTRO, J p:
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).
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 falling 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 the 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 occurred, 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 .. 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
[G.R. No. 150843. March 14, 2003.]
and embarrassment suffered by the respondents at the hands of a supercilious
CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. SPOUSES
boor of the Aer Lingus.
DANIEL VAZQUEZ and MARIA LUISA MADRIGAL
ACCORDINGLY, the judgment of the Court of Appeals dated August VAZQUEZ, respondents.
14, 1969 is affirmed, at KLM's cost.
Quasha Ancheta Peña Nolasco for petitioner.
||| (KLM Royal Dutch Airlines v. Court of Appeals, G.R. No. L-31150, [July 22,
Candelaria Candelaria & Candelaria Law Firm and Bello Gozon Elma Parel
1975], 160 PHIL 237-244) Asuncion & Lucila for private respondents.

SYNOPSIS
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa
Madrigal Vazquez are frequent flyers of petitioner Cathay Pacific Airways, Ltd.,
and are Gold Card members of its Marco Polo Club. 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, they
were booked on Cathay's Flight CX-905 Business Class Section. When boarding
time was announced, a ground attendant 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. Dr. Vazquez continued
to refuse, so the ground stewardess 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. Upon their
return to Manila, the Vazquezes instituted before the Regional Trial Court of
 Makati City an action for damages against Cathay. 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. The trial
court found for the Vazquezes and awarded them damages. On appeal by the
petitioner, the Court of Appeals 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. Hence this petition.
The Supreme Court partly granted the petition. According to the Court,
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. The Court,
however, was not convinced that the upgrading or the breach of contract was
attended by fraud or bad faith. The Vazquezes were not induced to agree to the
upgrading through insidious words or deceitful machination or through willful
concealment of material facts. The attendant was honest in telling them that their
seats were already given to other passengers and the Business Class Section was
fully booked. The attendant might have failed to consider the remedy of offering
the First. Class seats to other passengers. But, the Court found no bad faith in
her failure to do so, even if that amounted to an exercise of poor judgment. The
Court set aside and deleted the award of moral damages and attorney's fees and
reduced the award for nominal damages to P5,000.
SYLLABUS
1. CIVIL LAW; CONTRACTS; BREACH OF CONTRACT; DEFINED.
— 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. 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." It is also
defined as the "[f]ailure, without legal excuse, to perform any promise which forms
the whole or part of the contract." acIASE
2. ID.; ID.; ID.; BY INSISTING ON THE UPGRADE, PETITIONER
BREACHED ITS CONTRACT OF CARRIAGE WITH THE RESPONDENTS. —
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.
3. ID.; ID.; NO PROOF OF FRAUD OR BAD FAITH ON THE PART OF
PETITIONER AIRLINE'S EMPLOYEE. — 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. 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. 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. Needless to state, an upgrading is for the better
condition and, definitely, for the benefit of the passenger.
4. CIVIL LAW; DAMAGES; MORAL DAMAGES; NOT APPLICABLE
IN CASE AT BAR; AIRLINE NOT SHOWN TO HAVE 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. 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. 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. 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. 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.
 
5. ID.; ID.; EXEMPLARY DAMAGES; REQUISITE THAT THE ACT OF
THE OFFENDER WAS ACCOMPANIED BY BAD FAITH OR DONE IN
WANTON, FRAUDULENT OR MALEVOLENT MANNER, ABSENT IN CASE
AT BAR. — 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. 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. 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.
6. ID.; ID.; NOMINAL DAMAGES; REDUCED. — 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. 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. 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. EIAaDC
DECISION
DAVIDE, JR., C.J p:
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 decision 1 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 Appeals 3 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. DSCIEa
No pronouncement on costs.
SO ORDERED.
||| (Cathay Pacific Airways Ltd. v. Spouses Vazquez, G.R. No. 150843, [March 14,
2003], 447 PHIL 306-327)
[G.R. No. L-22425. August 31, 1965.]
NORTHWEST AIRLINES, INC., petitioner, vs. NICOLAS
L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH
DIVISION), respondents.
Ross, Selph & Carrascoso for petitioner.
Bengzon, Villegas & Zarraga for respondents.
SYLLABUS
1. AIR CARRIERS; LIABILITY UNDER THE WARSAW CONVENTION OF
1929 AND FOR OTHER BREACHES OF CONTRACT. — Articles 17, 18 and 19
of the Warsaw Convention of 1929 merely declare the airlines liable for damage in
the cases enumerated therein, if the conditions specified are present. Neither the
provisions of said articles nor others regulate or exclude liability for other breaches
of contract by the air carriers.
2. ID.; ID.; ID.; LIABILITY FOR NOMINAL AND EXEMPLARY DAMAGES;
CASE AT BAR. — Respondent boarded petitioner's plane in Manila with a first
class ticket to Tokyo. Upon arrival at Okinawa, an agent of petitioner rudely
compelled him, in the presence of other passengers, to move to the tourist class.
Respondent protested, revealing that he was traveling in his official capacity as
delegate of the Republic of the Philippines to a conference in Tokyo. In order to
reach the conference on time, respondent obeyed. Held: Having been given first class
accommodation as he took petitioner's plane in Manila, respondent was entitled to
believe that this was a confirmation of his first class reservation and that he would
keep the same until his ultimate destination, Tokyo. Since the offense had been
committed with full knowledge of the fact that respondent was an official
representative of the Republic of the Philippines, the sum of P20,000.00 awarded as
damages may well be considered as merely nominal. At any rate, considering that
petitioners agent had acted in a wanton, reckless and oppressive manner, said award
may, also, be considered as one for exemplary damages.
DECISION
CONCEPCION, J p:
This is an action for damages for alleged breach of contract. After appropriate
proceedings the Court of First Instance of Manila, in which the case was originally
filed, rendered judgment sentencing defendant Northwest Airlines, Inc., —
hereinafter referred to as petitioner — to pay to plaintiff Cuenca — hereinafter
referred to as respondent — "the sum of P20,000 as moral damages, together with
the sum of P5,000 as exemplary damages, with legal interest thereon from the date of
the filing of the complaint" — December 12, 1959 — "until fully paid, plus the
further sum of P2,000 as attorney's fees and expenses of litigation". On appeal taken
by petitioner, said decision was affirmed by the Court of Appeals, except as to the
P50,000.00 exemplary damages, which was eliminated, and the P20,000.00 award
for moral damages, which was converted into nominal damages. The case is now
before us on petition for review by certiorari filed by petitioner, upon the ground that
the lower court has erred: (1) in holding that the Warsaw Convention of October 12,
1929, relative to transportation by air is not in force in the Philippines; (2) in not
holding that respondent has no cause of action; and (3) in awarding P20,000 as
nominal damages.
We deem it unnecessary to pass upon the first assignment of error because the same
is the basis of the second assignment of error, and the latter is devoid of merit, even
if we assumed the former to be well taken. Indeed, the second assignment of error is
predicated upon Articles 17, 18 and 19 of said Convention, reading:
"ART. 17. The carrier shall be liable for damage sustained in the
event of the death or wounding of a passenger or any other
bodily injury suffered by a passenger if the accident which
caused the damage so sustained took place on board the aircraft
or in the course of any of the operations of embarking or
disembarking.
"ART. 18. (1) The carrier shall be liable for damage sustained in
the event of the destruction or loss of, or of damage to, any
checked baggage, or any goods, if the occurrence which caused
the damage so sustained took place during the transportation by
air.
"(2) The transportation by air within the meaning of the
preceding paragraph shall comprise the period during which the
baggage or goods are in charge of the carrier, whether in an
airport or on board an aircraft, or, in the case of a landing outside
an airport, in any place whatsoever.
"(3) The period of the transportation by air shall not extend to
any transportation by land, by sea, or by river performed outside
an airport. If, however, such transportation takes place in the
performance of a contract for transportation by air, for the
purpose of loading, delivery, or transshipment, any damage is
presumed, subject to proof to the contrary, to have been the
result of an event which took place during the transportation by
air.
"ART. 19. The carrier shall be liable for damage occasioned by
delay in the transportation by air of passengers, baggage, or
goods."
Petitioner argues that pursuant to these provisions, an air "carrier is liable only" in
the event of death of a passenger or injury suffered by him, or of destruction or loss
of, or damage to any checked baggage or any goods, or of delay in the transportation
by air of passengers, baggage or goods. This pretense is not borne out by the
language of said Articles. The same merely declare the carrier liable for damages in
the enumerated cases, if the conditions therein specified are present. Neither said
provisions nor others in the aforementioned Convention regulate or exclude liability
for other breaches of contract by carrier. Under petitioner's theory, 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.
The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz.
4606), and Quijano vs. Philippine Air Lines (CA-G.R. No. 21804). Neither case is,
however, in point, aside from the fact that the latter is not controlling upon us. In the
first case, this Court eliminated a P10,000 award for nominal damages, because the
aggrieved party had already been awarded P6,000 as compensatory damages,
P30,000 as moral damages and P10,000 as exemplary damages, and "nominal
damages cannot co-exist with compensatory damages". In the case at bar, the Court
of Appeals has adjudicated no such compensatory, moral and exemplary damages to
respondent herein.
Moreover, there are special reasons why the P20,000.00 award in favor of
respondent herein is justified, even if said award were characterized as nominal
damages. When his contract of carriage was violated by the petitioner, respondent
held the office of Commissioner of Public Highways of the Republic of the
Philippines. Having boarded petitioner's plane in Manila with a first class ticket to
Tokyo, he was, upon arrival at Okinawa, transferred to the tourist class compartment.
Although he revealed that he was traveling in his official capacity as official delegate
of the Republic to a conference in Tokyo, an agent of petitioner rudely compelled
him, in the presence of other passengers, to move, over his objection, to the tourist
class, under threat of otherwise leaving him in Okinawa. In order to reach the
conference on time, respondent had no choice but to obey.
It is true that said ticket was marked "W/L", but respondent's attention was not called
thereto. Much less was he advised that "W/L" meant "wait listed". Upon the other
hand, having paid the first class fare in full and having been given first class
accommodation as he took petitioner's plane in Manila, respondent was entitled to
believe that this was a confirmation of his first class reservation and that he would
keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not
tried to explain or even alleged that the person to whom respondent's first class seat
was given had a better right thereto. In other words, since the offense had been
committed with full knowledge of the fact that respondent was an official
representative of the Republic of the Philippines, the sum of P20,000 awarded as
damages may well be considered as merely nominal. At any rate, considering that
petitioner's agent had acted in a wanton, reckless and oppressive manner, said award
may, also, be considered as one for exemplary damages.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
petitioner. It is so ordered.
||| (Northwest Airlines, Inc. v. Cuenca, G.R. No. L-22425, [August 31, 1965], 122
PHIL 403-407)