1. [1993V747] PHILIPPINE AIRLINES, INC., petitioner, vs.

COURT OF APPEALS AND PEDRO

ZAPATOS, respondents.1993 Sep 151st DivisionG.R. No. 82619
BELLOSILLO, J.:
This petition for review on certiorari seeks to annul and set aside the decision of the then Intermediate
Appellate Court, 1 now Court of Appeals, dated 28 February 1985, in AC-G.R. CV No. 69327 ("Pedro
Zapatos v. Philippine Airlines, Inc.") affirming the decision of the then Court of First Instance, now
Regional Trial Court, declaring Philippine Airlines, Inc., liable in damages for breach of contract.
On 25 November 1976, private respondent filed a complaint for damages for breach of contract of
carriage 2 against Philippine Airlines, Inc. (PAL), before the then Court of First Instance, now Regional
Trial Court, of Misamis Occidental, at Ozamiz City. According to him, on 2 August 1976, he was among
the twenty-one (21) passengers of PAL Flight 477 that took off from Cebu bound for Ozamiz City. The
routing of this flight was Cebu-Ozamiz-Cotabato. While on flight and just about fifteen (15) minutes
before landing at Ozamiz City, the pilot received a radio message that the airport was closed due to
heavy rains and inclement weather and that he should proceed to Cotabato City instead.
Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of their options to return
to Cebu on Flight 560 of the same day and thence to Ozamiz City on 4 August 1975, or take the next
flight to Cebu the following day, or remain at Cotabato and take the next available flight to Ozamiz City
on 5 August 1975. 3 The Station Agent likewise informed them that Flight 560 bound for Manila would
make a stop-over at Cebu to bring some of the diverted passengers; that there were only six (6) seats
available as there were already confirmed passengers for Manila; and, that the basis for priority would
be the check-in sequence at Cebu.
Private respondent chose to return to Cebu but was not accommodated because he checked-in as
passenger No. 9 on Flight 477. He insisted on being given priority over the confirmed passengers in the
accommodation, but the Station Agent refused private respondent's demand explaining that the latter's
predicament was not due to PAL's own doing but to a force majeure. 4
Private respondent tried to stop the departure of Flight 560 as his personal belongings, including a
package containing a camera which a certain Miwa from Japan asked him to deliver to Mrs. Fe Obid of
Gingoog City, were still on board. His plea fell on deaf ears. PAL then issued to private respondent a free
ticket to Iligan City, which the latter received under protest. 5 Private respondent was left at the airport
and could not even hitch a ride in the Ford Fiera loaded with PAL personnel. 6 PAL neither provided
private respondent with transportation from the airport to the city proper nor food and accommodation
for his stay in Cotabato City.
The following day, private respondent purchased a PAL ticket to Iligan City. He informed PAL personnel
that he would not use the free ticket because he was filing a case against PAL. 7 In Iligan City, private
respondent hired a car from the airport to Kolambugan, Lanao del Norte, reaching Ozamiz City by
crossing the bay in a launch. 8 His personal effects including the camera, which were valued at
P2,000.00, were no longer recovered.

On 13 January 1977, PAL filed its answer denying that it unjustifiably refused to accommodate private
respondent. 9 It alleged that there was simply no more seat for private respondent on Flight 560 since
there were only six (6) seats available and the priority of accommodation on Flight 560 was based on the
check-in sequence in Cebu; that the first six (6) priority passengers on Flight 477 chose to take Flight
560; that its Station Agent explained in a courteous and polite manner to all passengers the reason for
PAL's inability to transport all of them back to Cebu; that the stranded passengers agreed to avail of the
options and had their respective tickets exchanged for their onward trips; that it was only the private
respondent who insisted on being given priority in the accommodation; that pieces of checked-in
baggage and hand-carried items of the Ozamiz City passengers were removed from the aircraft; that the
reason for the pilot's inability to land at Ozamiz City airport was because the runway was wet due to
rains thus posing a threat to the safety of both passengers and aircraft; and, that such reason of force
majeure was a valid justification for the pilot to bypass Ozamiz City and proceed directly to Cotabato
City.
On 4 June 1981, the trial court rendered its decision 10 the dispositive portion of which states:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Philippine
Air Lines, Inc. ordering the latter to pay:
(1) As actual damages, the sum of Two Hundred Pesos (P200.00) representing plaintiff's expenses for
transportation, food and accommodation during his stranded stay at Cotabato City; the sum of FortyEight Pesos (P48.00) representing his flight fare from Cotabato City to Iligan City; the sum of Five
Hundred Pesos (P500.00) representing plaintiff's transportation expenses from Iligan City to Ozamiz City;
and the sum of Five Thousand Pesos (P5,000.00) as loss of business opportunities during his stranded
stay in Cotabato City;
(2) As moral damages, the sum of Fifty Thousand Pesos (P50,000.00) for plaintiff's hurt feelings, serious
anxiety, mental anguish and unkind and discourteous treatment perpetrated by defendant's employees
during his stay as stranded passenger in Cotabato City;
(3) As exemplary damages, the sum of Ten Thousand Pesos (P10,000.00) to set a precedent to the
defendant airline that it shall provide means to give comfort and convenience to stranded passengers;
(4) The sum of Three Thousand Pesos (P3,000.00) as attorney's fees;
(5) To pay the costs of this suit."
PAL appealed to the Court of Appeals which on 28 February 1985, finding no reversible error, affirmed
the judgment of the court a quo. 11
PAL then sought recourse to this Court by way of a petition for review on certiorari 12 upon the
following issues: (1) Can the Court of Appeals render a decision finding petitioner (then defendantappellant in the court below) negligent and, consequently, liable for damages on a question of
substance which was neither raised in the complaint nor proved at the trial? (2) Can the Court of
Appeals award actual and moral damages contrary to the evidence and established jurisprudence? 13

An assiduous examination of the records yields no valid reason for reversal of the judgment on appeal;
only a modification of its disposition.
In its petition, PAL vigorously maintains that private respondent's principal cause of action was its
alleged denial of private respondent's demand for priority over the confirmed passengers on Flight 560.
Likewise, PAL points out that the complaint did not impute to PAL neglect in failing to attend to the
needs of the diverted passengers; and, that the question of negligence was not and never put in issue by
the pleadings or proved at the trial.
Contrary to the above arguments, private respondent's amended complaint touched on PAL's
indifference and inattention to his predicament. The pertinent portion of the amended complaint 14
reads:
"10. That by virtue of the refusal of the defendant through its agent in Cotabato to accommodate (sic)
and allow the plaintiff to take and board the plane back to Cebu, and by accommodating (sic) and
allowing passengers from Cotabato for Cebu in his stead and place, thus forcing the plaintiff against his
will, to be left and stranded in Cotabato, exposed to the peril and danger of muslim rebels plundering at
the time, the plaintiff, as a consequence, (have) suffered mental anguish, mental torture, social
humiliation, bismirched reputation and wounded feeling, all amounting to a conservative amount of
thirty thousand (P30,000.00) Pesos."
To substantiate this aspect of apathy, private respondent testified 15 -"A. I did not even notice that I was I think the last passenger or the last person out of the PAL
employees and army personnel that were left there. I did not notice that when I was already outside of
the building after our conversation.
Q. What did you do next?
A. I banished (sic) because it seems that there was a war not far from the airport. The sound of guns
and the soldiers were plenty.
Q. After that what did you do?
A. I tried to look for a transportation that could bring me down to the City of Cotabato.
Q. Were you able to go there?
A. I was at about 7:00 o'clock in the evening more or less and it was a private jeep that I boarded. I was
even questioned why I and who am (sic) I then. Then I explained my side that I am (sic) stranded
passenger. Then they brought me downtown at Cotabato.
Q. During your conversation with the Manager were you not offered any vehicle or transportation to
Cotabato airport downtown?

A. In fact I told him (Manager) now I am by-passed passenger here which is not my destination what can
you offer me. Then they answered, "it is not my fault. Let us forget that.
Q. In other words when the Manager told you that offer was there a vehicle ready?
A. Not yet. Not long after that the Ford Fiera loaded with PAL personnel was passing by going to the City
of Cotabato and I stopped it to take me a ride because there was no more available transportation but I
was not accommodated."
Significantly, PAL did not seem to mind the introduction of evidence which focused on its alleged
negligence in caring for its stranded passengers. Well-settled is the rule in evidence that the protest or
objection against the admission of evidence should be presented at the time the evidence is offered,
and that the proper time to make protest or objection to the admissibility of evidence is when the
question is presented to the witness or at the time the answer thereto is given. 16 There being no
objection, such evidence becomes property of the case and all the parties are amenable to any
favorable or unfavorable effects resulting from the evidence. 17
PAL instead attempted to rebut the aforequoted testimony. In the process, it failed to substantiate its
counter allegation for want of concrete proof 18 -"Atty. Rubin O. Rivera -- PAL's counsel:
Q. You said PAL refused to help you when you were in Cotabato, is that right?
Private respondent:
A. Yes.
Q. Did you ask them to help you regarding any offer of transportation or of any other matter asked of
them?
A. Yes, he (PAL PERSONNEL) said what is? It is not our fault.
Q. Are you not aware that one fellow passenger even claimed that he was given Hotel accommodation
because they have no money?
xxx

xxx

xxx

A. No, sir, that was never offered to me. I said, I tried to stop them but they were already riding that
PAL pick-up jeep, and I was not accommodated."
Having joined in the issue over the alleged lack of care it exhibited towards its passengers, PAL cannot
now turn around and feign surprise at the outcome of the case. When issues not raised by the pleadings
are tried by express or implied consent of the parties, they shall be treated in all respects as if they had
been raised in the pleadings. 19

With regard to the award of damages affirmed by the appellate court, PAL argues that the same is
unfounded. It asserts that it should not be charged with the task of looking after the passengers'
comfort and convenience because the diversion of the flight was due to a fortuitous event, and that if
made liable, an added burden is given to PAL which is over and beyond its duties under the contract of
carriage. It submits that granting arguendo that negligence exists, PAL cannot be liable in damages in the
absence of fraud or bad faith; that private respondent failed to apprise PAL of the nature of his trip and
possible business losses; and, that private respondent himself is to be blamed for unreasonably refusing
to use the free ticket which PAL issued.
The contract of air carriage is a peculiar one. Being imbued with public interest, the law requires
common carriers to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the circumstances. 20 In Air
France v. Carrascoso, 21 we held that -"A contract to transport passengers is quite different in kind and degree from any other contractual
relation. And this, because of the relation which an air carrier sustains with the public. Its business is
mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation attended with a public duty . . ." mphasis
supplied).
The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard
required by law. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous
event. Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the
business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with
situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation
of carrier and passenger continues until the latter has been landed at the port of destination and has left
the carrier's premises. 22 Hence, PAL necessarily would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of its stranded passengers until they have reached
their final destination. On this score, PAL grossly failed considering the then ongoing battle between
government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a
stranger to the place. As the appellate court correctly ruled -"While the failure of plaintiff in the first instance to reach his destination at Ozamis City in accordance
with the contract of carriage was due to the closure of the airport on account of rain and inclement
weather which was radioed to defendant 15 minutes before landing, it has not been disputed by
defendant airline that Ozamis City has no all-weather airport and has to cancel its flight to Ozamis City
or by-pass it in the event of inclement weather. Knowing this fact, it becomes the duty of defendant to
provide all means of comfort and convenience to its passengers when they would have to be left in a
strange place in case of such by-passing. The steps taken by defendant airline company towards this end
has not been put in evidence, especially for those 7 others who were not accommodated in the return
trip to Cebu, only 6 of the 21 having been so accommodated. It appears that plaintiff had to leave on the
next flight 2 days later. If the cause of non-fulfillment of the contract is due to a fortuitous event, it has
to be the sole and only cause (Art. 1755 C.C., Art. 1733 C.C.) Since part of the failure to comply with the

obligation of common carrier to deliver its passengers safely to their destination lay in the defendant's
failure to provide comfort and convenience to its stranded passengers using extra-ordinary diligence,
the cause of non-fulfillment is not solely and exclusively due to fortuitous event, but due to something
which defendant airline could have prevented, defendant becomes liable to plaintiff." 23
While we find PAL remiss in its duty of extending utmost care to private respondent while being
stranded in Cotabato City, there is no sufficient basis to conclude that PAL failed to inform him about his
non-accommodation on Flight 560, or that it was inattentive to his queries relative thereto.
On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato City that -"3. Of the fifteen stranded passengers two pax elected to take F478 on August 05, three pax opted to
take F442 August 03. The remaining ten (10) including subject requested that they be instead
accommodated (sic) on F446 CBO-IGN the following day where they intended to take the surface
transportation to OZC. Mr. Pedro Zapatos had by then been very vocal and boiceterous (sic) at the
counter and we tactfully managed to steer him inside the Station Agent's office. Mr. Pedro Zapatos then
adamantly insisted that all the diverted passengers should have been given priority over the originating
passengers of F560 whether confirmed or otherwise. We explained our policies and after awhile he
seemed pacified and thereafter took his ticket (in-lieued (sic) to CBO-IGN, COCON basis) at the counter
in the presence of five other passengers who were waiting for their tickets too. The rest of the diverted
pax had left earlier after being assured that their ticket will be ready the following day." 24
Aforesaid Report being an entry in the course of business is prima facie evidence of the facts therein
stated. Private respondent, apart from his testimony, did not offer any controverting evidence. If indeed
PAL omitted to give information about the options available to its diverted passengers, it would have
been deluged with complaints. But, only private respondent complained -"Atty. Rivera (for PAL)
Q. I understand from you Mr. Zapatos that at the time you were waiting at Cotabato Airport for the
decision of PAL, you were not informed of that decision until after the airplane left is that correct?
A. Yes.
COURT:
Q. What do you mean by "yes"? You meant you were not informed?
A. Yes, I was not informed of their decision, that they will only accommodate few passengers.
Q. Aside from you there were many other stranded passengers?
A. I believed, yes.
Q. And you want us to believe that PAL did not explain (to) any of these passengers about the decision
regarding those who will board the aircraft back to Cebu?

A. No, Sir.
Q. Despite these facts Mr. Zapatos did any of the other passengers complained (sic) regarding that
incident?
xxx

xxx

xxx

A. There were plenty of arguments and I was one of those talking about my case.
Q. Did you hear anybody complained (sic) that he has not been informed of the decision before the
plane left for Cebu?
A. No." 25
Admittedly, private respondent's insistence on being given priority in accommodation was unreasonable
considering the fortuitous event and that there was a sequence to be observed in the booking, i.e., in
the order the passengers checked-in at their port of origin. His intransigence in fact was the main cause
for his having to stay at the airport longer than was necessary -"Atty. Rivera:
Q. And, you were saying that despite the fact that according to your testimony there were at least 16
passengers who were stranded there in Cotabato airport according to your testimony, and later you said
that there were no other people left there at that time, is that correct?
A. Yes, I did not see anyone there around. I think I was the only civilian who was left there.
Q. Why is it that it took you long time to leave that place?
A. Because I was arguing with the PAL personnel." 26
Anent the plaint that PAL employees were disrespectful and inattentive toward private respondent, the
records are bereft of evidence to support the same. Thus, the ruling of respondent Court of Appeals in
this regard is without basis. 27 On the contrary, private respondent was attended to not only by the
personnel of PAL but also by its Manager. 28
In the light of these findings, we find the award of moral damages of Fifty Thousand Pesos (P50,000.00)
unreasonably excessive; hence, we reduce the same to Ten Thousand Pesos (P10,000.00). Conformably
herewith, the award of exemplary damages is also reduced to Five Thousand Pesos (P5,000.00). Moral
damages are not intended to enrich the private respondent. They are awarded only to enable the
injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering
he has undergone by reason of the defendant's culpable action. 29
With regard to the award of actual damages in the amount of P5,000.00 representing private
respondent's alleged business losses occasioned by his stay at Cotabato City, we find the same
unwarranted. Private respondent's testimony that he had a scheduled business "transaction of shark
liver oil supposedly to have been consummated on August 3, 1975 in the morning" and that "since

(private respondent) was out for nearly two weeks I missed to buy about 10 barrels of shark liver oil,"
30 are purely speculative. Actual or compensatory damages cannot be presumed but must be duly
proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork
as to the fact and amount of damages, but must depend upon competent proof that they have suffered
and on evidence of the actual amount thereof. 31
WHEREFORE the decision appealed from is AFFIRMED with modification however that the award of
moral damages of Fifty Thousand Pesos (P50,000.00) is reduced to Ten Thousand Pesos (P10,000.00)
while the exemplary damages of Ten Thousand Pesos (P10,000.00) is also reduced to Five Thousand
Pesos (P5,000.00). The award of actual damages in the amount Five Thousand Pesos (P5,000.00)
representing business losses occasioned by private respondent's being stranded in Cotabato City is
deleted.
SO ORDERED.
2.

[1993V877] SPOUSES CESAR & SUTHIRA ZALAMEA AND LIANA ZALAMEA, petitioners, vs.
HONORABLE COURT OF APPEALS AND TRANSWORLD AIRLINES, INC., respondents.1993 Nov
182nd DivisionG.R. No. 104235D E C I S I O N

NOCON, J.:
Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007 departing
from New York to Los Angeles on June 6, 1984 despite possession of confirmed tickets, petitioners filed
an action for damages before the Regional Trial Court of Makati, Metro Manila, Branch 145. Advocating
petitioners' position, the trial court categorically ruled that respondent TransWorld Airlines (TWA)
breached its contract of carriage with petitioners and that said breach was "characterized by bad faith."
On appeal, however, the appellate court found that while there was a breach of contract on respondent
TWA's part, there was neither fraud nor bad faith because under the Code of Federal Regulations by the
Civil Aeronautics Board of the United States of America it is allowed to overbook flights.
The factual backdrop of the case is as follows:
Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea,
purchased three (3) airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a
flight from New York to Los Angeles on June 6, 1984. The tickets of petitioners-spouses were purchased
at a discount of 75% while that of their daughter was a full fare ticket. All three tickets represented
confirmed reservations.
While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their
reservations for said flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an
hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list because the number
of passengers who had checked in before them had already taken all the seats available on the flight.
Liana Zalamea appeared as No. 13 on the wait-list while the two other Zalameas were listed as "No. 34,
showing a party of two." Out of the 42 names on the wait-list, the first 22 names were eventually

allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The two others, on the
other hand, at No. 34, being ranked lower than 22, were not able to fly. As it were, those holding fullfare tickets were given first priority among the wait-listed passengers. Mr. Zalamea, who was holding
the full-fare ticket of his daughter, was allowed to board the plane; while his wife and daughter, who
presented the discounted tickets were denied boarding. According to Mr. Zalamea, it was only later
when he discovered that he was holding his daughter's full-fare ticket.
Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated
because it was also fully booked. Thus, they were constrained to book in another flight and purchased
two tickets from American Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars.
Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract
of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch 145. As aforesaid, the
lower court ruled in favor of petitioners in its decision 1 dated January 9, 1989 the dispositive portion of
which states as follows:
"WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the following
amounts:
"(1) US $918.00, or its peso equivalent at the time of payment, representing the price of the tickets
bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from
New York City;
"(2) US $159.49, or its peso equivalent at the time of payment, representing the price of Suthira
Zalamea's ticket for TWA Flight 007;
"(3) Eight Thousand Nine Hundred Thirty-four Pesos and Fifty Centavos (P8,934.50), Philippine
Currency, representing the price of Liana Zalamea's ticket for TWA Flight 007;
"(4) Two Hundred Fifty Thousand Pesos (250,000.00), Philippine Currency, as moral damages for all the
plaintiffs;
"(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for attorney's fees; and
"(6) The costs of suit.
"SO ORDERED." 2
On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage suit
predicated upon a breach of contract of carriage only where there is fraud or bad faith. Since it is a
matter of record that overbooking of flights is a common and accepted practice of airlines in the United
States and is specifically allowed under the Code of Federal Regulations by the Civil Aeronautics Board,
no fraud nor bad faith could be imputed on respondent TransWorld Airlines.
Moreover, while respondent TWA was remiss in not informing petitioners that the flight was
overbooked and that even a person with a confirmed reservation may be denied accommodation on an

overbooked flight, nevertheless it ruled that such omission or negligence cannot under the
circumstances be considered to be so gross as to amount to bad faith.
Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with fortyeight (48) other passengers where full-fare first class tickets were given priority over discounted tickets.
The dispositive portion of the decision of respondent Court of Appeals 3 dated October 25, 1991 states
as follows:
"WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED in that the
award of moral and exemplary damages to the plaintiffs is eliminated, and the defendant-appellant is
hereby ordered to pay the plaintiffs the following amounts:
"(1) US$159.49, or its peso equivalent at the time of payment, representing the price of Suthira
Zalamea's ticket for TWA Flight 007;
"(2) US$159.49, or its peso equivalent at the time of payment, representing the price of Cesar Zalamea's
ticket for TWA Flight 007;
"(3) P50,000.00 as and for attorney's fees.
"(4) The costs of suit.
"SO ORDERED." 4
Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and
alleged the following errors committed by the respondent Court of Appeals, to wit:
I.
". . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF RESPONDENT TWA
BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS.
II.
". . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.
III.
". . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND PAYMENT FOR THE
AMERICAN AIRLINES TICKETS." 5
That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to
board their flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or
regulation allegedly authorizing overbooking has never been proved. Foreign laws do not prove
themselves nor can the courts take judicial notice of them. Like any other fact, they must be alleged and
proved. 6 Written law may be evidenced by an official publication thereof or by a copy attested by the

officer having the legal custody of the record, or by his deputy, and accompanied with a certificate that
such officer has custody. The certificate may be made by a secretary of an embassy or legation, consul
general, consul, vice-consul, or consular agent or by any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is kept, and authenticated by the seal of his office.
7
Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in
her deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil Aeronautics
Board allows overbooking. Aside from said statement, no official publication of said code was presented
as evidence. Thus, respondent court's finding that overbooking is specifically allowed by the US Code of
Federal Regulations has no basis in fact.
Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at
bar in accordance with the principle of lex loci contractus which requires that the law of the place where
the airline ticket was issued should be applied by the court where the passengers are residents and
nationals of the forum and the ticket is issued in such State by the defendant airline. 8 Since the tickets
were sold and issued in the Philippines, the applicable law in this case would be Philippine law.
Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers
concerned to an award of moral damages. In Alitalia Airways v. Court of Appeals, 9 where passengers
with confirmed bookings were refused carriage on the last minute, this Court held that when an airline
issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage
arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he
does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had
deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all
of them would show up for check in. For the indignity and inconvenience of being refused a confirmed
seat on the last minute, said passenger is entitled to an award of moral damages.
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not allowed
to board the plane because her seat had already been given to another passenger even before the
allowable period for passengers to check in had lapsed despite the fact that she had a confirmed ticket
and she had arrived on time, this Court held that petitioner airline acted in bad faith in violating private
respondent's rights under their contract of carriage and is therefore liable for the injuries she has
sustained as a result.
In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts to
bad faith. In Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-be
passenger had the necessary ticket, baggage claim and clearance from immigration all clearly and
unmistakably showing that she was indeed a confirmed passenger and that she was, in fact, included in
the passenger manifest of said flight, and yet was denied accommodation in said flight, this Court did
not hesitate to affirm the lower court's finding awarding her damages.
A contract to transport passengers is quite different in kind and degree from any other contractual
relation. So ruled this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a contract

of carriage generates a relation attended with public duty - a duty to provide public service and
convenience to its passengers which must be paramount to self-interest or enrichment. Thus, it was also
held that the switch of planes from Lockheed 1011 to a smaller Boeing 707 because there were only 138
confirmed economy class passengers who could very well be accommodated in the smaller plane,
thereby sacrificing the comfort of its first class passengers for the sake of economy, amounts to bad
faith. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost
consideration entitles the passenger to an award of moral damages. 13
Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not
informing its passengers beforehand that it could breach the contract of carriage even if they have
confirmed tickets if there was overbooking. Respondent TWA should have incorporated stipulations on
overbooking on the tickets issued or to properly inform its passengers about these policies so that the
latter would be prepared for such eventuality or would have the choice to ride with another airline.
Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the name
of the passenger and the points of origin and destination, contained such a notice. An examination of
Exhibit I does not bear this out. At any rate, said exhibit was not offered for the purpose of showing the
existence of a notice of overbooking but to show that Exhibit I was used for Flight 007 in first class of
June 11, 1984 from New York to Los Angeles.
Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of giving
less priority to discounted tickets. While the petitioners had checked in at the same time, and held
confirmed tickets, yet, only one of them was allowed to board the plane ten minutes before departure
time because the full-fare ticket he was holding was given priority over discounted tickets. The other
two petitioners were left behind.
It is respondent TWA's position that the practice of overbooking and the airline system of boarding
priorities are reasonable policies, which when implemented do not amount to bad faith. But the issue
raised in this case is not the reasonableness of said policies but whether or not said policies were
incorporated or deemed written on petitioners' contracts of carriage. Respondent TWA failed to show
that there are provisions to that effect. Neither did it present any argument of substance to show that
petitioners were duly apprised of the overbooked condition of the flight or that there is a hierarchy of
boarding priorities in booking passengers. It is evident that petitioners had the right to rely upon the
assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets represented
confirmed seats without any qualification. The failure of respondent TWA to so inform them when it
could easily have done so thereby enabling respondent to hold on to them as passengers up to the last
minute amounts to bad faith. Evidently, respondent TWA placed its self-interest over the rights of
petitioners under their contracts of carriage. Such conscious disregard of petitioners' rights makes
respondent TWA liable for moral damages. To deter breach of contracts by respondent TWA in similar
fashion in the future, we adjudge respondent TWA liable for exemplary damages, as well.
Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's ticket
because the ticket was used by her father. On this score, we uphold the respondent court. Petitioners

had not shown with certainty that the act of respondent TWA in allowing Mr. Zalamea to use the ticket
of her daughter was due to inadvertence or deliberate act. Petitioners had also failed to establish that
they did not accede to said arrangement. The logical conclusion, therefore, is that both petitioners and
respondent TWA agreed, albeit impliedly, to the course of action taken.
The respondent court erred, however, in not ordering the refund of the cost of the American Airlines
tickets purchased and used by petitioners Suthira and Liana. The evidence shows that petitioners Suthira
and Liana were constrained to take the American Airlines flight to Los Angeles not because they "opted
not to use their TWA tickets on another TWA flight" but because respondent TWA could not
accommodate them either on the next TWA flight which was also fully booked. 14 The purchase of the
American Airlines tickets by petitioners Suthira and Liana was the consequence of respondent TWA's
unjustifiable breach of its contracts of carriage with petitioners. In accordance with Article 2201, New
Civil Code, respondent TWA should, therefore, be responsible for all damages which may be reasonably
attributed to the non-performance of its obligation. In the previously cited case of Alitalia Airways v.
Court of Appeals, 15 this Court explicitly held that a passenger is entitled to be reimbursed for the cost
of the tickets he had to buy for a flight on another airline. Thus, instead of simply being refunded for the
cost of the unused TWA tickets, petitioners should be awarded the actual cost of their flight from New
York to Los Angeles. On this score, we differ from the trial court's ruling which ordered not only the
reimbursement of the American Airlines tickets but also the refund of the unused TWA tickets. To
require both prestations would have enabled petitioners to fly from New York to Los Angeles without
any fare being paid.
The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code which
allows recovery when the defendant's act or omission has compelled plaintiff to litigate or to incur
expenses to protect his interest. However, the award for moral and exemplary damages by the trial
court is excessive in the light of the fact that only Suthira and Liana Zalamea were actually "bumped off."
An award of P50,000.00 moral damages and another P50,000.00 exemplary damages would suffice
under the circumstances obtaining in the instant case.
WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is
hereby MODIFIED to the extent of adjudging respondent TransWorld Airlines to pay damages to
petitioners in the following amounts, to wit:
(1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets bought
by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New
York City;
(2) P50,000.00 as moral damages;
(3) P50,000.00 as exemplary damages;
(4) P50,000.00 as attorney's fees; and
(5) Costs of suit.

SO ORDERED.
3.

[1997V881] CARLOS SINGSON, petitioner vs. COURT OF APPEALS and CATHAY PACIFIC
AIRWAYS, INC., respondents.1997 Nov 181st DivisionG.R. No. 119995D E C I S I O N

BELLOSILLO, J:
A contract of air carriage is a peculiar one. Imbued with public interest, common carriers are required by
law to carry passengers safely as far as human care and foresight can provide, using the utmost diligence
of a very cautious person, with due regard for all the circumstances. 1 A contract to transport
passengers is quite different in kind and degree from any other contractual relation. And this because its
business is mainly with the traveling public. It invites people to avail of the comforts and advantages it
offers. The contract of carriage, therefore, generates a relation attended with a public duty. 2 Failure of
the carrier to observe this high degree of care and extraordinary diligence renders it liable for any
damage that may be sustained by its passengers.
The instant case is an illustration of the exacting standard demanded by the law of common carriers: On
24 May 1988 CARLOS SINGSON and his cousin Crescentino Tiongson bought from Cathay Pacific Airways,
Ltd. (CATHAY), at its Metro Manila ticket outlet two (2) open-dated, identically routed, round trip plane
tickets for the purpose of spending their vacation in the United States. Each ticket consisted of six (6)
flight coupons corresponding to this itinerary: flight coupon no. 1 Manila to Hongkong; flight coupon
no. 2 Hongkong to San Francisco; flight coupon no. 3 San Francisco to Los Angeles; flight coupon
no. 4 Los Angeles back to San Francisco; flight coupon no. 5 San Francisco to Hongkong; and,
finally, flight coupon no. 6 Hongkong to Manila. The procedure was that at the start of each leg of the
trip a flight coupon corresponding to the particular sector of the travel would be removed from the
ticket booklet so that at the end of the trip no more coupon would be left in the ticket booklet.
On 6 June 1988 CARLOS SINGSON and Crescentino Tiongson left Manila on board CATHAY's Flight No.
902. They arrived safely in Los Angeles and after staying there for about three (3) weeks they decided to
return to the Philippines. On 30 June 1988 they arranged for their return flight at CATHAY's Los Angeles
Office and chose 1 July 1988, a Friday for their departure. While Tiongson easily got a booking for the
flight, SINGSON was not as lucky. It was discovered that his ticket booklet did not have flight coupon no.
5 corresponding to the San Francisco-Hongkong leg of the trip. Instead, what was in his ticket was flight
coupon no. 3 San Francisco to Los Angeles which was supposed to have been used and removed
from the ticket booklet. It was not until 6 July 1988 that CATHAY was finally able to arrange for his
return flight to Manila.
On 26 August 1988 SINGSON commenced an action for damages against CATHAY before the Regional
Trial Court of Vigan, Ilocos Sur. 3 He claimed that he insisted on CATHAY's confirmation of his return
flight reservation because of very important and urgent business engagements in the Philippines. But
CATHAY allegedly shrugged off his protestations and arrogantly directed him to go to San Francisco
himself and do some investigations on the matter or purchase a new ticket subject to refund if it turned
out that the missing coupon was still unused or subsisting. He remonstrated that it was the airline's
agent/representative who must have committed the mistake of tearing off the wrong flight coupon; that

he did not have enough money to buy new tickets; and, CATHAY could conclude the investigation in a
matter of minutes because of its facilities. CATHAY, allegedly in scornful insolence, simply dismissed him
like an impertinent "brown pest." Thus he and his cousin Tiongson, who deferred his own flight to
accompany him, were forced to leave for San Francisco on the night of 1 July 1988 to verify the missing
ticket.
CATHAY denied these allegations and averred that since petitioner was holding an "open dated" ticket,
which meant that he was not booked on a specific flight on a particular date, there was no contract of
carriage yet existing such that CATHAY's refusal to immediately book him could not be construed as
breach of contract of carriage. Moreover, the coupon had been missing for almost a month hence
CATHAY must first verify its status, i.e., whether the ticket was still valid and outstanding, before it could
issue a replacement ticket to petitioner. For that purpose, it sent a request by telex on the same day, 1
July 1988, to its Hongkong Headquarters where such information could be retrieved. 4 However, due to
the time difference between Los Angeles and Hongkong, no response from the Hongkong office was
immediately received. Besides, since 2 and 3 July 1988 were a Saturday and a Sunday, respectively, and
4 July 1988 was an official holiday being U.S. Independence Day, the telex response of CATHAY
Hongkong was not read until 5 July 1988. Lastly, CATHAY denied having required SINGSON to make a trip
back to San Francisco; on the other hand, it was the latter who informed CATHAY that he was making a
side trip to San Francisco. Hence, CATHAY advised him that the response of Hongkong would be copied
in San Francisco so that he could conveniently verify thereat should he wish to.
The trial court rendered a decision in favor of petitioner herein holding that CATHAY was guilty of gross
negligence amounting to malice and bad faith for which it was adjudged to pay petitioner P20,000.00 for
actual damages with interest at the legal rate of twelve percent (12%) per annum from 26 August 1988
when the complaint was filed until fully paid, P500,000.00 for moral damages, P400,000.00 for
exemplary damages, P100,000.00 for attorney's fees, and, to pay the costs.
On appeal by CATHAY, the Court of Appeals reversed the trial court's finding that there was gross
negligence amounting to bad faith or fraud and, accordingly, modified its judgment by deleting the
awards for moral and exemplary damages, and the attorney's fees as well. Reproduced hereunder are
the pertinent portions of the decision of the appellate court 5
There is enough merit in this appeal to strike down the trial court's award of moral and exemplary
damages and attorney's fees . . . In this material respect, the appellant correctly underscores the fact
that the appellee held an open dated ticket for his return flight from San Francisco to Manila via
Hongkong and that, as a consequence, the latter was not actually confirmed on the July 1, 1988 flight or,
for that matter, any of the appellant's flights . . . The appellant certainly committed no breach of
contract of carriage when it refused the appellee the booking he requested on the said July 1, 1988
flight. As a "chance passenger," the latter had no automatic right to fly on that flight and on that date.
Even assuming arguendo that a breach of contract of carriage may be attributed the appellant, the
appellee's travails were directly traceable to the mistake in detaching the San Francisco-Hongkong flight
coupon of his plane ticket which led to the appellant's refusal to honor his plane ticket. While that may

constitute negligence on the part of the air carrier, the same cannot serve as basis for an award of moral
damages. The rule is that moral damages are recoverable in a damage suit predicated upon a breach of
contract of carriage only where (a) the mishap results in the death of a passenger and (b) it is proved
that the carrier was guilty of fraud and bad faith even if death does not result . . . In disallowing the trial
court's award of moral damages, the Court takes appropriate note of the necessity for the appellant's
verification of the status of the missing flight coupon as well as the justifiable delay thereto attendant . .
. Contrary to the appellee's allegation that he was peremptorily refused confirmation of his flight, and
arrogantly told to verify the missing flight coupon on his own, the record shows that the appellant
adopted such measures as were reasonably required under the circumstances. Even the testimonies
offered by the appellee and his witnesses collectively show no trace of fraud or bad faith as would justify
the trial court's award of moral damages.
The basis for the award of moral damages discounted, there exists little or no reason to allow the
exemplary damages and attorney's fees adjudicated in favor of the appellee.
Petitioner's subsequent motion for reconsideration having been denied for lack of merit and for being
pro forma he came to us for review. He claims that the trial court found CATHAY guilty of gross
negligence amounting to malice and bad faith in: (a) detaching the wrong coupon; (b) using that error to
deny confirmation of his return flight; and, (c) directing petitioner to prematurely return to San
Francisco to verify his missing coupon. He also underscores the scornful and demeaning posture of
CATHAY's employees toward him. He argues that since findings of fact of the trial court are entitled to
the highest degree of respect from the appellate courts, especially when they were supported by
evidence, it was erroneous for the Court of Appeals to strike out the award of moral and exemplary
damages as well as attorney's fees allegedly for lack of basis.
In its Comment, CATHAY firmly maintains that it did not breach its contract of carriage with petitioner. It
argues that it is only when a passenger is confirmed on a particular flight and on a particular date
specifically stated in his ticket that its refusal to board the passenger will result in a breach of contract.
And even assuming that there was breach of contract, there was no fraud or bad faith on the part of
CATHAY as to justify the award of moral and exemplary damages plus attorney's fees in favor of
petitioner.
There are two (2) main issues that confront the Court: first, whether a breach of contract was
committed by CATHAY when it failed to confirm the booking of petitioner for its 1 July 1988 flight; and,
second, whether the carrier was liable not only for actual damages but also for moral and exemplary
damages, and attorney's fees for failing to book petitioner on his return flight to the Philippines.
We find merit in the petition. CATHAY undoubtedly committed a breach of contract when it refused to
confirm petitioner's flight reservation back to the Philippines on account of his missing flight coupon. Its
contention that there was no contract of carriage that was breached because petitioner's ticket was
open-dated is untenable. To begin with, the round trip ticket issued by the carrier to the passenger was
in itself a complete written contract by and between the carrier and the passenger. It had all the
elements of a complete written contract, to wit: (a) the consent of the contracting parties manifested by

the fact that the passenger agreed to be transported by the carrier to and from Los Angeles via San
Francisco and Hongkong back to the Philippines, and the carrier's acceptance to bring him to his
destination and then back home; (b) cause or consideration, which was the fare paid by the passenger
as stated in his ticket; and, (c) object, which was the transportation of the passenger from the place of
departure to the place of destination and back, which are also stated in his ticket. 6 In fact, the contract
of carriage in the instant case was already partially executed as the carrier complied with its obligation
to transport the passenger to his destination, i.e., Los Angeles. Only the performance of the other half of
the contract which was to transport the passenger back to the Philippines was left to be done.
Moreover, Timothy Remedios, CATHAY's reservation and ticketing agent, unequivocally testified that
petitioner indeed had reservations booked for travel
Q: Were you able to grant what they wanted, if not, please state why?
A: I was able to obtain a record of Mr. Singson's computer profile from my flight reservations computer.
I verified that Mr. Singson did indeed have reservations booked for travel: Los Angeles to San Francisco,
San Francisco to Hongkong to Manila. I then proceeded to revalidate their tickets but was surprised to
observe that Mr. Singson's ticket did not contain a flight coupon for San Francisco to Hongkong. His
ticket did, however, contain a flight coupon for San Francisco to Los Angeles which was supposed to
have been utilized already, that is, supposed to have been removed by U.S. Air when he checked in San
Francisco for his flight from San Francisco to Los Angeles 7 mphasis supplied).
Clearly therefore petitioner was not a mere "chance passenger with no superior right to be boarded on
a specific flight," as erroneously claimed by CATHAY and sustained by the appellate court.
Interestingly, it appears that CATHAY was responsible for the loss of the ticket. One of two (2) things
may be surmised from the circumstances of this case: first, US Air (CATHAY's agent) had mistakenly
detached the San Francisco-Hongkong flight coupon thinking that it was the San Francisco-Los Angeles
portion; or, second, petitioner's booklet of tickets did not from issuance include a San FranciscoHongkong flight coupon. In either case, the loss of the coupon was attributable to the negligence of
CATHAY's agents and was the proximate cause of the non-confirmation of petitioner's return flight on 1
July 1988. It virtually prevented petitioner from demanding the fulfillment of the carrier's obligations
under the contract. Had CATHAY's agents been diligent in double checking the coupons they were
supposed to detach from the passengers' tickets, there would have been no reason for CATHAY not to
confirm petitioner's booking as exemplified in the case of his cousin and flight companion Tiongson
whose ticket booklet was found to be in order. Hence, to hold that no contractual breach was
committed by CATHAY and totally absolve it from any liability would in effect put a premium on the
negligence of its agents, contrary to the policy of the law requiring common carriers to exercise
extraordinary diligence.
With regard to the second issue, we are of the firm view that the appellate court seriously erred in
disallowing moral and exemplary damages. Although the rule is that moral damages predicated upon a
breach of contract of carriage may only be recoverable in instances where the mishap results in the
death of a passenger, 8 or where the carrier is guilty of fraud or bad faith, 9 there are situations where

the negligence of the carrier is so gross and reckless as to virtually amount to bad faith, in which case,
the passenger likewise becomes entitled to recover moral damages. 10
In the instant case, the following circumstances attended the breach of contract by CATHAY, to wit:
First, as heretofore discussed, the ticket coupon corresponding to the San Francisco-Hongkong flight was
missing either due to the negligence of CATHAY's agents in improperly detaching petitioner's flight
coupons or failing to issue the flight coupon for San Francisco-Hongkong in the ticket booklet; second,
petitioner and his cousin presented their respective ticket booklets bearing identical itineraries to prove
that there had been a mistake in removing the coupons of petitioner. Furthermore, CATHAY's Timothy
Remedios testified that he was able to ascertain from his flight reservations computer that petitioner
indeed had reservations booked for travel on their return flight, but CATHAY apparently ignored the
clear evidential import of these facts and peremptorily refused to confirm petitioner's flight while
ready to confirm his traveling companion's identically routed plane ticket on the lame and flimsy excuse
that the existence and validity of the missing ticket must first be verified; third, petitioner was directed
by CATHAY to go to its San Francisco office and make the necessary verification concerning the lost
coupon himself. This, notwithstanding the fact that CATHAY was responsible for the loss of the ticket
and had all the necessary equipment, e.g., computers, fax and telex machines and telephones which
could facilitate the verification right there at its Los Angeles Office.
CATHAY's allegation that it never required petitioner to go to San Francisco is unpersuasive. Petitioner
categorically testified that a lady employee of CATHAY in Los Angeles "insisted that we take the matter
(up) with their office in San Francisco." 11 In fact, it even appeared from the evidence that it was the San
Francisco office which arranged for his return flight to the Philippines and not the Los Angeles office. 12
Moreover, due deference must be accorded the trial court's finding that petitioner was indeed sent by
CATHAY to its San Francisco office to verify. For good and sound reasons, this Court has consistently
affirmed that review of the findings of fact of the trial court is not a function that appellate courts
ordinarily undertake, such findings being as a rule binding and conclusive. 13 It is true that certain
exceptions have become familiar. However, nothing in the records warrants a review based on any of
these well-recognized exceptions; and, fourth, private respondent endeavored to show that it
undertook the verification of the lost coupon by sending a telex to its Hongkong Office. It likewise tried
to justify the five (5) days delay in completing the verification process, claiming that it was due to the
time difference between Hongkong and Los Angeles and the coinciding non-working days in the United
States. The following dialogue between Consul Cortez and Cathay's reservation and ticketing agent
Timothy Remedios can be enlightening
Q: What official action did you in turn take?
A: While Mr. Singson was still in my office I sent a telex out at approximately 10:00 a.m. on 30 June 1988
to Hongkong Accounting Office and copied San Francisco ticket office since Mr. Singson advised he
might not be able to return to my office but would be going to San Francisco. 10:00 a.m. on 30 June
1988 in Los Angeles is however 2:00 a.m. on 1 July 1988 in Hongkong and since office hours start at 9:00
a.m. in Hongkong, no reply was instantly sent back to me. The response was sent out from Hongkong on
2 July 1988 at approximately 12:00 noon (Hongkong time) and was received immediately by the Los

Angeles telex machine. However, 12:00 noon 2 July 1988 Hongkong time was 8:00 p.m. 1 July 1988 in
Los Angeles where office hours close at 5:00 p.m. The Los Angeles office was closed on 2 and 3 July 1988
being Saturday and Sunday and also closed 4 July 1988 for a public holiday (Independence day) so the
reply from Hongkong was not read until 5 July 1988, 8:30 Los Angeles time. 14
But far from helping private respondent's cause, the foregoing testimony only betrayed another act of
negligence committed by its employees in Hongkong. It will be observed that CATHAY's Hongkong Office
received the telex from Los Angeles on 1 July 1988 at approximately 2:00 a.m. (Hongkong time) and sent
out their response only on 2 July 1988 at 12:00 noon. In spite of the fact that they had access to all
records and facilities that would enable them to verify in a matter of minutes, it strangely took them
more than twenty-four (24) hours to complete the verification process and to send their reply to Los
Angeles. The inevitable conclusion is that CATHAY's Hongkong personnel never acted promptly and
timely on the request for verification.
Besides, to be stranded for five (5) days in a foreign land because of an air carrier's negligence is too
exasperating an experience for a plane passenger. For sure, petitioner underwent profound distress and
anxiety, not to mention the worries brought about by the thought that he did not have enough money
to sustain himself, and the embarrassment of having been forced to seek the generosity of relatives and
friends.
Anent the accusation that private respondent's personnel were rude and arrogant, petitioner failed to
adduce sufficient evidence to substantiate his claim. Nonetheless, such fact will not in any manner affect
the disposition of this case. Private respondent's mistake in removing the wrong coupon was
compounded by several other independent acts of negligence above-enumerated. Taken together, they
indubitably signify more than ordinary inadvertence or inattention and thus constitute a radical
departure from the extraordinary standard of care required of common carriers. Put differently, these
circumstances reflect the carrier's utter lack of care and sensitivity to the needs of its passengers, clearly
constitutive of gross negligence, recklessness and wanton disregard of the rights of the latter, acts
evidently indistinguishable or no different from fraud, malice and bad faith. As the rule now stands,
where in breaching the contract of carriage the defendant airline is shown to have acted fraudulently,
with malice or in bad faith, the award of moral and exemplary damages, in addition to actual damages,
is proper. 15
However, the P500,000.00 moral damages and P400,000.00 exemplary damages awarded by the trial
court have to be reduced. 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. 16 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. 17 Damages are
not intended to enrich the complainant at the expense of the defendant. They are awarded only to
alleviate the moral suffering that the injured party had undergone by reason of the defendant's culpable
action. 18 There is no hard-and-fast rule in the determination of what would be a fair amount of moral
damages since each case must be governed by its own peculiar facts.

In the instant case, the injury suffered by petitioner is not so serious or extensive as to warrant an award
amounting to P900,000.00. The assessment of P200,000.00 as moral damages and P50,000.00 as
exemplary damages in his favor is, in our view, reasonable and realistic.
On the issue of actual damages, we agree with the Court of Appeals that the amount of P20,000.00
granted by the trial court to petitioner should not be disturbed. Petitioner categorically testified that he
incurred the amount during the period of his delay in departing from the United States
Q: Will you kindly tell the Court what expenses if any did you incur for these . . . days from July 1 until
you were able to leave on July 6, 1988?
A: Well, it is true we stayed in the house of my nephew but still we had to spend for our food and I left
him some around five hundred dollars for our stay for around five days.
Q: How about your meals?
A: For our meals, we have to eat outside.
Q: Will you tell, more or less, how much you spent for your meals?
xxx

xxx

xxx

A: For every meal we spend around thirty dollars each.

Q: And this is for how many days?
A: From July 1, up to the 6th in the morning, sir.
Q: So more or less how many in pesos did you spend for this period of waiting from July 1 to 6?
A: Twenty thousand pesos, sir. 19
In the absence of any countervailing evidence from private respondent, and in view of the negligence
attributable to it, the foregoing testimony suffices as basis for actual damages as determined by the
court a quo.
As regards attorney's fees, they may be awarded when the defendant's act or omission has compelled
the plaintiff to litigate with third persons or to incur expenses to protect his interest. It was therefore
erroneous for the Court of Appeals to delete the award made by the trial court; consequently, petitioner
should be awarded attorney's fees and the amount of P25,000.00, instead of P100,000.00 earlier
awarded, may be considered rational, fair and reasonable.
WHEREFORE, the petition is GRANTED and the 14 July 1994 Decision of the Court of Appeals is
REVERSED. Private respondent is ordered to pay petitioner P20,000.00 for actual damages as fixed by
the trial court, plus P200,000.00 for moral damages, P50,000.00 for exemplary damages and P25,000.00
for attorney's fees. No costs.

SO ORDERED.
4. [1994V705] LUFTHANSA GERMAN AIRLINES, petitioner, vs. COURT OF APPEALS and TIRSO V.
ANTIPORDA, SR., respondents.1994 Nov 243rd DivisionG.R. No. 83612D E C I S I O N
ROMERO, J.:
In this petition for review on certiorari, the Court is confronted with the issue of whether or not
petitioner Lufthansa German Airlines which issued a confirmed Lufthansa ticket to private respondent
Antiporda covering a five-leg trip abroad different airlines should be held liable for damages occasioned
by the "bumping-off" of said private respondent Antiporda by Air Kenya, one of the airlines contracted
to carry him to a particular destination of the five-leg trip.
Tirso V. Antiporda, Sr. was an associate director of the Central Bank of the Philippines and a registered
consultant of the Asian Development Bank, the World Bank and the UNDP. He was, contracted by Sycip,
Gorres, Velayo & Co. (SGV) to be the institutional financial specialist for the agricultural credit institution
project of the Investment and Development Bank of Malawi in Africa. According to the letter of August
30, 1984 addressed to Antiporda from J.F. Singson of SGV, he would render his services to the Malawi
bank as an independent contractor for which he would be paid US$9,167 for a 50-day period
commencing sometime in September 1984. For the engagement, Antiporda would be provided one
round-trip economy ticket from Manila to Blantyre and back with a maximum travel time of four days
per round-trip and, in addition, a travel allowance of $50 per day, a travel insurance coverage of
P100,000 and major hospitalization with AFIA and an accident insurance coverage of P150,000. 1
On September 17, 1984, Lufthansa, through SGV, issued ticket No. 3477712678 for Antiporda's
confirmed flights to Malawi, Africa. The ticket particularized his itinerary as follows:

Manila to

Carrier

Flight

Date

Time

Status

SQ

081

25-9-84

1530

OK

LH

695

25-9-84

2200

OK

KQ

203

Singapore
Singapore to
Bombay
Bombay to

26-9-84

0215

OK

Nairobi
Nairobi to

QM

335

26-9-84

1395

OK

QM

031

26-9-84

1600

OK

Lilongwe
Lilongwe to

Blantyre
Thus, on September 25, 1984, Antiporda took the Lufthansa flight to Singapore from where he
proceeded to Bombay on board the same airline. He arrived in Bombay as scheduled and waited at the
transit area of the airport for his connecting flight to Nairobi which was, per schedule given him by
Lufthansa, to leave Bombay in the morning of September 26, 1984. Finding no representative of
Lufthansa waiting for him at the gate, Antiporda asked the duty officer of Air India how he could get in
touch with Lufthansa. He was told to call up Lufthansa which informed him that somebody would attend
to him shortly.
Ten minutes later, Gerard Matias, Lufthansa's traffic officer, arrived, asked for Antiporda's ticket and
told him to just sit down and wait. Matias returned with one Leslie Benent, duty officer of Lufthansa,
who informed Antiporda that his seat in Air Kenya Flight 203 to Nairobi had been given to a very
important person of Bombay who was attending a religious function in Nairobi. Antiporda protested,
stressing that he had an important professional engagement in Blantyre, Malawi in the afternoon of
September 26, 1984. He requested that the situation be remedied but Air Kenya Flight 203 left for
Nairobi without him on board. Stranded in Bombay, Antiporda was booked for Nairobi via Addis Ababa
only on September 27, 1984. He finally arrived in Blantyre at 9:00 o'clock in the evening of September
28, 1984, more than a couple of days late for his appointment with people from the institution he was to
work with in Malawi.
Consequently, on January 8, 1985, Antiporda's counsel wrote the general manager of Lufthansa in
Manila demanding P1,000,000 in damages for the airline's "malicious, wanton, disregard of the contract
of carriage." 2 In reply, Lufthansa general manager Hagen Keilich assured Antiporda that the matter
would be investigated.
Apparently getting no positive action from Lufthansa, on January 21, 1985, Antiporda filed with the
Regional Trial Court of Quezon City a complaint against Lufthansa which was docketed as Civil Case No.
Q-43810.
The lower court, 3 guided by the Supreme Court ruling in KLM Dutch Airlines v. Court of Appeals, et al.,
4 found that Lufthansa breached the contract to transport Antiporda from Manila to Blantyre on a trip
of five legs. It said:
"The threshold issue that confronts this Court is:
Was there a breach of obligation by the defendant in failing to transport the plaintiff from Manila to
Blantyre, Malawi, Africa?
The defendant admits the issuance and validity of Ticket No. 3477712678 (Exh. B). However, it denies its
obligation to transport the plaintiff to his point of destination at Blantyre, Malawi, Africa. Defendant
claims that it was obligated to transport the plaintiff only up to Bombay.

This case is one of a contract of carriage. And the ticket issued by the defendant to the plaintiff is the
written agreement between the parties herein. Ticket No. 3477712678 particularizes the itinerary of the
plaintiff . . .
xxx

xxx

xxx

From the ticket, therefore, it is indubitably clear that it was the duty and responsibility of the defendant
Lufthansa to transport the plaintiff from Manila to Blantyre, on a trip of five legs.
The posture taken by the defendant that it was Air Kenya's, not Lufthansa's, liability to transport plaintiff
from Bombay to Malawi, is inacceptable. The plaintiff dealt exclusively with the defendant Lufthansa
which issued to him the ticket for his entire trip and which in effect guaranteed to the plaintiff that he
would have sure space in Air Kenya's flight to Nairobi. Plaintiff, under that assurance of the defendant,
naturally, had the right to expect that his ticket would be honored by Air Kenya, to which, in the legal
sense, Lufthansa had endorsed and in effect guaranteed the performance of its principal engagement to
carry out plaintiff's scheduled itinerary previously and mutually agreed upon by the parties. Defendant
itself admitted that the flight from Manila, Singapore, Bombay, Nairobi, Lilongwe, Blantyre, Malawi,
were all confirmed with the stamped letters 'OK' thereon. In short, after issuing a confirmed ticket from
Manila to Malawi and receiv(ing) payment from the plaintiff for such one whole trip, how can the
defendant now deny its contractual obligation by alleging that its responsibility ceased at the Bombay
Airport?
The contract of air transportation was exclusively between the plaintiff Antiporda and the defendant
Lufthansa, the latter merely endorsing its performance to Air Kenya, as its subcontractor or agent. The
fourth paragraph of the 'Conditions of Contracts' of the ticket (Exh. B) issued by Lufthansa to plaintiff
indubitably shows that the contract was one of continuous air transportation from Manila to Blantyre,
Malawi.
'4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single
operation.'
This condition embodied in the ticket issued to plaintiff is diametrically opposed to the defense theory
that Lufthansa's liability is only limited up to Bombay."
Pursuant to the above reasoning, the lower court held that Lufthansa cannot limit its liability as a mere
ticket issuing agent for other airlines and only to untoward occurrences on its own line.
The lower court added that under the pool arrangement of the International Air Transport Association
(IATA), of which Lufthansa and Air Kenya are members, member airlines are agents of each other in the
issuance of tickets and, therefore, in accordance with Ortigas v. Lufthansa, 5 an airline company is
considered bound by the mistakes committed by another member of IATA which, in behalf of the
former, had confirmed a passenger's reservation for accommodation.

In justifying its award of moral and exemplary damages, the lower court emphasized that the breach of
contract was "aggravated by the discourteous and highly arbitrary conduct of Gerard Matias, an official
of petitioner Lufthansa in Bombay." Its factual findings on the matter are the following:
". . . . Bumped off from his connecting flight to Nairobi and stranded in the Bombay Airport for 32 hours,
when plaintiff insisted on taking his scheduled flight to Nairobi, Gerard Matias got angry and threw the
ticket and passport on plaintiff's lap and was ordered to go to the basement with his heavy luggages for
no reason at all. It was a difficult task for the plaintiff to carry three luggages and yet Gerard Matias did
not even offer to help him. Plaintiff requested accommodation but Matias ignored it and just left. Not
even Lufthansa office in Bombay, after learning plaintiff's being stranded in Bombay and his
accommodation problem, provided any relief to plaintiff's sordid situation. Plaintiff had to stay in the
transit area and could not sleep for fear that his luggages might be lost. Everytime he went to the toilet,
he had to drag with him his luggages. He tried to eat the high-seasoned food available at the airport but
developed stomach trouble. It was indeed a pathetic sight that the plaintiff, an official of the Central
Bank, a multi-awarded institutional expert, tasked to perform consultancy work in a World Bank funded
agricultural bank project in Malawi instead found himself stranded in a foreign land where nobody was
expected to help him in his predicament except the defendant, who displayed utter lack of concern of its
obligation to the plaintiff and left plaintiff alone in his misery at the Bombay airport."
Citing Air France v. Carrascoso, 6 the lower court ruled that passengers have a right to be treated with
kindness, respect, courtesy and consideration by the carrier's employees apart from their right to be
protected against personal misconduct, injurious language, indignities and abuses from such employees.
Consequently, the trial court ordered Lufthansa to pay Antiporda the following:
"(a) the amount of P300,000.00 as moral damages;
(b) the amount of P200,000.00 as exemplary damages; and
(c ) the amount of P50,000.00 as reasonable attorney's fees.
With costs against the defendant."
Lufthansa elevated the case to the Court of Appeals arguing that it cannot be held liable for the acts
committed by Air Kenya on the basis of the following:
(a) it merely acted as a ticket-issuing agent in behalf of Air Kenya; consequently the contract of carriage
entered into is between respondent Antiporda and Air Kenya, to the exclusion of petitioner Lufthansa;
(b) under sections (1) and (2) Article 30 of the Warsaw Convention, an airline carrier is liable only to
untoward occurrences on its own line;
(c ) the award of moral and exemplary damages in addition to attorney's fees by the trial court is
without basis in fact and in law.

The Court of Appeals not convinced with Lufthansa's appeal, affirmed the decision on the trial court
sought to be reviewed.
Explained the Court of Appeals: although the contract of carriage was to be performed by several air
carriers, the same is to be treated as a single operation conducted by Lufthansa because Antiporda dealt
exclusively with it which issued him a Lufthansa ticket for the entire trip. By issuing a confirmed ticket,
Lufthansa in effect guaranteed Antiporda a sure seat with Air Kenya. Private respondent Antiporda,
maintained the Court of Appeals, had the right to expect that his ticket would be honored by Air Kenya
which, in the legal sense, Lufthansa had endorsed and, in effect, guaranteed the performance of its
principal engagement to carry out his five-leg trip.
The appellate court also ruled that Lufthansa cannot rely on Sections (1) and (2), Article 30 of the
Warsaw Convention 7 because the provisions thereof are not applicable under the circumstances of
the case.
Sections (1) and (2), Article 30 of the Warsaw Convention provide:
"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) 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. mphasis supplied).
According to the Court of Appeals, Antiporda's cause of action is not premised on the occurrence of an
accident or delay as contemplated under Section 2 of said Article but on Air Kenya's refusal to transport
him in order to accommodate another. To support this ruling, the Court of Appeals cited the Supreme
Court ruling in KLM Royal Dutch Airlines v. Court of Appeals, 8 which held, inter alia, that:
"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."
The Court of Appeals concluded that Lufthansa cannot, thus, invoke Sections (1) and (2), Article 30 of
the Warsaw Convention to evade liability.
Failing to obtain a favorable decision, Lufthansa filed this petition for review on certiorari anchored on
the following arguments:

"1. The respondent court erred as a matter of law in refusing to apply the Warsaw Convention to the
instant case.
"2. Respondent court's ruling that Lufthansa had deceived private respondent has no factual or legal
basis.
"3. The respondent court erred as a matter of law in affirming the trial court's award of moral damages
in the face of this Court's rulings concerning moral damages in cases of breach of contract.
"4. The respondent court erred as a matter of law in affirming the trial court's award of exemplary
damages for lack of legal or factual basis therefor."
The arguments propounded by petitioner Lufthansa cannot suffice to reverse the appellate court's
decision as prayed for. Lufthansa raised four assignments of error but the focal point at issue has been
defined by us at the inception of this ponencia.
Lufthansa maintains that its liability to any passenger is limited to occurrences in its own line, and, thus,
in the case at bench, its liability to Antiporda is limited to the extent that it had transported him from
Manila to Singapore and from Singapore to Bombay; that therefrom, responsibility for the performance
of the contract of carriage is assumed by the succeeding carriers tasked to transport him for the
remaining leg of his trip because at that stage, its contract of carriage with Antiporda ceases, with
Lufthansa acting, no longer as the principal in the contract of carriage, but merely as a ticket-issuing
agent for the other carriers.
In further advancing this line of defense, Lufthansa invoked Section 2, Article 30 of the Warsaw
Convention 9 which expressly stipulates that in cases where the transportation of passengers or goods
is performed by various successive carriers, the passenger can take action only against the carrier which
performed the transportation, during which the accident or delay occurred. Lufthansa further advanced
the theory that this provision of the Warsaw Convention is applicable to the present case, contrary to
the decision of the Court of Appeals which relied on the Supreme Court ruling in KLM Royal Dutch Lines.
10 For Lufthansa, "bumping-off" is considered delay since delay would inevitably result therefrom. It
implored this Court to re-examine our ruling in KLM and take heed of jurisprudence 11 in the U.S.
where "delay," unlike in our ruling in KLM, contemplates the instance of "bumping-off." In KLM, we held
that the term "delay" does not encompass the instance of "bumping-off," the latter having been defined
as refusal to carry or transport a passenger.
On his part, private respondent Antiporda insists that he entered with Lufthansa an exclusive contract of
carriage, the nature of which is a continuous carriage by air from Manila to Blantyre Malawi; that it did
not enter into a series of independent contracts with the carriers that transported him for the remaining
leg of his trip.
The basis for such claim is well-founded. As ruled by the trial court, with the Court of Appeals concurring
favorably, Antiporda was issued a confirmed Lufthansa ticket all throughout the five-leg trip. The fourth
paragraph of the "Conditions of Contract" stipulated in the ticket indubitably showed that the contract

of carriage was considered as one of continuous air transportation from Manila to Blantyre, Malawi,
thus:
"4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single
operation."
In light of the stipulations expressly specified in the ticket defining the true nature of its contract of
carriage with Antiporda, Lufthansa cannot claim that its liability thereon ceased at Bombay Airport and
thence, shifted to the various carriers that assumed the actual task of transporting said private
respondent.
We, therefore, reject Lufthansa's theory that from the time another carrier was engaged to transport
Antiporda on another segment of his trip, it merely acted as a ticket-issuing agent in behalf of said
carrier. In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage
with Antiporda and remains to be so, regardless of those instances when actual carriage was to be
performed by various carriers. The issuance of a confirmed Lufthansa ticket in favor of Antiporda
covering his entire five-leg trip abroad successive carriers concretely attests to this. This also serves as
proof that Lufthansa, in effect guaranteed that the successive carriers, such as Air Kenya would honor
his ticket; assure him of a space therein and transport him on a particular segment of his trip. This ruling
finds corroboration in the Supreme Court decision in KLM , 12 where the same issues were confronted,
thus:
"xxx

xxx

xxx

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."
On the issue of whether the Warsaw Convention, particularly Section 2, Article 30 thereof is applicable
herein, we agree with the Court of Appeals in ruling in the negative. We reiterate what has been settled
in KLM:
"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. . . ."

Lufthansa prays this court to take heed of jurisprudence in the United States where the term "delay"
was interpreted to include "bumping-off" or failure to carry a passenger with a confirmed reservation.
These decisions in the United States are not controlling in this jurisdiction. We are not prepared, absent
reasons of compelling nature, to entertain an extended meaning of the term "delay," which in KLM was
given its ordinary signification. "Construction and interpretation come only after it has been
demonstrated that application is impossible or inadequate without them. The ordinary language of a
statute must be given its ordinary meaning and limited to a reasonable interpretation." 13 In its ordinary
sense, "delay" means to prolong the time of or before; to stop, detain or hinder for a time, or cause
someone or something to be behind in schedule or usual rate of movement in progress. 14 "Bumpingoff," which is the refusal to transport passengers with confirmed reservation to their planned and
contracted destinations, totally forecloses said passengers' right to be transported, whereas delay
merely postpones for a time being the enforcement of such right.
Consequently, Section 2, Article 30 of the Warsaw Convention which does not contemplate the instance
of "bumping-off" but merely of simple delay, cannot provide a handy excuse for Lufthansa as to
exculpate it from any liability to Antiporda. The payment of damages is, thus, deemed warranted by this
Court. We find no reversible error in the lower court's award of moral and exemplary damages,
including attorney's fees in favor of Antiporda.
Article 2220 of the Civil Code provides:
"Art. 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."
According to the findings of the appellate court which affirmed that of the lower court, the reasons
given by the witnesses for Lufthansa for private respondent's being "bumped off" at Bombay airport
were conflicting.
Observed the Court of Appeals:
"If there was really no seat available because of over-booking, why did Lufthansa confirm the ticket of
the plaintiff-appellee? It has to be pointed out that the confirmed ticket is up to Blantyre, Malawi, not
only to Bombay.
If the plaintiff-appellee was not in the list of passengers of Kenya Airways (the connecting flight) then
Lufthansa must have deceived him in Manila because according to Gerard Matias, the passengers
booked by Kenya Airways for Boeing 707 were 190 passengers when the plane could accommodate only
144 passengers considering that the name of plaintiff-appellee was not in the list. If that was the
situation, Lufthansa by the issuance of its ticket should have not assured the plaintiff-appellee that he
could get the connecting flights as scheduled. Surely, Lufthansa before confirming the ticket of the
plaintiff-appellee must have confirmed the flight with Kenya Airways. If it was impossible to get a seat
upon its own investigation in Bombay, then it should have not confirmed the ticket of the plaintiff-

appellee. It is the defendant-appellant who was negligent in the performance of its duties, and plaintiffappellee was just plainly deceived.
Since the ticket was marked O.K., meaning confirmed, therefore plaintiff-appellee must have a definite
seat with Kenya Airways but it was lost or given to another person. It is not true therefore, that plaintiffappellee's name was not in the list of Kenya Airways. Besides, why should Lufthansa allow a passenger
to depart from the Philippines with a confirmed ticket, without instructing its Bombay office to reserve a
seat with Kenya Airways for its connecting flight? In spite of the confirmation, Nelda Aquino testified
that plaintiff-appellee was stranded in Bombay because he did not get a seat with Kenya Airways, and
his name did not appear in the list of passengers. Then contrary to the testimonies of Berndt Loewe and
Gerard Matias that the obligation of the defendant-appellant is only up to Bombay and the reason why
plaintiff-appellee was not in the list of passengers is because of overbooking. Nelda Aquino contrary to
the testimonies of the two, testified that the reason for the bumping-off is that the seat was given to
another passenger, to wit:
'Q Did you know or eventually learned later that the name of Antiporda was not in the list of confirmed
passengers?
A I only learned from the office at Bombay that it was given to other passenger which I only learned
from the office at Bombay.
Q Who informed you that the seat of Mr. Antiporda was given to other passenger?
A From our international officer.
Q Who is he?
A Our Sales Manager.
Q Is he your Sales Manager in Bombay?
A Yes, our Manager.'
If Nelda Aquino knew that the reason for the bumping-off is that the seat was given to another, how
come Berndt Loewe, passenger Sales Manager of defendant, Gerard Matias, an employee of defendantappellant in Bombay did not know the said reason why the name of plaintiff-appellee did not appear in
the list of passengers? It is either they knew the truth but because they wanted to escape liability they
pretended not to know the truth."
Clearly, bad faith attended the performance of the contract of carriage, for even while Antiporda was in
Bombay, representatives of Lufthansa already tried to evade liability first, by claiming that the contract
of carriage between Lufthansa and Antiporda ceased at Bombay airport, in disregard of the fact that
Antiporda was holding a Lufthansa ticket for the entire five-leg trip; second, despite Berndt Loewe's
knowledge that Antiporda's seat was allowed to be given to another passenger, the same suppressed
the information and feigned ignorance of the matter, presenting altogether another reason why

Antiporda was not listed in the manifest, i.e. that Air Kenya Boeing 707 was overbooked,
notwithstanding clear proof that Lufthansa in Manila confirmed his reservation for said flight.
Antiporda is likewise entitled to the award of exemplary damages on the basis of Article 2232 of the Civil
Code which provides:
"Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner."
There is every indication that Lufthansa, through its representatives in Bombay, acted in a reckless and
malevolent manner in dealing with Antiporda.
As found by the trial court:
"The breach of the guarantee was aggravated by the discourteous and highly arbitrary conduct of
Gerard Matias, an official of Lufthansa in Bombay. Bumped off from his connecting flight to Nairobi and
stranded in the Bombay Airport for 32 hours, when plaintiff insisted on taking his scheduled flight to
Nairobi, Gerard Matias got angry and threw the ticket and passport on plaintiff's lap and was ordered to
go to the basement with his heavy luggages for no reason at all. It was a difficult task for the plaintiff to
carry three luggages and yet Gerard Matias did not even offer to help him. Plaintiff requested
accommodation but Matias ignored it and just left. Not even Lufthansa office in Bombay, after learning
plaintiff's being stranded in Bombay and his accommodation problem, provided any relief to plaintiff's
sordid situation. Plaintiff has to stay in the transit area and could not sleep for fear that his luggages
might be lost. Everytime he went to the toilet, he had to drag with him his luggages. He tried to eat the
high-seasoned food available at the airport but developed stomach trouble. It was indeed a pathetic
sight that the plaintiff, an official of the Central Bank, a multi-awarded institutional expert, tasked to
perform consultancy work in a World Bank funded agricultural bank project in Malawi instead found
himself stranded in a foreign land where nobody was expected to help him in his predicament except
the defendant, who displayed utter lack of concern of its obligation to the plaintiff and left plaintiff
alone in his misery at the Bombay airport."
These findings of the trial court were affirmed by the Court of Appeals on the ground that there are no
cogent reasons to justify a contrary finding. The same holds true with this Court. The findings of fact of
lower courts are binding on us and will not be generally disturbed on appeal. 15 In affirming the lower
court's award of damages to Antiporda, we take into account his high position in the government,
coupled with the fact that he failed to meet his professional commitment in Blantyre, Malawi due to the
"bumping-off" incident accompanied by rude and discourteous behavior on the part of airline officials
who should have been the first to attend to his travel needs.
WHEREFORE, the petition for review is hereby DENIED and the decision of the Court of Appeals
AFFIRMED.
Costs against petitioner.
SO ORDERED.

5. [1975V207] 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.1975 Jul 221st DivisionG.R. No. L-31150
CASTRO, J:
In this appeal by way of certiorari the Koninklijke Luchtvaart Maatschappij N.V., otherwise known as the
KLM Royal Dutch Airlines (hereinafter referred to as the KLM) assails the award of damages made by the
Court of Appeals in CA-G.R. 40620 in favor of the spouses Rufino T. Mendoza and Consuelo T. Mendoza
(hereinafter referred to as the respondents).
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." mphasis 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 and embarrassment suffered by the respondents at the hands
of a supercilious boor of the Aer Lingus.
ACCORDINGLY, the judgment of the Court of Appeals dated August 14, 1969 is affirmed, at KLM's cost.
Makalintal, C.J., Makasiar, Esguerra and Muoz Palma, JJ., concur.

KLM Royal Dutch Airlines vs CA Case Digest

KLM Royal Dutch Airlines vs Court of Appeals
(65 SCRA 237)
Facts: Spouses Mendoza approached Mr. Reyes, the branch manager of Philippine Travel Bureau,
for consultation about a world tour which they were intending to make with their daughter and niece.
Three segments of the trip, the longest, was via KLM. Respondents decided that one of the routes
they will take was a Barcelona-Lourdes route with knowledge that only one airline, Aer Lingus,
served it. Reyes made the necessary reservations. To this, KLM secured seat reservations for the
Mendozas and their companions from the carriers which would ferry them throughout their trip,
which the exception of Aer Lingus. When the Mendozas left the Philippines, they were issued KLM
tickets for the entire trip. However, their coupon for Aer Lingus was marked on request.
When they were in Germany, they went to the KLM office and obtained a confirmation from Aer
Lingus. At the airport in Barcelona, the Mendozas and their companions checked in for their flight to
Lourdes. However, although their daughter and niece were allowed to take the flight, the spouses
Mendozas were off loaded on orders of the Aer Lingus manager, who brusquely shoved them aside
and shouted at them. So the spouses Mendozas took a train ride to Lourdes instead.
Thus, they filed a complaint for damages against KLM for breach of contract of carriage. The trial
court decided in favor of the Mendozas. On appeal, the CA affirmed the decision. Hence, KLM
brings this petition to the Supreme Court. KLM cites Art 30 of the Warsaw Convention, which states:
the passenger or his representatives can take action only against the carrier who performed the
transportation during which the accident or delay occurred. Also, KLM avers that the front cover of
each ticket reads: that liability of the carrier for damages shall be limited to occurrences on its own
line.
Issue: Whether or not KLM is liable for breach of contract of carriage?
Held: The applicability of Art. 30 of the Warsaw Convention cannot be sustained. The article
presupposes the occurrence of delay or accident. What is manifest here is that the Aer Lingus
refused to transport the spouses Mendozas to their planned and contracted destination.
As the airline which issued the tickets, KLM was chargeable with the duty and responsibility of
specifically informing the spouses of the conditions prescribed in their tickets or to ascertain that the
spouses read them before they accepted their passage tickets.
The Supreme Court held that KLM cannot be merely assumed as a ticket-issuing agent for other
airlines and limit its liability to untoward occurrences on its own line.
The court found, that the passage tickets provide that the carriage to be performed therein by
several successive carriers is to be regarded as a single operation.
6. G.R. No. 161730
January 28, 2005 JAPAN AIRLINES, petitioner,
vs.MICHAEL ASUNCION and JEANETTE ASUNCION, respondents.
DECISION
YNARES-SANTIAGO, J.:

This petition for review seeks to reverse and set aside the October 9, 2002 decision1 of the Court of
Appeals and its January 12, 2004 resolution,2 which affirmed in toto the June 10, 1997 decision of
the Regional Trial Court of Makati City, Branch 61 in Civil Case No. 92-3635.3
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan
Airlines (JAL) Flight 742 bound for Los Angeles. Their itinerary included a stop-over in Narita and an
overnight stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko Etou-Higuchi of JAL
endorsed their applications for shore pass and directed them to the Japanese immigration official.4 A
shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the
neighborhood of the port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared shorter than
his height as indicated in his passport. Because of this inconsistency, respondents were denied
shore pass entries and were brought instead to the Narita Airport Rest House where they were
billeted overnight.
The immigration official also handed Mrs. Higuchi a Notice5 where it was stated that respondents
were to be "watched so as not to escape".
Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japans
Immigration Department to handle passengers who were denied shore pass entries, brought
respondents to the Narita Airport Rest House where they stayed overnight until their departure the
following day for Los Angeles. Respondents were charged US$400.00 each for their
accommodation, security service and meals.
On December 12, 1992, respondents filed a complaint for damages6 claiming that JAL did not fully
apprise them of their travel requirements and that they were rudely and forcibly detained at Narita
Airport.
JAL denied the allegations of respondents. It maintained that the refusal of the Japanese
immigration authorities to issue shore passes to respondents is an act of state which JAL cannot
interfere with or prevail upon. Consequently, it cannot impose upon the immigration authorities that
respondents be billeted at Hotel Nikko instead of the airport resthouse.7
On June 10, 1997, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiffs
ordering defendant JAL to pay plaintiffs as follows:
1. the sum of US$800.00 representing the expenses incurred at the Narita Airport with
interest at 12% per annum from March 27, 1992 until the sum is fully paid;
2. the sum of P200,000.00 for each plaintiff as moral damages;
3. the amount of P100,000.00 for each plaintiff as exemplary damages;
4. the amount of P100,000.00 as attorneys fees; and
5. costs of suit.
SO ORDERED.8

The trial court dismissed JALs counterclaim for litigation expenses, exemplary damages and
attorneys fees.
On October 9, 2002, the Court of Appeals affirmed in toto the decision of the trial court. Its motion for
reconsideration having been denied,9 JAL now files the instant petition.
The basic issue for resolution is whether JAL is guilty of breach of contract.
Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its passengers
safely as far as human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances. When an airline issues a ticket to a passenger,
confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger has
every right to expect that he be transported on that flight and on that date and it becomes the
carriers obligation to carry him and his luggage safely to the agreed destination.10 If the passenger is
not so transported or if in the process of transporting he dies or is injured, the carrier may be held
liable for a breach of contract of carriage.11
We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has
the duty to inspect whether its passengers have the necessary travel documents, however, such
duty does not extend to checking the veracity of every entry in these documents. JAL could not
vouch for the authenticity of a passport and the correctness of the entries therein. The power to
admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL.
This is not within the ambit of the contract of carriage entered into by JAL and herein respondents.
As such, JAL should not be faulted for the denial of respondents shore pass applications.
Prior to their departure, respondents were aware that upon arrival in Narita, they must secure shore
pass entries for their overnight stay. Respondents mother, Mrs. Imelda Asuncion, insisted though
that Ms. Linda Villavicencio of JAL assured her that her children would be granted the passes.12 This
assertion was satisfactorily refuted by Ms. Villavicencios testimony during the cross examination, to
wit:
ATTY. GONZAGA:
Q I will show to you Exh. 9 which is the TIM and on page 184 hereof, particularly number 10,
and I quote, "Those holding tickets with confirmed seats and other documents for their
onward journey and continuing their journey to a third country provided that they obtain an
indorsement with an application of shore pass or transit pass from the airline ground
personnel before clearing the immigration formality?"
WITNESS:
A Yes, Sir.
Q Did you tell this provision to Mrs. Asuncion?
A Yes, Sir. I did.
Q Are you sure?
A Yes, Sir.

Q Did you give a copy?

A No, Sir, I did not give a copy but verbally I explained to her the procedure they have to
undergo when they get to narita airport.
.
Q And you read the contents of this [TIM]?
A No, Sir, I did not read it to her but I explained to her the procedure that each passenger
has to go through before when they get to narita airport before they line up in the immigration
counter.
Q In other words, you told Mrs. Asuncion the responsibility of securing shore passes bears
solely on the passengers only?
A Yes, Sir.
Q That the airline has no responsibility whatsoever with regards (sic) to the application for
shore passes?
A Yes, Sir.13
Next, respondents claimed that petitioner breached its contract of carriage when it failed to explain to
the immigration authorities that they had overnight vouchers at the Hotel Nikko Narita. They imputed
that JAL did not exhaust all means to prevent the denial of their shore pass entry applications.
To reiterate, JAL or any of its representatives have no authority to interfere with or influence the
immigration authorities. The most that could be expected of JAL is to endorse respondents
applications, which Mrs. Higuchi did immediately upon their arrival in Narita.
As Mrs. Higuchi stated during her deposition:
ATTY. QUIMBO
Q: Madam Witness, what assistance did you give, if any, to the plaintiffs during this
interview?
A: No, I was not present during their interview. I cannot assist.
Q: Why not?
A: It is forbidden for a civilian personnel to interfere with the Immigration agents duties.14
.
Q: During the time that you were in that room and you were given this notice for you to sign,
did you tell the immigration agent that Michael and Jeanette Asuncion should be allowed to
stay at the Hotel Nikko Narita because, as passengers of JAL, and according to the plaintiff,
they had vouchers to stay in that hotel that night?

A: No, I couldnt do so.

Q: Why not?
A: This notice is evidence which shows the decision of immigration authorities. It shows there
that the immigration inspector also designated Room 304 of the Narita Airport Resthouse as
the place where the passengers were going to wait for their outbound flight. I cannot
interfere with that decision.15
1aw phi1.nt

Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the denial of
respondents applications, Mrs. Higuchi immediately made reservations for respondents at the Narita
Airport Rest House which is really more a hotel than a detention house as claimed by respondents.16
More importantly, nowhere in respondent Michaels testimony did he state categorically that Mrs.
Higuchi or any other employee of JAL treated them rudely or exhibited improper behavior throughout
their stay. We therefore find JAL not remiss in its obligations as a common carrier.
1awphi 1.nt

Moral damages may be recovered in cases where one willfully causes injury to property, or in cases
of breach of contract where the other party acts fraudulently or in bad faith. Exemplary damages are
imposed by way of example or correction for the public good, when the party to a contract acts in
wanton, fraudulent, oppressive or malevolent manner. Attorneys fees are allowed when exemplary
damages are awarded and when the party to a suit is compelled to incur expenses to protect his
interest.17 There being no breach of contract nor proof that JAL acted in wanton, fraudulent or
malevolent manner, there is no basis for the award of any form of damages.
Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It has been
sufficiently proven that the amount pertained to ISC, an agency separate and distinct from JAL, in
payment for the accommodations provided to respondents. The payments did not in any manner
accrue to the benefit of JAL.
However, we find that the Court of Appeals correctly dismissed JALs counterclaim for litigation
expenses, exemplary damages and attorneys fees. The action was filed by respondents in utmost
good faith and not manifestly frivolous. Respondents honestly believed that JAL breached its
contract. A persons right to litigate should not be penalized by holding him liable for damages. This
is especially true when the filing of the case is to enforce what he believes to be his rightful claim
against another although found to be erroneous.18
WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The October 9,
2002 decision of the Court of Appeals and its January 12, 2004 resolution in CA-G.R. CV No. 57440,
are REVERSED and SET ASIDE insofar as the finding of breach on the part of petitioner and the
award of damages, attorneys fees and costs of the suit in favor of respondents is concerned.
Accordingly, there being no breach of contract on the part of petitioner, the award of actual, moral
and exemplary damages, as well as attorneys fees and costs of the suit in favor of respondents
Michael and Jeanette Asuncion, is DELETED for lack of basis. However, the dismissal for lack of
merit of petitioners counterclaim for litigation expenses, exemplary damages and attorneys fees, is
SUSTAINED. No pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Carpio, and Azcuna, JJ., concur.

Quisumbing, J., no part.

7. G.R. No. L-18965 October 30, 1964 COMPAIA MARITIMA, petitioner,

vs. INSURANCE COMPANY OF NORTH AMERICA, respondent.
Rafael Dinglasan for petitioner.
Ozaeta Gibbs & Ozaeta for respondent.
BAUTISTA ANGELO, J.:
Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the
services of the Compaia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp
from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to
Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on
confirmed by a formal and written booking issued by Macleod's branch office in Sasa and
handcarried to Compaia Maritima's branch office in Davao in compliance with which the latter sent
to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was
completed on October 29, 1952. These two lighters were manned each by a patron and an assistant
patron. The patrons of both barges issued the corresponding carrier's receipts and that issued by the
patron of Barge No. 1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel
Navigator.
FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the
government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot
belonging to Compaia Maritima on which the hemp was to be loaded. During the night of October
29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of
1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly notified the carrier's
main office in Manila and its branch in Davao advising it of its liability. The damaged hemp was
brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying.
During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to
Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of
1,162 bales weighing 2,324 piculs which had a total value of 116,835.00. After reclassification, the
value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72.
Adding to this last amount the sum of P8,863.30 representing Macleod's expenses in checking,
grading, rebating, and other fees for washing, cleaning and redrying in the amount of P19.610.00,
the total loss adds up to P60,421.02.
All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025,
were insured with the Insurance Company of North America against all losses and damages. In due
time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and
after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a
document which aside from being a receipt of the amount paid, was a subrogation agreement
between Macleod and the insurance company wherein the former assigned to the latter its rights
over the insured and damaged cargo. Having failed to recover from the carrier the sum of
P60,421.02, which is the only amount supported by receipts, the insurance company instituted the

present action on October 28, 1953. After trial, the court a quo rendered judgment ordering the
carrier to pay the insurance company the sum of P60,421.02, with legal interest thereon from the
date of the filing of the complaint until fully paid, and the costs. This judgment was affirmed by the
Court of Appeals on December 14, 1960. Hence, this petition for review.
The issues posed before us are: (1) Was there a contract of carriage between the carrier and the
shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which
was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry
the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the
cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural
disaster that would exempt the carrier from liability?; (3) Can respondent insurance company sue the
carrier under its insurance contract as assignee of Macleod in spite of the fact that the liability of the
carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in
regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of
the shipper's statement of accounts contrary to the burden of proof rule?; and (5) Can the insurance
company maintain this suit without proof of its personality to do so?
1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and
Company contracted by telephone the services of petitioner to ship the hemp in question from the
former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to Boston,
Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking
issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters
to undertake the service. It also appears that the patrons of said lighters were employees of the
carrier with due authority to undertake the transportation and to sign the documents that may be
necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the
cargo of hemp loaded therein as follows: .
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND
COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel
Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at
Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of
carriage already entered into between the carrier and the shipper, for that preparatory step is but
part and parcel of said contract of carriage. The lighters were merely employed as the first step of
the voyage, but once that step was taken and the hemp delivered to the carrier's employees, the
rights and obligations of the parties attached thereby subjecting them to the principles and usages of
the maritime law. In other words, here we have a complete contract of carriage the consummation of
which has already begun: the shipper delivering the cargo to the carrier, and the latter taking
possession thereof by placing it on a lighter manned by its authorized employees, under which
Macleod became entitled to the privilege secured to him by law for its safe transportation and
delivery, and the carrier to the full payment of its freight upon completion of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the contract to
carry and deliver, and if actually no goods are received there can be no such contract. The
liability and responsibility of the carrier under a contract for the carriage of goods commence
on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to
a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in
that way, is a good delivery and binds the vessel receiving the freight, the liability
commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract

to carry goods from one port to another, and they cannot be loaded directly on the vessel
and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its
substitutes, so that the bill of landing is applicable to the goods as soon as they are placed
on the lighters. (80 C.J.S., p. 901, emphasis supplied)
... The test as to whether the relation of shipper and carrier had been established is, Had the
control and possession of the cotton been completely surrendered by the shipper to the
railroad company? Whenever the control and possession of goods passes to the carrier and
nothing remains to be done by the shipper, then it can be said with certainty that the relation
of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W.
419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W.
834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E,
1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).
The claim that there can be no contract of affreightment because the hemp was not actually loaded
on the ship that was to take it from Davao City to Manila is of no moment, for, as already stated, the
delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by
the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of
S.S. Bowline Knot in good order and condition." On the other hand, the authorities are to the effect
that a bill of lading is not indispensable for the creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of
lading, although article 350 of the Code of Commerce provides that "the shipper as well as
the carrier of merchandise or goods may mutua-lly demand that a bill of lading is not
indispensable. As regards the form of the contract of carriage it can be said that provided
that there is a meeting of the minds and from such meeting arise rights and obligations, there
should be no limitations as to form." The bill of lading is not essential to the contract,
although it may become obligatory by reason of the regulations of railroad companies, or as
a condition imposed in the contract by the agreement of the parties themselves. The bill of
lading is juridically a documentary proof of the stipulations and conditions agreed upon by
both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the
Code does not demand, as necessary requisite in the contract of transportation, the delivery
of the bill of lading to the shipper, but gives right to both the carrier and the shipper to
mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895).
(Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13)
The liability of the carrier as common carrier begins with the actual delivery of the goods for
transportation, and not merely with the formal execution of a receipt or bill of lading; the
issuance of a bill of lading is not necessary to complete delivery and acceptance. Even
where it is provided by statute that liability commences with the issuance of the bill of lading,
actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind
the claim offorce majeure or storm which occurred on the night of October 29, 1952. But the
evidence fails to bear this out.
Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but
to lack of adequate precautions or measures taken by the carrier to prevent the loss as may be
inferred from the following findings of the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had
cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same

manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh.
JJJ-4) conclusively showing that the barge was not seaworthy it should be noted that
on the night of the nautical accident there was no storm, flood, or other natural disaster or
calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles
per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as
storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75
miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of
from 55 to 74 miles per hour in order to be classified as storm (Northern Assurance Co., Ltd.
vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).
The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors,
attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy
compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission of
two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain
water 'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals.
3. There can also be no doubt that the insurance company can recover from the carrier as assignee
of the owner of the cargo for the insurance amount it paid to the latter under the insurance contract.
And this is so because since the cargo that was damaged was insured with respondent company
and the latter paid the amount represented by the loss, it is but fair that it be given the right to
recover from the party responsible for the loss. The instant case, therefore, is not one between the
insured and the insurer, but one between the shipper and the carrier, because the insurance
company merely stepped into the shoes of the shipper. And since the shipper has a direct cause of
action against the carrier on account of the damage of the cargo, no valid reason is seen why such
action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor
can the carrier set up as a defense any defect in the insurance policy not only because it is not a
privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage
which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting
the following comments of the Court of Appeals:
It was not imperative and necessary for the trial court to pass upon the question of whether
or not the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134
isued by appellee. Appellant was neither a party nor privy to this insurance contract, and
therefore cannot avail itself of any defect in the policy which may constitute a valid reason for
appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever
defect the policy contained, if any, is deemed to have been waived by the subsequent
payment of Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as
a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit
MM. Since, as above demonstrated, appellant is liable to Macleod and Company of the
Philippines for the los or damage to the 1,162 bales of hemp after these were received in
good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows
that appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into
the shoes of and substi-tuted the latter in demanding from appellant the payment for the loss
and damage aforecited.
4. It should be recalled in connection with this issue that during the trial of this case the carrier asked
the lower court to order the production of the books of accounts of the Odell Plantation containing
the charges it made for the loss of the damaged hemp for verification of its accountants, but later it
desisted therefrom on the claim that it finds their production no longer necessary. This desistance
notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in
connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the
sum of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the
desistance of the carrier from producing the books of accounts of Odell Plantation implies an

admission of the correctness of the statements of accounts contained therein, petitioner now
contends that the Court of Appeals erred in basing the affirmance of the award on such erroneous
interpretation.
There is reason to believe that the act of petitioner in waiving its right to have the books of accounts
of Odell Plantation presented in court is tantamount to an admission that the statements contained
therein are correct and their verification not necessary because its main defense here, as well as
below, was that it is not liable for the loss because there was no contract of carriage between it and
the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's
theory, the correctness of the account representing the loss was not so material as would
necessitate the presentation of the books in question. At any rate, even if the books of accounts
were not produced, the correctness of the accounts cannot now be disputed for the same is
supported by the original documents on which the entries in said books were based which were
presented by the shipper as part of its evidence. And according to the Court of Appeals, these
documents alone sufficiently establish the award of P60,412.02 made in favor of respondent.
5. Finally, with regard to the question concerning the personality of the insurance company to
maintain this action, we find the same of no importance, for the attorney himself of the carrier
admitted in open court that it is a foreign corporation doing business in the Philippines with a
personality to file the present action.
WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.
8.

[1987V482] SEA-LAND SERVICE, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT and
PAULINO CUE, doing business under the name and style of "SEN HIAP HING," respondents.1987
Aug 311st DivisionG.R. No. 75118D E C I S I O N

NARVASA, J.:
The main issue here is whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of
lading limiting to a fixed amount the liability of the carrier for loss or damage to the cargo where its value is not
declared in the bill.
The factual antecedents, for the most part, are not in dispute.
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity), a foreign shipping and forwarding
company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California
a shipment consigned to Sen Hiap Hing, the business name used by Paulino Cue in the wholesale and retail trade
which he operated out of an establishment located on Borromeo and Plaridel Streets, Cebu City.
The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The bill
described the shipment only as "8 CTNS on 2 SKIDS-FILES." 1 Based on volume measurements Sea-land charged
the shipper the total amount of US$209.28 2 for freightage and other charges. The shipment was loaded on board the
MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port of Cebu.
The shipment arrived in Manila on February 12, 1981, and there discharged in Container No. 310996 into the custody
of the arrastre contractor and the customs and port authorities. 3 Sometime between February 13 and 16, 1981, after
the shipment had been transferred, along with other cargoes to Container No. 40158 near Warehouse 3 at Pier 3 in
South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered. 4
On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment
allegedly amounting to P179,643.48. 5 Sea-Land offered to settle for US$4,000.00, or its then Philippine peso
equivalent of P30,600.00. asserting that said amount represented its maximum liability for the loss of the shipment
under the package limitation clause in the covering bill of lading. 6 Cue rejected the offer and thereafter brought suit
for damages against Sea-Land in the then Court of First Instance of Cebu, Branch X. 7 Said Court, after trial,

rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the Philippine
currency value of the lost cargo, P55,814.00 for unrealized profit with one (1%) percent monthly interest from the
filing of the complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as litigation expenses. 8
Sea-Land appealed to the Intermediate Appellate Court. 9 That Court however affirmed the decision of the Trial Court
". . . in all its parts . . . . " 10 Sea-Land thereupon filed the present petition for review which, as already stated, poses
the question of whether, upon the facts above set forth, it can be held liable for the loss of the shipment in any
amount beyond the limit of US$500.00 per package stipulated in the bill of lading.
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier
or shipper for loss of, or damage to, goods being transported under said bill, although that document may have been
---- as in practice it oftentimes is ---- drawn up only by the consignor and the carrier without the intervention of the
consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the Court delved at some length into the reasons behind this
when, upon a claim made by the consignee of a motion picture film shipped by air that he was never a party to the
contract of transportation and was a complete stranger thereto, it said:
"But appellant now contends that he is not suing on a breach of contract but on a tort as provided for in Art. 1902 of
the Civil Code. We are a little perplexed as to this new theory of the appellant. First, he insists that the articles of the
Code of Commerce should be applied: that he invokes the provisions of aid Code governing the obligations of a
common carrier to make prompt delivery of goods given to it under a contract of transportation. Later, as already said,
he says that he was never a party to the contract of transportation and was a complete stranger to it, and that he is
now suing on a tort or a violation of his rights as a stranger (culpa aquiliana). If he does not invoke the contract of
carriage entered into with the defendant company, then he would hardly have any leg to stand on. His right to prompt
delivery of the can of film at the Phil. Air Port stems and is derived from the contract of carriage under which contract,
the PAL undertook to carry the can of film safely and to deliver it to him promptly. Take away or ignore that contract
and the obligation to carry and to deliver and right to prompt delivery disappear. Common carriers are not obligated
by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such
common carriers previously assume the obligation. Said rights and obligations are created by a specific contract
entered into by the parties. In the present case, the findings of the trial court which as already stated, are accepted by
the parties and which we must accept are to the effect that the LVN Pictures Inc. and Jose Mendoza on one side, and
the defendant company on the other, entered into a contract of transportation (p. 29, Rec. on Appeal). One
interpretation of said finding is that the LVN Pictures Inc. through previous agreement with Mendoza acted as the
latter's agent. When he negotiated with the LVN Pictures Inc. to rent the film 'Himala ng Birhen' and show it during the
Naga town fiesta, he most probably authorized and enjoined the Picture Company to ship the film for him on the PAL
on September 17th. Another interpretation is that even if the LVN Pictures Inc. as consignor of its own initiative, and
acting independently of Mendoza for the time being, made Mendoza as consignee, a stranger to the contract if that is
possible, nevertheless when he, Mendoza appeared at the Phil Air Port armed with the copy of the Air Way Bill (Exh.
1) demanding the delivery of the shipment to him, he thereby made himself a party to the contract of transportation.
The very citation made by appellant in his memorandum supports this view. Speaking of the possibility of a conflict
between the order of the shipper on the one hand and the order of the consignee on the other, as when the shipper
orders the shipping company to return or retain the goods shipped while the consignee demands their delivery,
Malagarriga in his book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina Court of
Appeals on commercial matters, cited by Tolentino in Vol. II of his book entitled 'Commentaries and Jurisprudence on
the Commercial Laws of the Philippines' p. 209, says that the right of the shipper to countermand the shipment
terminates when the consignee or legitimate holder of the bill of lading appears with such bill of lading before the
carrier and makes himself a party to the contract. Prior to that time he is a stranger to the contract.
Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old Civil Code (now
Art. 1311, second paragraph) which reads thus:
Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment provided he has
given notice of his acceptance to the person bound before the stipulation has been revoked.'
Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the stipulations of
delivery to Mendoza as consignee. His demand for the delivery of the can of film to him at the Phil Air Port may be
regarded as a notice of his acceptance of the stipulation of the delivery in his favor contained in the contract of
carriage and delivery. In this case he also made himself a party to the contract, or at least has come to court to
enforce it. His cause of action must necessarily be founded on its breach."

Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is
governed by the laws of the country of destination 12 and the goods in question were shipped from the United States
to the Philippines, the liability of petitioner Sea-Land to the respondent consignee is governed primarily by the Civil
Code, and as ordained by the said Code, suppletorily, in all matters not determined thereby, by the Code of
Commerce and special laws. 13 One of these suppletory special laws is the Carriage of Goods by Sea Act, U.S.
Public Act No. 521 which was made applicable to all contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade by Commonwealth Act No. 65, approved on October 22, 1936. Sec. 4(5) of said Act in part
reads:
"(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection
with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in
case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill
of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive
on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than
that mentioned in this paragraph may be fixed: Provided; That such maximum shall not be less than the figure above
named. In no event shall the carrier be liable for more than the amount of damage actually sustained.
xxx

xxx

xxx."

Clause 22, first paragraph, of the long-form bill of lading customarily issued by Sea-Land to its shipping clients 14 is a
virtual copy of the first paragraph of the foregoing provision. It says:
"22. VALUATION. In the event of any loss, damage or delay to or in connection with goods exceeding in actual value
$500 per package, lawful money of the United States, or in case of goods not shipped in packages, per customary
freight unit, the value of the goods shall be deemed to be $500 per package or per customary freight unit, as the case
may be, and the carrier's liability, if any, shall be determined on the basis of a value of $500 per package or
customary freight unit, unless the nature and a higher value shall be declared by the shipper in writing before
shipment and inserted in this Bill of Lading."
And in its second paragraph, the bill states:
"If a value higher than $500 shall have been declared in writing by the shipper upon delivery to the carrier and
inserted in this bill of lading and extra freight paid, if required and in such case if the actual value of the goods per
package or per customary freight unit shall exceed such declared value, the value shall nevertheless be deemed to
be declared value and the carrier's liability, if any, shall not exceed the declared value and any partial loss or damage
shall be adjusted pro rata on the basis of such declared value."
Since, as already pointed out, Article 1766 of the Civil Code expressly subjects the rights and obligations of common
carriers to the provisions of the Code of Commerce and of special laws in matters not regulated by said (Civil) Code,
the Court fails to fathom the reason or justification for the Appellate Court's pronouncement in its appealed Decision
that the Carriage of Goods by Sea Act ". . . has no application whatsoever in this case." 15 Not only is there nothing
in the Civil Code which absolutely prohibits agreements between shipper and carrier limiting the latter's liability for
loss of or damage to cargo shipped under contracts of carriage; it is also quite clear that said Code in fact has
agreements of such character in contemplation in providing, in its Articles 1749 and 1750, that:
"ART. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value, is binding."
"ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely
agreed upon."
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is repugnant to or inconsistent
with any of the just-cited provisions of the Civil Code. Said section merely gives more flesh and greater specificity to

the rather general terms of Article 1719 (without doing any violence to the plain intent thereof) and of Article 1750, to
give effect to just agreements limiting carriers' liability for loss or damage which are freely and fairly entered into.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did not exist, the validity and binding
effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of
the cited Civil Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art.
1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To
hold otherwise would amount to questioning the justice and fairness of that law itself, and this the private respondent
does not pretend to do. But over and above that consideration, the just and reasonable character of such stipulation
is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely
far from onerous expedient of declaring the nature and value of the shipment in the bill of lading. And since the
shipper here has not been heard to complaint of having been "rushed," imposed upon or deceived in any significant
way into agreeing to ship the cargo under a bill of lading carrying such a stipulation ---- in fact, it does not appear that
said party has been heard from at all insofar as this dispute is concerned ---- there is simply no ground for assuming
that its agreement thereto was not as the law would require, freely and fairly sought and given.
The private respondent had no direct part or intervention in the execution of the contract of carriage between the
shipper and the carrier as set forth in the bill of lading in question. As pointed out in Mendoza vs. PAL, supra, the right
of a party in the same situation as respondent here, to recover for loss of a shipment consigned to him under a bill of
lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may
exist between him and the shipper or consignor, or his status as a stranger in whose favor some stipulation is made
in said contract, and who becomes a party thereto when he demands fulfillment of that stipulation, in this case the
delivery of the goods or cargo shipped. In neither capacity can he assert personally, in bar to any provision of the bill
of lading, the alleged circumstance that fair and free agreement to such provision was vitiated by its being in such fine
print as to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case 16 where
this Court found that a similar package limitation clause was "(printed in the smallest type on the back of the bill of
lading," it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such
provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed
therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon
stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the
shipper declares a higher value and inserts it into said contract or bill. This pro-position, moreover, rests upon an
almost uniform weight of authority. 17
The issue of alleged deviation is also settled by Clause 13 of the bill of lading which expressly authorizes
transshipment of the goods at any point in the voyage in these terms:
"13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the exercise of its or his discretion and
although transshipment or forwarding of the goods may not have been contemplated or provided for herein, may at
port of discharge or any other place whatsoever transship or forward the goods or any part thereof by any means at
the risk and expense of the goods and at any time, whether before or after loading on the ship named herein and by
any route, whether within or outside the scope of the voyage or beyond the port of discharge or destination of the
goods and without notice to the shipper or consignee. The carrier or master may delay such transshipping or
forwarding for any reason, including but not limited to awaiting a vessel or other means of transportation whether by
the carrier or others."
Said provision obviates the necessity to offer any other justification for off loading the shipment in question in Manila
for transshipment to Cebu City, the port of destination stipulated in the bill of lading. Nonetheless, the Court takes
note of Sea-Land's explanation that it only directly serves the Port of Manila from abroad in the usual course of
voyage of its carriers, hence its maintenance of arrangements with a local forwarder. Aboitiz and Company, for
delivery of its imported cargo to the agreed final point of destination within the Philippines, such arrangements not
being prohibited, but in fact recognized, by law. 18
Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea Act is applicable up to the final port of
destination and that the fact that transshipment was made on an interisland vessel did not remove the contract of
carriage of goods from the operation of said Act.

Private respondent also contends that the aforecited Clauses 22 and 13 of the bill of lading relied upon by petitioner
Sea-Land form no part of the short-form bill of lading attached to his complaint before the Trial Court and appear only
in the long form of that document which, he claims. Sea-Land offered (as its Exhibit 2) as an unused blank form with
no entries or signatures therein. He, however, admitted in the Trial Court that several times in the past shipments had
been delivered to him through Sea-Land, 20 from which the assumption may fairly follow that by the time of the
consignment now in question, he was already reasonably apprised of the usual terms covering contracts of carriage
with said petitioner.
At any rate, as observed earlier, it has already been held that the provisions of the Carriage of Goods by Sea Act on
package limitation [sec. 4(5) of the Act hereinabove referred to] are as much a part of a bill of lading as though
actually placed therein by agreement of the parties. 21
Private respondent, by making claim for loss on the basis of the bill of lading, to all intents and purposes accepted
said bill. Having done so, he
". . . becomes bound by all stipulations contained therein whether on the front or the back thereof. Respondent cannot
elude its provisions simply because they prejudice him and take advantage of those that are beneficial. Secondly, the
fact that respondent shipped his goods on board the ship of petitioner and paid the corresponding freight thereon
shows that he impliedly accepted the bill of lading which was issued in connection with the shipment in question, and
so it may be said that the same is finding upon him as if it had been actually signed by him or by any other person in
his behalf. . . . . 22
There is one final consideration. The private respondent admits 23 that as early as on April 22, 1981, Sea-Land had
offered to settle his claim for US$4,000.00, the limit of said carrier's liability for loss of the shipment under the bill of
lading. This Court having reached the conclusion that said sum is all that is justly due said respondent, it does not
appear just or equitable that Sea-Land, which offered that amount in good faith as early as six years ago, should, by
being made to pay at the current conversion rate of the dollar to the peso, bear for its own account all of the increase
in said rate since the time of the offer of settlement. The decision of the Regional Trial Court awarding the private
respondent P186,048.00 as the peso value of the lost shipment is clearly based on a conversion rate of P8.00 to
US$1.00, said respondent having claimed a dollar value of $23,256.00 for said shipment. 24 All circumstances
considered, it is just and fair that Sea-Land's dollar obligation be convertible at the same rate.
WHEREFORE, the Decision of the Intermediate Appellate Court complained of is reversed and set aside. The
stipulation in the questioned bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by
said bill to US$500.00 per package is held valid and binding on private respondent. There being no question of the
fact that said shipment consisted of eight (8) cartons or packages, for the loss of which Sea-Land is therefore liable in
the aggregate amount of US$4,000.00, it is the judgment of the Court that said petitioner discharge that obligation by
paying private respondent the sum of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the
conversion rate of P8.00 to $1.00. Costs against private respondent.
SO ORDERED.

9.

[1952V45E] JOSE MENDOZA, plaintiff-appellant, vs. PHILIPPINE AIR LINES, INC., defendantappellee.1952 Feb 29En BancG.R. No. L-3678D E C I S I O N

MONTEMAYOR, J.:
The present appeal by plaintiff Jose Mendoza from the decision of the Court of First Instance of
Camarines Sur, has come directly to this Tribunal for the reason that both parties, appellant and
appellee, accepted the findings of fact made by the trial court and here raise only questions of law. On
our part, we must also accept said findings of fact of the lower court.
In the year 1948, appellant Jose Mendoza was the owner of the Cita Theater located in the City of Naga,
Camarines Sur, where he used to exhibit movie pictures booked from movie producers or film owners in
Manila. The fiesta or town holiday of the City of Naga, held on September 17 and 18, yearly, was usually

attended by a great many people, mostly from the Bicol region, especially since the Patron Saint Virgin
of Pea Francia was believed by many to be miraculous. As a good businessman, appellant, taking
advantage of these circumstances, decided to exhibit a film which would fit the occasion and have a
special attraction and significance to the people attending said fiesta. A month before the holiday, that
is to say, August 1948, he contracted with the LVN pictures Inc., a movie producer in Manila for him to
show during the town fiesta the Tagalog film entitled "Himala ng Birhen" or Miracle of the Virgin. He
made extensive preparations; he had two thousand posters printed and later distributed not only in the
City of Naga but also in the neighboring towns. He also advertised in a weekly of general circulation in
the province. The posters and advertisement stated that the film would be shown in the Cita Theater on
the 17th and 18th of September, corresponding to the eve and day of the fiesta itself.
In pursuance of the agreement between the LVN Pictures Inc. and Mendoza, the former on September
17th, 1948, delivered to the defendant Philippine Airlines (PAL) whose planes carried passengers and
cargo and made regular trips from Manila to the Pili Air Port near Naga, Camarines Sur, a can containing
the film "Himala ng Birhen" consigned to the Cita Theater. For this shipment the defendant issued its Air
Way Bill No. 317133 marked Exhibit "1". This can of films was loaded on flight 113 of the defendant, the
plane arriving at the Air Port at Pili a little after four o'clock in the afternoon of the same day, September
17th. For reasons not explained by the defendant, but which would appear to be the fault of its
employees or agents, this can of film was not unloaded at Pili Air Port and it was brought back to Manila.
Mendoza who had completed all arrangements for the exhibition of the film beginning in the evening of
September 17th, to exploit the presence of the big crowd that came to attend the town fiesta, went to
the Air Port and inquired from the defendant's station master there about the can of film. Said station
master could not explain why the film was not unloaded and sent several radiograms to his principal in
Manila making inquiries and asking that the film be sent to Naga immediately. After investigation and
search in the Manila office, the film was finally located the following day, September 18th, and then
shipped to the Pili Air Port on September 20th. Mendoza received it and exhibited the film but he had
missed his opportunity to realize a large profit as he expected for the people after the fiesta had already
left for their towns. To recoup his losses, Mendoza brought this action against the PAL. After trial, the
lower court found that because of his failure to exhibit the film "Himala ng Birhen" during the town
fiesta, Mendoza suffered damages or rather failed to earn profits in the amount of P3,000.00, but
finding the PAL not liable for said damages, dismissed the complaint.
To avoid liability, defendant-appellee, called the attention of the trial court to the terms and conditions
of paragraph 6 of the Way Bill printed on the back thereof, which paragraph reads as follows:
"6. The Carrier does not obligate itself to carry the Goods by any specified aircraft or on a specified
time. Said Carrier being hereby authorized to deviate from the route of the shipment without any
liability therefor."
It claimed that since there was no obligation on its part to carry the film in question on any specified
time, it could not be held accountable for the delay of about three days. The trial court, however, found
and held that although the defendant was not obligated to load the film on any specified plane or on
any particular day, once said can of film was loaded and shipped on one of its planes making the trip to

Camarines, then it assumed the obligation to unload it at its point of destination and deliver it to the
consignee, and its unexplained failure to comply with this duty constituted negligence. It however found
that fraud was not involved and that the defendant was a debtor in good faith.
The trial court presided over by Judge Jose N. Leuterio in a well-considered decision citing authorities,
particularly the case of Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587, held that not
because plaintiff failed to realize profits in the sum of P3,000.00 due to the negligence of the defendant,
should the latter be made to reimburse him said sum. Applying the provisions of Art. 1107 of the Civil
Code which provides that losses and damages for which a debtor in good faith is liable are those
foreseen, or which might have been foreseen, at the time of constituting the obligation, and which are a
necessary consequence of the failure to perform it, the trial court held that inasmuch as these damages
suffered by Mendoza were not foreseen or could not have been foreseen at the time that the defendant
accepted the can of film for shipment, for the reason that neither the shipper LVN Pictures Inc. nor the
consignee Mendoza had called its attention to the special circumstances attending the shipment and the
showing of the film during the town fiesta of Naga, plaintiff may not recover the damages sought.
Counsel for appellant insists that the articles of the Code of Commerce rather than those of the Civil
Code should have been applied in deciding this case for the reason that the shipment of the can of film
is an act of commerce; that the contract of transportation in this case should be considered commercial
under Art. 349 of the Code of Commerce because it not only involves merchandise or an object of
commerce but also the transportation company, the defendant herein, was a common carrier, that is to
say, customarily engaged in transportation for the public, and that although the contract of
transportation was not by land or waterways as defined in said Art. 349, nevertheless, air transportation
being analogous to land and water transportation, should be considered as included, especially in view
of the second paragraph of Art. 2 of the same Code which says that transactions covered by the Code of
Commerce and all others of analogous character shall be deemed acts of commerce. The trial court,
however, disagreed to this contention and opined that air transportation not being expressly covered by
the Code of Commerce, cannot be governed by its provisions.
We believe that whether or not transportation by air should be regarded as a commercial contract
under Art. 349, would be immaterial in the present case, as will be explained later. Without making a
definite ruling on the civil or commercial nature of transportation by air, it being unnecessary, we are
inclined to believe and to hold that a contract of transportation by air may be regarded as commercial.
The reason is that at least in the present case the transportation company (PAL) is a common carrier;
besides, air transportation is clearly similar or analogous to land and water transportation. The obvious
reason for its non-inclusion in the Code of Commerce was that at the time of its promulgation,
transportation by air on a commercial basis was not yet known. In the United States where air
transportation has reached its highest development, an airline company engaged in the transportation
business is regarded as a common carrier.
"The principles which govern carriers by other means, such as by railroad or motor bus, govern carriers
by aircraft." 6 Am Jur., Aviation, Sec. 56, p. 33.

"When Aircraft Operator is Common Carrier. - That aircraft and the industry of carriage by aircraft are
new is no reason why one in fact employing aircraft as common-carrier vehicles should not be classified
as a common carrier and charged with liability as such. There can be no doubt, under the general law of
common carriers, that those air lines and aircraft owners engaged in the passenger service on regular
schedules on definite routes, who solicit the patronage of the traveling public, advertise schedules for
routes, times of leaving, and rates of fare, and make the usual stipulation as to baggage, are common
carriers by air. A flying service company which, according to its printed advertising, will take anyone
anywhere at any time, though not operating on regular routes or schedules, and basing its charges not
on the number of passengers, but on the operating cost of the plane per mile, has been held to be a
common carrier. It is not necessary, in order to make one carrying passengers by aircraft a common
carrier of passengers that the passengers be carried from one point to another; the status and the
liability as a common carrier may exist notwithstanding the passenger's ticket issued by an airplane
carrier of passengers for hire contains a statement that it is not a common carrier, etc., or a stipulation
that it is to be held only for its proven negligence. But an airplane owner cannot be classed as a common
carrier of passengers unless he undertakes, for hire, to carry all persons who apply for passage
indiscriminately as long as there is room and no legal excuse for refusing. . . . " 6 Am. Jur., Aviation, Sec.
58, pp. 34-35.
"The rules governing the business of a common carrier by airship or flying machine may be readily
assimilated to those applied to other common carriers." 2 C.J. S., 1951, Cumulative Pocket Part, Aerial
Navigation, Sec. 38, p. 99.
"The test of whether one is a common carrier by air is whether he holds out that he will carry for hire, so
long as he has room, goods of everyone bringing goods to him for carriage, not whether he is carrying as
a public employment or whether he carries to a fixed place." (Ibid., Sec. 39, P. 99.)
Appellant contends that Art. 358 of the Code of Commerce should govern the award of damages in his
favor. Said article provides that if there is no period fixed for the delivery of the goods, the carrier shall
be bound to forward them in the first shipment of the same or similar merchandise which he may make
to the point of delivery, and that upon failure to do so, the damages caused by the delay should be
suffered by the carrier. This is a general provision for ordinary damages and is no different from the
provisions of the Civil Code, particularly Art. 1101 thereof, providing for the payment of damages caused
by the negligence or delay in the fulfillment of one's obligation. Even applying the provisions of the Code
of Commerce, as already stated, the pertinent provisions regarding damages only treats of ordinary
damages or damages in general, not special damages like those suffered by the plaintiff herein. Article 2
of the Code of Commerce provides that commercial transactions are to be governed by the provisions of
the Code of Commerce, but in the absence of applicable provisions, they will be governed by the usages
of commerce generally observed in each place; and in default of both, by those of the Civil Law. So that
assuming that the present case involved a commercial transaction, still inasmuch as the special damages
herein claimed finds no applicable provision in the Code of Commerce, neither has it been shown that
there are any commercial usages applicable thereto, then in the last analysis, the rules of the civil law
would have to come into play. Under Art. 1107 of the Civil Code, a debtor in good faith like the
defendant herein, may be held liable only for damages that were foreseen or might have been foreseen

at the time the contract of transportation was entered into. The trial court correctly found that the
defendant company could not have foreseen the damages that would be suffered by Mendoza upon
failure to deliver the can of film on the 17th of September, 1948 for the reason that the plans of
Mendoza to exhibit that film during the town fiesta and his preparations, specially the announcement of
said exhibition by posters and advertisement in the newspaper, were not called to the defendant's
attention.
In our research for authorities we have found a case very similar to the one under consideration. In the
case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered motion
picture films to the defendant Fargo, an express company, consigned and to be delivered to him in
Utica. At the time of shipment the attention of the express company was called to the fact that the
shipment involved motion picture films to be exhibited in Utica, and that they should be sent to their
destination, rush. There was delay in their delivery and it was found that the plaintiff because of his
failure to exhibit the film in Utica due to the delay suffered damages or loss of profits. But the highest
court in the State of New York refused to award him special damages. Said appellate court observed:
"But before defendant could be held to special damages, such as the present alleged loss of profits on
account of delay or failure of delivery, it must have appeared that he had notice at the time of delivery
to him of the particular circumstances attending the shipment, and which probably would lead to such
special loss if he defaulted. Or, as the rule has been stated in another form, in order to impose on the
defaulting party further liability than for damages naturally and directly, i.e., in the ordinary course of
things, arising from a breach of contract, such unusual or extraordinary damages must have been
brought within the contemplation of the parties as the probable result of a breach at the time of or prior
to contracting. Generally, notice then of any special circumstances which will show that the damages to
be anticipated from a breach would be enhanced has been held sufficient for this effect."
As may be seen, that New York case is a stronger one than the present case for the reason that the
attention of the common carrier in said case was called to the nature of the articles shipped, the
purpose of shipment, and the desire to rush the shipment, circumstances and facts absent in the
present case.
But appellant now contends that he is not suing on a breach of contract but on a tort as provided for in
Art. 1902 of the Civil Code. We are a little perplexed as to this new theory of the appellant. First, he
insists that the articles of the Code of Commerce should be applied; that he invokes the provisions of
said Code governing the obligations of a common carrier to make prompt delivery of goods given to it
under a contract of transportation. Later, as already said, he says that he was never a party to the
contract of transportation and was a complete stranger to it, and that he is now suing on a tort or a
violation of his rights as a stranger (culpa aquiliana). If he does not invoke the contract of carriage
entered into with the defendant company, then he would hardly have any leg to stand on. His right to
prompt delivery of the can of film at the Pili Air Port stems and is derived from the contract of carriage
under which contract, the PAL undertook to carry the can of film safely and to deliver it to him promptly.
Take away or ignore that contract and the obligation to carry and to deliver and the right to prompt
delivery disappear. Common carriers are not obligated by law to carry and to deliver merchandise, and

persons are not vested with the right to prompt delivery, unless such common carriers previously
assume the obligation. Said rights and obligations are created by a specific contract entered into by the
parties. In the present case, the findings of the trial court which as already stated, are accepted by the
parties and which we must accept are to the effect that the LVN Pictures Inc. and Jose Mendoza on one
side, and the defendant company on the other, entered into a contract of transportation. (p. 29, Rec. on
Appeal). One interpretation of said finding is that the LVN Pictures Inc. through previous agreement with
Mendoza acted as the latter's agent. When he negotiated with the LVN Pictures Inc. to rent the film
"Himala ng Birhen" and show it during the Naga town fiesta, he most probably authorized and enjoined
the Picture Company to ship the film for him on the PAL on September 17th. Another interpretation is
that even if the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza
for the time being, made Mendoza as consignee, a stranger to the contract if that is possible,
nevertheless when he, Mendoza, appeared at the Pili Air Port armed with the copy of the Air Way Bill
(Exh. 1) demanding the delivery of the shipment to him, he thereby made himself a party to the contract
of transportation. The very citation made by appellant in his memorandum supports this view. Speaking
of the possibility of a conflict between the order of the shipper on the one hand and the order of the
consignee on the other, as when the shipper orders the shipping company to return or retain the goods
shipped while the consignee demands their delivery, Malagarriga in his book Codigo de Comercio
Comentado, Vol. I, p. 400, citing a decision of Argentina Court of Appeals on commercial matters, cited
by Tolentino in Vol. II of his book entitled "Commentaries and Jurisprudence on the Commercial Laws of
the Philippines" p. 209, says that the right of the shipper to countermand the shipment terminates when
the consignee or legitimate holder of the bill of lading appears with such bill of lading before the carrier
and makes himself a party to the contract. Prior to that time, he is stranger to the contract.
Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old Civil
Code which reads thus:
"Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment,
provided he has given notice of his acceptance to the person bound before the stipulation has been
revoked."
Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the
stipulations of delivery to Mendoza as consignee. His demand for the delivery of the can of film to him
at the Pili Air Port may be regarded as a notice of his acceptance of the stipulation of the delivery in his
favor contained in the contract of carriage, such demand being one for the fulfillment of the contract of
carriage and delivery. In this case he also made himself a party to the contract, or at least has come to
court to enforce it. His cause of action must necessarily be founded on its breach.
One can readily sympathize with the appellant herein for his loss of profits which he expected to realize.
But he overlooked the legal angle. In situations like the present where failure to exhibit films on a
certain day would spell substantial damages or considerable loss of profits, including waste of efforts on
preparations and expenses incurred in advertisements, exhibitors, for their security, may either get hold
of the films well ahead of the time of exhibition in order to make allowance for any hitch in the delivery,
or else enter into a special contract or make a suitable arrangement with the common carrier for the

prompt delivery of the films, calling the attention of the carrier to the circumstances surrounding the
case and the approximate amount of damages to be suffered in case of delay.
Finding no reversible error in the decision appealed from, the same is hereby affirmed. No
pronouncement as to costs. So ordered.
Paras, C. J., Feria, Bengzon, Padilla, Reyes, Jugo and Bautista Angelo, JJ., concur.
Paras, C.J., I certify that Mr. Justice Tuason voted for the affirmance.