Zalamea vs.

CA

G.R. No. 104235, Nov. 18, 1993

OVERBOOKING OF FLIGHT IS BAD FAITH; LEX LOCI CONTRACTUS – LAW OF

THE PLACE WHERE TICKET WAS ISSUED GOVERNS

FACTS:

The Zalamea spouses and their daughter purchased 3 airline tickets from the
Manila agent of respondent TransWorld Airlines (TWA) for a flight to New York to Los
Angeles. The tickets of the spouses were purchased at a discount of 75% while that of
their daughter was a full-fare ticket. All three tickets represented confirmed reservations.
Once in New York, however, they found that their flight back to Manila was overbooked,
as a result of which they had to be wait-listed. Out of those waitlisted, the ones with full-
fare tickets were preferred. Thus, only the Zalamea husband, who was holding his
daughter’s ticket, was able to get on board while his wife and daughter had to wait for
the next flight. However, it turned out this next flight was likewise overbooked, forcing
the Zalameas to purchase tickets from another airlines. Later, they sued TWA for
breach of contract in the Philippines.

ISSUE:

Whether or not TWA is liable for breach of contract

HELD:

SC held in the affirmative. Overbooking of flight amounts to fraud or bad faith,

entitling plaintiff to an award of moral damages because of bad faith attending the
breach of contract. The holding that overbooking was allowed under US Federal
regulations was found erroneous because: (1) this regulation was not proved and our
courts cannot judicial notice of it, and (2) even if such regulation was proven, the rule of
lex loci contractus negated its application. According to this rule, 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. Since tickets were sold and issued in the Philippines, the applicable
law in this case would be Philippine law. Under our jurisprudence, overbooking of flight
is bad faith. Moreover, the hierarchy of tickets practiced by TWA was evidence of its
self-interest over that of its passengers, which SC held to be improper considering the
public interest involved in a contract of carriage.
Zalamea vs. CA

G.R. No. 104235, Nov. 18, 1993

Conflict Process
Jurisdiction of the Forum

The rule that lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. According to this rule, 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.
Since tickets were sold and issued in the Philippines, the applicable law in this case
would be Philippine law.
Determine Foreign Element

Contract was performed outside the Philippine Territory.

Existence of Conflict of Laws

US Federal Law vs Philippine Law regarding the acceptability of overbooking

Choice of Law

The rule of lex loci contractus negates the application of the US Federal Law. The
Philippine Laws shall govern as the contract of carriage was perfected in the
Philippines. As a result, the law of the Philippines considering overbooking as
amounting to fraud or bad faith and thus, entitling plaintiff to an award of moral damages
because of bad faith attending the breach of contract, is applied.