01.KUWAIT AIRWAYS CORPORATION v. PHILIPPINE AIRLINES, INC.
o 3RD FREEDOM: The privilege to put down passengers, mail and
G.R. No. 156087
May 8, 2009
BELTRAN
TOPIC: Applicable laws; Regulatory Perspectives; Freedoms of the Air
NOTE: 2 topics siya under our syllabus.
DOCTRINE:
The general rule is that the Civil Aeronautic Board has the power to regulate the
airline companies/air transportation industry BUT this case is an exception.
Airline companies in the Philippines are subject to different regulatory perspectives.
There is no doubt that Philippine Airlines forebears under several regulatory
perspectives. First, its authority to operate air services in the Philippines derives from
its legislative franchise and is accordingly bound by whatever limitations that are
presently in place or may be subsequently incorporated in its franchise. Second, PAL
is subject to the other laws of the Philippines, including RA No. 776, which grants
regulatory power of CAB over the economic aspect of air transportation. Third, there
is a very significant public interest in state regulation of air travel in view of
considerations of public safety, domestic and international commerce, as well as the
fact that air travel necessitates steady traversal of international boundaries, the amity
between nations.
PARTIES
PETITIONER: Kuwait Airways Corporation
RESPONDENT: Philippine Airlines, Inc.
RECIT READY DIGEST:
Kuwait Airways and PAL entered into a Commercial Agreement to assist each other
to develop traffic on the route Kuwait-Bangkok-Manila and vice-versa. Under the said
agreement, Kuwait Airways obligated itself to share with PAL revenue earned from
the uplift of passengers between Kuwait and Manila and vice-versa. Sometime later,
delegations from Philippines and Kuwait met and agreed that effective upon the
signing of the CMU, the exercise of the third and fourth freedom traffic rights shall not
be subject to any royalty payment or commercial agreement. A month later, petitioner
sent a letter informing PAL that by virtue of the CMU the termination of the royalty
payment is in effect. PAL insisted that the Agreement should continue to be in force
and petitioner is still obligated to pay PAL revenue until such date. Petitioner refusing
to pay, PAL filed a complaint before the RTC which ruled in its favor. SC ruled in favor
of PAL as well and ordered Kuwait Airways to pay its corresponding liability.
FACTS:
● Kuwait Airways and Philippine Airlines (PAL) entered into a Commercial
Agreement to assist each other to develop traffic on the route Kuwait-
Bangkok-Manila and vice-versa.
● The agreement also stipulated that only 3rd and 4th freedom traffic rights
between Kuwait and Manila and vice versa will be exercised and no 5th
freedom traffic rights will be exercised between Manila on one hand and
Bangkok on the other.
cargo destined for the territory of the State whose nationality the
aircraft possesses.
o 4th FREEDOM: The privilege to take on passengers, mail or cargo
destined for the territory of the State whose nationality the aircraft
possesses.
o 5th FREEDOM: The right to carry passengers from one's own
country to a second country, and from that country to a third
country.
● In essence, the Kuwait Airways flight was authorized to board passengers in
Kuwait and deplane them in Manila, as well as to board passengers in
Manila and deplane them in Kuwait. At the same time, with the limitation in
the exercise of Fifth Freedom traffic rights, the flight was barred from
boarding passengers in Bangkok and deplaning them in Manila, or boarding
passengers in Manila and deplaning them in Bangkok.
● Further, under the said commercial agreement, Kuwait Airways obligated
itself to share with PAL revenue earned from the uplift of passengers
between Kuwait and Manila and vice-versa.
● However, the agreement was subsequently amended by the parties six
times between 1981 and 1994
● Sometime later, delegations from Philippines and Kuwait (Philippine Panel
and Kuwait Panel) met and agreed that effective upon the signing of the
Confidential Memorandum of Understanding (CMU) or APRIL 12, 1995, the
exercise of the third and fourth freedom traffic rights shall not be subject to
any royalty payment or commercial agreements.
● The Philippine Panel composed of officials from Civil Aeronautics Board,
DFA, and PAL and headed by the Executive Director of the CAB signed the
CMU – in behalf of the Philippine Government.
● A month later or on MAY 15, 1995, Kuwait Airways sent a letter informing
PAL that by virtue of the CMU the termination of the royalty payment is in
effect.
● PAL insisted that the Agreement should continue to be in force and
petitioner is still obligated to pay PAL revenue until such date.
● PAL replied through a letter and called the attention of Kuwait Airways
regarding Section 6.5 of the Commercial Agreement
o “This agreement may be terminated by either party by giving
ninety (90) days notice in writing to the other party. However, any
termination date must be the last day of any traffic period, e.g.
[,] 31st March or 31st October.”
● Pursuant to this clause, PAL acknowledged the MAY 15, 1995 letter as the
requisite notice of termination.
● However, it also pointed out that the agreement could only be effectively
terminated on OCTOBER 31, 1995, or the last day of the then current traffic
period.
● Thus, PAL insisted that the provisions of the Commercial Agreement "shall
continue to be enforced until such date."
● Subsequently, PAL insisted that Kuwait Airways pay it the principal sum of
1,092,690USD as revenue for the uplift of passengers and cargo for the
APRIL 13, 1995 to OCTOBER 28, 1995
 ● Petitioner refusing to pay, PAL filed a complaint before the RTC which ruled
in its favor. Hence this petition.
Kuwait Airways’ Arguments:
● Kuwait Airways invoked the CMU and argued that its obligations under the
Commercial Agreement were terminated as of the effectivity date of the
CMU or APRIL 12, 1995
PAL’s Arguments:
● PAL countered that it was NOT a privy to the CMU though It would
eventually concede to the CMU
PROCEDURE:
RTC: Ruled in favor of PAL.
● The Commercial Agreement and its specific provisions on revenue sharing
having been freely and voluntarily agreed upon by the affected parties has
the force of law between the parties and they are bound to the fulfillment of
what has been expressly stipulated therein
● The execution of the CMU could not prejudice its existing rights under the
Commercial Agreement
● That the CMU could only be deemed effective only after October 31,1995
● The obligatory force of contracts between contracting parties as the source
of vested rights which may not be modified or impaired
● The fact that the CMU may have been executed by a Philippine Panel does
not necessarily give rise to the conclusion that CMU is a superior contract
ISSUE/S:
1. Whether or not the Civil Aeronautics Board can compel PAL to
terminate the Commercial Agreement with Kuwait Airways – NO.
2. Whether or not Kuwait Airways is liable for the revenue it failed to pay
PAL in the months of April to October in lieu of the Commercial
Agreement - YES
HELD:
ISSUE 1:
No, the CAB cannot compel PAL to terminate the Commercial Agreement with
Kuwait Airways.
RULE:
The Court does not doubt that the CAB, in the exercise of its statutory
mandate, has the power to compel PAL to immediately terminate its
Commercial Agreement with Kuwait Airways pursuant to the CMU.
IN THIS CASE:
● Considering that it is the Philippine government that has the sole authority to
charter air policy and negotiate with foreign governments with respect to air
traffic rights, the government through the CAB has the indispensable
authority to compel local air carriers to comply with government determined
policies, even at the expense of economic rights.
● However, this is NOT a case where the CAB had duly exercised its
regulatory authority over a local airline in order to implement or further
government air policy.
● What happened instead was an officer of the CAB, acting in behalf not of
the Board but of the Philippine government, had committed to a foreign
nation the immediate abrogation of PAL’s commercial agreement with
Kuwait Airways.
● Nor can the courts presume, simply because Dr. Linlingan, Executive
Director of the CAB had signed the CMU in behalf of the Philippine
Panel that he could have done so bearing the authority of the Board, in
the exercise of regulatory jurisdiction over Philippine Airlines.
● For one, the CAB is a collegial body composed of 5 members and no one
member–even the chairman–can act in behalf of the entire Board. The
Board is disabled from performing as such without a quorum. For another,
the Executive Director of the CAB is not even a member of the Board, per
R.A. No. 776, as amended.
ISSUE 2:
Yes, Kuwait shall pay PAL of what is being demanded of them in lieu of the
Commercial Agreement and the CMU cannot be invoked.
RULE:
The obligatory force of contracts between the contracting parties as the source
of vested rights may not be modified or impaired.
IN THIS CASE:
● The CMU effectively sought to end the 1981 agreement between
Philippine Airlines and Kuwait Airways, by precluding any commercial
arrangements in the exercise of the Third and Fourth freedom traffic rights.
● As a result, both Kuwait and the Philippines had the respective right to board
passengers from their respective countries and deplane them in the other
country, without having to share any revenue or enter into any commercial
arrangements to exercise such rights.
● Another notable point, one not touched upon by the parties or the trial court.
It is well known that at the time of the execution of the 1981 agreements,
Philippine Airlines was controlled by the Philippine government, with the
Government Service Insurance System (GSIS) holding the majority of
shares.
● However, in 1992, Philippine Airlines was privatized.
● Thus, at the time of the signing of the CMU, Philippine Airlines was a private
corporation no longer controlled by the Government.
● This fact is significant. Had Philippine Airlines remained a government
owned or controlled corporation at the time the CMU was executed in 1995,
its status as such would have bound Philippine Airlines to the commitments
made in the document by no less than the Philippine government.
 ● However, since Philippine Airlines had already become a private
corporation at that juncture, the question of impairment of private rights 2. [G.R. No. 119706. March 14, 1996.] PHILIPPINE AIRLINES, INC., Petitioner, v.
may come into consideration. COURT OF APPEALS and GILDA C. MEJIA, Respondents.
● It is also worthy to note that the CMU should be effective on October 31,
1995 and NOT April 12, 1995.
Topic: Care of Baggage
THEREFORE: Petitioner: Philippine Airlines Inc.
Kuwait Airways is liable to PAL for the payment of its shares in the revenue in the Respondents: Gilda C. Mejia
contract to uplift passengers as per the commercial agreement since it still has vested Doctrine:
rights over the said contract. - Petition DENIED.

Facts:

Issue:

Ruling:

3 October 28, 1991, demanding out-of-court settlement of PHP 1,000,000.00.
UNITED AIRLINES, petitioner,
vs.
WILLIE J. UY, respondent
G.R. No. 127768
November 19, 1999
BELLOSILLO, J.
By: Lacbayo
____________________________________________________________________
Petitioner: United Airlines
Respondent: Willi J. Uy
Topic: Care of Baggage
Doctrine: Applicability of the Warsaw Convention: the Convention's provisions do not
regulate or exclude liability for other breaches of contract by the carrier or misconduct
of its officers and employees, or for some particular or exceptional type of damage.
Neither may the Convention be invoked to justify the disregard of some extraordinary
sort of damage resulting to a passenger and preclude recovery therefor beyond the
limits set by said Convention. Likewise, we have held that the Convention does not
preclude the operation of the Civil Code and other pertinent laws. It does not regulate,
much less exempt, the carrier from liability for damages for violating the rights of its
passengers under the contract of carriage, especially if willful misconduct on the part
of the carrier's employees is found or established
____________________________________________________________________
Facts:
● October 13, 1989 – Uy is a passenger of United Airlines, bound from San
Francisco to Manila. While in San Francisco, it was found that one piece of
his luggage was over the maximum weight allowance of 70 kg. per bag. A
United Airlines employee rebuked him and in a loud voice, in front of the
milling crowd, ordered him to repack his things accordingly. Wishing not to
create a scene, Uy did as asked. Unfortunately, his luggage was still
overweight so the airline billed him overweight charges. Willie offered to pay
the charges with a Miscellaneous Charge Order (MCO) or an airline pre-paid
credit but the same employee, and an airline supervisor, refused to honor it,
contending that there were discrepancies in the figures. Thus, Uy was forced
to pay the charges with his American Express credit card. Upon arrival in
Manila, Uy discovered that one of his bags had been slashed and its
contents, amounting to USD 5,310.00, stolen.
● October 16, 1989 – Uy sent his first letter of demand to United Airlines. The
airline did not refute Willie’s allegations and mailed a check representing
payment of his loss based on the maximum liability of USD 9.70 per pound.
Uy, thinking the amount to be grossly inadequate to compensate him for his
losses as well as for the indignities he was subjected to, sent two more
letters to petitioner airline, one dated January 4, 1990 and the other dated
● June 9, 1992 – Uy filed a complaint for damages before the Philippine
courts. He had two causes of action: (1) the shabby and humiliating
treatment he received from petitioner’s employees at the San Francisco
Airport which caused him extreme embarrassment and social humiliation;
and (2) the slashing of his luggage and the loss of personal effects
amounting to USD 5,310.00.
● United Airlines Contention: moved to dismiss the complaint on the ground
that it was filed out of time. Under Art. 29 of the Warsaw Convention, the
right to damages shall be extinguished if an action is not brought within 2
years. However, the second paragraph of the said provision stated that the
method of calculating the period of limitation shall be determined by the law
of the court to which the case is submitted. It is Uy’s position that their rules
on interruption of prescriptive period should apply. When he sent his letters
of demand, the 2-year period was tolled, giving him ample time to file his
complaint.
● Trial Court: Dismissed the case. Art. 29(2) refers not to the local forum’s
rules in interrupting the prescriptive period but only to the rules of
determining the time in which the action was deemed commenced (meaning
“filed”).
● CA: Ruled in favor of Uy.
Issue:
WON the action for damages is barred by the lapse of the 2-year prescriptive period
under Art. 29 of the Warsaw Convention. - NO
Held:
● Although the 2-year prescriptive period under the Warsaw Convention has
lapsed, it did not preclude the application of other pertinent provisions of the
Civil Code.
● Thus, the action for damages could still be filed based on tort which can be
filed within 4 years from the time cause of action accrued.
● As for the action pertaining to the loss of the contents of the luggage, while it
was well within the bounds of the Warsaw Convention, the Supreme Court
found that there was an exception to the applicability of the 2-year
prescriptive period – that is when the airline employed delaying tactics
and gave the passenger the run-around.
● Convention's provisions do not regulate or exclude liability for other
breaches of contract by the carrier or misconduct of its officers and
employees, or for some particular or exceptional type of damage. Neither
may the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery
therefor beyond the limits set by said Convention.
● Convention does not preclude the operation of the Civil Code and other
pertinent laws. It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the
 contract of carriage, especially if willful misconduct on the part of the carrier's Dispositive:
employees is found or established.
● While Uy’s second cause of action - an action for damages arising from theft WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting
or damage to property or goods - is well within the bounds of the Warsaw aside the appealed order of the trial court granting the motion to dismiss the
Convention, his first cause of action -an action for damages arising complaint, as well as its Resolution denying reconsideration, is AFFIRMED. Let the
from the misconduct of the airline employees and the violation of records of the case be remanded to the court of origin for further proceedings taking
respondent's rights as passenger - clearly is not. its bearings from this disquisition.
● Action for damages arising from the misconduct of the airline
employees and the violation of the respondent’s rights as passengers
is covered under the Civil Code
● Insofar as the first cause of action is concerned, respondent's failure to file
his complaint within the two (2)-year limitation of the Warsaw
Convention does not bar his action since petitioner airline may still be
held liable for breach of other provisions of the Civil Code which
prescribe a different period or procedure for instituting the action,
specifically, Art. 1146 thereof which prescribes four (4) years for filing
an action based on torts.
● Exception to the Application of the 2-year prescriptive period: When
airline employed delaying tactics
● As for respondent's second cause of action, indeed the travaux
preparatories of the Warsaw Convention reveal that the delegates thereto
intended the two (2)-year limitation incorporated in Art. 29 as an absolute
bar to suit and not to be made subject to the various tolling provisions
of the laws of the forum. This therefore forecloses the application of
our own rules on interruption of prescriptive periods. Article 29, par.
(2), was intended only to let local laws determine whether an action
had been commenced within the two (2)-year period, and within our
jurisdiction an action shall be deemed commenced upon the filing of a
complaint.
● Since it is indisputable that respondent filed the present action beyond the
two (2)-year time frame his second cause of action must be barred.
Nonetheless, it cannot be doubted that respondent exerted efforts to
immediately convey his loss to petitioner, even employed the services of two
(2) lawyers to follow up his claims, and that the filing of the action itself was
delayed because of petitioner's evasion.
● Verily, respondent filed his complaint more than two (2) years later, beyond
the period of limitation prescribed by the Warsaw Convention for filing a
claim for damages. However, it is obvious that respondent was forestalled
from immediately filing an action because petitioner airline gave him the
runaround, answering his letters but not giving in to his demands. True,
respondent should have already filed an action at the first instance when his
claims were denied by petitioner but the same could only be due to his
desire to make an out-of-court settlement for which he cannot be faulted.
● Hence, despite the express mandate of Art. 29 of the Warsaw Convention
that an action for damages should be filed within two (2) years from the
arrival at the place of destination, such rule shall not be applied in the instant
case because of the delaying tactics employed by petitioner airline itself.
● Thus, private respondent's second cause of action cannot be
considered as time-barred under Art. 29 of the Warsaw Convention.
 4. British Airways v. Court of Appeals ER E S
G.R. No. 121824 January 29, 1998
Romero, J. MANIL MNL PR 310 Y Apr 16 17:3 OK
By: Yana Mendoza A 0
____________________________________________________________________
Topic: Care of Baggage HONG HKG BA 20 M Apr 16 21:0 OK
BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP MAHTANI, and KONG 0
PHILIPPINE AIRLINES, respondents.
BOMB BOM BA 19 M Apr 23 8:40 OK
Doctrine: AY
In a contract of air carriage, a declaration by the passenger of a higher value is
needed to recover a greater amount. BUT the benefits of limited liability are subject to HONG HKG PR 311 Y OK
waiver such as when the air carrier failed to raise timely objections during the trial KONG
when questions and answers regarding the actual claims and damages sustained by
the passenger were asked MANIL MNL OK
A
Member airlines of the International Air Transport Association (IATA) are regarded as
agents of each other in the issuance of tickets and other matters pertaining to their
relationship.
____________________________________________________________________ ● Since BA had no direct flights from Manila to Bombay, Mahtani had to
BUZZ WORD: Sibuyas Mahtani Bawang at Luya (lol) take a Hong Kong flight via Philippine Airlines (PAL); and upon arrival in
Hong Kong, he had to take a connecting flight to Bombay thru BA.
● Prior to his departure, Mahtani checked in at the PAL counter in Manila his 2
RECIT READY DIGEST:
pieces of luggage containing his clothes, and personal effects, confident
Mahtani decided to visit his relatives in Bombay so he hired Mr. Gumar to prepare his
that upon reaching Hong Kong, the same would be transferred to the BA
travel plant. Mr. Gumar bought a ticket from British Airways (BA) with a MNL-HK-
flight bound for Bombay.
BOM-HKG-MNL route; the reason being there’s no direct flight from Manila to
● Upon Mahtani’s arrival in Bombay, he discovered that his luggage was
Bombay so Mahtani hast to take a connecting flight to HK via PAL. Upon arrival in
missing. And upon inquiry, from BA representatives, he was told that the
Bombay, he discovered that his luggage was lost. And upon inquiry to BA, it said that
same might have been diverted to London.
that his belongings might have been directed to London. After waiting for about a
● After waiting for 1 week for his luggage, BA advised him to file a claim-
week, Mahtani filed a ”Property Irregular Report” and back in the Philippines, he filed
“Property Irregularity Report”.
a complaint for damages and attorney’s fees against BA and Mr. Gumar before the
● Back in the Philippines, Mahtani filed a complaint for damages and
trial court. BA in its answer said that Mahtani does not have a cause of action and it
attorney’s fees against BA and Mr. Gumar before the trial court (note: case
filed a 3rd party complaint against PAL. PAL, in its answer, disclaimed liability and
didn’t say what branch, etc).
blamed BA for the loss of the luggage. The trial court ruled in favour of Matani
● BA, in its answer with counterclaim said that Mahtani did not have a cause of
(P7,000 for the value of 2 suitcases; $400 representing the luggage’s contents; and
action against it.
P50k moral & actual damages), and 3rd party complaint against PAL was dismissed.
● It also filed a 3rd party complaint against PAL alleging that the reason for the
CA affirmed the decision. BA now questions the amount awarded for the loss
luggage’s non-transfer was due to its late arrival in Hong Kong thus; leaving
luggage, since Mahtani failed to declare a higher valuation of his luggage, a condition
hardly any time to properly transfer Mahtani’s belongings to the BA plane
provided in the ticket, and the dismissal of the 3rd party complaint.
bound for Bombay.
● PAL, in its answer, disclaimed any liability, arguing that there was sufficient
FACTS: time to transfer the luggage to BA in Hong Kong.
● On April 16, 1989, GOP Mahtani (MAHTANI) decided to visit his relatives in ● That the transfer of the luggage to Hong Kong should be considered as
Bombay, India. transfer to BA
● He engaged the services of a certain Mr. Gumar to prepare his travel plans.
● Mr. Gumar purchased a ticket from British Airways (BA) with the ff. Itinerary:
PROCEDURE:

CARRI FLIGHT DATE TIM STATU RTC: Ruled in favor of Mahtani.

● BA was ordered to pay Mahtani P7,000 for the value of 2 suitcases
 ● Pay $400 representing the luggage’s contents
● Award of P50,000 for moral and actual damages and 20% attorney’s fees
● 3rd party complaint against PAL was dismissed for lack of cause of action
Upon appeal, the Court of Appeals affirmed the trial court’s findings.
CA: Affirmed the findings of the trial court
British Airways’ Arguments:
● BA asserts that the award of compensatory damages in the separate
amount of P7,000 for loss of the 2 pieces of luggage has no basis since
Mahtani’s complaint stated as value of his personal belongings:
1. Personal belonging à P10,000
2. Gifts for parents and relatives à $5,000
Moreover, he failed to declare a higher valuation with respect to his
luggage, a condition provided in the ticket:
“Liability for loss, delay, or damage to baggage is limited unless a
higher value is declared in advance and additional charges are
paid:
1. For most international travel (including domestic corporations
of international journeys) the liability limit is approximately U.S.
$9.07 per pound (U.S. $20) per kilo for checked baggage and
U.S. $400 per passenger for unchecked baggage”
ISSUE/S:
1. Whether or not award of compensatory damages in the separate sum
of P7,000 with respect to the amount awarded for the loss luggage was
proper - YES
2. Whether or not dismissal of the 3rd party complaint against PAL was
proper - NO
HELD:
RE: ISSUE OF BA’s LIABILITY
The nature of an airline’s contract of carriage partakes of two types, namely: a
contract to deliver a cargo or merchandise to its destination and a contract to
transport passengers to their destination.
● A business intended to serve the travelling public primarily, it is imbued with
public interest, hence, the law governing common carriers imposes an
exacting standard.
● Neglect or malfeasance by the carrier’s employees could predictably
furnish bases for an action for damages
In this case, it is apparent that the contract of carriage was between Mahtani and
BA.
● Moreover, it is indubitable that his luggage never arrived in Bombay on
time.
● Therefore, as in a number of cases we have assessed the airlines’
culpability in the form of damages for breach of contract involving misplaced
luggage.
In determining the amount of compensatory damages in this kind of cases, it is
vital that the claimant satisfactorily prove during the trial the existence of the
factual basis of the damages and its causal connection to defendant’s acts.
However, as earlier stated, it is BA’s position that there should have been no separate
award for the luggage and the contents thereof since Mahtani failed to declare a
separate higher valuation for the luggage, and therefore, its liability is limited,
at most, only to the amount stated in the ticket.
● Considering the facts of the case, we cannot assent to such specious
argument.
Admittedly, in a contract of air carriage a declaration by the passenger of a
higher value is needed to recover a greater amount. Article 22(1) of the
Warsaw Convention, provides as follows:
“x x x xxx xxx
(2) In the transportation of checked baggage and goods, the liability of the
carrier shall be limited to a sum of 250 francs per kilogram, unless the
consignor has made, at the time the package was handed over to the
carrier, a special declaration of the value at delivery and has paid a
supplementary sum if the case so require s. In that case the carrier will be
liable to pay a sum not exceeding the declared sum, unless he proves that the
sum is greater than the actual value to the consignor at delivery.”
American jurisprudence provides that an air carrier is not liable for the loss of
baggage in an amount in excess of the limits specified in the tariff which was filed with
the proper authorities, such tariff being binding on the passenger regardless of the
passenger’s lack of knowledge thereof or assent thereto. This doctrine is recognized
in this jurisdiction.
Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance
on adhesion contracts where the facts and circumstances justify that they
should be disregarded.
In addition, we have held that benefits of limited liability are subject to waiver
such as when the air carrier failed to raise timely objections during the trial
when questions and answers regarding the actual claims and damages
sustained by the passenger were asked
● The court’s conclusion is that BA had waived the defense of limited liability
when it allowed Mahtani to testify as to the actual damages he incurred due
to the misplacement of his luggage, without any objection
 o According to the Stenographic notes of Mahtani’s testimony, in which he
testified that the amount of his belongings amounted to P10,000 and
$5,000;
§ BA’s counsel failed, not only to interpose a timely
objection, but even conducted his own cross-
examination as well.
RE: ISSUE OF 3rd PARTY COMPLAINT AGAINST PAL:
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in
view of their contract of carriage. Yet, BA adamantly disclaimed its liability and
instead imputed it to PAL which the latter naturally denies. In other words, BA and
PAL are blaming each other for the incident.
· It is but logical, fair and equitable to allow BA to sue PAL for
indemnification, if it is proven that the latter’s negligence was the
proximate cause of Mahtani’s unfortunate experience, instead of
totally absolving PAL from any liability.
DISPOSITIVE:
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-
G.R. CV No. 43309 dated September 7, 1995 is hereby MODIFIED, reinstating the
third- party complaint filed by British Airways dated November 9, 1990 against
Philippine Airlines. No costs.

In resolving this issue, it is worth observing that the contract of air transportation was
exclusively between Mahtani and BA, the latter merely endorsing the Manila to
Hongkong leg of the former’s journey to PAL, as its subcontractor or agent. In fact,
the 4th paragraph of the “Conditions of Contracts” of the ticket issued by BA to
Mahtani confirms that the contract was one of continuous air transportation from
Manila to Bombay.

“4. x x x carriage to be performed hereunder by several successive

carriers is regarded as a single operation.”

Prescinding from the above discussion, it is undisputed that PAL, in transporting

Mahtani from Manila to Hongkong acted as the agent of BA.

The CA should have been cognizant of the well-settled rule that an agent is also
responsible for any negligence in the performance of its function and is liable
for damages which the principal may suffer by reason of its negligent act.

· Hence, the CA erred when it opined that BA, being the principal, had no
cause of action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the
International Air Transport Association (IATA), wherein member airlines are
regarded as agents of each other in the issuance of the tickets and other
matters pertaining to their relationship.

· Therefore, in this case, the contractual relationship between BA

and PAL is one of agency, the former being the principal, since it
was the one which issued the confirmed ticket, and the latter the
agent.

Since this petition was based on breach of contract of carriage, Mahtani can only sue
BA, and not PAL, since the latter was not a party to the contract. However, this is not
to say that PAL is relieved from any liability due to any of its negligent acts.

5. Philippine Airlines v CA
G.R. No. 119641
May 17, 1996
By: Osorio
Topic: Extraordinary Diligence in Air Transpo / Care of Baggage
Doctrine:
The Warsaw Convention declares the carrier liable in the enumerated cases and
under certain limitations. However, it must not be construed to preclude the
operation of the Civil Code and pertinent laws. It does not regulate, much less
exempt, the carrier from liability for damages for violating the rights of its
passengers under the contract of carriage, especially if willful misconduct on
the part of the carrier's employees is found or established, which is the case
before Us.
PARTIES:
Petitioner/CC: PAL Flight PR 101
Respondent/PASSENGER: Sps. Miranda (Josefino and Luisa)
Nature of Action filed: Damages
Route: San Francisco to Manila via Honolulu -> Manila to Cebu
-> Cebu to Surigao
Cause/Accident: Baggages were off-loaded at Honolulu, Hawaii due to weight
limitations (not really)
Location: Manila
RECIT READY DIGEST:
Sps. Miranda were on the return trip back from San Francisco with Surigao as the
point of final destination. However, PAL employees told the Sps. that their baggages
were off loaded in Honolulu for being overweight. Consequentially, the Sps. missed
all their connecting flights for needing to wait for their luggage. While in Cebu on the
supposed final connecting flight to Surigao, the pilot announced that it had to return to
Mactan. The Sps. asked PAL to help with their accommodations to which PAL
begrudgingly did. Unfortunately, while in Cebu, the Sps. found out that their luggage
had already gone straight to Surigao. Upon returning to Surigao they filed the present
action for damages. The S.C. ruled that the Warsaw convention doesn’t apply in this
case because of the discriminatory off-loading.
FACTS:
● Sps. Miranda were on their way back to Surigao as their final
destination after a month long trip in the US.
● They had with them (5) pieces of baggage which consisted; 2
balikbayan boxes, 2 luggage, 1 fishing rod case
Series of Unfortunate Events
1. SFo-Hawaii: baggage off-loaded at Honolulu, Hawaii due to weight
limitations.
2. Manila - Cebu: Missed their connecting flight from, as originally
scheduled, since they had to wait for their baggage which arrived
the following day, after their pre-scheduled connecting flight had
left.
3. Cebu – Surgiao: missed their other scheduled connecting On June
25, 1988, they departed for Cebu City and therefrom Sps. Miranda
had to transfer to PAL Flight 471 for Surigao City.
4. On the way to Surigao: the pilot announced that they had to return
to Mactan Airport due to some mechanical problem.
5. Mactan Airport: the passengers were provided by PAL with lunch
and were booked for the afternoon flight to Surigao – flight
cancelled AGAIN.
6. Cebu Plaza Hotel: PAL told them it’s fully booked (when it’s not)
7. Luggage went straight to Surigao City
● Dr. Miranda called the hotel, he was informed that he and his wife
could be accommodated there.
PAL’s complementary
1. PAL agreed to overnight stay at said hotel.
2. Oscar Jereza, PAL duty manager, approved the corresponding hotel
authority with standard meals.
3. Only after Sps. Miranda insistence that their meals be ordered a la carte that
they were allowed to do so by PAL provided that they sign for their orders.
4. PAL offered them P150.00 for shuttle to include the fare for the return trip to
the airport. Dr. Miranda asked for P150.00 more as he and his wife, along
with all of their baggage, could not be accommodated in just one taxi, aside
from the need for tipping money for hotel boys (refused) – he said he’ll just
forego of the amenities offered by PAL
 5. Voucher for P150.00 and the authority for the hotel accommodations
prepared by PAL were voided due to Sps.’ decision not to avail themselves
thereof.
● To aggravate the muddled situation, when Sps. Miranda tried to retrieve their
baggage, they were told this time that the same were loaded on another
earlier PAL flight to Surigao City.
● They just proceeded to the hotel sans their baggage and of which they were
deprived for the remainder of their trip.
● They were finally able to leave on board the first PAL flight to Surigao City
only on June 26, 1988. Thereafter, they instituted an action for damages
PAL’s Argument:
● Express provisions on tickets stipulating that liability for delay in
delivery of baggage shall be limited to US$20.00 per kilo of
baggage delayed, unless the passenger declares a higher
valuation, constitutes the contract of carriage between PAL and
private respondents.
● Insists on the applicability of the provisions of the Warsaw
Convention regarding the carrier's limited liability since the off-
loading was supposedly justified and not attended by bad faith.
● Neither was there any claim for loss of baggage as in fact private
respondents' baggage were, albeit delayed, received by them in
good condition.
Edgar Mondejar: discrimination on weight limit.
PROCEDURE:
RTC: in favor of Sps. Miranda
CA: Upheld the RTC ruling
● Refused to apply the express provisions of the contract of carriage
and pertinent provisions of the Warsaw Convention limiting its
liability to US$20.00 per kilo of baggage. PAL filed for pet of
certiorari
ISSUE/S:
1. WON the application of Articles 2220, 2232 and 2208 of the Civil Code in for
moral and exemplary damages and attorney's fees despite absence of bad
faith on the part of PAL is proper. – YES
2. WON the Warsaw Convention should be applied. - NO (MAIN ISSUE)
HELD:
1ST ISSUE:
RULE: A contract of air carriage generates a relation attended with a public duty and
any discourteous conduct on the part of a carrier’s employee toward a passenger
gives the latter an action for damages and, more so, where there is bad faith
Bad faith must be duly proved and not merely presumed.
● PAL’s duty to provide assistance to private respondents and, for that matter,
any other passenger similarly inconvenienced due to delay in the completion
of the transport and the receipt of their baggage
● Run out of Philippine currency due to long trip abroad and exacerbated by
their additional stay in Manila due to the off-loading of their baggage.
● All these inconveniences should have warranted a commonsensical and
more understanding treatment from PAL, considering that private
respondents found themselves in this unpleasant situation through no fault
of theirs.
● A contract of air carriage generates a relation attended with a public duty
and any discourteous conduct on the part of a carrier’s employee toward a
passenger gives the latter an action for damages and, more so, where there
is bad faith.
● An airline’s unilateral and voluntary act of providing cash assistance is
deemed part of its obligations as an air carrier, and is hardly anything to rave
about
● Arrangements for and verification of requested hotel accommodations for
private respondents could and should have been done by PAL employees
themselves, and not by Dr. Miranda.
● While it may be true that there was no direct evidence on record of blatant
rudeness on the part of PAL employees towards the Mirandas, the fact that
they were practically compelled to haggle for accommodations, a situation
unbetting persons of their stature, is rather demeaning and it partakes of
discourtesy magnified by PAL's condescending attitude.
How can moral damages be awarded?
● Inattention to and lack of care for the interests of its passengers who are
entitled to its utmost consideration, particularly as to their convenience,
amount to bad faith which entitles the passenger to an award of moral
damages.
● Moral damages are recoverable in suits predicated on breach of a contract
of carriage where it is proved that the carrier was guilty of fraud or bad faith
in securing the contract and in the execution thereof, as well as in the
enforcement of its terms, or any other kind of deceit.
● Inattention to and lack of care for the interests of its passengers who are
entitled to its utmost consideration
● Moral damages are not awarded to penalize the defendant but to
compensate the plaintiff for the injuries he may have suffered
 ● In a contractual or quasi-contractual relationship,
● Exemplary damages - awarded only if the defendant had acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.
● Attorney’s fees - there is a finding of bad faith.
● In the present case there was a breach of contract committed in bad faith
because it was not really for the purpose of complying with weight limitations
but to give undue preference to newly-loaded baggag(e) in Honolulu.
● This was followed by another mishandling of said baggag(e) in the twice-
cancelled connecting flight from Cebu to Surigao. Appellees’ sad experience
was further aggravated by the misconduct of appellant’s personnel in Cebu,
who lied to appellees in denying their request to be billeted at Cebu Plaza
Hote
● Sps. had a confirmed booking on PAL Flight PR 101 from San Francisco to
Manila. Therefore plaintiffs were entitled to an assured passage not only for
themselves but for their baggage as well.
IN THIS CASE::
● This cannot be limited by the printed conditions in the tickets and baggage
checks. Neither can the Warsaw Convention exclude nor regulate the liability
for other breaches of contract by air carriers.
● A recognition of the Warsaw Convention does not preclude the operation of
our Civil Code and related laws in determining the extent of liability of
common carriers in breach of contract of carriage, particularly for willful
misconduct of their employee
● Articles 17, 18 and 19 of the Warsaw Convention of 1929 - merely declare
the air carriers liable for damages in the cases enumerated therein, if the
conditions specified are present. Neither the provisions of said articles nor
others regulate or exclude liability for other breaches of contract by air
carriers
● Therefore, Warsaw Convention does not regulate, much less exempt, the
carrier from liability for damages for violating the rights of its passengers
under the contract of carriage, especially if willful misconduct on the part of
the carrier’s employees is found or established, which is the case before Us.

Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al.
CATHAY was grossly negligent and reckless when it failed to deliver the luggage of
petitioner at the appointed place and time. We agree. x x x. While the mere failure of
CATHAY to deliver respondent’s luggage at the agreed place and time did not ipso
facto amount to willful misconduct since the luggage was eventually delivered to
private respondent, albeit belatedly, We are persuaded that the employees of
CATHAY acted in bad faith. x x x
THEREFORE: There was no error on the part of the Court of Appeals when it
refused to apply the provisions of the Warsaw Convention. Both the trial court
and respondent court found that there was discriminatory off-loading Sps.
Miranda’s luggage
DISPOSITIVE: ACCORDINGLY, finding no reversible error, the challenged
judgment of respondent Court of Appeals is hereby AFFIRMED in toto.

"x x x if the defendant airline is shown to have acted fraudulently or in bad faith, the
award of moral and exemplary damages is proper.

2ND ISSUE:

Warsaw Convention does not apply. Sps. Miranda do not seek payment for loss of
any baggage. They are claiming damages arising from the discriminatory off-loading
of their baggage

RULE:

Warsaw Convention has the force and effect of law in this country, being a treaty
commitment assumed by the Philippine government, said convention does not
operate as an exclusive enumeration of the instances for declaring a carrier liable for
breach of contract of carriage or as an absolute limit of the extent of that liability. The
Warsaw Convention declares the carrier liable in the enumerated cases and under
certain limitations

6 CATHAY PACIFIC AIRWAYS, LTD. v. COURT OF APPEALS
G.R. No. 60501; March 5, 1993; Bellosillo, J.
By: Ericka Agustin
________________________________________________________________________
Topic: Care of Baggage
Petitioner: Cathay Pacific Airways, Ltd.
Respondent: Court of Appeals and Tomas Alcantara
Doctrine: The air carriers were made liable when there was delay in the delivery of the
baggage.
________________________________________________________________________
FACTS:
● Tomas Alcantara was a first class passenger of Cathay Pacific Airways, Ltd.
(CATHAY) on its flight from Manila to HongKong and onward from
HongKong to Jakarta for him to attend a conference with the Director
General of Trade of Indonesia, and him being the Executive Vice-President
and General Manager of Iligan Cement Corporation, Chairman of the Export
Committee of the Philippine Cement Corporation, and representative of the
Cement Industry Authority and the Philippine Cement Corporation. He
checked in his luggage which contained not only his clothing and articles for
personal use but also papers and documents he needed for the conference.
● Upon his arrival in Jakarta, Tomas Alcantara discovered that his luggage
was missing. When he inquired about his luggage from CATHAY’s
representative in Jakarta, Tomas Alacantara was told that his luggage was
left behind in HongKong. For this, Alcantara was offered $20.00 as
"inconvenience money" to buy his immediate personal needs until the
luggage could be delivered to him.
● His luggage finally reached Jakarta more than 24 hours after his arrival.
However, it was not delivered to him at his hotel but it was required by
CATHAY to be picked up by an official of the Philippine Embassy.
● Tomas Alcantara filed his complaint against CATHAY with CFI of Lanao del
Norte praying for temperate, moral and exemplary damages, plus attorney’s
fees.
● TRIAL COURT: rendered its decision ordering CATHAY to pay Alcantara
P20,000.00 for moral damages, P5,000.00 for temperate damages,
P10,000.00 for exemplary damages, and P25,000.00 for attorney’s fees and
the costs.
● Both parties appealed to the CA:
○ CATHAY: assailed the conclusion of the trial court that it was
accountable for breach of contract and questioned the non-
application by the court of the Warsaw Convention as well as the
excessive damages awarded on the basis of its finding that
Alcantara was rudely treated by CATHAY's employees during the
time that his luggage could not be found.
○ ALCANTARA: assigned as error the failure of the trial court to grant
the full amount of damages sought in his complaint.
● COURT OF APPEALS: affirm the decision of trial court but modifying its
award by increasing the moral damages to P80,000.00, exemplary damages
to P20,000.00 and temperate or moderate damages to P10,000.00. The
award of P25,000.00 for attorney's fees was maintained.
● CATHAY raised the same grounds before the Supreme Court alleging that –
○ the CA erred in holding petitioner liable to respondent Alcantara for
moral, exemplary and temperate damages as well as attorney's
fees; and
■ CATHAY argues that although it failed to transport
respondent Alcantara's luggage on time, the one-day delay
was not made in bad faith so as to justify moral,
exemplary and temperate damages. It submits that the
conclusion of CA that private respondent was treated
rudely and arrogantly when he sought assistance from
CATHAY's employees has no factual basis, hence, the
award of moral damages has no leg to stand on.
○ the Court of Appeals erred in failing to apply the Warsaw
Convention on the liability of a carrier to its passengers.
ISSUE:
● W/N Cathay Pacific is liable for the delay in the delivery of the baggage.
RULING: YES, Cathay breached its contract of carriage with Alcantara when it failed
to deliver his luggage at the designated place and time, it being the obligation of a
common carrier to carry its passengers and their luggage safely to their destination,
which includes the duty not to delay their transportation, and the evidence shows
that Cathay acted fraudulently or in bad faith.
● Moral damages predicated upon a breach of contract of carriage may only
be recoverable in instances where the mishap results in death of a
passenger, or where the carrier is guilty of fraud or bad faith.
● In this case, both the trial court and CA found that CATHAY was grossly
negligent and reckless when it failed to deliver the luggage of Alcantara at
the pointed place and time.
● The CA noted that Alcantara was not even aware that it left behind
Alcantara's luggage until its attention was called by the Hongkong Customs
authorities. More, bad faith or otherwise improper conduct may be attributed
to the employees of Cathay. While the mere failure of CATHAY to deliver
Alcantara's luggage at the agreed place and time did not ipso facto amount
to willful misconduct since the luggage was eventually delivered to
Alcantara, albeit belatedly, The Court is persuaded that the employees of
CATHAY acted in bad faith.
"Q: What did Mr. Alcantara say, if any?
A. Mr. Alcantara was of course . . . . I could understand his position. He was
furious for the experience because probably he was thinking he was going to
meet the Director-General the following day and, well, he was with no change
of proper clothes and so, I would say, he was not happy about the situation.
Q: What did Mr. Alcantara say?
A: He was trying to press the fellow to make the report and if possible make
the delivery of his baggage as soon as possible.
Q: And what did the agent or duty officer say, if any?
A: The duty officer, of course, answered back saying 'What can we do, the
baggage is missing. I cannot do anything.' something like it. 'Anyhow you can
buy anything you need, charged to Cathay Pacific.'
Q: What was the demeanor or comportment of the duty officer of Cathay
Pacific when he said to Mr. Alcantara 'You can buy anything chargeable to
Cathay Pacific'?
A: If I had to look at it objectively, the duty officer would like to dismiss the
affair as soon as possible by saying indifferently 'Don't worry. It can be
found.'"
· Indeed, the aforequoted testimony shows that the language and
conduct of CATHAY's representative towards Alcantara was
discourteous or arbitrary to justify the grant of moral damages. The
CATHAY representative was not only indifferent and impatient; he was
also rude and insulting. He simply advised Alcantara to buy anything he
wanted. But even that was not sincere because the representative knew
that the passenger was limited only to $20.00 which, certainly, was not
enough to purchase comfortable clothings appropriate for an executive
conference. Considering that Alcantara was not only a revenue
passenger but even paid for a first class airline accommodation and
accompanied at the time by the Commercial Attache of the Philippine
Embassy who was assisting him in his problem, CATHAY or its agents
should have been more courteous and accommodating to Alcantara,
instead of giving him a curt reply, "What can we do, the baggage is
missing. I cannot do anything . . . Anyhow, you can buy anything you
need, charged to Cathay Pacific." CATHAY's employees should have
been more solicitous to a passenger in distress and assuaged his
anxieties and apprehensions. To compound matters, CATHAY refused
to have the luggage of Alcantara delivered to him at his hotel; instead,
he was required to pick it up himself and an official of the Philippine
Embassy. Under the circumstances, it is evident that CATHAY was
remiss in its duty to provide proper and adequate assistance to a paying
passenger, more so one with first class accommodation.
· Where in breaching the contract of carriage the defendant airline is not
shown to have acted fraudulently or in bad faith, liability for damages is
limited to the natural and probable consequences of the breach of
obligation which the parties had foreseen or could have reasonably
foreseen. In that case, such liability does not include moral and
exemplary damages. Conversely, if the defendant airline is shown to
have acted fraudulently or in bad faith, the award of moral and
exemplary damages is proper.
· However, Alcantara is not entitled to temperate damages, contrary to
the ruling of the court a quo, in the absence of any showing that he
sustained some pecuniary loss. It cannot be gainsaid that Alcantara's
luggage was ultimately delivered to him without serious or appreciable
damage.
· As regards its second assigned error, although the Warsaw Convention
has the force and effect of law in this country, being a treaty
commitment assumed by the Philippine government, said convention
does not operate as an exclusive enumeration of the instances for
declaring a carrier liable for breach of contract of carriage or as an
absolute limit of the extent of that liability. The Warsaw Convention
declares the carrier liable for damages in the enumerated cases and
under certain limitations. However, it must not be construed to preclude
the operation of the Civil Code and other pertinent laws. It does not
regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage,
especially if wilfull misconduct on the part of the carrier's employees is
found or established, which is clearly the case before Us. For, the
Warsaw Convention itself provides in Art. 25 that —
"(1) The carrier shall not be entitled to avail himself of the
provisions of this convention which exclude or limit his liability, if
the damage is caused by his wilfull misconduct or by such default
on his part as, in accordance with the law of the court to which the
case is submitted, is considered to be equivalent to wilfull
misconduct."
(2) Similarly the carrier shall not be entitled to avail himself of the
said provisions, if the damage is caused under the same
circumstances by any agent of the carrier acting within the scope of
his employment."
· When petitioner airline misplaced Alcantaras luggage and failed to
deliver it to its passenger at the appointed place and time, some special
species of injury must have been caused to him. For sure, the latter
 underwent profound distress and anxiety, and the fear of losing the
opportunity to fulfill the purpose of his trip. In fact, for want of
appropriate clothings for the occasion brought about by the delay of the
arrival of his luggage, to his embarrassment and consternation
Alcantara had to seek postponement of his pre-arranged conference
with the Director General of Trade of the host country.
· In one case, this Court observed that a traveller would naturally suffer
mental anguish, anxiety and shock when he finds that his luggage did
not travel with him and he finds himself in a foreign land without any
article of clothing other than what he has on.
· Thus, respondent is entitled to moral and exemplary damages. We
however find the award by the Court of Appeals of P80,000.00 for moral
damages excessive, hence, We reduce the amount to P30,000.00. The
exemplary damages of P20,000.00 being reasonable is maintained, as
well as the attorney's fees of P25,000.00 considering that petitioner's
act or omission has compelled Alcantara to litigate with third persons or
to incur expenses to protect his interest.
WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED
with the exception of the award of temperate damages of P10,000.00 which is
deleted, while the award of moral damages of P80,000.00 is reduced to P30,000.00.
The award of P20,000.00 for exemplary damages is maintained as reasonable
together with the attorney's fees of P25,000.00. The moral and exemplary damages
shall earn interest at the legal rate from 1 March 1976 when the complaint was filed
until full payment.
7.Pan American World Airways Inc v IAC.
GR 70462
August 11,1988
BELTRAN
Topic: Extraordinary Diligence in Air Transpo / Care of Baggage
Petitioner: Pan Americal World Airways Inc
Respondent: IAC, Rene Pangan, Sotang Bastos Production & Archer Productions
Ponente: Cortes
FACTS:
● Plaintiff Rene V. Pangan, pres. and gen. mngr. of the plaintiffs Sotang Bastos
and Archer Production while in San Francisco, Califonia and Primo Quesada of
Prime Films, San Francisco, California, entered into an agreement where the
former, for US $2,500.00 per picture, bound himself to supply the latter with 3
films.
o ('Ang Mabait, Masungit at ang Pangit,' '
o Big Happening with Chikiting and
o Iking,' and 'Kambal Dragon'
▪ for exhibition in the United States.)
▪ It was also agreed that plaintiffs would provide the promotional
and advertising materials.
● On his way home to the Philippines, Pangan visited Guam where he contacted
Leo Slutchnick of the Hafa Adai Organization.
● Pangan entered into a verbal agreement with Slutchnick for the exhibition of 2 of
the films at the Hafa Adai Theater in Guam for P7,000.00 per picture.
o Pangan also provided the promotional and advertising materials for the
films.
● Due to the above agreements, Pangan caused the preparation of the requisite
promotional handbills and still pictures for which he paid P12,900.00.
o Likewise in preparation for his trip abroad to comply with his contracts,
Pangan purchased 14 clutch bags, 4 capiz lamps and 4 barong tagalog,
total value of P4,400.00.
● Pangan obtained from defendant Pan Am's Manila Office (through Your Travel
Guide) an economy class airplane ticket for Manila to Guam on defendant's
Flight (No. 842) upon payment of the regular fare.
● The Your Travel Guide is a tour and travel office owned and managed by
plaintiffs witness Mila de la Rama.
● 2 hours before departure time Pangan was at the defendant's ticket counter at
the Manila International Airport and presented his ticket and checked in his 2
luggages, for which he was given baggage claim tickets.
● The 2 luggages had the promotional & advertising materials, clutch bags, barong
tagalog and his personal belongings.
● Subsequently, Pangan was informed that his name was not in the manifest and
so he could not take Flight (No. 842) in the economy class.
o Since there was no space in the economy class, Pangan took the first
class because he wanted to be on time in Guam to comply with his
commitment with an additional sum of $112.00.
● When Pangan arrived in Guam, his 2 luggages did not arrive with his flight, as a
consequence of which his agreements with Slutchnick and Quesada for the
exhibition of the films in Guam and in the United States were cancelled.
● He then filed a written claim for his missing luggages.
● Upon arrival in the Philippines, Pangan contacted his lawyer, who made the
necessary representations to protest as to the treatment which he received from
the employees of the defendant and the loss of his two luggages.
● Defendant Pan Am assured Pangan that his grievances would be investigated
and given its immediate consideration.
● The present complaint was filed by the plaintiff due to Pan Am’s failure to
communicate with Pangan.
● CFI: Pan Am liable. (actual damages with interest, attys fees, and costs of suit)
● IAC: Affirmed.
ISSUE:
● Whether or not the IAC erred as a matter of law in affirming the CFI's award of
actual damages beyond the limitation of liability set forth in the Warsaw
Convention and the contract of carriage.
RULING:
● Yes, petitioner's liability for the lost baggage is limited to $20.00 per kilo or
$600.00, as stipulated at the back of the ticket.
● The airline ticket contains the following conditions:
o NOTICE - “If the passenger's journey involves an ultimate
destination or stop in a country other than the country of departure
the Warsaw Convention may be applicable and the Convention
governs and in most cases limits the liability of carriers for death
or personal injury and in respect of loss of or damage to baggage.
See also notice headed "Advice to International Passengers on
Limitation of Liability.”
o CONDITIONS OF CONTRACT
▪ 1. As used in this contract "ticket" means this passenger ticket
and baggage check of which these conditions and the notices
form part, "carriage" is equivalent to "transportation," "carrier"
means all air carriers that carry or undertake to carry the
passenger or his baggage hereunder or perform any other
service incidental to such air carriage. "WARSAW
CONVENTION" means the convention for the Unification
of Certain Rules Relating to International Carriage by Air
signed at Warsaw, 12th October 1929, or that Convention as
amended at The Hague, 28th September 1955, whichever
may be applicable
▪ 2. Carriage hereunder is subject to the rules and limitations
relating to liability established by the Warsaw Convention
unless such carriage is not "international carriage" as defined
by that Convention.
▪ 3. To the extent not in conflict with the foregoing carriage and
other services performed by each carrier are subject to:
● (i) provisions contained in this ticket,
● (ii) applicable tariffs,
● (iii) carrier's conditions of carriage and related
regulations which are made part hereof (and are
available on application at the offices of carrier),
except in transportation between a place in the United
States or Canada and any place outside thereof to
which tariffs in force in those countries apply.
o NOTICE OF BAGGAGE LIABILITY LIMITATIONS - Liability for
loss, delay, or damage to baggage is limited as follows unless a
higher value is declared in advance and additional charges are
paid: (1) for most international travel (including domestic portions of
international journeys) to approximately $9.07 per pound ($20.00
per kilo) for checked baggage and $400 per passenger for
unchecked baggage: (2) for travel wholly between U.S. points, to
$750 per passenger on most carriers (a few have lower limits).
Excess valuation may not be declared on certain types of valuable
articles. Carriers assume no liability for fragile or perishable
articles. Further information may be obtained from the carrier.
● On the basis of the said stipulations printed at the back of the ticket,
petitioner contends that its liability for the lost baggage of Pangan is
limited to $600.00 ($20.00 x 30 kilos) as the latter did not declare a
higher value for his baggage and pay the corresponding additional
charges.
● Petitioner cites Ong Yiu v. CA, where the Court sustained the validity of a
printed stipulation at the back of an airline ticket limiting the liability of the
carrier for lost baggage to a specified amount and ruled that the carrier's
liability was limited to said amount since the passenger did not declare a
higher value, much less pay additional charges. (Ong Yiu is squarely
applicable to the instant case.)
● While it may be true that petitioner had not signed the plane ticket, he is,
nevertheless bound by the provisions thereof. "Such provisions have been
held to be a part of the contract of carriage, and valid and binding upon
the passenger regardless of the latter's lack of knowledge or assent to
the regulation." It is known as a contract of "adhesion" wherein one
party imposes a ready made form of contract on the other, as the plane
ticket in the case at bar, are contracts not entirely prohibited.
o The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent.
● Randolph v. American Airline: A contract limiting liability upon an agreed
valuation does not offend against the policy of the law forbidding one from
contracting against his own negligence.
● On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc.,
where the Court held that the stipulation limiting the carrier's liability to a
specified amount was invalid,
● Finds no application in the instant case, as the ruling in said case was
premised on the finding that the conditions printed at the back of the
ticket were so small and hard to read that they would not warrant the
presumption that the passenger was aware of the conditions and that
he had freely and fairly agreed thereto. In the instant case, similar facts
that would make the case fall under the exception have not been
alleged, much less shown to exist.
● Northwest Airlines, Inc. v. Cuenca: "To apply the Warsaw Convention which
limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases
of contractual breach of carriage is against public policy" is utterly
misplaced.
● Mendoza v. Philippine Air Lines, Inc.:
o 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
o 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.
o Or, as the rule has been stated in another form, in order to purpose
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 breach at the time of or prior to contracting.
o 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.
● Thus, applying the ruling to the instant case, in the absence of a
showing that Pan Am's attention was called to the special
circumstances requiring prompt delivery of Pangan's luggages, Pan
Am cannot be held liable for the cancellation of Pangan’s contracts as
it could not have foreseen such an eventuality when it accepted the
luggages for transit.
● The Court is unable to uphold the IAC's disregard the ruling in Mendoza
that petitioner is liable for damages based on the finding that "[tlhe
undisputed fact is that the contracts of the plaintiffs for the exhibition of
the films in Guam and California were cancelled because of the loss of the
2 luggages in question."
● The evidence reveals that the proximate cause of the cancellation of the
contracts was Pangan's failure to deliver the promotional and advertising
materials on the dates agreed upon. For this petitioner cannot be held
liable.
● Pangan had not declared the value of the 2 luggages he had checked in
and paid additional charges.
● Neither was petitioner privy to respondents' contracts nor was its attention
called to the condition therein requiring delivery of the promotional and
advertising materials on or before a certain date.
● WHEREFORE, the Petition is hereby GRANTED and the Decision of the
Intermediate Appellate Court is SET ASIDE and a new judgment is rendered
ordering petitioner to pay private respondents damages in the amount of US
$600.00 or its equivalent in Philippine currency at the time of actual payment.
9
FERNANDO LOPEZ, ET AL., plaintiffs-appellants,
vs.
PAN AMERICAN WORLD AIRWAYS(Pan-Am), defendant-appellant.
G.R. No. L-22415 March 30, 1966
BENGZON, J.P., J.
By:Lacbayo
____________________________________________________________________
Topic: Duty to Passenger
____________________________________________________________________
Facts:
● 28 March 1960 - Delfin Faustino of “Your Travel Guide Agency” reserved 4
first class accomodations with Pan-Am on its Flight No. 2 from Tokyo to San
Francisco scheduled on 24 May 1960 for Senator Fernando Lopez, his wife
Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter,
Mrs. Milagros Lopez Montelibano.
● 31 March 1960 - Pan-Am San Francisco head Office confirmed the
reservation.
● 21 & 23 May 1960 - Pan-Am issued the tickets to the above mentioned
parties. The total fare of P9,444 for all of them was fully paid before the
tickets were issued.
● 24 May 1960 - As scheduled Senator Lopez and party left Manila by
Northwest Airlines, arriving in Tokyo at 5:30 P.M. of that day. As soon as
they arrived Senator Lopez requested Minister Busuego of the Philippine
Embassy to contact Pan-Am's Tokyo office regarding their first class
accommodations for that evening's flight. For the given reason that the first
class seats therein were all booked up, however, Pan-Am's Tokyo office
informed Minister Busuego that Pan-Am could not accommodate Senator
Lopez and party in that trip as first class passengers. Senator Lopez
thereupon gave their first class tickets to Minister Busuego for him to show
the same to PAN-AM's Tokyo office, but the latter firmly reiterated that there
was no accommodation for them in the first class, stating that they could not
go in that flight unless they took the tourist class therein.
● Due to pressing engagements awaiting Senator Lopez and his wife, in the
United States — he had to attend a business conference in San Francisco
the next day and she had to undergo a medical check-up in Mayo Clinic,
Rochester, Minnesota, on May 28, 1960 and needed three days rest before
that in San Francisco — Senator Lopez and party were constrained to take
PAN-AM's flight from Tokyo to San Francisco as tourist passengers. Senator
Lopez however made it clear, as indicated in his letter to PAN-AM's Tokyo
office on that date, that they did so "under protest" and without prejudice to
further action against the airline.
● 02 June 1960 - Senator Lopez and party filed a suit for damages against
Pan-AM in the CFI for the alleged breach of contracts in bad faith.
 ● June 22, 1960 - PanAm asserted that its failure to provide first class
accommodations to plaintiffs was due to honest error of its employees.
● CFI: Sided with Lopez.
Issue: Whether the defendant acted in bad faith for deliberate refusal to comply with
its contract to provide first-class accommodation to the plaintiff - YES
Held:
● From the evidence of defendant it is in effect admitted that defendant —
through its agents — first cancelled plaintiffs, reservations by mistake and
thereafter deliberately and intentionally withheld from plaintiffs or their travel
agent the fact of said cancellation, letting them go on believing that their first
class reservations stood valid and confirmed.
● In so misleading plaintiffs into purchasing first class tickets in the conviction
that they had confirmed reservations for the same, when in fact they had
none, defendant wilfully and knowingly placed itself into the position of
having to breach its a foresaid contracts with plaintiffs should there be no
last-minute cancellation by other passengers before flight time, as it turned
out in this case.
● Such actuation of defendant may indeed have been prompted by nothing
more than the promotion of its self-interest in holding on to Senator Lopez
and party as passengers in its flight and foreclosing on their chances to seek
the services of other airlines that may have been able to afford them first
class accommodations.
● All the time, in legal contemplation such conduct already amounts to action
in bad faith. For bad faith means a breach of a known duty through some
motive of interest or ill-will.
● As stated in Kamm v. Flink,: "Self-enrichment or fraternal interest, and not
personal ill-will, may well have been the motive; but it is malice
nevertheless."
● As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew
that plaintiffs' reservations had been cancelled. As of May 20 he knew that
the San Francisco head office stated with finality that it could not reinstate
plaintiffs' cancelled reservations. And yet said reservations supervisor made
the "decision" — to use his own, word — to withhold the information from the
plaintiffs.
● At the time plaintiffs bought their tickets, defendant, therefore, in breach of
its known duty, made plaintiffs believe that their reservation had not been
cancelled. An additional indication of this is the fact that upon the face of the
two tickets of record, namely, the ticket issued to Alfredo Montelibano, Jr. on
May 21, 1960 and that issued to his wife, on May 23, 1960, the reservation
status is stated as "OK". Such willful-non-disclosure of the cancellation or
pretense that the reservations for plaintiffs stood — and not simply the
erroneous cancellation itself — is the factor to which is attributable the
breach of the resulting contracts. And, as above-stated, in this respect
defendant clearly acted in bad faith.
● As if to further emphasize its bad faith on the matter, defendant
subsequently promoted the employee who cancelled plaintiffs'
reservations and told them nothing about it. The record shows that
said employee — Mariano Herranz — was not subjected to
investigation and suspension by defendant but instead was given a
reward in the form of an increase of salary in June of the following
year.
Dispositive:
Wherefore, the judgment appealed from is hereby modified so as to award in favor of
plaintiffs and against defendant, the following: (1) P200,000.00 as moral damages,
divided among plaintiffs, thus: P100,000.00 for Senate President Pro Tempore
Fernando Lopez; P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his son-in-
law Alfredo Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo
Montelibano, Jr.; (2) P75,000.00 as exemplary or corrective damages; (3) interest at
the legal rate of 6% per annum on the moral and exemplary damages aforestated,
from December 14, 1963, the date of the amended decision of the court a quo, until
said damages are fully paid; (4) P50,000.00 as attorney's fees; and (5) the costs.
Counterclaim dismissed.So ordered.
NOTES:
● CONTENTIONS
Lopez: Pan-Am acted in bad faith because it deliberately refused to comply
with its contract to provide first class accommodations to plaintiffs, out of
racial prejudice against Orientals. And in support of its contention that what
was done to plaintiffs is an oftrepeated practice of defendant, evidence was
adduced relating to two previous instances of alleged racial discrimination by
defendant against Filipinos in favor of "white" passengers. Said previous
occasions are what allegedly happened to (1) Benito Jalbuena and (2)
Cenon S. Cervantes and his wife.
● Jalbuena bought a first class ticket from PAN-AM on April 13, 1960;
he confirmed it on April 15, 1960 as to the Tokyo-Hongkong flight of
April 20, 1960; PAN-AM similarly confirmed it on April 20, 1960. At
the airport he and another Oriental — Mr. Tung — were asked to
step aside while other passengers - including "white" passengers
— boarded PAN-AM's plane. Then PAN-AM officials told them that
one of them had to stay behind. Since Mr. Tung was going all the
way to London, Jalbuena was chosen to be left behind. PAN-AM's
officials could only explain by saying there was "some mistake".
Jalbuena thereafter wrote PAN-AM to protest the incident.
● As to Cenon S. Cervantes it would appear that in Flight No. 6 of
PAN-AM on September 29, 1958 from Bangkok to Hongkong, he
and his wife had to take tourist class, although they had first class
tickets, which they had previously confirmed, because their seats in
first class were given to "passengers from London."
Pan-Am: The first class reservations of Senator Lopez and party were
made on March 29, 1960 together with those of four members of the Rufino
family, for a total of eight (8) seats, as shown in their joint reservation card.
Subsequently on March 30, 1960, two other Rufinos secured reservations
and were given a separate reservation card. A new reservation card
consisting of two pages was then made for the original of eight passengers,
namely, Senator Lopez and party and four members of the Rufino family, the
first page referring to 2 Lopezes, 2 Montelibanos and 1 Rufino and the
second page referring to 3 Rufinos. On April 18, 1960 "Your Travel Guide"
agency cancelled the reservations of the Rufinos. A telex message was
thereupon sent on that date to PAN-AM's head office at San Francisco by
Mariano Herranz, PAN-AM's reservations employee at its office in Escolta,
Manila.In said message, however, Herranz mistakenly cancelled all the
seats that had been reserved, that is, including those of Senator Lopez and
party.
The next day — April 1960 — Herranz discovered his mistake, upon seeing
the reservation card newly prepared by his co-employee Pedro Asensi for
Sen. Lopez and party to the exclusion of the Rufinos. It was then that
Herranz sent another telex wire to the San Francisco head office, stating his
error and asking for the reinstatement of the four (4) first class seats
reserved for Senator Lopez and party. San Francisco head office replied on
April 22, 1960 that Senator Lopez and party are waitlisted and that said
office is unable to reinstate them..
Since the flight involved was still more than a month away and confident that
reinstatement would be made, Herranz forgot the matter and told no one
about it except his co-employee, either Armando Davila or Pedro Asensi or
both of them .
Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations
employee working in the same Escolta office as Herranz, phoned PAN-AM's
ticket sellers at its other office in the Manila Hotel, and confirmed the
reservations of Senator Lopez and party.
PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's
mistake after "Your Travel Guide" phone on May 18, 1960 to state that
Senator Lopez and party were going to depart as scheduled. Accordingly,
Jose sent a telex wire on that date to PAN-AM's head office at San
Francisco to report the error and asked said office to continue holding the
reservations of Senator Lopez and party (Annex B-Acker's to Exh. 6). Said
message was reiterated by Jose in his telex wire of May 19, 1960 (Annex C-
Acker's to Exh. 6). San Francisco head office replied on May 19, 1960 that it
regrets being unable to confirm Senator Lopez and party for the reason that
the flight was solidly booked (Exh. 7). Jose sent a third telex wire on May 20,
1960 addressed to PAN-AM's offices at San Francisco, New York (Idlewild
Airport), Tokyo and Hongkong, asking all-out assistance towards restoring
the cancelled spaces and for report of cancellations at their end (Annex D-
Acker's to Exh. 6). San Francisco head office reiterated on May 20, 1960
that it could not reinstate the spaces and referred Jose to the Tokyo and
Hongkong offices (Exh. 8). Also on May 20, the Tokyo office of PAN-AM
wired Jose stating it will do everything possible (Exh. 9).
Expecting that some cancellations of bookings would be made before the
flight time, Jose decided to withhold from Senator Lopez and party, or their
agent, the information that their reservations had been cancelled.
Armando Davila having previously confirmed Senator Lopez and party's first
class reservations to PAN-AM's ticket sellers at its Manila Hotel office, the
latter sold and issued in their favor the corresponding first class tickets on
the 21st and 23rd of May, 1960.
10. Air France v. Carrasco
G.R. No. L-21438. September 28, 1966.
Sanchez, J.
By: Yana Mendoza
____________________________________________________________________
AIR FRANCE, petitioner, vs. RAFAEL CARRASCOSO and THE HONORABLE
COURT OF APPEALS, respondents.
Doctrine: Neglect or malfeasance of the carrier's employees could give ground for an
action for damages. Damages here are proper because the stress of respondent's
action is placed upon his wrongful expulsion, which is a violation of a public duty by
petitioner-air carrier — a case of quasi-delict.
___________________________________________________________________
FACTS: Rafael Carrascoso, a civil engineer, was a member of a group of 48 Filipino
pilgrims that left Manila for Lourdes on March 30, 1958. On March 28, 1958, Air
France, through its authorized agent, Philippine Air Lines, Inc., issued to Carascoso a
"first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok,
he travelled in "first class", but at Bangkok, the Manager of Air France forced him to
vacate the "first class" seat that he was occupying because there was a "white
man”, who the Manager alleged, had a "better right" to the seat. When asked to
vacate his "first class" seat, a commotion ensued, many of the Filipino passengers
got nervous in the tourist class; when they found out that Mr. Carrascoso was having
a hot discussion with the white man, they came all across to Mr. Carrascoso and
pacified Mr. Carrascoso to give his seat to the white man"; and respondent reluctantly
gave his "first class" seat in the plane. Because of the incident, respondent filed an
action for damages for breach of contract.
Respondent contended that he paid to and received from petitioner a first class ticket.
But petitioner asserts the following:
1. That the said ticket did not represent the true and complete intent and
agreement of the parties;
2. That said respondent knew that he did not have confirmed reservations for
first class on any specific flight, although he had tourist class protection; and
 3. That the issuance of a first class ticket was no guarantee that he would have
a first class ride, but that such would depend upon the availability of first
class seats.
CFI/ RTC ruling:
-Petitioner tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael
Altonaga that although respondent paid for, and was issued a "first class" air plane
ticket, the ticket was subject to confirmation in Hongkong. The court cannot give
credit to the testimony of said witnesses. Oral evidence cannot prevail over written
evidence presented by the plaintiff which clearly shows that the respondent was
issued, and paid for, a first class ticket without any reservation whatever. It cannot be
believed that after such confirmation, petitioner had a verbal understanding with
respondent that the "first class" ticket issued to him by petitioner would be subject to
confirmation in Hongkong.
- CFI ruled in favor of Carrascoso. It sentenced petitioner to pay respondent
P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20
representing the difference in fare between first class and tourist class for the portion
of the trip Bangkok-Rome plus P3,000.00 for attorneys' fees; and the costs of suit
CA ruling:
- CA slightly reduced the amount of refund on Carrascoso's plane ticket from
P393.20 to P383.10, and voted to affirm the appealed decision "in all other respects",
with costs against petitioner.
class, by reason of which he suffered inconvenience,
embarrassments and humiliations, thereby causing him
mental anguish, serious anxiety, wounded feelings and social
humiliation, resulting in moral damages.
● A contract to transport passengers is quite different in kind and degree from
any other contractual obligation because of the relation which an air carrier
sustains with the public. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the carrier's
employees, could give ground for an action for damages.
Petitioner's contract with Carrascoso is one attended with public duty. The
stress of Carrascoso's action is placed upon his wrongful expulsion. This is a
violation of public duty by the petitioner air carrier — a case of quasi-delict.
Damages are proper.
● Article 21 of the Civil Code provides that, “any person who willfully causes
loss or injury to another in a manner that is contrary to morals, good customs
or public policy shall compensate the latter for the damage.” Exemplary
damages are also well awarded since the action of the
respondent is based on a contract. In addition, the plaintiff’s act of ejecting
the respondent in his first class seat is an act which was done in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
● SC affirmed the decision of CA.

ISSUES:
1. Whether or not Carrascoso was entitled to the first class seat
2. Whether or not he is entitled to damages

HELD:
1. Yes. If airline companies would have the policy that a first-class-ticket
holder is not entitled to a first class seat, notwithstanding the fact that seat
availability in specific flights is therein confirmed, then an air passenger is
placed in the hollow of the hands of an airline. There is no security for the
passengers. It will always be an easy matter for an airline aided by its
employees, to strike out the very stipulations in the ticket, and say that there
was a verbal agreement to the contrary. It is a rule that a written document
speaks a uniform language. There must be adherence to the ticket issued by
the airline company. Since Carrascoso was given a “first class” airplane
ticket, he is entitled to such.

2. Yes.
a. First, That there was a contract to furnish Carrascoso a first class
passage covering, among others, the Bangkok-Teheran leg;
b. Second, That said contract was breached when petitioner failed to
furnish first class transportation at Bangkok; and
c. Third, that there was bad faith when petitioner's employee
compelled Carrascoso to leave his first class accommodation
"after he was already, seated" and to take a seat in the tourist
 11. Zulueta v Pan American World Airways, Inc.
GR L-28589
February 29, 1972
OSORIO
Topic: Duty to Passengers
Petitioner: Rafael Zulueta, Telly Albert Zulueta and Carolinda Zulueta
Respondent: Pan America World Airways Inc
Ponente: Concepcion

Doctrine: The relation between carrier and passenger involves special and peculiar
obligations and duties, differing in kind and degree, from those of almost every other
legal or contractual relation. On account of the peculiar situation of the parties the
law implies a promise and imposes upon the carrier the corresponding duty of
protection and courteous treatment. Therefore, the carrier is under the absolute duty
of protecting his passengers from assault or insult by himself or his servants.

The general rule that a carrier owes to a passenger the highest degree of care has
been held to include the duty to protect the passenger from abusive language by the
carrier's agents, or by others if under such circumstances that the carrier's agents
should have known about it and prevented it. Some of the courts have mentioned the
implied duty of the carrier, arising out of the contract of carriage, not to insult the
passenger, or permit him to be insulted, and even where no mention is made of this
basis for liability, it is apparent that it is the ground upon which recovery is allowed.

FACTS:

● Spouses Rafael Zulueta and Telly Albert Zulueta, with their daughter,
boarded a Pan American plane from Honolulu to Manila
○ the first leg of which was Wake Island.
● While on the stopover, Mr. Zulueta found the need to relieve himself and
after finding the terminal’s comfort rooms full, he walked down the beach to
do his business.
● Meanwhile, the flight was called and Mr. Zulueta’s absence was noticed.
● Heading towards the ram, plaintiff remarked, “You people almost made me
miss your flight. You have a defective announcing system and I was not
paged.”
● Instead of allowing plaintiff to board the plane, however, the airport manager
stopped plaintiff and asked him to surrender his baggage for inspection.
● Refusing to comply with the order, plaintiff was not allowed to board the
plane. His wife and daughter were able to proceed but were instructed to
leave their baggage behind.
● The airport manager of then sent Mr. Zulueta a letter stating that his stay in
Wake Island would be for a minimum of one week during which he would be
charged $13.30 per day.
● Zulueta’s wife had to send him money and he was able to leave wake island
and return to Manila through Honolulu and Tokyo.
● Plaintiff instituted the present petition for recovery of damages against
respondents for breach of contract. The defendants, however, maintain that
 plaintiff’s reason for going to the beach was not to relieve himself but
because he had a quarrel with his wife.
● Court of First Instance of Rizal sentenced said defendant (PAN AM) to
pay plaintiffs - Rafael Zulueta, Telly Albert Zulueta and Carolinda Zulueta
"the sum of P5,502.85, as actual damages; plus the further sum of
P1,000,000.00 as moral damages; the further sum of P400,000.00 as
exemplary damages; and attorney's fees in the sum of P100,000.00," with
the costs against said defendant
●
MODIFIED, AS ABOVE STATED, in the sense that plaintiffs shall recover from
defendant, Pan American World Airways, Inc., the sums of P500,000 as moral
damages, P200,000 as exemplary damages, and P75,000 as attorney's fees,
apart from P5,502.85 as actual damages, and without prejudice to deducting the
aforementioned sum of P50,000 already paid to Mrs. Zulueta, the decision
appealed from is hereby affirmed in all other respects, with costs against said
defendant.

ISSUE: Whether or not the plaintiff is entitled to damages for breach of contract.

HELD:

● YES, the plaintiff is entitled to damages. Firstly, plaintiff’s testimony about

what he did upon reaching the beach is uncontradicted. Furthermore, there
is absolutely no direct evidence about said alleged quarrel. If such was true,
surely, plaintiff would not have walked back from the beach to the terminal
before the plane had resumed its flight to Manila, thereby exposing his
presence to the full view of those who were looking for him.
● Anent the request of the common carrier to inspect the bags of plaintiff, it
appears that Captain Zentner received information that one of the
passengers expressed a fear of a bomb on board the plane. As a result, he
asked for the plaintiff’s bags to verify the bomb.
● Nevertheless, this claim is unfounded. The Captain failed to explain why he
seemingly assumed that the alleged apprehension of his information was
justified.
○ Plaintiff himself intimated to them that he was well known to the US
State Department and that the Captain was not even aware of the
informant’s name or any circumstances which may substantiate the
latter’s fear of a certain bomb.
● The Zuluetas had a contract of carriage with the defendant, as a common
carrier, pursuant to which the latter was bound, for a substantial monetary
consideration paid by the former, not merely to transport them to Manila, but,
also, to do so with “extraordinary diligence” or “utmost diligence."The
responsibility of the common carrier, under said contract, as regards the
passenger’s safety, is of such a nature, affecting as it does public interest,
that it "cannot be dispensed with” or even “lessenedby stipulation, by the
posting of notices, by statements on tickets, or otherwise."
● Defendants further argue that plaintiff was also guilty of contributory
negligence for failure to reboard the plane within the 30 minutes announced
before the passengers debarked therefrom.
● This may have justified a reduction of the damages had plaintiff been
unwittingly left by the plane, owing to the negligence of PANAM personnel,
or even, wittingly, if he could not be found before the plane’s departure. It
does not, and cannot have such justification in the case at bar, plaintiff
having shown up before the plane had taken off and he having been off-
loaded intentionally and with malice.
● With all the foregoing, it is clear that plaintiff is entitled to damages from the
respondent company.