G.R. No. 122308 July 8, 1997

PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA, petitioners, vs.COURT OF APPEALS and TRANS-WORLD AIRLINES INC., respondents.

 

DAVIDE, JR., J.:

The main issue in this petition for review under Rule 45 of the Rules of Court is the applicability of Article 28(1) of the Warsaw Convention, 1 which provides as follows:

Art. 28. (1) An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination.

We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court of Appeals in CA-G.R. CV No. 39896 2 affirming the 24 July 1992 Order of the Regional Trial Court of Quezon City, Branch 102, which dismissed Civil Case No. Q-91-9620 3 on the ground of lack of jurisdiction in view of the aforementioned Article 28(1) of the Warsaw Convention.

The antecedent facts, as summarized by the Court of Appeals, are as follows:

Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society. Mr. Mapa is an established businessman and currently the Regional General Manager of Akerlund and Rausing, a multinational packaging material manufacturer based in Manila. He was previously the Senior Vice President of Phimco Industries, an affiliate company of Swedish Match Company. Mrs. Mapa is a successful businesswoman engaged in the commercial transactions of high value antique and oriental arts decor items originating from Asian countries. Carmina S. Mapa is the daughter of plaintiffs Purita and Cornelio and is a graduate of the International School in Bangkok, Thailand, now presently enrolled at the Boston University where she is majoring in communication.

Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidence by TWA ticket Nos. 015:9475:153:304 and 015:9475:153:305, purchased in Bangkok, Thailand. Said TWA tickets are for Los Angeles-New York-Boston-St. Louis-Chicago. . . .

Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is Kansas City, Missouri, USA. TWA's place of business through which the contracts were made is Bangkok, Thailand. The place of destination is Chicago, USA.

On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104 for Los Angeles. Carmina was to commence schooling and thus was accompanied by Purita to assist her in settling down at the University.

They arrived Los Angeles on the same date and stayed there until August 14, 1990 when they left for New York City.

On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F. Kennedy (JFK) Airport, New York, on TWA Flight No. 904.

On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a connecting flight on TWA's carrier, TW 0901, from JFK Airport, New York, to Boston's Logan Airport, checking in seven (7) pieces of luggage at the TWA counter in the JFK Airport. The seven baggages were received by a porter who issued seven TWA baggage receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor.

From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded to TWA's ticket counter and presented their confirmed TWA tickets numbered 015:9475:153:304 and 015:9475:153:305 with a 3:00 p.m. departure time. They were issued their boarding passes and were instructed to proceed to gate 35 for boarding. At about 2:40 p.m., plaintiffs noticed that there was still no instruction to board the aircraft so they made inquiries. The TWA ground stewardess informed plaintiffs that they were at the wrong gate because their flight was boarding at gate 1. Upon hearing this, plaintiffs rushed to gate 1 which was in another building terminal. At gate 1, they were told by a TWA ground stewardess that flight 901 had just departed. However, they were consoled that another TWA flight was leaving for Boston after 30 minutes and plaintiffs could use the same boarding pass for the next flight. At around 3:15 p.m., plaintiffs Purita and Carmina were able to board the next flight. However, the plane was not immediately cleared for take off on account of a thunderstorm. The passengers were instructed to stay inside the aircraft until 6:00 p.m. when the plane finally left for Boston.

Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim their baggages and found only three out of the seven they checked in, to wit: one Samsonite on the carousel, another Samsonite lying on the floor near the carousel and a third baggage, an American Tourister, inside the unclaimed baggage office. Plaintiffs immediately reported the loss of their four baggages to the TWA Baggage Office at Logan Airport. TWA's representative confidently assured them that their baggages would be located within 24 hours and not more than 48 hours.

On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler, Customer Relations-Baggage Service, apologizing for TWA's failure to locate the missing luggage and requesting plaintiffs to accomplish a passenger property questionnaire to facilitate a further intensive and computerized search for the lost luggage. Plaintiffs duly accomplished the passenger property questionnaire, taking pains to write down in detail the contents of each missing baggage. The total value of the lost items amounted to $11,283.79.

On September 20, 1990, plaintiff's counsel wrote TWA thru its General Sales Manager in the Philippines, Daniel Tuason, with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue corner Paseo de Roxas, Makati, Metro Manila demanding indemnification for the grave damage and injury suffered by the plaintiffs.

TWA again assured plaintiffs that intensive search was being conducted.

On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffs-appellants two options: (a) transportation credit for future TWA travel or (b) cash settlement. Five months lapsed without any result on TWA's intensive search.

On January 3, 1991, plaintiffs-appellant opted for transportation credit for future TWA travel.

On January 11, 1991, TWA disregarded plaintiffs' option and unilaterally declared the payment of $2,560.00 as constituting full satisfaction of the plaintiffs' claim.

On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the actual cost of their lost baggages and their contents.

Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and redress plaintiffs for the grave injury and damages they have suffered. 4

Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then filed with the trial court on 1 August 1991 a complaint 5 for damages, 6 which was docketed as Civil Case No. Q-91-9620. Before a responsive pleading was filed, the petitioners filed an Amended Complaint. 7 They prayed that after due trial private respondent Trans-World Airlines, Inc. (hereafter, TWA), be ordered to pay them the following amounts: (1) US$8,723.79, or its equivalent in Philippine currency, representing the cost of the lost luggage and its contents; (2) US$2,949.50, or its equivalent in Philippine currency, representing the cost of hotel, board and lodging, and communication expenses; (3) P1 million, by way of moral damages; (4) P1 million, by way of exemplary damages, with legal interest on said amounts from the date of extrajudicial demand thereof; and (5) P500,000.00 as attorney's fees, costs of the suit, and other expenses of litigation. 8

On 26 February 1992, TWA filed its Answer to the Amended Complaint raising, as special and affirmative defense, lack of jurisdiction of Philippine courts over the action for damages in the pursuant to Article 28(1) of the Warsaw Convention, the action could only be brought either in Bangkok where the contract was entered into, or in Boston which was the place of destination, or in Kansas City which is the carrier's domicile and principal place of business.

TWA further alleged that pursuant to the Warsaw Convention and the Notice of Baggage Limitations at the back of the tickets, its liability to the petitioners is limited to US$9.07 per pound, or US$20.00 per kilo, which is in lieu of actual and compensatory damages. Even assuming that petitioners' bag weighed the maximum acceptable weight of 70 pounds, TWA's maximum liability is $640.00 per bag or $2,560.00 for the four pieces of baggage, which the petitioners have been offered and have accepted. TWA also submitted that it could not be liable for moral and exemplary damages and attorney's fees because it did not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner. 9

On 7 February 1992, the petitioners filed their second Amended Complaint 10 to include a claim of US$2,500, or its equivalent in Philippine Currency, representing the additional replacement cost of the items and personal effects contained in their lost luggage; and US$4,500 representing the travel expenses, hotel, lodging, food and other expenses of petitioner Cornelio Mapa, who was constrained to join his family in Boston to extend the necessary assistance in connection with the lost luggage.

After the filing of TWA's Answer to the second Amended Complaint, 11 and petitioners' Reply thereto, the trial court gave TWA ten days within which to submit a memorandum in support of its affirmative defenses; after which the incident would be deemed submitted for resolution. 12 However, after TWA filed its Memorandum, 13 the trial court gave the petitioners five days within which to file a reply memorandum; and TWA, two days from receipt of the latter to file its comment thereon. 14 The petitioners then filed their Opposition (by way of Reply Memorandum) 15 to which TWA filed a Reply. 16 Thereafter, the petitioners submitted a Rejoinder 17; TWA, a Surrejoinder. 18

On 24 July 1992, the trial court issued an Order 19 dismissing the case for lack of jurisdiction in light of Article 28(1) of the Warsaw Convention. Thus:

It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case because plaintiffs' contract of transportation does not constitute "international transportation" as defined in said convention. This however is belied by the Passenger Property Questionnaire which is Annex C of plaintiffs' amended complaint. Page two of said questionnaire accomplished by plaintiffs under the heading "Your Complete Itinerary" shows that the TWA tickets issued to the plaintiffs form part of the contract of transportation to be performed from Manila to the United States. Since the Philippines and the United States are parties to the convention, plaintiffs' contracts of transportation come within the meaning of International Transportation.

xxx xxx xxx

On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to the case at bar, even if the basis of plaintiffs' present action is breach of contract of carriage under the New Civil Code.

The next question to be resolved is whether or not the Court has jurisdiction to try the present case in the light of the provision of Art. 28(1) above-quoted.

Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted only in any of the following places/courts:

(1) The court of the domicile of the carrier;

(2) The court of its principal place of business;

(3) The court where it has a place of business through which the contract had been made;

(4) The court of the place of destination.

In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in the same case of Augusto Benedicto Santos vs. Northwest Airlines held:

Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the petitioner cites several cases holding that Article 28(1) refers to venue rather that jurisdiction, there are later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional.

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong country may be waived by the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the parties, whether or not prohibition exists against their alteration.

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the

Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred.

xxx xxx xxx

It has been shown by the defendant that the domicile of the defendant Trans World Airlines, Inc. is Kansas City, Missouri, its principal place of business is also in Kansas City, Missouri, the carrier's place of business through which the contracts were made is Bangkok (Annexes A and A-1, Amended Complaint), and the place of destination was Boston.

The Philippines not being one of the places specified in Art. 28(1) abovequoted where the complaint may be instituted, this Court therefore, does not have jurisdiction over the present case.

Evidently discontented with the trial court's order, the petitioners appealed to the Court of Appeals, contending that the lower court erred in not holding that (1) it has jurisdiction over the instant case and (2) the Warsaw Convention is inapplicable in the instant case because the subject matter of the case is not included within the coverage of the said convention. 20 They claimed that their cause of action could be based on breach of contract of air carriage founded on Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code governing common carriers or Article 2176 of the same Code governing tort or quasi-delict.

The appellate court disagreed with the petitioners and affirmed the order of the trial court. It held that the Warsaw Convention is the law which governs the dispute between the petitioners and TWA because what is involved is international transportation defined by said Convention in Article I(2). This holding is founded on its determination that the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago purchased in Bangkok, Thailand, were issued in conjunction with, and therefore formed part of, the contract of transportation performed from Manila, Philippines, to the United States.

The respondent court further held that the cause of action of the petitioners arose from the loss of the four checked pieces of baggage, which then falls under Article 18(1), Chapter III (Liability of the Carrier) of the Warsaw Conventions. 21 Pursuant to Article 24(1) of the Convention, all actions for damages, whether based on tort, code law or common law, arising from loss of baggage under Article 18 of the Warsaw Convention, can only be brought subject to the conditions and limits set forth in the Warsaw Convention. Article 28(1) thereof sets forth conditions and limits in that the action for damages may be instituted only in the territory of one of the High Contracting Parties, before the court of (1) the domicile of the carrier, (2) the carrier's principal place of business, (3) the place of business through which the contract has been made, or (4) the place of destination. Since the Philippines is not one of these places, a Philippine Court, like the RTC, has no jurisdiction over the complaint for damages.

Respondent Court of Appeals likewise held that the petitioners could not claim application of Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code on common carriers without taking into consideration Article 1753 of the same Code, which provides that the law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction, or deterioration. Since the country of ultimate destination is Chicago, the law of Chicago shall govern the liability of TWA for the loss of the four pieces of baggage. Neither is Article 2176 of the New Civil

Code on torts or quasi-delicts applicable in view of the private international law principle of lex loci delicti commissi. 22 In addition, comformably with Santos III v. Northwest Orient Airlines, 23 mere allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention.

Failing in their bid to reconsider the decision, the petitioners filed this petition. They aver that respondent Court of Appeals gravely erred (1) in holding that the Warsaw Convention is applicable to this case and (2) in applying Article 1753 of the Civil Code and the principle of lex loci delicti commissi. 24

We resolved to give due course to the petitioner after the filing by TWA of its Comment on the petition and noted without action for the reasons stated in the resolution of 25 September 1996 petitioners' Reply and Rejoinder. We then required the parties to submit their respective memoranda. They did in due time.

The petitioners insist that the Warsaw Convention is not applicable to their case because the contracts they had with TWA did not involve an international transportation. Whether the contracts were of international transportation is to be solely determined from the TWA tickets issued to them in Bangkok, Thailand, which showed that their itinerary was Los Angeles-New York-Boston-St. Louis-Chicago. Accordingly, since the place of departure (Los Angeles) and the place of destination (Chicago) are both within the territory of one High Contracting Party, with no agreed stopping place in a territory subject to the sovereignty, mandate, suzerainty or authority of another Power, the contracts did not constitute 'international transportation' as defined by the convention. They also claim to be without legal basis the contention of TWA that their transportation contracts were of international character because of the handwritten notations in the tickets re "INT'S TKT #079-4402956821-2" and "INT'L TKT #079-4402956819." Notwithstanding such notations, the TWA tickets, viz., (a) No. 015.9475:153:304 and (b) No. 015:9475:153:305 did not cease to be for the itinerary therein designated. Besides, it is a fact that petitioners Purita and Carmina Mapa traveled from Manila to Los Angeles via Philippine Airlines (PAL) by virtue of PAL tickets issued independently of the TWA tickets.

The pitch issue to be resolved under the petitioner's first assigned error is whether the contracts of transportation between Purita and Carmina Mapa, on the one hand, and TWA, on the other, were contracts of "international transportation" under the Warsaw Convention. If they were, then we should sustain the trial court and the Court of Appeals in light of our ruling in Santos v. Northwest Orient Airlines. 25 It appears clear to us that TWA itself, the trial court, and the Court of Appeals impliedly admit that if the sole basis were the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago, the contracts cannot be brought within the term "international transportation," as defined in Article I(2) of the Warsaw Convention. As provided therein, a contract is one of international transportation only if

according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the transportation or a transshipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though that power is not a party to this convention.

There are then two categories of international transportation, viz., (1) that where the place of departure and the place of destination are situated within the territories of two High Contracting Parties regardless of whether or not there be a break in the transportation or a transshipment; and (2) that where the place of departure and the place of destination are within the territory of a single

High Contracting Party if there is an agreed stopping place within a territory subject to the sovereignty, mandate, or authority of another power, even though the power is not a party of the Convention.

The High Contracting Parties referred to in the Convention are the signatories thereto and those which subsequently adhered to it. In the case of the Philippines, the Convention was concurred in by the Senate, through Resolution No. 19, on 16 May 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on 13 October 1950 and was deposited with the Polish Government on 9 November 1950. The Convention became applicable to the Philippines on 9 February 1951. Then, on 23 September 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring the Philippines' formal adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof. 26

The contracts of transportation in this case are evidenced by the two TWA tickets, No. 015:9475:153:304 and No. 015:9475:153:305, both purchased and issued in Bangkok, Thailand. On the basis alone of the provisions therein, it is obvious that the place of departure and the place of destination are all in the territory of the United States, or of a single High Contracting Party. The contracts, therefore, cannot come within the purview of the first category of international transportation. Neither can it be under the second category since there was NO agreed stopping place within a territory subject to the sovereignty, mandate, or authority of another power.

The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and TWA, on the other, within the first category of "international transportation" is to link them with, or to make them an integral part of, the Manila-Los Angeles travel of Purita and Carmina through PAL aircraft. The "linkages" which have been pointed out by the TWA, the trial court, and the Court of Appeals are (1) the handwritten notations, viz., INT'L TKT # 079-4402956821-2 and INT'L TKT # 079-4402956819, on the two TWA tickets; and (2) the entries made by petitioners Purita and Carmina Mapa in column YOUR COMPLETE ITINERARY in TWA's Passenger Property Questionnaire, wherein they mentioned their travel from Manila to Los Angeles in flight PR 102.

The alleged "international tickets" mentioned in the notations in conjunction with which the two TWA tickets were issued were not presented. Clearly then, there is at all no factual basis of the finding that the TWA tickets were issued in conjunction with the international tickets, which are even, at least as of now, non-existent.

As regards the petitioner's entry in YOUR COMPLETE ITINERARY column of the Passenger Property Questionnaire wherein they included the Manila-Los Angeles travel, it must be pointed out that this was made on 4 September 1990 27 by petitioners Purita and Carmina Mapa, and only in connection with their claim for their lost pieces of baggage. The loss occurred much earlier, or on 27 August 1990. The entry can by no means be considered as a part of, or supplement to, their contracts of transportation evidenced by the TWA tickets which covered transportation within the United States only.

It must be underscored that the first category of international transportation under the Warsaw Convention is based on "the contract made by the parties." TWA does not claim that the Manila-Los Angeles contracts of transportation which brought Purita and Carmina to Los Angeles were also its contracts. It does not deny the assertion of the petitioners that those contracts were independent of the TWA tickets issued in Bangkok, Thailand. No evidence was offered that TWA and PAL had an agreement concerning transportation of passengers from points of departures not served with aircrafts of one or the other. There could have been no difficulty for such agreement, since TWA admitted without qualification in paragraph 1 of its Answer 28 to the second Amended Complaint the allegation in paragraph 1.1 of the latter 29 that TWA "is a foreign corporation licensed to do business in the

Philippines with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue, corner Paseo de Roxas, Makati, Metro Manila."

TWA relies on Article I(3) of the Convention, which provides as follows:

3. A carriage to be performed by several successive air carriers is deemed, for the purposes of this Convention, to be one undivided carriage, if it has been regarded by the parties as a single operation, whether it had been agreed upon under the form of a single contract or of a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party.

It also points to Article 15 of the IATA Recommend Practice 1724, which provides: Carriage to be performed by a several successive carriers under one ticket, or under a ticket and any conjunction ticket issued in connection therewith, is regarded as a single operation." 30

The flaw of respondent's position is the presumption that the parties have "regarded" as an "undivided carriage" or as a "single operation" the carriage from Manila to Los Angeles through PAL then to New York-Boston-St. Louis-Chicago through TWA. The dismissal then of the second Amended Complaint by the trial court and the Court of Appeals' affirmance of the dismissal were not based on indubitable facts or grounds, but no inferences without established factual basis.

TWA should have offered evidence for its affirmative defenses at the preliminary hearing therefor. Section 5 of Rule 16 of the Rules of Court expressly provides:

Sec. 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal provided for in this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed.

Without any further evidence as earlier discussed, the trial court should have denied the affirmative defense of lack of jurisdiction because it did not appear to be indubitable. Section 3 of Rule 16 of the Rules of Court provides:

Sec. 3. Hearing and order. — After hearing the court may deny or grant the motion or allow amendment of pleading, or may defer the hearing and determination of the motion until the trial if the ground alleged therein does not appear to be indubitable.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 31 May 1995 of respondent Court of Appeals in CA-G.R. CV No. 39896, as well as the Order of 24 July 1992 of the Regional Trial Court of Quezon City, Branch 102, in Civil Case No. Q-91-9620, is REVERSED and SET ASIDE.

The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to proceed with the pre-trial, if it has not been terminated, and with the trial on the merits of the case and then to render judgment thereon, taking into account the foregoing observations on the issue of jurisdiction.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

G.R. No. 101538 June 23, 1992

AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto Santos, petitioner, vs.NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.

 

CRUZ, J.:

This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:

Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination.

The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch office in the Philippines.

On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date was specified for his return to San Francisco. 1

On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure to Manila. Despite a previous confirmation and re-confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He therefore had to be wait-listed.

On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987, NOA moved to dismiss the complaint on the ground of lack of jurisdiction. Citing the above-quoted article, it contended that the complaint could be instituted only in the territory of one of the High Contracting Parties, before:

1. the court of the domicile of the carrier;

2. the court of its principal place of business;

3. the court where it has a place of business through which the contract had been made;

4. the court of the place of destination.

The private respondent contended that the Philippines was not its domicile nor was this its principal place of business. Neither was the petitioner's ticket issued in this country nor was his destination Manila but San Francisco in the United States.

On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner appealed to the Court of Appeals, which affirmed the decision of the lower court. 3 On June 26, 1991, the petitioner filed a motion for reconsideration, but the same was denied. 4 The petitioner then came to this Court, raising substantially the same issues it submitted in the Court of Appeals.

The assignment of errors may be grouped into two major issues, viz:

(1) the constitutionality of Article 28(1) of the Warsaw Convention; and

(2) the jurisdiction of Philippine courts over the case.

The petitioner also invokes Article 24 of the Civil Code on the protection of minors.

I

THE ISSUE OF CONSTITUTIONALITY

A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention violates the constitutional guarantees of due process and equal protection.

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." 5

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country.

The petitioner contends that Article 28(1) cannot be applied in the present case because it is unconstitutional. He argues that there is no substantial distinction between a person who purchases a ticket in Manila and a person who purchases his ticket in San Francisco. The classification of the places in which actions for damages may be brought is arbitrary and irrational and thus violates the due process and equal protection clauses.

It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible of judicial determination; the constitutional question must have been opportunely raised by the proper party; and the resolution of the question is unavoidably necessary to the decision of the case itself. 6

Courts generally avoid having to decide a constitutional question. This attitude is based on the doctrine of separation of powers, which enjoins upon the departments of the government a becoming respect for each other's acts.

The treaty which is the subject matter of this petition was a joint legislative-executive act. The presumption is that it was first carefully studied and determined to be constitutional before it was adopted and given the force of law in this country.

The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the Convention considered the four places designated in Article 28 the most convenient forums for the litigation of any claim that may arise between the airline and its passenger, as distinguished from all other places. At any rate, we agree with the respondent court that this case can be decided on other grounds without the necessity of resolving the constitutional issue.

B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention is inapplicable because of a fundamental change in the circumstances that served as its basis.

The petitioner goes at great lengths to show that the provisions in the Convention were intended to protect airline companies under "the conditions prevailing then and which have long ceased to exist." He argues that in view of the significant developments in the airline industry through the years, the treaty has become irrelevant. Hence, to the extent that it has lost its basis for approval, it has become unconstitutional.

The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an attempt to formulate a legal principle which would justify non-performance of a treaty obligation if the conditions with relation to which the parties contracted have changed so materially and so unexpectedly as to create a situation in which the exaction of performance would be unreasonable." 7 The key element of this doctrine is the vital change in the condition of the contracting parties that they could not have foreseen at the time the treaty was concluded.

The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8

The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air travel . . . The Warsaw delegates knew that, in the years to come, civil aviation would change in ways that they could not foresee. They wished to design a system of air law that would be both durable and flexible enough to keep pace with these changes . . . The ever-changing needs of the system of civil aviation can be served within the framework they created.

It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However, that circumstance alone is not sufficient justification for the rejection of the treaty at this time. The changes recited by the petitioner were, realistically, not entirely unforeseen although they were expected in a general sense only. In fact, the Convention itself, anticipating such developments, contains the following significant provision:

Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming into force of this convention to call for the assembling of a new international conference in order to consider any improvements which may be made in this convention. To this end, it will communicate with the Government of the French Republic which will take the necessary measures to make preparations for such conference.

But the more important consideration is that the treaty has not been rejected by the Philippine government. The doctrine of rebus sic stantibus does not operate automatically to render the treaty inoperative. There is a necessity for a formal act of rejection, usually made by the head of State, with a statement of the reasons why compliance with the treaty is no longer required.

In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such denunciation is authorized under its Article 39, viz:

Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a notification addressed to the Government of the Republic of Poland, which shall at once inform the Government of each of the High Contracting Parties.

(2) Denunciation shall take effect six months after the notification of denunciation, and shall operate only as regards the party which shall have proceeded to denunciation.

Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a function of the courts but of the other branches of government. This is a political act. The conclusion and renunciation of treaties is the prerogative of the political departments and may not be usurped by the judiciary. The courts are concerned only with the interpretation and application of laws and treaties in force and not with their wisdom or efficacy.

C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United States, because this would deny him the right to access to our courts.

The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a constructive denial of his right to access to our courts for the protection of his rights. He would consequently be deprived of this vital guaranty as embodied in the Bill of Rights.

Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It does not mean that a person can go to any court for redress of his grievances regardless of the nature or value of his claim. If the petitioner is barred from filing his complaint before our courts, it is because they are not vested with the appropriate jurisdiction under the Warsaw Convention, which is part of the law of our land.

II

THE ISSUE OF JURISDICTION.

A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention is a rule merely of venue and was waived by defendant when it did not move to dismiss on the ground of improper venue.

By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire.

International transportation is defined in paragraph (2) of Article 1 as follows:

(2) For the purposes of this convention, the expression "international transportation" shall mean any transportation in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the transportation or a transshipment, are situated [either] within the territories of two High Contracting Parties . . .

Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is the ticket. When the contract of carriage provides for the transportation of the passenger between certain designated terminals "within the territories of two High Contracting Parties," the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passenger.

Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to the United States, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four places where an action for damages may be brought.

Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the petitioner cites several cases holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional. 10

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon d court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition exists against their alteration. 11

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred.

This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was held:

. . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially when considered in the light of Article 32. Article 28(2) provides that "questions of procedure shall be governed by the law of the court to which the case is submitted" (Emphasis supplied). Section (2) thus may be read to leave for domestic decision questions regarding the suitability and location of a particular Warsaw Convention case.

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable

domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the court to which the case is submitted.

The petitioner submits that since Article 32 states that the parties are precluded "before the damages occurred" from amending the rules of Article 28(1) as to the place where the action may be brought, it would follow that the Warsaw Convention was not intended to preclude them from doing so "after the damages occurred."

Article 32 provides:

Art. 32. Any clause contained in the contract and all special agreements entered into before the damage occurred by which the parties purport to infringe the rules laid down by this convention, whether by deciding the law to be applied, or by altering the rules as to jurisdiction, shall be null and void. Nevertheless for the transportation of goods, arbitration clauses shall be allowed, subject to this convention, if the arbitration is to take place within one of the jurisdictions referred to in the first paragraph of Article 28.

His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have) occurred," the article should be regarded as possessing the character of a "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss on the ground of lack of jurisdiction, the private respondent has waived improper venue as a ground to dismiss.

The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any event, we agree that even granting arguendo that Article 28(1) is a venue and not a jurisdictional provision, dismissal of the case was still in order. The respondent court was correct in affirming the ruling of the trial court on this matter, thus:

Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is that NOA averred in its MOTION TO DISMISS that the ground thereof is "the Court has no subject matter jurisdiction to entertain the Complaint" which SANTOS considers as equivalent to "lack of jurisdiction over the subject matter . . ." However, the gist of NOA's argument in its motion is that the Philippines is not the proper place where SANTOS could file the action — meaning that the venue of the action is improperly laid. Even assuming then that the specified ground of the motion is erroneous, the fact is the proper ground of the motion — improper venue — has been discussed therein.

Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are special circumstances justifying this conclusion, as in the petition at bar. As we observed in Javier vs. Intermediate Court of Appeals: 13

Legally, of course, the lack of proper venue was deemed waived by the petitioners when they failed to invoke it in their original motion to dismiss. Even so, the motivation of the private respondent should have been taken into account by both the trial judge and the respondent court in arriving at their decisions.

The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where it was held that Article 28(1) is a venue provision. However, the private respondent avers that this was in effect reversed by the case of Aranas v. United Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision. Neither of these cases is binding on this Court, of course, nor was either of them appealed to us. Nevertheless, we here express our own preference for the later case of Aranas insofar as its pronouncements on jurisdiction conform to the judgment we now make in this petition.

B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the Warsaw Convention, this case was properly filed in the Philippines, because Manila was the destination of the plaintiff.

The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal. The date and time of departure were specified but not of the return flight. The plane crashed while on route

from Montreal to Los Angeles, killing Mrs. Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S. District Court of California. The defendant moved to dismiss for lack of jurisdiction but the motion was denied thus:

. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as evidenced by the ticket booklets and the Flight Coupon No. 1, was a contract for Air Canada to carry Mrs. Silverberg to Los Angeles on a certain flight, a certain time and a certain class, but that the time for her to return remained completely in her power. Coupon No. 2 was only a continuing offer by Air Canada to give her a ticket to return to Montreal between certain dates. . . .

The only conclusion that can be reached then, is that "the place of destination" as used in the Warsaw Convention is considered by both the Canadian C.T.C. and the United States C.A.B. to describe at least two "places of destination," viz., the "place of destination" of a particular flight either an "outward destination" from the "point of origin" or from the "outward point of destination" to any place in Canada.

Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on which Mrs. Silverberg was killed, was Los Angeles according to the ticket, which was the contract between the parties and the suit is properly filed in this Court which has jurisdiction.

The Petitioner avers that the present case falls squarely under the above ruling because the date and time of his return flight to San Francisco were, as in the Aanestad case, also left open. Consequently, Manila and not San Francisco should be considered the petitioner's destination.

The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States District Court (Eastern District of Pennsylvania) said:

. . . Although the authorities which addressed this precise issue are not extensive, both the cases and the commentators are almost unanimous in concluding that the "place of destination" referred to in the Warsaw Convention "in a trip consisting of several parts . . . is the ultimate destination that is accorded treaty jurisdiction." . . .

But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad; whether the return portion of the ticket is characterized as an option or a contract, the carrier was legally bound to transport the passenger back to the place of origin within the prescribed time and. the passenger for her part agreed to pay the fare and, in fact, did pay the fare. Thus there was mutuality of obligation and a binding contract of carriage, The fact that the passenger could forego her rights under the contract does not make it any less a binding contract. Certainly, if the parties did not contemplate the return leg of the journey, the passenger would not have paid for it and the carrier would not have issued a round trip ticket.

We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract of carriage or, specifically in this case, the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should therefore be considered merely an agreed stopping place and not the destination.

The petitioner submits that the Butz case could not have overruled the Aanestad case because these decisions are from different jurisdictions. But that is neither here nor there. In fact, neither of these cases is controlling on this Court. If we have preferred the Butz case, it is because, exercising our own freedom of choice, we have decided that it represents the better, and correct, interpretation of Article 28(1).

Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction under the Convention.

The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The use of the singular in this expression indicates the understanding of the parties to the Convention

that every contract of carriage has one place of departure and one place of destination. An intermediate place where the carriage may be broken is not regarded as a "place of destination."

C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the Warsaw Convention, this case was properly filed in the Philippines because the defendant has its domicile in the Philippines.

The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its provisions, American courts have taken the broad view that the French legal meaning must govern. 18 In French, he says, the "domicile" of the carrier means every place where it has a branch office.

The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held:

The plaintiffs' first contention is that Air France is domiciled in the United States. They say that the domicile of a corporation includes any country where the airline carries on its business on "a regular and substantial basis," and that the United States qualifies under such definition. The meaning of domicile cannot, however, be so extended. The domicile of a corporation is customarily regarded as the place where it is incorporated, and the courts have given the meaning to the term as it is used in article 28(1) of the Convention. (See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v. Societe Anonyme Belge d' Exploitation de la Navigation Aerienne Sabena Belgian World Airlines (E.D. pa. 1962). 207 F. Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as a whole, is also incompatible with the plaintiffs' claim. The article, in stating that places of business are among the bases of the jurisdiction, sets out two places where an action for damages may be brought; the country where the carrier's principal place of business is located, and the country in which it has a place of business through which the particular contract in question was made, that is, where the ticket was bought, Adopting the plaintiffs' theory would at a minimum blur these carefully drawn distinctions by creating a third intermediate category. It would obviously introduce uncertainty into litigation under the article because of the necessity of having to determine, and without standards or criteria, whether the amount of business done by a carrier in a particular country was "regular" and "substantial." The plaintiff's request to adopt this basis of jurisdiction is in effect a request to create a new jurisdictional standard for the Convention.

Furthermore, it was argued in another case 20 that:

. . . In arriving at an interpretation of a treaty whose sole official language is French, are we bound to apply French law? . . . We think this question and the underlying choice of law issue warrant some discussion. . . We do not think this statement can be regarded as a conclusion that internal French law is to be "applied" in the choice of law sense, to determine the meaning and scope of the Convention's terms. Of course, French legal usage must be considered in arriving at an accurate English translation of the French. But when an accurate English translation is made and agreed upon, as here, the inquiry into meaning does not then revert to a quest for a past or present French law to be "applied" for revelation of the proper scope of the terms. It does not follow from the fact that the treaty is written in French that in interpreting it, we are forever chained to French law, either as it existed when the treaty was written or in its present state of development. There is no suggestion in the treaty that French law was intended to govern the meaning of Warsaw's terms, nor have we found any indication to this effect in its legislative history or from our study of its application and interpretation by other courts. Indeed, analysis of the cases indicates that the courts, in interpreting and applying the Warsaw Convention, have, not considered themselves bound to apply French law simply because the Convention is written in French. . . .

We agree with these rulings.

Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article 28(1). By specifying the three other places, to wit, the principal place of business of the carrier, its place of business where the contract was made, and the place of destination, the article clearly meant that these three other places were not comprehended in the term "domicile."

D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention does not apply to actions based on tort.

The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in bad faith, discriminated against the petitioner, and committed a willful misconduct because it canceled his confirmed reservation and gave his reserved seat to someone who had no better right to it. In short. the private respondent committed a tort.

Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He argues that in at least two American cases, 21 it was held that Article 28(1) of the Warsaw Convention does not apply if the action is based on tort.

This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was interpreted thus:

. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly excludes any relief not provided for in the Convention as modified by the Montreal Agreement. It does not, however, limit the kind of cause of action on which the relief may be founded; rather it provides that any action based on the injuries specified in Article 17 "however founded," i.e., regardless of the type of action on which relief is founded, can only be brought subject to the conditions and limitations established by the Warsaw System. Presumably, the reason for the use of the phrase "however founded," in two-fold: to accommodate all of the multifarious bases on which a claim might be founded in different countries, whether under code law or common law, whether under contract or tort, etc.; and to include all bases on which a claim seeking relief for an injury might be founded in any one country. In other words, if the injury occurs as described in Article 17, any relief available is subject to the conditions and limitations established by the Warsaw System, regardless of the particular cause of action which forms the basis on which a plaintiff could seekrelief . . .

The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention. The petitioner has apparently misconstrued the import of Article 25(l) of the Convention, which reads as follows:

Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability. if the damage is caused by his willful misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to willful misconduct.

It is understood under this article that the court called upon to determine the applicability of the limitation provision must first be vested with the appropriate jurisdiction. Article 28(1) is the provision in the Convention which defines that jurisdiction. Article 22 23 merely fixes the monetary ceiling for the liability of the carrier in cases covered by the Convention. If the carrier is indeed guilty of willful misconduct, it can avail itself of the limitations set forth in this article. But this can be done only if the action has first been commenced properly under the rules on jurisdiction set forth in Article 28(1).

III

THE ISSUE OF PROTECTION TO MINORS

The petitioner calls our attention to Article 24 of the Civil Code, which states:

Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.

Application of this article to the present case is misplaced. The above provision assumes that the court is vested with jurisdiction to rule in favor of the disadvantaged minor, As already explained, such jurisdiction is absent in the case at bar.

CONCLUSION

A number of countries have signified their concern over the problem of citizens being denied access to their own courts because of the restrictive provision of Article 28(1) of the Warsaw Convention. Among these is the United States, which has proposed an amendment that would enable the passenger to sue in his own domicile if the carrier does business in that jurisdiction. The reason for this proposal is explained thus:

In the event a US citizen temporarily residing abroad purchases a Rome to New York to Rome ticket on a foreign air carrier which is generally subject to the jurisdiction of the US, Article 28 would prevent that person from suing the carrier in the US in a "Warsaw Case" even though such a suit could be brought in the absence of the Convention.

The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was adopted at Guatemala City on March 8,1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of contracting parties. Pending such ratification, the petitioner will still have to file his complaint only in any of the four places designated by Article 28(1) of the Warsaw Convention.

The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the right to sue in his own courts simply because the defendant airline has a place of business in his country.

The Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in his own country at least inconvenience. But we are unable to grant him the relief he seeks because we are limited by the provisions of the Warsaw Convention which continues to bind us. It may not be amiss to observe at this point that the mere fact that he will have to litigate in the American courts does not necessarily mean he will litigate in vain. The judicial system of that country in known for its sense of fairness and, generally, its strict adherence to the rule of law.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

Narvasa, C.J., Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur.

3. G.R. No. 171092               March 15, 2010

EDNA DIAGO LHUILLIER, Petitioner, vs.BRITISH AIRWAYS, Respondent.

D E C I S I O N

DEL CASTILLO, J.:

Jurisdictio est potestas de publico introducta cum necessitate juris dicendi. Jurisdiction is a power introduced for the public good, on account of the necessity of dispensing justice.1

Factual Antecedents

On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint2 for damages against respondent British Airways before the Regional Trial Court (RTC) of Makati City. She alleged that on February 28, 2005, she took respondent’s flight 548 from London, United Kingdom to Rome, Italy. Once on board, she allegedly requested Julian Halliday (Halliday), one of the respondent’s flight attendants, to assist her in placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and assist her, and even sarcastically remarked that "If I were to help all 300 passengers in this flight, I would have a broken back!"

Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight attendant, Nickolas Kerrigan (Kerrigan), singled her out from among all the passengers in the business class section to lecture on plane safety. Allegedly, Kerrigan made her appear to the other passengers to be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and regulations of the plane. Affronted, petitioner assured Kerrigan that she knew the plane’s safety regulations being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few centimeters away from that of the petitioner and menacingly told her that "We don’t like your attitude."

Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an apology. However, the latter declared that the flight stewards were "only doing their job."

Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay P5 million as moral damages, P2 million as nominal damages, P1 million as exemplary damages, P300,000.00 as attorney’s fees, P200,000.00 as litigation expenses, and cost of the suit.

On May 16, 2005, summons, together with a copy of the complaint, was served on the respondent through Violeta Echevarria, General Manager of Euro-Philippine Airline Services, Inc.3

On May 30, 2005, respondent, by way of special appearance through counsel, filed a Motion to Dismiss4 on grounds of lack of jurisdiction over the case and over the person of the respondent. Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the Warsaw Convention,5 Article 28(1) of which provides:

An action for damages must be brought at the option of the plaintiff, either before the court of domicile of the carrier or his principal place of business, or where he has a place of business through which the contract has been made, or before the court of the place of destination.

Thus, since a) respondent is domiciled in London; b) respondent’s principal place of business is in London; c) petitioner bought her ticket in Italy (through Jeepney Travel S.A.S, in Rome);6 and d) Rome, Italy is petitioner’s place of destination, then it follows that the complaint should only be filed in the proper courts of London, United Kingdom or Rome, Italy.

Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over the person of the respondent because the summons was erroneously served on Euro-Philippine Airline Services, Inc. which is not its resident agent in the Philippines.

On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her Comment/Opposition on the Motion to Dismiss within 10 days from notice thereof, and for respondent to file a Reply thereon.7 Instead of filing a Comment/Opposition, petitioner filed on June 27, 2005, an Urgent Ex-Parte Motion to Admit Formal Amendment to the Complaint and Issuance of Alias Summons.8 Petitioner alleged that upon verification with the Securities and Exchange Commission, she found out that the resident agent of respondent in the Philippines is Alonzo Q. Ancheta. Subsequently, on September 9, 2005, petitioner filed a Motion to Resolve Pending Incident and Opposition to Motion to Dismiss.9

Ruling of the Regional Trial Court

On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order10 granting respondent’s Motion to Dismiss. It ruled that:

The Court sympathizes with the alleged ill-treatment suffered by the plaintiff. However, our Courts have to apply the principles of international law, and are bound by treaty stipulations entered into by the Philippines which form part of the law of the land. One of this is the Warsaw Convention. Being a signatory thereto, the Philippines adheres to its stipulations and is bound by its provisions including the place where actions involving damages to plaintiff is to be instituted, as provided for under Article 28(1) thereof. The Court finds no justifiable reason to deviate from the indicated limitations as it will only run counter to the provisions of the Warsaw Convention. Said adherence is in consonance with the comity of nations and deviation from it can only be effected through proper denunciation as enunciated in the Santos case (ibid). Since the Philippines is not the place of domicile of the defendant nor is it the principal place of business, our courts are thus divested of jurisdiction over cases for damages. Neither was plaintiff’s ticket issued in this country nor was her destination Manila but Rome in Italy. It bears stressing however, that referral to the court of proper jurisdiction does not constitute constructive denial of plaintiff’s right to have access to our courts since the Warsaw Convention itself provided for jurisdiction over cases arising from international transportation. Said treaty stipulations must be complied with in good faith following the time honored principle of pacta sunt servanda.

The resolution of the propriety of service of summons is rendered moot by the Court’s want of jurisdiction over the instant case.

WHEREFORE, premises considered, the present Motion to Dismiss is hereby GRANTED and this case is hereby ordered DISMISSED.

Petitioner filed a Motion for Reconsideration but the motion was denied in an Order11 dated January 4, 2006.

Petitioner now comes directly before us on a Petition for Review on Certiorari on pure questions of law, raising the following issues:

Issues

I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A TORTIOUS CONDUCT COMMITTED AGAINST A FILIPINO CITIZEN AND RESIDENT BY AIRLINE PERSONNEL OF A FOREIGN CARRIER TRAVELLING BEYOND THE TERRITORIAL LIMIT OF ANY FOREIGN COUNTRY; AND THUS IS OUTSIDE THE AMBIT OF THE WARSAW CONVENTION.

II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN FILING ITS MOTION TO DISMISS BASED ON LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE CASE AND OVER ITS PERSON MAY BE DEEMED AS HAVING IN FACT AND IN LAW SUBMITTED ITSELF TO THE JURISDICTION OF THE LOWER COURT, ESPECIALLY SO, WHEN THE VERY LAWYER ARGUING FOR IT IS HIMSELF THE RESIDENT AGENT OF THE CARRIER.

Petitioner’s Arguments

Petitioner argues that her cause of action arose not from the contract of carriage, but from the tortious conduct committed by airline personnel of respondent in violation of the provisions of the Civil Code on Human Relations. Since her cause of action was not predicated on the contract of carriage, petitioner asserts that she has the option to pursue this case in this jurisdiction pursuant to Philippine laws.

Respondent’s Arguments

In contrast, respondent maintains that petitioner’s claim for damages fell within the ambit of Article 28(1) of the Warsaw Convention. As such, the same can only be filed before the courts of London, United Kingdom or Rome, Italy.

Our Ruling

The petition is without merit.

The Warsaw Convention has the force and effect of law in this country.

It is settled that the Warsaw Convention has the force and effect of law in this country. In Santos III v. Northwest Orient Airlines,12 we held that:

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof."

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country.13

The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was between the United Kingdom and Italy, which are both signatories to the Warsaw Convention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.

2. For the purposes of this Convention the expression "international carriage" means any carriage in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, suzerainty, mandate or authority of another Power, even though that Power is not a party to this Convention. A carriage without such an agreed stopping place between territories subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party is not deemed to be international for the purposes of this Convention. (Emphasis supplied)

Thus, when the place of departure and the place of destination in a contract of carriage are situated within the territories of two High Contracting Parties, said carriage is deemed an "international carriage". The High Contracting Parties referred to herein were the signatories to the Warsaw Convention and those which subsequently adhered to it.14

In the case at bench, petitioner’s place of departure was London, United Kingdom while her place of destination was Rome, Italy.15 Both the United Kingdom16 and Italy17 signed and ratified the Warsaw Convention. As such, the transport of the petitioner is deemed to be an "international carriage" within the contemplation of the Warsaw Convention.

Since the Warsaw Convention applies in the instant case, then the jurisdiction over the subject matter of the action is governed by the provisions of the Warsaw Convention.

Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

1. the court where the carrier is domiciled;

2. the court where the carrier has its principal place of business;

3. the court where the carrier has an establishment by which the contract has been made; or

4. the court of the place of destination.

In this case, it is not disputed that respondent is a British corporation domiciled in London, United Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy, which is

properly designated given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed by the petitioner.

Santos III v. Northwest Orient Airlines18 applies in this case.

Petitioner contends that Santos III v. Northwest Orient Airlines19 cited by the trial court is inapplicable to the present controversy since the facts thereof are not similar with the instant case.

We are not persuaded.

In Santos III v. Northwest Orient Airlines,20 Augusto Santos III, a resident of the Philippines, purchased a ticket from Northwest Orient Airlines in San Francisco, for transport between San Francisco and Manila via Tokyo and back to San Francisco. He was wait-listed in the Tokyo to Manila segment of his ticket, despite his prior reservation. Contending that Northwest Orient Airlines acted in bad faith and discriminated against him when it canceled his confirmed reservation and gave his seat to someone who had no better right to it, Augusto Santos III sued the carrier for damages before the RTC. Northwest Orient Airlines moved to dismiss the complaint on ground of lack of jurisdiction citing Article 28(1) of the Warsaw Convention. The trial court granted the motion which ruling was affirmed by the Court of Appeals. When the case was brought before us, we denied the petition holding that under Article 28(1) of the Warsaw Convention, Augusto Santos III must prosecute his claim in the United States, that place being the (1) domicile of the Northwest Orient Airlines; (2) principal office of the carrier; (3) place where contract had been made (San Francisco); and (4) place of destination (San Francisco).21

We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus:

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred.

x x x x

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the court to which the case is submitted.22

Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines23 is analogous to the instant case because (1) the domicile of respondent is London, United Kingdom;24 (2) the principal office of respondent airline is likewise in London, United Kingdom;25 (3) the ticket was purchased in Rome, Italy;26 and (4) the place of destination is Rome, Italy.27 In addition, petitioner based her complaint on Article 217628 of the Civil Code on quasi-delict and Articles 1929 and 2130 of the Civil

Code on Human Relations. In Santos III v. Northwest Orient Airlines,31 Augusto Santos III similarly posited that Article 28 (1) of the Warsaw Convention did not apply if the action is based on tort. Hence, contrary to the contention of the petitioner, the factual setting of Santos III v. Northwest Orient Airlines32 and the instant case are parallel on the material points.

Tortious conduct as ground for the petitioner’s complaint is within the purview of the Warsaw Convention.

Petitioner contends that in Santos III v. Northwest Orient Airlines,33 the cause of action was based on a breach of contract while her cause of action arose from the tortious conduct of the airline personnel and violation of the Civil Code provisions on Human Relations.34 In addition, she claims that our pronouncement in Santos III v. Northwest Orient Airlines35 that "the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention," is more of an obiter dictum rather than the ratio decidendi.36 She maintains that the fact that said acts occurred aboard a plane is merely incidental, if not irrelevant.37

We disagree with the position taken by the petitioner. Black defines obiter dictum as "an opinion entirely unnecessary for the decision of the case" and thus "are not binding as precedent."38 In Santos III v. Northwest Orient Airlines,39 Augusto Santos III categorically put in issue the applicability of Article 28(1) of the Warsaw Convention if the action is based on tort.

In the said case, we held that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the realm of the Warsaw Convention. In fact, our ruling that a cause of action based on tort did not bring the case outside the sphere of the Warsaw Convention was our ratio decidendi in disposing of the specific issue presented by Augusto Santos III. Clearly, the contention of the herein petitioner that the said ruling is an obiter dictum is without basis.

Relevant to this particular issue is the case of Carey v. United Airlines,40 where the passenger filed an action against the airline arising from an incident involving the former and the airline’s flight attendant during an international flight resulting to a heated exchange which included insults and profanity. The United States Court of Appeals (9th Circuit) held that the "passenger's action against the airline carrier arising from alleged confrontational incident between passenger and flight attendant on international flight was governed exclusively by the Warsaw Convention, even though the incident allegedly involved intentional misconduct by the flight attendant."41

In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action against the airline in the state court, arising from a confrontation with the flight attendant during an international flight to Mexico. The United States Court of Appeals (9th Circuit) held that the "Warsaw Convention governs actions arising from international air travel and provides the exclusive remedy for conduct which falls within its provisions." It further held that the said Convention "created no exception for an injury suffered as a result of intentional conduct" 43 which in that case involved a claim for intentional infliction of emotional distress.

It is thus settled that allegations of tortious conduct committed against an airline passenger during the course of the international carriage do not bring the case outside the ambit of the Warsaw Convention.

Respondent, in seeking remedies from the trial court through special appearance of counsel, is not deemed to have voluntarily submitted itself to the jurisdiction of the trial court.

Petitioner argues that respondent has effectively submitted itself to the jurisdiction of the trial court when the latter stated in its Comment/Opposition to the Motion for Reconsideration that "Defendant

[is at a loss] x x x how the plaintiff arrived at her erroneous impression that it is/was Euro-Philippines Airlines Services, Inc. that has been making a special appearance since x x x British Airways x x x has been clearly specifying in all the pleadings that it has filed with this Honorable Court that it is the one making a special appearance."44

In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v. Court of Appeals45 where we held that even if a party "challenges the jurisdiction of the court over his person, as by reason of absence or defective service of summons, and he also invokes other grounds for the dismissal of the action under Rule 16, he is not deemed to be in estoppel or to have waived his objection to the jurisdiction over his person."46

This issue has been squarely passed upon in the recent case of Garcia v. Sandiganbayan,47 where we reiterated our ruling in La Naval Drug Corporation v. Court of Appeals48 and elucidated thus:

Special Appearance to Question a Court’s Jurisdiction Is Not

Voluntary Appearance

The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly provides:

Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.

Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his person, together with other grounds raised therein, is not deemed to have appeared voluntarily before the court. What the rule on voluntary appearance – the first sentence of the above-quoted rule – means is that the voluntary appearance of the defendant in court is without qualification, in which case he is deemed to have waived his defense of lack of jurisdiction over his person due to improper service of summons.

The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that she voluntarily appeared without qualification. Petitioner filed the following pleadings in Forfeiture I: (a) motion to dismiss; (b) motion for reconsideration and/or to admit answer; (c) second motion for reconsideration; (d) motion to consolidate forfeiture case with plunder case; and (e) motion to dismiss and/or to quash Forfeiture I. And in Forfeiture II: (a) motion to dismiss and/or to quash Forfeiture II; and (b) motion for partial reconsideration.

The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely for special appearance with the purpose of challenging the jurisdiction of the SB over her person and that of her three children. Petitioner asserts therein that SB did not acquire jurisdiction over her person and of her three children for lack of valid service of summons through improvident substituted service of summons in both Forfeiture I and Forfeiture II. This stance the petitioner never abandoned when she filed her motions for reconsideration, even with a prayer to admit their attached Answer Ex Abundante Ad Cautelam dated January 22, 2005 setting forth affirmative defenses with a claim for damages. And the other subsequent pleadings, likewise, did not abandon her stance and defense of lack of jurisdiction due to improper substituted services of summons in the forfeiture cases. Evidently, from the foregoing Sec. 20, Rule 14 of the 1997 Revised Rules on Civil Procedure, petitioner and her sons did not voluntarily appear before the SB constitutive of or equivalent to service of summons.

Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant case. Said case elucidates the current view in our jurisdiction that a special appearance before the court––challenging its jurisdiction over the person through a motion to dismiss even if the movant invokes other grounds––is not tantamount to estoppel or a waiver by the movant of his objection to jurisdiction over his person; and such is not constitutive of a voluntary submission to the jurisdiction of the court.1avvphi1

Thus, it cannot be said that petitioner and her three children voluntarily appeared before the SB to cure the defective substituted services of summons. They are, therefore, not estopped from questioning the jurisdiction of the SB over their persons nor are they deemed to have waived such defense of lack of jurisdiction. Consequently, there being no valid substituted services of summons made, the SB did not acquire jurisdiction over the persons of petitioner and her children. And perforce, the proceedings in the subject forfeiture cases, insofar as petitioner and her three children are concerned, are null and void for lack of jurisdiction. (Emphasis supplied)

In this case, the special appearance of the counsel of respondent in filing the Motion to Dismiss and other pleadings before the trial court cannot be deemed to be voluntary submission to the jurisdiction of the said trial court. We hence disagree with the contention of the petitioner and rule that there was no voluntary appearance before the trial court that could constitute estoppel or a waiver of respondent’s objection to jurisdiction over its person.

WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the Regional Trial Court of Makati City, Branch 132, dismissing the complaint for lack of jurisdiction, is AFFIRMED.

SO ORDERED.

4. G.R. No. 60673 May 19, 1992PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs.JOSE K. RAPADAS and THE COURT OF APPEALS, respondents.Froilan P. Pobre for private respondent. GUTIERREZ, JR., J.:

This is a petition for review assailing the decision of the respondent Court of Appeals which affirmed in toto the trial court decision on the liability of petitioner Pan American World Airways for damages due to private respondent. The trial court ruled that the petitioner can not avail of a limitation of liabilities for lost baggages of a passenger. The dispositive portion of the trial court decision reads:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered ordering defendant to pay plaintiff by way of actual damages the equivalent peso value of the amount of $5,228.90 and 100 paengs, nominal damages in the amount of P20,000.00 and attorney's fees of P5,000.00, and the costs of the suit. Defendant's counterclaim is dismissed. (Rollo, p. 13)

On January 16, 1975, private respondent Jose K. Rapadas held Passenger Ticket and Baggage Claim Check No. 026-394830084-5 for petitioner's Flight No. 841 with the route from Guam to Manila. While standing in line to board the flight at the Guam airport, Rapadas was ordered by petitioner's handcarry control agent to check-in his Samsonite attache case. Rapadas protested pointing to the fact that other co-passengers were permitted to handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it to try if he can get through without having to register his attache case. However, the same man in charge of handcarry control did not fail to notice him and ordered him again to register his baggage. For fear that he would miss the plane if he insisted and argued on

personally taking the valise with him, he acceded to checking it in. He then gave his attache case to his brother who happened to be around and who checked it in for him, but without declaring its contents or the value of its contents. He was given a Baggage Claim Tag No. P-749-713. (Exhibit "B" for the plaintiff-respondent)

Upon arriving in Manila on the same date, January 16, 1975, Rapadas claimed and was given all his checked-in baggages except the attache case. Since Rapadas felt ill on his arrival, he sent his son, Jorge Rapadas to request for the search of the missing luggage. The petitioner exerted efforts to locate the luggage through the Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage Service.

On January 30, 1975, the petitioner required the private respondent to put the request in writing. The respondent filled in a Baggage Claim Blank Form. Thereafter, Rapadas personally followed up his claim. For several times, he called up Mr. Panuelos, the head of the Baggage Section of PAN AM. He also sent letters demanding and reminding the petitioner of his claim.

Rapadas received a letter from the petitioner's counsel dated August 2, 1975 offering to settle the claim for the sum of one hundred sixty dollars ($160.00) representing the petitioner's alleged limit of liability for loss or damage to a passenger's personal property under the contract of carriage between Rapadas and PAN AM. Refusing to accept this kind of settlement, Rapadas filed the instant action for damages on October 1, 1975. Rapadas alleged that PAN AM discriminated or singled him out in ordering that his luggage be checked in. He also alleged that PAN AM neglected its duty in the handling and safekeeping of his attache case from the point of embarkation in Guam to his destination in Manila. He placed the value of the lost attache case and its contents at US$42,403.90. According to him, the loss resulted in his failure to pay certain monetary obligations, failure to remit money sent through him to relatives, inability to enjoy the fruits of his retirement and vacation pay earned from working in Tonga Construction Company (he retired in August 1974) and inability to return to Tonga to comply with then existing contracts.

In its answer, petitioner-defendant PAN AM acknowledged responsibility for the loss of the attache case but asserted that the claim was subject to the "Notice of Baggage Liability Limitations" allegedly attached to and forming part of the passenger ticket. The petitioner argued that the same notice was also conspicuously posted in its offices for the guidance of the passengers.

At the trial, private respondent showed proof of his retirement award and vacation pay amounting to $4,750.00. He claimed that the attache case also contained other money consisting of $1,400 allegedly given to him by his son, Jaime, as a round trip fare of his (plaintiff-respondent) wife, but which amount was later found to be actually intended by Jaime as payment for arrears of a lot purchased from Tropical Homes, Inc.; $3,000 allegedly given by his brothers for payment of taxes and for constructing improvements on the Rapadas estates; and $300.00 birthday present of the spouses Mr. and Mrs. Ruben Canonizado to plaintiff-respondent's wife. He also claimed having kept several items in the attache case, namely –– (1) contracts and records of employment, letters of commendation, testimonials and newspaper clippings on his achievement for 13 years in Tonga, New Zealand and Australia, drafts of manuscripts, photographs and drivers license alleged to be worth $20,000.00; a Polaroid camera, films, calculator, and other personal items worth $403.90; memorabilia, autographs personally acquired from Charles Lindberg, Lawrence Rockefeller and Ryoichi Sasakawa, a commemorative palladium coin worth Tongan 100 paengs and unused Tongan stamps, all totalling $7,500.00; and a plan worth $5,000.00 drawn by his son Jaime, who is an architect, for the construction of a residential house and a 6-story commercial building. Rapadas claimed the amount of the attache case itself to be $25.50. (See Decision in Civil Case No. 99564 in Amended Record on Appeal, pp. 61-85)

The lower court ruled in favor of complainant Rapadas after finding no stipulation giving notice to the baggage liability limitation. The court rejected the claim of defendant PANAM that its liability under the terms of the passenger ticket is only up to $160.00. However, it scrutinized all the claims of the plaintiff. It discredited insufficient evidence to show discriminatory acts or bad faith on the part of petitioner PANAM.

On appeal, the Court of Appeals affirmed the trial court decision. Hence, this petition.

The main issue raised in the case at bar is whether or not a passenger is bound by the terms of a passenger ticket declaring that the limitations of liability set forth in the Warsaw Convention (October 12, 1929; 137 League of Nations Treaty Series II; See Proclamation No. 201 [1955], 51 O.G. 4933 [October, 1955]) as amended by the Hague Protocol (September 28, 1955; 478 UNTS 373; III PTS 515), shall apply in case of loss, damage or destruction to a registered luggage of a passenger.

The petitioner maintains that its liability for the lost baggage of respondent Rapadas was limited to $160.00 since the latter did not declare a higher value for his baggage and did not pay the corresponding additional charges.

The private respondent, on the other hand, insists that he is entitled to as much damages as those awarded by the court and affirmed by the respondent appellate court.

After a review of the various arguments of the opposing parties as well as the records of the case, the Court finds sufficient basis under the particular facts of this case for the availment of the liability limitations under the Warsaw Convention.

There is no dispute, and the courts below admit, that there was such a Notice appearing on page two (2) of the airline ticket stating that the Warsaw Convention governs in case of death or injury to a passenger or of loss, damage or destruction to a passenger's luggage.

The Notice states:

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." (The latter notice refers to limited liability for death or personal injury to passengers with proven damages not exceeding US $75,000 per passenger; Exhibit "K" for plaintiff respondent, Table of Exhibits, p. 19)

Furthermore, paragraph 2 of the "Conditions of Contract" also appearing on page 2 of the ticket states:

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. (Exhibit "K", supra)

We note that plaintiff-respondent Rapadas presented as proof of the Passenger Ticket and Baggage Check No. 026-394830084-5 a xerox copy of its page 2 which contains the Notice and Conditions of Contract, and also page 3 which recites the Advice to International Passengers on Limitation of Liability. He also presented two xerox copies of Flight Coupon No. 3 of the same passenger ticket showing the fares paid for the trips Honolulu to Guam, Guam to Manila, and Manila to Honolulu to prove his obligations which remained unpaid because of the unexpected loss of money allegedly placed inside the missing attache case. Rapadas explained during the trial that the same passenger ticket was returned by him to one Mr. S.L. Faupula of the Union Steam Ship Company of New Zealand, Ltd., Tonga who demanded the payment of the fares or otherwise, the return of the unused plane tickets (including the subject Passenger Ticket & Baggage Check No. 026-394830084-5). The issuance of these tickets was facilitated by Mr. Faupula on credit.

Meanwhile, the petitioner offered as evidence Exhibit "1" also showing page 2 of the passenger ticket to prove the notice and the conditions of the contract of carriage. It likewise offered Exhibit "1-A", a xerox copy of a "Notice of Baggage Liability Limitations" which the trial court disregarded and held to be non-existent. The same Exhibit "1-A" contained the following stipulations:

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 $8.16 per pound ($18.00 per kilo; now $20.00 per Exhibit "13") for checked baggage and $360 (now $400 per Exhibit "13") per passenger for unchecked baggage; (2) for travel wholly between U.S. points, to $500 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. (Table of Exhibits, p. 45)

The original of the Passenger Ticket and Baggage Check No. 026-394830084-5 itself was not presented as evidence as it was among those returned to Mr. Faupula. Thus, apart from the evidence offered by the defendant airline, the

lower court had no other basis for determining whether or not there was actually a stipulation on the specific amounts the petitioner had expressed itself to be liable for loss of baggage.

Although the trial court rejected the evidence of the defendant-petitioner of a stipulation particularly specifying what amounts it had bound itself to pay for loss of luggage, the Notice and paragraph 2 of the "Conditions of Contract" should be sufficient notice showing the applicability of the Warsaw limitations.

The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it defines in Article 1, par. 2 as follows:

(2) For the purposes of this Convention, the expression "international carriage" means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a breach in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties or within the territory of a single High Contracting Party if there is an agreed stopping place within the territory of another State, even if that State is not a High Contracting Party. Carriage between two points within the territory of a single High Contracting Party without an agreed stopping place within the territory of another State is not international carriage for the purposes of this Convention. ("High Contracting Party" refers to a state which has ratified or adhered to the Convention, or which has not effectively denounced the Convention [Article 40A(l)]).

Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations required. Nevertheless, it should become a common, safe and practical custom among air carriers to indicate beforehand the precise sums equivalent to those fixed by Article 22 (2) of the Convention.

The Convention governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket which complies with the provisions of Article 3, par. l (c). (Article 4, par. 2) In the case at bar, the baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket complies with Article 3, par. l (c) which provides:

(l) In respect of the carriage of passengers a ticket shall be delivered containing:

(a) . . .

(b) . . .

(c) a notice to the effect that, 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 that 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.

We have held in the case of Ong Yiu v. Court of Appeals, supra, and reiterated in a similar case where herein petitioner was also sued for damages, Pan American World Airways v. Intermediate Appellate Court (164 SCRA 268 [1988]) that:

It (plane ticket) is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. (Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, January 31, 1951, p. 49) And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, "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.

Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00 . . . (91 SCRA 223 at page 231)

We hasten to add that while contracts of adhesion are not entirely prohibited, neither is a blind reliance on them encouraged. In the face of facts and circumstances showing they should be ignored because of their basically one sided nature, the Court does not hesitate to rule out blind adherence to their terms. (See Sweet Lines, Inc. v. Teves, 83 SCRA 361, 368-369[1978])

The arguments of the petitioner do not belie the fact that it was indeed accountable for the loss of the attache case. What the petitioner is concerned about is whether or not the notice, which it did not fail to state in the plane ticket and which it deemed to have been read and accepted by the private respondent will be considered by this Court as adequate under the circumstances of this case. As earlier stated, the Court finds the provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he cannot avoid the application of the liability limitations.

The facts show that the private respondent actually refused to register the attache case and chose to take it with him despite having been ordered by the PANAM agent to check it in. In attempting to avoid registering the luggage by going back to the line, private respondent manifested a disregard of airline rules on allowable handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-in-luggage and placed in one's pockets or in a handcarried Manila-paper or plastic envelope.

The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply with the requirement that will exclude the application of limited liability. Had he not wavered in his decision to register his luggage, he could have had enough time to disclose the true worth of the articles in it and to pay the extra charges or remove them from the checked-in-luggage. Moreover, an airplane will not depart meantime that its own employee is asking a passenger to comply with a safety regulation.

Passengers are also allowed one handcarried bag each provided it conforms to certain prescribed dimensions. If Mr. Rapadas was not allowed to handcarry the lost attache case, it can only mean that he was carrying more than the allowable weight for all his luggages or more than the allowable number of handcarried items or more than the prescribed dimensions for the bag or valise. The evidence on any arbitrary behavior of a Pan Am employee or inexcusable negligence on the part of the carrier is not clear from the petition. Absent such proof, we cannot hold the carrier liable because of arbitrariness, discrimination, or mistreatment.

We are not by any means suggesting that passengers are always bound to the stipulated amounts printed on a ticket, found in a contract of adhesion, or printed elsewhere but referred to in handouts or forms. We simply recognize that the reasons behind stipulations on liability limitations arise from the difficulty, if not impossibility, of establishing with a clear preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are declared, it will always be the word of a passenger against that of the airline. If the loss of life or property is caused by the gross negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by satisfactory evidence other than the self-serving declarations of one party, the Court will not hesitate to disregard the fine print in a contract of adhesion. (See Sweet Lines Inc. v. Teves, supra) Otherwise, we are constrained to rule that we have to enforce the contract as it is the only reasonable basis to arrive at a just award.

We note that the finding on the amount lost is more of a probability than a proved conclusion.

The trial court stated:

xxx xxx xxx

We come now to the actual loss of $4,750.00 which the plaintiff claims was the amount of his retirement award and vacation pay. According to the plaintiff, this was in cash of $100 denominations and was placed in an envelope separate from the other money he was carrying. Plaintiff presented the memorandum award, Exhibit T-1 and the vouchers of payment, Exhibits T-2 and T-3. Under the circumstances, recited by the plaintiff in which the loss occurred, the Court believes that plaintiff could really have placed this amount in the attache case considering that he was originally handcarrying said attache case and the same was looked, and he did not expect that he would be required to check it in. . . . (Amended Record on Appeal, p. 75; Emphasis ours)

The above conclusion of the trial court does not arise from the facts. That the attache case was originally handcarried does not beg the conclusion that the amount of $4,750.00 in cash could have been placed inside. It may be noted that out of a claim for US$42,403.90 as the amount lost, the trial court found for only US$5,228.90 and 100 paengs. The court had doubts as to the total claim.

The lost luggage was declared as weighing around 18 pounds or approximately 8 kilograms. At $20.00 per kilogram, the petitioner offered to pay $160.00 as a higher value was not declared in advance and additional charges were not paid. We note, however, that an amount of $400.00 per passenger is allowed for unchecked luggage. Since the checking-in was against the will of the respondent, we treat the lost bag as partaking of involuntarily and hurriedly checked-in luggage and continuing its earlier status as unchecked luggage. The fair liability under the petitioner's own printed terms is $400.00. Since the trial court ruled out discriminatory acts or bad faith on the part of Pan Am or other reasons warranting damages, there is no factual basis for the grant of P20,000.00 damages.

As to the question of whether or not private respondent should be paid attorney's fees, the Court sustains the finding of the trial court and the respondent appellate court that it is just and equitable for the private respondent to recover expenses for litigation in the amount of P5,000.00. Article 22(4) of the Warsaw Convention, as amended does not preclude an award of attorney's fees. That provision states that the limits of liability prescribed in the instrument "shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or part of the court costs and other expenses of litigation incurred by the plaintiff." We, however, raise the award to P10,000.00 considering the resort to the Court of Appeals and this Court.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is REVERSED and SET ASIDE. The petitioner is ordered to pay the private respondent damages in the amount of US$400.00 or its equivalent in Philippine Currency at the time of actual payment, P10,000.00 in attorney's fees, and costs of the suit.

SO ORDERED.

Feleciano, Bidin, Davide, Jr. and Romero, JJ., concur.

5. G.R. No. 60501. March 5, 1993.

CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and TOMAS L. ALCANTARA, respondents.

Siguion-Reyna, Montecillo & Ongsiako and Tomacruz, Manguiat & Associates for petitioner.

Tanjuatco, Oreta, Tanjuatco, Berenger & Corpus for private respondent.

SYLLABUS

1. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF; PETITIONER BREACHED ITS CONTRACT OF CARRIAGE WITH PRIVATE RESPONDENT WHEN IT FAILED TO DELIVER HIS LUGGAGE AT THE DESIGNATED PLACE AND TIME. — Petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time, it being the obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to delay their transportation, and the evidence shows that petitioner acted fraudulently or in bad faith.

2. DAMAGES; MORAL AND EXEMPLARY DAMAGES PREDICATED UPON A BREACH OF CONTRACT OF CARRIAGE; RECOVERABLE ONLY IN INSTANCES WHERE THE MISHAP

RESULTS IN DEATH OF A PASSENGER, OR WHERE THE CARRIER IS GUILTY OF FRAUD OR BAD FAITH; THE CONDUCT OF PETITIONER'S REPRESENTATIVE TOWARDS RESPONDENT JUSTIFIES THE GRANT OF MORAL AND EXEMPLARY DAMAGES IN CASE AT BAR. — Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in death of a passenger, or where the carrier is guilty of fraud or bad faith. The language and conduct of petitioner's representative towards respondent Alcantara was discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was also rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that was not sincere because the representative knew that the passenger was limited only to $20.00 which, certainly, was not enough to purchase comfortable clothings appropriate for an executive conference. Considering that Alcantara was not only a revenue passenger but even paid for a first class airline accommodation and accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in his problem, petitioner or its agents should have been more courteous and accommodating to private respondent, instead of giving him a curt reply, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific." Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages. Conversely, if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper.

3. TEMPERATE DAMAGES; RECOVERABLE ONLY UPON PROOF THAT THE CLAIMANT SUSTAINED SOME PECUNIARY LOSS. — However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in the absence of any showing that he sustained some pecuniary loss. It cannot be gainsaid that respondent's luggage was ultimately delivered to him without serious or appreciable damage.

4. WARSAW CONVENTION; DOES NOT OPERATE AS AN EXCLUSIVE ENUMERATION OF THE INSTANCES FOR DECLARING A CARRIER LIABLE FOR BREACH OF CONTRACT OF CARRIAGE OR AS AN ABSOLUTE LIMIT OF THE EXTENT OF THAT LIABILITY; DOES NOT PRECLUDE THE OPERATION OF THE CIVIL CODE AND OTHER PERTINENT LAWS. — As We have repeatedly held, although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable for damages in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if wilfull misconduct on the part of the carrier's employees is found or established, which is clearly the case before Us.

D E C I S I O N

BELLOSILLO, J p:

This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed with modification that of the trial court by increasing the award of damages in favor of private respondent Tomas L. Alcantara.

The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara was a first class passenger of petitioner Cathay Pacific Airways, Ltd. (CATHAY for brevity) on its Flight No. CX-900

from Manila to Hongkong and onward from Hongkong to Jakarta on Flight No. CX-711. The purpose of his trip was to attend the following day, 20 October 1975, a conference with the Director General of Trade of Indonesia, Alcantara being the Executive Vice-President and General Manager of Iligan Cement Corporation, Chairman of the Export Committee of the Philippine Cement Corporation, and representative of the Cement Industry Authority and the Philippine Cement Corporation. He checked in his luggage which contained not only his clothing and articles for personal use but also papers and documents he needed for the conference.

Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When he inquired about his luggage from CATHAY's representative in Jakarta, private respondent was told that his luggage was left behind in Hongkong. For this, respondent Alcantara was offered $20.00 as "inconvenience money" to buy his immediate personal needs until the luggage could be delivered to him.

His luggage finally reached Jakarta more than twenty four (24) hours after his arrival. However, it was not delivered to him at his hotel but was required by petitioner to be picked up by an official of the Philippine Embassy.

On 1 March 1976, respondent filed his complaint against petitioner with the Court of First Instance (now Regional Trial Court) of Lanao del Norte praying for temperate, moral and exemplary damages, plus attorney's fees.

On 18 April 1976, the trial court rendered its decision ordering CATHAY to pay Plaintiff P20,000.00 for moral damages, P5,000.00 for temperate damages, P10,000.00 for exemplary damages, and P25,000.00 for attorney's fees, and the costs. 1

Both parties appealed to the Court of Appeals. CATHAY assailed the conclusion of the trial court that it was accountable for breach of contract and questioned the non-application by the court of the Warsaw Convention as well as the excessive damages awarded on the basis of its finding that respondent Alcantara was rudely treated by petitioner's employees during the time that his luggage could not be found. For his part, respondent Alcantara assigned as error the failure of the trial court to grant the full amount of damages sought in his complaint.

On 11 November 1981, respondent Court of Appeals rendered its decision affirming the findings of fact of the trial court but modifying its award by increasing the moral damages to P80,000.00, exemplary damages to P20,000.00 and temperate or moderate damages to P10,000.00. The award of P25,000.00 for attorney's fees was maintained.

The same grounds raised by petitioner in the Court of Appeals are reiterated before Us. CATHAY contends that: (1) the Court of Appeals erred in holding petitioner liable to respondent Alcantara for moral, exemplary and temperate damages as well as attorney's fees; and, (2) the Court of Appeals erred in failing to apply the Warsaw Convention on the liability of a carrier to its passengers.

On its first assigned error, CATHAY argues that although it failed to transport respondent Alcantara's luggage on time, the one-day delay was not made in bad faith so as to justify moral, exemplary and temperate damages. It submits that the conclusion of respondent appellate court that private respondent was treated rudely and arrogantly when he sought assistance from CATHAY's employees has no factual basis, hence, the award of moral damages has no leg to stand on.

Petitioner's first assigned error involves findings of fact which are not reviewable by this Court. 2 At any rate, it is not impressed with merit. Petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time, it being the

obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to delay their transportation, 3 and the evidence shows that petitioner acted fraudulently or in bad faith.

Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in death of a passenger, 4 or where the carrier is guilty of fraud or bad faith. 5

In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it failed to deliver the luggage of petitioner at the appointed place and time. We agree. CATHAY alleges that as a result of mechanical trouble, all pieces of luggage on board the first aircraft bound for Jakarta were unloaded and transferred to the second aircraft which departed an hour and a half later. Yet, as the Court of Appeals noted, petitioner was not even aware that it left behind private respondent's luggage until its attention was called by the Hongkong Customs authorities. More, bad faith or otherwise improper conduct may be attributed to the employees of petitioner. While the mere failure of CATHAY to deliver respondent's luggage at the agreed place and time did not ipso facto amount to willful misconduct since the luggage was eventually delivered to private respondent, albeit belatedly, 6 We are persuaded that the employees of CATHAY acted in bad faith. We refer to the deposition of Romulo Palma, Commercial Attache of the Philippine Embassy at Jakarta, who was with respondent Alcantara when the latter sought assistance from the employees of CATHAY. This deposition was the basis of the findings of the lower courts when both awarded moral damages to private respondent. Hereunder is part of Palma's testimony —

"Q: What did Mr. Alcantara say, if any?

A. Mr. Alcantara was of course . . . . I could understand his position. He was furious for the experience because probably he was thinking he was going to meet the Director-General the following day and, well, he was with no change of proper clothes and so, I would say, he was not happy about the situation.

Q: What did Mr. Alcantara say?

A: He was trying to press the fellow to make the report and if possible make the delivery of his baggage as soon as possible.

Q: And what did the agent or duty officer say, if any?

A: The duty officer, of course, answered back saying 'What can we do, the baggage is missing. I cannot do anything.' something like it. 'Anyhow you can buy anything you need, charged to Cathay Pacific.'

Q: What was the demeanor or comportment of the duty officer of Cathay Pacific when he said to Mr. Alcantara 'You can buy anything chargeable to Cathay Pacific'?

A: If I had to look at it objectively, the duty officer would like to dismiss the affair as soon as possible by saying indifferently 'Don't worry. It can be found.'" 7

Indeed, the aforequoted testimony shows that the language and conduct of petitioner's representative towards respondent Alcantara was discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was also

rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that was not sincere because the representative knew that the passenger was limited only to $20.00 which, certainly, was not enough to purchase comfortable clothings appropriate for an executive conference. Considering that Alcantara was not only a revenue passenger but even paid for a first class airline accommodation and accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in his problem, petitioner or its agents should have been more courteous and accommodating to private respondent, instead of giving him a curt reply, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific." CATHAY's employees should have been more solicitous to a passenger in distress and assuaged his anxieties and apprehensions. To compound matters, CATHAY refused to have the luggage of Alcantara delivered to him at his hotel; instead, he was required to pick it up himself and an official of the Philippine Embassy. Under the circumstances, it is evident that petitioner was remiss in its duty to provide proper and adequate assistance to a paying passenger, more so one with first class accommodation.

Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages. 8 Conversely, if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper.

However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in the absence of any showing that he sustained some pecuniary loss. 9 It cannot be gainsaid that respondent's luggage was ultimately delivered to him without serious or appreciable damage.

As regards its second assigned error, petitioner airline contends that the extent of its liability for breach of contract should be limited absolutely to that set forth in the Warsaw Convention. We do not agree. As We have repeatedly held, although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. 10 The Warsaw Convention declares the carrier liable for damages in the enumerated cases and under certain limitations. 11 However, it must not be construed to preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, 12 especially if wilfull misconduct on the part of the carrier's employees is found or established, which is clearly the case before Us. For, the Warsaw Convention itself provides in Art. 25 that —

"(1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the damage is caused by his wilfull misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to wilfull misconduct."

(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused under the same circumstances by any agent of the carrier acting within the scope of his employment."

When petitioner airline misplaced respondent's luggage and failed to deliver it to its passenger at the appointed place and time, some special species of injury must have been caused to him. For sure, the latter underwent profound distress and anxiety, and the fear of losing the opportunity to fulfill the

purpose of his trip. In fact, for want of appropriate clothings for the occasion brought about by the delay of the arrival of his luggage, to his embarrassment and consternation respondent Alcantara had to seek postponement of his pre-arranged conference with the Director General of Trade of the host country.

In one case, 13 this Court observed that a traveller would naturally suffer mental anguish, anxiety and shock when he finds that his luggage did not travel with him and he finds himself in a foreign land without any article of clothing other than what he has on.

Thus, respondent is entitled to moral and exemplary damages. We however find the award by the Court of Appeals of P80,000.00 for moral damages excessive, hence, We reduce the amount to P30,000.00. The exemplary damages of P20,000.00 being reasonable is maintained, as well as the attorney's fees of P25,000.00 considering that petitioner's act or omission has compelled Alcantara to litigate with third persons or to incur expenses to protect his interest. 14

WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with the exception of the award of temperate damages of P10,000.00 which is deleted, while the award of moral damages of P80,000.00 is reduced to P30,000.00. The award of P20,000.00 for exemplary damages is maintained as reasonable together with the attorney's fees of P25,000.00. The moral and exemplary damages shall earn interest at the legal rate from 1 March 1976 when the complaint was filed until full payment.

SO ORDERED.

6. G.R. No. 83612 November 24, 1994

LUFTHANSA GERMAN AIRLINES, petitioner, vs.COURT OF APPEALS and TIRSO V. ANTIPORDA, SR., respondents.

Quisumbing, Torres & Evangelista for petitioner.

Quirante and Associates Law Office for private respondent.

 

ROMERO, J.:

In this petition for review on certiorari, the Court is confronted with the issue of whether or not petitioner Lufthansa German Airlines which issued a confirmed Lufthansa ticket to private respondent Antiporda covering a five-leg trip abroad different airlines should be held liable for damages occasioned by the "bumping-off" of said private respondent Antiporda by Air Kenya, one of the airlines contracted to carry him to a particular destination of the five-leg trip.

Tirso V. Antiporda, Sr. was an associate director of the Central Bank of the Philippines and a registered consultant of the Asian Development Bank, the World Bank and the UNDP. He was, contracted by Sycip, Gorres, Velayo & Co. (SGV) to be the institutional financial

specialist for the agricultural credit institution project of the Investment and Development Bank of Malawi in Africa. According to the letter of August 30, 1984 addressed to Antiporda from J.F. Singson of SGV, he would render his services to the Malawi bank as an independent contractor for which he would be paid US$9,167 for a 50-day period commencing sometime in September 1984. For the engagement, Antiporda would be provided one round-trip economy ticket from Manila to Blantyre and back with a maximum travel time of four days per round-trip and, in addition, a travel allowance of $50 per day, a travel insurance coverage of P100,000 and major hospitalization with AFIA and an accident insurance coverage of P150,000. 1 On September 17, 1984, Lufthansa, through SGV, issued ticket No. 3477712678 for Antiporda's confirmed flights to Malawi, Africa. The ticket particularized his itinerary as follows:

Carrier Flight Date Time Status

Manila to SQ 081 25-9-84 1530 OKSingapore

Singapore to LH 695 25-9-84 2200 OKBombay

Bombay to KQ 203 26-9-84 0215 OKNairobi

Nairobi to QM 335 26-9-84 1395 OKLilongwe

Lilongwe to QM 031 26-9-84 1600 OKBlantyre

Thus, on September 25, 1984, Antiporda took the Lufthansa flight to Singapore from where he proceeded to Bombay on board the same airline. He arrived in Bombay as scheduled and waited at the transit area of the airport for his connecting flight to Nairobi which was, per schedule given him by Lufthansa, to leave Bombay in the morning of September 26, 1984. Finding no representative of Lufthansa waiting for him at the gate, Antiporda asked the duty officer of Air India how he could get in touch with Lufthansa. He was told to call up Lufthansa which informed him that somebody would attend to him shortly. Ten minutes later, Gerard Matias, Lufthansa's traffic officer, arrived, asked for Antiporda's ticket and told him to just sit down and wait. Matias returned with one Leslie Benent, duty officer of Lufthansa, who informed Antiporda that his seat in Air Kenya Flight 203 to Nairobi had been given to a very important person of Bombay who was attending a religious function in Nairobi. Antiporda protested, stressing that he had an important professional engagement in Blantyre, Malawi in the afternoon of September 26, 1984. He requested that the situation be remedied but Air Kenya Flight 203 left for Nairobi without him on board. Stranded in Bombay, Antiporda was booked for Nairobi via Addis Ababa only on September 27, 1984. He finally arrived in Blantyre at 9:00 o'clock in the evening of September 28, 1984, more than a couple of days late for his appointment with people from the institution he was to work with in Malawi.

Consequently, on January 8, 1985, Antiporda's counsel wrote the general manager of Lufthansa in Manila demanding P1,000,000 in damages for the airline's "malicious, wanton, disregard of the contract of carriage." 2 In reply, Lufthansa general manager Hagen Keilich assured Antiporda that the matter would be investigated.

Apparently getting no positive action from Lufthansa, on January 21, 1985, Antiporda filed with the Regional Trial Court of Quezon City a complaint against Lufthansa which was docketed as Civil Case No. Q-43810.

The lower court, 3 guided by the Supreme Court ruling in KLM Dutch Airlines v. Court of Appeals, et al., 4 found that Lufthansa breached the contract to transport Antiporda from Manila to Blantyre on a trip of five legs. It said:

The threshold issue that confronts this Court is:

Was there a breach of obligation by the defendant in failing to transport the plaintiff from Manila to Blantyre, Malawi, Africa?

The defendant admits the issuance and validity of Ticket No. 3477712678 (Exh. B). However, it denies its obligation to transport the plaintiff to his point of destination at Blantyre, Malawi, Africa. Defendant claims that it was obligated to transport the plaintiff only up to Bombay.

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

xxx xxx xxx

From the ticket, therefore, it is indubitably clear that it was the duty and responsibility of the defendant Lufthansa to transport the plaintiff from Manila to Blantyre, on a trip of five legs.

The posture taken by the defendant that it was Air Kenya's, not Lufthansa's, liability to transport plaintiff from Bombay to Malawi, is inacceptable. The plaintiff dealt exclusively with the defendant Lufthansa which issued to him the ticket for his entire trip and which in effect guaranteed to the plaintiff that he would have sure space in Air Kenya's flight to Nairobi. Plaintiff, under that assurance of the defendant, naturally, had the right to expect that his ticket would be honored by Air Kenya, to which, in the legal sense, Lufthansa had endorsed and in effect guaranteed the performance of its principal engagement to carry out plaintiff's scheduled itinerary previously and mutually agreed upon by the parties. Defendant itself admitted that the flight from Manila, Singapore, Bombay, Nairobi, Lilongwe, Blantyre, Malawi, were all confirmed with the stamped letters "OK" thereon. In short, after issuing a confirmed ticket from Manila to Malawi and receiv(ing) payment from the plaintiff for such one whole trip, how can the defendant now deny its contractual obligation by alleging that its responsibility ceased at the Bombay Airport?

The contract of air transportation was exclusively between the plaintiff Antiporda and the defendant Lufthansa, the latter merely endorsing its performance to Air Kenya, as its subcontractor or agent. The fourth paragraph of the "Conditions of Contracts" of the ticket (Exh. B) issued by Lufthansa to plaintiff indubitably shows that the contract was one of continuous air transportation from Manila to Blantyre, Malawi.

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

This condition embodied in the ticket issued to plaintiff is diametrically opposed to the defense theory that Lufthansa's liability is only limited up to Bombay.

Pursuant to the above reasoning, the lower court held that Lufthansa cannot limit its liability as a mere ticket issuing agent for other airlines and only to untoward occurrences on its own line.

The lower court added that under the pool arrangement of the International Air Transport Association (IATA), of which Lufthansa and Air Kenya are members, member airlines are agents of each other in the issuance of tickets and, therefore, in accordance with Ortigas v. Lufthansa, 5 an airline company is considered bound by the mistakes committed by another member of IATA which, in behalf of the former, had confirmed a passenger's reservation for accommodation.

In justifying its award of moral and exemplary damages, the lower court emphasized that the breach of contract was "aggravated by the discourteous and highly arbitrary conduct of Gerard Matias, an official of petitioner Lufthansa in Bombay." Its factual findings on the matter are the following:

. . . . Bumped off from his connecting flight to Nairobi and stranded in the Bombay Airport for 32 hours, when plaintiff insisted on taking his scheduled flight to Nairobi, Gerard Matias got angry and threw the ticket and passport on plaintiff's lap and was ordered to go to the basement with his heavy luggages for no reason at all. It was a difficult task for the plaintiff to carry three luggages and yet Gerard Matias did not even offer to help him. Plaintiff requested accommodation but Matias ignored it and just left. Not even Lufthansa office in Bombay, after learning plaintiff's being stranded in Bombay and his accommodation problem, provided any relief to plaintiff's sordid situation. Plaintiff had to stay in the transit area and could not sleep for fear that his luggages might be lost. Everytime he went to the toilet, he had to drag with him his luggages. He tried to eat the high-seasoned food available at the airport but developed stomach trouble. It was indeed a pathetic sight that the plaintiff, an official of the Central Bank, a multi-awarded institutional expert, tasked to perform consultancy work in a World Bank funded agricultural bank project in Malawi instead found himself stranded in a foreign land where nobody was expected to help him in his predicament except the defendant, who displayed utter lack of concern of its obligation to the plaintiff and left plaintiff alone in his misery at the Bombay airport.

Citing Air France v. Carrascoso, 6 the lower court ruled that passengers have a right to be treated with kindness, respect, courtesy and consideration by the carrier's employees apart from their right to be protected against personal misconduct, injurious language, indignities and abuses from such employees.

Consequently, the trial court ordered Lufthansa to pay Antiporda the following:

(a) the amount of P300,000.00 as moral damages;

(b) the amount of P200,000.00 as exemplary damages; and

(c) the amount of P50,000.00 as reasonable attorney's fees.

With costs against the defendant.

Lufthansa elevated the case to the Court of Appeals arguing that it cannot be held liable for the acts committed by Air Kenya on the basis of the following:

(a) it merely acted as a ticket-issuing agent in behalf of Air Kenya; consequently the contract of carriage entered into is between respondent Antiporda and Air Kenya, to the exclusion of petitioner Lufthansa;

(b) under sections (1) and (2) Article 30 of the Warsaw Convention, an airline carrier is liable only to untoward occurrences on its own line;

(c) the award of moral and exemplary damages in addition to attorney's fees by the trial court is without basis in fact and in law.

The Court of Appeals not convinced with Lufthansa's appeal, affirmed the decision on the trial court sought to be reviewed.

Explained the Court of Appeals: although the contract of carriage was to be performed by several air carriers, the same is to be treated as a single operation conducted by Lufthansa because Antiporda dealt exclusively with it which issued him a Lufthansa ticket for the entire trip. By issuing a confirmed ticket, Lufthansa in effect guaranteed Antiporda a sure seat with Air Kenya. Private respondent Antiporda, maintained the Court of Appeals, had the right to expect that his ticket would be honored by Air Kenya which, in the legal sense, Lufthansa had endorsed and, in effect, guaranteed the performance of its principal engagement to carry out his five-leg trip.

The appellate court also ruled that Lufthansa cannot rely on Sections (1) and (2), Article 30 of the Warsaw Convention 7 because the provisions thereof are not applicable under the circumstances of the case.

Sections (1) and (2), Article 30 of the Warsaw Convention provide:

Art. 30 (1). In the case of transportation to be performed by various successive carriers and falling within the definition set out in the third paragraph of Article I, each carrier who accepts passengers, baggage, or goods shall be subject to the rules set out in the convention, and shall be deemed to be one of the contracting parties to the contract of transportation insofar as the contract deals with that part of the transportation which is performed under his supervision.

(2) In the case of transportation of this nature, the passenger or his representative can take action only against the carrier who performed the transportation during which the accident or the delay occurred, save in the case where, by express agreement, the first carrier has assumed liability for the whole journey. (Emphasis supplied).

According to the Court of Appeals, Antiporda's cause of action is not premised on the occurrence of an accident or delay as contemplated under Section 2 of said Article but on Air Kenya's refusal to transport him in order to accommodate another. To support this ruling, the Court of Appeals cited the Supreme Court ruling in KLM Royal Dutch Airlines v. Court of Appeals, 8 which held, inter alia, that:

1. The applicability insisted upon by the KLM of Article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to transport the respondents to their planned and contracted destination.

The Court of Appeals concluded that Lufthansa cannot, thus, invoke Sections (1) and (2), Article 30 of the Warsaw Convention to evade liability.

Failing to obtain a favorable decision, Lufthansa filed this petition for review on certiorari anchored on the following arguments:

1. The respondent court erred as a matter of law in refusing to apply the Warsaw Convention to the instant case.

2. Respondent court's ruling that Lufthansa had deceived private respondent has no factual or legal basis.

3. The respondent court erred as a matter of law in affirming the trial court's award of moral damages in the face of this Court's rulings concerning moral damages in cases of breach of contract.

4. The respondent court erred as a matter of law in affirming the trial court's award of exemplary damages for lack of legal or factual basis therefor.

The arguments propounded by petitioner Lufthansa cannot suffice to reverse the appellate court's decision as prayed for. Lufthansa raised four assignments of error but the focal point at issue has been defined by us at the inception of this ponencia.

Lufthansa maintains that its liability to any passenger is limited to occurrences in its own line, and, thus, in the case at bench, its liability to Antiporda is limited to the extent that it had transported him from Manila to Singapore and from Singapore to Bombay; that therefrom, responsibility for the performance of the contract of carriage is assumed by the succeeding carriers tasked to transport him for the remaining leg of his trip because at that stage, its contract of carriage with Antiporda ceases, with Lufthansa acting, no longer as the principal in the contract of carriage, but merely as a ticket-issuing agent for the other carriers.

In further advancing this line of defense, Lufthansa invoked Section 2, Article 30 of the Warsaw Convention 9 which expressly stipulates that in cases where the transportation of passengers or goods is performed by various successive carriers, the passenger can take action only against the carrier which performed the transportation, during which the accident or delay occurred. Lufthansa further advanced the theory that this provision of the Warsaw Convention is applicable to the present case, contrary to the decision of the Court of Appeals which relied on the Supreme Court ruling in KLM Royal Dutch Lines. 10 For Lufthansa, "bumping-off" is considered delay since delay would inevitably result therefrom. It implored this Court to re-examine our ruling in KLM and take heed of jurisprudence 11 in the U.S. where "delay," unlike in our ruling in KLM, contemplates the instance of "bumping-off." In KLM, we held that the term "delay" does not encompass the instance of "bumping-off," the latter having been defined as refusal to carry or transport a passenger.

On his part, private respondent Antiporda insists that he entered with Lufthansa an exclusive contract of carriage, the nature of which is a continuous carriage by air from Manila to Blantyre Malawi; that it did not enter into a series of independent contracts with the carriers that transported him for the remaining leg of his trip.

The basis for such claim is well-founded. As ruled by the trial court, with the Court of Appeals concurring favorably, Antiporda was issued a confirmed Lufthansa ticket all throughout the five-leg trip. The fourth paragraph of the "Conditions of Contract" stipulated in the ticket indubitably showed

that the contract of carriage was considered as one of continuous air transportation from Manila to Blantyre, Malawi, thus:

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

In light of the stipulations expressly specified in the ticket defining the true nature of its contract of carriage with Antiporda, Lufthansa cannot claim that its liability thereon ceased at Bombay Airport and thence, shifted to the various carriers that assumed the actual task of transporting said private respondent.

We, therefore, reject Lufthansa's theory that from the time another carrier was engaged to transport Antiporda on another segment of his trip, it merely acted as a ticket-issuing agent in behalf of said carrier. In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers. The issuance of a confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip abroad successive carriers concretely attests to this. This also serves as proof that Lufthansa, in effect guaranteed that the successive carriers, such as Air Kenya would honor his ticket; assure him of a space therein and transport him on a particular segment of his trip. This ruling finds corroboration in the Supreme Court decision in KLM , 12 where the same issues were confronted, thus:

xxx xxx xxx

The passage tickets of the respondents provide that the carriage to be performed thereunder by several successive carriers "is to be regarded as a single operation," which is diametrically incompatible with the theory of the KLM that the respondents entered into a series of independent contracts with the carriers which took them on the various segments of their trip. This position of KLM we reject. The respondents dealt exclusively with the KLM which issued them tickets for their entire trip and which in effect guaranteed to them that they would have sure space in Aer Lingus flight 861. The respondents, under that assurance of the internationally prestigious KLM, naturally had the right to expect that their tickets would be honored by Aer Lingus to which, in the legal sense, the KLM had indorsed and in effect guaranteed the performance of its principal engagement to carry out the respondents' scheduled itinerary previously and mutually agreed upon between the parties.

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

1. The applicability insisted upon by the KLM of Article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to transport the respondents to their planned and contracted destination. . . .

Lufthansa prays this court to take heed of jurisprudence in the United States where the term "delay" was interpreted to include "bumping-off" or failure to carry a passenger with a confirmed reservation. These decisions in the United States are not controlling in this jurisdiction. We are not prepared, absent reasons of compelling nature, to entertain an extended meaning of the term "delay," which in KLM was given its ordinary signification. "Construction and interpretation come only after it has been

demonstrated that application is impossible or inadequate without them. The ordinary language of a statute must be given its ordinary meaning and limited to a reasonable interpretation." 13 In its ordinary sense, "delay" means to prolong the time of or before; to stop, detain or hinder for a time, or cause someone or something to be behind in schedule or usual rate of movement in progress. 14 "Bumping-off," which is the refusal to transport passengers with confirmed reservation to their planned and contracted destinations, totally forecloses said passengers' right to be transported, whereas delay merely postpones for a time being the enforcement of such right.

Consequently, Section 2, Article 30 of the Warsaw Convention which does not contemplate the instance of "bumping-off" but merely of simple delay, cannot provide a handy excuse for Lufthansa as to exculpate it from any liability to Antiporda. The payment of damages is, thus, deemed warranted by this Court. We find no reversible error in the lower court's award of moral and exemplary damages, including attorney's fees in favor of Antiporda.

Article 2220 of the Civil Code provides:

Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

According to the findings of the appellate court which affirmed that of the lower court, the reasons given by the witnesses for Lufthansa for private respondent's being "bumped off" at Bombay airport were conflicting.

Observed the Court of Appeals:

If there was really no seat available because of over-booking, why did Lufthansa confirm the ticket of the plaintiff-appellee? It has to be pointed out that the confirmed ticket is up to Blantyre, Malawi, not only to Bombay.

If the plaintiff-appellee was not in the list of passengers of Kenya Airways (the connecting flight) then Lufthansa must have deceived him in Manila because according to Gerard Matias, the passengers booked by Kenya Airways for Boeing 707 were 190 passengers when the plane could accommodate only 144 passengers considering that the name of plaintiff-appellee was not in the list. If that was the situation, Lufthansa by the issuance of its ticket should have not assured the plaintiff-appellee that he could get the connecting flights as scheduled. Surely, Lufthansa before confirming the ticket of the plaintiff-appellee must have confirmed the flight with Kenya Airways. If it was impossible to get a seat upon its own investigation in Bombay, then it should have not confirmed the ticket of the plaintiff-appellee. It is the defendant-appellant who was negligent in the performance of its duties, and plaintiff-appellee was just plainly deceived.

Since the ticket was marked O.K., meaning confirmed, therefore plaintiff-appellee must have a definite seat with Kenya Airways but it was lost or given to another person. It is not true therefore, that plaintiff-appellee's name was not in the list of Kenya Airways. Besides, why should Lufthansa allow a passenger to depart from the Philippines with a confirmed ticket, without instructing its Bombay office to reserve a seat with Kenya Airways for its connecting flight? In spite of the confirmation, Nelda Aquino testified that plaintiff-appellee was stranded in Bombay because he did not get a seat with Kenya Airways, and his name did not appear in the list of passengers.

Then contrary to the testimonies of Berndt Loewe and Gerard Matias that the obligation of the defendant-appellant is only up to Bombay and the reason why plaintiff-appellee was not in the list of passengers is because of overbooking. Nelda Aquino contrary to the testimonies of the two, testified that the reason for the bumping-off is that the seat was given to another passenger, to wit:

Q Did you know or eventually learned later that the name of Antiporda was not in the list of confirmed passengers?

A I only learned from the office at Bombay that it was given to other passenger which I only learned from the office at Bombay.

Q Who informed you that the seat of Mr. Antiporda was given to other passenger?

A From our international officer.

Q Who is he?

A Our Sales Manager.

Q Is he your Sales Manager in Bombay?

A Yes, our Manager.

If Nelda Aquino knew that the reason for the bumping-off is that the seat was given to another, how come Berndt Loewe, passenger Sales Manager of defendant, Gerard Matias, an employee of defendant-appellant in Bombay did not know the said reason why the name of plaintiff-appellee did not appear in the list of passengers? It is either they knew the truth but because they wanted to escape liability they pretended not to know the truth.

Clearly, bad faith attended the performance of the contract of carriage, for even while Antiporda was in Bombay, representatives of Lufthansa already tried to evade liability first, by claiming that the contract of carriage between Lufthansa and Antiporda ceased at Bombay airport, in disregard of the fact that Antiporda was holding a Lufthansa ticket for the entire five-leg trip; second, despite Berndt Loewe's knowledge that Antiporda's seat was allowed to be given to another passenger, the same suppressed the information and feigned ignorance of the matter, presenting altogether another reason why Antiporda was not listed in the manifest, i.e. that Air Kenya Boeing 707 was overbooked, notwithstanding clear proof that Lufthansa in Manila confirmed his reservation for said flight.

Antiporda is likewise entitled to the award of exemplary damages on the basis of Article 2232 of the Civil Code which provides:

Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

There is every indication that Lufthansa, through its representatives in Bombay, acted in a reckless and malevolent manner in dealing with Antiporda.

As found by the trial court:

The breach of the guarantee was aggravated by the discourteous and highly arbitrary conduct of Gerard Matias, an official of Lufthansa in Bombay. Bumped off from his connecting flight to Nairobi and stranded in the Bombay Airport for 32 hours, when plaintiff insisted on taking his scheduled flight to Nairobi, Gerard Matias got angry and threw the ticket and passport on plaintiff's lap and was ordered to go to the basement with his heavy luggages for no reason at all. It was a difficult task for the plaintiff to carry three luggages and yet Gerard Matias did not even offer to help him. Plaintiff requested accommodation but Matias ignored it and just left. Not even Lufthansa office in Bombay, after learning plaintiff's being stranded in Bombay and his accommodation problem, provided any relief to plaintiff's sordid situation. Plaintiff has to stay in the transit area and could not sleep for fear that his luggages might be lost. Everytime he went to the toilet, he had to drag with him his luggages. He tried to eat the high-seasoned food available at the airport but developed stomach trouble. It was indeed a pathetic sight that the plaintiff, an official of the Central Bank, a multi-awarded institutional expert, tasked to perform consultancy work in a World Bank funded agricultural bank project in Malawi instead found himself stranded in a foreign land where nobody was expected to help him in his predicament except the defendant, who displayed utter lack of concern of its obligation to the plaintiff and left plaintiff alone in his misery at the Bombay airport.

These findings of the trial court were affirmed by the Court of Appeals on the ground that there are no cogent reasons to justify a contrary finding. The same holds true with this Court. The findings of fact of lower courts are binding on us and will not be generally disturbed on appeal. 15 In affirming the lower court's award of damages to Antiporda, we take into account his high position in the government, coupled with the fact that he failed to meet his professional commitment in Blantyre, Malawi due to the "bumping-off" incident accompanied by rude and discourteous behavior on the part of airline officials who should have been the first to attend to his travel needs.

WHEREFORE, the petition for review is hereby DENIED and the decision of the Court of Appeals AFFIRMED.

7. G.R. No. 121824 January 29, 1998

BRITISH AIRWAYS, petitioner, vs.COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.

 

ROMERO, J.:

In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of respondent Court of Appeals 1 promulgated on September 7, 1995, which affirmed the award of damages and attorney's fees made by the Regional Trial Court of Cebu, 7th Judicial Region, Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its third-party complaint against Philippine Airlines (PAL). 2

The material and relevant facts are as follows:

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA where the following itinerary was indicated: 3

CARRIER FLIGHT DATE TIME STATUS

MANILA MNL PR 310 Y 16 APR. 1730 OK

HONGKONG HKG BA 20 M 16 APR. 2100 OK

BOMBAY BOM BA 19 M 23 APR. 0840 OK

HONGKONG HKG PR 311 Y

MANILA MNL

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report." 4

Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages and attorney's fees 5 against BA and Mr. Gumar before the trial court, docketed as Civil Case No. CEB-9076.

On September 4, 1990, BA filed its answer with counter claim 6 to the complaint raising, as special and affirmative defenses, that Mahtani did not have a cause of action against it. Likewise, on November 9, 1990, BA filed a third-party complaint 7 against PAL alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.

On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing that there was, in fact, adequate time to transfer the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to Hongkong authorities should be considered as transfer to BA. 8

After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of Mahtani, 9 the dispositive portion of which reads as follows:

WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendant for which defendant is ordered to pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the value of the two (2) suit cases; Four Hundred U.S. ($400.00) Dollars representing the value of the contents of plaintiff's luggage; Fifty Thousand (P50,000.00) Pesos for moral and actual damages and twenty percent (20%) of the total amount imposed against the defendant for attorney's fees and costs of this action.

The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED for lack of cause of action.

SO ORDERED.

Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial court's findings. Thus:

WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed from to be in accordance with law and evidence, the same is hereby AFFIRMED in toto, with costs against defendant-appellant.

SO ORDERED. 10

BA is now before us seeking the reversal of the Court of Appeals' decision.

In essence, BA assails the award of compensatory damages and attorney's fees, as well as the dismissal of its third-party complaint against PAL. 11

Regarding the first assigned issue, BA asserts that the award of compensatory damages in the separate sum of P7,000.00 for the loss of Mahtani's two pieces of luggage was without basis since Mahtani in his complaint 12 stated the following as the value of his personal belongings:

8. On the said travel, plaintiff took with him the following items and its corresponding value, to wit:

1. personal belonging P10,000.00

2. gifts for his parents and relatives $5,000.00

Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided for in the ticket, which reads: 13

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. $20.000) per kilo for checked baggage and U.S. $400 per passenger for unchecked baggage.

Before we resolve the issues raised by BA, it is needful to state that 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 traveling public primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting standard. 14 Neglect or malfeasance by the carrier's employees could predictably furnish bases for an action for damages. 15

In the instant 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 16 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. 17

In this regard, the trial court granted the following award as compensatory damages:

Since plaintiff did not declare the value of the contents in his luggage and even failed to show receipts of the alleged gifts for the members of his family in Bombay, the most that can be expected for compensation of his lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or combined value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos representing the contents plus Seven Thousand (P7,000.00) Pesos representing the purchase price of the two (2) suit cases.

However, as earlier stated, it is the position of BA 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, 18 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, 19 provides as follows:

xxx 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 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 requires. 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. 20 This doctrine is recognized in this jurisdiction. 21

Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the facts and circumstances justify that they should be disregarded. 22

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. 23

Given the foregoing postulates, the inescapable 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. In this regard, we quote the pertinent transcript of stenographic notes of Mahtani's direct testimony: 24

Q — How much are you going to ask from this court?

A — P100,000.00.

Q — What else?

A — Exemplary damages.

Q — How much?

A — P100,000.00.

Q — What else?

A — The things I lost, $5,000.00 for the gifts I lost and my personal belongings, P10,000.00.

Q — What about the filing of this case?

A — The court expenses and attorney's fees is 30%.

Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party to be inadmissible for any reason, the latter has the right to object. However, such right is a mere privilege which can be waived. Necessarily, the objection must be made at the earliest opportunity, lest silence when there is opportunity to speak may operate as a waiver of objections. 25 BA has precisely failed in this regard.

To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even conducted his own cross-examination as well. 26 In the early case of Abrenica v. Gonda, 27 we ruled that:

. . . (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the admission of any evidence must be made at the proper time, and that if not so made it will be understood to have been waived. The proper time to make a protest or objection is when, from the question addressed to the witness, or from the answer thereto, or from the presentation of proof, the inadmissibility of evidence is, or may be inferred.

Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great respect. 28 Since the actual value of the luggage involved appreciation of evidence, a task within the competence of the Court of Appeals, its ruling regarding the amount is assuredly a question of fact, thus, a finding not reviewable by this Court. 29

As to the issue of the dismissal of BA's third-party complaint against PAL, the Court of Appeals justified its ruling in this wise, and we quote: 30

Lastly, we sustain the trial court's ruling dismissing appellant's third-party complaint against PAL.

The contract of air transportation in this case pursuant to the ticket issued by appellant to plaintiff-appellee was exclusively between the plaintiff Mahtani and defendant-appellant BA. When plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a subcontractor or agent of BA. This is shown by the fact that in the ticket issued by appellant to plaintiff-appellee, it is specifically provided on the "Conditions of Contract," paragraph 4 thereof that:

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

The rule that carriage by plane although performed by successive carriers is regarded as a single operation and that the carrier issuing the passenger's ticket is considered the principal party and the other carrier merely subcontractors or agent, is a settled issue.

We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko, 31 we expounded on the nature of a third-party complaint thus:

The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts, as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The third-party complaint is actually independent of and separate and distinct from the plaintiff's complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and separately from the original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiff's claim against a third-party in the original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts.

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.

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 fourth paragraph of the "Conditions of Contracts" of the ticket 32 issued by BA to Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay.

4. . . . 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.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any negligence in the performance of its function. 33 and is liable for damages which the principal may suffer by reason of its negligent act. 34 Hence, the Court of Appeals 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. 35 Therefore, in the instant 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.

Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German Airlines v. Court of Appeals. 36 In that case, Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines which was to carry Antiporda to a specific destination "bumped" him off.

An action for damages was filed against Lufthansa which, however, denied any liability, contending that its responsibility towards its passenger is limited to the occurrence of a mishap on its own line. Consequently, when Antiporda transferred to Air Kenya, its obligation as a principal in the contract of carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya.

In rejecting Lufthansa's argument, we ruled:

In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers. The issuance of confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip abroad successive carriers concretely attest to this.

Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, 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. In China Air Lines, Ltd. v. Court of Appeals, 37 while not exactly in point, the case, however, illustrates the principle which governs this particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the performance of its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately determining who was primarily at fault as between them, is without legal basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases which would entail receiving the same or similar evidence for both cases and enforcing separate judgments therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay and circuitry of action and to enable the controversy to be disposed of in one suit. 38 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.

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.

SO ORDERED.

Narvasa, C.J., Melo and Francisco, JJ., concur.

8. G.R. No. 151783             July 8, 2003

VICTORINO SAVELLANO, VIRGINIA B. SAVELLANO and DEOGRACIAS B. SAVELLANO, petitioners, vs.NORTHWEST AIRLINES, respondent.

PANGANIBAN, J.:

When, as a result of engine malfunction, a commercial airline is unable to ferry its passengers on the original contracted route, it nonetheless has the duty of fulfilling its responsibility of carrying them to their contracted destination on the most convenient route possible. Failing in this, it cannot just unilaterally shuttle them, without their consent, to other routes or stopping places outside of the contracted sectors. However, moral damages cannot be awarded without proof of the carrier's bad faith, ill will, malice or wanton conduct. Neither will actual damages be granted in the absence of convincing and timely proof of loss. But nominal damages may be allowed under the circumstances in the case herein.

The Case

Before the Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set aside the June 29, 2001 Decision1 of the Court of Appeals2 (CA) in CA-GR CV No. 47165. The dispositive part of the Decision reads:

"WHEREFORE, the judgment of July 29, 1994 is hereby REVERSED and SET ASIDE and another rendered DISMISSING [petitioners'] Complaint. No pronouncement as to costs."3

On the other hand, the dispositive portion of the Regional Trial Court (RTC) Decision4 that was reversed by the CA disposed thus:

"WHEREFORE, premises considered, decision is hereby rendered in favor of the plaintiffs and against the defendant, sentencing the latter to pay to the former, the following amounts:

1. P500,000.00 as actual damages;

2. P3,000,000.00 as moral damages;

3. P500,000.00 as exemplary damages; and

4. P500,000.00 as attorney's fees;

"All such sums shall bear legal interest, i.e., 6% per annum pursuant to Article 2209 of the Civil Code (Reformina vs. Tomol, 139 SCRA 260) from the date of the filing of the complaint until fully paid. Costs against the x x x Northwest Airlines, Inc.

"[Respondent's] counterclaim is ordered dismissed, for lack of merit."5

The Facts

The facts of the case are summarized by the CA as follows:

"[Petitioner] Victorino Savellano (Savellano) was a Cabugao, Ilocos Sur mayor for many terms, former Chairman of the Commission on Elections and Regional Trial Court (RTC) judge. His wife, [Petitioner] Virginia is a businesswoman and operates several rural banks in Ilocos Sur. The couple's x x x son [Petitioner] Deogracias was, at the time [of] the incident subject of the case, the Vice-Governor of Ilocos Sur.

"On October 27, 1991, at around 1:45 p.m., [petitioners] departed from San Francisco, USA on board Northwest Airlines (NW) Flight 27, Business Class, bound for Manila, Philippines using the NW round-trip tickets which were issued at [respondent's] Manila ticketing office.

"[Petitioners] were expected to arrive at the Ninoy Aquino International Airport (NAIA), Manila on October 29, 1991 (Manila time) or after twelve (12) hours of travel.

"After being airborne for approximately two and one-half (2½) hours or at about 4:15 p.m. of the same day, October 27, 1991 (Seattle, USA time), NW Flight 27's pilot made an emergency landing in Seattle after announcing that a fire had started in one of the plane's engines.

"[Petitioners] and the other passengers proceeded to Gate 8 of the Seattle Airport where they were instructed to go home to Manila the next day, 'using the same boarding passes with the same seating arrangements'.

"[Respondent's] shuttle bus thereafter brought all passengers to the Seattle Red Lion Hotel where they were billeted by, and at the expense of [respondent].

"[Petitioners] who were travelling as a family were assigned one room at the hotel. At around 12:00 midnight, they were awakened by a phone call from [respondent's] personnel who advised them to be at the Seattle Airport by 7:00 a.m. (Seattle time) the following day, October 28, 1991, for departure. To reach the airport on time, the NW shuttle bus fetched them early, making them skip the 6:30 a.m. hotel breakfast.

"Prior to leaving the hotel, however, [petitioners] met at the lobby Col. Roberto Delfin, a Filipino co-passenger who was also travelling Business Class, who informed them that he and some passengers were leaving the next day, October 29, 1991, on board the same plane with the same itinerary.

"On account of the 'engine failure' of the plane, [petitioner] Virginia developed nervousness. On getting wind of information that they were 'bumped off', she took 'valium' to calm her nerves and 'cough syrup' for the fever and colds she had developed during the trip.

"When [petitioners] reached the Seattle Airport, [respondent's] ground stewardess belatedly advised them that instead of flying to Manila they would have to board NW Flight 94, a DC-10 plane, bound for a 3-hour flight to Los Angeles for a connecting flight to Manila. When [Petitioner] Savellano insisted theirs was a direct flight to Manila, the female ground stewardess just told them to hurry up as they were the last passengers to board.

"In Los Angeles, [petitioners] and the other passengers became confused for while 'there was a sort of a board' which announced a Seoul-Bangkok flight, none was posted for a Manila flight. It was only after they complained to the NW personnel that the latter 'finally changed the board to include Manila.'

"Before boarding NW Flight 23 for Manila via Seoul, [petitioners] encountered another problem. Their three small handcarried items which were not padlocked as they were merely closed by zippers were 'not allowed' to be placed inside the passengers' baggage compartments of the plane by an arrogant NW ground stewardess.

"On [petitioners'] arrival at the NAIA, Manila where they saw Col. Delfin and his wife as well as the other passengers of the distressed flight who unlike them [petitioners] who left Seattle on October 28, 1991, left Seattle on October 29, 1991, they were teased for taking the longer and tiresome route to the Philippines.

"When [petitioners] claimed their luggage at the baggage carousel, they discovered that the would-have-been handcarried items which were not allowed to be placed inside the passengers' baggage compartment had been ransacked and the contents thereof stolen. Virginia was later to claim having lost her diamond earrings costing P300,000.00, two (2) Perry Gan shoes worth US$250.00, four (4) watches costing US$40.00 each, two (2) pieces of Tag Heuer watch and three (3) boxes of Elizabeth Arden [perfumes]. Deogracias, on the other hand, claimed to have lost two (2) pairs of Cole Haan shoes which he bought for his wife, and the clothes, camera, personal computer, and jeans he bought for his children.

"By letter of November 22, 1991, [petitioners] through counsel demanded from [respondent] the amount of P3,000,000.00 as damages for what they claimed to be the humiliation and inconvenience they suffered in the hands of its personnel. [Respondent] did not accede to the demand, however, impelling [petitioners] to file a case for damages at the RTC of Cabugao, Ilocos Sur — subject of the present appeal.

"[Petitioners] concede that they were not downgraded in any of the flights on their way home to Manila. Their only complaint is that they suffered inconvenience, embarrassment, and humiliation for taking a longer route.

"During the trial, the [RTC], on motion of [petitioners], issued on October 29, 1993 a subpoena duces tecum directing [respondent] to submit the passengers' manifest of the distressed flight from San Francisco to Tokyo on October 27, 1991, the passengers' manifest of the same distressed plane from Seattle to Tokyo which took off on October 29, 1991, and the passenger manifest of the substitute plane from Seattle to Los Angeles and Los Angeles to Seoul enroute to Manila which took off on October 28, 1991.

"The subpoena duces tecum was served on December 1, 1993 but was not complied with, however, by [respondent], it proffering that its Minneapolis head office retains documents only for one year after which they are destroyed.

" x x x Branch 24 of the RTC of Cabugao, Ilocos Sur rendered judgment in favor of [petitioners] x x x.

"In granting moral and actual damages to [petitioners], the [RTC] credited [petitioners'] claim that they were excluded from the Seattle-Tokyo-Manila flight to accommodate several Japanese passengers bound for Japan. And as basis of its award of actual damages arising from the allegedly lost articles contained in the would-have-been handcarried [luggage], the [RTC], passing on the lack of receipts covering the same, took judicial notice of the Filipinos' practice of often bringing home pasalubong for friends and relatives."6

Ruling of the Court of Appeals

The CA ruled that petitioners had failed to show respondent's bad faith, negligence or malice in transporting them via the Seattle-Los Angeles-Seoul-Manila route. Hence, it held that there was no basis for the RTC's award of moral and exemplary damages. Neither did it find any reason to grant attorney's fees.

It further ruled:

"[Petitioners'] testimonial claim of losses is unsupported by any other evidence at all. It is odd and even contrary to human experience for [petitioner] Virginia not to have taken out a P300,000.00 pair of diamond earrings from an unlocked small luggage after such luggage was not allowed to be placed inside the passenger's baggage compartment, given the ease with which it could have been done as the small luggage was merely closed by zipper. Just as it is odd why no receipts for alleged purchases for valuable pasalubongs including Tag Huer watches, camera and personal computer were presented x x x "7

Thus, even the trial court's award of actual damages was reversed by the appellate court.

Hence this Petition.8

Issues

In their appeal, petitioners ask this Court to rule on these issues:

" x x x [W]hether or not petitioners' discriminatory bump-off from NW Flight No. 0027 on 28 October 1991 (not the diversion of the distressed plane to Seattle the day before, i.e. NW Flight 27 on 27 October 1991) constitutes breach by respondent airline of its air-carriage contract?

"And if so, whether or not petitioners are entitled to actual, moral and exemplary damages — including attorney's fees — as a consequence?"9

The Court's Ruling

The Petition is partly meritorious.

First Issue:Breach of Contract

Petitioners' contract of carriage with Northwest was for the San Francisco-Tokyo (Narita)-Manila flights scheduled for October 27, 1991. This itinerary was not followed when the aircraft used for the first segment of the journey developed engine trouble. Petitioners stress that they are questioning, not the cancellation of the original itinerary, but its substitution, which they allegedly had not contracted for or agreed to. They insist that, like the other passengers of the distressed flight, they had the right to be placed on Flight 27, which had a connecting flight from Japan to Manila. They add that in being treated differently and shabbily, they were being discriminated against.

A contract is the law between the parties.10 Thus, in determining whether petitioners' rights were violated, we must look into its provisions, which are printed on the airline ticket. Condition 9 in the agreement states that a " x x x [c]arrier may without notice substitute alternate carriers or aircraft, and may alter or omit stopping places shown on the ticket in case of necessity. x x x ."11

The basis of the Complaint was the way respondent allegedly treated petitioners like puppets that could be shuttled to Manila via Los Angeles and Seoul without their consent.12 Undeniably, it did not take the time to explain how it would be meeting its contractual obligation to transport them to their final destination. Its employees merely hustled the confused petitioners into boarding one plane after another without giving the latter a choice from other courses of action that were available. It unilaterally decided on the most expedient way for them to reach their final destination.

Passengers' Consent

After an examination of the conditions printed on the airline ticket, we find nothing there authorizing Northwest to decide unilaterally, after the distressed flight landed in Seattle, what other stopping places petitioners should take and when they should fly. True, Condition 9 on the ticket allowed respondent to substitute alternate carriers or aircraft without notice. However, nothing there permits shuttling passengers — without so much as a by your-leave — to stopping places that they have not been previously notified of, much less agreed to or been prepared for. Substituting aircrafts or carriers without notice is entirely different from changing stopping places or connecting cities without notice.

The ambiguities in the contract, being one of adhesion, should be construed against the party that caused its preparation — in this case, respondent.13 Since the conditions enumerated on the ticket do not specifically allow it to change stopping places or to fly the passengers to alternate connecting cities without consulting them, then it must be construed to mean that such unilateral change was not permitted.

Proof of Necessity of Alteration

Furthermore, the change in petitioners' flight itinerary does not fall under the situation covered by the phrase "may alter or omit stopping places shown on the ticket in case of necessity."14 A case of necessity must first be proven. The burden of proving it necessarily fell on respondent. This responsibility it failed to discharge.

Petitioners do not question the stop in Seattle, so we will not delve into this matter. The airplane engine trouble that developed during the flight bound for Tokyo from San Francisco definitely merited the "necessity" of landing the plane at some place for repair — in this case, Seattle — but not that of shuttling petitioners to other connecting points thereafter without their consent.

Northwest failed to show a "case of necessity" for changing the stopping place from Tokyo to Los Angeles and Seoul. It is a fact that some of the passengers on the distressed flight continued on to the Tokyo (Narita) connecting place. No explanation whatsoever was given to petitioners as to why they were not similarly allowed to do so. It may be that the Northwest connecting flight from Seattle to Tokyo to Manila could no longer accommodate them. Yet it may also be that there were other carriers that could have accommodated them for these sectors of their journey, and whose route they might have preferred to the more circuitous one unilaterally chosen for them by respondent.

In the absence of evidence as to the actual situation, the Court is hard pressed to determine if there was a "case of necessity" sanctioning the alteration of the Tokyo stopping place in the case of petitioners. Thus, we hold that in the absence of a demonstrated necessity thereof and their rerouting to Los Angeles and Seoul as stopping places without their consent, respondent committed a breach of the contract of carriage.

Second Issue:Damages

Being guilty of a breach of their contract, respondent may be held liable for damages suffered by petitioners in accordance with Articles 1170 and 2201 of the Civil Code, which state:

"Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof are liable for damages." (Emphasis supplied)

"Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted."

"In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation."

As a general rule, the factual findings of the CA when supported by substantial evidence on record are final and conclusive and may not be reviewed on appeal.15 An exception to this rule is when the lower court and the CA arrive at different factual findings.16 In this case, the trial court found the presence of bad faith and hence awarded moral and exemplary damages; while the CA found none and hence deleted the award of damages. Thus, the Court is now behooved to review the basis for sustaining the award or deletion of damages.

Petitioners impute oppression, discrimination, recklessness and malevolence to respondent. We are not convinced. There is no persuasive evidence that they were maliciously singled out to fly the Seattle-Los Angeles-Seoul-Manila route. It appears that the passengers of the distressed flight were randomly divided into two groups. One group was made to take the Tokyo-Manila flight; and the other, the Los Angeles-Seoul-Manila flight. The selection of who was to take which flight was handled via the computer reservation system, which took into account only the passengers' final destination.17

The records show that respondent was impelled by sincere motives to get petitioners to their final destination by whatever was the most expeditious course — in its judgment, if not in theirs. Though they claim that they were not accommodated on Flight 27 from Seattle to Tokyo because respondent had taken on Japanese passengers, petitioners failed to present convincing evidence to back this allegation. In the absence of convincing evidence, we cannot find respondent guilty of bad faith.

Lopez, Zulueta and Ortigas Rulings Not Applicable

Petitioners cite the cases of Lopez v. Pan American World Airways,18 Zulueta v. Pan American World Airways, Inc.19 and Ortigas Jr. v. Lufthansa German Airlines20 to support their claim for moral and exemplary damages.

In Lopez, Honorable Fernando Lopez, then an incumbent senator and former Vice President of the Philippines — together with his wife, his daughter and his son-in-law — made first-class reservations with the Pan American World Airways on its Tokyo-San Francisco flight. The reservation having been confirmed, first-class tickets were subsequently issued in their favor. Mistakenly, however, defendant's agent cancelled the reservation. But expecting other cancellations before the flight scheduled a month later, the reservations supervisor decided to withhold the information from them, with the result that upon arrival in Tokyo, the Lopezes discovered they had no first-class accommodations. Thus, they were compelled to take the tourist class, just so the senator could be on time for his pressing engagements in the United States.

In the light of these facts, the Court held there was a breach of the contract of carriage. The failure of the defendant to inform the plaintiffs on time that their reservations for the first class had long been cancelled was considered as the element of bad faith entitling them to moral damages for the contractual breach. According to the Court, such omission had placed them in a predicament that enabled the company to keep them as — their passengers in the tourist class. Thus, the defendant was able to retain the business and to promote its self-interest at the expense of embarrassment, discomfort and humiliation on their part.

In Zulueta, the passenger was coming home to Manila from Honolulu via a Pan-American flight. The plane had a stopover at Wake Island, where Rafael Zulueta went down to relieve himself. At flight time, he could not be located immediately. Upon being found, an altercation ensued between him and the Pan-Am employees. One of them remonstrated: "What in the hell do you think you are? Get on that plane." An exchange of angry words followed, and the pilot went to the extent of referring to the Zuluetas as "those monkeys." Subsequently, for his "belligerent" attitude, Rafael Zulueta was intentionally off-loaded and left at Wake Island with the prospect of being stranded there for a week, with malice aforethought. The Court awarded to the Zuluetas P500,000.00 as moral damages, P200,000.00 as exemplary damages and P75,000.00 as attorney's fees, apart from the actual damages of P5,502.85.

In Ortigas, Francisco Ortigas Jr. had a confirmed and validated first-class ticket for Lufthansa's Flight No. 646. His reserved first class seat was, however, given to a Belgian. As a result, he was forced to take economy class on the same flight. Lufthansa succeeded in keeping him as a passenger by assuring him that he would be given first-class accommodation at the next stop. The proper arrangements therefor had supposedly been made already, when in truth such was not the case. In justifying the award of moral and exemplary damages, the Court explained.

" x x x [W]hen it comes to contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passenger to the award of moral damages in accordance with Article 2220 of the Civil Code. But in the instant case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over plaintiff was done willfully and in wanton disregard of plaintiff's rights and his dignity as a human being and as a Filipino, who may not be discriminated against with impunity."

To summarize, in Loipez despite sufficient time — one month — to inform the passengers of what had happened to their booking, the airline agent intentionally withheld that information from them. In Zulueta, the passenger was deliberately off-loaded after being gravely insulted during an altercation. And in Ortigas, the passenger was intentionally downgraded in favor of a European.

These cases are different from and inapplicable to the present case. Here, there is no showing that the breach of contract was done with the same entrepreneurial motive or self-interest as in Lopez or with ill will as in Zulueta and Ortigas. Petitioners have failed to show convincingly that they were rerouted by respondent to Los Angeles and Seoul because of malice, profit motive or self-interest. Good faith is presumed, while bad faith is a matter of fact that needs to be proved21 by the party alleging it.

In the absence of bad faith, ill will, malice or wanton conduct, respondent cannot be held liable for moral damages. Article 2219 of the Civil Code22 enumerates the instances in which moral damages may be awarded. In a breach of contract, such damages are not awarded if the defendant is not shown to have acted fraudulently or with malice or bad faith.23 Insufficient to warrant the award of moral damages is the fact that complainants suffered economic hardship, or that they worried and experienced mental anxiety.24

Neither are exemplary damages proper in the present case. The Civil Code provides that "[i]n contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner."25 Respondent has not been proven to have acted in that manner. At most, it can only be found guilty of having acted without first considering and weighing all other possible courses of actions it could have taken, and without consulting petitioners and securing their consent to the new stopping places.

The unexpected and sudden requirement of having to arrange the connecting flights of every single person in the distressed plane in just a few hours, in addition to the Northwest employees' normal workload, was difficult to satisfy perfectly. We cannot find respondent liable for exemplary damages for its imperfection of neglecting to consult with the passengers beforehand.

Nevertheless, herein petitioners will not be totally deprived of compensation. Nominal damages may be awarded as provided by the Civil Code, from which we quote:

"Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him."

"Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any property right has been invaded."

Nominal damages are recoverable if no actual, substantial or specific damages were shown to have resulted from the breach.26 The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.27

In the present case, we must consider that petitioners suffered the inconvenience of having to wake up early after a bad night and having to miss breakfast; as well as the fact that they were business class passengers. They paid more for better service; thus, rushing them and making them miss their small comforts was not a trivial thing. We also consider their social and official status. Victorino Savellano was a former mayor, regional trial court judge and chairman of the Commission on Elections. Virginia B. Savellano was the president of five rural banks, and Deogracias Savellano was then the incumbent vice governor of Ilocos Sur. Hence, it will be proper to grant one hundred fifty thousand pesos (P150,000) as nominal damages28 to each of them, in order to vindicate and recognize their right29 to be notified and consulted before their contracted stopping place was changed.

A claim for the alleged lost items from the baggage of petitioners cannot prosper, because they failed to give timely notice of the loss to respondent. The Conditions printed on the airline ticket plainly read:

"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.

xxx             xxx             xxx

"7. Checked baggage will be delivered to bearer of the baggage check. In case of damage to baggage moving in international transportation complaint must be made in writing to carrier forthwith after discovery of damage, and at the latest, within 7 days from receipt; in case of

delay, complaint must be made within 21 days from date the baggage was delivered. x x x ."30

The pertinent provisions of the Rules Relating to International Carriage by Air (Warsaw Convention) state:

"Article 26

1. Receipt by the person entitled to delivery of luggage or goods without complaint is prima facie evidence that the same have been delivered in good condition and in accordance with the document of carriage.

2. In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within three days from the date of receipt in the case of luggage and seven days from date of receipt in the case of goods. In the case of delay the complaint must be made at the latest within fourteen days from the date on which the luggage or goods have been placed at his disposal.

3. Every complaint must be made in writing upon the document of carriage or by separate notice in writing dispatched within the times aforesaid.

4. Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part."

After allegedly finding that their luggage had been ransacked, petitioners never lodged a complaint with any Northwest airport personnel. Neither did they mention the alleged loss of their valuables in their November 22, 1991 demand letter.31 Hence, in accordance with the parties' contract of carriage, no claim can be heard or admitted against respondent with respect to alleged damage to or loss of petitioners' baggage.

WHEREFORE, the Petition is hereby PARTIALLY GRANTED, and the assailed Decision MODIFIED. Respondent is ORDERED to pay one hundred fifty thousand pesos (P150,000) to each of the three petitioners as nominal damages. No. pronouncement as to costs.

SO ORDERED.

Puno, Sandoval-Gutierrez and Corona, JJ ., concur.Carpio-Morales, J ., took no part.