G.R. No. 60501 - Cathay Pacific Airways, Ltd. vs. Court of Appeals

On 19 October 1975, Tomas L. Alcantara, a first-class passenger of Cathay Pacific Airways, Ltd. (hereafter “CATHAY”), embarked on Flight No. CX-900 from Manila to Hongkong and continued on Flight No. CX-711 from Hongkong to Jakarta.
The purpose of his trip was to attend a conference on 20 October 1975 with the Director General of Trade of Indonesia. Alcantara was an executive officer holding positions such as Executive Vice-President and General Manager of Iligan Cement Corporation, Chairman of the Export Committee of the Philippine Cement Corporation, and a representative of the Cement Industry Authority.

Alcantara checked in luggage that contained both his clothing and important documents for the conference.
Upon his arrival in Jakarta, he discovered that his luggage was missing. An inquiry with CATHAY’s representative in Jakarta revealed that the luggage had been mistakenly left behind in Hongkong.
To alleviate the inconvenience, Alcantara was offered $20.00 to purchase his immediate personal needs pending the delivery of his luggage.
The luggage was eventually delivered to Jakarta after a delay of more than twenty-four (24) hours. However, it was not delivered directly to his hotel; instead, he had to pick it up from the Philippine Embassy, where an official was designated to release it.

On 1 March 1976, responding to the mishap, Alcantara filed a complaint against CATHAY before the Court of First Instance (now Regional Trial Court) of Lanao del Norte.
The complaint sought temperate, moral, and exemplary damages in addition to attorneys’ fees, stemming from the breach of contract and the subsequent mismanagement of his luggage.

The trial court rendered a decision on 18 April 1976 ordering CATHAY to pay moral damages of P20,000.00, temperate damages of P5,000.00, exemplary damages of P10,000.00, and attorneys’ fees of P25,000.00, plus costs.
Both parties appealed, leading to the Court of Appeals modifying the trial court’s award by:

The one-day delay was not attributable to bad faith and did not justify the award of moral, exemplary, and temperate damages.
The factual basis for alleging that its employees treated Alcantara rudely was unfounded.
The Warsaw Convention should have been applied to limit the carrier’s liability.

Alcantara, on the other hand, contended that the trial court failed to grant the full amount of damages claimed, emphasizing the improper and discourteous handling of his complaint by CATHAY’s employees.

Whether CATHAY breached its contract of carriage with Alcantara by failing to deliver his luggage at the designated time and place.
Whether the conduct of CATHAY’s employees—characterized by indifference, rudeness, and a failure to issue proper assistance—constitutes bad faith or wilful misconduct justifying the award of moral and exemplary damages.
Whether the application of the Warsaw Convention should limit CATHAY’s liability for the alleged breach, particularly in light of its provisions on carrier liability and the exclusion or limitation of damages in cases of wilful misconduct.