G.R. No. 119641 - Philippine Airlines, Inc. vs. Court of Appeals

In May 1988, Dr. Josefino Miranda and his wife, Luisa Miranda, residents of Surigao City, secured confirmed bookings from Philippine Airlines’ (PAL) San Francisco Office.
Their itinerary included PAL Flight PR 101 (San Francisco to Manila via Honolulu on June 21, 1988), connecting to Flight PR 851 from Manila to Cebu and then Flight PR 905 from Cebu to Surigao on June 24, 1988.

On June 21, 1988, the Mirandas boarded Flight PR 101 in San Francisco carrying five pieces of baggage.
During the stopover at Honolulu, PAL personnel off-loaded part of their baggage—including two balikbayan boxes, two pieces of luggage, and a fishing rod case—citing weight limitations as the reason.
The off-loading was carried out without prior notification, causing the passengers to miss their connecting flight from Manila to Cebu City.
The baggage arrived only on June 24, 1988, well after their originally scheduled connections.

On June 25, 1988, while en route to Surigao City via Cebu on Flight 471, a mechanical problem led to a return to Mactan Airport.
PAL provided lunch and rescheduled the passengers for a later flight to Surigao City; however, the rescheduled flight was cancelled.
When the Mirandas requested hotel accommodation at their usual establishment (Cebu Plaza Hotel), PAL initially denied it claiming full occupancy, although the hotel later confirmed availability.
PAL eventually arranged an overnight stay at the hotel with standard meals. However, the passengers were compelled to sign for à la carte meal orders and to settle for a limited taxi fare offer (P150.00) which did not fully cover their logistical needs.
Following further insistence on additional fare to cover transport expenses (including the extra P150.00 for taxi pooling and tips), the Mirandas declined the offered arrangements.
In a subsequent development, when attempting to retrieve their baggage, they were informed that the same had been loaded on an earlier PAL flight to Surigao City, leaving them without their belongings for the remainder of their trip.
The delayed arrival of both the baggage and the mishandled flight arrangements contributed significantly to their inconvenience.

The Mirandas filed an action for damages based on the breaches and the inconveniences suffered.
The trial court found PAL liable for moral damages (P100,000.00), exemplary or corrective damages (P30,000.00), attorney’s fees (P10,000.00), and costs.
The Court of Appeals affirmed the trial court’s judgment, focusing on the issue of bad faith in handling the contract of carriage, particularly the discriminatory and arbitrary off-loading of baggage, and the cavalier responses to the Mirandas’ accommodation requests.

Whether PAL breached its contractual duty in a manner that amounted to bad faith by arbitrarily off-loading the Mirandas’ baggage beyond what was necessitated by weight limitations.
Whether the manner in which PAL’s employees managed the flight disruptions, mishandled baggage retrieval, and treatment regarding hotel accommodations reflected malice, deceit, or a flagrant disregard for the passengers’ rights.

Applicability of the Express Contractual Provisions and the Warsaw Convention

Whether the express provisions in the Mirandas’ ticket, limiting liability for delayed baggage to US$20.00 per kilo unless a higher valuation was declared, should shield PAL from liability for damages beyond mere delay.
Whether the provisions of the Warsaw Convention, concerning liability in international carriage, preclude an award for damages arising from breaches of contract not strictly related to loss of baggage but to bad faith in service delivery.