Case Digest (G.R. No. 201816)
Facts:
On March 1, 1989, Aniceto Fontanilla purchased confirmed round‑trip tickets from United Airlines, Inc. through an agent in Manila for himself, his wife and his minor son, and later obtained rewritten coupons in Washington, D.C. for United Airlines Flight No. 1108 scheduled May 5, 1989, with boarding passes stating "CHECK‑IN REQUIRED." On May 5 the Fontanillas alleged they checked in, were denied boarding for alleged overbooking, suffered insulting remarks by a United ground employee, were offered $50 each, and eventually departed on a later flight; they sued in Civil Case No. 89‑4268 before the Regional Trial Court of Makati, which dismissed the complaint. The Court of Appeals reversed and awarded P200,000 moral damages, P200,000 exemplary damages and P50,000 attorney’s fees; United Airlines, Inc. petitioned to the Supreme Court.
Issues:
- Did the Court of Appeals err in finding an admission that private respondent complied with the check‑in requirement?
- Did private respondent’s alleged failure to check in preclude recovery where denied boarding rules were not followed?
- Were private respondents entitled to P200,000 moral damages for breach of contract of carriage?
- Were private respondents entitled to P200,000 exemplary damages?
- Was the award of P50,000 attorney’s fees proper?
Ruling:
The petition was GRANTED; the decision of the Court of Appeals was REVERSED and SET ASIDE and the decision of the Regional Trial Court of Makati dismissing the complaint was REINSTATED. The Court held there was no sufficient admission to foreclose proof, that private respondents failed to establish breach in bad faith, and that the awards of moral damages, exemplary damages and attorney’s fees were improper.
Ratio:
The Court found that petitioner’s answer alleging lack of knowledge did not operate as a conclusive admission where petitioner produced evidence and the parties litigated the fact at trial. Applying the doctrine of lex loci contractus, the Court held Philippine law governed the contract because the tickets were issued in Manila and the passengers were Filipino; thus Economic Regulations No. 7 (as amended) applied and conditions for denied boarding compensation require compliance with check‑in and reconfirmation rules. The trial court’s credibility findings favored petitioner; private respondents failed by preponderance of evidence to prove deliberate overbooking beyond the ten percent statutory allowance or corroborate the alleged discriminatory insults, so bad faith and entitlement to moral, exemplary damages and attorney’s fees were not shown.
Doctrine:
- Rule 9, Section 1, Rules of Court admissions do not preclude proof where the responding party pleads lack of knowledge but later adduces evidence on the fact.
- The *lex loci contractus* rule applies to airline tickets issued in the forum, making local law applicable to the contract of carriage.
- Economic Regulations No. 7 requires compliance with check‑in and reconfirmation before a passenger may claim denied boarding compensation.
- Moral and exemplary damages for breach of contract of carriage require proof of fraud or bad faith by the carrier.
- Overbooking not exceeding ten percent of seating capacity is not, as a matter of law, deliberate non‑accommodation constituting bad faith.
- Appellate courts will not lightly overturn trial court findings on witness credibility in the absence of compelling reasons.