Case Summary (G.R. No. 60501)
Key Dates and Procedural Posture
Complaint filed: 1 March 1976 in the Court of First Instance (now Regional Trial Court) of Lanao del Norte.
Trial court decision: 18 April 1976 (award of moral damages P20,000; temperate damages P5,000; exemplary damages P10,000; attorneys’ fees P25,000).
Court of Appeals decision: 11 November 1981 (affirmed findings of fact; modified awards to moral P80,000; exemplary P20,000; temperate P10,000; attorneys’ fees maintained at P25,000).
Supreme Court review: petition for review on certiorari from the Court of Appeals decision.
Applicable Law (constitutional frame and statutory instruments)
Constitutional basis: The decision falls after 1990 and, accordingly, is to be situated within the 1987 Philippine Constitution (as the controlling constitutional framework for cases decided in that era).
Statutory and treaty instruments and provisions applied or discussed in the decision: the Warsaw Convention (treaty) as incorporated into Philippine law; New Civil Code provisions cited in the decision (Arts. 1764, 2206, 2208(2), 2220, 2224); relevant jurisprudence on carrier liability and exceptions.
Issues Presented
- Whether Cathay Pacific is liable to Alcantara for moral, exemplary, and temperate damages, and for attorneys’ fees, because of the delayed loss and handling of his checked luggage and the conduct of carrier personnel.
- Whether the Warsaw Convention limits or precludes liability beyond the Convention’s enumerated limits for the carrier’s breach of the contract of carriage.
Factual Findings Relevant to Liability
Facts were undisputed: Alcantara’s luggage did not arrive with him in Jakarta and was left behind in Hong Kong; it arrived more than 24 hours later and was not delivered to his hotel but required embassy pick-up. Trial and appellate courts found that Cathay’s employees were discourteous and indifferent and that the carrier failed in its duty to deliver luggage at the agreed place and time. Testimony (notably that of Romulo Palma, Commercial Attaché of the Philippine Embassy) described the duty officer’s blunt and dismissive responses and the inadequate assistance offered (the US$20 offer, indifferent assurances, and refusal to deliver to the hotel).
Court’s Liability Rationale
The Court applied the well-established duty of common carriers to carry passengers and their luggage safely and without delay to the destination, noting that failure to do so is a breach of the contract of carriage. The Court reiterated that moral damages for breach of such contract are generally recoverable only where the mishap results in death or where the carrier is guilty of fraud or bad faith. Given the findings of discourteous, indifferent, and arguably improper conduct by carrier personnel, the Court concluded that there was bad faith or willful misconduct on the part of Cathay’s employees sufficient to justify awards for moral and exemplary damages.
Evidence of Bad Faith and its Legal Consequences
The Court relied on Palma’s deposition to characterize the airline representative’s demeanor as indifferent, rude, and dismissive — telling Alcantara essentially, “What can we do, the baggage is missing. I cannot do anything… Anyhow, you can buy anything you need, charged to Cathay Pacific,” while limiting any actual assistance to US$20. The carrier also refused to deliver the luggage to the hotel and instead required embassy pickup. These facts, together with the asserted failure of the carrier to know that luggage was left behind until notified by Hong Kong customs, supported the courts’ finding of gross negligence and improper conduct amounting to bad faith, which in turn justified moral and exemplary damages.
Application of the Warsaw Convention
The petitioner argued the carrier’s liability should be governed exclusively by the Warsaw Convention. The Court rejected the argument that the Convention operates as an exclusive or absolute limit upon a carrier’s civil liability under domestic law. While recognizing that the Warsaw Convention has the force of law in the Philippines and sets out liability limits in enumerated cases, the Court held that the Convention does not preclude the operation of the Civil Code and other pertinent laws, nor does it exempt a carrier from liability where wilful misconduct or equivalent default is established. The Court specifically cited Article 25 of the Warsaw Convention, which denies the benefit of Convention limits where damage is caused by willful misconduct of the carrier or an agent acting within the scope of employment. Thus, the existence of willful misconduct or bad faith permits recovery beyond the Convention’s limitations.
Analysis of Damages
- Moral damages: Awardable where carrier’s conduct constitutes fraud or bad faith. Both lower courts found bad faith; the Supreme Court agreed such damages were warranted but found the Court of Appeals’ amount excessive. The Court reduced moral damages from P80,000 to P30,000.
- Exemplary damages: Proper where defendant’s conduct is grossly negligent, reckless, or entails bad faith; the Court sustained the appellate award of P20,000 as reasonable.
- Temperate (moderate) damages: Recoverable only upon proof of pecuniary loss. The Court found no showing of pecuniary loss suffered by Alcantara and therefore deleted the appellate award of P10,000 for temperate damages.
- Attorneys’ fees: The Court maintained the award of P25,000, finding it reasonable given that petitioner’s acts forced respondent to liti
Case Syllabus (G.R. No. 60501)
Facts
- On 19 October 1975, Tomas L. Alcantara was a first class passenger of Cathay Pacific Airways, Ltd. (CATHAY) on Flight No. CX-900 from Manila to Hong Kong and onward on Flight No. CX-711 from Hong Kong to Jakarta.
- Alcantara’s trip purpose was to attend a conference on 20 October 1975 with the Director General of Trade of Indonesia; he was 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.
- Alcantara checked in luggage containing clothing, personal articles, and papers/documents needed for the conference.
- Upon arrival in Jakarta, Alcantara discovered his luggage was missing; Cathay’s representative in Jakarta informed him the luggage had been left behind in Hong Kong.
- Cathay offered Alcantara $20.00 as “inconvenience money” to buy immediate personal needs until the luggage could be delivered.
- Alcantara’s luggage arrived in Jakarta more than twenty‑four (24) hours after his arrival.
- The luggage was not delivered to Alcantara at his hotel; Cathay required that it be picked up by an official of the Philippine Embassy.
- Because of lack of proper clothing caused by the delayed luggage, Alcantara had to seek postponement of his pre‑arranged conference with the Director General of Trade.
Procedural History
- On 1 March 1976, Alcantara filed a complaint in the Court of First Instance of Lanao del Norte for temperate, moral and exemplary damages, plus attorneys’ fees.
- On 18 April 1976, the trial court ordered Cathay to pay: P20,000.00 moral damages, P5,000.00 temperate damages, P10,000.00 exemplary damages, P25,000.00 attorneys’ fees, and costs.
- Both parties appealed to the Court of Appeals. Cathay contested liability, non‑application of the Warsaw Convention, and the excessiveness of damages; Alcantara contended the trial court failed to grant the full damages he sought.
- On 11 November 1981, the Court of Appeals affirmed the trial court’s findings of fact but modified the awards: moral damages increased to P80,000.00, exemplary damages to P20,000.00, temperate damages to P10,000.00, and attorneys’ fees of P25,000.00 were maintained.
- Cathay petitioned to the Supreme Court for review on certiorari, reiterating the grounds it raised in the Court of Appeals.
Issues Presented
- Whether Cathay is liable to Alcantara for moral, exemplary and temperate damages, and attorneys’ fees for delay/misplacement of luggage and attendant conduct of Cathay’s employees.
- Whether the liability of Cathay should be limited exclusively to the terms and limitations of the Warsaw Convention.
Petitioner's Arguments (as raised)
- The one‑day delay in transporting Alcantara’s luggage was not made in bad faith; therefore moral, exemplary and temperate damages are not justified.
- The Court of Appeals’ finding that Alcantara was rudely treated by Cathay’s employees lacks factual basis; hence the moral damages award is unsupported.
- The extent of Cathay’s liability should be limited absolutely to the Warsaw Convention’s rules and monetary limits.
Respondent’s Position (as reflected in the record)
- Alcantara alleged breach of contract of carriage and sought temperate, moral and exemplary damages and attorneys’ fees due to the mishandling/delay of his luggage and the conduct of Cathay’s representatives.
- On appeal, Alcantara assigned as error the trial court’s failure to grant the full amount of damages he had sought.
Court of Appeals’ Findings and Award
- The Court of Appeals affirmed the trial court’s findings of fact that Cathay breached its contract of carriage, and that the conduct of its employees toward Alcantara justified an award of moral and exemplary damages.
- The Court of Appeals increased awards to: P80,000.00 moral damages, P20,000.00 exemplary damages, P10,000.00 temperate damages, and maintained P25,000.00 attorneys’ fees.
Supreme Court’s Review — Findings of Fact and Standard of Review
- Petitioners’ first assigned error involved findings of fact not ordinarily reviewable by the Supreme Court; the Court nonetheless addressed the factual findings and found no merit in Cathay’s challenge.
- The Supreme Court agreed with the lower courts that Cathay breached its contract of carriage by failing to deliver Alcantara’s luggage at the designated place and time and that evidence established fraudulent or bad faith conduct by Cathay or its employees.
Evidence of Improper Conduct (Palma Deposition)
- The deposition of Romulo Palma, Commercial Attache of the Philippine Embassy at Jakarta, recounted Alcantara’s fury and the exchange with Cathay’s duty officer.
- Palma testified that the duty officer responded indifferently: “What can we do, the baggage is missing. I cannot do anything … Anyhow, you can buy anything you need, charged to Cathay Pacific.”
- Palma described the duty officer’s demeanor as attempting to dismiss the affair, being indifferent, impatient, rude and insulting, which the lower courts relied upon to award moral damages.
Legal Principles Applied — Liability and Damages
- It is the obligation of a common carrier to carry passengers and their luggage safely to destination, including the duty not to delay their transportation.
- Moral damages on a breach of contract of carriage are recoverable only where the mishap results in death or where the carrier is guilty of fraud or bad faith.
- Where breach of a car