Case Summary (G.R. No. L-40597)
Factual Background
On August 26, 1967, petitioner travelled as a fare-paying passenger on PAL Flight No. 463-R from Mactan Airport, Cebu to Butuan City, to attend trial hearings scheduled in the Court of First Instance in Butuan. He checked in one piece of luggage, a blue "maleta," and was issued Claim Check No. 2106-R. The plane arrived at Bancasi Airport, Butuan, around 2:00 P.M. that day, but petitioner’s luggage was missing when claimed.
PAL conducted initial inquiries—messages were exchanged between Butuan, Cebu, and Manila offices regarding the misplaced luggage. It was discovered that the luggage had been overcarried to Manila but was to be forwarded back to Cebu and subsequently to Butuan on the next available flights. However, lack of messaging at PAL Butuan caused a delay in the luggage being received.
Worried due to the vital court documents inside the luggage, petitioner sent a telegram demanding delivery before the next day’s noon, threatening to hold PAL liable for damages if unmet. Despite PAL's efforts, petitioner did not wait for the morning flight’s arrival in Butuan the following day, which carried the luggage.
When the luggage was delivered to petitioner via a driver he knew, it was found opened and documents were missing. Petitioner refused to accept the luggage, leading to a postponement of his scheduled civil trial.
Petitioner formally demanded production of the luggage intact and claimed damages amounting to ₱250,000 for actual and moral damages. PAL later delivered the luggage intact to petitioner’s office, but the investigation found it impossible to locate missing documents or responsible personnel.
Proceedings and Lower Courts’ Findings
Petitioner filed a Complaint for damages against PAL for breach of contract of transportation. The Court of First Instance ruled in favor of the petitioner, finding PAL acted in bad faith and awarding moral damages of ₱80,000, exemplary damages of ₱30,000, attorney’s fees of ₱5,000, and costs.
PAL appealed, and the Court of Appeals reversed the trial court’s award of moral and exemplary damages, holding that PAL was guilty only of simple negligence, not bad faith or fraud. The Court also limited PAL's liability to ₱100—the baggage limit stated at the back of the airline ticket.
Issues on Review
- Whether PAL was guilty of bad faith or gross negligence warranting moral and exemplary damages.
- Whether the stipulated baggage liability limit of ₱100.00 in the contract of carriage was binding and proper as a limit on PAL’s liability.
- Whether the petitioner was entitled to damages exceeding the limit due to lack of declared value or due notice.
- Questions concerning procedural matters after the petitioner’s death and substitution by his widow.
Supreme Court’s Analysis on Bad Faith and Damages
The Court agreed with the Court of Appeals that PAL did not act in bad faith but only committed simple negligence. Bad faith requires a breach of duty motivated by ill will or fraud, which was not present in this case. PAL exerted due diligence in searching and forwarding the luggage promptly upon discovering the error.
The Court noted that the delay in sending and receiving messages, the handling of the luggage, and the efforts to locate and return the baggage were reasonable given the circumstances. The failure of the PAL Cebu office to immediately respond to petitioner’s urgent telegram was deemed an assumption that the luggage would arrive timely, not bad faith.
Because no wrongful act or bad faith was proven as the proximate cause of harm, moral damages were not warranted. Articles 2217 and 2220 of the Civil Code allow moral damages only when there is fraud or bad faith, neither of which PAL committed. Similarly, exemplary damages could only be granted upon a showing of a wanton, reckless, or malevolent act, which was absent here.
Supreme Court’s Analysis on Contractual Limitation of Liability
The Court upheld the limitation of PAL’s liability to ₱100 as printed at the back of the ticket, emphasizing that such stipulations constitute part of the contract of carriage. Despite petitioner’s argument that he did not sign the ticket, the Court held that contracts of adhesion like airplane tickets are binding if reasonably and fairly printed and if the passenger adheres to the contract.
The Court referenced jurisprudence and legal doctrine confirming the validity of such contractual limitations against liability for loss or damage to baggage when no higher declared value was paid. Petitioner did not declare any higher value nor pay additional fees, thus limiting recovery to the stipulated amount.
The Court als
...continue readingCase Syllabus (G.R. No. L-40597)
Facts of the Case
- On August 26, 1967, petitioner Agustino B. Ong Yiu, a fare-paying passenger and lawyer, boarded Philippine Air Lines (PAL) Flight No. 463-R from Mactan, Cebu to Butuan City. He was to attend trial hearings scheduled August 28-31, 1967.
- Petitioner checked in one piece of luggage, a blue maleta, for which he received Claim Check No. 2106-R.
- Upon arrival at Bancasi Airport, Butuan City, the luggage was missing.
- PAL initiated efforts to locate the missing luggage, including dispatching telegrams between Butuan, Cebu, Manila, and back.
- PAL informed that the luggage was overcarried to Manila but would be forwarded to Cebu and then to Butuan on the next available flight.
- Petitioner sent a telegram demanding delivery by noon the next day, threatening to hold PAL liable for damages due to gross negligence causing worry and embarrassment.
- PAL Cebu assumed the luggage would arrive before petitioner’s message was received and took no reply action.
- Petitioner went to Bancasi Airport but left before the morning flight arrived with the luggage.
- The luggage was then opened by PAL porter clerk Maximo Gomez and delivered via petitioner’s driver, who noted no lock was intact.
- Upon inspection by petitioner, vital legal documents and personal gifts were reported missing.
- Petitioner refused to accept the luggage and requested a court postponement for his trial due to the loss.
- Petitioner returned to Cebu and demanded compensation of P250,000 for actual and moral damages.
- PAL Cebu later delivered the luggage to petitioner’s office. An investigation into the missing items was inconclusive.
- Petitioner filed suit for damages, claiming breach of contract and alleging gross negligence and bad faith by PAL.
Procedural History
- The trial court ruled in favor of petitioner, finding PAL liable for breach of contract in bad faith; awarded P80,000 moral damages, P30,000 exemplary damages, P5,000 attorneys’ fees, and costs.
- Both parties appealed to the Court of Appeals: petitioner contested the amount of moral damages awarded; PAL challenged the liability and damage awards.
- The Court of Appeals reversed the trial court’s findings of bad faith, ruling PAL guilty only of simple negligence; eliminated moral and exemplary damages; limited liability to P100 as stipulated on the back of the plane ticket—the amount agreed upon for baggage loss.
- Petitioner filed a Petition for Review by Certiorari before the Supreme Court.