Title
Pan American World Airways, Inc. vs. Intermediate Appellate Court
Case
G.R. No. 70462
Decision Date
Aug 11, 1988
A filmmaker’s lost baggage led to canceled contracts; Pan Am’s liability was limited to $600 under the Warsaw Convention, as higher value wasn’t declared.

Case Summary (G.R. No. 70462)

Key Dates and Agreements

April 25, 1978: Pangan and Quesada entered an agreement for delivery of three films for exhibition in the United States for US$2,500 per picture; plaintiffs agreed to provide promotional and advertising materials by May 30, 1978. May 1978 (while in Guam): Pangan made a verbal agreement with Slutchnick to exhibit two films at the Hafa Adai Theater on May 30, 1978 for ₱7,000 per picture, and undertook to provide promotional materials by that date. May 18, 1978: Pangan obtained an economy-class ticket from Pan Am’s Manila office through the travel agency. May 27, 1978: Pangan checked two luggages at Manila International Airport; flight to Guam was May 27, 1978. Complaint was filed December 6, 1978; the Supreme Court decision in the record is dated August 11, 1988.

Facts Concerning Preparation and Checked Items

Pangan caused preparation of promotional handbills and still pictures at a total price of ₱12,900 (exhibits B, B-1, C, C-1). He also purchased 14 clutch bags, four capiz lamps, and four barong tagalog valued at ₱4,400 (exhibits D, D‑1, E, F). On May 27, 1978, two hours before departure, he presented his ticket and checked two luggages, receiving baggage claim tickets Nos. 963633 and 963649 (exhs. H and H-1). The two luggages contained the promotional materials, the merchandise and his personal belongings.

Ticketing, Class Change and Loss of Baggage

At check-in Pangan was informed his name was not on the manifest for economy class; because economy had no space and to meet his schedule he paid an additional US$112 and took first class. Upon arrival in Guam the two luggages did not arrive. As a result, the agreements for film exhibitions in Guam and the United States were cancelled (exh. L). Pangan filed a written claim for missing luggages (exh. J) and his counsel made representations and protests to Pan Am (exhs. M, O, Q, S, T). Pan Am provided assurances of investigation (exhs. N, P, R) but failed to communicate results, prompting suit.

Trial Court Disposition and Intermediate Appellate Court

The Court of First Instance found Pan Am liable and awarded: (1) ₱83,000.00 actual damages to all plaintiffs plus 14% interest from December 6, 1978 and ₱10,000 attorney’s fees; (2) an additional ₱8,123.34 to Pangan with 14% interest; (3) dismissal of Pan Am’s counterclaim; and (4) costs of suit. The Intermediate Appellate Court affirmed that judgment, leading to Pan Am’s petition to the Supreme Court.

Ticket Terms and Warsaw Convention Notice

The back of the airline ticket (exh. G) contained express conditions: notice that the Warsaw Convention may apply and governs/limits carrier liability for loss of baggage; a “Conditions of Contract” including incorporation of Warsaw Convention and carrier’s tariffs and conditions; and a specific “Notice of Baggage Liability Limitations” stating liability for checked baggage is approximately $9.07 per pound ($20.00 per kilo) unless a higher value is declared in advance and additional charges paid. The ticket thus contained an adhesion clause limiting baggage liability and advising passengers of the valuation procedure.

Petitioner’s Principal Assignments of Error

Pan Am argued the appellate court erred by (1) affirming awards of actual damages beyond the Warsaw Convention and the contract of carriage limitation printed on the ticket, and (2) affirming awards for alleged lost profits in contravention of the rule on special or consequential damages (citing Mendoza v. Philippine Airlines, 90 Phil. 836 (1952)).

Supreme Court’s Analysis on Ticket Stipulation and Precedent

The Court found Ong Yiu v. Court of Appeals (G.R. No. L‑40597) directly controlling: a printed stipulation limiting carrier liability on the ticket is a part of the contract of carriage and binding on the passenger even absent signature, as an adhesion contract. The Court distinguished Shewaram v. Philippine Air Lines (where the printed terms were illegible) and held that no comparable facts were alleged here to invalidate notice. Relying on the ticket’s limitation ($20.00 per kilo) and Pangan’s failure to declare higher value or pay additional charges, the Court concluded Pan Am’s liability must be limited to $20.00 per kilo — calculated on 30 kilos, yielding US$600.00.

Application of Mendoza and Rejection of Lost Profits Claim

The Court

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