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
...continue readingCase Syllabus (G.R. No. 70462)
Nature of the Case and Relief Sought
- Petition for review to the Supreme Court by Pan American World Airways, Inc. (petitioner), an international air carrier, contesting the decision of the Intermediate Appellate Court which affirmed the trial court's award of damages to private respondents for lost baggage and consequential losses.
- Petitioner seeks limitation of liability to the amount specified in the airline ticket absent a declaration of higher valuation and payment of additional charges.
- Case presented on the basis of stipulated facts adopted by the trial court and appellate court and sharpened into legal issues concerning carrier liability, contractual limitation printed on the ticket, applicability of the Warsaw Convention, and recoverability of consequential or special damages (lost profits).
Undisputed Factual Background
- On April 25, 1978, Rene V. Pangan (plaintiff), president and general manager of plaintiffs Sotang Bastos and Archer Productions, entered into an agreement (Exh. A) in San Francisco with Primo Quesada of Prime Films to supply three films for exhibition in the United States at US$2,500.00 per picture; plaintiffs agreed to provide promotional and advertising materials on or before May 30, 1978.
- While in Guam en route to the Philippines, Pangan made a verbal agreement with Leo Slutchnick of the Hafa Adai Organization to exhibit two of the films at the Hafa Adai Theater in Guam on May 30, 1978 for P7,000.00 per picture; plaintiffs likewise agreed to provide promotional materials by the exhibition date.
- Pangan caused the preparation of promotional handbills and still pictures costing P12,900.00 (Exhs. B, B-1, C and C-1) and purchased fourteen clutch bags, four capiz lamps and four barong tagalog totaling P4,400.00 (Exhs. D, D-1, E, and F) to prepare for the trip and contractual obligations.
- On May 18, 1978, Pangan obtained from Pan Am’s Manila Office through the Your Travel Guide an economy class ticket No. 0269207406324 (Exh. G) for Manila to Guam Flight No. 842 of May 27, 1978, paying the regular fare; Your Travel Guide was owned/managed by Pangan’s witness Mila de la Rama.
- On May 27, 1978, two hours before departure, Pangan presented his ticket and checked in two luggages at Pan Am’s ticket counter at Manila International Airport and received baggage claim tickets Nos. 963633 and 963649 (Exhs. H and H-1); the luggages contained promotional and advertising materials, clutch bags, barong tagalog and personal belongings.
- Pangan was later informed his name was not in the manifest and thus could not take the flight in economy class; with no economy space available he took first class, paying an additional US$112.00 to be on time in Guam.
- Upon arrival in Guam on May 27, 1978, his two luggages did not arrive with his flight; as a consequence the agreements with Slutchnick and Quesada for exhibition in Guam and the United States were cancelled (Exh. L).
- Pangan filed a written claim for the missing luggages (Exh. J) and his lawyer later made representations and protests regarding treatment by Pan Am employees and loss of the luggages (Exhs. M, O, Q, S, and T); Pan Am assured investigation and immediate consideration (Exhs. N, P and R), but failed to communicate action taken, prompting the complaint.
Trial Court Findings and Judgment
- The Court of First Instance found petitioner liable and rendered judgment:
- (1) Order Pan Am to pay all plaintiffs P83,000.00 as actual damages with 14% interest per annum from December 6, 1978 (date complaint filed), plus P10,000.00 as attorney’s fees.
- (2) Order Pan Am to pay Rene V. Pangan P8,123.34 as additional actual damages with 14% interest per annum from December 6, 1978.
- (3) Dismiss Pan Am’s counterclaim.
- (4) Order Pan Am to pay costs of suit.
- The trial court awarded damages that included compensation for lost profits due to cancellation of film exhibition contracts.
Intermediate Appellate Court Disposition
- The Intermediate Appellate Court affirmed the trial court’s decision, including awards for actual damages based on cancellation of contracts and related consequential losses.
- The appellate court relied on certain quotations and precedents in reaching its conclusion (discussed further in the analysis section).
Petition and Assigned Errors Presented to the Supreme Court
- Petitioner assigned errors challenging the appellate court’s affirmance on two primary grounds:
- (1) The appellate court erred in affirming award of actual damages beyond the limitation of liability set forth in the Warsaw Convention and the contract of carriage.
- (2) The appellate court erred in affirming the award of alleged lost profits (special or consequential damages) contrary to the rule in Mendoza v. Philippine Airlines (90 Phil. 836, 1952).
Conditions Printed on the Airline Ticket and Notices
- The airline ticket (Exh. G) contained prominent printed conditions and notices including:
- NOTICE: If passenger’s journey involves an ultimate destination or stop in a country other than country of departure the Warsaw Convention may be applicable and governs and in most cases limits liability of carriers for death/personal injury and loss/damage to baggage; see also Notice headed “Advice to International Passengers on Limitation of Liability.”
- CONDITIONS OF CONTRACT: Definitions of “ticket”, “carriage”, “carrier”, and reference to the WARSAW CONVENTION (Convention for the Unification of Certain Rules Relating to International Carriage by Air signed at Warsaw, October 12, 1929, and amended at The Hague, September 28, 1955) and that carriage is subject to rules and limi