Case Summary (G.R. No. 104235)
Issue of Applicable Law and Proof of U.S. Regulation
TWA’s claim that U.S. Civil Aeronautics Board regulations explicitly permit overbooking was unproved. Foreign laws must be formally alleged and evidenced by official publications or properly certified copies. Reliance on an agent’s deposition did not satisfy proof. Thus, the CA’s finding that overbooking was lawfully authorized had no factual basis.
Application of Lex Loci Contractus and Philippine Law
Under the principle of lex loci contractus, the law where the contract was formed governs. Since the tickets were sold and issued in the Philippines, Philippine law applies. Local jurisprudence uniformly deems overbooking without passenger notice as bad faith entitling claimants to moral damages.
Jurisprudence on Overbooking and Bad Faith
In Alitalia Airways v. CA (1990) and Korean Airlines v. CA (1987), this Court held that denying a confirmed passenger boarding constitutes bad faith breach and warrants moral damages. Pan American v. IAC (1987) and Zulueta v. Pan American (1972) reinforce that a contract of carriage imposes a public service duty; neglect of that duty through deliberate overbooking or equipment substitution for airline economy undermines passenger rights and gives rise to moral damages.
Failure to Inform and Incorporation of Overbooking Policy
Even if overbooking were permissible, TWA acted in bad faith by failing to notify passengers or incorporate overbooking and boarding-priority clauses into the carriage contract. Absent clear stipulations or proper disclosure on the ticket or by the carrier, passengers rightfully rely on the assurance of confirmed seats. TWA’s omission placed its interests above contractual obligations.
Refund of Unused Ticket and Reimbursement of Substitute Airfare
The Court upheld that no refund was due for Liana’s unused ticket used by her father, as both parties implicitly agreed to the ticket’s use. However, TWA must reimburse Suthira and Liana for their American Airlines expenses (US $918). Under Civil Code Art. 2201, a party in breach is liable for all damages reasonably flowing from non-performance; reimbursement of alternative transport costs is proper.
Award of Moral, Exemplary Damages, and Attorney’s Fees
Case Syllabus (G.R. No. 104235)
Facts of the Case
- Petitioners Cesar and Suthira Zalamea and their daughter Liana purchased three confirmed tickets from TWA’s Manila agent for Flight 007 (New York to Los Angeles) on June 6, 1984.
- The spouses’ tickets were at a 75% discount; the daughter’s was full fare.
- On June 4, 1984, petitioners received reconfirmation notices for their reservations.
- On June 6, petitioners checked in at 10:00 am (one hour before departure) but were placed on a wait-list as all seats had been taken.
- Liana was No. 13 on the wait-list; the spouses were listed as No. 34 (party of two). There were 42 names in total.
- The first 22 wait-listed passengers, prioritized by full-fare tickets, were boarded; Cesar (holding Liana’s full-fare coupon) was admitted, while Suthira and Liana (with discounted tickets) were bumped.
- Subsequent TWA flights were also fully booked; Suthira and Liana purchased American Airlines tickets for US$918 to reach Los Angeles.
Procedural History
- Petitioners sued TWA for breach of contract of carriage before the Regional Trial Court (RTC) of Makati, Branch 145.
- RTC ruled in favor of petitioners, awarding:
• US$918 (or peso equivalent) for American Airlines tickets
• US$159.49 for Suthira’s TWA ticket
• ₱8,934.50 for Liana’s TWA ticket
• ₱250,000 moral damages
• ₱100,000 attorney’s fees
• costs of suit - TWA appealed to the Court of Appeals (CA).
- CA found breach of contract but no fraud or bad faith (overbooking permitted under alleged U.S. regulations), removed moral and exemplary damages, and modified the award to:
• US$159.49 each for Suthira’s and Cesar’s TWA tickets
• ₱50,000 attorney’s fees
• costs of suit - Petitioners filed a petition for