G.R. No. 124110 - United Airlines, Inc. vs. Court of Appeals

Case Summary (G.R. No. 124110)

Factual Background

ANICETO FONTANILLA purchased through petitioner three confirmed roundtrip tickets on March 1, 1989 for travel with his wife and minor son Mychal on a series of United Airlines flights originating and ending in San Francisco, with intermediate stops and specified dates. The family used the first coupon from San Francisco to Washington. On April 24, 1989, while in the United States, ANICETO FONTANILLA purchased two additional coupons each for the three travelers at petitioner’s office in Washington Dulles Airport and paid penalties for rewriting the tickets. The rewritten tickets and boarding passes bore the words “CHECK-IN REQUIRED” and showed no seat numbers for the May 5, 1989 Los Angeles–San Francisco flight No. 1108 scheduled at 10:30 a.m. The Fontanillas allege that on May 5 they presented themselves at petitioner’s check-in counter in Los Angeles, were attended by an employee identified by a nameplate “Linda,” were told to wait, and were thereafter denied boarding when the flight was called. They claim Linda and another employee uttered derogatory and discriminatory remarks, offered USD 50.00 each without explanation, and left their baggage on the departed aircraft. Petitioner’s version is that the Fontanillas joined the boarding queue without first obtaining seat assignments as required by their tickets and boarding passes; the gate attendant directed them to the check-in counter, where customer representative Linda Allen informed them the flight was overbooked, rebooked them on the next flight, and offered denied-boarding compensation. Linda Allen denied making the alleged derogatory remarks.

Trial Court Proceedings

ANICETO FONTANILLA and his son instituted Civil Case No. 89-4268 before the Regional Trial Court of Makati seeking damages for the alleged denial of boarding and attendant conduct. After trial on the merits, the trial court dismissed the complaint. The court found that the plaintiffs had failed to prove their allegations by a preponderance of evidence, observed that their testimony lacked corroboration, and concluded that the plaintiffs’ failure to comply with the “check-in” requirement printed on their boarding passes explained the absence of seat assignments and their initial denial of boarding.

Court of Appeals Ruling

On appeal, the COURT OF APPEALS reversed and set aside the trial court’s judgment in a decision dated September 29, 1995, and awarded P200,000.00 as moral damages, P200,000.00 as exemplary damages, and P50,000.00 as attorney’s fees. The appellate court found that United Airlines had admitted that the Fontanillas observed the check-in requirement, that the denied-boarding rules under the U.S. Code of Federal Regulations on oversales had not been followed, and that the airline’s employees were discourteous, arbitrary, and discriminatory, thereby entitling the Fontanillas to moral damages.

Issues Presented to the Supreme Court

UNITED AIRLINES, INC. raised five assignments of error: that the Court of Appeals erred in treating as admitted the allegation that the Fontanillas observed the check-in requirement; that the appellate court erred in holding that failure to check in would not defeat the Fontanillas’ claims because denied-boarding procedures were not complied with; that the award of moral damages in the amount of P200,000.00 was erroneous; that the award of exemplary damages in the amount of P200,000.00 was erroneous; and that the award of attorney’s fees in the amount of P50,000.00 lacked basis.

Admission and Burden of Proof Analysis

The Court addressed the appellate court’s conclusion that an admission arose under Rule 9, Section 1, Rules of Court from petitioner’s answer. Paragraph 7 of the complaint alleged that plaintiff and his son “checked in at defendant’s designated counter at the airport in Los Angeles” at 9:45 a.m. Petitioner’s answer “admitted the allegation except to deny that plaintiff and his son checked in at 9:45 a.m., for lack of knowledge or information.” The Supreme Court observed that an answer asserting lack of knowledge will not stand where the fact is plainly within the defendant’s knowledge and that petitioner later presented evidence denying that the plaintiffs had complied with the check-in requirement. The Court held that by litigating the fact and allowing rebuttal, the plaintiffs effectively waived any rule of admitted facts and that the trial court’s factual finding deserved deference. The Court reiterated the general civil rule that the party bearing the burden must prove an essential fact by a preponderance of evidence and that appellate courts should not lightly disturb trial court findings of fact because trial judges are better positioned to observe witness demeanor and weigh real evidence.

Check-In Requirement, Lex Loci Contractus, and Applicable Law

The Court examined whether the plaintiffs’ failure to comply with the “check-in” requirement defeated their contract claim. It rejected the appellate court’s reliance on the U.S. regulation (CFR 250.6) cited by that court, holding that Philippine law governed the contract of carriage because the tickets were originally purchased through petitioner’s agent in Manila. Applying the doctrine of lex loci contractus as articulated in Zalamea v. Court of Appeals, the Court held that the law of the place where the airline ticket was issued governs its nature and validity. Accordingly, the governing law was Philippine law, and the appropriate rule was Economic Regulations No. 7, as amended, of the Civil Aeronautics Board, which conditions denied-boarding compensation on presentation at the proper place and time and full compliance with the carrier’s check-in and reconfirmation procedures. The Court affirmed the trial court’s view that the plaintiffs’ failure to comply with the printed check-in requirement explained the absence of seat assignments and their initial denial of boarding.

Evidence of Discriminatory Conduct and Damages

The Court reviewed the Fontanillas’ allegations of abusive and discriminatory language by airline employees. It noted the trial court’s finding that the plaintiffs’ proof relied primarily on the testimony of Aniceto Fontanilla without corroboration by bystanders who allegedly witnessed the conduct. The Supreme Court held that such limited testimony,

Case Syllabus (G.R. No. 124110)

Parties and Procedural Posture

United Airlines, Inc. filed a petition to the Supreme Court contesting the Court of Appeals' reversal of the trial court judgment.
Court of Appeals reversed the Regional Trial Court and awarded damages to Aniceto Fontanilla and his minor son Mychal Andrew Fontanilla.
The Regional Trial Court of Makati originally dismissed Civil Case No. 89-4268 and denied the counterclaim.
The Court of Appeals in CA-G.R. CV No. 37044 ordered United Airlines, Inc. to pay P200,000.00 as moral damages, P200,000.00 as exemplary damages, and P50,000.00 as attorney's fees.
The Supreme Court granted the petition, reversed and set aside the Court of Appeals decision, and reinstated the Regional Trial Court judgment.

Key Facts

On March 1, 1989, Aniceto Fontanilla purchased three through "Visit the U.S.A." tickets from United Airlines, Inc. through the Philippine Travel Bureau for travel involving San Francisco, Washington, Chicago, Los Angeles, and return to San Francisco.
The Fontanillas used the first coupon from San Francisco to Washington and on April 24, 1989 purchased additional coupons at Washington Dulles Airport and received boarding passes marked "CHECK-IN REQUIRED" for United Airlines Flight No. 1108 scheduled May 5, 1989.
The Fontanillas allege that at Los Angeles Airport an attendant named "LINDA" checked their tickets, told them to wait, and later refused them boarding because of overbooking while making derogatory and racist remarks and offering USD 50 each.
United Airlines, Inc. contended that the Fontanillas did not obtain seat assignments by checking in as required, that a gate stewardess instructed them to obtain seat assignments, and that Linda Allen, the customer representative, informed them of overbooking, booked them on the next flight, and offered denied-boarding compensation while denying the alleged insults.
The Fontanillas eventually departed on United Airlines Flight No. 803 at noon.

Issues

Whether the Court of Appeals erred in treating as admitted the allegation that the Fontanillas observed the check-in requirement under Rule 9, Section 1, Rules of Court.
Whether the Fontanillas' alleged failure to check in defeated their claim because denied-boarding rules were not complied with.
Whether the Court of Appeals erred in awarding P200,000.00 as moral damages.
Whether the Court of Appeals erred in awarding P200,000.00 as exemplary damages.
Whether the Court of Appeals erred in awarding P50,000.00 as attorney's fees.

Parties' Contentions

United Airlines, Inc. contended that the Fontanillas failed to comply with the check-in requirement, that the trial court correctly dismissed the complaint, and that the Court of Appeals erroneously applied foreign law and misapplied admission rules.
Aniceto Fontanilla contended that he and his son checked in at 9:45 a.m., that airline employees denied them boarding notwithstanding confirmed tickets, that they were subjected to discourtesy and racial slurs, and that they suffered compensable moral and exemplary damages and attorney's fees.

Applicable Law

Rule 9, Section 1, Rules of Court governs deemed admissions when allegations are not specifically denied.
Economic Regulations No. 7 as amended by the Civil Aeronautics Board governs boarding priority and denied boarding compensation for flights originating from or serving the Philippines.
The doctrine of lex loci contractus as expounded in Zalamea v. Court of Appeals governs the law applicable to airline contracts issued in the Philippines.
The Court of Appeals' reli