BRITISH AIRWAYS vs. CA

Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA.

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA.

Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report."

Mahtani filed his complaint for damages and attorney's fees against BA and Mr. Gumar before the trial court.

BA filed its answer with counter claim to the complaint raising, as special and affirmative defenses, that Mahtani did not have a cause of action against it. BA filed a third-party complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong.

PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing that there was, in fact, adequate time to transfer the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to Hongkong authorities should be considered as transfer to BA.

Trial court rendered its decision in favor of Mahtani, dismissed the 3 rd party complaint against PAL.

BA appealed to the Court of Appeals, which however, affirmed the trial court's findings.

ISSUE: WON BA is liable to Mahtani. YES.

Before we resolve the issues raised by BA, it is needful to state that the nature of an airline's contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their destination. A business intended to serve the traveling public primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting standard. Neglect or malfeasance by the carrier's employees could predictably furnish bases for an action for damages.

In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of cases we have assessed the airlines' culpability in the form of damages for breach of contract involving misplaced luggage.

In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection to defendant's acts.

Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater amount. Article 22(1) of the Warsaw Convention, provides as follows:

(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless the consignor has made, at time the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery.

American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being binding, on the passenger regardless of the passenger's lack of knowledge thereof or assent thereto. This doctrine is recognized in this jurisdiction.

Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the facts and circumstances justify that they should be disregarded.

In addition, we have held that benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely objections during the trial when questions and answers regarding the actual claims and damages sustained by the passenger were asked.

Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of limited liability when it allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage, without any objection.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any negligence in the performance of its function. And is liable for damages which the principal may suffer by reason of its negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship. Therefore, in the instant case, the contractual relationship between BA and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the agent.

Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately determining who was primarily at fault as between them, is without legal basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases which would entail receiving the same or similar evidence for both cases and enforcing separate judgments therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay and circuitry of action and to enable the controversy to be disposed of in one suit. It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is proven that the latter's negligence was the proximate cause of Mahtani's unfortunate experience, instead of totally absolving PAL from any liability.JAL vs. ASUNCION

Michael and Jeanette Asuncion left Manila on board Japan Airlines’ (JAL) bound for Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko of JAL endorsed their applications for shore pass and directed them to the Japanese immigration official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of call for not more than 72 hours.

Japanese immigration official noted that Michael appeared shorter than his height as indicated in his passport. Because of this inconsistency, respondents were denied shore pass entries and were brought instead to the Narita Airport Rest House where they stayed overnight.

Respondents filed a complaint for damages claiming that JAL did not fully apprise them of their travel requirements and that they were rudely and forcibly detained at Narita Airport.

JAL denied the allegations of respondents. It maintained that the refusal of the Japanese immigration authorities to issue shore passes to respondents is an act of state which JAL cannot interfere with or prevail upon. Consequently, it cannot impose upon the immigration authorities that respondents be billeted at Hotel Nikko instead of the airport resthouse.

Trial Court favored Asuncion and held JAL liable to pay: expenses, moral, exemplary, attorney’s fees; dismissed JAL’s counterclaim for litigation expenses, exemplary damages and attorney’s fees.

On appeal, Court of Appeals affirmed TC’s decision.

ISSUE: WON JAL is guilty of breach of contract. NO

Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger has every right to expect that he be transported on that flight and on that date and it becomes the carrier’s obligation to carry him and his luggage safely to the agreed destination. If the passenger is not so transported or if in the process of transporting he dies or is injured, the carrier may be held liable for a breach of contract of carriage.

We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents’ shore pass applications.

Moral damages may be recovered in cases where one willfully causes injury to property, or in cases of breach of contract where the other party acts fraudulently or in bad faith. Exemplary damages are imposed by way of example or correction for the public good, when the party to a contract acts in wanton, fraudulent, oppressive or malevolent manner. Attorney’s fees are allowed when exemplary damages are awarded and when the party to a suit is compelled to incur expenses to protect his interest. There being no breach of contract nor proof that JAL acted in wanton, fraudulent or malevolent manner, there is no basis for the award of any form of damages.

We find that the Court of Appeals correctly dismissed JAL’s counterclaim for litigation expenses, exemplary damages and attorney’s fees. The action was filed by respondents in utmost good faith and not manifestly frivolous. Respondents honestly believed that JAL breached its contract. A person’s right to litigate should not be penalized by holding him liable for damages. This is especially true when the filing of the case is to enforce what he believes to be his rightful claim against another although found to be erroneous.

LHUILLIER vs. BA

Petitioner Edna Diago Lhuillier filed a Complaint for damages against respondent British Airways before the RTC of Makati City. She alleged that she took respondent’s flight from London, United Kingdom to Rome, Italy. Once on board, she allegedly requested Halliday, one of the respondent’s flight attendants, to assist her in placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and assist her, and even sarcastically remarked that "If I were to help all 300 passengers in this flight, I would have a broken back!"

And another flight attendant, Kerrigan, singled her out from among all the passengers in the business class section to lecture on plane safety which made her appear to the other passengers to be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and regulations of the plane. Affronted, petitioner assured Kerrigan that she knew the plane’s safety regulations being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few centimeters away from that of the petitioner and menacingly told her that "We don’t like your attitude."

She complained to respondent’s ground manager and demanded an apology. However, the latter declared that the flight stewards were "only doing their job."

Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay P5 million as moral damages, P2 million as nominal damages, P1 million as exemplary damages, P300,000.00 as attorney’s fees, P200,000.00 as litigation expenses, and cost of the suit.

Summons, together with a copy of the complaint, was served on the respondent through Echevarria, General Manager of Euro-Philippine Airline Services, Inc.

Respondent, by way of special appearance through counsel, filed a Motion to Dismiss on grounds of lack of jurisdiction over the case and over the person of the respondent. Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the Warsaw Convention, Article 28(1) of which provides:

An action for damages must be brought at the option of the plaintiff, either before the court of domicile of the carrier or his principal place of business, or where he has a place of business through which the contract has been made, or before the court of the place of destination.

Thus, since a) respondent is domiciled in London; b) respondent’s principal place of business is in London; c) petitioner bought her ticket in Italy (through Jeepney Travel S.A.S, in Rome); and d) Rome, Italy is petitioner’s place of destination, then it follows that the complaint should only be filed in the proper courts of London, United Kingdom or Rome, Italy.

Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over the person of the respondent because the summons was erroneously served on Euro-Philippine Airline Services, Inc. which is not its resident agent in the Philippines.

RTC Makati granted the Motion to Dismiss on the ground of lack of jurisdiction; service of summons was rendered moot; principles of international law bound the Philippines.

MR – denied; Petition for review on certiotari was filed.

ISSUE: WON Phil. Courts have jurisdiction over a tortuous conduct committed against a Fil citizen by airline personnel of foreign carrier beyond territorial limit. NO.

The Republic of the Philippines is a party to the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country.

For the purposes of this Convention the expression "international carriage" means any carriage in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, suzerainty, mandate or authority of another Power, even though that Power is not a party to this Convention. A carriage without such an agreed stopping place between territories subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party is not deemed to be international for the purposes of this Convention.

Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

1. the court where the carrier is domiciled;2. the court where the carrier has its principal place of business;3. the court where the carrier has an establishment by which the contract has been made; or4. the court of the place of destination.

We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus:

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred.

PAL vs. SAVILLO

Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in Jakarta, Indonesia. He and several companions decided to purchase their respective passenger tickets from PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private respondent and his companions were made to understand by PAL that its plane would take them from Manila to Singapore, while Singapore Airlines would take them from Singapore to Jakarta.

Private respondent and his companions took the PAL flight to Singapore and upon their arrival, they proceeded to the Singapore Airlines office to check-in for their flight to Jakarta scheduled at 8:00 o’clock in the same evening. Singapore Airlines rejected the tickets of private respondent and his group because they were not endorsed by PAL. It was explained to private respondent and his group that if Singapore Airlines honored the tickets without PAL’s endorsement, PAL would not pay Singapore Airlines for their passage. Private respondent tried to contact PAL’s office at the airport, only to find out that it was closed.

They were forced to purchase tickets from Garuda Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about 12:00 o’clock midnight, the party who was supposed to fetch them from the airport had already left and they had to arrange for their transportation to the hotel at a very late hour. After the series of nerve-wracking experiences, private respondent became ill and was unable to participate in the tournament.

Private respondent brought the matter to the attention of PAL. He sent a demand letter to PAL and another to Singapore Airlines. However, both airlines disowned liability and blamed each other for the fiasco. They filed a Complaint for Damages before the RTC seeking compensation for moral damages in the amount of P1,000,000.00 and attorney’s fees.

PAL filed a Motion to Dismiss on the ground that the said complaint was barred on the ground of prescription under Section 1(f) of Rule 16 of the Rules of Court. PAL argued that the Warsaw Convention, particularly Article 29 thereof, governed this case, as it provides that any claim for damages in connection with the international transportation of persons is subject to the prescription period of two years. Since the Complaint was filed on 15 August 1997, more than three years after PAL received the demand letter on 25 January 1994, it was already barred by prescription.

RTC issued an Order denying the Motion to Dismiss. It maintained that the provisions of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to the present case.

Court of Appeals, dismissed the Petition for Certiorari filed by PAL and affirmed the Order of the RTC. It pronounced that the application of the Warsaw Convention must not be construed to preclude the application of the Civil Code and other pertinent laws. By applying Article 1144 of the Civil Code, which allowed for a ten-year prescription period, the appellate court declared that the Complaint filed by private respondent should not be dismissed.

ISSUE: WON the Warsaw Convention is applicable in this case. NO, it must be Civil Code.

The Warsaw Convention applies to "all international transportation of persons, baggage or goods performed by any aircraft for hire." It seeks to accommodate or balance the interests of passengers seeking recovery for personal injuries and the interests of air carriers seeking to limit potential liability. It employs a scheme of strict liability favoring passengers and imposing damage caps to benefit air carriers. The cardinal purpose of the Warsaw Convention is to provide uniformity of rules governing claims arising from international air travel; thus, it precludes a passenger from maintaining an action for personal injury damages under local law when his or her claim does not satisfy the conditions of liability under the Convention.

Article 19 of the Warsaw Convention provides for liability on the part of a carrier for "damages occasioned by delay in the transportation by air of passengers, baggage or goods." Article 24 excludes other remedies by further providing that "(1) in the cases covered by articles 18 and 19, any action for damages, however founded, can only be brought subject to the conditions and limits set out in this convention." Therefore, a claim covered by the Warsaw Convention can no longer be recovered under local law, if the statute of limitations of two years has already lapsed.

Court notes that jurisprudence in the Philippines and the United States also recognizes that the Warsaw Convention does not "exclusively regulate" the relationship between passenger and carrier on an international flight. This Court finds that the present case is substantially similar to cases in which the damages sought were considered to be outside the coverage of the Warsaw Convention.

In United Airlines v. Uy, this Court distinguished between the (1) damage to the passenger’s baggage and (2) humiliation he suffered at the hands of the airline’s employees. The first cause of action was covered by the Warsaw Convention which prescribes in two years, while the second was covered by the provisions of the Civil Code on torts, which prescribes in four years.

AMERICAN AIRLINES vs. CA

Private respondent purchased from Singapore Airlines in Manila conjunction tickets for Manila-Singapore-Athens-Larnaca-Rome-Turin-Zurich-Geneva-Copenhagen-New York. The petitioner was not a participating airline in any of the segments in the itinerary under the said conjunction tickets. In Geneva the petitioner decided to forego his trip to Copenhagen and to go straight to New York and in the absence of a direct flight under his conjunction tickets from Geneva to New York, the private respondent exchanged the unused portion of the conjunction ticket for a one-way ticket from Geneva to New York from the petitioner airline. Petitioner issued its own ticket to the private respondent in Geneva and claimed the value of the unused portion of the conjunction ticket from the IATA clearing house in Geneva.

Private respondent filed an action for damages before the RTC of Cebu for the alleged embarrassment and mental anguish he suffered at the Geneva Airport when the petitioner's security officers prevented him from boarding the plane, detained him for about an hour and allowed him to board the plane only after all the other passengers have boarded.

The petitioner filed a motion to dismiss for lack of jurisdiction of Philippine courts to entertain the said proceedings under Art. 28(1) of the Warsaw Convention.

The trial court denied the motion. The order of denial was elevated to the Court of Appeals which affirmed the ruling of the trial court. Both the trial and the appellate courts held that the suit may be brought in the Philippines under the pool partnership agreement among the IATA members, which include Singapore Airlines and American Airlines, wherein the members act as agents of each other in the issuance of tickets to those who may need their services.

The contract of carriage perfected in Manila between the private respondent and Singapore Airlines binds the petitioner as an agent of Singapore Airlines and considering that the petitioner has a place of business in Manila, the third option of the plaintiff under the Warsaw Convention i.e. the action may be brought in the place where the contract was perfected and where the airline has a place of business, is applicable.

ISSUE: WON the contract of transportation between the petitioner and private respondents would be considered as single transaction. YES

The Warsaw Convention to which the Republic of the Philippines is a party and which has the force and effect of law in this country applies to all international transportation of persons, baggage or goods performed by an aircraft gratuitously or for hire. As enumerated in the Preamble of the Convention, one of the objectives is "to regulate in a uniform manner the conditions of international transportation by air". The contract of carriage entered into by the private respondent with Singapore Airlines, and subsequently with the petitioner, to transport him to nine cities in different countries with New York as the final destination is a contract of international transportation and the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passengers. This includes section 28 (1) which enumerates the four places where an action for damages may be brought.

The contract of carriage between the private respondent and Singapore Airlines although performed by different carriers under a series of airline tickets, including that issued by

the petitioner, constitutes a single operation. Members of the IATA are under a general pool partnership agreement wherein they act as agent of each other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world.

Booking and reservation among airline members are allowed even by telephone and it has become an accepted practice among them. A member airline which enters into a contract of carriage consisting of a series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and through the required process of interline settlement of accounts by way of the IATA clearing house an airline is duly compensated for the segment of the trip serviced.

Thus, when the petitioner accepted the unused portion of the conjunction tickets, entered it in the IATA clearing house and undertook to transport the private respondent over the route covered by the unused portion of the conjunction tickets, i.e., Geneva to New York, the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as agent of the principal contracting airline, Singapore Airlines, as to the segment of the trip the petitioner agreed to undertake. As such, the petitioner thereby assumed the obligation to take the place of the carrier originally designated in the original conjunction ticket.

The petitioner's argument that it is not a designated carrier in the original conjunction tickets and that it issued its own ticket is not decisive of its liability. The new ticket was simply a replacement for the unused portion of the conjunction ticket, both tickets being for the same amount of US$2,760 and having the same points of departure and destination. By constituting itself as an agent of the principal carrier the petitioner's undertaking should be taken as part of a single operation under the contract of carriage executed by the private respondent and Singapore Airlines in Manila.

The quoted provision of the Warsaw Convention Art. 1(3) clearly states that a contract of air transportation is taken as a single operation whether it is founded on a single contract or a series of contracts. The number of tickets issued does not detract from the oneness of the contract of carriage as long as the parties regard the contract as a single operation. The evident purpose underlying this Article is to promote international air travel by facilitating the procurement of a series of contracts for air transportation through a single principal and obligating different airlines to be bound by one contract of transportation. Petitioner's acquiescence to take the place of the original designated carrier binds it under the contract of carriage entered into by the private respondent and Singapore Airlines in Manila.

The third option of the plaintiff under Art 28 (1) of the Warsaw Convention e.g., to sue in the place of business of the carrier wherein the contract was made, is therefore, Manila, and Philippine courts are clothed with jurisdiction over this case. We note that while this case was filed in Cebu and not in Manila the issue of venue is no longer an issue as the petitioner is deemed to have waived it when it presented evidence before the trial court.

SAVELLANO vs. NW

Savellano was a Cabugao, Ilocos Sur mayor for many terms, former Chairman of the Commission on Elections and Regional Trial Court (RTC) judge. His wife, Virginia is a businesswoman and operates several rural banks in Ilocos Sur. The couple's son Deogracias was, at the time [of] the incident subject of the case, the Vice-Governor of Ilocos Sur.

Petitioners departed from San Francisco, USA on board Northwest Airlines (NW) Flight 27, Business Class, bound for Manila, Philippines using the NW round-trip tickets which were issued at [respondent's] Manila ticketing office.

NW Flight 27's pilot made an emergency landing in Seattle after announcing that a fire had started in one of the plane's engines.

Passengers proceeded to Gate 8 of the Seattle Airport where they were instructed to go home to Manila the next day, 'using the same boarding passes with the same seating arrangements.

When they reached the Seatle’s Airport ground stewardess belatedly advised them that instead of flying to Manila they would have to board NW Flight 94, a DC-10 plane, bound for a 3-hour flight to Los Angeles for a connecting flight to Manila. When Savellano insisted theirs was a direct flight to Manila, the female ground stewardess just told them to hurry up as they were the last passengers to board.

Their three small handcarried items which were not padlocked as they were merely closed by zippers were 'not allowed' to be placed inside the passengers' baggage compartments of the plane by an arrogant NW ground stewardess.

Upon arrival at NAIA, they discovered that the would-have-been handcarried items which were not allowed to be placed inside the passengers' baggage compartment had been ransacked and the contents thereof stolen.

Petitioners through counsel demanded from NW the amount of P3,000,000.00 as damages for what they claimed to be the humiliation and inconvenience they suffered in the hands of its personnel. [Respondent] did not accede to the demand, however, impelling [petitioners] to file a case for damages at the RTC of Cabugao, Ilocos Sur.

RTC issued sub poena duces tecum, directing NW to submit the passengers' manifest of the distressed flight from San Francisco to Tokyo, the passengers' manifest of the same distressed plane from Seattle to Tokyo, and the passenger manifest of the substitute plane from Seattle to Los Angeles and Los Angeles to Seoul enroute to Manila. – not complied with; favored petitioners

CA - ruled that petitioners had failed to show respondent's bad faith, negligence or malice in transporting them via the Seattle-Los Angeles-Seoul-Manila route. Hence, it held that there was no basis for the RTC's award of moral and exemplary damages. Neither did it find any reason to grant attorney's fees.

ISSUE: WON there is breach of contract of carriage. YES

A contract is the law between the parties. Thus, in determining whether petitioners' rights were violated, we must look into its provisions, which are printed on the airline

ticket. Conditiion 9 in the agreement states that a "[c]arrier may without notice substitute alternate carriers or aircraft, and may alter or omit stopping places shown on the ticket in case of necessity.

The ambiguities in the contract, being one of adhesion, should be construed against the party that caused its preparation — in this case, respondent. Since the conditions enumerated on the ticket do not specifically allow it to change stopping places or to fly the passengers to alternate connecting cities without consulting them, then it must be construed to mean that such unilateral change was not permitted.

As a general rule, the factual findings of the CA when supported by substantial evidence on record are final and conclusive and may not be reviewed on appeal. An exception to this rule is when the lower court and the CA arrive at different factual findings. In this case, the trial court found the presence of bad faith and hence awarded moral and exemplary damages; while the CA found none and hence deleted the award of damages. Thus, the Court is now behooved to review the basis for sustaining the award or deletion of damages.

In the absence of bad faith, ill will, malice or wanton conduct, respondent cannot be held liable for moral damages. Article 2219 of the Civil Code enumerates the instances in which moral damages may be awarded. In a breach of contract, such damages are not awarded if the defendant is not shown to have acted fraudulently or with malice or bad faith. Insufficient to warrant the award of moral damages is the fact that complainants suffered economic hardship, or that they worried and experienced mental anxiety.

Neither are exemplary damages proper in the present case. The Civil Code provides that "[i]n contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." Respondent has not been proven to have acted in that manner. At most, it can only be found guilty of having acted without first considering and weighing all other possible courses of actions it could have taken, and without consulting petitioners and securing their consent to the new stopping places.

Nominal damages are recoverable if no actual, substantial or specific damages were shown to have resulted from the breach. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.

KLM vs. CA

Respondents approached Tirso Reyes, manager of a branch of the Philippine Travel Bureau, a travel agency, for consultations about a world tour which they were intending to make with their daughter and a niece. Reyes submitted to them, after preliminary discussions, a tentative itinerary which prescribed a trip of thirty-five legs; the respondents would fly on different airlines. Three segments of the trip, the longest, would be via KLM. The respondents expressed a desire to visit Lourdes, France, and discussed with Reyes two alternate routes, namely, Paris to Lourdes and Barcelona to Lourdes. The respondents decided on the Barcelona-Lourdes route with knowledge that only one airline, Aer Lingus, serviced it.

They approved the itinerary prepared for them, and asked Reyes to make the necessary plane reservations. Reyes went to the KLM, for which the respondents had expressed preference. The KLM thereafter secured seat reservations for the respondents and their two companions from the carriers which would ferry them throughout their trip, with the exception of Aer Lingus. When the respondents left the Philippines (without their young wards who had enplaned much earlier), they were issued KLM tickets for their entire trip. However, their coupon for the Aer Lingus portion was marked "RQ" which meant "on request".

Upon arrival at Germany, they went to a KLM office there and obtained a confirmation from Aer Lingus of seat reservations on flight 861. After meandering in London, Paris and Lisbon, the foursome finally took wing to Barcelona for their trip to Lourdes, France.

At the airport, although their daughter and niece were allowed to take the plane, the respondents were off-loaded on orders of the Aer Lingus manager who brusquely shoved them aside with the aid of a policeman and who shouted at them, "Conos! Ignorantes Filipinos!"

Respondents, referring to KLM as the principal of Aer Lingus, filed a complaint for damages with the Court of First Instance of Manila arising from breach of contract of carriage and for the humiliating treatment received by them at the hands of the Aer Lingus manager in Barcelona. After due hearing, the trial court awarded damages to the respondents as follows: $43.35 or its peso equivalent as actual damages, P10,000 as moral damages, P5,000 as exemplary damages, and P5,000 as attorney's fees, and expenses of litigation.

Both parties appealed to the Court of Appeals. The KLM sought complete exoneration; the respondents prayed for an increase in the award of damages. In its decision of August 14, 1969 the Court of Appeals decreed as follows: "Appellant KLM is condemned to pay unto the plaintiffs the sum of $43.35 as actual damages; P50,000 as moral damages; and P6,000 as attorney's fees and costs."

ISSUE: WON KLM should be held liable. YES

The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to transport the respondents to their planned and contracted destination.

The argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus because of the provision printed on the respondents' tickets expressly limiting the KLM's liability for damages only to occurrences on its own lines is unacceptable. As noted by the Court of Appeals that condition was printed in letters so small that one would have to use a magnifying glass to read the words. Under the circumstances, it would be unfair and inequitable to charge the respondents with automatic knowledge or notice of the said condition so as to preclude any doubt that it was fairly and freely agreed upon by the respondents when they accepted the passage tickets issued to them by the KLM. As the airline which issued those tickets with the knowledge that the respondents would be flown on the various legs of their journey by different air carriers, the KLM was chargeable with the duty and responsibility of specifically informing the respondents of conditions prescribed in their tickets or, in the very least, to ascertain that the respondents read them before they accepted their passage tickets. A thorough search of the record, however, inexplicably fails to show that any effort was exerted by the KLM officials or employees to discharge in a proper manner this responsibility to the respondents. Consequently, we hold that the respondents cannot be bound by the provision in question by which KLM unilaterally assumed the role of a mere ticket-issuing agent for other airlines and limited its liability only to untoward occurrences on its own lines.

Moreover, as maintained by the respondents and the Court of Appeals, the passage tickets of the respondents provide that the carriage to be performed thereunder by several successive carriers "is to be regarded as a single operation," which is diametrically incompatible with the theory of the KLM that the respondents entered into a series of independent contracts with the carriers which took them on the various segments of their trip. This position of KLM we reject. The respondents dealt exclusively with the KLM which issued them tickets for their entire trip and which in effect guaranteed to them that they would have sure space in Aer Lingus flight 861.

The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to transport the respondents on the Barcelona-Lourdes segment of their itinerary. It is but just and in full accord with the policy expressly embodied in our civil law which enjoins courts to be more vigilant for the protection of a contracting party who occupies an inferior position with respect to the other contracting party, that the KLM should be held responsible for the abuse, injury and embarrassment suffered by the respondents at the hands of a supercilious boor of the Aer Lingus.