Cathay Pacific Airways, Ltd. vs. Alcantara

A carrier's liability for breach of contract of carriage is not limited to the amounts set forth in the Warsaw Convention where the damage is caused by the wilful misconduct or bad faith of the carrier's employees. In such cases, the carrier may be held liable for moral and exemplary damages under the Civil Code, notwithstanding the liability limits prescribed by the Convention.

Private respondent Tomas L. Alcantara was a first-class passenger of petitioner Cathay Pacific Airways, Ltd., a foreign airline operating in the Philippines. The Warsaw Convention, a treaty commitment assumed by the Philippine government, has the force and effect of law in the country and prescribes limits on a carrier's liability for damages in enumerated cases. However, the Convention does not operate as an exclusive enumeration of instances for declaring a carrier liable or as an absolute limit on the extent of that liability, and it does not preclude the operation of the Civil Code and other pertinent laws.

On 19 October 1975, respondent Tomas L. Alcantara was a first-class passenger of petitioner Cathay Pacific Airways, Ltd. (CATHAY) on its Flight No. CX-900 from Manila to Hongkong and onward from Hongkong to Jakarta on Flight No. CX-711. The purpose of his trip was to attend a conference the following day, 20 October 1975, with the Director General of Trade of Indonesia. Alcantara was the Executive Vice-President and General Manager of Iligan Cement Corporation, Chairman of the Export Committee of the Philippine Cement Corporation, and representative of the Cement Industry Authority and the Philippine Cement Corporation. He checked in his luggage which contained not only his clothing and articles for personal use but also papers and documents he needed for the conference.

Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When he inquired about his luggage from CATHAY's representative in Jakarta, he was told that his luggage was left behind in Hongkong. For this, respondent Alcantara was offered $20.00 as "inconvenience money" to buy his immediate personal needs until the luggage could be delivered to him. His luggage finally reached Jakarta more than twenty-four (24) hours after his arrival. However, it was not delivered to him at his hotel but was required by petitioner to be picked up by an official of the Philippine Embassy.

The deposition of Romulo Palma, Commercial Attache of the Philippine Embassy at Jakarta, who was with respondent Alcantara when the latter sought assistance from the employees of CATHAY, revealed the treatment Alcantara received. When Alcantara pressed the duty officer to make a report and deliver his baggage as soon as possible, the duty officer answered back saying, "What can we do, the baggage is missing. I cannot do anything. Anyhow you can buy anything you need, charged to Cathay Pacific." The duty officer's demeanor was indifferent, as he would like to dismiss the affair as soon as possible by saying indifferently, "Don't worry. It can be found."

CATHAY alleged that as a result of mechanical trouble, all pieces of luggage on board the first aircraft bound for Jakarta were unloaded and transferred to the second aircraft which departed an hour and a half later. However, as the Court of Appeals noted, petitioner was not even aware that it left behind private respondent's luggage until its attention was called by the Hongkong Customs authorities. For want of appropriate clothing for the occasion brought about by the delay of the arrival of his luggage, to his embarrassment and consternation, respondent Alcantara had to seek postponement of his pre-arranged conference with the Director General of Trade of the host country.

• Findings of Fact Not Reviewable: Petitioner argued that its first assigned error involved findings of fact which are not reviewable by the Supreme Court, and that the conclusion of the appellate court that private respondent was treated rudely and arrogantly had no factual basis.
• Lack of Bad Faith: Petitioner argued that although it failed to transport respondent Alcantara's luggage on time, the one-day delay was not made in bad faith so as to justify moral, exemplary and temperate damages.
• Warsaw Convention as Exclusive Limit: Petitioner contended that the extent of its liability for breach of contract should be limited absolutely to that set forth in the Warsaw Convention.

• Insufficient Damages: Respondent Alcantara assigned as error the failure of the trial court to grant the full amount of damages sought in his complaint.

• Liability for Damages: Whether the Court of Appeals erred in holding petitioner liable to respondent Alcantara for moral, exemplary and temperate damages as well as attorney's fees.
• Application of the Warsaw Convention: Whether the Court of Appeals erred in failing to apply the Warsaw Convention on the liability of a carrier to its passengers.

• Liability for Damages: No. The award of moral and exemplary damages was proper because the evidence showed that petitioner acted fraudulently or in bad faith. However, the award of temperate damages was deleted for lack of proof of pecuniary loss, and the moral damages were reduced from P80,000.00 to P30,000.00 as excessive.
• Application of the Warsaw Convention: No. The Warsaw Convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability, especially where wilful misconduct on the part of the carrier's employees is found or established.

• Liability for Damages: The Court held that petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time, it being the obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to delay their transportation. Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in death of a passenger, or where the carrier is guilty of fraud or bad faith. Both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it failed to deliver the luggage at the appointed place and time. The Court found that the language and conduct of petitioner's representative towards respondent Alcantara was discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was also rude and insulting. He simply advised Alcantara to buy anything he wanted, but even that was not sincere because the representative knew that the passenger was limited only to $20.00 which was not enough to purchase comfortable clothing appropriate for an executive conference. CATHAY also refused to have the luggage delivered to Alcantara at his hotel; instead, he was required to pick it up himself with an official of the Philippine Embassy. Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach; conversely, if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper. However, respondent Alcantara was not entitled to temperate damages in the absence of any showing that he sustained some pecuniary loss, since his luggage was ultimately delivered to him without serious or appreciable damage. The Court reduced the moral damages from P80,000.00 to P30,000.00 as excessive, but maintained the exemplary damages of P20,000.00 and attorney's fees of P25,000.00.

• Application of the Warsaw Convention: The Court held that although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable for damages in the enumerated cases and under certain limitations, but it must not be construed to preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if wilful misconduct on the part of the carrier's employees is found or established. The Warsaw Convention itself provides in Art. 25 that the carrier shall not be entitled to avail himself of the provisions of the convention which exclude or limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as is considered equivalent to wilful misconduct, or if the damage is caused under the same circumstances by any agent of the carrier acting within the scope of his employment.

• Bad Faith in Breach of Contract of Carriage — Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in death of a passenger, or where the carrier is guilty of fraud or bad faith. In this case, the discourteous, indifferent, and insulting treatment of the passenger by the carrier's employees, coupled with the carrier's refusal to deliver the luggage to the passenger's hotel, constituted bad faith justifying the award of moral and exemplary damages.

• Warsaw Convention Not an Exclusive Limit on Carrier Liability — Although the Warsaw Convention has the force and effect of law in the Philippines, being a treaty commitment assumed by the Philippine government, it does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Convention does not preclude the operation of the Civil Code and other pertinent laws, and does not exempt the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if wilful misconduct on the part of the carrier's employees is found or established.

• Wilful Misconduct Under Article 25 of the Warsaw Convention — Under Article 25 of the Warsaw Convention, the carrier shall not be entitled to avail himself of the provisions of the convention which exclude or limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as is considered equivalent to wilful misconduct, or if the damage is caused under the same circumstances by any agent of the carrier acting within the scope of his employment.

• Temperate Damages Require Proof of Pecuniary Loss — Temperate damages may be recovered only when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. In this case, temperate damages were not awarded because the passenger's luggage was ultimately delivered to him without serious or appreciable damage, and there was no showing that he sustained some pecuniary loss.

• "Indeed, the aforequoted testimony shows that the language and conduct of petitioner's representative towards respondent Alcantara was discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was also rude and insulting." — This passage establishes the factual basis for the award of moral damages, finding that the carrier's employees acted in bad faith through their discourteous treatment of the passenger.

• "As We have repeatedly held, although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability." — This passage articulates the Court's interpretation of the Warsaw Convention's role in Philippine law, holding that it does not preclude the application of the Civil Code.

• "The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the damage is caused by his wilfull misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to wilfull misconduct." — This quotation from Article 25 of the Warsaw Convention provides the basis for denying the carrier the benefit of the Convention's liability limits where wilful misconduct is established.

• Philippine Air Lines vs. Court of Appeals, G.R. No. 92501, 6 March 1992, 207 SCRA 100 — Cited for the proposition that findings of fact are not reviewable by the Supreme Court in a petition for review on certiorari.
• Tan Liao vs. American President Lines, 98 Phil 203 — Cited for the proposition that it is the obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to delay their transportation.
• China Airlines, Ltd. vs. IAC, G.R. No. 73835, 17 January 1989, 169 SCRA 226 — Cited for the proposition that moral damages may be recovered in breach of contract of carriage where the carrier is guilty of fraud or bad faith.
• Alitalia vs. IAC, G.R. No. 71929, 4 December 1990, 192 SCRA 9 — Cited for the proposition that the mere failure of the carrier to deliver luggage at the agreed place and time does not ipso facto amount to wilful misconduct, and for the proposition that the Warsaw Convention does not operate as an exclusive enumeration of instances for declaring a carrier liable.
• China Airlines Limited vs. Court of Appeals, G.R. No. 94590, 29 July 1992 — Cited for the proposition that where the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach and does not include moral and exemplary damages.
• Northwest Airlines, Inc. vs. Cuenca, No. L-22425, 31 August 1965, 14 SCRA 1063 — Cited in support of the proposition that the Warsaw Convention does not operate as an exclusive enumeration of instances for declaring a carrier liable.
• Pan American World Airways, Inc. vs. IAC, G.R. No. 68988, 21 June 1990, 186 SCRA 687 — Cited for the observation that a traveller would naturally suffer mental anguish, anxiety and shock when he finds that his luggage did not travel with him and he finds himself in a foreign land without any article of clothing other than what he has on.

• Article 1764, New Civil Code — Applied in conjunction with Article 2206 to support the award of moral damages in cases where the breach of contract of carriage results in death of a passenger.
• Article 2206, New Civil Code — Cited with Article 1764 as a basis for moral damages in breach of contract of carriage resulting in death.
• Article 2220, New Civil Code — Applied as the basis for moral damages where the carrier is guilty of fraud or bad faith in breaching the contract of carriage.
• Article 2224, New Civil Code — Applied to deny temperate damages in the absence of any showing that the passenger sustained some pecuniary loss.
• Article 2208, par. (2), New Civil Code — Applied to support the award of attorney's fees where the defendant's act or omission compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.
• Article 25, Warsaw Convention — Applied to deny the carrier the benefit of the Convention's liability limits where the damage is caused by the wilful misconduct of the carrier or its agents acting within the scope of their employment.
• Article 22, Warsaw Convention — Quoted to show the liability limits prescribed by the Convention for carriage of passengers and registered baggage, which limits were held not to apply due to the carrier's wilful misconduct.

Cruz, Griño-Aquino, and Quiason, JJ., concurred.