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Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 60501. March 5, 1993.

CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and TOMAS L. ALCANTARA, respondents.

Siguion-Reyna, Montecillo & Ongsiako and Tomacruz, Manguiat & Associates for petitioner.

Tanjuatco, Oreta, Tanjuatco, Berenger & Corpus for private respondent.

SYLLABUS

1. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF; PETITIONER BREACHED ITS CONTRACT OF
CARRIAGE WITH PRIVATE RESPONDENT WHEN IT FAILED TO DELIVER HIS LUGGAGE AT THE
DESIGNATED PLACE AND TIME. — 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,
and the evidence shows that petitioner acted fraudulently or in bad faith.

2. DAMAGES; MORAL AND EXEMPLARY DAMAGES PREDICATED UPON A BREACH OF CONTRACT OF

CARRIAGE; RECOVERABLE ONLY IN INSTANCES WHERE THE MISHAP RESULTS IN DEATH OF A
PASSENGER, OR WHERE THE CARRIER IS GUILTY OF FRAUD OR BAD FAITH; THE CONDUCT OF
PETITIONER'S REPRESENTATIVE TOWARDS RESPONDENT JUSTIFIES THE GRANT OF MORAL AND
EXEMPLARY DAMAGES IN CASE AT BAR. — 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. 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,
certainly, was not enough to purchase comfortable clothings appropriate for an executive conference. Considering
that Alcantara was not only a revenue passenger but even paid for a first class airline accommodation and
accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in his
problem, petitioner or its agents should have been more courteous and accommodating to private respondent,
instead of giving him a curt reply, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow, you
can buy anything you need, charged to Cathay Pacific." 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 of obligation which the parties had foreseen or could have reasonably
foreseen. In that case, such liability does not include moral and exemplary damages. Conversely, if the defendant
airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper.

3. TEMPERATE DAMAGES; RECOVERABLE ONLY UPON PROOF THAT THE CLAIMANT SUSTAINED SOME
PECUNIARY LOSS. — However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling
of the court a quo, in the absence of any showing that he sustained some pecuniary loss. It cannot be gainsaid that
respondent's luggage was ultimately delivered to him without serious or appreciable damage.

4. 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; DOES NOT PRECLUDE THE OPERATION OF THE CIVIL CODE
AND OTHER PERTINENT LAWS. — 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. The Warsaw Convention declares the carrier liable for
damages in the enumerated cases and under certain limitations. However, 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 wilfull misconduct
on the part of the carrier's employees is found or established, which is clearly the case before Us.

DECISION

BELLOSILLO, J p:

This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed with modification that
of the trial court by increasing the award of damages in favor of private respondent Tomas L. Alcantara.

The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara was a first class passenger of
petitioner Cathay Pacific Airways, Ltd. (CATHAY for brevity) 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 the following day, 20
October 1975, a conference with the Director General of Trade of Indonesia, Alcantara being 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, private respondent 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.

On 1 March 1976, respondent filed his complaint against petitioner with the Court of First Instance (now Regional
Trial Court) of Lanao del Norte praying for temperate, moral and exemplary damages, plus attorney's fees.

On 18 April 1976, the trial court rendered its decision ordering CATHAY to pay Plaintiff P20,000.00 for moral
damages, P5,000.00 for temperate damages, P10,000.00 for exemplary damages, and P25,000.00 for attorney's
fees, and the costs. 1

Both parties appealed to the Court of Appeals. CATHAY assailed the conclusion of the trial court that it was
accountable for breach of contract and questioned the non-application by the court of the Warsaw Convention as
well as the excessive damages awarded on the basis of its finding that respondent Alcantara was rudely treated by
petitioner's employees during the time that his luggage could not be found. For his part, respondent Alcantara
assigned as error the failure of the trial court to grant the full amount of damages sought in his complaint.

On 11 November 1981, respondent Court of Appeals rendered its decision affirming the findings of fact of the trial
court but modifying its award by increasing the moral damages to P80,000.00, exemplary damages to P20,000.00
and temperate or moderate damages to P10,000.00. The award of P25,000.00 for attorney's fees was maintained.

The same grounds raised by petitioner in the Court of Appeals are reiterated before Us. CATHAY contends that: (1)
the Court of Appeals erred in holding petitioner liable to respondent Alcantara for moral, exemplary and temperate
damages as well as attorney's fees; and, (2) the Court of Appeals erred in failing to apply the Warsaw Convention
on the liability of a carrier to its passengers.

On its first assigned error, CATHAY argues 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. It
submits that the conclusion of respondent appellate court that private respondent was treated rudely and arrogantly
when he sought assistance from CATHAY's employees has no factual basis, hence, the award of moral damages
has no leg to stand on.

Petitioner's first assigned error involves findings of fact which are not reviewable by this Court. 2 At any rate, it is not
impressed with merit. 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, 3 and the evidence
shows that petitioner acted fraudulently or in bad faith.

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, 4 or where the carrier is guilty of fraud or bad faith. 5
In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless
when it failed to deliver the luggage of petitioner at the appointed place and time. We agree. CATHAY alleges 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. Yet, 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. More, bad faith or otherwise improper conduct may be attributed to the employees
of petitioner. While the mere failure of CATHAY to deliver respondent's luggage at the agreed place and time did not
ipso facto amount to willful misconduct since the luggage was eventually delivered to private respondent, albeit
belatedly, 6 We are persuaded that the employees of CATHAY acted in bad faith. We refer to 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. This deposition was the basis of the findings of the
lower courts when both awarded moral damages to private respondent. Hereunder is part of Palma's testimony —

"Q: What did Mr. Alcantara say, if any?

A. Mr. Alcantara was of course . . . . I could understand his position. He was furious for the experience because
probably he was thinking he was going to meet the Director-General the following day and, well, he was with no
change of proper clothes and so, I would say, he was not happy about the situation.

Q: What did Mr. Alcantara say?

A: He was trying to press the fellow to make the report and if possible make the delivery of his baggage as soon as
possible.

Q: And what did the agent or duty officer say, if any?

A: The duty officer, of course, answered back saying 'What can we do, the baggage is missing. I cannot do
anything.' something like it. 'Anyhow you can buy anything you need, charged to Cathay Pacific.'

Q: What was the demeanor or comportment of the duty officer of Cathay Pacific when he said to Mr. Alcantara 'You
can buy anything chargeable to Cathay Pacific'?

A: If I had to look at it objectively, the duty officer would like to dismiss the affair as soon as possible by saying
indifferently 'Don't worry. It can be found.'" 7

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. 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, certainly, was not enough to purchase comfortable clothings appropriate for an
executive conference. Considering that Alcantara was not only a revenue passenger but even paid for a first class
airline accommodation and accompanied at the time by the Commercial Attache of the Philippine Embassy who was
assisting him in his problem, petitioner or its agents should have been more courteous and accommodating to
private respondent, instead of giving him a curt reply, "What can we do, the baggage is missing. I cannot do
anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific." CATHAY's employees should
have been more solicitous to a passenger in distress and assuaged his anxieties and apprehensions. To compound
matters, CATHAY refused to have the luggage of Alcantara delivered to him at his hotel; instead, he was required to
pick it up himself and an official of the Philippine Embassy. Under the circumstances, it is evident that petitioner was
remiss in its duty to provide proper and adequate assistance to a paying passenger, more so one with first class
accommodation.

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 of obligation which the
parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and
exemplary damages. 8 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 is not entitled to temperate damages, contrary to the ruling of the court a quo, in the
absence of any showing that he sustained some pecuniary loss. 9 It cannot be gainsaid that respondent's luggage
was ultimately delivered to him without serious or appreciable damage.

As regards its second assigned error, petitioner airline contends that the extent of its liability for breach of contract
should be limited absolutely to that set forth in the Warsaw Convention. We do not agree. 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. 10 The Warsaw Convention declares the carrier liable for damages in the enumerated cases and under
certain limitations. 11 However, 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, 12 especially if wilfull misconduct on the part of the carrier's
employees is found or established, which is clearly the case before Us. For, the Warsaw Convention itself provides
in Art. 25 that —

"(1) 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."

(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused under the
same circumstances by any agent of the carrier acting within the scope of his employment."

When petitioner airline misplaced respondent's luggage and failed to deliver it to its passenger at the appointed
place and time, some special species of injury must have been caused to him. For sure, the latter underwent
profound distress and anxiety, and the fear of losing the opportunity to fulfill the purpose of his trip. In fact, for want
of appropriate clothings 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.

In one case, 13 this Court observed 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.

Thus, respondent is entitled to moral and exemplary damages. We however find the award by the Court of Appeals
of P80,000.00 for moral damages excessive, hence, We reduce the amount to P30,000.00. The exemplary
damages of P20,000.00 being reasonable is maintained, as well as the attorney's fees of P25,000.00 considering
that petitioner's act or omission has compelled Alcantara to litigate with third persons or to incur expenses to protect
his interest. 14

WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with the exception of the award
of temperate damages of P10,000.00 which is deleted, while the award of moral damages of P80,000.00 is reduced
to P30,000.00. The award of P20,000.00 for exemplary damages is maintained as reasonable together with the
attorney's fees of P25,000.00. The moral and exemplary damages shall earn interest at the legal rate from 1 March
1976 when the complaint was filed until full payment.

SO ORDERED.

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

Footnotes

1. Record on Appeal, pp. 12-23; Rollo, p. 30.

2. Philippine Air Lines v. Court of Appeals, G.R. No. 92501, 6 March 1992, 207 SCRA 100.

3. Tan Liao v. American President Lines, 98 Phil 203.

4. Arts. 1764 and 2206, New Civil Code.

5. Art. 2220, New Civil Code; China Airlines, Ltd. v. IAC, G.R. No. 73835, 17 January 1989, 169 SCRA 226.

6. Alitalia v. IAC, G.R. No. 71929, 4 December 1990, 192 SCRA 9.

7. Records, pp. 12-13.

8. China Airlines Limited v. Court of Appeals, G.R. No. 94590, 29 July 1992.

9. Art. 2224, New Civil Code.

10. See Note 6; Northwest Airlines, Inc. v. Cuenca, No. L-22425, 31 August 1965, 14 SCRA 1063.

11. Art. 22. 1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of
250,000 francs. . . . Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of
liability.

"2.a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of 250 francs
per kilogramme, unless the passenger or consignor has made, at the time when the package was handed over to
the carrier, a special declaration of interest in delivery at destination 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.

"2.b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained therein,
the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be
only the total weight of the package or packages concerned. Nevertheless, when the loss, damage or delay of a part
of the registered baggage or cargo, or of an object contained therein, affects the value of other packages covered by
the same baggage check or the same air way bill, the total weight of such package or packages shall also be taken
into consideration in determining the limit of liability."

12. See Note 6.

13. Pan American World Airways, Inc. v. IAC, G.R. No. 68988, 21 June 1990, 186 SCRA 687.

14. Art. 2208, par. (2), New Civil Code.

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