Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=28725:g-r-no-l-70462-august-11,-1988-pan-american-world-airways,-inc-v-intermediate-appellate-court&amp;catid=1240&amp;Itemid=566
Timestamp: 2019-04-24 02:13:15+00:00

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PAN AMERICAN WORLD AIRWAYS, INC., Petitioner, v. INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS PRODUCTIONS and ARCHER PRODUCTIONS, Respondents.
Guerrero & Torres for Petitioner.
Jose B. Layug for Private Respondents.
1.	WARSAW CONVENTION; CIVIL LAW; ACTUAL DAMAGES; LIABILITY OR AIRLINE CARRIER. — On the basis of the stipulations printed at the back of the Airline ticket, specifically referring to the applicability of the Warsaw convention the airline carriers liability for the lost baggage of private respondent Pangan is limited to $20.00 per kilo or $600.00, as stipulated at the back of the ticket as the latter did not declare a higher value for his baggage and pay the corresponding additional charges, the case of Ong Yiu v. Court of Appeals (G.R. No. L-40597, June 29, 1979, 91 SCRA 223) is squarely applicable to the instant case.
2.	REMEDIAL LAW; EVIDENCE; CONCLUSION AND FINDINGS OF THE TRIAL COURT AND THE COURT OF APPEALS, REVERSED AND SET ASIDE. — The Court set aside the decision of the trial court and affirmed by the Court of Appeals, awarding private respondent’s damages as for and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled. Applying the ruling in Mendoza v. Philippine Airlines, Inc. (90 Phil. 836), petitioner cannot be held liable for the cancellation of respondents’ contracts in the absence of showing that petitioner’s attention was called to the special circumstances requiring prompt delivery of the respondent’s luggage on or before a certain date.
On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of the plaintiffs Sotang Bastos and Archer Productions, while in San Francisco, California and Primo Quesada of Prime Films, San Francisco, California, entered into an agreement (Exh. A) whereby the former, for and in consideration of the amount of US $2,500.00 per picture, bound himself to supply the latter with three films.’Ang Mabait, Masungit at ang Pangit,’ ‘Big Happening with Chikiting and Iking,’ and ‘Kambal Dragon’ for exhibition in the United States. It was also their agreement that plaintiffs would provide the necessary promotional and advertising materials for said films on or before May 30, 1978.
On his way home to the Philippines, plaintiff Pangan visited Guam where he contacted Leo Slutchnick of the Hafa Adai Organization. Plaintiff Pangan likewise entered into a verbal agreement with Slutchnick for the exhibition of two of the films above-mentioned at the Hafa Adai Theater in Guam on May 30, 1978 for the consideration of P7,000.00 per picture (p. 11, tsn, June 20, 1979). Plaintiff Pangan undertook to provide the necessary promotional and advertising materials for said films on or before the exhibition date on May 30, 1978.
By virtue of the above agreements, plaintiff Pangan caused the preparation of the requisite promotional handbills and still pictures for which he paid the total sum of P12,900.00 (Exhs. B, B-1, C and C-1). Likewise in preparation for his trip abroad to comply with his contracts, plaintiff Pangan purchased fourteen clutch bags, four capiz lamps and four barong tagalog, with a total value of P4,400.00 (Exhs. D, D-1, E, and F).
On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am’s Manila Office, through the Your Travel Guide, an economy class airplane ticket with No. 0269207406324 (Exh. G) for passage from Manila to Guam on defendant’s Flight No. 842 of May 27, 1978, upon payment by said plaintiff of the regular fare. The Your Travel Guide is a tour and travel office owned and managed by plaintiffs witness Mila de la Rama.
On May 27, 1978, two hours before departure time plaintiff Pangan was at the defendant’s ticket counter at the Manila International Airport and presented his ticket and checked in his two luggages, for which he was given baggage claim tickets Nos. 963633 and 963649 (Exhs. H and H-1). The two luggages contained the promotional and advertising materials, the clutch bags, barong tagalog and his personal belongings. Subsequently, Pangan was informed that his name was not in the manifest and so he could not take Flight No. 842 in the economy class. Since there was no space in the economy class, plaintiff Pangan took the first class because he wanted to be on time in Guam to comply with his commitment, paying an additional sum of $112.00.
When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two luggages did not arrive with his flight, as a consequence of which his agreements with Slutchnick and Quesada for the exhibition of the films in Guam and in the United States were cancelled (Exh. L). Thereafter, he filed a written claim (Exh. J) for his missing luggages.
On appeal, the then Intermediate Appellate Court affirmed the trial court decision.
Hence, the instant recourse to this Court by petitioner.
The petition was given due course and the parties, as required, submitted their respective memoranda. In due time the case was submitted for decision.
1.	The respondent court erred as a matter of law in affirming the trial court’s award of actual damages beyond the limitation of liability set forth in the Warsaw Convention and the contract of carriage.
The assigned errors shall be discussed seriatim.
1.	As used in this contract "ticket" means this passenger ticket and baggage check of which these conditions and the notices form part, "carriage" is equivalent to "transportation," "carrier" means all air carriers that carry or undertake to carry the passenger or his baggage hereunder or perform any other service incidental to such air carriage. "WARSAW CONVENTION" means the convention for the Unification of Certain Rules Relating to International Carriage by Air signed at Warsaw, 12th October 1929, or that Convention as amended at The Hague, 28th September 1955, whichever may be applicable.
2.	Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not "international carriage" as defined by that Convention.
3.	To the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii) carrier’s conditions of carriage and related regulations which are made part hereof (and are available on application at the offices of carrier), except in transportation between a place in the United States or Canada and any place outside thereof to which tariffs in force in those countries apply.
Liability for loss, delay, or damage to baggage is limited as follows unless a higher value is declared in advance and additional charges are paid: (1) for most international travel (including domestic portions of international journeys) to approximately $9.70 per pound ($20.00 per kilo) for checked baggage and $400 per passenger for unchecked baggage: (2) for travel wholly between U.S. points, to $750 per passenger on most carriers (a few have lower limits). Excess valuation may not be declared on certain types of valuable articles. Carriers assume no liability for fragile or perishable articles further information may be obtained from the carrier. [Emphasis supplied.].
On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends that its liability for the lost baggage of private respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter did not declare a higher value for his baggage and pay the corresponding additional charges.
To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA 223), where the Court sustained the validity of a printed stipulation at the back of an airline ticket limiting the liability of the carrier for lost baggage to a specified amount and ruled that the carrier’s liability was limited to said amount since the passenger did not declare a higher value, much less pay additional charges.
Petitioner further contends that respondent Court committed grave error when it limited PAL’s carriage liability to the amount of P100.00 as stipulated at the back of the ticket . . .
8.	BAGGAGE LIABILITY . . . The total liability of the Carrier for lost or damage baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier’s tariffs.
There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter’s liability for loss or delay of the baggage of its passengers, and that Article 1750 ** of the Civil Code has not been complied with.
Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00.
In view thereof petitioner’s liability for the lost baggage is limited to $20.00 per kilo or $600.00, as stipulated at the back of the ticket.
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of a passenger or injury suffered by him, or of destruction or loss of, or damages to any checked baggage or any goods, or of delay in the transportation by air of passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The same merely declare the carrier liable for damages in enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier. Under petitioner’s theory, an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.
. . . The case is now before us on petition for review by certiorari, upon the ground that the lower court has erred: (1) in holding that the Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines: (2) in not holding that respondent has no cause of action; and (3) in awarding P20,000 as nominal damages.
Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the validity of provisions of the Warsaw Convention. Consequently, by no stretch of the imagination may said quotation from Northwest be considered as supportive of the appellate court’s statement that the provisions of the Warsaw Convention limited a carrier’s liability are against public policy.
2.	The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of Appeals, awarding private respondents damages as and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled.
. . . Under Art. 1107 of the Civil Code, a debtor in good faith like the defendant herein, may be held liable only for damages that were foreseen or might have been foreseen at the time the contract of transportation was entered into. The trial court correctly found that the defendant company could not have foreseen the damages that would be suffered by Mendoza upon failure to deliver the can of film on the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit that film during the town fiesta and his preparations, specially the announcement of said exhibition by posters and advertisement in the newspaper, were not called to the defendant’s attention.
But before defendant could be held to special damages such as the present alleged loss of profits on account of delay or failure of delivery it must have appeared that he had notice at the time of delivery to him of the particular circumstances attending the shipment and which probably would lead to such special loss if he defaulted. Or, as the rule has been stated in another form in order to impose on the defaulting party further liability than for damages naturally and directly i.e., in the ordinary course of things arising from a breach of contract such unusual or extraordinary damages must have been brought within the contemplation of the parties as the probable result of breach at the time of or prior to contracting. Generally notice then of any special circumstances which will show that the damages to be anticipated from a breach would be enhanced has been held sufficient far this effect.
The Court is unable to uphold the Intermediate Appellate Court’s disregard of the rule laid down in Mendoza and affirmance of the trial court’s conclusion that petitioner is liable for damages based on the finding that" [t]he undisputed fact is that the contracts of the plaintiffs for the exhibition of the films in Guam and California were cancelled because of the loss of the two luggages in question." [Rollo, p. 36] The evidence reveals that the proximate cause of the cancellation of the contracts was private respondent Pangan’s failure to deliver the promotional and advertising materials on the dates agreed upon. For this petitioner cannot be held liable. Private respondent Pangan had not declared the value of the two luggages he had checked in and paid additional charges. Neither was petitioner privy to respondents’ contracts nor was its attention called to the condition therein requiring delivery of the promotional and advertising materials on or before a certain date.
3.	With the Court’s holding that petitioner’s liability is limited to the amount stated in the ticket, the award of attorney’s fees, which is grounded on the alleged unjustified refusal of petitioner to satisfy private respondent’s just and valid claim, loses support and must be set aside.
Fernan, (C. J.), Feliciano and Bidin, JJ., concur.
Gutierrez, Jr., J., no part as I was on leave during the deliberation.
**	Art. 1750.	A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.

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 Art. 1107
	Art. 1750