AGUSTINO B. ONG YIU, PETITIONER, VS. HONORABLE COURT OF APPEALS AND PHILIPPINE AIR LINES, INC., RESPONDENTS.

In this Petition for Review by Certiorari, peti­tioner, a practicing
lawyer and businessman, seeks a reversal of the Decision of the Court of
Appeals in CA-G.R. No. 45005-R, which reduced his claim for damages for breach
of contract of transportation.

The facts are as follows:

On August 26, 1967, petitioner was a fare paying passenger of
respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from
Mactan, Cebu, bound for Butuan City.  He
was scheduled to attend the trial of Civil Case No. 1005 and Spec. Procs. No.
1125 in the Court of First Instance, Branch II, thereat, set for hearing on August 28-31, 1967.  As a passenger, he checked in one piece of
luggage, a blue “maleta” for which he was issued Claim Check No.
2106-R (Exh. “A”).  The plane
left Mactan Airport, Cebu, at about 1:00 o’clock P.M., and arrived at
Bancasi airport, Butuan City, at past 2:00 o’clock P.M., of the same day.  Upon arrival, petitioner claimed his luggage
but it could not be found.  According to
petitioner, it was only after reacting indignantly to the loss that the matter
was attended to by the porter clerk, Maximo Gomez, which, however, the latter
denies.  At about 3:00 o’clock P.M., PAL,
Butuan, sent a message to PAL, Cebu, inquiring about the missing luggage, which
message was, in turn, re­layed in full to the Mactan Airport teletype operator
at 3:45 P.M. (Exh. “2”) that same afternoon.  It must have been transmitted to Manila
immediately, for at 3:59 that same afternoon, PAL Manila wired PAL Cebu
advising that the luggage had been overcarried to Manila aboard Flight No. 156
and that it would be forwarded to Cebu on Flight No. 345 of the same day.  Instructions were also given that the luggage
be immediately forwarded to Butuan City on the first available flight (Exh.
“3”).  At 5:00 P.M. of the same
afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be
forwarded on Flight No. 963 the following day, August 27, 1967.  However, this message was not received by PAL
Butuan as all the personnel had already left since there were no more incoming
flights that afternoon.

In the meantime, petitioner was worried about the missing luggage
because it contained vital documents needed for trial the next day.  At 10:00 o’clock that evening, petitioner
wired PAL Cebu demanding the delivery of his baggage before noon the next day,
otherwise, he would hold PAL liable for damages, and stating that PAL’s gross
negligence had caused him undue inconvenience, worry, anxiety and extreme
embarrassment (Exh. “B”).  This
telegram was received by the Cebu PAL supervisor but the latter felt no need to
wire petitioner that his luggage had already been forwarded on the assumption
that by the time the message reached Butuan City, the luggage would have
arrived.

Early in the morning of the next day, August 27, 1967, petitioner
went to the Bancasi Airport to inquire about his luggage.  He did not wait, however, for the morning
flight which arrived at 10:00 o’clock that morning.  This flight carried the missing luggage.  The porter clerk, Maximo Gomez, paged
petitioner, but the latter had already left. 
A certain Emilio Dagorro, a driver of a “colorum” car, who
also used to drive for petitioner, volunteered to take the luggage to
petitioner.  As Maximo Gomez knew Dagorro
to be the same driver used by petitioner whenever the latter was in Butuan City, Gomez took the luggage
and placed it on the counter.  Dagorro
examined the lock, pressed it, and it opened. 
After calling the attention of Maximo Gomez, the “maleta” was
opened, Gomez took a look at its contents, but did not touch them.  Dagorro then delivered the “maleta”
to petitioner, with the information that the lock was open.  Upon inspection, petitioner found that a
folder containing certain exhibits, transcripts and private documents in Civil
Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items
for his parents-in-law.  Petitioner
refused to accept the luggage.  Dagorro
returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded the
same to PAL Cebu.

Meanwhile, petitioner asked for postponement of the hearing of
Civil Case No. 1005 due to loss of his documents, which was granted by the
Court (Exhs. “C” and “C-1”).  Petitioner returned to Cebu City on August
28, 1967.  In a letter dated August 29,
1967 addressed to PAL, Cebu, petitioner called attention to his telegram (Exh.
“D”), demanded that his luggage be produced intact, and that he be
compensated in the sum of P250,000.00 for actual and moral damages within five
days from receipt of the letter, otherwise, he would be left with no alter­native
but to file suit (Exh. “D”).

On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of
PAL Cebu, went to petitioner’s office to deliver the “maleta”.  In the presence of Mr. Jose Yap and Atty.
Manuel Maranga, the contents were listed and receipted for by petitioner (Exh.
“E”).

On September 5, 1967, petitioner sent a tracer letter to PAL Cebu
inquiring about the results of the investigation which Messrs. de Leon, Navarsi
and Agustin had promised to conduct to pinpoint respon­sibility for the
unauthorized opening of the “maleta” (Exh. “F”).

The following day,
September 6, 1967, PAL sent its reply hereinunder quoted verbatim:

“Dear Atty. Ong Yiu:

“This is with reference to your September 5, 1967, letter to
Mr. Ricardo G. Paloma, Acting Manager, Southern Philippines.

“First of all, may we apologize for the delay in informing you
of the result of our investigation since we visited you in your office last August 31, 1967.  Since there are stations other than Cebu
which are involved in your case, we have to com­municate and await replies from
them.  We regret to in­form you that to
date we have not found the supposedly lost folder of papers nor have we been
able to pinpoint the personnel who allegedly pil­ferred your baggage.

“You must realize that no inventory was taken of the cargo
upon loading them on any plane. 
Consequently, we have no way of knowing the real contents of your
baggage when same was loaded.

“We realized the incon­venience you encountered of this
incident but we trust that you will give us another opportunity to be of better
service to you.

Very truly yours,

PHILIPPINE AIR LINES, INC.

(Sgd) JEREMIAS S.
AGUSTIN

Branch Supervisor
Cebu”

(Exhibit G, Folder
of Exhibits)”^[1]

On September 13, 1967, petitioner filed a Complaint against PAL for
damages for breach of contract of trans­portation with the Court of First
Instance of Cebu, Branch V, docketed as Civil Case No. R-10188, which PAL
traversed.  After due trial, the lower
Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages in the
sum of P80,000.00, exemplary damages of P30,000.00, attor­ney’s fees of
P5,000.00, and costs.

Both parties appealed to the Court of Appeals – petitioner in so
far as he was awarded only the sum of P80,000.00 as moral damages; and
defendant because of the unfavorable judgment rendered against it.

On August 22, 1974, the Court of Appeals,* find­ing
that PAL was guilty only of simple negligence, reversed the judgment of the
trial Court granting petitioner moral and exemplary damages, but ordered PAL to
pay plaintiff the sum of P100.00, the
baggage liability assumed by it under the condition of carriage printed at the
back of the ticket.

Hence, this Petition for Review by Certiorari, filed on
May 2, 1975, with petitioner making the following Assignments of Error:

“I.   THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE AND NOT BAD FAITH IN
THE BREACH OF ITS CONTRACT OF TRANSPORTATION WITH PETITIONER.

“II.  THE HONORABLE COURT OF APPEALS MISCONSTRUED
THE EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF THE LOWER COURT
AWARDING TO PETITIONER MORAL DAMAGES IN THE AMOUNT OF P80,000.00, EXEMPLARY
DAMAGES OF P30,000.00, AND P5,000.00 REPRESENTING ATTOR­NEY’S FEES, AND ORDERED
RES­PONDENT PAL TO COMPENSATE PLAINTIFF THE SUM OF P100.00 ONLY, CONTRARY TO THE EXPLICIT
PROVISIONS OF ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL CODE OF THE
PHILIPPINES.

On July 16, 1975, this Court gave due course to the Petition.

There is no dispute that PAL incurred in delay in the delivery of
petitioner’s luggage.  The question is
the correctness of respondent Court’s conclusion that there was no gross
negligence on the part of PAL and that it had not acted fraudulently or in bad
faith as to entitle petitioner to an award of moral and exemplary damages.

From the facts of the case, we agree with res­pondent Court that PAL had
not acted in bad faith.  Bad faith means
a breach of a known duty through
some motive of interest or ill will.^[2] It was the duty of PAL to look for
petitioner’s luggage which had been miscarried. 
PAL exerted due diligence in complying with such duty.

As aptly stated by the appellate Court:

“We do not find any evidence of bad faith in this.  On the contrary, We find that the defendant
had exerted diligent effort to locate plaintiff’s baggage.  The trial court saw evidence of bad faith
because PAL sent the telegraphic message to Mactan only at 3:00 o’clock that
same afternoon, despite plaintiff’s indignation for the non-arrival of his baggage. 
The message was sent within less than one hour after plaintiff’s luggage
could not be located.  Efforts had to be
exerted to locate plaintiff’s maleta. 
Then the Bancasi airport had to attend to other incoming passengers and
to the out­going passengers.  Certainly,
no evidence of bad faith can be inferred from these facts.  Cebu office immediately wired Manila
inquiring about the missing baggage of the plaintiff.  At 3:59 P.M., Manila station agent at the
domestic airport wired Cebu that the baggage was over carried to Manila.  And this message
was received in Cebu one minute thereafter, or at 4:00 P.M.  The baggage was in fact sent back to Cebu
City that same afternoon.  His Honor stated that the fact that
the message was sent at 3:59 P.M. from Manila and completely relayed to Mactan
at 4:00 P.M., or within one minute, made the message appear spurious.  This is a forced reasoning.  A radio message of about 50 words can be
completely transmitted in even less than one minute, depending upon atmospheric
conditions.  Even if the message was sent
from Manila or other distant places, the
message can be received within a minute. 
That is a scientific fact which cannot be questioned.”^[3]

Neither was the failure of PAL Cebu to reply to petitioner’s rush
telegram indicative of bad faith.  The
telegram (Exh. B) was dispatched by petitioner at around 10:00 P.M. of August
26, 1967.  The PAL super­visor at Mactan
Airport was notified of it only in the morning of the following day.  At that time the luggage was already to be
forwarded to Butuan City.  There was no
bad faith, therefore, in the assumption made by said supervisor that the plane
carrying the bag would arrive at Butuan earlier than a reply telegram.  Had petitioner waited or caused someone to wait
at the Bancasi airport for the arrival of the morning flight, he would have
been able to retrieve his luggage sooner.

In the absence of a
wrongful act or omission or of fraud or bad faith, petitioner is not entitled
to moral damages.

“Art. 2217.  Moral damages
include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar
injury.  Though incapable of pecuniary
computation, moral damages may be re­covered if they are the proximate result
of the defendant’s wrongful act of omission.”

“Art. 2220.  Willful
injury to property may be a legal ground for awarding moral damages if the
court should find that, under the circumstances, such damages are justly
due.  The same rule applies to breaches
of contract where the defendant acted fraudulently or in bad faith.”

Petitioner is neither entitled to exemplary damages.  In contracts, as provided for in Article 2232
of the Civil Code, exemplary damages can be granted if the de­fendant acted in a wanton, fraudulent, reckless, op­pressive,
or malevolent manner, which has not been
proven in this case.

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.  In this connection, respondent
Court opined:

“As a general proposition, the plaintiff’s maleta having been
pilfered while in the custody of the defendant, it is presumed that the
defendant had been negligent.  The lia­bility,
however, of PAL for the loss, in accordance with the stipulation written on the
back of the ticket, Exhibit 12, is limited to P100.00 per baggage plaintiff not
having declared a great value, and not having called the attention of the
defendant on its true value and paid the tariff therefor.  The validity of this stipulation is not
questioned by the plain­tiff.  They are
printed in reasonably and fairly big letters, and are easily readable.  Moreover, plaintiff had been a frequent
passenger of PAL from Cebu to Butuan City and back, and he, being a lawyer and businessman, must be fully
aware of these conditions.”^[4]

We agree with the foregoing finding.  The pertinent Condition of Carriage printed
at the back of the plane ticket reads:

“8.  BAGGAGE LIABILITY….  The total liability of the Carrier for lost
or damaged 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.

While it may be true that petitioner had not signed the plane
ticket (Exh. “12”), he is
neverthe­less bound by
the provisions thereof. “Such provisions have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latter’s lack of knowledge or
assent to the regulation”.^[5] It is what is known as a contract of
“adhesion”, in regards which it has been said that contracts of
adhesion wherein one party imposes a ready made form of contract on the other,
as the plane ticket in the case at bar, are contracts not entirely
prohibited.  The one who adheres to the
con­tract is in reality free to reject it entirely; if he adheres, he gives his
consent.^[6] And as held in Randolph v. American
Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World
Airlines, Inc., 349 S.W. 2d 483, “a contract limiting liability upon an
agreed valuation does not offend against the policy of the law forbidding one
from contracting against his own negligence.”

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. 
Besides, passengers are advised not to place valuable items
inside their baggage but “to avail of our V-cargo service” (Exh.
“1”).  It is likewise to be
noted that there is nothing in the evidence to show the actual value of the
goods allegedly lost by petitioner.

There is another matter involved, raised as an error by PAL – the
fact that on October 24, 1974 or two months after the promulgation of the
Decision of the appellate Court, petitioner’s widow filed a Motion for
Substitution claiming that petitioner died on January 6, 1974 and that she only
came to know of the adverse Decision on October 23, 1974 when peti­tioner’s law
partner informed her that he received copy of the Decision on August 28,
1974.  Attached to her Motion was an
Affidavit of petitioner’s law partner reciting facts constitutive of excusable
negligence.  The appellate Court noting
that all pleadings had been signed by petitioner himself al­lowed the widow
“to take such steps as she or counsel may deem necessary.” She then
filed a Motion for Reconsideration over the opposition of PAL which alleged that the Court of Appeals
Decision, promulgated on August 22, 1974, had already become final and
executory since no appeal had been interposed therefrom within the reglementary
period.

Under the circumstances, considering the demise of petitioner
himself, who acted as his own counsel, it is best that technicality yields to
the interests of substantial
justice.  Besides, in the last analysis,
no serious prejudice has been caused respondent PAL.

In fine, we hold that the conclusions drawn by respondent Court
from the evidence on record are not erroneous.

WHEREFORE, for lack of merit, the instant Petition is
hereby denied, and the judgment sought to be reviewed hereby affirmed in toto.

No costs.

SO ORDERED.

Teehankee, (Chairman), Makasiar, Fernandez, Guerrero, and De Castro, JJ., concur.

^[1]
pp. 47-48, Rollo.

* Decision penned by Justice Jose
Leuterio, with Justice Roseller Lim and Francisco Tantuico, Jr., concurring.

^[2]
Air France vs. Carrascoso, 18 SCRA 166 (1966); Lopez vs. Pan
American World Airways, 16 SCRA 431 (1966).

^[3]
pp. 12-13, Decision, on pp. 53-54, Rollo.

^[4]
pp. 8-9, Decision on pp. 27-28, Rollo.

* “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.”

^[5]
Tannebaum v. National Airline, Inc. 13 Misc. 2d 450, 176 N.Y.S. 2d 400;
Lichten vs. Eastern Airlines, 87 Fed. Supp. 691; Migoski v.
Eastern Air Lines, Inc., Fla. 63 So. 2d 634.

^[6]
Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L.
Reyes, Lawyer’s Journal, Jan. 31, 1951, p. 49.