agency and partnership for digests

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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 88539 October 26, 1993

KUE CUISON, doing business under the firm name and style"KUE CUISON PAPERSUPPLY," petitioner,vs.THE COURT OF APPEALS, VALIANT INVESTMENT ASSOCIATES, respondents.

Leighton R. Siazon for petitioner.

Melanio L. Zoreta for private respondent.

BIDIN, J. :

This petition for review assails the decision of the respondent Court of Appeals ordering

petitioner to pay private respondent, among others, the sum of P297,482.30 with interest. Saiddecision reversed the appealed decision of the trial court rendered in favor of petitioner.

The case involves an action for a sum of money filed by respondent against petitioner anchoredon the following antecedent facts:

Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint,bond paper and scrap, with places of business at Baesa, Quezon City, and Sto. Cristo, Binondo,Manila. Private respondent Valiant Investment Associates, on the other hand, is a partnershipduly organized and existing under the laws of the Philippines with business address at KalookanCity.

From December 4, 1979 to February 15, 1980, private respondent delivered various kinds ofpaper products amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The deliverieswere made by respondent pursuant to orders allegedly placed by Tiu Huy Tiac who was thenemployed in the Binondo office of petitioner. It was likewise pursuant to Tiac's instructions thatthe merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the merchandiseby issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac

issued nine (9) postdated checks to private respondent as payment for the Unfortunately, sad checks were later dishonored by the drawee bank.

Thereafter, private respondent made several demands upon petitioner to pamerchandise in question, claiming that Tiu Huy Tiac was duly authorized bymanager of his Binondo office, to enter into the questioned transactions withand Lilian Tan. Petitioner denied any involvement in the transaction enteredand refused to pay private respondent the amount corresponding to the sellsubject merchandise.

Left with no recourse, private respondent filed an action against petitioner fo

P297,487.30 representing the price of the merchandise. After due hearing, dismissed the complaint against petitioner for lack of merit. On appeal, howthe trial court was modified, but was in effect reversed by the Court of Appeportion of which reads:

WHEREFORE, the decision appealed from is MODIFIED inappellant Kue Cuison is hereby ordered to pay plaintiff-appeInvestment Associates the sum of P297,487.30 with 12% inof the complaint until the amount is fully paid, plus the sum oamount due as attorney's fees, and to pay the costs. In all odecision appealed from is affirmed. (Rollo, p. 55)

In this petition, petitioner contends that:

THE HONORABLE COURT ERRED IN FINDING TIU HUYDEFENDANT-APPELLANT CONTRARY TO THEUNDISPUTED/ESTABLISHED FACTS AND CIRCUMSTAN

THE HONORABLE COURT ERRED IN FINDING DEFENDLIABLE FOR AN OBLIGATION UNDISPUTEDLY BELONGTIAC.

THE HONORABLE COURT ERRED IN REVERSING THE WELL-FOUNDETHE TRIAL COURT, (Rollo, p, 19)

The issue here is really quite simple whether or not Tiu Huy Tiac possesauthority from petitioner sufficient to hold the latter liable for the disputed tra

This petition ought to have been denied outright, forin the final analysis, it raIt is elementary that in petitions for review under Rule 45, this Court only paof law. An exception thereto occurs where the findings of fact of the Court o


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variance with the trial court, in which case the Court reviews the evidence in order to arrive at thecorrect findings based on the records.

As to the merits of the case, it is a well-established rule that one who clothes another withapparent authority as his agent and holds him out to the public as such cannot be permitted todeny the authority of such person to act as his agent, to the prejudice of innocent third partiesdealing with such person in good faith and in the honest belief that he is what he appears to be(Macke, et al, v. Camps, 7 Phil. 553 (1907]; Philippine National Bank. v Court of Appeals, 94SCRA 357 [1979]). From the facts and the evidence on record, there is no doubt that this ruleobtains. The petition must therefore fail.

It is evident from the records that by his own acts and admission, petitioner held out Tiu Huy Tiacto the public as the manager of his store in Sto. Cristo, Binondo, Manila. More particularly,petitioner explicitly introduced Tiu Huy Tiac to Bernardino Villanueva, respondent's manager, ashis (petitioner's) branch manager as testified to by Bernardino Villanueva. Secondly, Lilian Tan,who has been doing business with petitioner for quite a while, also testified that she knew TiuHuy Tiac to be the manager of petitioner's Sto. Cristo, Binondo branch. This general perceptionof Tiu Huy Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by the factthat Tiu Huy Tiac is known in the community to be the "kinakapatid" (godbrother) of petitioner. Infact, even petitioner admitted his close relationship with Tiu Huy Tiac when he said that they are"like brothers" (Rollo, p. 54). There was thus no reason for anybody especially those transactingbusiness with petitioner to even doubt the authority of Tiu Huy Tiac as his manager in the Sto.Cristo Binondo branch.

In a futile attempt to discredit Villanueva, petitioner alleges that the former's testimony is clearly

self-serving inasmuch as Villanueva worked for private respondent as its manager.

We disagree, The argument that Villanueva's testimony is self-serving and thereforeinadmissible on the lame excuse of his employment with private respondent utterly misconstruesthe nature of "'self-serving evidence" and the specific ground for its exclusion. As pointed out bythis Court in Co v. Court of Appeals et, al., (99 SCRA 321 [1980]):

Self-serving evidence is evidence made by a party out of courtat one time; itdoes not include a party's testimony as a witness in court. It is excluded on thesame ground as any hearsay evidence, that is the lack of opportunity for cross-examination by the adverse party, and on the consideration that its admissionwould open the door to fraud and to fabrication of testimony. On theother hand, aparty's testimony in court is sworn and affords the other party the opportunity forcross-examination (emphasis supplied)

Petitioner cites Villanueva's failure, despite his commitment to do so on cross-examination, toproduce the very first invoice of the transaction between petitioner and private respondent asanother ground to discredit Villanueva's testimony. Such failure, proves that Villanueva was not

only bluffing when he pretended that he can produce the invoice, but that Vlikewise prevaricating when he insisted that such prior transactions actuallyis mistaken. In fact, it was petitioner's counsel himself who withdrew the resVillanueva produce the document in court. As aptly observed by the Court odecision:

. . . However, during the hearing on March 3, 1981, Villanuethe document adverted to because defendant-appellant's coreservation to have the former (Villanueva) produce the docthus prompting plaintiff-appellant to rest its case that same dSess. of March 3, 1981). Now, defendant-appellant assails t

Villanueva for having allegedly failed to produce even one sshow that plaintiff-appellant have had transactions before, wfailure of Villanueva to produce said document is a direct offof defendant-appellant's counsel who withdrew his reservatof the document or invoice and which led plaintiff-appellant very day. (Rollo, p.52)

In the same manner, petitioner assails the credibility of Lilian Tan by alleginof an intricate plot to defraud him. However, petitioner failed to substantiatesubject transaction was designed to defraud him. Ironically, it was even thepetitioner's daughter and assistant manager Imelda Kue Cuison which confof Tan as a witness. On the witness stand, Imelda testified that she knew fothe transaction in question, Tan regularly transacted business with her fathethereby corroborating Tan's testimony to the same effect. As correctly foundcourt, there was no logical explanation for Tan to impute liability upon petitiotestimony of Imelda Kue Cuison only served to add credence to Tan's testimtransaction, the liability for which petitioner wishes to be absolved.

But of even greater weight than any of these testimonies, is petitioner's catethe witness stand that Tiu Huy Tiac was the manager of his store in Sto. Cri

Court:

xxx xxx xxx

Q And who was managing the store in Sto. C

A At first it was Mr. Ang, then later Mr. Tiu H

remember the exact year.

Q So, Mr. Tiu Huy Tiac took over the manag


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A Not that was because every afternoon, I was there, sir.

Q But in the morning, who takes charge?

A Tiu Huy Tiac takes charge of managementand if there (sic)orders for newsprint or bond papers they are always referred tothe compound in Baesa, sir. (t.s.n., p. 16, Session of January 20,1981, CA decision, Rollo, p. 50, emphasis supplied).

Such admission, spontaneous no doubt, and standing alone, is sufficient to negate all thedenials made by petitioner regarding the capacity of Tiu Huy Tiac to enter into the transaction in

question. Furthermore, consistent with and as an obvious indication of the fact that Tiu Huy Tiacwas the manager of the Sto. Cristo branch, three (3) months after Tiu Huy Tiac left petitioner'semploy, petitioner even sent, communications to its customers notifying them that Tiu Huy Tiacis no longer connected with petitioner's business. Such undertaking spoke unmistakenly of TiuHuy Tiac's valuable position as petitioner's manager than any uttered disclaimer. More thananything else, this act taken together with the declaration of petitioner in open court amount toadmissions under Rule 130 Section 22 of the Rules of Court, to wit : "The act, declaration oromission of a party as to a relevant fact may be given in evidence against him." For well-settledis the rule that "a man's acts, conduct, and declaration, wherever made, if voluntary, areadmissible against him, for the reason that it is fa ir to presume that they correspond with thetruth, and it is his fault if they do not. If a man's extrajudicial admissions are admissible againsthim, there seems to be no reason why his admissions made in open court, under oath, shouldnot be accepted against him." (U.S. vs. Ching Po, 23 Phil. 578, 583 [1912];).

Moreover, petitioner's unexplained delay in disowning the transactions entered into by Tiu HuyTiac despite several attempts made by respondent to collect the amount from him, proved all themore that petitioner was aware of the questioned commission was tantamount to an admissionby silence under Rule 130 Section 23 of the Rules of Court, thus: "Any act or declaration madein the presence of and within the observation of a party who does or says nothing when the actor declaration is such as naturally to call for action or comment if not true, may be given inevidence against him."

All of these point to the fact that at the time of the transaction Tiu Huy Tiac was admittedly themanager of petitioner's store in Sto. Cristo, Binondo. Consequently, the transaction in questionas well as the concomitant obligation is valid and binding upon petitioner.

By his representations, petitioner is now estopped from disclaiming liability for the transactionentered by Tiu Huy Tiac on his behalf. It matters not whether the representations are intentionalor merely negligent so long as innocent, third persons relied upon such representations in goodfaith and for value As held in the case of Manila Remnant Co. Inc. v. Court of Appeals, (191SCRA 622 [1990]):

More in point, we find that by the principle of estoppel, Manideemed to have allowed its agent to act as though it had ple1911 of the Civil Code provides:

"Even when the agent has exceeded his autissolidarily liable with the agent if the formeract as though he had full powers." (Emphas

The above-quoted article is new. It is intended to protect thepersons. In such a situation, both the principal and the agenas joint tortfeasors whose liability is joint and solidary.

Authority by estoppel has arisen in the instant case becausthe principal, Manila Remnant, has permitted its agent, A.U.exercise powers not granted to it. That the principal might nknowledge of theagent's misdeed is of no moment.

Tiu Huy Tiac, therefore, by petitioner's own representations and manifestatiagent of petitioner by estoppel, an admission or representation is rendered person making it, and cannot be denied or disproved as against the person (Article 1431, Civil Code of the Philippines). A party cannot be allowed to goacts and representations to the prejudice of the other party who, in good fa(Philippine National Bank v. Intermediate Appellate Court, et al., 189 SCRA

Taken in this light,. petitioner is liable for the transaction entered into by Tiu

behalf. Thus, even when the agent has exceeded his authority, the principawith the agent if the former allowed the latter to fact as though he had full poCivil Code), as in the case at bar.

Finally, although it may appear that Tiu Huy Tiac defrauded his principal (peturning over the proceeds of the transaction to the latter, such fact cannot inexonerate petitioner of his liability to private respondent. For it is an equitabbetween two innocent parties, the one who made it possible for the wrong tthe one to bear the resulting loss (Francisco vs. Government Service Insur577 [1963]).

Inasmuch as the fundamental issue of the capacity or incapacity of the purpTiac, has already been resolved, the Court deems it unnecessary to resolveissues raised by petitioner.

WHEREFORE, the instant petition in hereby DENIED for lack of merit. Cos

SO ORDERED.


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Feliciano, Romero, Melo and Vitug, JJ., concur.

____________________________________________________________________


Manila

THIRD DIVISION

G.R. No. 121824 January 29, 1998

BRITISH AIRWAYS, petitioner,vs.COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.

ROMERO, J. :

In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of

respondent Court of Appeals 1 promulgated on September 7, 1995, which affirmed the award ofdamages and attorney's fees made by the Regional Trial Court of Cebu, 7th Judicial Region,Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its third-partycomplaint against Philippine Airlines (PAL). 2

The material and relevant facts are as follows:

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of hisvisit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, inturn, purchased a ticket from BA where the following itinerary was indicated: 3

CARRIER FLIGHT DATE TIME STATUS

MANILA MNL PR 310 Y 16 APR. 1730 OK

HONGKONG HKG BA 20 M 16 APR. 2100 OK

BOMBAY BOM BA 19 M 23 APR. 0840

HONGKONG HKG PR 311 Y

MANILA MNL

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

Prior to his departure, Mahtani checked in at the PAL counter in Manila his luggage containing his clothings and personal effects, confident that upon rthe same would be transferred to the BA flight bound for Bombay.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggthat upon inquiry from the BA representatives, he was told that the same midiverted to London. After patiently waiting for his luggage for one week, BA file a claim by accomplishing the "Property Irregularity Report." 4

Back in the Philippines, specifically on June 11, 1990, Mahtani filed his comand attorney's fees 5against BA and Mr. Gumar before the trial court, dockeCEB-9076.

On September 4, 1990, BA filed its answer with counter claim 6to the compspecial and affirmative defenses, that Mahtani did not have a cause of actioLikewise, on November 9, 1990, BA filed a third-party complaint 7against Preason for the non-transfer of the luggage was due to the latter's late arrivalleaving hardly any time for the proper transfer of Mahtani's luggage to the BBombay.

On February 25, 1991, PAL filed its answer to the third-party complaint, wheany liability, arguing that there was, in fact, adequate time to transfer the lugin Hongkong. Furthermore, the transfer of the luggage to Hongkong authorconsidered as transfer to BA. 8

After appropriate proceedings and trial, on March 4, 1993, the trial court refavor of Mahtani, 9the dispositive portion of which reads as follows:

WHEREFORE, premises considered, judgment is renderedagainst the defendant for which defendant is ordered to paySeven Thousand (P7,000.00) Pesos for the value of the twoHundred U.S. ($400.00) Dollars representing the value of th


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plaintiff's luggage; Fifty Thousand (P50,000.00) Pesos for moral and actualdamages and twenty percent (20%) of the total amount imposed against thedefendant for attorney's fees and costs of this action.

The Third-Party Complaint against third-party defendant Philippine Airlines isDISMISSED for lack of cause of action.

SO ORDERED.

Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial court'sfindings. Thus:

WHEREFORE, in view of all the foregoing considerations, finding the Decisionappealed from to be in accordance with law and evidence, the same is herebyAFFIRMED in toto, with costs against defendant-appellant.

SO ORDERED. 10

BA is now before us seeking the reversal of the Court of Appeals' decision.

In essence, BA assails the award of compensatory damages and attorney's fees, as well as thedismissal of its third-party complaint against PAL. 11

Regarding the first assigned issue, BA asserts that the award of compensatory damages in theseparate sum of P7,000.00 for the loss of Mahtani's two pieces of luggage was without basissince Mahtani in his complaint 12 stated the following as the value of his personal belongings:

8. On the said travel, plaintiff took with him the following items and itscorresponding value, to wit:

1. personal belonging P10,000.00

2. gifts for his parents and relatives $5,000.00

Moreover, he failed to declare a higher valuation with respect to his luggage, a conditionprovided for in the ticket, which reads: 13

Liability for loss, delay, or damage to baggage is limited unless a higher value isdeclared in advance and additional charges are paid:

1. For most international travel (including domestic corporations of internationaljourneys) the liability limit is approximately U.S. $9.07 per pound (U.S. $20.000)

per kilo for checked baggage and U.S. $400 per passenger baggage.

Before we resolve the issues raised by BA, it is needful to state that the natcontract of carriage partakes of two types, namely: a contract to deliver a cato its destination and a contract to transport passengers to their destinationto serve the traveling public primarily, it is imbued with public interest, henccommon carriers imposes an exacting standard. 14 Neglect or malfeasance employees could predictably furnish bases for an action for damages. 15

In the instant case, it is apparent that the contract of carriage was between

Moreover, it is indubitable that his luggage never arrived in Bombay on timenumber of cases 16 we have assessed the airlines' culpability in the form of of contract involving misplaced luggage.

In determining the amount of compensatory damages in this kind of cases, claimant satisfactorily prove during the trial the existence of the factual basiits causal connection to defendant's acts. 17

In this regard, the trial court granted the following award as compensatory d

Since plaintiff did not declare the value of the contents in hisfailed to show receipts of the alleged gifts for the members oBombay, the most that can be expected for compensation osuit cases) is Twenty U.S. Dollars ($20.00) per kilo, or comb

Hundred ($400.00) U.S. Dollars for Twenty kilos representinSeven Thousand (P7,000.00) Pesos representing the purch(2) suit cases.

However, as earlier stated, it is the position of BA that there should have beaward for the luggage and the contents thereof since Mahtani failed to declvaluation for the luggage, 18 and therefore, its liability is limited, at most, onlystated in the ticket.

Considering the facts of the case, we cannot assent to such specious argum

Admittedly, in a contract of air carriage a declaration by the passenger of a needed to recover a greater amount. Article 22(1) of the Warsaw Conventiofollows:

xxx xxx xxx


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

American jurisprudence provides that an air carrier is not liable for the loss of baggage in anamount 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.20

This doctrine is recognized in this jurisdiction.21

Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesioncontracts where the facts and circumstances justify that they should be disregarded. 22

In addition, we have held that benefits of limited liability are subject to waiver such as when theair carrier failed to raise timely objections during the trial when questions and answers regardingthe actual claims and damages sustained by the passenger were asked. 23

Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense oflimited liability when it allowed Mahtani to testify as to the actual damages he incurred due to themisplacement of his luggage, without any objection. In this regard, we quote the pertinenttranscript of stenographic notes of Mahtani's direct testimony: 24

Q

How much are you going to ask from this court?

A P100,000.00.

QWhat else?

A Exemplary damages.

Q How much?

A P100,000.00.

QWhat else?

A

The things I lost, $5,000.00 for the gifts I lost and mypersonal belongings, P10,000.00.

QWhat about the filing of this case?

A The court expenses and attorney's fees

Indeed, it is a well-settled doctrine that where the proponent offers evidenceof the adverse party to be inadmissible for any reason, the latter has the rigsuch right is a mere privilege which can be waived. Necessarily, the objectithe earliest opportunity, lest silence when there is opportunity to speak mayof objections. 25BA has precisely failed in this regard.

To compound matters for BA, its counsel failed, not only to interpose a time

conducted his own cross-examination as well. 26 In the early case ofAbreniruled that:

. . . (I)t has been repeatedly laid down as a rule of evidenceobjection against the admission of any evidence must be matime, and that if not so made it will be understood to have bproper time to make a protest or objection is when, from theto the witness, or from the answer thereto, or from the preseinadmissibility of evidence is, or may be inferred.

Needless to say, factual findings of the trial court, as affirmed by the Court oentitled to great respect. 28 Since the actual value of the luggage involved apevidence, a task within the competence of the Court of Appeals, its ruling reis assuredly a question of fact, thus, a finding not reviewable by this Court.

As to the issue of the dismissal of BA's third-party complaint against PAL, tjustified its ruling in this wise, and we quote: 30

Lastly, we sustain the trial court's ruling dismissing appellancomplaint against PAL.

The contract of air transportation in this case pursuant to theappellant to plaintiff-appellee was exclusively between the pdefendant-appellant BA. When plaintiff boarded the PAL plaHongkong, PAL was merely acting as a subcontractor or agshown by the fact that in the ticket issued by appellant to plaspecifically provided on the "Conditions of Contract," paragr

4. . . . carriage to be performed hereunder bycarriers is regarded as a single operation.


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The rule that carriage by plane although performed by successive carriers is regarded as asingle operation and that the carrier issuing the passenger's ticket is considered the principalparty and the other carrier merely subcontractors or agent, is a settled issue.

We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko, 31we expounded on thenature of a third-party complaint thus:

The third-party complaint is, therefore, a procedural device whereby a "thirdparty" who is neither a party nor privy to the act or deed complained of by the

plaintiff, may be brought into the case with leave of court, by the defendant, whoacts, as third-party plaintiff to enforce against such third-party defendant a rightfor contribution, indemnity, subrogation or any other relief, in respect of theplaintiff's claim. The third-party complaint is actually independent of and separateand distinct from the plaintiff's complaint. Were it not for this provision of theRules of Court, it would have to be filed independently and separately from theoriginal complaint by the defendant against the third-party. But the Rules permitdefendant to bring in a third-party defendant or so to speak, to litigate hisseparate cause of action in respect of plaintiff's claim against a third-party in theoriginal and principal case with the object of avoiding circuitry of action andunnecessary proliferation of law suits and of disposing expeditiously in onelitigation the entire subject matter arising from one particular set of facts.

Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their

contract of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PALwhich the latter naturally denies. In other words, BA and PAL are blaming each other for theincident.

In resolving this issue, it is worth observing that the contract of air transportation was exclusivelybetween Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the former'sjourney to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the "Conditions ofContracts" of the ticket 32issued by BA to Mahtani confirms that the contract was one ofcontinuous air transportation from Manila to Bombay.

4. . . . carriage to be performed hereunder by several successive carriers isregarded as a single operation.

Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani fromManila to Hongkong acted as the agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that anagent is also responsible for any negligence in the performance of its function. 33 and is liable for

damages which the principal may suffer by reason of its negligent act. 34 HeAppeals erred when it opined that BA, being the principal, had no cause of its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the InterAssociation (IATA), wherein member airlines are regarded as agents of eacissuance of the tickets and other matters pertaining to their relationship. 35 Tinstant case, the contractual relationship between BA and PAL is one of agebeing the principal, since it was the one which issued the confirmed ticket, agent.

Our pronouncement that BA is the principal is consistent with our ruling in LAirlines v. Court of Appeals. 36 In that case, Lufthansa issued a confirmed ticAntiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kairlines which was to carry Antiporda to a specific destination "bumped" him

An action for damages was filed against Lufthansa which, however, deniedcontending that its responsibility towards its passenger is limited to the occuon its own line. Consequently, when Antiporda transferred to Air Kenya, its principal in the contract of carriage ceased; from there on, it merely acted aAir Kenya.

In rejecting Lufthansa's argument, we ruled:

In the very nature of their contract, Lufthansa is clearly the p

contract of carriage with Antiporda and remains to be so, reinstances when actual carriage was to be performed by varissuance of confirmed Lufthansa ticket in favor of Antipordafive-leg trip abroad successive carriers concretely attest to t

Since the instant petition was based on breach of contract of carriage, Mahtalone, and not PAL, since the latter was not a party to the contract. Howevethat PAL is relieved from any liability due to any of its negligent acts. In ChiCourt of Appeals, 37 while not exactly in point, the case, however, illustratesgoverns this particular situation. In that case, we recognized that a carrier (agent of another carrier, is also liable for its own negligent acts or omission its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party complthe purpose of ultimately determining who was primarily at fault as betweenlegal basis. After all, such proceeding is in accord with the doctrine against which would entail receiving the same or similar evidence for both cases anjudgments therefor. It must be borne in mind that the purpose of a third-par


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precisely to avoid delay and circuitry of action and to enable the controversy to be disposed of inone suit. 38 It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it isproven that the latter's negligence was the proximate cause of Mahtani's unfortunate experience,instead of totally absolving PAL from any liability.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No.43309 dated September 7, 1995 is hereby MODIFIED, reinstating the third-party complaint filedby British Airways dated November 9, 1990 against Philippine Airlines. No costs.

SO ORDERED.

Narvasa, C.J., Melo and Francisco, JJ., concur.

Panganiban, J., concurs in the result.

Footnotes

1 CA G.R. CV No. 43309; penned by Associate Justice Cezar P.Francisco, concurred in by Associate Justices Buenaventura J. Guerreroand Antonio P. Solano, Rollo, pp. 38-58.

2 Per Jose P. Burgos.

3 Original Record, p. 5.

4 Folder of Exhibit, Exhibit "B."

5 Original Record, pp. 1-4.

6 Ibid., pp. 14-17.

7 Ibid., pp. 26-27.

8 Ibid., 56-57.

9 Ibid., pp. 165-178.

10 Rollo, pp. 30-58.

11 Ibid., p. 18.

12 Original Record, p. 2.

13 Folder of Exhibit, Exhibit "A."

14 Art. 1735. In all cases other than those mentioneand 5 of the preceding article, if the goods are lost, deteriorated, common carriers are presumed to havhave acted negligently, unless they prove that they oextraordinary diligence as required in article 1733.

15 Philippine Airlines v. Court of Appeals, G.R. No. 1997.

16 Lufthansa German Airlines v. IAC, 207 SCRA 35Pacific Airways v. CA, 219 SCRA 521 (1993).

17 Air France v. Court of Appeals, 171 SCRA 399 (

18 Rollo, pp. 29-30.

19 The full title is Warsaw Convention for UnificationRelating to International Carriage by Air. See PhilippVol. II, 577-590 (1968).

20 Tannen Baum v. National Airlines, Inc., 176 NYSAmerican Airlines, Inc., 269 SW 2d 855; Randall v. Inc., 397 F. Supp 840.

21 Philippine Airlines v. Court of Appeals, 235 SCRA

22 Sweet Lines, Inc. v. Teves, 83 SCRA 361 (1978)

23 Lufthansa German Airlines v. IAC, 207 SCRA 35

24 TSN, February 19, 1992, p. 9.

25 Talosig v. Vda. de Neeba, 43 SCRA 472 (1972); Appeals, 236 SCRA 398 (1994); Willex Plastic Induof Appeals, 256 SCRA 478 (1996).

26 TSN, February 19, 1992, pp. 13-14.

27 34 Phil. 739 (1916).


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28 Meneses v. Court of Appeals, 246 SCRA 162 (1994).

29 Chan v. Court of Appeals, 33 SCRA 737 (1970); Atlantic Gulf andPacific Company of Manila, Inc. v. Court of Appeals, 247 SCRA 606(1995).

30 Rollo, p. 56.

31 27 SCRA 418 (1969).

32 Exhibit "A".

33 Art. 1909. "An agent is responsible not only for fraud, but also fornegligence, which shall be judged with more or less rigor by the court,according to whether the agency was or was not for compensation."

34 Art. 1884. "The agent is bound by his acceptance to carry out theagency, and is liable for damages which through his non-performance,the principal may suffer."

35 Ortigas v. Lufthansa, 64 SCRA 610 (1975).

36 238 SCRA 290 (1994).

37 185 SCRA 449 (1990).

38 67 CJS 1034.

______________________________________________________________


Manila

FIRST DIVISION

G.R. No. 123560 March 27, 2000

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners,vs.

PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICECANILAO and CLAUDIA TAGUNICAR, respondents.

PUNO, J .:

This petition for review seeks a reversal of the 31 August 1995 Decision1aResolution2of the Court of Appeals holding private respondent Claudia Tagfor moral and exemplary damages and attorney's fees, and deleting the triaactual damages.

The facts as found by the trial court are as follows:

Plaintiff Yu Eng Cho is the owner of Young Hardware Co. anIn connection with [this] business, he travels from time to timand Hongkong. On July 10, 1976, plaintiffs bought plane tickfrom defendant Claudia Tagunicar who represented herselfdefendant Tourist World Services, Inc. (TWSI). The destinaTokyo, San Francisco, U.S.A., for the amount of P25,000.00said defendant Claudia Tagunicar (Exhs. C & C-1). The purgo to Fairfield, New Jersey, U.S.A. to buy to two (2) lines of system processing textured plastic article (Exh. K).

On said date, only the passage f rom Manila to Hongkong, thconfirmed. [PAA] Flight 002 from Tokyo to San Francisco wmeaning "on request". Per instruction of defendant Claudia

returned after a few days for the confirmation of the Tokyo-Ssegment of the trip. After calling up Canilao of TWSI, defendplaintiffs that their flight is now confirmed all the way. Thereathe confirmation stickers on the plane tickets (Exhs. A & B).

A few days before the scheduled flight of plaintiffs, their sonthe Pan Am office to verify the status of the flight. Accordingpersonnel of defendant Pan Am told him over the phone thaare confirmed.

On July 23, 1978, plaintiffs left for Hongkong and stayed theThey left Hongkong for Tokyo on July 28, 1978. Upon their acalled up Pan-Am office for reconfirmation of their flight to Soffice, however, informed them that their names are not in thplaintiffs were supposed to leave on the 29th of July, 1978, in Japan for more than 72 hours, they were constrained to atickets for Taipei instead, per advise of JAL officials. This is them because Northwest Airlines was then on strike, hence
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chance for the plaintiffs to obtain airline seats to the United States within 72hours. Plaintiffs paid for these tickets.

Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, theywere forced to return back to Manila on August 3, 1978, instead of proceeding tothe United States. [Japan] Air Lines (JAL) refunded the plaintiffs the difference ofthe price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I & J) in the totalamount of P2,602.00.

In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises,Inc. cancelled Yu Eng Cho's option to buy the two lines of infra-red heating

system (Exh. K). The agreement was for him to inspect the equipment and makefinal arrangement[s] with the said company not later than August 7, 1978. Fromthis business transaction, plaintiff Yu Eng Cho expected to realize a profit ofP300,000.00 to P400,000.00.

[A] scrutiny of defendants' respective evidence reveals the following:

Plaintiffs, who were intending to go to the United States, were referred todefendant Claudia Tagunicar, an independent travel solicitor, for the purchase oftheir plane tickets. As such travel solicitor, she helps in the processing of travelpapers like passport, plane tickets, booking of passengers and some assistanceat the airport. She is known to defendants Pan-Am, TWSI/Julieta Canilao,because she has been dealing with them in the past years. Defendant Tagunicaradvised plaintiffs to take Pan-Am because Northwest Airlines was then on strikeand plaintiffs are passing Hongkong, Tokyo, then San Francisco and Pan-Amhas a flight from Tokyo to San Francisco. After verifying from defendant TWSI,thru Julieta Canilao, she informed plaintiffs that the fare would be P25,093.93giving them a discount of P738.95 (Exhs. C, C-1). Plaintiffs, however, gave her acheck in the amount of P25,000.00 only for the two round trip tickets. Out of thistransaction, Tagunicar received a 7% commission and 1% commission fordefendant TWSI.

Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets fromdefendant Julieta Canilao with the following schedules:

Origin Destination Airline Date Time/Travel

Manila Hongkong CX900 7-23-781135/1325hrs

Hongkong Tokyo CS500 7-28-781615/2115hrs

Tokyo San Francisco PA0027-29-781930/1640hrs

The use of another airline, like in this case it is Cathay Pacifallowed, although the tickets issued are Pan-Am tickets, as connection with a Pan-Am flight. When the two (2) tickets (Eissued to plaintiffs, the letter "RQ" appears below the printedflights from Tokyo to San Francisco which means "under reqPan-Am). Before the date of the scheduled departure, defenreceived several calls from the plaintiffs inquiring about the bookings. Tagunicar in turn called up TWSI/Canilao to verifywould answer that the bookings are not yet confirmed, she wthe plaintiffs.

Defendant Tagunicar claims that on July 13, 1978, a few dascheduled flight, plaintiff Yu Eng Cho personally went to herabout their flight. She called up defendant Julieta Canilao, a"o sige Claudia, confirm na." She even noted this in her indeit was Julieta who confirmed the booking (Exh. L-1). It was tallegedly attached the confirmation stickers (Exhs. 2, 2-B TWThese stickers came from TWSI.

Defendant Tagunicar alleges that it was only in the first weethat she learned from Adrian Yu, son of plaintiffs, that the latake the flight from Tokyo to San Francisco, U.S.A. After a fYu came over with a gentleman and a lady, who turned out his secretary. Defendant Tagunicar claims that plaintiffs weso that they could file an action against Pan-Am. Because oshe will not be involved, she agreed to sign the affidavit (Ex

lawyer.

Defendants TWSI/Canilao denied having confirmed the Toksegment of plaintiffs' flight because flights then were really ton-going strike at Northwest Airlines. Defendant Claudia Taaware that [said] particular segment was not confirmed, becof plaintiffs' departure, Tagunicar called up TWSI from the aCanilao asked her why she attached stickers on the tickets portion of the flight was not yet confirmed. Neither TWSI northe flight and never authorized defendant Tagunicar to attacstickers. In fact, the confirmation stickers used by defendanstickers exclusively for use of Pan-Am only. Furthermore, if that confirms the booking, the IATA number of said agency validation or confirmation stickers. The IATA number that ap

attached to plaintiffs' tickets (Exhs. A & B) is 2-82-0770 (Exwhen in fact TWSI's IATA number is 2-83-0770 (Exhs. 5, 5-A
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A complaint for damages was filed by petitioners against private respondents Pan AmericanWorld Airways, Inc. (Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao),and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets andhotel accommodations when petitioners were compelled to stay in Hongkong and then in Tokyoby reason of the non-confirmation of their booking with Pan-Am. In a Decision dated November14, 1991, the Regional Trial Court of Manila, Branch 3, held the defendants jointly and severallyliable, except defendant Julieta Canilao, thus:

WHEREFORE, judgment is hereby rendered for the plaintiffs and orderingdefendants Pan American World Airways, Inc., Tourist World Services, Inc. andClaudia Tagunicar, jointly and severally, to pay plaintiffs the sum of P200,000.00

as actual damages, minus P2,602.00 already refunded to the plaintiffs;P200,000.00 as moral damages; P100,000.00 as exemplary damages; anamount equivalent to 20% of the award for and as attorney's fees, plus the sumof P30,000.00 as litigation expenses.

Defendants' counterclaims are hereby dismissed for lack of merit.

SO ORDERED.

Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995,the appellate court rendered judgment modifying the amount of damages awarded, holdingprivate respondent Tagunicar solely liable therefor, and absolving respondents Pan Am andTWSI from any and all liability, thus:

PREMISES CONSIDERED, the decision of the Regional Trial Court is herebySET ASIDE and a new one entered declaring appe llant Tagunicar solely liablefor:

1) Moral damages in the amount of P50,000.00;

2) Exemplary damages in the amount of P25,000.00; and

3) Attorney's fees in the amount of P10,000.00 plus costs of suit.

The award of actual damages is hereby DELETED.

SO ORDERED.

In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not aduly authorized agent or representative of either Pan Am or TWSI. It held that their businesstransactions are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as

its agent and sub-agent, respectively. It further held that Tagunicar was not the bookings of, nor issue validation stickers to, herein petitioners and henccannot be held responsible for her actions. Finally, it deleted the award for alack of proof.

Hence this petition based on the following assignment of errors:

1. the Court of Appeals, in reversing the decision of the trial ruling in Nicos Industrial Corporation vs. Court of Appeals, e127]; and

2. the findings of the Court of Appeals that petitioners' ticketquestion were not confirmed and that there is no agency relPAN-AM, TWSI and Tagunicar are contrary to the judicial aAM, TWSI and Tagunicar and likewise contrary to the findincourt.

We affirm.

I. The first issue deserves scant consideration. Petitioners contend that conthe Court of Appeals, the decision of the trial court conforms to the standarddecision set in Nicos Industrial Corporation, et. al. vs. Court of Appeals, et.with welcome economy of words, arrives at the factual findings, reaches therenders its ruling and, having done so, ends." It is averred that the trial coura detailed statement of the relevant facts and evidence adduced by the par

became the bases for the court's conclusions.

A careful scrutiny of the decision rendered by the trial court will show that aevidence of the parties, it proceeded to dispose of the case with a one-parato wit:

On the basis of the foregoing facts, the Court is constraineddefendant Pan-Am is the principal, and defendants TWSI anauthorized agent and sub-agent, respectively. ConsequentlyAm, TWSI and Claudia Tagunicar should be held jointly andplaintiffs for damages. Defendant Julieta Canilao, who actedcapacity as Office Manager of defendant TWSI should not bliable.5

The trial court's finding of facts is but a summary of the testimonies of the wdocumentary evidence presented by the parties. It did not distinctly and clesubstantiate, the factual and legal bases for holding respondents TWSI, Pajointly and severally liable. In Del Mundo vs. CA, et al.6where the trial cour
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the conflicting asseverations of the parties, disposed of the kernel issue in just two (2)paragraphs, we held:

It is understandable that courts, with their heavy dockets and time constraints,often find themselves with little to spare in the preparation of decisions to theextent most desirable. We have thus pointed out that judges might learn tosynthesize and to simplify their pronouncements. Nevertheless, concisely writtensuch as they may be, decisions must still distinctly and clearly express, at least inminimum essence, its factual and legal bases.

For failing to explain clearly and well the factual and legal bases of its award of moral damages,

we set it aside in said case. Once more, we stress that nothing less than Section 14 of ArticleVIII of the Constitution requires that "no decision shall be rendered by any court withoutexpressing therein clearly and distinctly the facts and the law on which it is based." This isdemanded by the due process clause of the Constitution. In the case at bar, the decision of thetrial court leaves much to be desired both in form and substance. Even while said decisioninfringes the Constitution, we will not belabor this infirmity and rather examine the sufficiency ofthe evidence submitted by the petitioners.

II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorizedticketing agent of Pan Am. Proceeding from this premise, they contend that TWSI and Pan Amshould be held liable as principals for the acts of Tagunicar. Petitioners stubbornly insist that theexistence of the agency relationship has been established by the judicial admissions allegedlymade by respondents herein, to wit: (1) the admission made by Pan Am in its Answer that TWSIis its authorized ticket agent; (2) the affidavit executed by Tagunicar where she admitted that sheis a duly authorized agent of TWSI; and (3) the admission made by Canilao that TWSI received

commissions from ticket sales made by Tagunicar.

We do not agree. By the contract of agency, a person binds himself to render some service or todo something in representation or on behalf of another, with the consent or authority of the latter.7The elements of agency are: (1) consent, express or implied, of the parties to establish therelationship; (2) the object is the execution of a juridical act in relation to a third person; (3) theagent acts as a representative and not for himself; (4) the agent acts within the scope of hisauthority.8It is a settled rule that persons dealing with an assumed agent are bound at theirperil, if they would hold the principal liable, to ascertain not only the fact of agency but also thenature and extent of authority, and in case either is controverted, the burden of proof is uponthem to establish it.9

In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated thatshe is an authorized agent of TWSI. This affidavit, however, has weak probative value in light of

respondent Tagunicar's testimony in court to the contrary. Affidavits, being taken ex parte, arealmost always incomplete and often inaccurate, sometimes from partial suggestion, or for wantof suggestion and inquiries. Their infirmity as a species of evidence is a matter of judicial

experience and are thus considered inferior to the testimony given in court.are not complete reproductions of what the declarant has in mind because tprepared by the administering officer and the affiant simply signs them afterread to her.11Respondent Tagunicar testified that her affidavit was preparethe secretary of petitioners' lawyer, Atty. Acebedo, who both came with Adrpetitioners, when the latter went to see her at her office. This was confirmedtestified that Atty. Acebedo brought his notarial seal and notarized the affida12The circumstances under which said affidavit was prepared put in doubt pit was executed voluntarily by respondent Tagunicar. It appears that the affiand was based on the answers which respondent Tagunicar gave to the quto her by Atty. Acebedo.13They never told her that the affidavit would be usfiled against her.14They even assured her that she would not be included aagreed to execute the affidavit.15Respondent Tagunicar was prevailed upoand their lawyer to sign the affidavit despite her objection to the statement tan agent of TWSI. They assured her that "it is immaterial "16and that "if we fwe cannot get anything from you."17This purported admission of respondebe used by petitioners to prove their agency relationship. At any rate, even be given any probative value, the existence of the agency relationship cannits sole basis. The declarations of the agent alone are generally insufficient or extent of his authority.18In addition, as between the negative allegation oCanilao and Tagunicar that neither is an agent nor principal of the other, anallegation of petitioners that an agency relationship exists, it is the latter whevidence to prove their allegation,19failing in which, their claim must neces

We stress that respondent Tagunicar categorically denied in open court thaauthorized agent of TWSI, and declared that she is an independent travel a

consistently ruled that in case of conflict between statements in the affidavitdeclarations, the latter command greater weight.21

As further proofs of agency, petitioners call our attention to TWSI's Exhibitswhich show that Tagunicar and TWSI received sales commissions from Pathe Ticket Sales Report submitted by TWSI to Pan Am reflecting the commTWSI as an agent of Pan Am. Exhibit "7-A"23is a listing of the routes takenwere audited to TWSI's sales report. Exhibit "8"24is a receipt issued by TWpayment made by Tagunicar for the tickets she bought from TWSI. These djustify the decision that Tagunicar was paid a commission either by TWSI ocontrary, Tagunicar testified that when she pays TWSI, she already deductscommission and merely gives the net amount to TWSI. 25From all sides of transaction is simply a contract of sale wherein Tagunicar buys airline tickethen sells it at a premium to her clients.

III. Petitioners included respondent Pan Am in the complainant on the suppTWSI is its duly authorized agent, and respondent Tagunicar is an agent of should also be held responsible for the acts of respondent Tagunicar. Our d
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show that this contention lacks factual and legal bases. Indeed, there is nothing in the records toshow that respondent Tagunicar has been employed by Pan Am as its agent, except the bareallegation of petitioners. The real motive of petitioners in suing Pan Am appears in its AmendedComplaint that "[d]efendants TWSI, Canilao and Tagunicar may not be financially capable ofpaying plaintiffs the amounts herein sought to be recovered, and in such event, defendant PanAm, being their ultimate principal, is primarily and/or subsidiary liable to pay the said amounts toplaintiffs."26This lends credence to respondent Tagunicar's testimony that she was persuaded toexecute an affidavit implicating respondents because petitioners knew they would not be able toget anything of value from her. In the past, we have warned that this Court will not tolerate anabuse of judicial process by passengers in order to pry on international airlines for damageawards, like "trophies in a safari."27

This meritless suit against Pan Am becomes more glaring with petitioner' inaction after they werebumped off in Tokyo. If petitioners were of the honest belief that Pan Am was responsible for themisfortune which beset them, there is no evidence to show that they lodged a protest with PanAm's Tokyo office immediately after they were refused passage for the flight to San Francisco, oreven upon their arrival in Manila. The testimony of petitioner Yu Eng Cho in this regard is of titlevalue, viz:

Atty. Jalandoni: . . .

q Upon arrival at the Tokyo airport, what did you do if any in connection with yourschedule[d] trip?

a I went to the Hotel, Holiday Inn and from there I immediately called up Pan Amoffice in Tokyo to reconfirm my flight, but they told me that our names were notlisted in the manifest, so next morning, very early in the morning I went to theairport, Pan Am office in the airport to verify and they told me the same and wewere not allowed to leave.

q You were scheduled to be in Tokyo for how long Mr. Yu?

a We have to leave the next day 29th.

q In other words, what was your status as a passenger?

a Transient passengers. We cannot stay for more than 72 hours.

x x x x x x x x x

q As a consequence of the fact that you claimed that the Pan Am office in Tokyotold you that your names were not in the manifest, what did you do, if any?

a I ask[ed] them if I can go anywhere in the State? They tolvia Japan Airlines and I accepted it.

q Do you have the tickets with you that they issued for Los A

a It was taken by the Japanese Airlines instead they issue[dTaipei.

x x x x x x x x x

q Were you able to take the trip to Los Angeles via Pan Am

issued to you in lieu of the tickets to San Francisco?

a No, sir.

q Why not?

a The Japanese Airlines said that there were no more availa

q And as a consequence of that, what did you do, if any?

a I am so much scared and worried, so the Japanese AirlineTaipei and I accepted it.

x x x x x x x x x

q Why did you accept the Japan Airlines offer for you to go t

a Because there is no chance for us to go to the United Statbecause during that time Northwest Airlines [was] on strike scarce. So they advised me better left (sic) before the 72 hohave trouble with the Japanese immigration.

q As a consequence of that you were force[d] to take the trip

a Yes, sir.28(emphasis supplied)

It grinds against the grain of human experience that petitioners did not insisto board, considering that it was then doubly difficult to get seats because oNorthwest Airlines strike. It is also perplexing that petitioners readily acceptTokyo office had to offer as an alternative. Inexplicably too, no demand lette
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respondents TWSI and Canilao.29Nor was a demand letter sent to respondent Pan Am. To saythe least, the motive of petitioners in suing Pan Am is suspect.

We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to boardto justify petitioners' claim for damages. Mere refusal to accede to the passenger's wishes doesnot necessarily translate into damages in the absence of bad faith. 30The settled rule is that thelaw presumes good faith such that any person who seeks to be awarded damages due to acts ofanother has the burden of proving that the latter acted in bad faith or with ill motive. 31In the caseat bar, we find the evidence presented by petitioners insufficient to overcome the presumption ofgood faith. They have failed to show any wanton, malevolent or reckless misconduct imputableto respondent Pan Am in its refusal to accommodate petitioners in its Tokyo-San Francisco flight.

Pan Am could not have acted in bad faith because petitioners did not have confirmed tickets andmore importantly, they were not in the passenger manifest.

In not a few cases, this Court did not hesitable to hold an airline liable for damages for havingacted in bad faith in refusing to accommodate a passenger who had a confirmed ticket andwhose name appeared in the passenger manifest. In Ortigas Jr. v. Lufthansa German AirlinesInc.,32we ruled that there was a valid and binding contract between the airline and its passengerafter finding that validating sticker on the passenger's ticket had the letters "O.K." appearing inthe "Res. Status" box which means "space confirmed" and that the ticket is confirmed orvalidated. In Pan American World Airways Inc. v. IAC, et al.33where a would-be-passenger hadthe necessary ticket, baggage claim and clearance from immigration all clearly showing that shewas a confirmed passenger and included in the passenger manifest and yet was deniedaccommodation in said flight, we awarded damages. In Armovit, et al. v. CA, et al.,34we upheldthe award of damages made against an airline for gross negligence committed in the issuance oftickets with erroneous entries as to the time of flight. In Alitalia Airways v. CA, et al.,35we held

that when airline issues a ticket to a passenger confirmed on a particular flight, on a certain date,a contract of carriage arises, and the passenger has every right to expect that he would fly onthat flight and on that date. If he does not, then the carrier opens itself to a suit for breach ofcontract of carriage. And finally, an award of damages was held proper in the case of Zalamea,et al. v. CA, et al.,36where a confirmed passenger included in the manifest was deniedaccommodation in such flight.

On the other hand, the respondent airline in Sarreal, Sr. v. Japan Airlines Co., Ltd.,37was heldnot liable for damages where the passenger was not allowed to board the plane because histicket had not been confirmed. We ruled that "[t]he stub that the lady employee put on thepetitioner's ticket showed among other coded items, under the column "status" the letters "RQ" which was understood to mean "Request." Clearly, this does not mean a confirmation but onlya request. JAL Traffic Supervisor explained that it would have been different if what was writtenin the stub were the letter "ok" in which case the petitioner would have been assured of a seat on

said flight. But in this case, the petitioner was more of a wait-listed passenger than a regularlybooked passenger."

In the case at bar, petitioners' ticket were on "RQ" status. They were not coand their names were not listed in the passenger manifest. In other words, twhere Pan Am bound itself to transport petitioners and thereafter reneged oHence, respondent airline cannot be held liable for damages.

IV. We hold that respondent Court of Appeals correctly rules that the ticketsconfirmed for good reasons: (1) The persistent calls made by respondent Tand those made by petitioners at the Manila, Hongkong and Tokyo offices ieloquent indications that petitioners knew that their tickets have not been cocorrectly observed by Pan Am, why would one continually try to have one 'shad already been confirmed? (2) The validation stickers which respondent T

petitioners' tickets were those intended for the exclusive use of airline compauthority to use them. Hence, said validation stickers, wherein the word "OKstatus box, are not valid and binding. (3) The names of petitioners do not appassengers manifest. (4) Respondent Tagunicar's "Exhibit 1"38shows that Francisco-New York segment was "Ok", meaning it was confirmed, but thatTokyo-San Francisco segment was still "on request". (5) Respondent Canilthe day that petitioners were to depart for Hongkong, respondent Tagunicarairport asking for confirmation of the Tokyo-San Francisco flight, and that wrespondent Tagunicar that she should not have allowed petitioners to leavehave not been confirmed, respondent Tagunicar merely said "Bahala na." 3

controverted nor refuted by respondent Tagunicar. (6) To prove that it reallybookings of petitioners, respondent Canilao pointed out that the validation srespondent Tagunicar attached to the tickets of petitioners had IATA No. 2-it, whereas the IATA number of TWSI is 28-30770.40

Undoubtedly, respondent Tagunicar should be liable for having acted in badmisrepresenting to petitioners that their tickets have been confirmed. Her cuwas properly mitigated. Petitioner Yu Eng Cho testified that he repeatedly trthe confirmation of their tickets with Pan Am because he doubted the confirrespondent Tagunicar.41This is clear proof that petitioners knew that they mat Tokyo when they decided to proceed with the trip. Aware of this risk, petito confirm their tickets in Manila, then in Hongkong, and finally in Tokyo. Remodification as to the amount of damages awarded just and equitable unde

WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost aga

SO ORDERED.

Davide, Jr., C.J., Kapunan and Pardo, JJ., concur.

Ynares-Santiago, J., took no part.
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Footnotes

1Penned by Associate Justice Antonio M. Martinez, with Consuelo Ynares-Santiago and Ruben T. Reyes, JJ., concurring; Rollo, 35-49.

2Ibid., 51.

3Original Records, 647-650.

4206 SCRA 127 (1992).

5Original Record, 650.

6240 SCRA 348 (1995).

7New Civil Code, Article 1868.

8Tolentino, Civil Code of the Phils., Vol. V, 1992 ed., p. 396.

9BA Finance v. CA, et al., 211 SCRA 112 (1992).

10People v. Diaz, 262 SCRA 723 (1996).

11People v. Gondora, 265 SCRA 408 (1996).

12TSN, December 16, 1982, pp. 17-19.

13TSN, September 29, 1983, pp. 12-13.

14TSN, December 16, 1982, p. 17.

15TSN, September 29, 1983, pp. 16-17.

16TSN, July 22, 1983, p. 43.

17Ibid., p, 38.

18Reuschlein & Gregory, The Law of Agency and Partnership, 1990, Second ed.,p. 28; BA Finance v. CA, et al., 211 SCRA 112 (1992).

19Martinez v. NLRC, et al., 272 SCRA 793 (1997).

20TSN, July 22, 1983, p. 44; August 12, 1983, pp. 6-7.

21People v. Aliposa, 263 SCRA 471 (1996).

22Original Records, p. 448.

23Ibid., 449.

24Ibid., 450.

25TSN, July 22, 1983, p. 50.


27Alitalia Airways vs. CA, et al., 187 SCRA 763 (1990).

28TSN, August 20, 1981, pp. 18-28.

29TSN, November 23, 1983, p. 35.

30Air France v. CA, et al., 171 SCRA 399 (1989).

31

Ford Phils., Inc. v. CA, et al., 267 SCRA 320 (1997).3264 SCRA 610 (1975).

65153 SCRA 521 (1987).

34184 SCRA 476 (1990).

35187 SCRA 763 (1990).

36228 SCRA 23 (1993).

37207 SCRA 359 (1992).


39TSN, November 23, 1983, pp. 29-31.
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40Ibid., p. 14.

41TSN, August 27, 1981, p. 42.

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Manila

THIRD DIVISION

G.R. No. 95641 September 22, 1994

SANTOS B. AREOLA and LYDIA D. AREOLA, petitioners-appellants,vs.COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC.,respondents-appellees.

Gutierrez, Cortes & Gonzales for petitioners.

Bengzon, Bengzon, Baraan & Fernandez Law Offices for private respondent.

ROMERO, J .:

On June 29, 1985, seven months after the issuance of petitioner Santos Areola's PersonalAccident Insurance Policy No. PA-20015, respondent insurance company unilaterally cancelledthe same since company records revealed that petitioner-insured failed to pay his premiums.

On August 3, 1985, respondent insurance company offered to reinstate same policy it hadpreviously cancelled and even proposed to extend its lifetime to December 17, 1985, upon afinding that the cancellation was erroneous and that the premiums were paid in full by petitioner-insured but were not remitted by Teofilo M. Malapit, respondent insurance company's branchmanager.

These, in brief, are the material facts that gave rise to the action for damages due to breach ofcontract instituted by petitioner-insured beforeBranch 40 RTC, Dagupan City against respondent insurance company.

There are two issues for resolution in this case:

(1) Did the erroneous act of cancelling subject insurance policy entitle petitipayment of damages?

(2) Did the subsequent act of reinstating the wrongfully cancelled insuranceinsurance company, in an effort to rectify such error, obliterate whatever liamay have to bear, thus absolving it therefrom?

From the factual findings of the trial court, it appears that petitioner-insured,lawyer from Dagupan City, bought, through

the Baguio City branch of Prudential Guarantee and Assurance, Inc. (hereinPrudential), a personal accident insurance policy covering the one-year perNovember 28, 1984 and noon of November 28, 1985. 1Under the terms of account issued by respondent insurance company, petitioner-insured was stotal amount of P1,609.65 which included the premium of P1,470.00, documP110.25 and 2% premium tax of P29.40. 2At the lower left-hand corner of taccount, the following is legibly printed:

This Statement of Account must not be considered a receipbe issued to you upon payment of this account.

If payment is made to our representative, demand for a Provour Official Receipts is (sic) not received by you within 7 day

If payment is made to our office, demand for an OFFICIAL R

On December 17, 1984, respondent insurance company issued collector's No. 9300 to petitioner-insured for the amount of P1,609.65 3On the lower pthe following is written in capital letters:

Note: This collector's provisional receipt will be confirmed bour official receipt is not received by you within 7 days, plea

On June 29, 1985, respondent insurance company, through its Baguio CityMalapit, sent petitioner-insured EndorsementNo. BG-002/85 which "cancelled flat" Policy No. PA BG-20015 "for non-payeffective as of inception dated." 5The same endorsement also credited "a rP1,609.65 plus documentary stamps and premium tax" to the account of th

Shocked by the cancellation of the policy, petitioner-insured confronted Carrespondent insurance company, and demanded the issuance of an official petitioner-insured that the cancellation of the policy was a mistake but he w
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to its rectification. However, petitioner-insured failed to receive any official receipt fromPrudential.

Hence, on July 15, 1985, petitioner-insured sent respondent insurance company a letterdemanding that he be insured under the same terms and conditions as those contained in PolicyNo. PA-BG-20015 commencing upon its receipt of his letter, or that the current commercial rateof increase on the payment he had made under provisional receipt No. 9300 be returned withinfive days. 6Areola also warned that should his demands be unsatisfied, he would sue fordamages.

On July 17, 1985, he received a letter from production manager Malapit informing him that the

"partial payment" of P1,000.00 he had made on the policy had been "exhausted pursuant to theprovisions of the Short Period Rate Scale" printed at the back of the policy. Malapit warnedAreola that should be fail to pay the balance, the company's liability would cease to operate. 7

In reply to the petitioner-insured's letter of July 15, 1985, respondent insurance company,through its Assistant Vice-President Mariano M. Ampil III, wrote Areola a letter dated July 25,1

agency and partnership for digests

Documents