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PAL V MIANO FACTS: On August 31, 1988, private respondent took petitioner's flight PR 722, Mabuhay Class, bound for Frankfurt, Germany. He had an immediate onward connecting flight via Lufthansa flight LH 1452 to Vienna, Austria. At the Ninoy Aquino International Airport, he checked-in one brown suitcase weighing twenty (20) kilograms but did not declare a higher valuation. He claimed that his suitcase contained money, documents, one Nikkon camera with zoom lens, suits, sweaters, shirts, pants, shoes, and other accessories. Upon private respondent's arrival at Vienna via Lufthansa flight LH 1452, his checked-in baggage was missing. He reported the matter to the Lufthansa authorities. After three (3) hours of waiting in vain, he proceeded to Piestany, Czechoslovakia. Eleven (11) days after or on September 11, 1988, his suitcase was delivered to him in his hotel in Piestany, Czechoslovakia. He claimed that because of the delay in the delivery of his suitcase, he was forced to borrow money to buy some clothes, to pay $200.00 for the transportation of his baggage from Vienna to Piestany, and lost his Nikkon camera. In November 1988, private respondent wrote to petitioner a letter demanding: (1) P10,000.00 cost of allegedly lost Nikkon camera; (2) $200.00 for alleged cost of transporting luggage from Vienna to Piestany; and (3) P100,000.00 as damages. In its reply, petitioner informed private respondent that his letter was forwarded to its legal department for investigation. • Private respondent felt his demand letter was left unheeded. He instituted an action for Damages docketed as Civil Case No. 89-3496 before the Regional Trial Court of Makati. • Petitioner contested the complaint. It disclaimed any liability on the ground that there was neither a report of mishandled baggage on flight PR 722 nor a tracer telex received from its Vienna Station. It, however, contended that if at all liable its obligation is limited by the Warsaw Convention rate. • Petitioner filed a Third-Party Complaint against Lufthansa German Airlines imputing the mishandling of private respondent's baggage, but was dismissed for its failure to prosecute. • In its decision, the trial court observed that petitioner's actuation was not attended by bad faith. Nevertheless, it awarded private respondent moral and exemplary damages and attorney's fees hence this petition for review. ISSUE: Whether or not trial court erred in awarding moral and exemplary damages? HOLDING & RATION DECIDENDI YES. In breach of contract of carriage by air, moral damages are awarded only if the defendant acted fraudulently or in bad faith. Bad faith means a breach of a known duty through same motive of interest or ill will. The trial court erred in awarding moral damages to private respondent. The established facts evince that petitioner's late delivery of the baggage for eleven (11) days was not motivated by ill will or bad faith. In fact, it immediately coordinated with its Central Baggage Services to trace private respondent's suitcase and succeeded in finding it. At the hearing, petitioner's Manager for Administration of Airport Services Department Miguel Ebio testified that their records disclosed that Manila, the originating station, did not receive any tracer telex. A tracer telex, an airline lingo, is an action of any station that the airlines operate from whom a passenger

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PAL V MIANOFACTS: On August 31, 1988, private respondent took petitioner's fight PR722, Mabuha!"ass, bound#or $rank#urt, %er&an' (ehadani&&ediate on)ard *onne*ting fight via +u#thansa fight +( 1,-2to .ienna, Austria'Atthe/inoA0uino1nternationa" Airport,he*he*ked2in one bro)n suit*ase )eighing t)ent 3245 ki"ogra&s butdid notde*"area higher va"uation'(e *"ai&ed thathissuit*ase*ontained &one, do*u&ents, one /ikkon *a&era )ith 6oo& "ens,suits, s)eaters, shirts, pants, shoes, and other a**essories' 7ponprivate respondent's arriva" at .ienna via +u#thansa fight +( 1,-2,his *he*ked2inbaggage )as &issing'(ereported the &atter tothe +u#thansa authorities' A#ter three 335 hours o# )aiting in vain,he pro*eeded to Piestan, !6e*hos"ovakia' 8"even 3115 das a#teror on 9epte&ber 11, 1988, his suit*ase )as de"ivered to hi& in hishote" in Piestan, !6e*hos"ovakia' (e *"ai&ed that be*ause o# thede"ainthede"ivero# hissuit*ase, he)as#or*edtoborro)&one to bu so&e *"othes, to pa :244'44 #or the transportationo# his baggage #ro&.ienna to Piestan, and "ost his /ikkon*a&era';1n /ove&ber 1988, private respondent )rote to petitioner a "etterde&anding< 315 P14,444'44 *ost o# a""eged" "ost /ikkon *a&era=325 :244'44 #or a""eged *ost o# transporting "uggage #ro& .iennato Piestan= and 335 P144,444'44 as da&ages' 1n its rep",petitioner in#or&ed private respondent that his "etter )as#or)arded to its "ega" depart&ent #or investigation' ; Private respondent #e"t his de&and "etter )as "e#t unheeded' (einstituted an a*tion #or >a&ages do*keted as !ivi"!ase /o' 8923,9? be#ore the Regiona" @ria" !ourt o# Makati' ; Petitioner *ontested the *o&p"aint' 1t dis*"ai&ed an "iabi"it onthe ground that there )as neither a report o# &ishand"ed baggageon fight PR 722 nor a tra*er te"eA re*eived #ro& its .ienna 9tation'1t, ho)ever, *ontended that i# at a"" "iab"e its ob"igation is "i&itedb the Barsa) !onvention rate' ; Petitioner C"ed a @hird2Part !o&p"aint against +u#thansa %er&anAir"ines i&puting the &ishand"ing o# private respondent'sbaggage, but )as dis&issed #or its #ai"ure to prose*ute' ;1n its de*ision, the tria" *ourt observed that petitioner's a*tuation)as not attended b bad #aith' /everthe"ess, it a)arded privaterespondent &ora" andeAe&p"arda&agesandattorne's#eeshen*e this petition #or revie)' ISSUE: Bhether or not tria" *ourt erred in a)arding &ora" and eAe&p"arda&agesDHOLDING & RATION DECIDENDI YES' 1n brea*h o# *ontra*t o# *arriage b air, &ora" da&ages area)arded on" i# the de#endant a*ted #raudu"ent" or in bad #aith'Ead #aith &eans a brea*h o# a kno)n dut through sa&e &otiveo# interest or i"" )i""' @hetria" *ourt erredina)arding&ora"da&ages to private respondent' @he estab"ished #a*ts evin*e that petitioner's "ate de"iver o# thebaggage #or e"even 3115 das )as not &otivated b i"" )i"" or bad#aith' 1n #a*t, it i&&ediate" *oordinated )ith its !entra" Eaggage9ervi*es to tra*e private respondent's suit*ase and su**eeded inCnding it' At the hearing, petitioner's Manager #or Ad&inistrationo# Airport 9ervi*es >epart&ent Migue" 8biotestiCedthat theirre*ords dis*"osed that Mani"a, the originating station, did notre*eive an tra*er te"eA' A tra*er te"eA, an air"ine "ingo, is an a*tion o# an station that theair"ines operate #ro& )ho& a passenger &a *o&p"ain or have notre*eived his baggage upon his arriva"' 1t)as reasonab"e to presu&e thatthe hand"ingo# the baggage)as nor&a" and regu"ar' 7pon in0uir #ro& their $rank#urt 9tation, it )as ho)everdis*overed that the inter"ine tag o# private respondent's baggage)as a**identa"" taken oF' A**ording to Mr' 8bio, it )as *usto&ar#ordestinationstationstoho"datag"essbaggageunti" proper"identiCed' @he tra*er te"eA, )hi*h *ontained in#or&ation on the baggage, is&at*hed)iththetag"ess"uggage#oridentiC*ation'Bithoutthetra*er te"eA, the *o"or and the tpe o# baggage are used as basis#or the&at*hing, thus, thede"a' Be*anneither sustainthea)ard o# eAe&p"ar da&ages' @he prere0uisite #or the a)ard o# eAe&p"ar da&ages in *ases o#*ontra*t or 0uasi2*ontra*t is that the de#endant a*ted in )anton,#raudu"ent, re*k"ess, oppressive, or &a"evo"ent &anner' @he undisputed #a*ts do not so )arrant the *hara*teri6ation o# thea*tion o# petitioner' @he a)ard o# attorne's #ees &ust a"so be disa""o)ed #or "a*k o#"ega" "eg to stand on' @he #a*t that private respondent )as*o&pe""ed to "itigate and in*ur eApenses to prote*t and en#or*e his*"ai& did not Gusti# the a)ard o# attorne's #ees' @he genera" ru"e isthatattorne's#ees*annotbere*overed aspart o# da&ages be*ause o# the po"i* that no pre&iu& shou"d bep"a*ed on the right to "itigate' Petitioner is )i""ing to pa the Gust *"ai& o# :244'44 as a resu"t o#the de"a in the transportation o# the "uggage in a**ord )ith theBarsa) !onvention' /eed"ess to sa, the a)ard o# attorne's #ees&ust be de"eted )here the a)ard o# &ora" and eAe&p"arda&ages are e"i&inated'