Pan American V Intermediate Appellate Court

SUPREME COURT REPORTS ANNOTATED VOLUME 164 3/18/22, 1:03 AM
268 SUPREME COURT REPORTS ANNOTATED

Pan American World Airways, Inc. vs. IAC
*
No. L-70462. August 11, 1988.
PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs.

INTERMEDIATE APPELLATE COURT, RENE V.
PANGAN, SOTANG BASTOS PRODUCTIONS and
ARCHER PRODUCTIONS, respondents.
Civil Law; Common Carrier; Liability for lost of baggage;

Ruling in Ong Yiu vs. Court of Appeals sustaining the validity of a
printed stipulation at the back of an airline ticket limiting liability
of the carrier for lost baggage to a specified amount and that the
liability limited to said amount since the passenger did not declare a
higher value much less pay additional charges squarely applicable
to the instant case.·We find the ruling in Ong Yiu squarely
applicable to the instant case. In said case the Court, through
Justice Melencio-Herrera, stated: Petitioner further contends that
respondent Court committed grave error when it limited PALÊs
carriage liability to the amount of P100.00 as stipulated at the back
of the ticket. . . . We agree with the foregoing finding. The pertinent
Condition of Carnage 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 CarrierÊs
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.
Same; Same; Same; Same; Fact that petitioner had not signed
the plane ticket he is nevertheless bound by the provisions thereof.·
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
https://www.central.com.ph/sfsreader/session/0000017f98d5e4b0f6c2efb6000d00d40059004a/p/APX179/?username=Guest Page 1 of 15
the latterÊs lack of
_______________
* THIRD DIVISION.
269
VOL. 164, AUGUST 11, 1988 269
knowledge or assent to the regulation.‰ [Tannebaum v. National

Airline, Inc., 13 Misc. 2d 450, 176 N.Y.S. 2d 400; Lichten v. Eastern
Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla.,
63 So. 2d 634.] 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 [Tolentino, Civil
Code, Vol IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes,
LawyerÊs Journal, Jan. 31, 1951, p. 49]. And as held in Randolph v.
American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein
v. 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.‰
Same; Same; Same; Ruling in Shewaram vs. PAL Inc. that the
stipulation limiting the carrierÊs liability to a specified amount was
invalid finds no application in the instant case.·On the other hand,
the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-
20099, July 2, 1966, 17 SCRA 606], where the court held that the
stipulation limiting the carrierÊs liability to a specified amount was
invalid, finds no application in the instant case, as the ruling in
said case was premised on the finding that the conditions printed at
the back of the ticket were so small and hard to read that they
would not warrant the presumption that the passenger was aware
of the conditions and that he had freely and fairly agreed thereto. In
the instant case, similar facts that would make the case fall under
the exception have not been alleged, much less shown to exist.
Same; Same; Same; Damages; Court inable to agree with
decision of the trial court and affirmed by the Court of Appeals

awarding private respondents damages as and for lost profits.·The
Court finds itself unable to agree with the decision of the trial court,
and affirmed by the Court of Appeals, awarding private
respondents damages as and for lost profits when their contracts to
show the films in Guam and San Francisco, California were
cancelled. The rule laid down in Mendoza v. Philippine Air Lines,
Inc. [90 Phil. 836 (1952)] cannot be any clearer:. . . Under Art. 1107
of the Civil Code, a debtor in good faith like the defendant herein,
may be held liable only for damages that were foreseen or might
have been foreseen at the time the contract of transportation was
entered into. The trial court correctly found that the defendant
company could not have foreseen the damages that would be
suffered by Mendoza upon failure to deliver the
270
can of film on the 17th of September, 1948 for the reason that the
plans of Mendoza to exhibit that film during the two fiesta and his
preparations, specially the announcement of said exhibition by
posters and advertisement in the newspaper, were not called to the
defendantÊs attention.
Same; Same; Same; Same; Same; Petitioner cannot be held
liable for the cancellation of private respondentsÊ contract.·Thus,
applying the foregoing ruling to the facts of the instant case, in the
absence of a showing that petitionerÊs attention was called to the
special circumstances requiring prompt delivery of private
respondent PanganÊs luggages, petitioner cannot be held liable for
the cancellation of private respondentsÊ contracts as it could not
have foreseen such an eventuality when it accepted the luggages for
transit.
Same; Same; Same; AttorneyÊs fees; Award of AttorneyÊs fees
losses support and must be set aside.·With the CourtÊs holding that
petitionerÊs liability is limited to the amount stated in the ticket,
the award of attorneyÊs fees, which is grounded on the alleged
unjustified refusal of petitioner to satisfy private respondentÊs just
and valid claim, loses support and must be set aside.
PETITION to review the decision of the Intermediate
Appellate Court.
The facts are stated in the opinion of the Court.

Guerrero & Torres for petitioner.
Jose B. Layug for private respondents.
CORTES, J.:
Before the Court is a petition filed by an international air

carrier seeking to limit its liability for lost baggage,
containing promotional and advertising materials for films
to be exhibited in Guam and the U.S.A., clutch bags,
barong tagalogs and personal belongings, to the amount
specified in the airline ticket absent a declaration of a
higher valuation and the payment of additional charges.
The undisputed facts of the case, as found by the trial
court and adopted by the appellate court, are as follows:
On April 25, 1978, plaintiff Rene V. Pangan, president and general

manager of the plaintiffs Sotang Bastos and Archer Produc-
271
VOL. 164, AUGUST 11, 1988 271

tions, while in San Francisco, California and Primo Quesada of

Prime Films, San Francisco, California, entered into an agreement
(Exh. A) whereby the former, for and in consideration of the amount
of US $2,500.00 per picture, bound himself to supply the latter with
three films. ÂAng Mabait, Masungit at ang Pangit,Ê ÂBig Happening
with Chikiting and Iking,Ê and ÂKambal DragonÊ for exhibition in the
United States. It was also their agreement that plaintiffs would
provide the necessary promotional and advertising materials for
said films on or before May 30, 1978.
On his way home to the Philippines, plaintiff Pangan visited
Guam where he contacted Leo Slutchnick of the Hafa Adai
Organization. Plaintiff Pangan likewise entered into a verbal
agreement with Slutchnick for the exhibition of two of the films
above-mentioned at the Hafa Adai Theater in Guam on May 30,
1978 for the consideration of P7,000.00 per picture (p. 11, tsn, June
20, 1979). Plaintiff Pangan undertook to provide the necessary
promotional and advertising materials for said films on or before
the exhibition date on May 30, 1978.
By virtue of the above agreements, plaintiff Pangan caused the
preparation of the requisite promotional handbills and still pictures
for which he paid the total sum of P12,900.00 (Exhs. B, B-1, C and
C-1). Likewise in preparation for his trip abroad to comply with his
contracts, plaintiff Pangan purchased fourteen clutch bags, four
capiz lamps and four barong tagalog, with a total value of P4,400.00
(Exhs. D, D-1, E, and F).
On May 18, 1978, plaintiff Pangan obtained from defendant Pan
AmÊs Manila Office, through the Your Travel Guide, an economy
class airplane ticket with No. 0269207406324 (Exh. G) for passage
from Manila to Guam on defendantÊs Flight No. 842 of May 27,
1978, upon payment by said plaintiff of the regular fare. The Your
Travel Guide is a tour and travel office owned and managed by
plaintiff Ês witness Mila de la Rama.
On May 27, 1978, two hours before departure time plaintiff
Pangan was at the defendantÊs ticket counter at the Manila
International Airport and presented his ticket and checked in his
two luggages, for which he was given baggage claim tickets Nos.
963633 and 963649 (Exhs. H and H-1). The two luggages contained
the promotional and advertising materials, the clutch bags, barong
tagalog and his personal belongings. Subsequently, Pangan was
informed that his name was not in the manifest and so he could not
take Flight No. 842 in the economy class. Since there was no space
in the economy class, plaintiff Pangan took the first class because
he wanted to be on time in Guam to comply with his commitment,
paying an additional sum of $112.00.
272

When plaintiff Pangan arrived in Guam on the date of May 27,

1978, his two luggages did not arrive with his flight, as a
consequence of which his agreements with Slutchnick and Quesada
for the exhibition of the films in Guam and in the United States
were cancelled (Exh. L). Thereafter, he filed a written claim (Exh. J)
for his missing luggages.
Upon arrival in the Philippines, Pangan contacted his lawyer,
who made the necessary representations to protest as to the
treatment which he received from the employees of the defendant
and the loss of his two luggages (Exh. M, O, Q, S, and T). Defendant
Pan Am assured plaintiff Pangan that his grievances would be
investigated and given its immediate consideration (Exhs. N, P and
R). Due to the defendantÊs failure to communicate with Pangan
about the action taken on his protests, the present complaint was
filed by the plaintiff. (Pages 4-7, Record On Appeal). [Rollo, pp. 27-
29.]
On the basis of these facts, the Court of First Instance

found petitioner liable and rendered judgment as follows:
(1) Ordering defendant Pan American World Airways,

Inc. to pay all the plaintiffs the sum of P83,000.00,
for actual damages, with interest thereon at the
rate of 14% per annum from December 6, 1978,
when the complaint was filed, until the same is
fully paid, plus the further sum of P10,000.00 as
attorneyÊs fees;
Inc. to pay plaintiff Rene V. Pangan the sum of
P8,123.34, for additional actual damages, with
interest thereon at the rate of 14% per annum from
December 6, 1978, until the same is fully paid;
(3) Dismissing the counterclaim interposed by
defendant Pan American World Airways, Inc.; and
Inc. to pay the costs of suit. [Rollo, pp. 106-107.]
On appeal, the then Intermediate Appellate Court affirmed

the trial court decision.
Hence, the instant recourse to this Court by petitioner.
The petition was given due course and the parties, as
required, submitted their respective memoranda. In due
time the case was submitted for decision.
In assailing the decision of the Intermediate Appellate
Court petitioner assigned the following errors:
1. The respondent court erred as a matter of law in

affirming the trial courtÊs award of actual damages
beyond the
273
VOL. 164, AUGUST 11, 1988 273

limitation of liability set forth in the Warsaw

Convention and the contract of carriage.
2. The respondent court erred as a matter of law in
affirming the trial courtÊs award of actual damages
consisting of alleged lost profits in the face of this

CourtÊs ruling concerning special or consequential
damages as set forth in Mendoza v. Philippine
Airlines [90 Phil. 836 (1952).]
The assigned errors shall be discussed seriatim.
1. The airline ticket (Exh. „G‰) contains the following

conditions:
NOTICE
If the passengerÊs journey involves an ultimate destination or stop

in a country other than the country of departure the Warsaw
Convention may be applicable and the Convention governs and in
most cases limits the liability of carriers for death or personal
injury and in respect of loss of or damage to baggage. See also notice
headed „Advice to International Passengers on Limitation of
Liability.‰
CONDITIONS OF CONTRACT
1. As used in this contract „ticket‰ means this passenger ticket

and baggage check of which these conditions and the notices
form part, „carriage‰ is equivalent to „transportation,‰
„carrier‰ means all air carriers that carry or undertake to
carry the passenger or his baggage hereunder or perform
any other service incidental to such air carriage. „WARSAW
CONVENTION‰ means the convention for the Unification of
Certain Rules Relating to International Carriage by Air
signed at Warsaw, 12th October 1929, or that Convention as
amended at The Hague, 28th September 1955, whichever
may be applicable.
2. Carriage hereunder is subject to the rules and limitations
relating to liability established by the Warsaw Convention
unless such carriage is not „international carriage‰ as
defined by that Convention.
3. To the extent not in conflict with the foregoing carriage and
other services performed by each carrier are subject to: (i)
provisions contained in this ticket, (ii) applicable tariffs, (iii)
carrierÊs conditions of carriage and related regulations
which are made part hereof (and are available on
application at the offices of carrier), except in transportation
between a place in the United States or Canada and any
place outside thereof to which tariffs in force in those
countries apply.
xxx
274

NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as

follows unless a higher value is declared in advance and additional
charges are paid: (1) for most international travel (including
domestic portions of international journeys) to approximately $9.07
per pound ($20.00 per kilo) for checked baggage and $400 per
passenger for unchecked baggage: (2) for travel wholly between U.S.
points, to $750 per passenger on most carriers (a few have lower
limits). Excess valuation may not be declared on certain types of
valuable articles. Carriers assume no liability for fragile or
perishable articles, further information may be obtained from the
carrier. [Italics supplied.].
On the basis of the foregoing stipulations printed at the

back of the ticket, petitioner contends that its liability for
the lost baggage of private respondent Pangan is limited to
$600.00 ($20.00 x 30 kilos) as the latter did not declare a
higher value for his baggage and pay the corresponding
additional charges.
To support this contention, petitioner cites the case of
Ong Yiu v. Court of Appeals [G.R. No. L-40597, June 29,
1979, 91 SCRA 223), where the Court sustained the
validity of a printed stipulation at the back of an airline
ticket limiting the liability of the carrier for lost baggage to
a specified amount and ruled that the carrierÊs liability was
limited to said amount since the passenger did not declare
a higher value, much less pay additional charges.
We find the ruling in Ong Yiu squarely applicable to the
instant case. In said case, the Court, through Justice
Melencio-Herrera, stated:
Petitioner further contends that respondent Court committed grave

error when it limited PALÊs carriage liability to the amount of
P100.00 as stipulated at the back of the ticket. . . .
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
damage baggage of the passenger is LIMITED TO P100.00 for each ticket

unless a passenger declares a higher valuation in excess of P100.00, but
not in excess, however, of a total valuation of P1,000.00 and additional
charges are paid pursuant to CarrierÊs tariffs.
275
VOL. 164, AUGUST 11, 1988 275

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 latterÊs 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 latterÊs lack of knowledge or assent to the regulation.‰
[Tannebaum v. National Airline, Inc., 13 Misc. 2d 450, 176 N.Y.S. 2d
400; Lichten v. Eastern Airlines, 87 Fed. Supp. 691; Migoski v.
Eastern Air Lines, Inc., Fla., 63 So. 2d 634.] 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 [Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing
Mr. Justice J.B.L. Reyes, LawyerÊs Journal, Jan. 31, 1951, p. 49].
And as held in Randolph v. American Airlines, 103 Ohio App. 172,
144 N.E. 2d 878; Rosenchein v. 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. . . .
On the other hand, the ruling in Shewaram v. Philippine

Air Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA
606], where the Court held that the stipulation limiting the
carrierÊs liability to a specified amount was invalid, finds

no application in the instant case, as the ruling in said case
was premised on the finding that the conditions printed at
the back of the ticket
_______________
** Art. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has been
fairly and freely agreed upon.
276

were so small and hard to read that they would not

warrant the presumption that the passenger was aware of
the conditions and that he had freely and fairly agreed
thereto. In the instant case, similar facts that would make
the case fall under the exception have not been alleged,
much less shown to exist.
In view thereof petitionerÊs liability for the lost baggage
is limited to $20.00 per kilo or $600.00, as stipulated at the
back of the ticket.
At this juncture, in order to rectify certain
misconceptions the Court finds it necessary to state that
the Court of AppealÊs reliance on a quotation from
Northwest Airlines, Inc. v. Cuenca [G.R. No. L-22425,
August 31, 1965, 14 SCRA 1063] to sustain the view that
„to apply the Warsaw Convention which limits a carrierÊs
liability to US$9.07 per pound or US$20.00 ***
per kilo in
cases of contractual breach of carriage is against public
policy‰ is utterly misplaced, to say the least. In said case,
while the Court, as quoted in the Intermediate Appellate
CourtÊs decision, said:
Petitioner argues that pursuant to those provisions, an air „carrier

is liable only‰ in the event of death of a passenger or injury suffered
by him, or of destruction or loss of, or damages to any checked
baggage or any goods, or of delay in the transportation by air of
passengers, baggage or goods. This pretense is not borne out by the
language of said Articles. The same merely declare the carrier liable
_______________
*** The Warsaw Convention actually provides that „[i]n the transportation of
checked baggage and of goods, the liability of the carrier shall be limited to a
sum of 250 francs per kilogram, unless the consignor has made, at the time
when the package was handed over to the carrier, a special declaration of the
value of delivery and has paid a supplementary sum if the case so requires. In
that case, the carrier will be liable to pay a sum not exceeding the declared
sum, unless he proves that the sum is greater than the actual value to the
consignor at delivery. . . . The sums mentioned above shall be deemed to refer
to the French franc consisting of 65-1/2 milligrams of gold at the standard of
fineness of nine hundred thousandths. These sums may be converted into any
national currency in round figures.‰ [51 O.G. 5084, 5091.]
Proclamation No. 201, (September 23, 1955) made public the adherence of
the Republic of the Philippines to the Warsaw Convention. [51 O.G. 4933.]
277
VOL. 164, AUGUST 11, 1988 277

for damages in enumerated cases, if the conditions therein specified

are present. Neither said provisions nor others in the
aforementioned Convention regulate or exclude liability for other
breaches of contract by the carrier. Under petitionerÊs theory, an air
carrier would be exempt from any liability for damages in the event
of its absolute refusal, in bad faith, to comply with a contract of
carriage, which is absurd.
it prefaced this statement by explaining that:
. . . The case is now before us on petition for review by certiorari,

upon the ground that the lower court has erred: (1) in holding that
the Warsaw Convention of October 12, 1929, relative to
transportation by air is not in force in the Philippines: (2) in not
holding that respondent has no cause of action; and (3) in awarding
P20,000 as nominal damages.
We deem it unnecessary to pass upon the first assignment of error
because the same is the basis of the second assignment of error, and
the latter is devoid of merit, even if we assumed the former to be
well-taken. (Italics supplied.)
Thus, it is quite clear that the Court never intended to, and
in fact never did, rule against the validity of provisions of
the Warsaw Convention. Consequently, by no stretch of the
imagination may said quotation from Northwest be
considered as supportive of the appellate courtÊs statement

that the provisions of the Warsaw Convention limited a
carrierÊs liability are against public policy.
2. The Court finds itself unable to agree with the

decision of the trial court, and affirmed by the
Court of Appeals, awarding private respondents
damages as and for lost profits when their contracts
to show the films in Guam and San Francisco,
California were cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc.

[90 Phil. 836 (1952)] cannot be any clearer:
. . . Under Art. 1107 of the Civil Code, a debtor in good faith like the
defendant herein, may be held liable only for damages that were
foreseen or might have been foreseen at the time the contract of
transportation was entered into. The trial court correctly found that
the defendant company could not have foreseen the damages that
would be suffered by Mendoza upon failure to deliver the can of film
278

on the 17th of September, 1948 for the reason that the plans of
Mendoza to exhibit that film during the town fiesta and his
preparations, specially the announcement of said exhibition by
posters and advertisement in the newspaper, were not called to the
defendantÊs attention.
In our research for authorities we have found a case very similar
to the one under consideration. In the case of Chapman vs. Fargo,
L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered
motion picture films to the defendant Fargo, an express company,
consigned and to be delivered to him in Utica. At the time of
shipment the attention of the express company was called to the
fact that the shipment involved motion picture films to be exhibited
in Utica, and that they should be sent to their destination, rush.
There was delay in their delivery and it was found that the plaintiff
because of his failure to exhibit the film in Utica due to the delay
suffered damages or loss of profits. But the highest court in the
State of New York refused to award him special damages. Said
appellate court observed:
But before defendant could be held to special damages, such as the
present alleged loss of profits on account of delay or failure of delivery, it

must have appeared that he had notice at the time of delivery to him of
the particular circumstances attending the shipment, and which probably
would lead to such special loss if he defaulted. Or, as the rule has been
stated in another form, in order to impose on the defaulting party further
liability than for damages naturally and directly, i.e., in the ordinary
course of things, arising from a breach of contract, such unusual or
extraordinary damages must have been brought within the contemplation
of the parties as the probable result of breach at the time of or prior to
contacting. Generally, notice then of any special circumstances which will
show that the damages to be anticipated from a breach would be
enhanced has been held sufficient for this effect.
As may be seen, that New York case is a stronger one than the
present case for the reason that the attention of the common carrier
in said case was called to the nature of the articles shipped, the
purpose of shipment, and the desire to rush the shipment,
circumstances and facts absent in the present case. [Italics
supplied.]
Thus, applying the foregoing ruling to the facts of the

instant case, in the absence of a showing that petitionerÊs
attention was called to the special circumstances requiring
prompt delivery of private respondent PanganÊs luggages,
petitioner cannot
279
VOL. 164, AUGUST 11, 1988 279

be held liable for the cancellation of private respondentsÊ

contracts as it could not have foreseen such an eventuality
when it accepted the luggages for transit.
The Court is unable to uphold the Intermediate
Appellate CourtÊs disregard of the rule laid down in
Mendoza and affirmance of the trial courtÊs conclusion that
petitioner is liable for damages based on the finding that
„[t]he undisputed fact is that the contracts of the plaintiffs
for the exhibition of the films in Guam and California were
cancelled because of the loss of the two luggages in
question.‰ [Rollo, p. 36] The evidence reveals that the
proximate cause of the cancellation of the contracts was
private respondent PanganÊs failure to deliver the
promotional and advertising materials on the dates agreed
upon. For this petitioner cannot be held liable. Private

respondent Pangan had not declared the value of the two
luggages he had checked in and paid additional charges.
Neither was petitioner privy to respondentsÊ contracts nor
was its attention called to the condition therein requiring
delivery of the promotional and advertising materials on or
before a certain date.
3. With the CourtÊs holding that petitionerÊs liability is

limited to the amount stated in the ticket, the
award of attorneyÊs fees, which is grounded on the
alleged unjustified refusal of petitioner to satisfy
private respondentÊs just and valid claim, loses
support and must be set aside.
WHEREFORE, the Petition is hereby GRANTED and the

Decision of the Intermediate Appellate Court is SET
ASIDE and a new judgment is rendered ordering petitioner
to pay private respondents damages in the amount of
US$600.00 or its equivalent in Philippine currency at the
time of actual payment.
SO ORDERED.
Fernan, (C.J.), Feliciano and Bidin, JJ., concur.

Gutierrez, Jr., J., no part as I was on leave during
the deliberation.
Petition granted. Decision set aside.
Notes.·Stipulation in the bill of lading limiting

carrierÊs liability to the value of goods appearing therein,
unless shipper
280

People vs. Del Pilar
declares a quarter value, is valid and binding. (St. Paul

Fire and Marine Insurance Co. vs. Macondray and Co., 70
SCRA 122.)
Limitations of carrierÊs liability for lose or damage to
goods is valid. (Servando vs. Philippine Steam Navigation
Co., 117 SCRA 832.)
··o0o··
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SUPREME COURT REPORTS ANNOTATED VOLUME 164 3/18/22, 1:03 AM

268 SUPREME COURT REPORTS ANNOTATED

PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs.

Civil Law; Common Carrier; Liability for lost of baggage;

the latterÊs lack of

VOL. 164, AUGUST 11, 1988 269

Pan American World Airways, Inc. vs. IAC

knowledge or assent to the regulation.‰ [Tannebaum v. National

decision of the trial court and affirmed by the Court of Appeals

270 SUPREME COURT REPORTS ANNOTATED

Pan American World Airways, Inc. vs. IAC

PETITION to review the decision of the Intermediate

The facts are stated in the opinion of the Court.

Before the Court is a petition filed by an international air

On April 25, 1978, plaintiff Rene V. Pangan, president and general

VOL. 164, AUGUST 11, 1988 271

tions, while in San Francisco, California and Primo Quesada of

272 SUPREME COURT REPORTS ANNOTATED

When plaintiff Pangan arrived in Guam on the date of May 27,

On the basis of these facts, the Court of First Instance

(1) Ordering defendant Pan American World Airways,

On appeal, the then Intermediate Appellate Court affirmed

1. The respondent court erred as a matter of law in

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limitation of liability set forth in the Warsaw

consisting of alleged lost profits in the face of this

The assigned errors shall be discussed seriatim.

1. The airline ticket (Exh. „G‰) contains the following

If the passengerÊs journey involves an ultimate destination or stop

1. As used in this contract „ticket‰ means this passenger ticket

274 SUPREME COURT REPORTS ANNOTATED

NOTICE OF BAGGAGE LIABILITY LIMITATIONS

Liability for loss, delay, or damage to baggage is limited as

On the basis of the foregoing stipulations printed at the

Petitioner further contends that respondent Court committed grave

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

damage baggage of the passenger is LIMITED TO P100.00 for each ticket

VOL. 164, AUGUST 11, 1988 275

There is no dispute that petitioner did not declare any higher

On the other hand, the ruling in Shewaram v. Philippine

carrierÊs liability to a specified amount was invalid, finds

276 SUPREME COURT REPORTS ANNOTATED

were so small and hard to read that they would not

Petitioner argues that pursuant to those provisions, an air „carrier

VOL. 164, AUGUST 11, 1988 277

for damages in enumerated cases, if the conditions therein specified

it prefaced this statement by explaining that:

. . . The case is now before us on petition for review by certiorari,

considered as supportive of the appellate courtÊs statement

2. The Court finds itself unable to agree with the

The rule laid down in Mendoza v. Philippine Air Lines, Inc.

278 SUPREME COURT REPORTS ANNOTATED

But before defendant could be held to special damages, such as the

present alleged loss of profits on account of delay or failure of delivery, it

Thus, applying the foregoing ruling to the facts of the

VOL. 164, AUGUST 11, 1988 279

be held liable for the cancellation of private respondentsÊ

upon. For this petitioner cannot be held liable. Private

3. With the CourtÊs holding that petitionerÊs liability is