G.R. No.

L-40597 June 29, 1979

AGUSTINO B. ONG YIU, petitioner,

Petitioner, a practicing lawyer and businessman, seeks a reversal of the Decision of the CA, which reduced his
claim for damages for breach of contract of transportation.

On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL) from
Mactan Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil Case and Spec. Procs. in the
Court of First Instance. As a passenger, he checked in one piece of luggage, a blue "maleta" for which he was
issued Claim Check. The plane left Mactan Airport, Cebu and arrived at Bancasi airport, Butuan City.

Upon arrival, petitioner claimed his luggage but it could not be found. According to petitioner it was only after
reacting indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez, which,
however, the latter denies, PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing luggage, which
message was, in turn relayed in full to the Mactan Airport teletype operator.

PAL Manila wired PAL Cebu advising that the luggage had been over carried to Manila aboard and that it would
be forwarded to Cebu of the same day. Instructions were also given that the luggage be immediately forwarded
to Butuan City on the first available flight. At 5:00 P.M. of the same afternoon, PAL Cebu sent a message to PAL
Butuan that the luggage would be forwarded on the following day. However, this message was not received by
PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon.
petitioner was worried about the missing luggage because it contained vital documents needed for trial the next
day.

At 10:00 o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his baggage before noon the
next day, otherwise, he would hold PAL liable for damages, and stating that PAL's gross negligence had caused
him undue inconvenience, worry, anxiety and extreme embarrassment.

Early in the morning, petitioner went to the Bancasi Airport to inquire about his luggage. He did not wait,
however, for the morning flight which arrived at 10:00 o'clock that morning. This flight carried the missing
luggage.

The porter clerk, Maximo Gomez, paged petitioner, but the latter had already left. A certain Emilio Dagorro a
driver of a "colorum" car, who also used to drive for petitioner, volunteered to take the luggage to petitioner. As
Maximo Gomez knew Dagorro to be the same driver used by petitioner whenever the latter was in Butuan City,
Gomez took the luggage and placed it on the counter. Dagorro examined the lock, pressed it, and it opened. After
calling the attention of Maximo Gomez, the "maleta" was opened, Gomez took a look at its contents, but did not
touch them. Dagorro then delivered the "maleta" to petitioner, with the information that the lock was open. Upon
inspection, petitioner found that a folder containing certain exhibits, transcripts and private documents in Civil
Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-law. Petitioner
refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded
the same to PAL Cebu.

Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss of his documents,
which was granted by the Court. So, petitioner demanded that his luggage be produced intact, and that he be
compensated in the sum of P250,000,00 for actual and moral damages within five days from receipt of the letter,
otherwise, he would be left with no alternative but to file suit. Petitioner sent a tracer letter to PAL Cebu inquiring
about the results of the investigation which Messrs. de Leon, Navarsi, and Agustin had promised to conduct to
pinpoint responsibility for the unauthorized opening of the "maleta"

PAL sent its reply :

We regret to inform you that to date we have not found the supposedly lost folder of papers nor have we
been able to pinpoint the personnel who allegedly pilferred your baggage.

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

Petitioner filed a Complaint against PAL for damages for breach of contract of transportation with the
Court of First Instance of Cebu.

The lower Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to
moral damages in the sum of P80,000.00, exemplary damages of P30,000.00, attorney's fees of P5,000.00, and
costs.

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

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

ISSUE:

1. Whether or not PAL is GUILTY ONLY OF SIMPLE NEGLIGENCE AND NOT BAD FAITH IN
THE BREACH OF ITS CONTRACT OF TRANSPORTATION WITH PETITIONER
2. Whether or not the respondent Court committed grave error when it limited PAL's carriage liability to
the amount of P100.00 as stipulated at the back of the ticket

HELD:

1. No. There is no bad faith committed when airline company exerted due diligence with its duty in locating
a passengers lost luggage. From the facts of the case, we agree with respondent Court that PAL had not
acted in bad faith. Bad faith means a breach of a known duty through some motive of interest or ill will. It
was the duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due diligence
in complying with such duty.

2. No. In this connection, respondent Court opined:

The liability, however, of PAL for the loss, in accordance with the stipulation written on the back
of the ticket, is limited to P100.00 per baggage, plaintiff not having declared a greater value, and
not having called the attention of the defendant on its true value and paid the tariff therefor. The
validity of this stipulation is not questioned by the plaintiff. They are printed in reasonably and
 fairly big letters, and are easily readable. Moreover, plaintiff had been a frequent passenger of PAL
from Cebu to Butuan City and back, and he, being a lawyer and businessman, must be fully aware
of these conditions.

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

8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger is LIMITED TO P100.00 for each
ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional
charges are paid pursuant to Carrier's tariffs.

But petitioner argues that there is nothing in the evidence to show that he had actually entered into a
contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article
1750* of the Civil Code has not been complied with.

While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the
provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation".

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.

Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be
permitted a recovery in excess of P100.00. Besides, passengers are advised not to place valuable items inside
their baggage but "to avail of our V-cargo service". I t is likewise to be noted that there is nothing in the
evidence to show the actual value of the goods allegedly lost by petitioner.