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VOL. 304, MARCH 2, 1999 25

Cervantes vs. Court of Appeals

*
G.R. No. 125138. March 2, 1999.

NICHOLAS Y. CERVANTES, petitioner, vs. COURT OF

APPEALS AND THE PHILIPPINE AIRLINES, INC.,
respondent.

Evidence; As a rule, conclusions and findings of fact arrived at by

the trial court are entitled to great weight on appeal and should not be
disturbed unless for strong and cogent reasons.—To rule on the first
issue, there is a need to quote the findings below. As a rule,
conclusions and findings of fact arrived at by the trial court are entitled
to great weight on appeal and should not be disturbed unless for strong
and cogent reasons.

Agency; Common Carriers; Air Transportation; Where a

passenger was fully aware of the need to send a letter to a particular
office of an airline for the extension of the period of validity of his
ticket, he cannot subsequently use what was done by airline agents,
who acted without authority, in confirming his flights.—From the
aforestated facts, it can be gleaned that the petitioner was fully aware
that there was a need to send a letter to the legal counsel of PAL for the
extension of the period of validity of his ticket. Since the PAL agents
are not privy to the said Agreement and petitioner knew that a written
request to the legal counsel of PAL was necessary, he cannot use what
the PAL agents did to his advantage. The said agents, according to the
Court of Appeals, acted without authority when they confirmed the
flights of the petitioner.

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Same; Same; Same; The acts of an agent beyond the scope of his
authority do not bind the principal, unless the latter ratifies the same
expressly or impliedly.—Under Article 1898 of the New Civil Code,
the acts of an agent beyond the scope of his authority do not bind the
principal, unless the latter ratifies the same expressly or impliedly.
Furthermore, when the third person (herein petitioner) knows that the
agent was acting beyond his power or authority, the principal cannot be
held liable for the acts of the agent. If the said third person is aware of
such limits of authority, he is to blame, and is not entitled to recover
damages from the agent, unless the latter undertook to secure the
principal’s ratification.

____________________

* THIRD DIVISION.

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Cervantes vs. Court of Appeals

Same; Same; Same; The admission by a passenger that he had to

submit a letter to the airline’s legal counsel requesting for an extension
of the validity of his tickets is tantamount to knowledge on his part that
mere employees of the airline had no authority to extend the validity of
his tickets.—The admission by Cervantes that he was told by PAL’s
legal counsel that he had to submit a letter requesting for an extension
of the validity of subject tickets was tantamount to knowledge on his
part that the PAL employees had no authority to extend the validity of
subject tickets and only PAL’s legal counsel was authorized to do so.

Same; Same; Actions; Pleadings and Practice; The failure of a

defendant to raise the defense of lack of authority of its agents in its
answer or in a motion to dismiss is cured where the said issue was
litigated upon.—However, notwithstanding PAL’s failure to raise the
defense of lack of authority of the said PAL agents in its answer or in a
motion to dismiss, the omission was cured since the said issue was

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litigated upon, as shown by the testimony of the petitioner in the

course of trial.

Same; Same; Damages; In awarding moral damages for breach

of contract of carriage, the breach must be wanton and deliberately
injurious or the one responsible acted fraudulently or with malice or
bad faith.—In awarding moral damages for breach of contract of
carriage, the breach must be wanton and deliberately injurious or the
one responsible acted fraudulently or with malice or bad faith.
Petitioner knew there was a strong possibility that he could not use the
subject ticket, so much so that he bought a back-up ticket to ensure his
departure. Should there be a finding of bad faith, we are of the opinion
that it should be on the petitioner. What the employees of PAL did was
one of simple negligence. No injury resulted on the part of petitioner
because he had a back-up ticket should PAL refuse to accommodate
him with the use of subject ticket.

Same; Same; Same; To warrant the award of exemplary dam-

ages, the wrongful act must be accompanied by bad faith, and the
guilty party acted in a wanton, fraudulent, reckless or malevolent
manner.—Neither can the claim for exemplary damages be upheld.
Such kind of damages is imposed by way of example or correction for
the public good, and the existence of bad faith is established. The
wrongful act must be accompanied by bad faith, and an award of
damages would be allowed only if the guilty party acted in a wanton,

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Cervantes vs. Court of Appeals

fraudulent, reckless or malevolent manner. Here, there is no showing

that PAL acted in such a manner. An award for attorney’s fees is also
improper.

PETITION for review on certiorari of a decision of the Court of

Appeals.

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The facts are stated in the opinion of the Court.

     Enrique Y. Tandan for petitioner.
       Rebanal, Hernando & Rebanal Law Offices for private
respondent.

PURISIMA, J.:

This Petition for Review on certiorari

1
assails the 25 July 1995
decision of the Court of Appeals in CA GR CV No. 41407,
entitled “Nicholas Y. Cervantes vs. Philippine Airlines, Inc.,”
affirming in toto the judgment of the trial court dismissing
petitioner’s complaint for damages.
On March 27, 1989, the private respondent, Philippine
Airlines, Inc. (PAL), issued to the herein petitioner, Nicholas
Cervantes (Cervantes), a round trip plane ticket for Manila-
Honolulu-Los Angeles-Honolulu-Manila, which ticket
expressly provided an expiry date of one year from issuance,
i.e., until March 27, 1990. The issuance of the said plane ticket
was in compliance with a Compromise Agreement entered into
between the contending parties in two previous suits, docketed
as Civil Case Nos. 3392 and 3451 before the Regional Trial
2
Court in Surigao City.

___________________

1 Eighth Division of CA with Ma. Alicia Austria-Martinez ponente and

Justices Jaime M. Lantin and Bernardo LL. Salas as members.
2 The compromise agreement which was approved by the court in its joint
decision dated Nov. 15, 1988 (Exhibit 4) provides in paragraph 4 thereof, to wit:
“PAL will issue the tickets only upon the written advice of plaintiff or counsel.
The ticket issued will have the same conditions

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On March 23, 1990, four days before the expiry date of subject
ticket, the petitioner used it. Upon his arrival in Los Angeles on
the same day, he immediately booked his Los Ange-les-Manila
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return ticket with the PAL office, and it was confirmed for the
April 2, 1990 flight.
Upon learning that the same PAL plane would make a stop-
over in San Francisco, and considering that he would be there
on April 2, 1990, petitioner made arrangements with PAL for
him to board the flight in San Francisco instead of boarding in
Los Angeles.
On April 2, 1990, when the petitioner checked in at the PAL
counter in San Francisco, he was not allowed to board. The
PAL personnel concerned marked the following notation on his
ticket: “TICKET NOT ACCEPTED DUE EXPIRATION OF
VALIDITY.”
Aggrieved, petitioner Cervantes filed a Complaint for
Damages, for breach of contract of carriage docketed as Civil
Case No. 3807 before Branch 32 of the Regional Trial Court of
Surigao del Norte in Surigao City. But the said complaint was
3
dismissed for lack of merit.
On September 20, 1993, petitioner interposed an appeal to
the Court of Appeals, which came out with a Decision, on July
25, 1995, upholding the dismissal of the case.
On May 22, 1996, petitioner came to this Court via the
Petition for Review under consideration.
The issues raised for resolution are: (1) Whether or not the
act of the PAL agents in confirming subject ticket extended the
period of validity of petitioner’s ticket; (2) Whether or not the
defense of lack of authority was correctly ruled upon; and (3)
Whether or not the denial of the award for damages was proper.

________________

as revenue tickets of PAL, except that such tickets shall be specifically

restricted as non-refundable and non-endorsable. The ticket(s) will be valid for
one (1) year from the date of issuance. (Page 16 of Rollo, page 2 of CA
Decision) (italics ours)
3 Judge Diomedes M. Eviota of RTC-Surigao, Branch 32.

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To rule on the first issue, there is a need to quote the findings

below. As a rule, conclusions and findings of fact arrived at by
the trial court are entitled to great weight on appeal and
4
should
not be disturbed unless for strong and cogent reasons.
5
The facts of the case as found by the lower court are, as
follows:

“The plane ticket itself (Exhibit A for plaintiff; Exhibit 1 for

defendant) provides that it is not valid after March 27, 1990. (Exhibit
1-F). It is also stipulated in paragraph 8 of the Conditions of Contract
(Exhibit 1, page 2) as follows:
“8. This ticket is good for carriage for one year from date of issue,
except as otherwise provided in this ticket, in carrier’s tariffs,
conditions of carriage, or related regulations. The fare for carriage
hereunder is subject to change prior to commencement of carriage.
Carrier may refuse transportation if the applicable fare has not been
6
paid.”

The question on the validity of subject ticket can be resolved in

light of 7 the ruling in the case of Lufthansa vs. Court of
Appeals. In the said case, the Tolentinos were issued first class
tickets on April 3, 1982, which will be valid until April 10,
1983. On June 10, 1982, they changed their accommodations to
economy class but the replacement tickets still contained the
same restriction. On May 7, 1983, Tolentino requested that
subject tickets be extended, which request was refused by the
petitioner on the ground that the said tickets had already
expired. The non-extension of their tickets prompted the
Tolentinos to bring a complaint for breach of contract of
carriage against the petitioner. In ruling against the award of
damages, the Court held that the “ticket constitute the contract
between the parties. It is axiomatic that when the terms are clear
and leave no doubt as to the inten-

_____________________

4 Donato vs. Court of Appeals, 217 SCRA 196.

5 Rollo, p. 15.
6 Rollo, p. 16; CA Decision, p. 2.
7 208 SCRA 708, p. 711.

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tion of the contracting parties, contracts are to be interpreted

according to their literal meaning.”
In his effort to evade this inevitable conclusion, petitioner
theorized that the confirmation by the PAL’s agents in Los
Angeles and San Francisco changed the compromise agreement
between the parties.
As aptly ruled by the appellate court:

“x x x on March 23, 1990, he was aware of the risk that his ticket could
expire, as it did, before he returned to the Philippines.’ (pp. 320-321,
8
Original Records)”
“The question is: ‘Did these two (2) employees, in effect, extend
the validity or lifetime of the ticket in question? The answer is in the
negative. Both had no authority to do so. Appellant knew this from the
very start when he called up the Legal Department of appellee in the
Philippines before he left for the United States of America. He had first
hand knowledge that the ticket in question would expire on March 27,
1990 and that to secure an extension, he would have to file a written
request for extension at the PAL’s office in the Philippines (TSN,
Testimony of Nicholas Cervantes, August 2, 1991, pp. 20-23). Despite
9
this knowledge, appellant persisted to use the ticket in question.”

From the aforestated facts, it can be gleaned that the petitioner

was fully aware that there was a need to send a letter to the
legal counsel of PAL for the extension of the period of validity
of his ticket.
Since the PAL agents are not privy to the said Agreement
and petitioner knew that a written request to the legal counsel of
PAL was necessary, he cannot use what the PAL agents did to
his advantage.
10
The said agents, according to the Court of
Appeals, acted without authority when they confirmed the
flights of the petitioner.

_______________

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8 Rollo, p. 17; CA Decision, p. 3.

9 Rollo, p. 18; CA Decision, p. 4.
10 Rollo, p. 19.

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Cervantes vs. Court of Appeals

11
Under Article 1898 of the New Civil Code, the acts of an
agent beyond the scope of his authority do not bind the
principal, unless the latter ratifies the same expressly or
impliedly. Furthermore, when the third person (herein
petitioner) knows that the agent was acting beyond his power or
authority, the principal cannot be held liable for the acts of the
agent. If the said third person is aware of such limits of
authority, he is to blame, and is not entitled to recover damages
from the agent, unless the latter undertook to secure the
12
principal’s ratification.
Anent the second issue, petitioner’s stance that the defense
of lack of authority on the part of the PAL employees was
deemed waived under Rule 9, Section 2 of the Revised Rules of
Court, is unsustainable. Thereunder, failure of a party to put up
defenses in their answer or in a motion to dismiss is a waiver
thereof.
Petitioner stresses that the alleged lack of authority of the
PAL employees was neither raised in the answer nor in the
motion to dismiss. But records show that the question of
whether there was authority on the part of the PAL employees
was acted upon by the trial court when Nicholas Cervantes was
presented as a witness and the depositions of the PAL
employees, Georgina M. Reyes and Ruth Villanueva, were
presented.
The admission by Cervantes that he was told by PAL’s legal
counsel that he had to submit a letter requesting for an
extension of the validity of subject tickets was tantamount to
knowledge on his part that the PAL employees had no

____________________

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11 Art. 1898. If the agent contracts in the name of the principal, exceeding
the scope of his authority, and the principal does not ratify the contract, it shall
be void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal. In this case, however, the agent is liable if he
undertook to secure the principal’s ratification.
12 Tolentino, Arturo M., Civil Code of the Philippines, Vol. V, pages 421-
422, 1992 ed.

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Cervantes vs. Court of Appeals

authority to extend the validity of subject tickets and only PAL’s

legal counsel was authorized to do so.
However, notwithstanding PAL’s failure to raise the defense
of lack of authority of the said PAL agents in its answer or in a
motion to dismiss, the omission was cured since the said issue
was litigated upon, as shown by the testimony of the petitioner
in the course of trial. Rule 10, Section 5 of the 1997 Rules of
Civil Procedure provides:

“Sec. 5. Amendment to conform or authorize presentation of evidence.

—When issues not raised by the pleadings are tried with express or
implied consent of the parties, as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to
cause them to conform to the evidence and to raise these issues may be
made upon motion of any party at any time, even after judgment; but
failure to amend does not affect the result of the trial of these issues. x
x x”

Thus, “when evidence is presented by one party, with the

express or implied consent of the adverse party, as to issues not
alleged in the pleadings, judgment may be rendered validly as
regards the said issue, which shall be treated as if they have
been raised in the pleadings. There is implied consent to the
evidence thus presented when the adverse party fails to object
13
thereto.”
Re: the third issue, an award of damages is improper
because petitioner failed to show that PAL acted in bad faith in
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refusing to allow him to board its plane in San Francisco.

In awarding moral damages for breach of contract of
carriage, the breach must be wanton and deliberately injurious
or the14 one responsible acted fraudulently or with malice or bad
faith. Petitioner knew there was a strong possibility that he
could not use the subject ticket, so much so that he bought a
back-up ticket to ensure his departure. Should there be a finding
of bad faith, we are of the opinion that it should be on

____________________

13 Moran, Comments on the Rules of Court, Vol. 1, p. 380.

14 Perez vs. Court of Appeals, 13 SCRA 137.

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Cervantes vs. Court of Appeals

the petitioner. What the employees of PAL did was one of

simple negligence. No injury resulted on the part of petitioner
because he had a back-up ticket should PAL refuse to
accommodate him with the use of subject ticket. Neither can the
claim for exemplary damages be upheld. Such kind of damages
is imposed by way of example or correction for the public good,
and the existence of bad faith is established. The wrongful act
must be accompanied by bad faith, and an award of damages
would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless or malevolent manner.15 Here, there is no
showing that PAL acted in such a manner. An award for
attorney’s fees is also improper.
WHEREFORE, the Petition is DENIED and the decision of
the Court of Appeals dated July 25, 1995 AFFIRMED in toto.
No pronouncement as to costs.
SO ORDERED.

     Romero (Chairman) and Gonzaga-Reyes, JJ., concur.

     Vitug, J., Abroad on official business.
     Panganiban, J., On leave.

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Petition denied, judgment affirmed.

Note.—As far as third persons are concerned, an act is

deemed to have been performed within the scope of the agent’s
authority, if such is within the terms of the power of attorney, as
written, even if the agent has in fact exceeded the limits of his
authority according to the understanding between the principal
and his agent. (Eugenio vs. Court of Appeals, 239 SCRA 207
[1994])

——o0o——

__________________

15 Sangco, Philippine Law on Torts and Damages, Vol. II, p. 1034.

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