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SPS. CESAR v. CA

FACTS:

Petitioners, Cesar C. Zalamea, Suthira Zalamea, and their daughter, Liana Zalamea, purchased airline tickets from TransWorld Airlines (TWA) for a flight from New York to Los Angeles. The tickets were confirmed reservations, with the Zalameas receiving a discount on their tickets. However, on the day of the flight, the Zalameas checked in only to be placed on the wait-list because all seats on the flight were already taken by passengers who checked in before them. Out of the 42 names on the wait-list, only the first 22 were allowed to board the flight, with full-fare ticket holders given priority. Cesar Zalamea, holding his daughter's full-fare ticket, was allowed to board, while his wife and daughter, with discounted tickets, were denied boarding. In order to travel to Los Angeles, the Zalameas had to book a flight with American Airlines at their own expense.

Consequently, the Zalameas filed an action for damages based on breach of contract of carriage against TWA. The trial court ruled in favor of the Zalameas and awarded them damages. However, the appellate court found that while there was a breach of contract, there was no fraud or bad faith on the part of TWA as overbooking is allowed by the Code of Federal Regulations by the Civil Aeronautics Board of the United States. The appellate court modified the damages awarded to the Zalameas. Dissatisfied with the decision, the Zalameas filed a petition for review on certiorari asserting that the appellate court committed errors in its decision.

ISSUES:

  1. Whether the US Code of Federal Regulations allows overbooking.

  2. Whether the principle of lex loci contractus requires the application of Philippine law in this case.

  3. Whether overbooking amounts to bad faith and entitles passengers to moral damages.

  4. Whether respondent TWA failed to inform its passengers about overbooking and boarding priorities.

  5. Whether the failure of respondent TWA to inform the petitioners of the overbooked condition of the flight constitutes bad faith.

  6. Whether respondent TWA should refund the cost of the American Airlines tickets purchased and used by petitioners Suthira and Liana.

  7. Whether petitioners are entitled to moral and exemplary damages.

  8. Whether petitioners are entitled to attorney's fees.

RULING:

  1. The court found that the statement of respondent's customer service agent regarding the US Code of Federal Regulations allowing overbooking is not supported by any official publication of said code. Thus, the court concluded that the finding of the trial court regarding this issue has no basis in fact.

  2. The court held that the principle of lex loci contractus requires the application of the law of the place where the airline ticket was issued, which in this case is the Philippines.

  3. The court cited existing jurisprudence that explicitly states that overbooking amounts to bad faith, entitling passengers to an award of moral damages.

  4. The court found that respondent TWA failed to inform its passengers beforehand about the possibility of breaching the contract of carriage through overbooking. Moreover, the court held that respondent TWA was also guilty of not informing its passengers about its alleged policy of giving less priority to discounted tickets.

  5. The failure of respondent TWA to inform the petitioners of the overbooked condition of the flight, despite their tickets representing confirmed seats, amounts to bad faith.

  6. Respondent TWA should be responsible for all damages reasonably attributed to the non-performance of its obligation, which includes refunding the cost of the American Airlines tickets purchased and used by petitioners Suthira and Liana.

  7. Petitioners are entitled to moral and exemplary damages, with an award of P50,000.00 each, as only Suthira and Liana were bumped off the flight.

  8. Petitioners are entitled to attorney's fees under Article 2208(2) of the Civil Code.

PRINCIPLES:

  • Overbooking amounts to bad faith and entitles passengers to an award of moral damages.

  • The principle of lex loci contractus requires the application of the law of the place where the airline ticket was issued.

  • A contract of carriage generates a relation attended with public duty, and thus, the airline must provide public service and convenience to its passengers.

  • Parties have the right to rely on the assurance of the airline that their tickets represent confirmed seats.

  • Failure to inform passengers of an overbooked condition, despite their tickets representing confirmed seats, constitutes bad faith.

  • Passengers are entitled to be reimbursed for the cost of tickets they had to buy for a flight on another airline as a consequence of the airline's breach of contract.

  • Damages must be reasonably attributed to the non-performance of the airline's obligation.

  • Attorney's fees may be awarded when the defendant's act or omission compels the plaintiff to litigate or incur expenses to protect their interest.