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PHILIPPINE AIRLINES v. CA

## FACTS:

The case involves a dispute between Gilda C. Mejia and Philippine Airlines (PAL) regarding a microwave oven that was shipped from San Francisco, USA to Manila, Philippines through PAL. When the microwave oven arrived in Manila, Mejia discovered that its front glass door was broken. She made demands for reimbursement to PAL but these were ignored. Mejia filed a complaint for damages against PAL, alleging that the court had jurisdiction over the case and that PAL acted in good faith and with diligence in selecting and supervising its employees. During the trial, Mejia testified that she checked in the microwave oven and her sister noticed the damage upon arrival in Manila. PAL employees testified that Mejia's claim was not investigated until after the formal claim was filed and that it was filed out of time. The trial court held PAL liable for damages and the Court of Appeals affirmed the decision. PAL appealed to the Supreme Court, questioning the interpretation of the air waybill provisions and the award of damages.

## ISSUES:

  1. Whether Philippine Air Lines (PAL) should be strictly bound by the provisions of the contract as it is a contract of adhesion.

  2. Whether PAL's liability for damages is limited by the provisions of the air waybill.

  3. Whether the award of moral and exemplary damages, attorney's fees, and litigation expenses by the lower courts was appropriate.

## RULING:

  1. The Supreme Court held that the air waybill is considered a contract of adhesion, which means that any ambiguity or obscurity in its terms should be interpreted strictly against the drafter, i.e., PAL. As such, PAL is strictly bound by the provisions of the contract despite their claim that it is not ambiguous.

  2. The court ruled that PAL's liability is not limited by the provisions of the air waybill, particularly because PAL's personnel in San Francisco advised the plaintiff not to declare the value of the microwave oven, effectively preventing her from complying with the conditions that would limit PAL's liability.

  3. The award of moral and exemplary damages, attorney's fees, and litigation expenses was affirmed by the Supreme Court. The court found PAL acted in bad faith by delaying and denying the valid claim for the damaged oven, causing the plaintiff profound distress. The unexplained negligence in handling the cargo and the inordinate delay in processing the claim justified the awards made by the lower courts.

## PRINCIPLES:

  • Contracts of adhesion bind both parties involved, with any ambiguity being interpreted against the drafter.

  • The limitations of a carrier's liability in a contract of adhesion are not applicable when the carrier's personnel prevent the passenger from fulfilling conditions that would invoke such limitations.

  • A carrier's unexplained negligence and delay in addressing damage claims can constitute bad faith, thus justifying awards for moral and exemplary damages, as well as attorney's fees and litigation expenses.