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BRITISH AIRWAYS v. CA

FACTS:

Petitioner British Airways appealed the decision of the Court of Appeals, which affirmed the award of damages and attorney's fees made by the Regional Trial Court (RTC) in favor of private respondent GOP Mahtani, and the dismissal of its third-party complaint against Philippine Airlines (PAL). The pertinent facts are as follows: Mahtani obtained the services of Mr. Gumar to prepare his travel plans for a trip to Bombay, India. Gumar purchased a ticket from BA with an itinerary that included a flight from Manila to Hongkong via PAL, and a connecting flight from Hongkong to Bombay on BA. Mahtani checked in his luggage at the PAL counter in Manila, expecting it to be transferred to the BA flight. However, upon arrival in Bombay, his luggage was missing. BA representatives informed him that it may have been diverted to London. After waiting for one week, BA advised Mahtani to file a claim. Mahtani then filed a complaint for damages and attorney's fees against BA and Gumar. BA filed its answer with counterclaim and a third-party complaint against PAL, alleging that the non-transfer of the luggage was due to PAL's late arrival in Hongkong. PAL denied liability, arguing that there was adequate time for the transfer and that the transfer to Hongkong authorities should be considered as transfer to BA. The trial court ruled in favor of Mahtani, awarding damages and attorney's fees, and dismissed BA's third-party complaint against PAL. The Court of Appeals affirmed the trial court's decision. Dissatisfied, BA appealed to the Supreme Court.

ISSUES:

  1. Whether the award of compensatory damages to Mahtani was appropriate.

  2. Whether BA's third-party complaint against PAL should have been dismissed.

RULING:

  1. Award of Compensatory Damages: The Supreme Court upheld the compensatory damages awarded to Mahtani, stating that BA had waived the defense of limited liability by failing to object to Mahtani’s testimony regarding actual damages.

  2. Third-Party Complaint: The Supreme Court reinstated the third-party complaint filed by British Airways against Philippine Airlines. The Court noted that an agent (PAL) is responsible for any negligence in the performance of its functions, and BA should be allowed to seek indemnification from PAL if PAL’s negligence was the proximate cause of the loss.

PRINCIPLES:

  • Adhesion Contracts: Courts will not always uphold adhesion contract limitations where facts and circumstances justify disregarding them.

  • Waiver of Objections: Failure to raise timely objections to inadmissible evidence constitutes a waiver.

  • Responsibility of Agents: An agent is responsible for negligence in performing its duties.

  • Third-Party Complaint: A third-party complaint is a procedural device to avoid circuitous litigation and unnecessary proliferation of lawsuits, allowing the original defendant to seek relief from a third-party.

  • Multiplicity of Suits: The doctrine aims to resolve all related issues in a single suit to avoid multiple litigations.