FACTS:

On March 1, 1989, Aniceto Fontanilla purchased three "Visit the U.S.A." tickets from United Airlines. The Fontanillas used the first coupon for their flight from San Francisco to Washington. On April 24, 1989, Aniceto Fontanilla bought two additional coupons. On May 5, 1989, when they arrived at the Los Angeles Airport for their flight, they were informed that the flight was overbooked. They were told to go back to the check-in counter where they claimed to have been treated rudely by a United Airlines employee named Linda, who allegedly made derogatory and racist remarks. The Fontanillas were not able to board their flight and only left Los Angeles on a later flight. They filed a complaint for damages against United Airlines, which was initially dismissed by the trial court but later reversed by the Court of Appeals.

ISSUES:

1. Whether or not the defendant's answer asserting lack of knowledge or information constitutes a denial of the plaintiff's allegation.

2. Whether or not the plaintiff waived the rule on admission by presenting evidence to support its contention and allowing the defendant to present rebuttal evidence.

3. Whether or not the plaintiff was able to prove with sufficient evidence its allegations of breach of contract in bad faith.

4. Whether or not the appellate court erred in applying the laws of the United States instead of Philippine law.

5. Whether the law of the place where the contract of carriage was made or entered into governs with respect to its nature and validity, obligation, and interpretation.

6. Whether the check-in requirement under the Civil Aeronautics Board's Economic Regulations No. 7 must be complied with before a passenger can claim against a carrier for being denied boarding.

7. Whether the private respondents have proven their claim for damages against the petitioner.

RULING:

1. The defendant's answer asserting lack of knowledge or information does not constitute a denial of the plaintiff's allegation because the fact as to which want of knowledge is asserted is so plainly and necessarily within the defendant's knowledge.

2. The plaintiff waived the rule on admission by presenting evidence to support its contention and allowing the defendant to present rebuttal evidence.

3. The plaintiff was not able to prove with sufficient evidence its allegations of breach of contract in bad faith.

4. The appellate court erred in applying the laws of the United States instead of Philippine law as Philippine law is the applicable law in the case.

5. Yes, the law of the place where the contract of carriage was made or entered into governs with respect to its nature and validity, obligation, and interpretation. In this case, the Court applied the doctrine of lex loci contractus and applied the law of the place where the airline ticket was issued because the passengers were residents and nationals of that place and the ticket was issued there by the petitioner airline.

6. Yes, the check-in requirement under the Civil Aeronautics Board's Economic Regulations No. 7 must be complied with before a passenger can claim against a carrier for being denied boarding.

7. No, the private respondents failed to prove that they were subjected to coarse and harsh treatment by the ground crew of the petitioner or that there was bad faith on the part of the petitioner. Thus, the Court reversed and set aside the award of moral and exemplary damages by the Court of Appeals. The award of attorney's fees was also denied for lack of legal and factual basis.

PRINCIPLES:

• The rule authorizing an answer that the defendant has no knowledge or information sufficient to form a belief as to the truth of an averment and giving such answer the effect of a denial does not apply when the fact as to which want of knowledge is asserted is so plainly and necessarily within the defendant's knowledge. The fact of compliance with the "check-in" requirement by the plaintiff was necessarily within the defendant's knowledge.

• The plaintiff may waive the rule on admission by introducing evidence and failing to object to the defendant's evidence in refutation. Once the rule is waived, all the evidence presented becomes competent and the case must be decided based on such evidence.

• In civil cases, the party having the burden of proof of an essential fact must produce a preponderance of evidence. The strength of the plaintiff's evidence is not enough to support a judgment in its favor if it is not sufficient to sustain its cause of action. The plaintiff cannot rely on the weakness of the defendant's evidence.

• Appellate courts should not reverse the findings of facts of trial courts unless there are strong and cogent reasons. Trial judges are in a better position to examine real evidence and observe the actuation and demeanor of the witnesses. The credibility of a witness plays a significant role in the determination of facts.

• The doctrine of lex loci contractus provides that the law of the place where a contract is made or entered into governs with respect to its nature and validity, obligation, and interpretation.

• The law of the forum on the subject matter applies, particularly the Civil Aeronautics Board's Economic Regulations No. 7, when it comes to the check-in requirement for claiming against a carrier for being denied boarding.

• To be entitled to an award of moral damages arising from a breach of contract of carriage, the carrier must have acted with fraud or bad faith. The deliberate and willful overbooking exceeding ten percent of the seating capacity of the aircraft is considered bad faith.

• The court requires sufficient evidence to support a claim for damages and awards should be based on a preponderance of evidence.

• The text does not provide any specific legal principles or doctrines that can be identified.