G.R. No. L-60501. March 5, 1993.
CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. COURT OF APPEALS and TOMAS L. ALCANTARA, respondents.

FACTS

On October 19, 1975, private respondent Tomas L. Alcantara, an executive, was a first-class passenger of petitioner Cathay Pacific Airways (CATHAY) from Manila to Hong Kong and onward to Jakarta to attend a conference the following day. He checked in luggage containing clothing, personal articles, and necessary conference documents. Upon arrival in Jakarta, his luggage was missing. A CATHAY representative informed him it was left in Hong Kong and offered him $20.00 as “inconvenience money.” His luggage arrived more than 24 hours later but was not delivered to his hotel; he was required to have it picked up by a Philippine Embassy official. Alcantara filed a complaint for damages. The trial court awarded moral, temperate, and exemplary damages and attorney’s fees. The Court of Appeals affirmed but increased the damages. CATHAY appealed, contending the Warsaw Convention should limit its liability and that the delay was not in bad faith.

ISSUE

1. Whether petitioner is liable for moral, exemplary, and temperate damages, and attorney’s fees for breach of contract of carriage.
2. Whether the Warsaw Convention operates to exclude the application of the Civil Code and limit the carrier’s liability in this case.

RULING

1. Yes, petitioner is liable. The Court found that CATHAY breached its contract of carriage by failing to deliver the luggage at the designated place and time. The evidence, particularly the deposition of the Philippine Embassy Commercial Attaché who accompanied Alcantara, established that the CATHAY representative acted with discourtesy, indifference, and rudeness, stating, “What can we do, the baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific.” This conduct amounted to bad faith or fraud, justifying awards for moral and exemplary damages under the Civil Code, as such damages are recoverable in breach of contract cases where the carrier is guilty of fraud or bad faith. However, the Court reduced the moral damages from P80,000 to P30,000 and deleted the temperate damages of P10,000 for lack of proof of pecuniary loss, as the luggage was ultimately delivered without serious damage. The awards of exemplary damages (P20,000) and attorney’s fees (P25,000) were maintained as reasonable.
2. No, the Warsaw Convention does not preclude the application of the Civil Code. While the Convention has the force of law, it does not provide an exclusive enumeration of instances for carrier liability or an absolute limit on such liability. It does not regulate or exempt the carrier from liability for damages arising from violating passengers’ rights under the contract of carriage, especially when willful misconduct or bad faith is established, as in this case. Therefore, the Civil Code provisions on damages remain applicable.