ZALAMEA v.

CA
G.R. No. 104235 November 18, 1993 J. Nocon Cadorna
petitioners Spouses Cesar and Suthira Zalamea, and Liana Zalamea
respondents Honorable Court of Appeals and Transworld Airlines, Inc.
summary Petitioners werent able to board their flight due to overbooking. RTC ruled that they were
entitled to moral damages because overbooking by the airline allegedly amounted to bad
faith. CA reversed, saying US law allows overbooking and as such, it cant be deemed to
amount to bad faith. SC reversed the CA, saying US law on the matter was not proven as a
fact, and thus, cannot be the basis of saying that the airlines act of overbooking was
perfectly valid. In any case, the SC ruled that US law was inapplicable in accordance with
the principle of lex loci contractus, and since in this case, the tickets were sold and issued in
the Philippines, the applicable law would be Philippine law.

facts of the case

Petitioners-spouses Zalamea, and their daughter, Liana, purchased three airline tickets from the Manila
agent of respondent TransWorld Airlines, Inc. (TWA) for a NY-LA flight. The spouses tickets were
purchased at a 75% discount, while their daughters was paid in full. They all had confirmed reservations.
While in NY, petitioners received reconfirmation of their reservations. On the appointed date, however,
after checking in an hour before their scheduled flight, petitioners were placed on the waitlist because the
flight was already fully booked. Liana got no. 13, while her parents got no. 34 on the waitlist.
Only the first 22 names on the wait-list were eventually allowed to board the flight to LA. This included
Cesar Zalamea, who apparently held his daughters ticket. Liana and Suthira, being ranked lower than 22,
were not able to fly. As it were, those holding full-fare tickets were given first priority.
Neither were Liana and Suthira able to board the next TWA flight to LA since it was also fully booked.
Thus, they were constrained to purchase tickets and board the flight of American Airlines at a cost of $918.
Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of
contract of air carriage before the RTC of Manila, where they obtained favorable judgment consisting of
actual damages, moral damages, attorneys fees and costs of suit.
Upon TWAs appeal however, the CA deleted the award of moral damages, after it found that TWAs
breach of contract was not done in bad faith, based on the common and accepted practice of airlines in the
US of overbooking flights, which is specifically allowed under the Code of Federal Regulations by the
Civil Aeronautics Board of the said country. It ruled that TWAs omission in not informing petitioners that
the flight was overbooked and that even a person with a confirmed reservation may be denied accommodation
on an overbooked flight was not so gross as to amount to bad faith. Finally, it also held that there was no bad
faith in giving priority to full-fare ticket holders on the waitlist.
Thus, petitioners brought the case on petition for review on certiorari before the SC.

issue
WON TWA should be liable for moral damages YES.

ratio
Failure to prove US law as a fact
The CA erred in ruling that TWA did not commit bad faith in the manner that it breached its contract with
petitioners upon the basis that under US law, it was perfectly fine for it to commit overbooking. The U.S. law
or regulation allegedly authorizing such has never been proved. Foreign laws do not prove themselves nor
can the courts take judicial notice of them. Like any other fact, they must be alleged and proved.
Written law may be evidenced by an official publication thereof or by a copy attested by the officer having
the legal custody of the record, or by his deputy, and accompanied with a certificate that such officer has

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custody. The certificate may be made by a secretary of an embassy or legation, consul general, consul, vice-
consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign
country in which the record is kept, and authenticated by the seal of his office.
In this case, the above procedure was not followed in proving US law on the matter of overbooking.
Instead, TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her
deposition that the Code of Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside
from said statement, no official publication of said code was presented as evidence. Thus, the CAs finding
that overbooking is specifically allowed by the US Code of Federal Regulations has no basis in fact.

In any case, US law is N/A

Even if the claimed US Code of Federal Regulations does exist, the same is not applicable to the case at
bar in accordance with the principle of lex loci contractus which requires that the law of the place where the
airline ticket was issued should be applied by the court where the passengers are residents and nationals of the
forum and the ticket is issued in such State by the defendant airline. Since the tickets were sold and issued in
the Philippines, the applicable law in this case would be Philippine law.

Under Philippine law, overbooking = bad faith (A/N: Apparently, wala pa yung 10% rule that we learned in Transpo)
Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to an award of
moral damages. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in
case all of them would show up for the check in. For the indignity and inconvenience of being refused a confirmed seat on the last
minute, said passenger is entitled to an award of moral damages. This was the ruling in Alitalia Airways v. CA, Korean Airlines v. CA and
PanAm World Airways v. IAC.
Also, as held in Zulueta v. PanAm World Airways, a contract of carriage is different in kind and degree from any other contractual
relation as the former generates a relation attended with public duty a duty to provide public service and convenience to its
passengers which must be paramount to self-interest or enrichment.

Regardless of overbooking, TWAs omission amounts to bad faith

Even on the assumption that overbooking is allowed, TWA is still guilty of bad faith in not informing its passengers beforehand
that it could breach the contract of carriage even if they have confirmed tickets if there was overbooking. It should have incorporated
stipulations on overbooking on the tickets issued, or found other means to properly inform its passengers about these policies so that
the latter would be prepared for such eventuality or would have the choice to ride with another airline.
TWA cannot rely on the allegation that the detached flight coupon upon which were written the name of the passenger and the
points of origin and destination contained such a notice. An examination of the said evidence does not bear this out. At any rate, said
evidence was not offered for the purpose of showing the existence of a notice of overbooking.
Moreover, TWA was also guilty of not informing its passengers of its alleged policy of giving less priority to discounted tickets.

Damages awarded
TWAs conscious disregard of petitioners' rights makes it liable for moral damages. To deter breach of contracts by TWA in similar
fashion in the future, the SC also adjudged it liable for exemplary damages.
Also, the amount of the tickets purchased by Liana and Suthira to be able to board the American Airlines flight should be included
in the award for actual damages. The evidence shows that the two were constrained to take this flight not because they opted not to use
their TWA tickets on another TWA flight but because TWA could not accommodate them either on the next TWA flight which was also
fully booked.
However, it is no longer proper to award actual damages for the cost of the unused TWA tickets. To grant reimbursement of both
the unused TWA tickets and the used American Airlines tickets would have enabled petitioners to fly from NY-LA for free.
Attorneys fees and costs of suit were also sustained.