Zalamea vs.

CA
G.R. No. 104235, Nov. 18, 1993
OVERBOOKING OF FLIGHT IS BAD FAITH; LEX LOCI CONTRACTUS
LAW OF THE PLACE WHERE TICKET WAS ISSUED GOVERNS
FACTS:
The Zalamea spouses and their daughter purchased 3 airline tickets
from the Manila agent of respondent TransWorld Airlines (TWA) for a flight to
New York to Los Angeles. The tickets of the spouses were purchased at a
discount of 75% while that of their daughter was a full-fare ticket. All three
tickets represented confirmed reservations. Once in New York, however, they
found that their flight back to Manila was overbooked, as a result of which
they had to be wait-listed. Out of those waitlisted, the ones with full-fare
tickets were preferred. Thus, only the Zalamea husband, who was holding his
daughters ticket, was able to get on board while his wife and daughter had
to wait for the next flight. However, it turned out this next flight was likewise
overbooked, forcing the Zalameas to purchase tickets from another airlines.
Later, they sued TWA for breach of contract in the Philippines.
ISSUE:
Whether or not TWA is liable for breach of contract
HELD:
SC held in the affirmative. Overbooking of flight amounts to fraud or
bad faith, entitling plaintiff to an award of moral damages because of bad
faith attending the breach of contract. The holding that overbooking was
allowed under US Federal regulations was found erroneous because: (1) this
regulation was not proved and our courts cannot judicial notice of it, and (2)
even if such regulation was proven, the rule of lex loci contractus negated its
application. According to this rule, 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 tickets were sold and issued in the Philippines,
the applicable law in this case would be Philippine law. Under our
jurisprudence, overbooking of flight is bad faith. Moreover, the hierarchy of
tickets practiced by TWA was evidence of its self-interest over that of its
passengers, which SC held to be improper considering the public interest
involved in a contract of carriage.

Zalamea vs. CA
G.R. No. 104235, Nov. 18, 1993
Conflict Process
Jurisdiction of the Forum
The rule that lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. According to this rule, 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 tickets were sold and issued in the Philippines, the applicable law in this case
would be Philippine law.
Determine Foreign Element
Contract was performed outside the Philippine Territory.
Existence of Conflict of Laws
US Federal Law vs Philippine Law regarding the acceptability of overbooking
Choice of Law
The rule of lex loci contractus negates the application of the US Federal Law. The
Philippine Laws shall govern as the contract of carriage was perfected in the
Philippines. As a result, the law of the Philippines considering overbooking as
amounting to fraud or bad faith and thus, entitling plaintiff to an award of moral damages
because of bad faith attending the breach of contract, is applied.