2018 Civil Law, Q18

Shasha purchased an airline ticket from Sea Airlines (SAL) covering Manila-Bangkok- Hanoi-Manila. The ticket was exclusively endorsable to Siam Airlines (SMA). The contract of air transportation was between Shasha and SAL, with the latter endorsing to SMA the Hanoi-Manila segment of the journey. All her flights were confirmed by SAL before she left Manila. Shasha took the flight from Manila to Bangkok on board SAL using the ticket. When she arrived in Bangkok, she went to the SAL ticket counter and confirmed her return trip from Hanoi to Manila on board SMA Flight No. SA 888. On the date of her return trip, she checked in for SMA Flight No. SA 888, boarded the plane, and before she could even settle in on her assigned seat, she was off-loaded and treated rudely by the crew. She lost her luggage and missed an important business meeting. She thereafter filed a complaint solely against SAL and argued that it was solidarily liable with SMA for the damages she suffered since the latter was only an agent of the former.
(a) Should either, or both, SAL and SMA be held liable for damages that Shasha suffered? (2.5%)
(b) Assuming that one is an agent of the other, is the agency coupled with interest? (2.5%)

Quick check

Under China Airlines v. Chiok, what is the legal liability of a ticket-issuing carrier when a passenger is wrongfully offloaded by an endorsing airline?

Under Article 1927 of the Civil Code, when is an agency considered coupled with an interest?

Why was Siam Airlines (SMA) NOT held legally liable for damages in the lawsuit filed by Shasha?

What relationship exists between a ticket-issuing airline and an endorsing carrying airline under a contract of air carriage?

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Why is an agency coupled with an interest when an airline ticket is exclusively endorsable to a specific carrying airline?

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1. Issuing Carrier Liability
Under the doctrine established in China Airlines v. Chiok, a ticket-issuing airline remains liable as principal for the breach of a contract of carriage, even if the breach occurs on a flight segment operated by another endorsing carrier. The contract of air transportation is perfected between the passenger and the issuing carrier upon ticket purchase. The endorsing airline acts merely as an agent or subcontractor of the issuing carrier in performing the transportation. Consequently, the principal issuing carrier cannot evade liability for damages resulting from the offloading or mistreatment of a passenger by the carrying airline.

2. Agency Coupled Interest
Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership. An agency is coupled with an interest when the agent has a material or economic stake in the execution of the power granted. Where an airline ticket is exclusively endorsable to a specific carrying airline, both carriers possess a mutual economic interest in performing the contract of carriage.

3. Non-Impleaded Party Liability
Under Philippine civil procedure and due process, a person or entity who is not impleaded as a party defendant in a civil lawsuit cannot be held legally liable for damages. While an endorsing carrier may be jointly or solidarily liable in tort or contract, no monetary judgment or legal finding of liability can be validly rendered against it if the plaintiff chooses to file the action exclusively against the ticket-issuing carrier. Due process demands that every defendant be properly summoned and given an opportunity to present its defense.

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