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G.R. No.

111127 July 26, 1996

MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN
RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS
CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO MA. V. ORTIZ,
MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA
MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ,
LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.

MENDOZA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals1 in CA-GR No. 28245, dated September
30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch 58, ordering
petitioners jointly and severally to pay damages to private respondent Amyline Antonio, and its resolution which
denied petitioners' motion for reconsideration for lack of merit.

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus principally
in connection with a bus service for school children which they operated in Manila. The couple had a driver, Porfirio
J. Cabil, whom they hired in 1981, after trying him out for two weeks, His job was to take school children to and from
the St. Scholastica's College in Malate, Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with
petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in
consideration of which private respondent paid petitioners the amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However, as several
members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until
8:00 o'clock in the evening. Petitioner Porfirio Cabil drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair,
sot hat petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a
detour through the town of Baay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp
curve on the highway, running on a south to east direction, which he described as "siete." The road was slippery
because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left
road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus
Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came
to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned
down by a wooden seat which came down by a wooden seat which came off after being unscrewed. It took three
persons to safely remove her from this portion. She was in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar with the
area and he could not have seen the curve despite the care he took in driving the bus, because it was dark and there
was no sign on the road. He said that he saw the curve when he was already within 15 to 30 meters of it. He allegedly
slowed down to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding they filed
a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court.
Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latter's fence. On the basis of Escano's affidavit
of desistance the case against petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result of the
accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the trial she
described the operations she underwent and adduced evidence regarding the cost of her treatment and therapy.
Immediately after the accident, she was taken to the Nazareth Hospital in Baay, Lingayen. As this hospital was not
adequately equipped, she was transferred to the Sto. Niño Hospital, also in the town of Ba-ay, where she was given
sedatives. An x-ray was taken and the damage to her spine was determined to be too severe to be treated there. She
was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati Medical Center where
she underwent an operation to correct the dislocation of her spine.

In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip and that
the driver was properly screened and tested before being admitted for employment. Indeed, all the evidence
presented have shown the negligent act of the defendants which ultimately resulted to the accident subject of this
case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the only ones
who adduced evidence in support of their claim for damages, the Court is therefore not in a position to award damages
to the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs. Engracio Fabre,
Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said defendants
are ordered to pay jointly and severally to the plaintiffs the following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorney's fees;

6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it with
respect to the other plaintiffs on the ground that they failed to prove their respective claims. The Court of Appeals
modified the award of damages as follows:

1) P93,657.11 as actual damages;


2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorney's fees; and

6) Costs of suit.

The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise due care and precaution
in the operation of his vehicle considering the time and the place of the accident. The Court of Appeals held that the
Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise the following issues:

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY PRIVATE RESPONDENTS.

III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is insisted
that, on the assumption that petitioners are liable an award of P600,000.00 is unconscionable and highly speculative.
Amyline Antonio testified that she was a casual employee of a company called "Suaco," earning P1,650.00 a month,
and a dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees
do not have security of tenure, the award of P600,000.00, considering Amyline Antonio's earnings, is without factual
basis as there is no assurance that she would be regularly earning these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners are
liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as both
the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and carrier is
"contractual both in origin and nature," nevertheless "the act that breaks the contract may be also a tort." 2 In either
case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent.

The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise
the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the
evidence on record. These factual findings of the two courts we regard as final and conclusive, supported as they are
by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and as a consequence,
the road was slippery, and it was dark. He averred these facts to justify his failure to see that there lay a sharp curve
ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed
down when he noticed the curve some 15 to 30 meters ahead. 3 By then it was too late for him to avoid falling off the
road. Given the conditions of the road and considering that the trip was Cabil's first one outside of Manila, Cabil should
have driven his vehicle at a moderate speed. There is testimony 4 that the vehicles passing on that portion of the road
should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high
speed.

Considering the foregoing — the fact that it was raining and the road was slippery, that it was dark, that he drove his
bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that he
was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by private
respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the
Fabres, were themselves negligent in the selection and supervisions of their employee.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver's
license. The employer should also examine the applicant for his qualifications, experience and record of service. 5 Due
diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of
employees and issuance of proper instructions as well as actual implementation and monitoring of consistent
compliance with the rules.6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that
Cabil had been driving for school children only, from their homes to the St. Scholastica's College in Metro Manila. 7
They had hired him only after a two-week apprenticeship. They had hired him only after a two-week apprenticeship.
They had tested him for certain matters, such as whether he could remember the names of the children he would be
taking to school, which were irrelevant to his qualification to drive on a long distance travel, especially considering
that the trip to La Union was his first. The existence of hiring procedures and supervisory policies cannot be casually
invoked to overturn the presumption of negligence on the part of an employer. 8

Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the congregation's
delayed meeting) could have a averted the mishap and (2) under the contract, the WWCF was directly responsible for
the conduct of the trip. Neither of these contentions hold water. The hour of departure had not been fixed. Even if it
had been, the delay did not bear directly on the cause of the accident. With respect to the second contention, it was
held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to be
conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of negligence of
the latter or prevented from recovering for injuries suffered from a collision between the automobile and a train,
caused by the negligence or the automobile driver. 9

As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged
in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. As
this Court has held: 10

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the general population.
We think that Article 1732 deliberately refrained from making such distinctions.

As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe transportation of the
passengers to their destination. This duty of care is not excused by proof that they exercise the diligence of a good
father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the
former's employees although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father
of a family in the selection and supervision of their employees.

The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings them guilty of breach of contract
of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of Appeals
erred in increasing the amount of compensatory damages because private respondents did not question this award
as inadequate. 11 To the contrary, the award of P500,000.00 for compensatory damages which the Regional Trial
Court made is reasonable considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able to work again has not been
foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ her again.

With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not sufficiently
indicate the factual and legal basis for them, we find that they are nevertheless supported by evidence in the records
of this case. Viewed as an action for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing
for the payment of moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of
contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil's gross
negligence amounted to bad faith.12 Amyline Antonio's testimony, as well as the testimonies of her father and
copassengers, fully establish the physical suffering and mental anguish she endured as a result of the injuries caused
by petitioners' negligence.

The award of exemplary damages and attorney's fees was also properly made. However, for the same reason that it
was error for the appellate court to increase the award of compensatory damages, we hold that it was also error for
it to increase the award of moral damages and reduce the award of attorney's fees, inasmuch as private respondents,
in whose favor the awards were made, have not appealed. 13

As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that
of breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners and
driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may be. In
Dangwa Trans. Co. Inc. v. Court of Appeals, 14 on facts similar to those in this case, this Court held the bus company
and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor Express,
Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a fellow passenger
ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered injuries, was held also
jointly and severally liable with the bus company to the injured passengers.

The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was
riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident.
In Anuran v. Buño, 16 Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit
Corporation v. Court of Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of
the vehicle were jointly and severally held liable to the injured passenger or the latters' heirs. The basis of this
allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:

Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while that of
respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus
on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are
jointly and severally liable for damages. Some members of the Court, though, are of the view that under the
circumstances they are liable on quasi-delict. 20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the jeepney driver from
liability to the injured passengers and their families while holding the owners of the jeepney jointly and severally
liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa contractual. As
this Court there explained:

The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and Carreon (the jeepney
owners) were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally liable with
Manalo is erroneous. The driver cannot be held jointly and severally liable with carrier in case of breach of the contract
of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier is
exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver (see
Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). 22

As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out their claim against the
carrier and the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was
permitted for them to allege alternative causes of action and join as many parties as may be liable on such causes of
action 23 so long as private respondent and her coplaintiffs do not recover twice for the same injury. What is clear
from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus, justifying the
holding that the carrier and the driver were jointly and severally liable because their separate and distinct acts
concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to award of damages.
Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the following amounts:

1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorney's fees; and

6) costs of suit.

SO ORDERED.

Regalado, Romero, Puno and Torres, Jr., JJ., concur.

Footnotes

1 Per Justice Jainal D. Rasul and concurred in by Justices Emeterio C. Cui and Segundino G. Chua.

2 Air France v. Carrascoso, 18 SCRA 155, 168 (1966). Accord, Singson v. Bank of the Philippines Islands, 23 SCRA
1117, 1119 (1968).
3 Testimony of Porfirio Cabil, TSN, p. 14, Oct. 26. 1987.

4 Testimony of Pat. Chito Esmenda, TSN, pp. 37-38, Sept. 12, 1985.

5 Metro Manila Transit Corp. v. Court of Appeals, 223 SCRA 521 (1993); Campo v. Camarote, 100 Phil. 459 (1956).

6 Filamer Christian Institute v. Intermediate Appellate Court, 212 SCRA 637 (1992).

7 Testimony of Porfirio Cabil, TSN, p. 7, Oct. 26, 1987.

8 Supra note 5.

9 Yamada v. Manila Railroad Co., 33 Phil. 8, 14 (1915).

10 De Guzman v. Court of Appeals, 168 SCRA 612, 618 (1988); Bascos v. Court of Appeals, 221 SCRA 318 (1993).

11 Philippine Airlines v. Court of Appeals, 226 SCRA 423 (1993).

12 Gatchalian v. Delim, 203 SCRA 126 (1991); Prudenciado v. Alliance Transport System, Inc., 148 SCRA 440 (1987).

13 La Mallorca v. Court of Appeals, 175 SCRA 739 (1989).

14 202 SCRA 574 (1991).

15 188 SCRA 216 (1990).

16 17 SCRA 224 (1966).

17 167 SCRA 379 (1988).

18 223 SCRA 521 (1993).

19 16 SCRA 742 (1966).

20 Id., at 747

21 189 SCRA 158 (1988).

22 Id., at 172-173.

23 La Mallorca v. Court of Appeals, 17 SCRA 739 (1966).

Rule 8, §2 provides: "Alternative causes of action or defenses. — A party may set forth two or more statements of a
claim or defense alternatively or hypothetically, either in one cause of action or defense or in separate causes of action
or defenses. When two or more statements are made in the alternative and one of them if made independently would
be sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements."

Rule 3, §6 provides: "Permissive joinder of parties. — All persons in whom or against whom any right to relief in
respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally,
or in the alternative, may, except as otherwise provided in these rules, join as plaintiffs or be joined as defendants in
one complaint, where any question of law of fact common to all such plaintiffs or to all such defendants may arise in
the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he may have no interest."

G.R. No. 139875 December 4, 2000

GREGORIO PESTAÑO and METRO CEBU AUTOBUS CORPORATION, petitioners, vs. Spouses TEOTIMO SUMAYANG
and PAZ C. SUMAYANG, respondents.

PANGANIBAN, J.:

Factual findings of the Court of Appeals, affirming those of the trial judge, are binding on this Court. In quasi-delicts,
such findings are crucial because negligence is largely a matter of evidence. In computing an award for lost earning
capacity, the life expectancy of the deceased, not that of the heir, is used as basis.

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the April 21, 1999 Decision
and the August 6, 1999 Resolution of the Court of Appeals 1 (CA) in CA-GR CV No. 30289. The questioned Decision
disposed as follows:

"WHEREFORE, premises considered, the instant appeal is hereby DENIED. The assailed Decision of the lower
court is hereby AFFIRMED with the aforesaid modification regarding the award of death penalty."

The Resolution of August 6, 1999 denied reconsideration.2

The Facts

The events leading to this Petition were summarized by the Court of Appeals as follows:

"It appears from the records that at around 2:00 o'clock [o]n the afternoon of August 9, 1986, Ananias
Sumayang was riding a motorcycle along the national highway in Ilihan, Tabagon, Cebu. Riding with him was
his friend Manuel Romagos. As they came upon a junction where the highway connected with the road leading
to Tabagon, they were hit by a passenger bus driven by [Petitioner] Gregorio Pestaño and owned by
[Petitioner] Metro Cebu Autobus Corporation (Metro Cebu, for brevity), which had tried to overtake them,
sending the motorcycle and its passengers hurtling upon the pavement. Both Ananias Sumayang and Manuel
Romagos were rushed to the hospital in Sogod, where Sumayang was pronounced dead on arrival. Romagos
was transferred to the Cebu Doctors' Hospital, but he succumbed to his injuries the day after.

"Apart from the institution of criminal charges against Gregorio Pestaño, [Respondents] Teotimo and Paz
Sumayang, as heirs of Ananias Sumayang, filed this civil action for damages against Gregorio Pestaño, as driver
of the passenger bus that rammed the deceased's motorcycle, Metro Cebu, as owner and operator of the said
bus, and Perla Compania de Seguros, as insurer of Metro Cebu. The case was docketed as Civil Case No. CEB-
6108.

"On November 9, 1987, upon motion of [Petitioner] Pestaño, Judge Pedro C. Son ordered the consolidation of
the said case with Criminal Case No. 10624, pending in Branch 16 of the same Court, involving the criminal
prosecution of Gregorio Pestaño for [d]ouble [h]omicide thru [r]eckless [i]mprudence. Joint trial of the two
cases thereafter ensued, where the following assertions were made:

'[Respondents] rely mainly on the testimonies of Ignacio Neis, Pat. Aquilino Dinoy and Teotimo
Sumayang, father of the deceased. Neis declared that he saw the incident while he was sitting on a
bench beside the highway; that both vehicles c[a]me from the North; that as the motorcycle
approached the junction to Tab[a]gon, the driver Ananias Sumayang signalled with his left arm to
indicate that he was taking the Tab[a]gon Road; that the motorcycle did turn left but as it did so, it was
bumped by an overspeeding bus; that the force of the impact threw Ananias Sumayang and his
companion Manuel Romagos about 14 meters away. The motorcycle, Neis continued, was badly
damaged as it was dragged by the bus.

'On the other hand, Pat. Dinoy testified that he was in the nearby house of Ruben Tiu [when] he heard
the sound or noise caused by the collision; that he immediately went to the scene where he found
Ananias Sumayang and Manuel Romagos lying on the road bleeding and badly injured; that he
requested the driver of a PU vehicle to take them to a hospital; that he took note of the various
distances which he included in his sketch (Exh. J) that the probable point of impact was at the left lane
of the highway and right at the junction to Tab[a]gon (Exh J-11); that he based his conclusion on the
'scratches' caused by the motorcycle's footrest on the asphalt pavement; that he described the damage
caused to the motorcycle in his sketch (Exh J); that on the part of the bus, the right end of its front
bumper was bent and the right portion of the radiator grill was dented. Pat. Dinoy acknowledged that
he met at the scene Ignacio Neis who informed him that he saw the incident.

'On the contrary, Pestaño blamed Sumayang for the accident. He testified that when he first blew the
horn the motorcycle which was about 15 or 20 meters ahead went to the right side of the highway that
he again blew the horn and accelerated in order to overtake the motorcycle; that when he was just
one meter behind, the motorcycle suddenly turned left towards the Tab[a]gon [R]oad and was bumped
by his bus; that he was able to apply his break only after the impact. Pestaño's testimony was
corroborated by Ireneo Casilia who declared that he was one of the passengers of the bus; that the
motorcycle suddenly turned left towards Tab[a]gon [R]oad without giving any signal to indicate its
maneuver; that the bus was going at 40 kph when the accident occurred.

'To substantiate its defense of bonos pater familias [petitioner] [c]orporation recalled to the witness
box Gregorio Pestaño who explained how his driving experience and ability were tested by the
company before he was hired. He further declared that the management gave regular lectures to
drivers and conductors touching on various topics like speeding, parking, loading and treatment of
passengers, and that before he took to the road at 2:30 AM of that day he checked together with the
mechanic the tires, brake, signal lights as well as the tools to be brought along. He did the same thing
before commencing his return trip from Hagnaya, San Remegio later in the day.

'The corporation also presented its maintenance supervisor, Agustin Pugeda, Jr., and its manager,
Alfonso Corominas, Jr. who corroborated Pestaño's testimony that his driving ability was thoroughly
tested, and that all drivers underwent periodic lecture on various aspects of safety driving including
pertinent traffic regulations. They also confirmed the thorough checkup of every vehicle before it
would depart and that the performance of the drivers was being monitored by several inspectors
posted at random places along the route.'

"In judgment, the lower court found [petitioners] liable to the [respondents], in the amounts of P30,000.00
for death indemnity, P829,079 for loss of earning capacity of the deceased Ananias Sumayang, and P36,000.00
for necessary interment expenses. The liability of defendant Perla Compania de Seguros, Inc., however, was
limited only to the amount stipulated in the insurance policy, which [was] P12,000 for death indemnity and
P4,500.00 for burial expenses.

"In so ruling, the lower court found [Petitioner] Pestaño to have been negligent in driving the passenger bus
that hit the deceased. It was shown that Pestaño negligently attempted to overtake the motorcycle at a
dangerous speed as they were coming upon a junction in the road, and as the motorcycle was about to turn
left towards Tabagon. The court likewise found Metro Cebu directly and primarily liable, along with Pestaño,
the latter's employer under Article 2180 of the Civil Code, as [Petitioner] Metro Cebu failed to present evidence
to prove that it had observed . . . [the] diligence of a good father of a family to prevent damage. Nor has Metro
Cebu proven that it had exercised due diligence in the supervision of its employees and in the maintenance of
vehicles."3

Ruling of the Court of Appeals

The CA affirmed respondent's liability for the accident and for Sumayang's death. Pestaño was negligent when he
tried to overtake the victim's motorcycle at the Tabagon junction. As a professional driver operating a public transport
vehicle, he should have taken extra precaution to avoid accidents, knowing that it was perilous to overtake at a
junction, where adjoining roads had brought about merging and diverging traffic.

The appellate court opined that Metro Cebu had shown laxity in the conduct of its operations and in the supervision
of its employees. By allowing the bus to ply its route despite the defective speedometer, said petitioner showed its
indifference towards the proper maintenance of its vehicles. Having failed to observe the extraordinary diligence
required of public transportation companies, it was held vicariously liable to the victims of the vehicular accident.

In accordance with prevailing jurisprudence, the CA raised to P50,000 the granted indemnity for the death of the
victim. It also affirmed the award of loss of earning capacity based on his life expectancy. Such liability was assessed,
not as a pension for the claiming heirs, but as a penalty and an indemnity for the driver's negligent act.

Hence, this Petition.4

Issues

Petitioners submit the following issues5 for our consideration:

1) The Court of Appeals misapplied facts of weight and substance affecting the result of the case.

2) The Court of Appeals misapplied R.A. 4136 as regards the behavior of the deceased at the time of the
accident.

3) The Court of Appeals erred in ruling that the award of damages representing income that deceased could
have earned be considered a penalty.

4) The Court of Appeals, contrary to Article 2204, Civil Code, raised the award of P30,000.00 damages
representing indemnity for death to P50,000.00.

5) The Court of Appeals used as basis for the loss of earning capacity, the life expectancy of the [d]eceased
instead of that of the respondents which was shorter."6

In short, they raise these questions: whether the CA erred (1) in applying Section 45 of RA 4136 when it ruled that
negligence in driving was the proximate cause of the accident; (2) in increasing the civil indemnity from P30,000 to
P50,000; and (3) in using the life expectancy of the deceased instead of the life expectancies of respondents.

The Court's Ruling

The Petition has no merit.

First Issue: Negligence


Petitioners contend that Pestaño was not under any obligation to slow down when he overtook the motorcycle,
because the deceased had given way to him upon hearing the bus horn. Seeing that the left side of the road was
clearly visible and free of oncoming traffic, Pestaño accelerated his speed to pass the motorcycle. Having given way
to the bus, the motorcycle driver should have slowed down until he had been overtaken.

They further contend that the motorcycle was not in the middle of the road nearest to the junction as found by the
trial and the appellate courts, but was on the inner lane. This explains why the damage on the bus were all on the
right side - the right end of the bumper and the right portion of the radiator grill were bent and dented. Hence, they
insist that it was the victim who was negligent.

We disagree. Petitioners are raising a question of fact based on Pestaño's testimony contradicting that of Eyewitness
Ignacio Neis and on the location of the dents on the bumper and the grill. Neis testified that as the two vehicles
approached the junction, the victim raised his left arm to signal that he was turning left to Tabagon, but that the latter
and his companion were thrown off the motorcycle after it was bumped by the overspeeding bus.

These contentions have already been passed upon by the trial and the appellate courts. We find no cogent reason to
reverse or modify their factual findings. The CA agreed with the trial court that the vehicular collision was caused by
Pestaño's negligence when he attempted to overtake the motorcycle. As a professional driver operating a public
transport bus, he should have anticipated that overtaking at a junction was a perilous maneuver and should thus have
exercised extreme caution.

Factual findings of the CA affirming those of the trial court are conclusive and binding on this Court. Petitioners failed
to demonstrate that this case falls under any of the recognized exceptions to this rule.7 Indeed, the issue of negligence
is basically factual and, in quasi-delicts, crucial in the award of damages.

Petitioners aver that the CA was wrong in attributing the accident to a faulty speedometer and in implying that the
accident could have been avoided had this instrument been properly functioning.

This contention has no factual basis. Under Articles 2180 and 2176 of the Civil Code, owners and managers are
responsible for damages caused by their employees. When an injury is caused by the negligence of a servant or an
employee, the master or employer is presumed to be negligent either in the selection or in the supervision of that
employee. This presumption may be overcome only by satisfactorily showing that the employer exercised the care
and the diligence of a good father of a family in the selection and the supervision of its employee.8

The CA said that allowing Pestaño to ply his route with a defective speedometer showed laxity on the part of Metro
Cebu in the operation of its business and in the supervision of its employees. The negligence alluded to here is in its
supervision over its driver, not in that which directly caused the accident. The fact that Pestaño was able to use a bus
with a faulty speedometer shows that Metro Cebu was remiss in the supervision of its employees and in the proper
care of its vehicles. It had thus failed to conduct its business with the diligence required by law.

Second Issue: Life Indemnity

Petitioners aver that the CA erred in increasing the award for life indemnity from P30,000 to P50,000, without
specifying any aggravating circumstance to justify the increment as provided in the Civil Code. 9

This contention is untenable. The indemnity for death caused by a quasi-delict used to be pegged at P3,000, based on
Article 2206 of the Civil Code. However, the amount has been gradually increased through the years because of the
declining value of our currency. At present, prevailing jurisprudence fixes the amount at P50,000. 10

Third Issue: Loss of Earning Capacity


Petitioners cite Villa Rey Transit, Inc. v. Court of Appeals,11 which held:

"The determination of the indemnity to be awarded to the heirs of a deceased person has therefore no fixed basis. . .
. The life expectancy of the deceased or of the beneficiary, whichever is shorter, is an important factor . . . "

They contend that the CA used the wrong basis for its computation of earning capacity.

We disagree. The Court has consistently computed the loss of earning capacity based on the life expectancy of the
deceased,12 and not on that of the heir.13 Even Villa Rey Transit did likewise.

The award for loss of earning capacity is based on two factors: (1) the number of years on which the computation of
damages is based and (2) the rate at which the loss sustained by the heirs is fixed. 14 The first factor refers to the life
expectancy, which takes into consideration the nature of the victim's work, lifestyle, age and state of health prior to
the accident. The second refers to the victim's earning capacity minus the necessary living expenses. Stated otherwise,
the amount recoverable is that portion of the earnings of the deceased which the beneficiary would have received —
the net earnings of the deceased.15

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Cost against
petitioners.1âwphi1.nêt

SO ORDERED.

G. R. No. 154278 December 27, 2002

VICTORY LINER, INC. petitioner, vs. HEIRS OF ANDRES MALECDAN, respondents.

DECISION

MENDOZA, J.:

This is a petition for review of the decision1 of the Eighth Division of the Court of Appeals, which affirmed the
decision2 of the Regional Trial Court of Baguio City, Branch 5, in Civil Case No. 3082-R, ordering petitioner and its
driver, Ricardo Joson, Jr., to pay damages to the heirs of Andres Malecdan, who had been killed after being hit by a
bus while attempting to cross the National Highway in Barangay Nungnungan 2 in Cauayan, Isabela.

The facts of the case are as follows:

Petitioner is a common carrier. Private respondent Elena Malecdan is the widow of the deceased, while private
respondents Veronica, Virginia, Mary Pauline, Arthur, Viola, Manuel and Valentin Malecdan are their children.

Andres Malecdan was a 75 year-old farmer residing in Barangay Nungnungan 2, Municipality of Cauayan, Province of
Isabela.3 On July 15, 1994, at around 7:00 p.m., while Andres was crossing the National Highway on his way home
from the farm, a Dalin Liner bus on the southbound lane stopped to allow him and his carabao to pass. However, as
Andres was crossing the highway, a bus of petitioner Victory Liner, driven by Ricardo C. Joson, Jr., bypassed the Dalin
bus. In so doing, respondent hit the old man and the carabao on which he was riding. As a result, Andres Malecdan
was thrown off the carabao, while the beast toppled over.4 The Victory Liner bus sped past the old man, while the
Dalin bus proceeded to its destination without helping him.

The incident was witnessed by Andres Malecdan's neighbor, Virgilio Lorena, who was resting in a nearby waiting shed
after working on his farm. Malecdan sustained a wound on his left shoulder, from which bone fragments protruded.
He was taken by Lorena and another person to the Cagayan District Hospital where he died a few hours after
arrival.5 The carabao also died soon afterwards.6 Lorena executed a sworn statement before the police authorities.
Subsequently, a criminal complaint for reckless imprudence resulting in homicide and damage to property was filed
against the Victory Liner bus driver Ricardo Joson, Jr.7

On October 5, 1994, private respondents brought this suit for damages in the Regional Trial Court, Branch 5, Baguio
City,8 which, in a decision rendered on July 17, 2000, found the driver guilty of gross negligence in the operation of his
vehicle and Victory Liner, Inc. also guilty of gross negligence in the selection and supervision of Joson, Jr. Petitioner
and its driver were held liable for damages. The dispositive portion of the trial court's decision reads:

WHEREFORE, judgment is hereby rendered ordering the defendants to pay, jointly and severally to the plaintiffs the
amounts of:

a. P50,000.00 as death indemnity;

b. P88,339.00 for actual damages;

c. P200,000.00 for moral damages;

d. P50,000.00 as exemplary damages;

e. Thirty percent (30%) as attorney's fees of whatever amount that can be collected by the plaintiff; and

f. The costs of the suit.

The counterclaim of the defendant Victory Liner, Inc. against the plaintiffs and the third-party complaint of the same
defendant against the Zenith Insurance Corporation are dismissed.

SO ORDERED.9

On appeal, the decision was affirmed by the Court of Appeals, with the modification that the award of attorney's fees
was fixed at P50,000.00.10

Hence, this appeal raising the following issues:

I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE APPEALED DECISION OF THE
REGIONAL TRIAL COURT GRANTING P200,000.00 AS MORAL DAMAGES WHICH IS DOUBLE THE P100,000.00 AS
PRAYED FOR BY THE PRIVATE RESPONDENTS IN THEIR COMPLAINT AND IN GRANTING ACTUAL DAMAGES NOT
SUPPORTED BY OFFICIAL RECEIPTS AND SPENT WAY BEYOND THE BURIAL OF THE DECEASED VICTIM.

II. WHETHER OR NOT THE AFFIRMATION BY THE HONORABLE COURT OF APPEALS OF THE APPEALED DECISION OF THE
REGIONAL TRIAL COURT GRANTING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES
WHICH WERE NOT PROVED AND CONSIDERING THAT THERE IS NO FINDING OF BAD FAITH AND GROSS NEGLIGENCE
ON THE PART OF THE PETITIONER WAS NOT ESTABLISHED, IS IN ACCORD WITH LAW AND JURISPRUDENCE.

III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE APPEALED DECISION OF THE
REGIONAL TRIAL COURT WHICH DISREGARDED THE APPELLANT'S TESTIMONIAL AND DOCUMENTARY EVIDENCE THAT
IT HAS EXERCISED EXTRAORDINARY DILIGENCE IN THE SELECTION AND SUPERVISION OF ITS EMPLOYEES, OR STATED
DIFFERENTLY, WHETHER OR NOT THE AFFIRMATION BY THE COURT OF APPEALS OF THE APPEALED DECISION OF THE
TRIAL COURT THAT IS CONTRARY TO LAW AND JURISPRUDENCE CONSTITUTES GRAVE ABUSE AND EXCESS OF
JURISDICTION.11
We find the appealed decision to be in order.

First. Victory Liner, Inc. no longer questions the findings of the Regional Trial Court that Andres Malecdan was injured
as a result of the gross negligence of its driver, Ricardo Joson, Jr. What petitioner now questions is the finding that it
(petitioner) failed to exercise the diligence of a good father of the family in the selection and supervision of its
employee. Petitioner argues,

With all due respect, the assignment of three inspectors to check and remind the drivers of petitioner Victory Liner of
its policies in a two-and-a-half hour driving distance, the installation of tachometers to monitor the speed of the bus
all throughout the trip, the periodic monitoring and checking of the trips from one station to another through a trip
ticket from station to station, the regular periodic conducting of safety and defensive driving [training sessions] for its
drivers are concrete and physical proofs of the formulated operating standards, the implementation and monitoring
of the same, designed for the exercise of due diligence of a good father of a family in the supervision of its
employees.12

It explained that it did not present bus driver Joson, Jr. on the witness stands because he had been dismissed from
the company after the incident, which it found was a breach in the company regulations. Petitioner blames private
respondents for the death of their father, Andres Malecdan, who was already 75 years old, for allowing him to plough
their field by himself.13

The contention has no merit.

Article 2176 provides:

Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.

Article 2180 provides for the solidary liability of an employer for the quasi-delict committed by an employee. The
responsibility of employers for the negligence of their employees in the performance of their duties is primary and,
therefore, the injured party may recover from the employers directly, regardless of the solvency of their
employees.14 The rationale for the rule on vicarious liability has been explained thus:

What has emerged as the modern justification for vicarious liability is a rule of policy, a deliberate allocation of a risk.
The losses caused by the torts of employees, which as a practical matter are sure to occur in the conduct of the
employer's enterprise, are placed upon that enterprise itself, as a required cost of doing business. They are placed
upon the employer because, having engaged in an enterprise, which will on the basis of all past experience involve
harm to others through the tort of employees, and sought to profit by it, it is just that he, rather than the innocent
injured plaintiff, should bear them; and because he is better able to absorb them and to distribute them, through
prices, rates or liability insurance, to the public, and so to shift them to society, to the community at large. Added to
this is the makeweight argument that an employer who is held strictly liable is under the greatest incentive to be
careful in the selection, instruction and supervision of his servants, and to take every precaution to see that the
enterprise is conducted safely.15

Employers may be relieved of responsibility for the negligent acts of their employees acting within the scope of their
assigned task only if they can show that "they observed all the diligence of a good father of a family to prevent
damage."16 For this purpose, they have the burden of proving that they have indeed exercised such diligence, both in
the selection of the employee and in the supervision of the performance of his duties. 17

In the selection of prospective employees, employers are required to examine them as to their qualifications,
experience and service records.18 With respect to the supervision of employees, employers must formulate standard
operating procedures, monitor their implementation and impose disciplinary measures for breaches thereof.19 These
facts must be shown by concrete proof, including documentary evidence. 20

In the instant case, petitioner presented the results of Joson, Jr.'s written examination, 21 actual driving tests,22 x-ray
examination,23 psychological examination,24 NBI clearance,25 physical examination,26 hematology
examination,27urinalysis,28 student driver training,29 shop training,30 birth certificate,31 high school diploma32 and
reports from the General Maintenance Manager and the Personnel Manager showing that he had passed all the tests
and training sessions and was ready to work as a professional driver. 33 However, as the trial court noted, petitioner
did not present proof that Joson, Jr. had nine years of driving experience.34

Petitioner also presented testimonial evidence that drivers of the company were given seminars on driving safety at
least twice a year.35 Again, however, as the trial court noted there is no record of Joson, Jr. ever attending such a
seminar.36 Petitioner likewise failed to establish the speed of its buses during its daily trips or to submit in evidence
the trip tickets, speed meters and reports of field inspectors. The finding of the trial court that petitioner's bus was
running at a very fast speed when it overtook the Dalin bus and hit the deceased was not disputed by petitioner. For
these reasons, we hold that the trial court did not err in finding petitioner to be negligent in the supervision of its
driver Joson, Jr.

Second. To justify an award of actual damages, there should be proof of the actual amount of loss incurred in
connection with the death, wake or burial of the victim.37 We cannot take into account receipts showing expenses
incurred some time after the burial of the victim, such as expenses relating to the 9th day, 40th day and 1st year death
anniversaries.38 In this case, the trial court awarded P88,339.00 as actual damages. While these were duly supported
by receipts, these included the amount of P5,900.00, the cost of one pig which had been butchered for the 9th day
death anniversary of the deceased. This item cannot be allowed. We, therefore, reduce the amount of actual damages
to P82,439.00.00. The award of P200,000.00 for moral damages should likewise be reduced. The trial court found that
the wife and children of the deceased underwent "intense moral suffering" as a result of the latter's death. 39 Under
Art. 2206 of the Civil Code, the spouse, legitimate children and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of the deceased. Under the
circumstances of this case an award of P100,000.00 would be in keeping with the purpose of the law in allowing moral
damages.40

On the other hand, the award of P50,000.00 for indemnity is in accordance with current rulings of the Court.41

Art. 2231 provides that exemplary damages may be recovered in cases involving quasi-delicts if the defendant acted
with gross negligence. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as
a deterrent against or as a negative incentive to curb socially deleterious actions. 42 In this case, petitioner's driver
Joson, Jr. was grossly negligent in driving at such a high speed along the national highway and overtaking another
vehicle which had stopped to allow a pedestrian to cross. Worse, after the accident, Joson, Jr. did not stop the bus to
help the victim. Under the circumstances, we believe that the trial court's award of P50,000.00 as exemplary damages
is proper.

Finally, private respondents are entitled to attorney's fees. Under Art. 2008 of the Civil Code, attorney's fees may be
recovered when, as in the instant case, exemplary damages are awarded. In the recent case of Metro Manila Transit
Corporation v. Court of Appeals,43 we held an award of P50,000.00 as attorney's fees to be reasonable. Hence, private
respondents are entitled to attorney's fees in that amount.

WHEREFORE, the decision of the Court of Appeals, dated January 17, 2002, is hereby AFFIRMED, with the
MODIFICATION that petitioner Victory Liner, Inc. is ordered to pay the following amounts to the respondent heirs of
Andres Malecdan:

1. Death indemnity in the amount of Fifty Thousand Pesos (P50,000.00);


2. Actual damages in the amount of Eighty-Two Thousand Four Hundred Thirty-Nine Pesos (P82,439.00);

3. Moral damages in the amount of One Hundred Thousand Pesos (P100,000.00);

4. Exemplary damages in the amount of Fifty Thousand Pesos (P50,000.00);

5. Attorney's fees in the amount of Fifty Thousand Pesos (P50,000.00); and

6. Costs of suit.

SO ORDERED.

G.R. No. 117103 January 21, 1999

Spouses RENATO S. ONG and FRANCIA N. ONG, petitioners, vs. COURT OF APPEALS, INLAND RAILWAYS, INC. and
PHILTRANCO SERVICE ENTERPRISE, INC., respondents.

PANGANIBAN, J.:

Evidence not formally offered during the trial cannot be used for or against a party litigant. Neither may it be taken
into account on appeal. Furthermore, actual and moral damages must be proven before any award thereon can be
granted.

The Case

Before us is a Petition for Review on Certiorari of the Decision dated May 20, 1993 and the Resolution dated June 8,
1994, both promulgated by the Court of Appeals 1 in CA-GR CV No. 33755, modifying the Decision of the trial court in
an action for damages filed by spouses Renato and Francia Ong (petitioners herein) against Philtranco Service
Enterprise, Inc. and Inland Trailways, Inc. (respondents herein, hereafter referred to as "Philtranco" and "Inland,"
respectively).

The assailed Decision disposed as follows:2

WHEREFORE, the appealed decision is hereby MODIFIED by ordering INLAND TRAILWAYS, INC. to pay
[petitioners] P3,977.00 for actual damages, P30,000.00 as moral damages and ten (10) percent as
contingent attorney's fees and to pay the costs of the suit.

Reconsideration was denied in the assailed Resolution:3

WHEREFORE, IN VIEW OF THE FOREGOING, both motions for reconsideration filed by [petitioners] and
. . . Inland Trailways, Inc. are hereby DENIED.

The Facts

On February 9, 1987, petitioners boarded as paying passengers Bus-No. 101 with late No. EVB-508 ("Inland bus," for
convenience), which was owned and operated by Inland Trailways under a Lease Agreement with Philtranco. It was
driven by Calvin Coronel.4 Around 3:50 in the morning of said date, when the Inland bus slowed down to avoid a
stalled cargo truck in Tiaong, Quezon, it was bumped from the rear by another bus, owned and operated by Philtranco
and driven by Apolinar Miralles. Francia sustained wounds and fractures in both of her legs and her right arm, while
Renato suffered injuries on his left chest, right knee, right arm and left eye.5 They were brought to the San Pablo City
District Hospital for treatment and were confined there from February 9 to 18, 1987. 6

On December 22, 1988, petitioners filed an action for damages against Philtranco and Inland. 7 In their Complaint,
they alleged that they suffered injuries, preventing Francia from operating a sari-sari store at Las Piña's, Metro Manila,
where she derived a daily income of P200; and Renato from continuing his work as an overseas contract worker (pipe
welder) with a monthly salary of $690. Stating that they incurred P10,000 as medical and miscellaneous expenses,
they also claimed moral damages of P500,000 each, exemplary and corrective damages of P500,000 each, and
compensatory damages of P500,000 each plus 35 percent thereof as attorney's fees. In addition to their testimonies,
petitioners also presented the following documentary evidence:

Exhibit A — Philtranco Bus Ticket No. 333398

B — Philtranco Bus Ticket No. 333399

C — Certification dated February 12, 1987

D — Medical Certificate of Francis Ong dated February 18, 1987

E — Medical Certificate of Renato S. Ong dated February 18, 1987

F — Statement of Account of Francia N. Ong in the amount of P1,153.50

G — Statement of Account of Renato S. Ong in the amount of P1,973.50

H — Receipt dated February 9, 1987

I — Receipt dated March 3, 1987

J — Receipt dated February 18, 1987

K — Receipt dated February 24, 1987

L & - L-1 — Picture of face of Renato S. Ong

M & M-1 — Picture of face of Renato S. Ong

N — Payroll Summary for [period ending] November 1986

O — Payroll Summary for [period ending] December, 1986

Philtranco answered that the Inland bus with Plate No. EVB-508 (which had transported petitioners) was registered
and owned by Inland; that its driver, Calvin Coronel, was an employee of Inland; that Philtranco was merely leasing
its support facilities, including the use of its bus tickets, to Inland; and that under their Agreement, Inland would be
solely liable for all claims and liabilities arising from the operation of said bus. Philtranco further alleged that, with
respect to its own bus (which bumped the Inland bus), it exercised the diligence of a good father of a family in the
selection and supervision of its drivers, and that the proximate cause of the accident was the negligence of either the
cargo truck or the Inland bus which collided with said cargo truck.

Inland answered that, according to the Police Report, it was Apolinar Miralles, the driver of the Philtranco bus, who
was at fault, as shown by his flight from the situs of the accident; that said bus was registered and owned by Philtranco;
and that the driver of the Inland bus exercised extraordinary diligence as testified to by its passengers. Inland and
Philtranco filed cross-claims against each other.

Both respondents moved to submit the case for decision without presenting further evidence. Consequently, the trial
court, in its Order dated July 5, 1989, resolved:8

When this case was called for continuation of presentation of plaintiffs evidence, over objections from
counsels for defendants, plaintiffs counsel was allowed to recall his first witness, Renato S. Ong, for
some additional direct questions[;] and after cross-examination by defendant Inland Trailways, Inc.,
adopted by defendant Philtranco Service Enterprise, Inc., plaintiff presented his second witness,
[Francia] Ong, whose testimony on direct, cross and redirect was terminated[;] and as prayed for,
counsel for the plaintiffs shall have five (5) days from today within which to submit his formal offer of
evidence, furnishing copies thereof to defendants who shall have five (5) days from their receipt within
which to submit comments after which the same shall be deemed submitted for resolution.

By agreement, considering the stipulations of parties made of record regarding factual issues except as
to whether or not the bus is included in the lease, counsels for the two (2) defendants are given a
period of ten (10) days from today within which to submit simultaneous offer[s] of admission and
denials not only on the above exception but on any other relevant matter.

Considering that the documents are admitted, there is no necessity of any formal written offer of
evidence and, therefore, after all the foregoing, the case shall be deemed submitted for decision upon
simultaneous memoranda of the parties and upon submission of complete transcripts.

Thereafter, the trial court rendered its May 7, 1991 Decision, which disposed as follows: 9

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of the [petitioners] absolving
Inland Trailways, Inc., from any liability whatsoever, and against . . . Philtranco Service Enterprise, Inc.,
ordering the latter to pay the [petitioners] —

1) P10,000.00 as actual damages for medical and miscellaneous expenses;

2) P50,000.00 as compensatory damages for the [diminution] of the use of the right arm of [petitioner]-
wife;

3) P48,000.00 as unrealized profit or income;

4) P50,000.00 as moral damages;

5) 25% of the foregoing as contingent attorney's fees; and

6) the costs.

According to the trial court, the proximate cause of the accident was "the bumping from behind by the Philtranco bus
with Plate No. 259 driven by Apolinar Miralles" based on the Police Report and the affidavits of passengers, to which
Philtranco did not object. As it failed to prove that it exercised due diligence in the selection and supervision of its
employees under Article 2176 of the Civil Code, Philtranco was held liable based on culpa aquiliana.

Ruling of the Court of Appeals


On appeal, the Court of Appeals (CA) resolved that Philtranco's liability for damages could not be predicated upon the
Police Report which had not been formally offered in evidence. The report was merely annexed to the answer of
Inland, and petitioner did not adopt or offer it as evidence. Consequently, it had no probative value and, thus,
Philtranco should be absolved from liability.

Instead, the appellate court found that petitioners sufficiently established a claim against Inland based on culpa
contractual. As a common carrier, Inland was required to observe extra ordinary diligence under Articles 1735 and
1750 of the Code. Its liability arose from its failure to transport its passengers and cargo safely, and a finding of fault
or negligence was not necessary to hold it liable for damages. Inland failed to overcome this presumption of
negligence by contrary evidence; thus, it was liable for breach of its contractual obligation to petitioners under Article
2201 of the Civil Code.

The liability of Inland for medical and miscellaneous expenses was reduced, as the evidence on record showed that
petitioners spent only P3,977. Deemed self-serving was Francia's testimony that the use of her right arm was
diminished and that she lost income. Thus, the award for unearned income was disallowed and the amount of moral
damages was reduced to P30,000.

Hence, this petition.10

The Issues

In their Memorandum,11 petitioners raise the following issues: 12

[I] Whether or not public respondent committed grave abuse of discretion in completely
reversing the decision of the Regional Trial Court, ordering Philtranco to indemnify
petitioners and in lieu thereof, order[ing] Inland to pay petitioners for their damages.

[II] Whether or not public respondent committed grave abuse of discretion in


disallowing the P50,000.00 awarded to petitioner, Francia Ong for the diminution of the
use of her right arm and the P48,000.00 representing unrealized income.

[III] Whether or not public respondent committed grave abuse of discretion in reducing
the award for actual and miscellaneous expenses from P10,000.00 to P3,977.00; the
award of P50,000.00 moral damages to P30,000.00; and the 25% contingent attorney's
fees to10% thereof.

Simply stated, the main issues raised are: (1) whether the Police Report, which was not formally offered in evidence,
could be used to establish a claim against Philtranco based on culpa aquiliana; and (2) whether the reduction in the
amounts of damages awarded was proper.

The Court's Ruling

The petition is devoid of merit.

First Issue:

Retirement of Formal Offer of Evidence

Petitioners take exception to the rule requiring documents to be formally offered in evidence before they can be given
any probative value, arguing that the parties agreed to submit the case for resolution based on the July 5, 1989 Order
of the trial court. Because of the agreement, petitioners assumed that all the pieces of documentary evidence,
including the Complaint and its Annexes, as well as those in the respective Answers of the private respondents, were
deemed admitted.

We disagree. Section 34, Rule 132 of the Rules of Court, provides that "[t]he court shall consider no evidence which
has not been formally offered." A formal offer is necessary, since judges are required to base their findings of fact and
their judgment solely and strictly upon the evidence offered by the parties at the trial. To allow parties to attach any
document to their pleadings and then expect the court to consider it as evidence, even without formal offer and
admission, may draw unwarranted consequences. Opposing parties will be deprived of their chance to examine the
document and to object to its admissibility. On the other hand, the appellate court will have difficulty reviewing
documents not previously scrutinized the court below.13

In adhering to this rule, the appellate court cannot be faulted with reversible error, as it held: 14

. . . [T]he burden of proof lies with the plaintiff in establishing fault or negligence on the part of the
defendant (Ong vs. Metropolitan Water). This, however, plaintiff-appellees failed to establish. Albeit,
there was a police investigation report finding the driver of PHILTRANCO negligent which became the
basis of the court a qou [for] holding PHILTRANCO liable, this piece of evidence was merely attached
as Annex "1" of INLAND's answer, nothing more. It was not presented and even offered as evidence by
INLAND nor utilized by plaintiffs-appellees. Thus, even assuming arguendo that the same had been
identified in court, it would have no evidentiary value. Identification of documentary evidence must be
distinguished from its formal offer as an exhibit. The first is done in the course of the trial and is
accompanied by the marking of the evidence as an exhibit. The second is done only when the party
rests its case and not before. The mere fact that a particular document is identified and marked as an
exhibit does not mean it will be or has been offered as part of the evidence of the party. The party may
decide to offer it if it believes this will advance the cause, and then again it may decide not to do so at
all (People vs. Santito, Jr., 201 SCRA 87).

In the case at bar, the defendant INLAND and plaintiffs-appellees did not identify the said Annex "1" or
the Police Investigation Report as evidence. Thus, under Section 35 of Rule 132 of the Revised Rules on
Evidence, the court shall consider no evidence which has not been formally offered. Corollary, the
Police Investigation Report of Annex "1" cannot be given any evidentiary value.

Absen[t] Annex "1" which was the basis of the trial court in finding PHILTRANCO liable, the latter is thus
exonerated from liability.

Petitioners similarly erred in presuming that said Annex was admitted in evidence by virtue of the Order of July 5,
1989. Their presumption has no basis. The Order required counsel for the petitioners to "submit his formal offer of
evidence, furnishing copies thereof to defendants who shall have five (5) days from their receipt within which to
submit comments after which the same shall be deemed submitted for resolution." 15 In compliance, petitioners filed
a written offer of evidence on July 12, 1989.16 Such offer led the trial court, in its Order of August 2, 1989, to formally
admit in evidence Exhibits "A"-"O."17 Clearly, the Police Report was neither offered by the petitioners nor admitted
by the trial court.

Moreover, the petitioners' allegations in their Complaint did not establish a cause of action against Philtranco. They
similarly failed to make any reference to said Police Report during the presentation of their case. This is precisely why
Respondent Philtranco opted not to present further evidence. A document or an article is valueless unless it is formally
offered in evidence, and the opposing counsel is given an opportunity to object to it and to cross-examine any witness
called to present or identify it.18 Evidence not formally offered before the trial court cannot be considered on appeal,
for to consider them at such stage will deny the other parties their right to rebut them. 19
There is no agreement to submit the case based on the pleading, as contended by the petitioners. The parties had no
such intention, nor did said Order evince such an agreement.

Second Issue:

Damages Require Evidence

Petitioners aver that there was grave abuse of discretion when the amount of actual damages awarded was reduced
from P10,000 to P3,977, even if the original amount did not even include the medical expenses that Francia continued
to incur; and when the award of P48,000 as unrealized income was deleted despite her testimony which was given
credence by the trial court.

The Court disagrees. Granting arguendo that there was an agreement to submit the case for decision based on the
pleadings, this does not necessarily imply that petitioners are entitled to the award of damages. The fundamental
principle of the law on damages is that one injured by a breach of contract (in this case, the contract of transportation)
or by a wrongful or negligent act or omission shall have a fair and just compensation, commensurate with the loss
sustained as a consequence of the defendant's acts. Hence, actual pecuniary compensation is the general rule, except
where the circumstances warrant the allowance of other kinds of damages.

Actual damages are such compensation or damages for an injury that will put the injured party in the position in which
he had been before he was injured. They pertain to such injuries or losses that are actually sustained and susceptible
of measurement. Except as provided by law or by stipulation, a party is entitled to adequate compensation only for
such pecuniary loss as he has duly proven.

To be recoverable, actual damages must be pleaded and proven in Court. In no instance may the trial judge award
more than those so pleaded and proven. Damages cannot be presumed. The award there of must be based on the
evidence presented, not on the personal knowledge of the court; and certainly not on flimsy, remote, speculative and
nonsubstantial proof. Article 2199 of the Civil Code expressly mandates that "[e]xcept as provided by law or by
stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly
proved."

The lack of basis for such award was patent in the trial court Decision:

The records will show that from the documentary evidence, [petitioners] have jointly spent the sum of
P3,977.00. [Respondent] Philtranco has not presented any evidence that it has advanced any amount
for medicine, hospitalization and doctor's fees, but on the contrary, [petitioners] have testified that
they paid for their expenses except at the initial stage wherein a representative of [respondent]
Philtranco went to the hospital to get the receipts of medicines only and paid (t.s.n. — June 29, 1989,
p. 6). Considering the claim of the [petitioners], as alleged in their complaint they spent P10,000.00
representing medical and miscellaneous expenses[;] considering that they have gone for consultation
to at least two (2) different doctors, this Court may take judicial notice of the fact that miscellaneous
expenses [are] bound to be incurred to cover transportation and food, and therefore, finds the amount
of P10,000.00 as actual damages to be reasonable.

Damages, after all, are not intended to enrich the complainant at the expense of the defendant. 20

Moral Damages and Diminution

of Use of Francia's Arm


Petitioners protest the deletion of the amount of P50,000 earlier awarded by the trial court because of the diminution
of the use of Francia's right arm, arguing that she stated during direct examination that it could no longer perform its
normal functions,21 and that private respondents impliedly admitted this matter when they failed to present
controverting evidence.

A person is entitled to the physical integrity of his or her body, and if that integrity is violated, damages are due and
assessable. However, physical injury, like loss or diminution of use of an arm or a limb, is not a pecuniary loss. Indeed,
it is nor susceptible of exact monetary estimation.

Thus, the usual practice is to award moral damages for physical injuries sustained. In Mayo v. People,22 the Court held
that the permanent scar on the forehead and the loss of the use of the right eye entitled the victim to moral damages.
The victim, in said case, devastated by mental anguish, wounded feelings and shock, which she experienced as a result
of her false eye and the scar on her forehead. Furthermore, the loss of vision in her right eye hampered her
professionally for the rest of her life.

In the case at bar, it was sufficiently shown during the trial that Francia's right arm could not function in a normal
manner and that, as a result, she suffered mental anguish and anxiety. Thus, an increase in the amount of moral
damages awarded, from P30,000 to P50,000, appears to be reasonable and justified. Renato also suffered mental
anxiety and anguish from the accident. Thus, he should be separately awarded P30,000 as moral damages.

In some instances, the Court awards the cost of medical procedures to restore the injured person to his or her former
condition. However, this award necessitates expert testimony on the cost of possible restorative medical procedure.
In Gatchalian v. Delim, 23 the Court, reasoning that a scar resulting from the infliction of injury on the face of a woman
gave rise to a legitimate claim for restoration to her conditio ante, granted P15,000 as actual damages for plastic
surgery. It bears emphasis that the said amount was based on expert testimony.24

In another case, the Court granted actual or compensatory damages in the sum of P18,000 for the surgical intervention
necessary to arrest the degeneration of the mandible of a young boy. Again, there was an expert testimony that such
medical procedure would cost P3,000 and would have to be repeated several times to restore him to nearly normal
condition. 25

In the case at bar, petitioner failed to present evidence regarding the feasibility or practicability and the cost of a
restorative medical operation on her arm. Thus, there is no basis to grant her P48,000 for such expense.

Unrealized Income

Protesting the deletion of the award for Francia's unrealized income, petitioners contend that Francia's injuries and
her oral testimony adequately support their claim. The Court disagrees. Although actual damages include
indemnification for profits which the injured party failed to obtain (lucro cesante or lucrum cesans),26 the rule requires
that said person produce the "best evidence of which his case is susceptible. 27

The bare and unsubstantiated assertion of Francia that she usually earned P200 a day from her market stall is not the
best evidence to prove her claim of unrealized income for the eight-month period that her arm was in plaster cast.
Her testimony that was their lessor who filed their income tax returns and obtained business licenses for them does
not justify her failure to present more credible evidence of her income. Furthermore, after her ten-day confinement
at the San Pablo Hospital,28 she could have returned so her work at the public market despite the plaster cast on her
right arm, since she claimed to have two nieces as helpers.29 Clearly, the appellate court was correct in deleting the
award for unrealized income, because of petitioner's utter failure to substantiate her claim.

Attorney's Fees
Counsel for petitioner deeply laments the reduction in the award of attorney's fees. He alleges that he had to use his
own money for transportation, stenographic transcriptions and other court expenses, and for such reason, avers that
the award of 25 percent attorney's fees made by the trial court was proper.

Under the Civil Code, an award of attorney's fees is an indemnity for damages ordered by a court to be paid by the
losing party to the prevailing party, based on any of the cases authorized by law. 30 It is payable not to the lawyer but
to the client, unless the two have agreed that the award shall pertain to the lawyer as additional compensation or as
part thereof. The Court has established a set standards in fixing the amount of attorney's fees: 31

(1) [T]he amount and character of the services rendered; (2) labor, time and trouble involved; (3) the
nature and importance of the litigation or business in which the services were rendered; (4) the
responsibility imposed; (5) the amount of money or the value of the property affected by the
controversy or involved in the employment; (6) the skill and experience called for in the performance
of the services; (7) the professional character and social standing of the attorney; (8) the results
secured, it being a recognized rule that an attorney may properly charge a much larger fee when it is
contingent than when it is not.

Counsel's performance, however, does not justify the award of 25 percent attorney's fees. It is well-settled that such
award is addressed to sound judicial discretion and subject to judicial control. 32

We do not see any abuse thereof in the case at bar. In fact, the appellate court had been generous to petitioners'
counsel, considering that the nature of the case was not exceptionally difficult, and he was not required to exert
Herculean efforts. All told, his handling of the case was sorely, inadequate, as shown by his failure to follow elementary
norms of civil procedure and evidence.

WHEREFORE, the assailed Decision is AFFIRMED with the MODIFICATION that Renato and Francia Ong are separately
awarded moral damages in the amount of P30,000 and P50,000, respectively. The ten percent (10%) attorney's fees
shall be based on the total modified award.1âwphi1.nêt

SO ORDERED.

G.R. No. 130378 March 8, 2001

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
ARNEL MATARO y ELIZAGA and NICK PERUCHO y SINGSON, accused-appellants.

QUISUMBING, J.:

On appeal is the decision1 dated January 29, 1997, of the Regional Trial Court, Quezon City, Branch 88, finding
appellants herein Amel Mataro and Nick Perucho guilty of murder, and sentencing each of them to suffer the penalty
of reclusion perpetua, to indemnify the heirs of the victim, Enrique Castillo, P725,000.00 as actual damages and
P1,000,000.00 as moral damages, and to pay the costs.1âwphi1.nêt

Two separate informations were filed against appellants, thus:

Q-93-41704 against accused Arnel Mataro

That on or about the 23rd day of October 1992 in Quezon City, Metro Manila, Philippines, the above-named
accused, conspiring, confederating with other persons whose true identities, whereabouts and other personal
circumstances of which have not as yet been ascertained and mutually helping one another, with intent to kill,
with treachery, superior strength and evident premeditation, did, then and there, willfully, unlawfully and
feloniously attack, assault and employ personal violence upon the person of one SPO1 ENRIQUE CASTILLO, JR.
y BALBIN, by then and there shooting the latter with the use of firearms thereby inflicting upon him serious
and mortal wounds which were the direct and immediate cause of his untimely death, to the damage and
prejudice of the heirs of the said SPO1 ENRIQUE CASTILLO, JR., y BALBIN.

Contrary to law.

Q-93-48440 against accused Nick Perucho

That on or about the 23rd day of October, 1992, in Quezon City, Philippines, the above-named accused,
conspiring and confederating with and mutually helping with his co-accused / ARNEL MATARO, who was then
charged with the same offense in the Regional Trial Court, Branch 88, this City docketed as Crim. Case No. Q-
93-41704, with intent to kill, with treachery, superior strength and evident premeditation, did then and there
willfully, unlawfully and feloniously attack, assault and employ personal violence upon the person of SPO1
ENRIQUE CASTILLO, JR. Y BALBIN, by means then and there shooting the latter with the use of firearms, thereby
inflicting upon him serious and mortal wounds which were the direct and immediate cause of his untimely
death, to the damage and prejudice of the heirs of said SPO1 ENRIQUE CASTILLO, JR. Y BALBIN.

Contrary to law.2

Initially, the information against Nick Perucho was filed in RTC, Branch 87, but upon motions of complainant
Evangeline Castillo and Asst. City Prosecutor Ralph S. Lee, the two cases were consolidated. Both accused pleaded
"Not Guilty" during their respective arraignment. Trial thereafter on the merits ensued.

The prosecution presented two eyewitnesses, Victor Nilo Fernandez and Reden Guzman.

Fernandez, a jeepney driver whose Cubao-Divisoria route passed along Magsaysay Blvd., declared that on October 23,
1992, at around 4:00 P.M., he saw SPO 1 Enrique Castillo, Jr., stop a light brown Toyota Corona. Mataro and Perucho
disembarked and talked to Castillo. After a while, Mataro and Perucho went to their car and returned with an armalite
and a .45 cal. firearm. Castillo raised his hands and motioned the two accused to move along and forget their citation.
The two accused shot him instead.3

Guzman testified that on October 23, 1992 at around 4:15 P.M., the passenger jeepney he was riding stopped in front
of SM Centerpoint. At the same time, he saw the two accused shoot SPO1 Castillo. 4

Dr. Juan Zaldariaga, the NBI medico-legal officer, testified that three gunshot wounds were inflicted upon the victim,
one on the left side of the chest and two on the left side of the back. He said one of the wounds could have been
inflicted while the victim was standing up, facing his assailant who was about three feet away. Another wound could
have been inflicted while the victim was already in a supine position facing up with the assailant on top of the head
of the victim. The third wound could have been inflicted when the victim was already lying face down. 5

SPO3 Jaime Santos testified that he was the one who handled the investigation of the case. He said that after the case
was assigned to him, he immediately contacted Victor Nilo Fernandez and asked him whether he could still identify
the two persons he saw shooting SPO1 Enrique Castillo. When Fernandez confirmed that he could, SPO3 Jaime Santos
accompanied him first to the PNP jail in Camp Crame where Fernandez identified Mataro. They then proceeded to the
Muntinlupa jail where Fernandez identified Perucho. Both identifications were made in line-ups.6

The widow of the victim, Evangeline Castillo, testified on the expenses she incurred as a result of her husband's death. 7
The appellants interposed alibi and denial in their defense. They presented Morieto Bello who testified that he was
with accused Mataro at around 4:00 P.M. to 5:00 P.M. on October 23, 1992. They were at the Villamor Vulcanizing
Shop located between V. V. Soliven and SSS Village in Marikina where Mataro was having his jeep fixed. 8

Another witness for the defense, Amy Pangilinan, testified that she was with Mataro in the afternoon of October 23,
1992 with a certain Gemma Sunga. They went to Antipolo to buy a pig for her birthday. On their way home they had
engine trouble. They went to a vulcanizing shop for at least one hour waiting for the jeepney to be fixed.9

Appellant Mataro testified that on October 23, 1992, he went to Antipolo with Gemma Sunga and Amy Pangilinan to
buy a pig for the latter's birthday. They left Fairview at past 12:00 noon. They reached Antipolo at around 3:00 P.M.
and they left at around 5:00 P.M. The jeepney had engine trouble so they stopped at Villamor Vulcanizing Shop in
Cupang, Antipolo for about an hour. He said that he was arrested by operatives of the PACC on December 21, 1992
on suspicion that he was a member of a kidnap for ransom gang. He admitted knowing Perucho since they were both
bodyguards of Atty. Leonardo Laurente. He denied shooting SPO1 Castillo. During cross-examination, he testified that
as a former military man he was given a machine gun but had returned it to their supply officer. He only met Perucho
when he arrived in Cagayan.10

Defense witness Arturo dela Cruz testified that he was with Perucho in Aklan on October 23, 1992 and that Perucho
left Aklan only sometime in November of 1992.11

Appellant Perucho testified that he was in Aklan from June 1992 until November of the same year. He said he worked
for one Atty. Laurente as a bodyguard for the elections after the latter helped in his release from detention. He denied
the accusation against him.12

On January 29, 1997, the trial court rendered its decision, the dispositive portion of which reads:

WHEREFORE, premises considered, accused Amel Mataro and Nick Perucho are hereby found GUlLTY beyond
reasonable doubt for the crime of murder, both to suffer the penalty of reclusion perpetua and to pay jointly
and severally the heirs of Enrique Castillo the following: 1) P725,000.00 as actual damages; 2) P1,000,000.00
as moral damages; and 3) to pay the cost.

SO ORDERED.13

The accused filed this appeal. Appellants alleged that the trial court erred in:

...CONVICTING THE ACCUSED APPELLANTS AND IN NOT ACQUITTING THEM:

(A) ON GROUNDS OF REASONABLE DOUBT; AND

(B) BY APPLYING THE "EQUIPOISE RULE."14

The appellants question the credibility of Femandez and Guzman. They aver that during the investigation, a certain
Ebalde gave his statements to the police that the car used by the assailants was a gray Kia Pride. They also point out
that the witnesses of the prosecution did not agree on the number of persons riding the car which was stopped by
Castillo. They likewise raise that during the initial investigation, the eyewitnesses described Mataro as a man between
35 to 40 years old. Mataro was only 24 years old at the time of the incident. Finally, they invoke the "equipoise"
rule15 because their guilt had not been established beyond reasonable doubt.16

The Office of the Solicitor General, for its part, asserts that the testimonies of the witnesses were positive,
straightforward and unerring. The appellants were identified by Femandez in two separate line-ups and during trial.
Witness Guzman likewise identified them during the trial.
That Mataro was described as 35 years old is explained by Mataro's face which did not look a young 25.

On the "equipoise" rule, the OSG asserts that positive and unerring identification made by the witnesses rule out any
erroneous identification, thus the "equipoise" rule need not be applied. 17

In People vs. Teehankee, Jr., 249 SCRA 54 (1995), we enumerated the requisite for credible identification as follows:

1) the witness' opportunity to view the criminal at the time of the crime;

2) witness' degree of attention at that time;

3) the accuracy of any prior description given by the witness;

4) the level of certainty demonstrated by the witness at the identification;

5) the length of time between the crime and the identification; and

6) the suggestiveness of the identification procedure.18

In our view, these requirements were met. We agree with the trial court when it said:

In the instant case, there is no question that both witnesses had the opportunity to view the incident as it
unfolded before them with a degree of attention that allowed them to take in the important details and recall
them clearly. The incident occurred in broad daylight (approximately 4:00 P.M.) in an intersection where
witness Coronel, driving his passenger jeep which was temporarily on a standstill, waiting for the go signal
from the traffic officer. Being a bare 3 meters away from the three men, it was expected that Co[r]onel had
his attention focused on the traffic officer, alert and ready to move as soon as the signal is given. It was no
coincidence for him to have watched with keenness the meeting that ended in a shooting. The same is true
with witness De Guzman, a passenger riding in a jeepney about 9 to 10 meters from the scene. Passengers are
wont to (sic) get curious when their vehicles are stalled not necessarily to see what is happening but to check
when their vehicles would be moving.

The case of a traffic officer confronted by two (2) motorists is bound to attract attention of passersby
particularly passengers like De Guzman interested in the uninterrupted flow of traffic. 19

Moreover, as repeatedly stressed, appellate court should accord to the factual findings of trial courts and their
evaluation great weight and respect concerning the credibility of witnesses. 20 The conditions of visibility being
favorable and these witnesses not appearing to be biased, the conclusion of trial courts regarding the identity of the
malefactors should normally be accepted.21

Fernandez and Guzman had no stake whatsoever in this case. The defense had not been able to impute any ill motive
on their part which would prompt them to falsely accuse appellants. Where there is no showing that the prosecution
witnesses were actuated by any improper motive, the presumption is that they are not so actuated and their
testimony is entitled to full faith and credit.22

Appellants claim that the car used by the killers was a gray Kia Pride as averred by Ebalde in his sworn statement and
not a Toyota as testified to by Fernandez and Guzman. But Ebalde was never presented in court. His alleged
statements are hearsay, without any probative value.23

The alleged inconsistency in the number of passengers inside the Toyota Corona is a minor detail which only serves
to strengthen, rather than weaken, the credibility of Fernandez and Guzman. The same holds true with respect to the
witnesses' erroneous estimate of the age of appellants. Such minor inconsistencies are actually indicative of honest
and unrehearsed declarations and responses of witnesses and thereby even enhance their credibility. 24 The fact
remains that there were eyewitnesses who positively, categorically and firmly testified that they saw the actual killing.
While Femandez did categorically state that there were three persons inside the vehicle, no such categorical
declaration came out from Reden Guzman. His testimony reads:

Q: How far were you while you were riding in a jeep from the policeman who was shot?

A: Nine (9) to ten (10) meters, Sir.

Q: And was your jeep in a stop position or was it moving, Mr. Witness?

A: Stop position, Sir.

Q: How many persons shot this policeman?

A: Two (2) persons.

Q: And will you please tell the Court how did these two (2) persons shoot the policeman?

A: The policeman stopped the car and the two (2) persons alighted and then after that they went....there
was a conversation which I did not hear but later on they returned to their vehicle and got their firearms and
shot the policeman.

xxx25

Nothing therein refers to the number of passengers inside the Toyota Corona.

Appellants interposed alibi and denial in their defense. However, in light of the positive, categorical, and unerring
identification of appellants, the defense's plea of alibi and denial must necessarily fail. Alibi cannot stand against
strong and positive identification.26

The trial court did not err in qualifying the killing as murder. There was treachery in this case since, as testified to by
prosecution witness Femandez, the victim had already dismissed the appellants after they talked to him. The victim
was deliberately allowed to enjoy a false sense of security. They shot the victim when the latter had his hands raised.
In People vs. Castro, 20 SCRA 543 (1967), this Court held:

Where the victim was shot, when his hands were raised, to show that he would not fight, or because of fright,
or to try to ward off the shots that were to come, he was clearly in a defenseless position. This circumstance
constitutes treacery.27

In People vs. Tobias, 267 SCRA 229 (1997), we held:

That the attack was preceded by a scuffle, as pointed out by the accused, is of no moment, since treachery
may still be appreciated even when the victim was forewarned of danger to his person. What is decisive is that
the execution of the attack made it impossible for the victim to defend himself or to retaliate: 28

In our view, the amount of damages awarded must be modified. An appeal in a criminal case opens the entire case
for review on any question including one not raised by the parties. 29 The trial court awarded P725,000.00 as actual
damages and P1,000,000.00 as moral damages. In arriving at P725,000.00 as actual damages, the trial court added
the loss of earning capacity of the victim which it computed to be P660,000.00 and the other expenses incurred by
the heirs of the victim as a result of his death.

We agree that the life expectancy formula should be applied. However, the loss of earning capacity should not be
based on the net monthly income of the deceased. The proper computation should be based on the gross annual
income of the victim minus the necessary and incidental living expenses which the victim would have incurred if he
were alive, estimated at 50%30 of the gross annual income. The prosecution proved through the Certification of
Employment and Compensation31 that the gross annual income (including 13th month pay and bonus) of the deceased
is P65,906.00. Deducting from this the estimated necessary and incidental living expenses, the net annual income is
P32,953.00. Multiplying this by the computed life expectancy of the victim which is 22 years, the amount of loss of
earning capacity should be P724,966.00. 1âwphi1.nêt

With respect to actual damages, we have consistently ruled that the recovery of actual damages must be premised
upon competent proof and best evidence obtainable by the injured party showing the actual expenses incurred in
connection with the death, wake or burial of the victim. Courts cannot simply assume that damages are sustained by
the injured party, nor can it rely on speculation or guesswork in determining the fact and amount of damages. 32 In
this case, of the expenses summarized by the injured party, only the one incurred for funeral services amounting to
P25,000.00 is duly evidenced by a receipt.33 The trial court's award of P1,200.00 for hospital bills, P43,800.00 for
funeral services and P20,000.00 for transportation and representation expenses lacks sufficient basis and should be
deleted.

In line with People vs. Suplito, 314 SCRA 493 (1999), however, temperate damages may be awarded, it appearing that
the victim's heirs had suffered pecuniary losses other than the actual damage but the amount thereof cannot be
proved with certainty. Taking into consideration the medical and burial services for the victim, an award of P30,000.00
by way of temperate damages should suffice in this regard.

The award of P1,000,000.00 as moral damages should be reduced, bearing in mind that the purpose for making such
award is not to enrich the heirs of the victim but to compensate them however inexact for injuries to their feelings.
In line with current jurisprudence on moral damages, an award of P50,000.00 is in order. 34 Likewise, based on
prevailing case laws P50,000.00 is awarded as indemnity for wrongful death. Attorney's fees of P24,000.00 is also
proper.35

WHEREFORE above premises considered, the assailed decision of the Regional Trial Court, Branch 88 of Quezon City
is hereby AFFIRMED WITH THE MODIFICATION that accused-appellants are ordered to pay the heirs of the victim the
total sum of P903,966.00, consisting of P50,000 as death indemnity; P724,966 for loss of earning capacity; P25,000 as
actual damages; P30,000 as temperate damages; P50,000 as moral damages; and P24,000 for attorney's fees.

Costs against appellants.

SO ORDERED.

G.R. No. 193861 March 14, 2012

PAULITA "EDITH" SERRA,1 Petitioner, vs.NELFA T. MUMAR, Respondent.

At around 6:30 in the evening of 3 April 2000, there was a vehicular accident along the National Highway in Barangay
Apopong, General Santos City, which resulted in the death of Armando Mumar (Mumar), husband of respondent Nelfa
T. Mumar (respondent).

Based on the evidence presented before the Regional Trial Court (RTC) of General Santos City, one Armando Tenerife
(Tenerife) was driving his Toyota Corolla sedan on the National Highway heading in the direction of Polomolok, South
Cotabato. Tenerife noticed the van owned by petitioner Paulita "Edith" Serra (petitioner) coming from the opposite
direction, which was trying to overtake a passenger jeep, and in the process encroached on his lane. The left side of
the sedan was hit by the van, causing the sedan to swerve to the left and end up on the other side of the road. The
van collided head on with the motorcycle, which was about 12 meters behind the sedan on the outer lane, causing
injuries to Mumar, which eventually led to his death.

On the other hand, petitioner denied that her van was overtaking the jeepney at the time of the incident. She claimed
that the left tire of Tenerife’s sedan burst, causing it to sideswipe her van. Consequently, the left front tire of the van
also burst and the van’s driver, Marciano de Castro (de Castro), lost control of the vehicle. The van swerved to the left
towards Mumar’s motorcycle. The impact resulted in the death of Mumar.

Subsequently, respondent filed a complaint against petitioner for Damages by Reason of Reckless Imprudence
resulting to Homicide and Attachment before the General Santos City RTC.

Ruling of the Regional Trial Court

On 20 November 2003, the General Santos City RTC promulgated a judgment,4 the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered against defendant Paulita Sierra, her co-defendant not having been served
with summons because he could no longer be found, finding her liable for damages by reason of reckless imprudence,
and she is hereby ordered to pay plaintiff the sum of:

1. ₱65,000.00 for burial damages;

2. ₱300,000.00 for loss of income;

3. ₱50,000.00 as moral damages; and

4. ₱50,000.00 as exemplary damages.

SO ORDERED.5

The RTC found that, based on the evidence presented at the trial, at the time of impact "the van was overtaking
another vehicle without due regard for the safety of others, bumped the Toyota Car (sic) and the motorcycle traveling
in the right lane going to Polomolok, South Cotabato." The RTC noted that the damage to the van was located at the
bumper, evincing a frontal collision, while the damage to the sedan was on the left side door and window, evincing
that the van sideswiped the sedan. Likewise, the RTC found that the van encroached on the sedan and motorcycle’s
lane, in the process hitting the motorcycle, causing the injuries and subsequent death of Mumar.6

As to the claim for damages, the RTC said that Nelfa testified that her husband was earning about ₱6,000.00 a month
without presenting any documentary evidence to prove her claim, but nonetheless awarded her ₱300,000.00 for
damages due to loss of income.

Petitioner appealed the RTC ruling to the CA.

Ruling of the Court of Appeals

In its 31 July 2009 Decision, the CA denied the appeal and affirmed with modification the RTC’s ruling:
FOR REASONS STATED, the appeal is DENIED. The assailed Decision of the Regional Trial Court of General Santos City,
11th Judicial Region, Branch 23, in Civil Case No. 6764 is AFFIRMED with MODIFICATION in that the appellant is
ordered to pay appellee the following:

1. Civil indemnity in the amount of ₱50,000.00;

2. Indemnity for loss of earning capacity in the amount of ₱1,224,000.00;

3. Temperate damages amounting to ₱25,000.00 in lieu of the award for burial expenses;

4. Moral damages in the amount of ₱50,000.00.

5. The total amount of damages shall bear an interest of 12% per annum from the finality of this Decision until
fully paid.

The awards for burial expenses and exemplary damages are deleted.

SO ORDERED.7

The CA adopted the factual findings of the RTC. It also ruled that the RTC erred in awarding burial expenses and actual
damages for loss of earning capacity despite lack of proof. Based on the wife’s claim that the victim earned not less
than ₱6,000.00 a month and his age at the time of death, based on his birth certificate (29), the CA applied the formula:

Net earning capacity = 2/3 x (80 less the age of the victim at time of death) x [Gross Annual Income less the Reasonable
and Necessary Living Expenses (50% of gross income)]

Using the foregoing formula, the CA awarded damages due to loss of earning capacity in the amount of
₱1,224,000.00.8

Likewise, the CA said that the RTC erred in not awarding civil indemnity in the amount of ₱50,000.00. The CA also
awarded temperate damages of ₱25,000.00 finding that respondent spent for her husband’s burial although the exact
amount could not be proven.

Petitioner’s Arguments

Petitioner raises the following issues:

I. Whether or not the (sic) both the lower court and the Court of Appeals committed reversible error in finding
that the incident which killed Armando Mumar was not purely accidental for which defendants may not be
held liable[;]

II. Whether or not both the lower court and the Court of Appeals committed reversible error in holding Editha
Serra as liable for damages and in not appreciating that she was not negligent in the selection and supervision
of the driver of the van, Marciano de Castro[;]

III. Whether or not the Court of Appeals erred in awarding to herein respondent "loss of earning capacity"
despite complete absence of documentary evidence that the deceased Mumar was self-employed and earning
less than the minimum wage under current labor laws in force at the time of his death, following the ruling
in People v. Mallari, G.R. No. 145993, June 17, 2003[.]9
Petitioner maintains that it was Tenerife’s sedan that encroached on the lane of the van after the sedan’s left front
tire blew out. Petitioner points out that Tenerife himself admitted that what happened was merely a "sliding
collision."10 She points out that the sedan not only cut across two lanes headed in the opposite direction, it also made
a half-circle such that it stopped on the shoulder of the left side of the road (opposite its original lane), and then faced
towards its origin, General Santos City. This could be for no other reason than that Tenerife completely lost control of
his vehicle because the tire burst. Then, the sedan rammed into the van causing the latter’s front tire to tear; thus,
the van’s driver also lost control of the vehicle and headed towards the opposite lane and hit Mumar. Yet, the van
was still facing its destination – General Santos City. The greater damage to the van was from hitting the signboard on
the side of the road and not from hitting the sedan.

Petitioner argues that the foregoing description of the events proves that it is purely accidental and without
negligence on her driver’s part.

Petitioner also insists that she was not negligent in the selection and supervision of the driver of the van. Respondent
had the burden to prove that petitioner was negligent but failed to do so, petitioner claims.

As to the CA’s award of damages due to loss of earning capacity, petitioner argues that the same has no basis. She
points out that there was no documentary evidence presented or formally offered at the trial to substantiate the claim
for damages due to loss of earning capacity. Likewise, petitioner further argues that, based on Nelfa’s testimony that
her husband was earning "not less than ₱6,000 a month," the conclusion was that he was earning not less than the
minimum wage at the time of the accident.

Petitioner counters that in 2005 the minimum wage in Region XII, where the accident occurred, was ₱200.00 per day
plus a cost of living allowance of ₱13.50, or ₱5,558.00 per month. Petitioner posits that it was safe to assume that at
the time of the accident on 3 April 2000, the minimum wage was lower than the rate in 2005.

Petitioner also argues that in Mumar’s line of work – contracting and manufacturing steel grills, fences and gates –
some form of documentary evidence would be available to support his widow’s claim. That these were not presented
in evidence would remove the claim from the exceptions to the requirement that the amount of actual damages must
be duly proved.11

Thus, petitioner prays that the assailed CA decision and resolution be reversed and set aside. In the alternative,
petitioner prays that, should the Court sustain the finding of negligence, that the award of damages for loss of earning
capacity in the sum of ₱1,224,000.00 be completely deleted for lack of evidentiary basis. 12

Respondent’s Argument

In her Comment, respondent counters that petitioner raises no new matter, and the arguments are merely a rehash
of those raised before the lower courts, which had already ruled on these.13

The Court’s Ruling

The petition is partly granted. The Court affirms the decision of the CA, but modifies the award for damages.

Uniform Findings of Fact by the RTC and CA

A petition for review on certiorari should raise only questions of law. In resolving a petition for review, the Court "does
not sit as an arbiter of facts for it is not the function of the Supreme Court to analyze or weigh all over again the
evidence already considered in the proceedings below."14
When supported by substantial evidence, the factual findings of the CA affirming those of the trial court 15 are final
and conclusive on this Court and may not be reviewed on appeal, 16 unless petitioner can show compelling or
exceptional reasons17 for this Court to disregard, overturn or modify such findings.

In the present case, the Court notes the uniform factual findings by the RTC and CA, and petitioner has not shown
compelling or exceptional reasons warranting deviation from these findings.

Both the trial court and the CA found that it was petitioner’s van, then being driven by de Castro, that encroached on
the sedan’s lane, then hit the latter and, eventually, Mumar’s motorcycle.

The Court has previously held that evidence to be worthy of credit, must not only proceed from a credible source but
must, in addition, be credible in itself. The evidence must be natural, reasonable and probable as to make it easy to
believe. No better test has yet been found to determine the value of the testimony of a witness than its conformity
to the knowledge and common experience of mankind.18

Petitioner’s testimony is not credible considering that she admitted that she did not see the actual bumping of the
van with the sedan because "it was dark and showering."19 When she came out of the van, she said she did not notice
the sedan. She then left the scene to ask help from her brother, without even coming to the aid of her driver. 20

Moreover, the traffic investigator’s findings are more consistent with human experience.

As found by the investigator, the van ended up on the other side of the road, opposite the lane it was originally
traversing. The van’s forward momentum was going towards the opposite side. If indeed the van stayed on its proper
lane when the sedan’s tire blew out and lost control, the sedan would have bumped into the van on the latter’s lane
and the van would have ended up on the side of the road with the sedan. Likewise, if the van had stayed on its lane,
and the impact of the sedan propelled it forward, the van would have hit the jeepney in front of it, not Mumar’s
motorcycle, which was on the opposite lane to the right of the sedan. The only plausible explanation is it was the van,
while trying to overtake the jeepney in front of it at a fast speed, that bumped into the sedan and subsequently,
Mumar’s motorcycle.

Petitioner insists that the traffic investigator SPO3 Haron Abdullatip’s report should be disregarded because he was
not at the scene when the accident happened.

Rarely does it happen that the investigating officer personally witnesses an accident that he investigates, yet this does
not mean that his observations are not valid. A traffic investigator’s training and experience allow him to determine
how an accident occurred even without witnessing the accident himself.

In this case, Abdullatip had been a traffic investigator for nine years.21 Even if he arrived at the scene after the accident,
he saw the vehicles in their relative positions as a result of the accident. His experience, as well as his evaluation of
the statements from various witnesses, guided him in assessing who was at fault. In any case, the presumption of
regularity in the exercise of functions is in his favor and therefore his report must be given credence.

Liability for Damages of Petitioner

Under Article 2180 of the Civil Code, employers are liable for the damages caused by their employees acting within
the scope of their assigned tasks. Whenever an employee’s negligence causes damage or injury to another, there
instantly arises a presumption that the employer failed to exercise the due diligence of a good father of the family in
the selection or supervision of its employees.22 The liability of the employer is direct or immediate. It is not conditioned
upon prior recourse against the negligent employee and a prior showing of insolvency of such employee. 23
Moreover, under Article 2184 of the Civil Code,24 if the causative factor was the driver’s negligence, the owner of the
vehicle who was present is likewise held liable if he could have prevented the mishap by the exercise of due diligence.

Petitioner failed to show that she exercised the level of diligence required in supervising her driver in order to prevent
the accident. She admitted that de Castro had only been her driver for one year and she had no knowledge of his
driving experience or record of previous accidents. She also admitted that it was de Castro who maintained the vehicle
and would even remind her "to pay the installment of the car."25

Petitioner also admitted that, at the time of the accident, she did not know what was happening and only knew they
bumped into another vehicle when the driver shouted. She then closed her eyes and a moment later felt something
heavy fall on the roof of the car. When the vehicle stopped, petitioner left the scene purportedly to ask help from her
brother, leaving the other passengers to come to the aid of her injured driver.

Damages for Loss of Earning Capacity

Next, the Court holds that the CA erred in awarding damages for loss of earning capacity in the absence of
documentary evidence to support the claim.

Damages for loss of earning capacity is in the nature of actual damages,26 which as a rule must be duly proven27 by
documentary evidence, not merely by the self-serving testimony of the widow.

By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary
evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and
judicial notice may be taken of the fact that in the deceased’s line of work no documentary evidence is available; or
(2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.28

Based solely on Nelfa’s testimony, the CA determined that the deceased falls within one of these exceptions. Nelfa
testified that her husband was in the business of contracting and manufacturing grills, fences and gates,29 and his
earnings "exceed ₱6,000.00"30 per month prior to his death. She presented no documentary proof of her claims.

It was error for the CA to have awarded damages for loss of earning capacity based on Nelfa’s testimony alone.

First, while it is conceded that the deceased was self-employed, the Court cannot accept that in his line of work there
was no documentary proof available to prove his income from such occupation. There would have been receipts, job
orders, or some form of written contract or agreement between the deceased and his clients when he is contracted
for a job.

Second, and more importantly, decedent was not earning "less than the minimum wage" at the time of his death.

Wage Order No. RTWPB-XI-07,31 issued by the Regional Tripartite Wages and Productivity Board-XI of the National
Wages and Productivity Commission, under the Department of Labor and Employment, took effect on 1 November
1999 and mandated the minimum wage rate in Region XI, including General Santos City, at the time of the accident.
Section 1 provides:

SECTION 1. NEW MINIMUM WAGE RATES. Effective November 1, 1999, the new minimum wage rates in Region XI
shall be as follows:
SECTOR/INDUSTRY Davao City Provinces of:
General Santos City Davao del Norte
Island Garden City of Davao del Sur
Samal Davao Oriental
Tagum City
Compostela Valley
South Cotabato
NON-AGRICULTURE 148.00 146.00
AGRICULTURE
- Plantation (i.e. more than 138.00 136.00
24 Hectares or employing at
least
20 workers) 117.00 115.00
- Non-Plantation
RETAIL/SERVICE 148.00 146.00
- Employing more than 10
workers 117.00 115.00
- Employing not more than 10
workers

Respondent testified that her husband was earning not less than ₱6,000.00 per month.1âwphi1 On the other hand,
the highest minimum wage rate at the time of the accident, based on Wage Order No. RTWPB-XI-07, was ₱148.00. At
that rate, the monthly minimum wage would be ₱3,256.00,32 clearly an amount less than what respondent testified
to as her husband’s monthly earnings. The deceased would not fall within the recognized exceptions.

There is therefore no basis for the CA’s computation for Mumar’s supposed net earning capacity and the subsequent
award of damages due to loss of earning capacity.

WHEREFORE, we GRANT IN PART the petition. We AFFIRM WITH MODIFICATION the Decision of the Court of Appeals
dated 31 July 2009 and Resolution dated 27 July 2010 in CA-G.R. CV No. 00023-MIN. We ORDER petitioner to pay
respondent the following:

1. Civil indemnity of ₱50,000.00;

2. Temperate damages of ₱25,000.00, in lieu of the award for burial expenses;

3. Moral damages of ₱50,000.00; and

4. Interest on the total monetary award at the rate of 12% per annum from the finality of this decision until
the award is fully satisfied.

SO ORDERED.

G.R. No. 157917 August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, vs. SPOUSES TERESITA PHILIPPINE NICOLAS and L.
ZARATE, NATIONAL RAILWAYS, and the COURT OF APPEALS Respondents.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision
promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed
them jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and
Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school
student of Don Bosco Technical Institute (Don Bosco).

Antecedents

The Pereñas were engaged in the business of transporting students from their respective residences in Parañaque City
to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used a KIA Ceres Van (van) with
Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in the
front beside the driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro
(Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, as
on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his place
on the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo playing
loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students were due
at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath
the Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into Makati. At
the time, the narrow path was marked by piles of construction materials and parked passenger jeepneys, and the
railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible persons
manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny
Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on its left side. The train blew its horn to warn
motorists of its approach. When the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train
hit the rear end of the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the van.
Aaron landed in the path of the train, which dragged his body and severed his head, instantaneously killing him. Alano
fled the scene on board the train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against
Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective answers, with cross-claims against
each other, but Alfaro could not be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation carriage
of the former spouses' son from their residence in Parañaque to his school at the Don Bosco Technical Institute
in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son
of spouses Zarate died in connection with a vehicular/train collision which occurred while Aaron was riding the
contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of
August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad
crossing used by motorists for crossing the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no appropriate and safety warning signs
and railings at the site commonly used for railroad crossing;

(6) At the material time, countless number of Makati bound public utility and private vehicles used on a daily
basis the site of the collision as an alternative route and short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the commuter train involved without
waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator
for railroad crossing at the time of the vehicular collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the
former and its project contractor; and

(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the
Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence
constituting the proximate cause of the vehicular collision, which resulted in the death of plaintiff spouses'
son;

(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for any
negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable
for negligence in failing to provide adequate safety warning signs and railings in the area commonly used by
motorists for railroad crossings, constituting the proximate cause of the vehicular collision which resulted in
the death of the plaintiff spouses' son;

(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with plaintiff-
spouses in failing to provide adequate and safe transportation for the latter's son;

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and
attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of employers
and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the
accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices or
equipment at the site of the accident for the protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever
amount the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by reason
of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the
latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary damages
and attorney's fees.2

The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport of Aaron;
but that against PNR was based on quasi-delict under Article 2176, Civil Code.

In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had
not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that
Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van
whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been
intended to be a railroad crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants
ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorney’s fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration, 4 reiterating that the cooperative gross
negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages
awarded to the Zarates were not excessive, but based on the established circumstances.

The CA’s Ruling

Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with
defendant-appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente Alfaro to pay
plaintiffs-appellees for the death of Aaron Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming
documentary evidence on record, supporting the case of defendants-appellants Philippine National Railways.

The Pereñas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary
damages and attorney’s fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine National Railways
and in not holding the latter and its train driver primarily responsible for the incident.

The trial court erred in awarding excessive damages and attorney’s fees.

The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the absence of sufficient
basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral
damages to ₱ 2,500,000.00; and deleted the attorney’s fees because the RTC did not state the factual and legal bases,
to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Parañaque City is
AFFIRMED with the modification that the award of Actual Damages is reduced to ₱ 59,502.76; Moral Damages is
reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum representing
the loss of the deceased’s earning capacity despite Cariaga being only a medical student at the time of the fatal
incident. Applying the formula adopted in the American Expectancy Table of Mortality:–

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21
(the age when he would have graduated from college and started working for his own livelihood) instead of 15 years
(his age when he died). Considering that the nature of his work and his salary at the time of Aaron’s death were
unknown, it used the prevailing minimum wage of ₱ 280.00/day to compute Aaron’s gross annual salary to be ₱
110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3
years, his gross income would aggregate to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱
2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net income
turning out to be higher than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly prayed
for by them, was granted.

On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration. 8

Issues

In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and severally liable to
pay damages with Philippine National Railways and dismissing their cross-claim against the latter.

II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning capacity of a minor
who was only a high school student at the time of his death in the absence of sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at
all.

Ruling

The petition has no merit.

1.
Were the Pereñas and PNR jointly
and severally liable for damages?

The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing their claim
against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.

The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in the selection
and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s license and that he had not been
involved in any vehicular accident prior to the fatal collision with the train; that they even had their own son travel to
and from school on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in transporting the
passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as
inappropriate in an action for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as a common
carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a
family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier,9primarily because he only caters to some specific or privileged individuals, and his operation is neither open
to the indefinite public nor for public use, the exact nature of the operation of a school bus service has not been finally
settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public
carrier.10 A private carrier is one who, without making the activity a vocation, or without holding himself or itself out
to the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular
instance only, to transport goods or persons from one place to another either gratuitously or for hire. 11 The provisions
on ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required of a private
carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering such services to the public. 12 Contracts of common carriage are
governed by the provisions on common carriers of the Civil Code, the Public Service Act, 13 and other special laws
relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at
fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14

In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco, 15viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged
individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public
character. In determining whether a use is public, we must look not only to the character of the business to be done,
but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There
must be, in general, a right which the law compels the owner to give to the general public. It is not enough that the
general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by
which to judge the character of the use is whether the public may enjoy it by right or only by permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction
between a person or an enterprise offering transportation on a regular or an isolated basis; and has not distinguished
a carrier offering his services to the general public, that is, the general community or population, from one offering
his services only to a narrow segment of the general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the
notion of public service under the Public Service Act, which supplements the law on common carriers found in the
Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientèle, whether permanent or occasional, and done for the general business
purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation
of passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services. x x x. 17

Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common
carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had limited
clientèle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a
part of the activity engaged in by the carrier that he has held out to the general public as his business or occupation.
If the undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised
and held out to the general public, the individual or the entity rendering such service is a private, not a common,
carrier. The question must be determined by the character of the business actually carried on by the carrier, not by
any secret intention or mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.21

Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a school
bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual occupation; (b)
undertaking to carry passengers over established roads by the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a common carrier
because they held themselves out as a ready transportation indiscriminately to the students of a particular school
living within or near where they operated the service and for a fee.

The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law. Given the
nature of the business and for reasons of public policy, the common carrier is bound "to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all
the circumstances of each case."22 Article 1755 of the Civil Code specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances." To successfully fend off liability in an action upon the death or injury to
a passenger, the common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal
presumption that he or it was at fault or acted negligently would stand. 23 No device, whether by stipulation, posting
of notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the common carrier
as defined under Article 1755 of the Civil Code. 24

And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court might now
reverse the CA’s findings on their liability. On the contrary, an examination of the records shows that the evidence
fully supported the findings of the CA.

As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the
accident because death had occurred to their passenger.25 The presumption of negligence, being a presumption of
law, laid the burden of evidence on their shoulders to establish that they had not been negligent. 26 It was the law no
less that required them to prove their observance of extraordinary diligence in seeing to the safe and secure carriage
of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible
for the death of Aaron and thus to be held liable for all the natural consequences of such death.

There is no question that the Pereñas did not overturn the presumption of their negligence by credible evidence. Their
defense of having observed the diligence of a good father of a family in the selection and supervision of their driver
was not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did not cease
upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their
employee. This was the reason why the RTC treated this defense of the Pereñas as inappropriate in this action for
breach of contract of carriage.

The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope
of his authority or even in violation of the orders of the common carrier.27 In this connection, the records showed their
driver’s actual negligence. There was a showing, to begin with, that their driver traversed the railroad tracks at a point
at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although that point
had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking
that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack of care was that loud music was playing inside the
air-conditioned van at the time of the accident. The loudness most probably reduced his ability to hear the warning
horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he
sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost
his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate
his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided a collision
with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop
before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined by the traffic laws and regulations.28He thereby violated a
specific traffic regulation on right of way, by virtue of which he was immediately presumed to be negligent.29

The omissions of care on the part of the van driver constituted negligence, 30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection
of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.’"33

The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading
case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of course be always
determined in the light of human experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably said: Reasonable men govern their conduct
by the circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient
of the future. Hence they can be expected to take care only when there is something before them to suggest or warn
of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of
harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is
this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that
an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its
consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he traversed the
railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of the grave harm to be
thereby caused to his passengers; and when he disregarded the foresight of harm to his passengers by overtaking the
bus on the left side as to leave himself blind to the approach of the oncoming train that he knew was on the opposite
side of the bus.

Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court held the PNR
solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus
that was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities. In
Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was adduced
against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary diligence
by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the
Pereñas and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate
Appellate Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school
van traversed the railroad tracks at a point not intended for that purpose.

At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable for damages
arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the
accident, and questions of fact and of law were common as to the Zarates. 36 Although the basis of the right to relief
of the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right
to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the RTC
rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing the railroad tracks at
a point not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure
the safety of others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers
to prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard had been
assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others
as well as the need to control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint
tortfeasors.

2.
Was the indemnity for loss of
Aaron’s earning capacity proper?

The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the liability, the
CA modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had
been enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child
prior to his death. The basis for the computation of Aaron’s earning capacity was not what he would have become or
what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his
death. Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at
the time of his death, but on 21 years, his age when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable and fully warranted.

Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and unfounded.1âwphi1 They
cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s loss of earning capacity
as a pilot for being speculative due to his having graduated from high school at the International School in Manila only
two years before the shooting, and was at the time of the shooting only enrolled in the first semester at the Manila
Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court, that he was for
all intents and purposes only a high school graduate.

We reject the Pereñas’ submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to
that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid professional, like
a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Aaron’s earning capacity
was premised on him being a lowly minimum wage earner despite his being then enrolled at a prestigious high school
like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and
in favor of the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but
also deprived his parents of their right to his presence and his services as well. Our law itself states that the loss of the
earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and shall
in every case be assessed and awarded by the court "unless the deceased on account of permanent physical disability
not caused by the defendant, had no earning capacity at the time of his death." 38 Accordingly, we emphatically hold
in favor of the indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of time or earnings but for loss of the deceased’s power or ability
to earn money.39

This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s earning capacity, although he survived
the accident but his injuries rendered him permanently incapacitated, was computed to be that of the physician that
he dreamed to become. The Court considered his scholastic record sufficient to justify the assumption that he could
have finished the medical course and would have passed the medical board examinations in due time, and that he
could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez, 41 the Court opined
that murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying
jobs had they graduated in due time, and that their jobs would probably pay them high monthly salaries from ₱
10,000.00 to ₱ 15,000.00 upon their graduation. Their earning capacities were computed at rates higher than the
minimum wage at the time of their deaths due to their being already senior agriculture students of the University of
the Philippines in Los Baños, the country’s leading educational institution in agriculture.

3.
Were the amounts of damages excessive?

The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective
amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts were excessive.

The plea is unwarranted.

The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established circumstances of this
case because they were intended by the law to assuage the Zarates’ deep mental anguish over their son’s unexpected
and violent death, and their moral shock over the senseless accident. That amount would not be too much,
considering that it would help the Zarates obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice, given
the passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.

Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective
the desired example for the public good. As a common carrier, the Pereñas needed to be vigorously reminded to
observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from happening again.
Only by an award of exemplary damages in that amount would suffice to instill in them and others similarly situated
like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public
interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13,
2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION
PHILIPPINE AIRLINES, INCORPORATED, G.R. No. 123238

Petitioner, Present:

- versus – YNARES-SANTIAGO, J.,

COURT OF APPEALS and SPOUSES MANUEL Chairperson,


S. BUNCIO and AURORA R. BUNCIO, Minors
DEANNA R. BUNCIO and NIKOLAI R. AUSTRIA-MARTINEZ,
BUNCIO, assisted by their Father, MANUEL
S. BUNCIO, and JOSEFA REGALADO, CHICO-NAZARIO,
represented by her Attorney-in-Fact,
MANUEL S. BUNCIO, NACHURA, and

Respondents. REYES, JJ.

Promulgated:

September 22, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review1 on Certiorari under Rule 45 of the Rules of Court seeking to set aside
the Decision,2 dated 20 December 1995, of the Court of Appeals in CA-G.R. CV No. 26921 which affirmed
in toto the Decision,3 dated 2 April 1990, of the Quezon City Regional Trial Court (RTC), Branch 90, in Civil
Case No. Q-33893.

The undisputed facts are as follows:

Sometime before 2 May 1980, private respondents spouses Manuel S. Buncio and Aurora R. Buncio
purchased from petitioner Philippine Airlines, Incorporated, two plane tickets4 for their two minor
children, Deanna R. Buncio (Deanna), then 9 years of age, and Nikolai R. Buncio (Nikolai), then 8 years
old. Since Deanna and Nikolai will travel as unaccompanied minors, petitioner required private
respondents to accomplish, sign and submit to it an indemnity bond.5 Private respondents complied with
this requirement. For the purchase of the said two plane tickets, petitioner agreed to transport Deanna
and Nikolai on 2 May 1980 from Manila to San Francisco, California, United States of America (USA),
through one of its planes, Flight 106. Petitioner also agreed that upon the arrival of Deanna and Nikolai
in San Francisco Airport on 3 May 1980, it would again transport the two on that same day through a
connecting flight from San Francisco, California, USA, to Los Angeles, California, USA, via another airline,
United Airways 996. Deanna and Nikolai then will be met by their grandmother, Mrs. Josefa Regalado
(Mrs. Regalado), at the Los Angeles Airport on their scheduled arrival on 3 May 1980.
On 2 May 1980, Deanna and Nikolai boarded Flight 106 in Manila.

On 3 May 1980, Deanna and Nikolai arrived at the San Francisco Airport. However, the staff of United
Airways 996 refused to take aboard Deanna and Nikolai for their connecting flight to Los Angeles because
petitioner’s personnel in San Francisco could not produce the indemnity bond accomplished and
submitted by private respondents. The said indemnity bond was lost by petitioner’s personnel during the
previous stop-over of Flight 106 in Honolulu, Hawaii. Deanna and Nikolai were then left stranded at the
San Francisco Airport. Subsequently, Mr. Edwin Strigl (Strigl), then the Lead Traffic Agent of petitioner in
San Francisco, California, USA, took Deanna and Nikolai to his residence in San Francisco where they
stayed overnight.

Meanwhile, Mrs. Regalado and several relatives waited for the arrival of Deanna and Nikolai at the Los
Angeles Airport. When United Airways 996 landed at the Los Angeles Airport and its passengers
disembarked, Mrs. Regalado sought Deanna and Nikolai but she failed to find them. Mrs. Regalado asked
a stewardess of the United Airways 996 if Deanna and Nikolai were on board but the stewardess told her
that they had no minor passengers. Mrs. Regalado called private respondents and informed them that
Deanna and Nikolai did not arrive at the Los Angeles Airport. Private respondents inquired about the
location of Deanna and Nikolai from petitioner’s personnel, but the latter replied that they were still
verifying their whereabouts.

On the morning of 4 May 1980, Strigl took Deanna and Nikolai to San Francisco Airport where the two
boarded a Western Airlines plane bound for Los Angeles. Later that day, Deanna and Nikolai arrived at
the Los Angeles Airport where they were met by Mrs. Regalado. Petitioner’s personnel had previously
informed Mrs. Regalado of the late arrival of Deanna and Nikolai on 4 May 1980.

On 17 July 1980, private respondents, through their lawyer, sent a letter6 to petitioner demanding
payment of 1 million pesos as damages for the gross negligence and inefficiency of its employees in
transporting Deanna and Nikolai. Petitioner did not heed the demand.

On 20 November 1981, private respondents filed a complaint7 for damages against petitioner before the
RTC. Private respondents impleaded Deanna, Nikolai and Mrs. Regalado as their co-plaintiffs. Private
respondents alleged that Deanna and Nikolai were not able to take their connecting flight from San
Francisco to Los Angeles as scheduled because the required indemnity bond was lost on account of the
gross negligence and malevolent conduct of petitioner’s personnel. As a consequence thereof, Deanna
and Nikolai were stranded in San Francisco overnight, thereby exposing them to grave danger. This
dilemma caused Deanna, Nikolai, Mrs. Regalado and private respondents to suffer serious anxiety,
mental anguish, wounded feelings, and sleepless nights. Private respondents prayed the RTC to render
judgment ordering petitioner: (1) to pay Deanna and Nikolai P100,000.00 each, or a total of P200,000.00,
as moral damages; (2) to pay private respondents P500,000.00 each, or a total of P1,000,000,00, as moral
damages; (3) to pay Mrs. Regalado P100,000.00 as moral damages; (4) to pay Deanna, Nikolai, Mrs.
Regalado and private respondents P50,000.00 each, or a total of P250,000.00 as exemplary damages; and
(5) to pay attorney’s fees equivalent to 25% of the total amount of damages mentioned plus costs of suit.

In its answer8 to the complaint, petitioner admitted that Deanna and Nikolai were not allowed to take
their connecting flight to Los Angeles and that they were stranded in San Francisco. Petitioner, however,
denied that the loss of the indemnity bond was caused by the gross negligence and malevolent conduct
of its personnel. Petitioner averred that it always exercised the diligence of a good father of the family in
the selection, supervision and control of its employees. In addition, Deanna and Nikolai were personally
escorted by Strigl, and the latter exerted efforts to make the connecting flight of Deanna and Nikolai to
Los Angeles possible. Further, Deanna and Nikolai were not left unattended from the time they were
stranded in San Francisco until they boarded Western Airlines for a connecting flight to Los Angeles.
Petitioner asked the RTC to dismiss the complaint based on the foregoing averments.

After trial, the RTC rendered a Decision on 2 April 1990 holding petitioner liable for damages for breach
of contract of carriage. It ruled that petitioner should pay moral damages for its inattention and lack of
care for the welfare of Deanna and Nikolai which, in effect, amounted to bad faith, and for the agony
brought by the incident to private respondents and Mrs. Regalado. It also held that petitioner should pay
exemplary damages by way of example or correction for the public good under Article 2229 and 2232 of
the Civil Code, plus attorney’s fees and costs of suit. In sum, the RTC ordered petitioner: (1) to pay Deanna
and Nikolai P50,000.00 each as moral damages and P25,000.00 each as exemplary damages; (2) to pay
private respondent Aurora R. Buncio, as mother of Deanna and Nikolai, P75,000.00 as moral damages;
(3) to pay Mrs. Regalado, as grandmother of Deanna and Nikolai, P30,000.00 as moral damages; and (4)
to pay an amount of P38,250.00 as attorney’s fees and the costs of suit. Private respondent Manuel S.
Buncio was not awarded damages because his court testimony was disregarded, as he failed to appear
during his scheduled cross-examination. The dispositive portion of the RTC Decision reads:

ACCORDINGLY, judgment is hereby rendered:

1. Ordering defendant Philippines Airlines, Inc. to pay Deanna R. Buncio and Nikolai R. Buncio the amount
of P50,000.00 each as moral damages; and the amount of P25,000.00 each as exemplary damages;

2. Ordering said defendant to pay the amount of P75,000.00 to Aurora R. Buncio, mother of Deanna and
Nikolai, as moral damages; and the amount of P30,000.00 to Josefa Regalado, grandmother of Deanna
and Nikolai, as moral damages; and

3. Ordering said defendant to pay P38,250.00 as attorney’s fees and also the costs of the suit.9

Petitioner appealed to the Court of Appeals. On 20 December 1995, the appellate court promulgated its
Decision affirming in toto the RTC Decision, thus:

WHEREFORE, the decision appealed is hereby AFFIRMED in toto and the instant appeal DISMISSED.10

Petitioner filed the instant petition before us assigning the following errors 11 :

I.

THE COURT OF APPEALS ERRED IN SUSTAINING THE RTC AWARD OF MORAL DAMAGES.

II.

THE COURT OF APPEALS ERRED IN SUSTAINING THE RTC AWARD OF EXEMPLARY DAMAGES.

III.

THE COURT OF APPEALS ERRED IN SUSTAINING THE RTC AWARD OF ATTORNEY’S FEES AND ORDER FOR
PAYMENT OF COSTS.

Anent the first assigned error, petitioner maintains that moral damages may be awarded in a breach of
contract of air carriage only if the mishap results in death of a passenger or if the carrier acted
fraudulently or in bad faith, that is, by breach of a known duty through some motive of interest or ill will,
some dishonest purpose or conscious doing of wrong; if there was no finding of fraud or bad faith on its
part; if, although it lost the indemnity bond, there was no finding that such loss was attended by ill will,
or some motive of interest, or any dishonest purpose; and if there was no finding that the loss was
deliberate, intentional or consciously done.12

Petitioner also claims that it cannot be entirely blamed for the loss of the indemnity bond; that during
the stop-over of Flight 106 in Honolulu, Hawaii, USA, it gave the indemnity bond to the immigration office
therein as a matter of procedure; that the indemnity bond was in the custody of the said immigration
office when Flight 106 left Honolulu, Hawaii, USA; that the said immigration office failed to return the
indemnity bond to petitioner’s personnel before Flight 106 left Honolulu, Hawaii, USA; and that even
though it was negligent in overlooking the indemnity bond, there was still no liability on its part because
mere carelessness of the carrier does not per se constitute or justify an inference of malice or bad faith. 13

When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger has every right to expect that he be transported on that flight
and on that date, and it becomes the airline’s obligation to carry him and his luggage safely to the agreed
destination without delay. If the passenger is not so transported or if in the process of transporting, he
dies or is injured, the carrier may be held liable for a breach of contract of carriage.14

Private respondents and petitioner entered into a contract of air carriage when the former purchased
two plane tickets from the latter. Under this contract, petitioner obliged itself (1) to transport Deanna
and Nikolai, as unaccompanied minors, on 2 May 1980 from Manila to San Francisco through one of its
planes, Flight 106; and (2) upon the arrival of Deanna and Nikolai in San Francisco Airport on 3 May 1980,
to transport them on that same day from San Francisco to Los Angeles via a connecting flight on United
Airways 996. As it was, petitioner failed to transport Deanna and Nikolai from San Francisco to Los
Angeles on the day of their arrival at San Francisco. The staff of United Airways 996 refused to take aboard
Deanna and Nikolai for their connecting flight to Los Angeles because petitioner’s personnel in San
Francisco could not produce the indemnity bond accomplished and submitted by private respondents.
Thus, Deanna and Nikolai were stranded in San Francisco and were forced to stay there overnight. It was
only on the following day that Deanna and Nikolai were able to leave San Francisco and arrive at Los
Angeles via another airline, Western Airlines. Clearly then, petitioner breached its contract of carriage
with private respondents.

In breach of contract of air carriage, moral damages may be recovered where (1) the mishap results in
the death of a passenger; or (2) where the carrier is guilty of fraud or bad faith; or (3) where the
negligence of the carrier is so gross and reckless as to virtually amount to bad faith. 15

Gross negligence implies a want or absence of or failure to exercise even slight care or diligence, or the
entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to
avoid them.16

In Singson v. Court of Appeals,17 we ruled that a carrier’s utter lack of care for and sensitivity to the needs
of its passengers constitutes gross negligence and is no different from fraud, malice or bad faith. Likewise,
in Philippine Airlines, Inc. v. Court of Appeals,18 we held that a carrier’s inattention to, and lack of care
for, the interest of its passengers who are entitled to its utmost consideration, particularly as to their
convenience, amount to bad faith and entitles the passenger to an award of moral damages.

It was established in the instant case that since Deanna and Nikolai would travel as unaccompanied
minors, petitioner required private respondents to accomplish, sign and submit to it an indemnity bond.
Private respondents complied with this requirement. Petitioner gave a copy of the indemnity bond to
one of its personnel on Flight 106, since it was required for the San Francisco-Los Angeles connecting
flight of Deanna and Nikolai. Petitioner’s personnel lost the indemnity bond during the stop-over of Flight
106 in Honolulu, Hawaii. Thus, Deanna and Nikolai were not allowed to take their connecting flight.

Evidently, petitioner was fully aware that Deanna and Nikolai would travel as unaccompanied minors and,
therefore, should be specially taken care of considering their tender age and delicate situation. Petitioner
also knew well that the indemnity bond was required for Deanna and Nikolai to make a connecting flight
from San Francisco to Los Angeles, and that it was its duty to produce the indemnity bond to the staff of
United Airways 996 so that Deanna and Nikolai could board the connecting flight. Yet, despite knowledge
of the foregoing, it did not exercise utmost care in handling the indemnity bond resulting in its loss in
Honolulu, Hawaii. This was the proximate cause why Deanna and Nikolai were not allowed to take the
connecting flight and were thus stranded overnight in San Francisco. Further, petitioner discovered that
the indemnity bond was lost only when Flight 106 had already landed in San Francisco Airport and when
the staff of United Airways 996 demanded the indemnity bond. This only manifests that petitioner did
not check or verify if the indemnity bond was in its custody before leaving Honolulu, Hawaii for San
Francisco.

The foregoing circumstances reflect petitioner’s utter lack of care for and inattention to the welfare of
Deanna and Nikolai as unaccompanied minor passengers. They also indicate petitioner’s failure to
exercise even slight care and diligence in handling the indemnity bond. Clearly, the negligence of
petitioner was so gross and reckless that it amounted to bad faith.

It is worth emphasizing that petitioner, as a common carrier, is bound by law to exercise extraordinary
diligence and utmost care in ensuring for the safety and welfare of its passengers with due regard for all
the circumstances.19 The negligent acts of petitioner signified more than inadvertence or inattention and
thus constituted a radical departure from the extraordinary standard of care required of common
carriers.

Petitioner’s claim that it cannot be entirely blamed for the loss of the indemnity bond because it gave the
indemnity bond to the immigration office of Honolulu, Hawaii, as a matter of procedure during the stop-
over, and the said immigration office failed to return the indemnity bond to petitioner’s personnel before
Flight 106 left Honolulu, Hawaii, deserves scant consideration. It was petitioner’s obligation to ensure
that it had the indemnity bond in its custody before leaving Honolulu, Hawaii for San Francisco. Petitioner
should have asked for the indemnity bond from the immigration office during the stop-over instead of
partly blaming the said office later on for the loss of the indemnity bond. Petitioner’s insensitivity on this
matter indicates that it fell short of the extraordinary care that the law requires of common carriers.

Petitioner, nonetheless, insists that the following circumstances negate gross negligence on its part: (1)
Strigl requested the staff of United Airways 996 to allow Deanna and Nikolai to board the plane even
without the indemnity bond; (2) Strigl took care of the two and brought them to his house upon refusal
of the staff of the United Airways 996 to board Deanna and Nikolai; (3) private respondent Aurora R.
Buncio and Mrs. Regalado were duly informed of Deanna and Nikolai’s predicament; and (4) Deanna and
Nikolai were able to make a connecting flight via an alternative airline, Western Airlines.20 We do not
agree. It was petitioner’s duty to provide assistance to Deanna and Nikolai for the inconveniences of delay
in their transportation. These actions are deemed part of their obligation as a common carrier, and are
hardly anything to rave about.21

Apropos the second and third assigned error, petitioner argues that it was not liable for exemplary
damages because there was no wanton, fraudulent, reckless, oppressive, or malevolent manner on its
part. Further, exemplary damages may be awarded only if it is proven that the plaintiff is entitled to moral
damages. Petitioner contends that since there was no proof that private respondents were entitled to
moral damages, then they are also not entitled to exemplary damages.22
Petitioner also contends that no premium should be placed on the right to litigate; that an award of
attorney’s fees and order of payment of costs must be justified in the text of the decision; that such award
cannot be imposed by mere conclusion without supporting explanation; and that the RTC decision does
not provide any justification for the award of attorney’s fees and order of payment of costs. 23

Article 2232 of the Civil Code provides that exemplary damages may be awarded in a breach of contract
if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. In addition,
Article 2234 thereof states that the plaintiff must show that he is entitled to moral damages before he
can be awarded exemplary damages.

As we have earlier found, petitioner breached its contract of carriage with private respondents, and it
acted recklessly and malevolently in transporting Deanna and Nikolai as unaccompanied minors and in
handling their indemnity bond. We have also ascertained that private respondents are entitled to moral
damages because they have sufficiently established petitioner’s gross negligence which amounted to bad
faith. This being the case, the award of exemplary damages is warranted.

Current jurisprudence24 instructs that in awarding attorney’s fees, the trial court must state the factual,
legal, or equitable justification for awarding the same, bearing in mind that the award of attorney’s fees
is the exception, not the general rule, and it is not sound public policy to place a penalty on the right to
litigate; nor should attorney’s fees be awarded every time a party wins a lawsuit. The matter of attorney’s
fees cannot be dealt with only in the dispositive portion of the decision. The text of the decision must
state the reason behind the award of attorney’s fees. Otherwise, its award is totally unjustified. 25

In the instant case, the award of attorney’s fees was merely cited in the dispositive portion of the RTC
decision without the RTC stating any legal or factual basis for said award. Hence, the Court of Appeals
erred in sustaining the RTC’s award of attorney’s fees.

Since we have already resolved that the RTC and Court of Appeals were correct in awarding moral and
exemplary damages, we shall now determine whether their corresponding amounts were proper.

The purpose of awarding moral damages is to enable the injured party to obtain means, diversion or
amusement that will serve to alleviate the moral suffering he has undergone by reason of defendant’s
culpable action.26On the other hand, the aim of awarding exemplary damages is to deter serious
wrongdoings.27

Article 2216 of the Civil Code provides that assessment of damages is left to the discretion of the court
according to the circumstances of each case. This discretion is limited by the principle that the amount
awarded should not be palpably excessive as to indicate that it was the result of prejudice or corruption
on the part of the trial court.28 Simply put, the amount of damages must be fair, reasonable and
proportionate to the injury suffered.

The RTC and the Court of Appeals ordered petitioner to pay Deanna and Nikolai P50,000.00 each as moral
damages. This amount is reasonable considering the harrowing experience they underwent at their
tender age and the danger they were exposed to when they were stranded in San Francisco. Both of them
testified that they were afraid and were not able to eat and sleep during the time they were stranded in
San Francisco.29 Likewise, the award of P25,000.00 each to Deanna and Nikolai as exemplary damages is
fair so as to deter petitioner and other common carriers from committing similar or other serious
wrongdoings.
Both courts also directed petitioner to pay private respondent Aurora R. Buncio P75,000.00 as moral
damages. This is equitable and proportionate considering the serious anxiety and mental anguish she
experienced as a mother when Deanna and Nikolai were not allowed to take the connecting flight as
scheduled and the fact that they were stranded in a foreign country and in the company of strangers.
Private respondent Aurora R. Buncio testified that she was very fearful for the lives of Deanna and Nikolai
when they were stranded in San Francisco, and that by reason thereof she suffered emotional stress and
experienced upset stomach.30 Also, the award of P30,000.00 as moral damages to Mrs. Regalado is
appropriate because of the serious anxiety and wounded feelings she felt as a grandmother when Deanna
and Nikolai, whom she was to meet for the first time, did not arrive at the Los Angeles Airport. Mrs.
Regalado testified that she was seriously worried when Deanna and Nikolai did not arrive in Los Angeles
on 3 May 1980, and she was hurt when she saw the two crying upon arriving in Los Angeles on 4 May
1980.31 The omission of award of damages to private respondent Manuel S. Buncio was proper for lack
of basis. His court testimony was rightly disregarded by the RTC because he failed to appear in his
scheduled cross-examination.32

On another point, we held in Eastern Shipping Lines, Inc. v. Court of Appeals,33 that when an obligation,
not constituting a loan or forbearance of money is breached, an interest on the amount of damages
awarded may be imposed at the rate of 6% per annum. We further declared that when the judgment of
the court awarding a sum of money becomes final and executory, the rate of legal interest, whether it is
a loan/forbearance of money or not, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be then equivalent to a forbearance of credit.

In the instant case, petitioner’s obligation arose from a contract of carriage and not from a loan or
forbearance of money. Thus, an interest of 6% per annum should be imposed on the damages awarded,
to be computed from the time of the extra-judicial demand on 17 July 1980 up to the finality of this
Decision. In addition, the interest shall become 12% per annum from the finality of this Decision up to its
satisfaction.

Finally, the records34 show that Mrs. Regalado died on 1 March 1995 at the age of 74, while Deanna
passed away on 8 December 2003 at the age of 32. This being the case, the foregoing award of damages
plus interests in their favor should be given to their respective heirs.

WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the Court of Appeals, dated 20 December
1995, in CA-G.R. CV No. 26921, is hereby AFFIRMED with the following MODIFICATIONS: (1) the award of
attorney’s fees is deleted; (2) an interest of 6% per annum is imposed on the damages awarded, to be
computed from 17 July 1980 up to the finality of this Decision; and (3) an interest of 12% per annum is
also imposed from the finality of this Decision up to its satisfaction. The damages and interests granted
in favor of deceased Mrs. Regalado and deceased Deanna are hereby awarded to their respective heirs.
Costs against petitioner.

SO ORDERED.
G.R. No. 185891 June 26, 2013

CATHAY PACIFIC AIRWAYS, Petitioner, vs. JUANITA REYES, WILFREDO REYES, MICHAEL ROY REYES, SIXTA LAPUZ,
and SAMPAGUITA TRAVEL CORP., Respondents.

PEREZ, J.:

Assailed in this petition for review are the Decision1 dated 22 October 2008 in CA-G.R. CV. No. 86156 and the 6 January
2009 Resolution2 in the same case of the Court of Appeals.

This case started as a complaint for damages tiled by respondents against Cathay Pacific Airways (Cathay Pacific) and
Sampaguita Travel Corp. (Sampaguita Travel), now joined as a respondent. The factual backdrop leading to the filing
of the complaint is as follows:

Sometime in March 1997, respondent Wilfredo Reyes (Wilfredo) made a travel reservation with Sampaguita Travel
for his family’s trip to Adelaide, Australia scheduled from 12 April 1997 to 4 May 1997. Upon booking and confirmation
of their flight schedule, Wilfredo paid for the airfare and was issued four (4) Cathay Pacific round-trip airplane tickets
for Manila-HongKong-Adelaide-HongKong-Manila with the following record locators:
1âwphi1
Name of Passenger PNR OR RECORD LOCATOR NOS.3
Reyes, Wilfredo J76TH
Reyes, Juanita HDWC3
Reyes, Michael Roy H9VZF
Lapuz, Sixta HTFMG4

On 12 April 1997, Wilfredo, together with his wife Juanita Reyes (Juanita), son Michael Roy Reyes (Michael) and
mother-in-law Sixta Lapuz (Sixta), flew to Adelaide, Australia without a hitch.

One week before they were scheduled to fly back home, Wilfredo reconfirmed his family’s return flight with the
Cathay Pacific office in Adelaide. They were advised that the reservation was "still okay as scheduled."

On the day of their scheduled departure from Adelaide, Wilfredo and his family arrived at the airport on time. When
the airport check-in counter opened, Wilfredo was informed by a staff from Cathay Pacific that the Reyeses did not
have confirmed reservations, and only Sixta’s flight booking was confirmed. Nevertheless, they were allowed to board
the flight to HongKong due to adamant pleas from Wilfredo. When they arrived in HongKong, they were again
informed of the same problem. Unfortunately this time, the Reyeses were not allowed to board because the flight to
Manila was fully booked. Only Sixta was allowed to proceed to Manila from HongKong. On the following day, the
Reyeses were finally allowed to board the next flight bound for Manila.

Upon arriving in the Philippines, Wilfredo went to Sampaguita Travel to report the incident. He was informed by
Sampaguita Travel that it was actually Cathay Pacific which cancelled their bookings.

On 16 June 1997, respondents as passengers, through counsel, sent a letter to Cathay Pacific advising the latter of the
incident and demanding payment of damages.
After a series of exchanges and with no resolution in sight, respondents filed a Complaint for damages against Cathay
Pacific and Sampaguita Travel and prayed for the following relief: a) ₱1,000,000.00 as moral damages; b) ₱300,000.00
as actual damages; c) ₱100,000.00 as exemplary damages; and d) ₱100,000.00 as attorney’s fees.5

In its Answer, Cathay Pacific alleged that based on its computerized booking system, several and confusing bookings
were purportedly made under the names of respondents through two (2) travel agencies, namely: Sampaguita Travel
and Rajah Travel Corporation. Cathay Pacific explained that only the following Passenger Name Records (PNRs)
appeared on its system: PNR No. H9V15, PNR No. HTFMG, PNR No. J9R6E, PNR No. J76TH, and PNR No. H9VSE. Cathay
Pacific went on to detail each and every booking, to wit:

1. PNR No. H9V15

Agent: Sampaguita Travel Corp.

Party: Ms. J Reyes, Mr. M R Reyes, Mr. W Reyes

Itinerary: CX902/CX105 MNL/HKG/ADL 12 APR.

The itinerary listed above was confirmed booking. However, the itinerary did not include booking for the return flights.
From information retrieved from ABACUS (the booking system used by agents), the agent has, on 10 April, added
segments CX104/CX905 ADL/HKG/MNL 04 MAY on MK status, which was not a confirmed booking. MK function is
used for synchronizing records or for ticketing purposes only. It does not purport to be a real booking. As a result, no
booking was transmitted into CPA’s system.

2. PNR No. HTFMG

Agent: Sampaguita Travel Corp.

Party: Mrs. Sixta Lapuz

Itinerary: CX902/CX105 MNL/HKG/ADL 12 APR, CX104/CX907 ADL/HKG/MNL 04/05 MAY.

The above itinerary is the actual itinerary that the passenger has flown. However, for the return sector, HKG/MNL,
the original booking was on CX905 of 04 May. This original booking was confirmed on 21 Mar. and ticketed on 11 Apr.

This booking was cancelled on 04 May at 9:03 p.m. when CX905 was almost scheduled to leave at the behest of the
passenger and she was re-booked on CX907 of 05 May at the same time.

3. PNR No. J9R6E

Agent: Rajah Travel Corp.

Party: Mrs. Julieta Gaspar, Mrs. Sixta Lapuz, Mrs. Juanita Reyes,

Mr. Michael Roy Reyes, Mr. Wilfredo Reyes.

Itinerary: CX900 & CX902 MNL/HKG 12 APR, CX105 HKG/ADL 12 APR, CX104/CX905 ADL/HKG/MNL 04 MAY & 07 MAY

The party was confirmed initially on CX900/12 Apr, CX105/12 Apr, CX104/CX9095 07 May and on waiting list for
CX902/12 Apr, CX104/CX905 04 May.
However, on 31 Mar., the booking was cancelled by the agent.

4. PNR No. J76TH

Agent: Sampaguita Travel Corp.

Party: Mr. W Reyes

Itinerary: CX104/CX905 ADL/HKG/MNL 04 MAY.

The booking on the above itinerary was confirmed initially. When the agent was asked for the ticket number as the
flight CX905 04 May was very critical, the agent has inputted the ticket number on 10 Apr. but has removed the record
on 11 April. Since the booking was reflected as not ticketed, the booking was cancelled on 18 Apr. accordingly.

This PNR was split from another PNR record, H9VSE.

5. PNR No. H9VSE

Agent: Sampaguita Travel Corp.

Party: Ms. R Lapuz, Mr. R Lapuz, Mr. A Samson, originally Mr. W Reyes was included in this party as well

Itinerary: CX104/CX905 ADL/HKG/MNL 04 MAY.

The booking was confirmed initially but were not ticketed by 11 Apr. and was cancelled accordingly. However, the
PNR of Mr. W Reyes who was originally included in this party was split to a separate record of J76TH. 6

Cathay Pacific asserted that in the case of Wilfredo with PNR No. J76TH, no valid ticket number was inputted within a
prescribed period which means that no ticket was sold. Thus, Cathay Pacific had the right to cancel the booking. Cathay
Pacific found that Sampaguita Travel initially inputted a ticket number for PNR No. J76TH and had it cancelled the
following day, while the PNR Nos. HDWC3 and HTFMG of Juanita and Michael do not exist.

The Answer also contained a cross-claim against Sampaguita Travel and blamed the same for the cancellation of
respondents’ return flights. Cathay Pacific likewise counterclaimed for payment of attorney’s fees.

On the other hand, Sampaguita Travel, in its Answer, denied Cathay Pacific’s claim that it was the cause of the
cancellation of the bookings. Sampaguita Travel maintained that it made the necessary reservation with Cathay Pacific
for respondents’ trip to Adelaide. After getting confirmed bookings with Cathay Pacific, Sampaguita Travel issued the
corresponding tickets to respondents. Their confirmed bookings were covered with the following PNRs:
PASSENGER NAME PNR No.
Lapuz, Sixta H9V15/ J76TH
Reyes, Wilfredo H9V15/HDWC3
Reyes, Michael Roy H9V15/H9VZF
Reyes, Juanita HTFMG7

Sampaguita Travel explained that the Reyeses had two (2) PNRs each because confirmation from Cathay Pacific was
made one flight segment at a time. Sampaguita Travel asserted that it only issued the tickets after Cathay Pacific
confirmed the bookings. Furthermore, Sampaguita Travel exonerated itself from liability for damages because
respondents were claiming for damages arising from a breach of contract of carriage. Sampaguita Travel likewise filed
a cross-claim against Cathay Pacific and a counterclaim for damages.

During the pre-trial, the parties agreed on the following stipulation of facts:

1. That the plaintiffs did not deal directly with Cathay Pacific Airways;

2. That the plaintiffs did not make their bookings directly with Cathay Pacific Airways;

3. That the plaintiffs did not purchase and did not get their tickets from Cathay Pacific Airways;

4. That Cathay Pacific Airways has promptly replied to all communications sent by the plaintiffs through their
counsel;

5. That the plane tickets issued to plaintiffs were valid, which is why they were able to depart from Manila to
Adelaide, Australia and that the reason why they were not able to board their return flight from Adelaide was
because of the alleged cancellation of their booking by Cathay Pacific Airways at Adelaide, save for that of Sixta
Lapuz whose booking was confirmed by Cathay Pacific Airways;

6. That several reservations and bookings for the plaintiffs were done by defendant Sampaguita Travel
Corporation through the computer reservation system and each of such request was issued a PNR;

7. That, as a travel agent, defendant Sampaguita Travel Corporation merely acts as a booking/sales/ticketing
arm for airline companies and it has nothing to do with the airline operations;

8. That in the travel industry, the practice of reconfirmation of return flights by passengers is coursed or done
directly with the airline company and not with the travel agent, which has no participation, control or authority
in making such reconfirmations.

9. That in the travel industry, the practice of cancellation of flights is within the control of the airline and not
of the travel agent, unless the travel agent is requested by the passengers to make such cancellations; and,

10. That defendant Cathay Pacific Airways has advertised that "there is no need to confirm your flight when
travelling with us", although Cathay Pacific Airways qualifies the same to the effect that in some cases there is
a need for reconfirmations.8

After trial on the merits, the Regional Trial Court (RTC) rendered a Decision, 9 the dispositive part of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendants and against the herein
plaintiff. Accordingly, plaintiffs’ complaint is hereby ordered DISMISSED for lack of merit. Defendants’ counterclaims
and cross-claims are similarly ordered dismissed for lack of merit. No pronouncement as to cost.10

The trial court found that respondents were in possession of valid tickets but did not have confirmed reservations for
their return trip to Manila. Additionally, the trial court observed that the several PNRs opened by Sampaguita Travel
created confusion in the bookings. The trial court however did not find any basis to establish liability on the part of
either Cathay Pacific or Sampaguita Travel considering that the cancellation was not without any justified reason.
Finally, the trial court denied the claims for damages for being unsubstantiated.

Respondents appealed to the Court of Appeals. On 22 October 2008, the Court of Appeals ordered Cathay Pacific to
pay ₱25,000.00 each to respondents as nominal damages.
Upon denial of their motion for reconsideration, Cathay Pacific filed the instant petition for review assigning the
following as errors committed by the Court of Appeals:

A.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE ERROR IN HOLDING THAT
CATHAY PACIFIC AIRWAYS IS LIABLE FOR NOMINAL DAMAGES FOR ITS ALLEGED INITIAL BREACH OF CONTRACT
WITH THE PASSENGERS EVEN THOUGH CATHAY PACIFIC AIRWAYS WAS ABLE TO PROVE BEYOND REASONABLE
DOUBT THAT IT WAS NOT AT FAULT FOR THE PREDICAMENT OF THE RESPONDENT PASSENGERS.

B.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE ERROR IN RELYING ON
MATTERS NOT PROVED DURING THE TRIAL AND NOT SUPPORTED BY THE EVIDENCE AS BASIS FOR HOLDING
CATHAY PACIFIC AIRWAYS LIABLE FOR NOMINAL DAMAGES.

C.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE ERROR IN HOLDING
CATHAY PACIFIC AIRWAYS LIABLE FOR NOMINAL DAMAGES TO RESPONDENT SIXTA LAPUZ.

D.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE ERROR IN NOT HOLDING
SAMPAGUITA TRAVEL CORP. LIABLE TO CATHAY PACIFIC AIRWAYS FOR WHATEVER DAMAGES THAT THE
AIRLINE COMPANY WOULD BE ADJUDGED THE RESPONDENT PASSENGERS.

E.

ALTERNATIVELY, WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE ERROR
WHEN IT FAILED TO APPLY THE DOCTRINE OF STARE DECISIS IN FIXING THE AMOUNT OF NOMINAL DAMAGES
TO BE AWARDED.11

Cathay Pacific assails the award of nominal damages in favor of respondents on the ground that its action of cancelling
the flight bookings was justifiable. Cathay Pacific reveals that upon investigation, the respondents had no confirmed
bookings for their return flights. Hence, it was not obligated to transport the respondents. In fact, Cathay Pacific adds,
it exhibited good faith in accommodating the respondents despite holding unconfirmed bookings.

Cathay Pacific also scores the Court of Appeals in basing the award of nominal damages on the alleged asthmatic
condition of passenger Michael and old age of Sixta. Cathay Pacific points out that the records, including the
testimonies of the witnesses, did not make any mention of Michael’s asthma. And Sixta was in fact holding a confirmed
booking but she refused to take her confirmed seat and instead stayed in HongKong with the other respondents.

Cathay Pacific blames Sampaguita Travel for negligence in not ensuring that respondents had confirmed bookings for
their return trips.

Lastly, assuming arguendo that the award of nominal damages is proper, Cathay Pacific contends that the amount
should be reduced to ₱5,000.00 for each passenger.

At the outset, it bears pointing out that respondent Sixta had no cause of action against Cathay Pacific or Sampaguita
Travel. The elements of a cause of action consist of: (1) a right existing in favor of the plaintiff, (2) a duty on the part
of the defendant to respect the plaintiff’s right, and (3) an act or omission of the defendant in violation of such
right.12 As culled from the records, there has been no violation of any right or breach of any duty on the part of Cathay
Pacific and Sampaguita Travel. As a holder of a valid booking, Sixta had the right to expect that she would fly on the
flight and on the date specified on her airplane ticket. Cathay Pacific met her expectations and Sixta was indeed able
to complete her flight without any trouble. The absence of any violation to Sixta’s right as passenger effectively
deprived her of any relief against either Cathay Pacific or Sampaguita Travel.

With respect to the three remaining respondents, we rule as follows:

The determination of whether or not the award of damages is correct depends on the nature of the respondents’
contractual relations with Cathay Pacific and Sampaguita Travel. It is beyond dispute that respondents were holders
of Cathay Pacific airplane tickets and they made the booking through Sampaguita Travel.

Respondents’ cause of action against Cathay Pacific stemmed from a breach of contract of carriage. A contract of
carriage is defined as one whereby a certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price. 13 Under Article 1732 of the Civil Code, this
"persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public" is called a common carrier.

Respondents entered into a contract of carriage with Cathay Pacific. As far as respondents are concerned, they were
holding valid and confirmed airplane tickets. The ticket in itself is a valid written contract of carriage whereby for a
consideration, Cathay Pacific undertook to carry respondents in its airplane for a round-trip flight from Manila to
Adelaide, Australia and then back to Manila. In fact, Wilfredo called the Cathay Pacific office in Adelaide one week
before his return flight to re-confirm his booking. He was even assured by a staff of Cathay Pacific that he does not
need to reconfirm his booking.

In its defense, Cathay Pacific posits that Wilfredo’s booking was cancelled because a ticket number was not inputted
by Sampaguita Travel, while bookings of Juanita and Michael were not honored for being fictitious. Cathay Pacific
clearly blames Sampaguita Travel for not finalizing the bookings for the respondents’ return flights. Respondents are
not privy to whatever misunderstanding and confusion that may have transpired in their bookings. On its face, the
airplane ticket is a valid written contract of carriage. This Court has held that when an airline issues a ticket to a
passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every
right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit
for breach of contract of carriage.14

As further elucidated by the Court of Appeals:

Now, Article 1370 of the Civil Code mandates that "if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control." Under Section 9, Rule 130 of
the Rules of Court, once the terms of an agreement have been reduced to writing, it is deemed to contain all the terms
agreed upon by the parties and no evidence of such terms other than the contents of the written agreement shall be
admissible. The terms of the agreement of appellants and appellee Cathay Pacific embodied in the tickets issued by
the latter to the former are plain – appellee Cathay Pacific will transport appellants to Adelaide, Australia from Manila
via Hongkong on 12 April 1991 and back to Manila from Adelaide, Australia also via Hongkong on 4 May 1997. In
addition, the tickets reveal that all appellants have confirmed bookings for their flight to Adelaide, Australia and back
to Manila as manifested by the words "Ok" indicated therein. Arlene Ansay, appellee Cathay Pacific’s Reservation
Supervisor, validated this fact in her testimony saying that the return flights of all appellants to the Philippines on 4
May 1997 were confirmed as appearing on the tickets. Indubitably, when appellee Cathay Pacific initially refused to
transport appellants to the Philippines on 4 May 1997 due to the latter’s lack of reservation, it has, in effect, breached
their contract of carriage. Appellants, however, were eventually accommodated and transported by appellee Cathay
Pacific to Manila.15
Cathay Pacific breached its contract of carriage with respondents when it disallowed them to board the plane in Hong
Kong going to Manila on the date reflected on their tickets. Thus, Cathay Pacific opened itself to claims for
compensatory, actual, moral and exemplary damages, attorney’s fees and costs of suit.

In contrast, the contractual relation between Sampaguita Travel and respondents is a contract for services. The object
of the contract is arranging and facilitating the latter’s booking and ticketing. It was even Sampaguita Travel which
issued the tickets.

Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is
that of a good father of a family under Article 1173 of the Civil Code. This connotes reasonable care consistent with
that which an ordinarily prudent person would have observed when confronted with a similar situation. The test to
determine whether negligence attended the performance of an obligation is: did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence.16

There was indeed failure on the part of Sampaguita Travel to exercise due diligence in performing its obligations under
the contract of services. It was established by Cathay Pacific, through the generation of the PNRs, that Sampaguita
Travel failed to input the correct ticket number for Wilfredo’s ticket. Cathay Pacific even asserted that Sampaguita
Travel made two fictitious bookings for Juanita and Michael.

The negligence of Sampaguita Travel renders it also liable for damages.

For one to be entitled to actual damages, it is necessary to prove the actual amount of loss with a reasonable degree
of certainty, premised upon competent proof and the best evidence obtainable by the injured party. To justify an
award of actual damages, there must be competent proof of the actual amount of loss. Credence can be given only
to claims which are duly supported by receipts.17

We echo the findings of the trial court that respondents failed to show proof of actual damages. Wilfredo initially
testified that he personally incurred losses amounting to ₱300,000.00 which represents the amount of the contract
that he was supposedly scheduled to sign had his return trip not been cancelled. During the cross-examination
however, it appears that the supposed contract-signing was a mere formality and that an agreement had already been
hatched beforehand. Hence, we cannot fathom how said contract did not materialize because of Wilfredo’s absence,
and how Wilfredo incurred such losses when he himself admitted that he entered into said contract on behalf of
Parsons Engineering Consulting Firm, where he worked as construction manager. Thus, if indeed there were losses,
these were losses suffered by the company and not by Wilfredo. Moreover, he did not present any documentary
evidence, such as the actual contract or affidavits from any of the parties to said contract, to substantiate his claim of
losses. With respect to the remaining passengers, they likewise failed to present proof of the actual losses they
suffered.

Under Article 2220 of the Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in order
upon a showing that the defendant acted fraudulently or in bad faith.18 What the law considers as bad faith which
may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the
execution thereof, as well as in the enforcement of its terms, or any other kind of deceit. In the same vein, to warrant
the award of exemplary damages, defendant must have acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.19

In the instant case, it was proven by Cathay Pacific that first, it extended all possible accommodations to
respondents.1âwphi1 They were promptly informed of the problem in their bookings while they were still at the
Adelaide airport. Despite the non-confirmation of their bookings, respondents were still allowed to board the Adelaide
to Hong Kong flight. Upon arriving in Hong Kong, they were again informed that they could not be accommodated on
the next flight because it was already fully booked. They were however allowed to board the next available flight on
the following day. Second, upon receiving the complaint letter of respondents, Cathay Pacific immediately addressed
the complaint and gave an explanation on the cancellation of their flight bookings.

The Court of Appeals is correct in stating that "what may be attributed to x x x Cathay Pacific is negligence concerning
the lapses in their process of confirming passenger bookings and reservations, done through travel agencies. But this
negligence is not so gross so as to amount to bad faith."20 Cathay Pacific was not motivated by malice or bad faith in
not allowing respondents to board on their return flight to Manila. It is evident and was in fact proven by Cathay
Pacific that its refusal to honor the return flight bookings of respondents was due to the cancellation of one booking
and the two other bookings were not reflected on its computerized booking system.

Likewise, Sampaguita Travel cannot be held liable for moral damages. True, Sampaguita Travel was negligent in the
conduct of its booking and ticketing which resulted in the cancellation of flights. But its actions were not proven to
have been tainted with malice or bad faith. Under these circumstances, respondents are not entitled to moral and
exemplary damages.1âwphi1 With respect to attorney’s fees, we uphold the appellate court’s finding on lack of
factual and legal justification to award attorney’s fees.

We however sustain the award of nominal damages in the amount of ₱25,000.00 to only three of the four respondents
who were aggrieved by the last-minute cancellation of their flights. Nominal damages are recoverable where a legal
right is technically violated and must be vindicated against an invasion that has produced no actual present loss of
any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have
been or can be shown.21 Under Article 2221 of the Civil Code, nominal damages may be awarded to a plaintiff whose
right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, not for
indemnifying the plaintiff for any loss suffered.

Considering that the three respondents were denied boarding their return flight from HongKong to Manila and that
they had to wait in the airport overnight for their return flight, they are deemed to have technically suffered injury.
Nonetheless, they failed to present proof of actual damages. Consequently, they should be compensated in the form
of nominal damages.

The amount to be awarded as nominal damages shall be equal or at least commensurate to the injury sustained by
respondents considering the concept and purpose of such damages. The amount of nominal damages to be awarded
may also depend on certain special reasons extant in the case.22

The amount of such damages is addressed to the sound discretion of the court and taking into account the relevant
circumstances,23 such as the failure of some respondents to board the flight on schedule and the slight breach in the
legal obligations of the airline company to comply with the terms of the contract, i.e., the airplane ticket and of the
travel agency to make the correct bookings. We find the award of ₱25,000.00 to the Reyeses correct and proper.

Cathay Pacific and Sampaguita Travel acted together in creating the confusion in the bookings which led to the
erroneous cancellation of respondents’ bookings. Their negligence is the proximate cause of the technical injury
sustained by respondents. Therefore, they have become joint tortfeasors, whose responsibility for quasi-delict, under
Article 2194 of the Civil Code, is solidary.

Based on the foregoing, Cathay Pacific and Sampaguita Travel are jointly and solidarily liable for nominal damages
awarded to respondents Wilfredo, Juanita and Michael Roy.

WHEREFORE, the Petition is DENIED. The 22 October 2008 Decision of the Court of Appeals is AFFIRMED with
MODIFICATION that Sampaguita Travel is held to be solidarily liable with Cathay Pacific in the payment of nominal
damages of ~25,000.00 each for Wilfredo Reyes, Juanita Reyes, and Michael Rox Reyes. The complaint of respondent
Sixta
Lapuz is DISMISSED for lack of cause of action.

SO ORDERED.

G.R. No. 130030 June 25, 1999

EXPERTRAVEL & TOURS, INC., petitioner,


vs.
THE HON. COURT OF APPEALS and RICARDO LO, respondents.

VITUG, J.:

Petitioner, Expertravel and Tours, Inc., seeks in the instant petition for review on certiorari a modification of the
decision, dated 20 March 1997, of the Court of Appeals affirming in toto the 07th November 1994 judgment of the
Regional Trial Court (Branch 5) of Manila, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, judgment is rendered declaring the instant suit DISMISSED,
and hereby orders the plaintiff to pay defendant Ricardo Lo moral damages in the amount of
P30,000.00; attorney's fees in the amount of P10,000.00, and to pay the costs of the suit.

No pronouncement as to other damages for lack of evidence to warrant the same. 1

The factual and case settings of the controversy are culled from the pleadings on record and the assailed decision of
the appellate court and that of the court a quo.

On 07 October 1987, Expertravel & Tours, Inc., ("Expertravel"), a domestic corporation engaged in the travel agency
business, issued to private respondent Ricardo Lo four round-trip plane tickets for Hongkong, together with hotel
accommodations and transfers, for a total cost of P39,677.20. Alleging that Lo had failed to pay the amount due,
Expertravel caused several demands to be made. Since the demands were ignored by Lo, Expertravel filed a court
complaint for recovery of the amount claimed plus damages.

Respondent Lo explained, in his answer, that his account with Expertravel had already been fully paid. The outstanding
account was remitted to Expertravel through its then Chairperson, Ms. Ma. Rocio de Vega, who was theretofore
authorized to deal with the clients of Expertravel. The payment was evidenced by a Monte de Piedad Check No.
291559, dated 06 October 1987, for P42,175.20 for which Ms. de Vega, in turn, issued City Trust Check No. 417920 in
favor of Expertravel for the amount of P50,000.00, with the notation "placement advance for Ricardo Lo, etc." Per its
own invoice, Expertravel received the sum on 10 October 1987.

The trial court, affirmed by the appellate court, held that the payment made by Lo was valid and bidding on petitioner
Expertravel. Even on the assumption that Ms. de Vera had not been specifically authorized by Expertravel, both courts
said, the fact that the amount "delivered to the latter remain(ed) in its possession up to the present, mean(t) that the
amount redounded to the benefit of petitioner Expertravel, in view of the second paragraph of Article 1241 of the
Civil Code to the effect that payment made to a third person shall also be valid in so far as it has rebounded to the
benefit of the creditor."

In this recourse, petitioner confines itself to the following related legal issues; viz.:

I. Can moral damages be recovered in a clearly unfounded suit?


II. Can moral damages be awarded for negligence or quasi-delict that did not result to physical injury
to the offended party?2

There is merit in the petition.

Moral damages are not punitive in nature but are designed to


compensate3 and alleviate in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly caused to a person. Although
incapable of pecuniary computation, moral damages, nevertheless, must somehow be proportional to and in
approximation of the suffering inflicted.4 Such damages, to be recoverable, must be the proximate result of a wrongful
act or omission the factual basis for which is satisfactorily established by the aggrieved party. 5 An award of moral
damages would require certain conditions to be met; to wit: (1) First, there must be an injury, whether physical,
mental or psychological, clearly sustained by the claimant; (2) second, there must be a culpable act or omission
factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the cases stated in Article
2219.6 Under the provisions of this law, in culpa contractual or breach of contract, moral damages may be recovered
when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton
disregard of his contractual obligation and, exceptionally, when the act of breach of contract itself is constitutive of
tort resulting in physical injuries.7 By special rule in Article 1764, in relation to Article 2206, of the Civil Code, moral
damages may also be awarded in case the death of a passenger results from a breach of carriage. In culpa aquiliana,
or quasi-delict, (a) when an act or omission causes physical injuries, or (b) where the defendant is guilty of intentional
tort,8 moral damages may aptly be recovered. This rule also applies, as aforestated, to contracts when breached by
tort. In culpa criminal, moral damages could be lawfully due when the accused is found guilty of physical injuries,
lascivious acts, adultery or concubinage, illegal or arbitrary detention, illegal arrest, illegal search, or defamation.
Malicious prosecution can also give rise to a claim for moral damages. The term "analogous cases," referred to in
Article 2219, following the ejusdem generis rule, must be held similar to those expressly enumerated by the law. 9

Although the institution of a clearly unfounded civil suit can at times be a legal justification for an award of attorney's
fees, 10 such filing, however, has almost invariably been held not to be a ground for an award of moral
damages. 11 The rationale for the rule is that the law could not have meant to impose a penalty on the right to litigate.
The anguish suffered by a person for having been made a defendant in a civil suit would be no different from the usual
worry and anxiety suffered by anyone who is haled to court, a situation that cannot by itself be a cogent reason for
the award of moral damages. 12 If the rule were otherwise, then moral damages must every time be awarded in favor
of the prevailing defendant against an unsuccessful plaintiff.13

The Court confirms, once again, the foregoing rules.

WHEREFORE, the petition is GRANTED and the award of moral damages to respondent Ricardo Lo under the assailed
decision is DELETED. In its other aspects, the appealed decision shall remain undisturbed. No costs.1âwphi1.nêt

SO ORDERED.

Panganiban, Purisima and Gonzaga-Reyes, JJ., concur.

Romero, J., abroad, on official business leave.


Footnotes

1 Rollo, pp. 30-31.

2 Rollo, p. 24.
3 Dee Hua Liong Electrical Equipment Corp. vs. Reyes, 145 SCRA 713.

4 Philtranco Service Enterprises, Inc. vs. CA, 273 SCRA 562.

5 San Miguel Brewery, Inc. vs. Magno, 21 SCRA 292; Dee Hua Liong Electrical Equipment Corp. vs. Reyes, 145
SCRA 713.

6 Art. 2219. Moral damages may be recovered in the following and analogous cases:

1) A criminal offense resulting in physical injuries;

2) Quasi-delicts causing physical injuries;

3) Seduction, abduction, rape, or other lascivious acts;

4) Adultery or concubinage;

5) Illegal or arbitrary detention or arrest;

6) Illegal search;

7) Libel, slander or any other form of defamation;

8) Malicious prosecution;

9) Acts mentioned in Article 309;

10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30,32, 34 and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this Article, may also
recover moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this
Article, in the order named.

7 See Phil. Airlines vs. Court of Appeals, 106 SCRA 391; Singson vs. Bank of P.I., 23 SCRA 1117; Air France vs.
Carrascoso, 18 SCRA 155.

8 In this latter case, moral damages may be recovered even in loss of or damage to property.

9 Bagumbayan Corp. vs. IAC, 132 SCRA 441.

10 Art. 2208(4), Civil Code; Mirasol vs. De la Cruz, 84 SCRA 337.

11 Enervida vs. Dela Torre, 55 SCRA 339; Ramos vs. Ramos, 61 SCRA 284; Manila Gas Corporation vs. CA, 100
SCRA 602; Philippine National Bank vs. Court of Appeals, 159 SCRA 433.

12 Philippine National Bank vs. Court of Appeals, 159 SCRA 433.

13 Filinvest Credit Corp. vs. Mendez, 152 SCRA 593.


G.R. No. 165266 December 15, 2010

AIR FRANCE, Petitioner, vs. BONIFACIO H. GILLEGO, substituted by his surviving heirs represented by Dolores P.
Gillego, Respondent.

Sometime in April 1993, respondent Bonifacio H. Gillego,3 then incumbent Congressman of the Second District of
Sorsogon and Chairman of the House of Representatives Committee on Civil, Political and Human Rights, was invited
to participate as one of the keynote speakers at the 89th Inter-Parliamentary Conference Symposium on Parliament
Guardian of Human Rights to be held in Budapest, Hungary and Tokyo, Japan from May 19 to 22, 1993. The Philippines
is a member of the Inter-Parliamentary Union which organized the event.4

On May 16, 1993, respondent left Manila on board petitioner Air France’s aircraft bound for Paris, France. He arrived
in Paris early morning of May 17, 1993 (5:00 a.m.). While waiting at the De’ Gaulle International Airport for his
connecting flight to Budapest scheduled at 3:15 p.m. that same day, respondent learned that petitioner had another
aircraft bound for Budapest with an earlier departure time (10:00 a.m.) than his scheduled flight. He then went to
petitioner’s counter at the airport and made arrangements for the change in his booking. He was given a
corresponding ticket and boarding pass for Flight No. 2024 and also a new baggage claim stub for his checked-in
luggage.5

However, upon arriving in Budapest, respondent was unable to locate his luggage at the claiming section. He sought
assistance from petitioner’s counter at the airport where petitioner’s representative verified from their computer that
he had indeed a checked-in luggage. He was advised to just wait for his luggage at his hotel and that petitioner’s
representatives would take charge of delivering the same to him that same day. But said luggage was never delivered
by petitioner’s representatives despite follow-up inquiries by respondent.

Upon his return to the Philippines, respondent’s lawyer immediately wrote petitioner’s Station Manager complaining
about the lost luggage and the resulting damages he suffered while in Budapest. Respondent claimed that his single
luggage contained his personal effects such as clothes, toiletries, medicines for his hypertension, and the speeches he
had prepared, including the notes and reference materials he needed for the conference. He was thus left with only
his travel documents, pocket money and the clothes he was wearing. Because petitioner’s representatives in Budapest
failed to deliver his luggage despite their assurances and his repeated follow-ups, respondent was forced to shop for
personal items including new clothes and his medicines. Aside from these unnecessary expenditures of about $1,000,
respondent had to prepare another speech, in which he had difficulty due to lack of data and information. Respondent
thus demanded the sum of ₱1,000,000.00 from the petitioner as compensation for his loss, inconvenience and moral
damages.6 Petitioner, however, continued to ignore respondent’s repeated follow-ups regarding his lost luggage.

On July 13, 1993, respondent filed a complaint 7 for damages against the petitioner alleging that by reason of its
negligence and breach of obligation to transport and deliver his luggage, respondent suffered inconvenience, serious
anxiety, physical suffering and sleepless nights. It was further alleged that due to the physical, mental and emotional
strain resulting from the loss of his luggage, aggravated by the fact that he failed to take his regular medication,
respondent had to be taken to a medical clinic in Tokyo, Japan for emergency treatment. Respondent asserted that
as a common carrier which advertises and offers its services to the public, petitioner is under obligation to observe
extraordinary diligence in the vigilance over checked-in luggage and to see to it that respondent’s luggage entrusted
to petitioner’s custody would accompany him on his flight and/or could be claimed by him upon arrival at his point of
destination or delivered to him without delay. Petitioner should therefore be held liable for actual damages ($2,000.00
or ₱40,000.00), moral damages (₱1,000,000.00), exemplary damages (₱500,000.00), attorney’s fees (₱50,000.00) and
costs of suit.

Petitioner filed its answer8 admitting that respondent was issued tickets for the flights mentioned, his subsequent
request to be transferred to another flight while at the Paris airport and the loss of his checked-in luggage upon arrival
at Budapest, which luggage has not been retrieved to date and the respondent’s repeated follow-ups ignored.
However, as to the rest of respondent’s allegations, petitioner said it has no knowledge and information sufficient to
form a belief as to their truth. As special and affirmative defense, petitioner contended that its liability for lost
checked-in baggage is governed by the Warsaw Convention for the Unification of Certain Rules Relating to
International Carriage. Under the said treaty, petitioner’s liability for lost or delayed registered baggage of respondent
is limited to 250 francs per kilogram or US$20.00, which constitutes liquidated damages and hence respondent is not
entitled to any further damage.

Petitioner averred that it has taken all necessary measures to avoid loss of respondent’s baggage, the contents of
which respondent did not declare, and that it has no intent to cause such loss, much less knew that such loss could
occur. The loss of respondent’s luggage is due to or occasioned by force majeure or fortuitous event or other causes
beyond the carrier’s control. Diligent, sincere and timely efforts were exerted by petitioner to locate respondent’s
missing luggage and attended to his problem with utmost courtesy, concern and dispatch. Petitioner further asserted
that it exercised due diligence in the selection and supervision of its employees and acted in good faith in denying
respondent’s demand for damages. The claims for actual, moral and exemplary damages and attorney’s fees therefore
have no basis in fact and in law, and are, moreover speculative and unconscionable.

In his Reply,9 respondent maintained that the loss of his luggage cannot be attributed to anything other than
petitioner’s simple negligence and its failure to perform the diligence required of a common carrier.

On January 3, 1996, the trial court rendered its decision in favor of respondent and against the petitioner, as follows:

WHEREFORE, premises considered, judgment is rendered ordering defendant to pay plaintiff:

1. The sum of P1,000,000.00 as moral damages;

2. The sum of P500,000.00 as exemplary damages;

3. The sum of P50,000.00 as attorney’s fees; and

4. The costs.

SO ORDERED.10

The trial court found there was gross negligence on the part of petitioner which failed to retrieve respondent’s
checked-in luggage up to the time of the filing of the complaint and as admitted in its answer, ignored respondent’s
repeated follow-ups. It likewise found petitioner guilty of willful misconduct as it persistently disregarded the rights
of respondent who was no ordinary individual but a high government official. As to the applicability of the limited
liability for lost baggage under the Warsaw Convention, the trial court rejected the argument of petitioner citing the
case of Alitalia v. Intermediate Appellate Court.11

Petitioner appealed to the CA, which affirmed the trial court’s decision. The CA noted that in the memorandum
submitted by petitioner before the trial court it was mentioned that respondent’s luggage was eventually found and
delivered to him, which was not denied by respondent and thus resulted in the withdrawal of the claim for actual
damages. As to the trial court’s finding of gross negligence, bad faith and willful misconduct which justified the award
of moral and exemplary damages, the CA sustained the same, stating thus:

It bears stressing that defendant-appellant committed a breach of contract by its failure to deliver the luggage of
plaintiff-appellee on time despite demand from plaintiff-appellee. The unreasonable delay in the delivery of the
luggage has not been satisfactorily explained by defendant-appellant, either in its memorandum or in its appellant’s
brief. Instead of justifying the delay, defendant-appellant took refuge under the provisions of the Warsaw Convention
to escape liability. Neither was there any showing of apology on the part of defendant-appellant as to the delay.
Furthermore, the unapologetic defendant-appellant even faulted plaintiff-appellee for not leaving a local address in
Budapest in order for the defendant-appellant to contact him (plaintiff-appellee) in the event the luggage is found.
This actuation of defendant-appellant is a clear showing of willful misconduct and a deliberate design to avoid liability.
It amounts to bad faith. As elucidated by Chief Justice Hilario Davide, Jr., "[b]ad faith does not simply connote bad
judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a
breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud." 12(Emphasis
supplied.)

Its motion for reconsideration having been denied, petitioner filed the present Rule 45 petition raising the following
grounds:

I.

THE AMOUNTS AWARDED TO RESPONDENT AS MORAL AND EXEMPLARY DAMAGES ARE EXCESSIVE,
UNCONSCIONABLE AND UNREASONABLE.

II.

THERE IS NO LEGAL AND FACTUAL BASIS TO THE FINDINGS OF THE TRIAL COURT AND THE COURT OF APPEALS
THAT PETITIONER’S ACTIONS WERE ATTENDED BY GROSS NEGLIGENCE, BAD FAITH AND WILLFUL
MISCONDUCT AND THAT IT ACTED IN A WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT
MANNER, TO JUSTIFY THE AWARD OF MORAL AND EXEMPLARY DAMAGES.13

Petitioner assails the trial and appellate courts for awarding extravagant sums to respondent that already tend to
punish the petitioner and enrich the respondent, which is not the function at all of moral damages. Upon the facts
established, the damages awarded are definitely not proportionate or commensurate to the wrong or injury
supposedly inflicted. Without belittling the problems respondent experienced in Budapest after losing his luggage,
petitioner points out that despite the unfortunate incident, respondent was able to reconstruct the speeches, notes
and study guides he had earlier prepared for the conference in Budapest and Tokyo, and to attend, speak and
participate therein as scheduled. Since he prepared the research and wrote his speech, considering his acknowledged
and long-standing expertise in the field of human rights in the Philippines, respondent should have had no difficulty
delivering his speech even without his notes. In addition, there is no evidence that members of the Inter-Parliamentary
Union made derogatory statements or even knew that he was unprepared for the conference. Bearing in mind that
the actual damages sought by respondent was only $2,000.00, then clearly the trial court went way beyond that
amount in determining the appropriate damages, inspite of the fact that the respondent eventually got back his
baggage.14

Comparing the situation in this case to other cases awarding similar damages to the aggrieved passenger as a result
of breaches of contract by international carriers, petitioner argues that even assuming that respondent was entitled
to moral and exemplary damages, the sums adjudged should be modified or reduced. It is stressed that petitioner or
its agents were never rude or discourteous toward respondent; he was not subjected to humiliating treatment or
comments as in the case of Lopez, et al. v. Pan American World Airways,15 Ortigas, Jr. v. Lufthansa German
Airlines16 and Zulueta v. Pan American World Airways, Inc.17. The mere fact that respondent was a Congressman
should not result in an automatic increase in the moral and exemplary damages recoverable. As held in Kierulf v. Court
of Appeals18 the social and financial standing of a claimant may be considered only if he or she was subjected to
contemptuous conduct despite the offender’s knowledge of his or her social and financial standing. 19

In any event, petitioner invokes the application of the exception to the rule that only questions of law may be
entertained by this Court in a petition for review under Rule 45 as to allow a factual review of the case. First, petitioner
contends that it has always maintained that the "admission" in its answer was only made out of inadvertence,
considering that it was inconsistent with the special and affirmative defenses set forth in the same pleading. The trial
court incorrectly concluded that petitioner had not prepared a Property Irregularity Report (PIR) but fabricated one
only as an afterthought. A PIR can only be initiated upon the instance of a passenger whose baggage had been lost,
and in this case it was prepared by the station where the loss was reported. The PIR in this case was automatically and
chronologically recorded in petitioner’s computerized system. Respondent himself admitted in his testimony that he
gave his Philippine address and telephone number to the lady in charge of petitioner’s complaint desk in Budapest. It
was not necessary to furnish a passenger with a copy of the PIR since its purpose is for the airline to trace a lost
baggage. What respondent ought to have done was to make a xerox copy thereof for himself. 20

Petitioner reiterates that there was no bad faith or negligence on its part and the burden is on the respondent to
prove by clear and convincing evidence that it acted in bad faith. Respondent in his testimony miserably failed to
prove that bad faith, fraud or ill will motivated or caused the delay of his baggage. This Court will surely agree that
mere failure of a carrier to deliver a passenger’s baggage at the agreed place and time did not ipso facto amount to
willful misconduct as to make it liable for moral and exemplary damages. Petitioner adduced evidence showing that
it exerted diligent, sincere and timely efforts to locate the missing baggage, eventually leading to its recovery. It
attended to respondent’s problem with utmost courtesy, concern and dispatch. Respondent, moreover, never alleged
that petitioner’s employees were at anytime rude, mistreated him or in anyway showed improper behavior. 21

The petition is partly meritorious.

A business intended to serve the travelling public primarily, a contract of carriage is imbued with public interest. 22The
law governing common carriers consequently imposes an exacting standard. Article 1735 of the Civil Codeprovides
that in case of lost or damaged goods, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as required by Article 1733. Thus, in an
action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier
was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-
performance by the carrier.23

That respondent’s checked-in luggage was not found upon arrival at his destination and was not returned to him until
about two years later24 is not disputed. The action filed by the respondent is founded on such breach of the contract
of carriage with petitioner who offered no satisfactory explanation for the unreasonable delay in the delivery of
respondent’s baggage. The presumption of negligence was not overcome by the petitioner and hence its liability for
the delay was sufficiently established. However, upon receipt of the said luggage during the pendency of the case in
the trial court, respondent did not anymore press on his claim for actual or compensatory damages and neither did
he adduce evidence of the actual amount of loss and damage incurred by such delayed delivery of his luggage.
Consequently, the trial court proceeded to determine only the propriety of his claim for moral and exemplary
damages, and attorney’s fees.

In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious
or the one responsible acted fraudulently or with malice or bad faith. 25 Not every case of mental anguish, fright or
serious anxiety calls for the award of moral damages.26 Where in breaching the contract of carriage the airline is not
shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable
consequences of the breach of the obligation which the parties had foreseen or could have reasonably foreseen. In
such a case the liability does not include moral and exemplary damages.27

Bad faith should be established by clear and convincing evidence. The settled rule is that the law always presumes
good faith such that any person who seeks to be awarded damages due to the acts of another has the burden of
proving that the latter acted in bad faith or with ill motive.28

In the case of Tan v. Northwest Airlines, Inc.,29 we sustained the CA’s deletion of moral and exemplary damages
awarded to a passenger whose baggage were loaded to another plane with the same expected date and time of arrival
but nevertheless not delivered to her on time. We found that respondent carrier was not motivated by malice or bad
faith in doing so due to weight and balance restrictions as a safety measure. In another case involving the off-loading
of private respondents’ baggage to another destination, taken together with petitioner airline’s neglect in providing
the necessary accommodations and assistance to its stranded passengers, aggravated by the discourteous acts of its
employees, we upheld the CA in sustaining the trial court’s decision awarding moral and exemplary damages and
attorney’s fees. We pointed out that it is PAL’s duty to provide assistance to private respondents and to any other
passenger similarly inconvenienced due to delay in the completion of the transport and the receipt of their baggage. 30

After a careful review, we find that petitioner is liable for moral damages.

Petitioner’s station manager, Ma. Lourdes Reyes, testified that upon receiving the letter-complaint of respondent’s
counsel, she immediately began working on the PIR from their computerized data. Based on her testimony, a PIR is
issued at the airline station upon complaint by a passenger concerning missing baggage. From the information
obtained in the computer-printout, it appears that a PIR31 was initiated at petitioner’s Budapest counter. A search
telex for the missing luggage was sent out on the following dates: May 17, May 21 and May 23, 1993. As shown in the
PIR printout, the information respondent supposedly furnished to petitioner was only his Philippine address and
telephone number, and not the address and contact number of the hotel where he was billeted at Budapest.
According to the witness, PIR usually is printed in two originals, one is kept by the station manager and the other copy
given to the passenger. The witness further claimed that there was no record or entry in the PIR of any follow-up call
made by the respondent while in Budapest.32 Respondent, on the other hand, claimed that he was not given a copy
of this PIR and that his repeated telephone calls to inquire about his lost luggage were ignored.

We hold that the trial and appellate courts did not err in finding that petitioner acted in bad faith in repeatedly ignoring
respondent’s follow-up calls. The alleged entries in the PIR deserve scant consideration, as these have not been
properly identified or authenticated by the airline station representative in Budapest who initiated and inputed the
said entries. Furthermore, this Court cannot accept the convenient excuse given by petitioner that respondent should
be faulted in allegedly not giving his hotel address and telephone number. It is difficult to believe that respondent,
who had just lost his single luggage containing all his necessities for his stay in a foreign land and his reference
materials for a speaking engagement, would not give an information so vital such as his hotel address and contact
number to the airline counter where he had promptly and frantically filed his complaint. And even assuming arguendo
that his Philippine address and contact number were the only details respondent had provided for the PIR, still there
was no explanation as to why petitioner never communicated with respondents concerning his lost baggage long after
respondent had already returned to the Philippines. While the missing luggage was eventually recovered, it was
returned to respondent only after the trial of this case.

Furthermore, the alleged copy of the PIR confirmed that the only action taken by the petitioner to locate respondent’s
luggage were telex searches allegedly made on May 17, 21 and 23, 1993. There was not even any attempt to explain
the reason for the loss of respondent’s luggage. Clearly, petitioner did not give the attention and care due to its
passenger whose baggage was not transported and delivered to him at his travel destination and scheduled time.
Inattention to and lack of care for the interest of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral
damages.33 What the law considers as bad faith which may furnish the ground for an award of moral damages would
be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any
other kind of deceit.34

While respondent failed to cite any act of discourtesy, discrimination or rudeness by petitioner’s employees, this did
not make his loss and moral suffering insignificant and less deserving of compensation. In repeatedly ignoring
respondent’s inquiries, petitioner’s employees exhibited an indifferent attitude without due regard for the
inconvenience and anxiety he experienced after realizing that his luggage was missing. Petitioner was thus guilty of
bad faith in breaching its contract of carriage with the respondent, which entitles the latter to the award of moral
damages.1awphi1
However, we agree with petitioner that the sum of ₱1,000,000.00 awarded by the trial court is excessive and not
proportionate to the loss or suffering inflicted on the passenger under the circumstances. As in Trans World Airlines
v. Court of Appeals35 where this Court after considering the social standing of the aggrieved passenger who is a lawyer
and director of several companies, the amount of ₱500,000.00 awarded by the trial court as moral damages was still
reduced to ₱300,000.00, the moral damages granted to herein respondent should likewise be adjusted.

The purpose of awarding moral damages is to enable the injured party to obtain means, diversion or amusement that
will serve to alleviate the moral suffering he has undergone by reason of defendant's culpable action. On the other
hand, the aim of awarding exemplary damages is to deter serious wrongdoings. 36 Article 2216 of the Civil
Code provides that assessment of damages is left to the discretion of the court according to the circumstances of each
case. This discretion is limited by the principle that the amount awarded should not be palpably excessive as to
indicate that it was the result of prejudice or corruption on the part of the trial court. Simply put, the amount of
damages must be fair, reasonable and proportionate to the injury suffered.37

Where as in this case the air carrier failed to act timely on the passenger’s predicament caused by its employees’
mistake and more than ordinary inadvertence or inattention, and the passenger failed to show any act of arrogance,
discourtesy or rudeness committed by the air carrier’s employees, the amounts of ₱200,000.00, ₱50,000.00 and
₱30,000.00 as moral damages, exemplary damages and attorney’s fees would be sufficient and justified. 38

WHEREFORE, the petition is DENIED. The Decision dated June 30, 2004 of the Court of Appeals in CA-G.R. CV No.
56587 is hereby AFFIRMED with MODIFICATION in that the award of moral damages, exemplary damages and
attorney’s fees are hereby reduced to ₱200,000.00, ₱50,000.00 and ₱30,000.00, respectively.

With costs against the petitioner.

SO ORDERED.

G.R. No. 156087 May 8, 2009

KUWAIT AIRWAYS, CORPORATION, Petitioner, vs. PHILIPPINE AIRLINES, INC., Respondent.

This petition for review1 filed by the duly designated air carrier of the Kuwait Government assails a decision2 dated 25
October 2002 of the Makati Regional Trial Court (RTC), Branch 60, ordering Kuwait Airways to pay respondent
Philippine Airlines the amount of US$1,092,690.00, plus interest, attorney’s fees, and cost of suit.3 The principal
liability represents the share to Philippine Airlines in the revenues the foreign carrier had earned for the uplift of
passengers and cargo in its flights to and from Kuwait and Manila which the foreign carrier committed to remit as a
contractual obligation.

On 21 October 1981, Kuwait Airways and Philippine Airlines entered into a Commercial Agreement,4 annexed to which
was a Joint Services Agreement5 between the two airlines. The Commercial Agreement covered a twice weekly Kuwait
Airways flight on the route Kuwait-Bangkok-Manila and vice versa.6 The agreement stipulated that "only 3rd and 4th
freedom traffic rights between Kuwait and Manila and vice versa will be exercised. No 5th freedom traffic rights will
be exercised between Manila on the one hand and Bangkok on the other."7

The "freedom traffic rights" referred to in the Agreement are the so-called "five freedoms" contained in the
International Air Transport Agreement (IATA) signed in Chicago on 7 December 1944. Under the IATA, each contracting
State agreed to grant to the other contracting states, five "freedoms of air." Among these freedoms were "[t]he
privilege to put down passengers, mail and cargo taken on in

the territory of the State whose nationality the aircraft possesses" (Third Freedom); "[t]he privilege to take on
passengers, mail or cargo destined for the territory of the State whose nationality the aircraft possesses" (Fourth
Freedom); and the right to carry passengers from one's own country to a second country, and from that country to a
third country (Fifth Freedom). In essence, the Kuwait Airways flight was authorized to board passengers in Kuwait and
deplane them in Manila, as well as to board passengers in Manila and deplane them in Kuwait. At the same time, with
the limitation in the exercise of Fifth Freedom traffic rights, the flight was barred from boarding passengers in Bangkok
and deplaning them in Manila, or boarding passengers in Manila and deplaning them in Bangkok.

The Commercial Agreement likewise adverted to the annexed Joint Services Agreement covering the Kuwait-Manila
(and vice versa) route, which both airlines had entered into "[i]n order to reflect the high level of friendly relationships
between [Kuwait Airways] and [Philippine Airlines] and to assist each other to develop traffic on the route."8 The
Agreement likewise stipulated that "[u]ntil such time as [Philippine Airlines] commences its operations to or via
Kuwait, the Joint Services shall be operated with the use of [Kuwait Airways] aircraft and crew."9 By virtue of the Joint
Services Agreement, Philippine Airlines was entitled to seat allocations on specified

Kuwait Airways sectors, special prorates for use by Philippine Airlines to specified Kuwait Airways sectors, joint
advertising by both carriers in each other’s timetables and other general advertising, and mutual assistance to each
other with respect to the development of traffic on the route. 10

Most pertinently for our purposes, under Article 2.1 of the Commercial Agreement, Kuwait Airways obligated itself to
"share with Philippine Airlines revenue earned from the uplift of passengers between Kuwait and Manila and vice
versa."11 The succeeding paragraphs of Article 2 stipulated the basis for the shared revenue earned from the uplift of
passengers.

The Commercial Agreement and the annexed Joint Services Agreement was subsequently amended by the parties six
times between 1981 and 1994. At one point, in 1988, the agreement was amended to authorize Philippine Airlines to
operate provisional services, referred to as "ad hoc joint services," on the Manila-Kuwait (and vice versa) route for the
period between April to June 1988.12 In 1989, another amendment was agreed to by the parties, subjecting the uplift
of cargo between Kuwait and Manila to the same revenue sharing arrangement as the uplift of passengers.13From
1981 until when the present incidents arose in 1995, there seems to have been no serious disagreements relating to
the contract.

In April of 1995, delegations from the Philippines and Kuwait (Philippine Panel and Kuwait Panel) met in Kuwait. The
talks culminated in a Confidential Memorandum of Understanding (CMU) entered into in Kuwait on 12 April 1995.
Among the members of the Philippine Panel were officials of the Civil Aeronautics Board (CAB), the Department of
Foreign Affairs (DFA), and four officials of Philippine Airlines: namely its Vice-President for Marketing, Director for
International Relations, Legal Counsel, and a Senior International Relations Specialist. Dr. Victor S. Linlingan, the Head
of the Delegation and Executive Director of the CAB, signed the CMU in behalf of the Government of the Republic of
the Philippines.

The present controversy stems from the fourth paragraph of the CMU, which read:

4. The two delegations agreed that the unilateral operation and the exercise of third and fourth freedom traffic rights
shall not be subject to any royalty payment or commercial arrangements, as from the date of signing of this [CMU].

The aeronautical authorities of the two Contracting Parties will bless and encourage any cooperation between the
two designated airlines.

The designated airlines shall enter into commercial arrangements for the unilateral exercise of fifth freedom traffic
rights. Such arrangements will be subject to the approval of the aeronautical authorities of both contracting parties. 14

On 15 May 1995, Philippine Airlines received a letter from Dawoud M. Al-Dawoud, the Deputy Marketing & Sales
Director for International Affairs of Kuwait Airways, addressed to Ms. Socorro Gonzaga, the Director for International
Relations of Philippine Airlines.15 Both Al-Dawoud and Gonzaga were members of their country’s respective
delegations that had met in Kuwait the previous month. The letter stated in part:

Regarding the [Kuwait Airways/Philippine Airlines] Commercial Agreement, pursuant to item 4 of the new MOU[,] we
will advise our Finance Department that the Agreement concerning royalty for 3rd/4th freedom traffic will be
terminated effective April 12, 1995. Although the royalty agreement will no longer be valid, we are very keen on
seeing that [Philippine Airlines] continues to enjoy direct participation in the Kuwait/Philippines market through the
Block Space Agreement and to that extent we would like to maintain the Jt. Venture (Block Space) Agreement,
although with some minor modifications.16

To this, Gonzaga replied to Kuwait Airways in behalf of Philippine Airlines in a letter dated 22 June 1995.17 Philippine
Airlines called attention to Section 6.5 of the Commercial Agreement, which read:

This agreement may be terminated by either party by giving ninety (90) days notice in writing to the other party.
However, any termination date must be the last day of any traffic period, e.g.[,] 31st March or 31st October. 18

Pursuant to this clause, Philippine Airlines acknowledged the 15 May 1995 letter as the requisite notice of termination.
However, it also pointed out that the agreement could only be effectively terminated on 31 October 1995, or the last
day of the then current traffic period. Thus, Philippine Airlines insisted that the provisions of the Commercial
Agreement "shall continue to be enforced until such date."19

Subsequently, Philippine Airlines insisted that Kuwait Airways pay it the principal sum of US$1,092,690.00 as revenue
for the uplift of passengers and cargo for the period 13 April 1995 until 28 October 1995. 20 When Kuwait Airways
refused to pay, Philippine Airlines filed a Complaint21 against the foreign airline with the Regional Trial Court (RTC) of
Makati City, seeking the payment of the aforementioned sum with interest, attorney’s fees, and costs of suit. In its
Answer,22 Kuwait Airways invoked the CMU and argued that its obligations under the Commercial Agreement were
terminated as of the effectivity date of the CMU, or on 12 April 1995. Philippine Airlines countered in its Reply that it
was "not privy to the [CMU],"23 though it would eventually concede the existence of the CMU.24

An exhaustive trial on the merits was had. On 25 October 2002, the RTC rendered a Decision in favor of Philippine
Airlines. The RTC noted that "the only issue to resolve in this case is a legal one," particularly whether Philippine
Airlines is entitled to the sums claimed under the terms of the Commercial Agreement. The RTC also considered as a
corollary issue whether Kuwait Airways "validly terminated the Commercial Agreement x x x, plaintiff’s contention
being that [Kuwait Airways] had not complied with the terms of termination provided for in the Commercial
Agreement."

The bulk of the RTC’s discussion centered on the Philippine Airlines’ claim that the execution of the CMU could not
prejudice its existing rights under the Commercial Agreement, and that the CMU could only be deemed effective only
after 31 October 1995, the purported effectivity date of termination under the Commercial Agreement. The rationale
for this position of Philippine Airlines was that the execution of the CMU could not divest its proprietary rights under
the Commercial Agreement.

On this crucial point, the RTC agreed with Philippine Airlines. It asserted the obligatory force of contracts between
contracting parties as the source of vested rights which may not be modified or impaired. After recasting Kuwait
Airway’s arguments on this point as being that "the Confidential Memorandum of Understanding is superior to the
Commercial Agreement[,] the same having been supposedly executed by virtue of the state’s sovereign power," the
RTC rejected the argument, holding that "[t]he fact that the [CMU] may have been executed by a Philippine Panel
consisting of representative [sic] of CAB, DFA, etc. does not necessarily give rise to the conclusion that the [CMU] is a
superior contract[,] for the exercise of the State’s sovereign power cannot be arbitrarily and indiscriminately utilized
specifically to impair contractual vested rights."25
Instead, the RTC held that "[t]he Commercial Agreement and its specific provisions on revenue sharing having been
freely and voluntarily agreed upon by the affected parties x x x has the force of law between the parties and they are
bound to the fulfillment of what has been expressly stipulated therein." 26 Accordingly, "the provision of the [CMU]
must be applied in such a manner that it does not impair the vested rights of the parties."

From this Decision, Kuwait Airways directly filed with this Court the present Petition for Review, raising pure questions
of law. Kuwait Airways poses three questions of law for resolution: whether the designated air carrier of the Republic
of the Philippines can have better rights than the government itself; whether the bilateral agreement between the
Republic of the Philippines and the State of Kuwait is superior to the Commercial Agreement; and whether the
enforcement of the CMU violates the non-impairment clause of the Constitution.

Let us review the factual backdrop to appreciate the underlying context behind the Commercial Agreement and the
CMU. The Commercial Agreement was entered into in 1981 at a time when Philippine Airlines had not provided a
route to Kuwait while Kuwait Airways had a route to Manila. The Commercial Agreement established a joint
commercial arrangement whereby Philippine Airlines and Kuwait Airways were to jointly operate the Manila-Kuwait
(and vice versa) route, utilizing the planes and services of Kuwait Airways. Based on the preambular paragraphs of the
Joint Services Agreement, as of 1981, Kuwait Airways was interested in establishing a "second frequency" (or an
increase of its Manila flights to two) and that "as a result of cordial and frank discussions the concept of a joint service
emerged as the most desirable alternative option."27

As a result, the revenue-sharing agreement was reached between the two airlines, an agreement which stood as an
alternative to both carriers offering competing flights servicing the Manila-Kuwait route. An apparent concession
though by Philippine Airlines was the preclusion of the exercise of one of the fundamental air traffic rights, the Fifth
Freedom traffic rights with respect to the Manila-Bangkok-Kuwait, thereby precluding the deplaning of passengers
from Manila in Bangkok and the boarding in Bangkok of passengers bound for Manila.

The CMU effectively sought to end the 1981 agreement between Philippine Airlines and Kuwait Airways, by precluding
any commercial arrangements in the exercise of the Third and Fourth freedom traffic rights. As a result, both Kuwait
and the Philippines had the respective right to board passengers from their respective countries and deplane them in
the other country, without having to share any revenue or enter into any commercial arrangements to exercise such
rights. In exchange, the designated airline or airlines of each country was entitled to operate six frequencies per week
in each direction. In addition, the designated airlines were allowed to enter into commercial arrangements for the
unilateral exercise of the Fifth Freedom traffic rights.

Another notable point, one not touched upon by the parties or the trial court. It is well known that at the time of the
execution of the 1981 agreements, Philippine Airlines was controlled by the Philippine government, with the
Government Service Insurance System (GSIS) holding the majority of shares. However, in 1992, Philippine Airlines was
privatized, with a private consortium acquiring 67% of the shares of the carrier. 28 Thus, at the time of the signing of
the CMU, Philippine Airlines was a private corporation no longer controlled by the Government. This fact is significant.
Had Philippine Airlines remained a government owned or controlled corporation at the time the CMU was executed
in 1995, its status as such would have bound Philippine Airlines to the commitments made in the document by no less
than the Philippine government. However, since Philippine Airlines had already become a private corporation at that
juncture, the question of impairment of private rights may come into consideration.

In this regard, we observe that the RTC appears to have been under the impression that the CMU was brought about
by machinations of the Philippine Panel and the Kuwait Panel of which Philippine Airlines was not aware or in which
it had a part. This impression is not exactly borne by the record since no less than four of the nine members of the
Philippine Panel were officials of Philippine Airlines. It should be noted though that one of these officials, Senior
International Relations Specialist Arnel Vibar, testified for Philippine Airlines that the airline voiced its opposition to
the withdrawal of the commercial agreements under the CMU even months before the signing of the CMU, but the
objections were overruled.
Now, the arguments raised in the petition.

One line of argument raised by Kuwait Airways can be dismissed outright. Kuwait Airways points out that the third
Whereas clause of the 1981 Commercial Agreement stated: "NOW, it is hereby agreed, subject to and without
prejudice to any existing or future agreements between the Government Authorities of the Contracting Parties hereto
…" That clause, it is argued, evinces acknowledgement that from the beginning Philippine Airlines had known fully
well that its rights under the Commercial Agreement would be limited by whatever agreements the Philippine and
Kuwait governments may enter into later.

But can a perambulatory clause, which is what the adverted "Whereas" clause is, impose a binding obligation or
limitation on the contracting parties? In the case of statutes, while a preamble manifests the reasons for the passage
of the statute and aids in the interpretation of any ambiguities within the statute to which it is prefixed, it nonetheless
is not an essential part of an act, and it neither enlarges nor confers powers. 29 Philippine Airlines submits that the
same holds true as to the preambular whereas clauses of a contract.

What was the intention of the parties in forging the "Whereas" clause and the contexts the parties understood it in
1981? In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be
principally considered,30 and in doing so, the courts may consider the relations existing between the parties and the
purpose of the contract.31 In 1981, Philippine Airlines was still owned by the Philippine government. In that context,
it is evident that the Philippine government, as owner Philippine Airlines, could enter into agreements with the Kuwait
government that would supersede the Commercial Agreement entered into by one of its GOCCs, a scenario that
changed once Philippine Airlines fell to private ownership. Philippine Airlines argues before us that the cited
preambular stipulation is in fact superfluous, and we can agree in the sense that as of the time of the execution of the
Commercial Agreement, it was evident, without need of stipulation, that the Philippine government could enter into
an agreement with the Kuwait government that would prejudice the terms of the commercial arrangements between
the two airlines. After all, Philippine Airlines then would not have been in a position to challenge the wishes of its then
majority stockholder – the Philippine government.

Yet by the time ownership of Philippine Airlines was transferred into private hands, the controverted "Whereas"
clause had taken on a different complexion, for it was newly evident that an act of the Philippine government negating
the commercial arrangement between the two airlines would infringe the vested rights of a private individual. The
original intention of the "Whereas" clause was to reflect what was then a given fact relative to the nationalized status
of Philippine Airlines. With the change of ownership of Philippine Airlines, the "Whereas" clause had ceased to be
reflective of the current situation as it now stands as a seeming invitation to the Philippine government to erode
private vested rights. We would have no problem according the interpretation preferred by Kuwait Airways of the
"Whereas" clause had it been still reflective of the original intent to waive vested rights of private persons, rather than
the rights in favor of the government by a GOCC. That is not the case, and we are not inclined to give effect to the
"Whereas" clause in a manner that does not reflect the original intention of the contracting parties.

Thusly, the proper focus of our deliberation should be whether the execution of the CMU between the Philippine and
Kuwait governments could have automatically terminated the Commercial Agreement, as well as the Joint Services
Agreement between Philippine Airlines and Kuwait Airways.

Philippine Airlines is the grantee of a legislative franchise authorizing it to provide domestic and international air
services.32 Its initial franchise was granted in 1935 through Act No. 4271, which underwent substantial amendments
in 1959 through Republic Act No. 2360.33 It was granted a new franchise in 1979 through Presidential Decree No.
1590, wherein statutory recognition was accorded to Philippine Airlines as the "national flag carrier." P.D. No. 1590
also recognized that the "ownership, control, and management" of Philippine Airlines had been reacquired by the
Government. Section 19 of P.D. No. 1590 authorized Philippine Airlines to contract loans, credits and indebtedness
from foreign sources, including foreign governments, with the unconditional guarantee of the Republic of the
Philippines.
At the same time, Section 8 of P.D. No. 1590 subjects Philippine Airlines "to the laws of the Philippines now existing
or hereafter enacted." After pointing to this provision, Kuwait Airways correlates it to Republic Act (R.A.) No. 776, or
the Civil Aeronautics Act of the Philippines, which grants the Civil Aeronautics Board (CAB) "the power to regulate the
economic aspect of air transportation, [its] general supervision and regulation of, and jurisdiction and control over,
air carriers as well as their property, property rights, equipment, facilities, and franchise." R.A. No. 776 also mandates
that the CAB "shall take into consideration the obligation assumed by the Republic of the Philippines in any treaty,
convention or agreement with foreign countries on matters affecting civil aviation."

There is no doubt that Philippine Airlines forebears under several regulatory perspectives. First, its authority to
operate air services in the Philippines derives from its legislative franchise and is accordingly bound by whatever
limitations that are presently in place or may be subsequently incorporated in its franchise. Second, Philippine Airlines
is subject to the other laws of the Philippines, including R.A. No. 776, which grants regulatory power to the CAB over
the economic aspect of air transportation. Third, there is a very significant public interest in state regulation of air
travel in view of considerations of public safety, domestic and international commerce, as well as the fact that air
travel necessitates steady traversal of international boundaries, the amity between nations.

At the same time, especially since Philippine Airlines was already under private ownership at the time the CMU was
entered into, we cannot presume that any and all commitments made by the Philippine government are unilaterally
binding on the carrier even if this comes at the expense of diplomatic embarrassment. While it may have been, prior
to the privatization of Philippine Airlines, that the Philippine Government had the authority to bind the airline in its
capacity as owner of the airline, under the post-privatization era, however, whatever authority of the Philippine
Government to bind Philippine Airlines can only come in its capacity as regulator.1awphi1

As with all regulatory subjects of the government, infringement of property rights can only avail with due process of
law. Legislative regulation of public utilities must not have the effect of depriving an owner of his property without
due process of law, nor of confiscating or appropriating private property without due process of law, nor of
confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably
vested rights or privileges lawfully acquired under a charter or franchise. The power to regulate is subject to these
constitutional limits.34

We can deem that the CAB has ample power under its organizing charter, to compel Philippine Airlines to terminate
whatever commercial agreements the carrier may have. After all, Section 10 of R.A. No. 776 grants to the CAB the
"general supervision and regulation of, and jurisdiction and control over, air carriers as well as their property, property
rights, equipment, facilities and franchise," and this power correlates to Section 4(c) of the same law, which mandates
that the Board consider in the exercise of its functions "the regulation of air transportation in such manner as to
recognize and preserve the inherent advantages of, assure the highest degree of safety in, and foster sound economic
condition in, such transportation, and to improve the relations between, and coordinate transportation by air
carriers."

We do not doubt that the CAB, in the exercise of its statutory mandate, has the power to compel Philippine Airlines
to immediately terminate its Commercial Agreement with Kuwait Airways pursuant to the CMU. Considering that it is
the Philippine government that has the sole authority to charter air policy and negotiate with foreign governments
with respect to air traffic rights, the government through the CAB has the indispensable authority to compel local air
carriers to comply with government determined policies, even at the expense of economic rights. The airline industry
is a sector where government abjuration is least desired.

However, this is not a case where the CAB had duly exercised its regulatory authority over a local airline in order to
implement or further government air policy. What happened instead was an officer of the CAB, acting in behalf not
of the Board but of the Philippine government, had committed to a foreign nation the immediate abrogation of
Philippine Airlines’s commercial agreement with Kuwait Airways. And while we do not question that ability of that
member of the CAB to represent the Philippine government in signing the CMU, we do question whether such member
could have bound Philippine Airlines in a manner that can be accorded legal recognition by our courts.

Imagine if the President of the Philippines, or one of his alter egos, acceded to the demands of a foreign counterpart
and agreed to shut down a particular Filipino business or enterprise, going as far as to co-sign a document averring
that the business "will be shut down immediately." Granting that there is basis in Philippine law for the closure of such
business, could the mere declaration of the President have the legal effect of immediately rendering business
operations illegal? We, as magistrates in a functioning democratic State with a fully fleshed Bill of Rights and a
Constitution that emphatically rejects "l’etat cest moi" as the governing philosophy, think not. There is nothing to
prevent the Philippine government from utilizing all the proper channels under law to enforce such closure, but unless
and until due process is observed, it does not have legal effect in this jurisdiction. Even granting that the "agreement"
between the two governments or their representatives creates a binding obligation under international law, it remains
incumbent for each contracting party to adhere to its own internal law in the process of complying with its obligations.

The promises made by a Philippine president or his alter egos to a foreign monarch are not transubstantiated by divine
right so as to ipso facto render legal rights of private persons obviated. Had Philippine Airlines remained a government-
owned or controlled corporation, it would have been bound, as part of the executive branch, to comply with the
dictates of the President or his alter egos since the President has executive control and supervision over the
components of the executive branch. Yet Philippine Airlines has become, by this time, a private corporation – one that
may have labored under the conditions of its legislative franchise that allowed it to conduct air services, but private
in character nonetheless. The President or his alter egos do not have the legal capacity to dictate insuperable
commands to private persons. And that undesirable trait would be refuted on the President had petitioner’s position
prevailed, since it is imbued with the presumption that the commitment made to a foreign government becomes
operative without complying with the internal processes for the divestiture of private rights.

Herein, we do not see why the Philippine government could not have observed due process of law, should it have
desired to see the Commercial Agreement immediately terminated in order to adhere to its apparent commitment to
the Kuwait government. The CAB, with its ample regulatory power over the economic affairs of local airliners, could
have been called upon to exercise its jurisdiction to make it so. A remedy even exists in civil law–the judicial annulment
or reformation of contracts–which could have been availed of to effect the immediate termination of the Commercial
Agreement. No such remedy was attempted by the government.

Nor can we presume, simply because Dr. Linlingan, Executive Director of the CAB had signed the CMU in behalf of the
Philippine Panel, that he could have done so bearing the authority of the Board, in the exercise of regulatory
jurisdiction over Philippine Airlines. For one, the CAB is a collegial body composed of five members, 35 and no one
member–even the chairman–can act in behalf of the entire Board. The Board is disabled from performing as such
without a quorum. For another, the Executive Director of the CAB is not even a member of the Board, per R.A. No.
776, as amended.

Even granting that the police power of the State, as given flesh in the various laws governing the regulation of the
airline industry in the Philippines, may be exercised to impair the vested rights of privately-owned airlines, the
deprivation of property still requires due process of law. In order to validate petitioner’s position, we will have to
concede that the right to due process may be extinguished by executive command. While we sympathize with
petitioner, who reasonably could rely on the commitment made to it by the Philippine government, we still have to
respect the segregate identity of the government and that of a private corporation and give due meaning to that
segregation, vital as it is to the very notion of democracy.

WHEREFORE, the petition is DENIED. No pronouncement as to costs.

SO ORDERED.
G.R. No. 121824 January 29, 1998

BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the
services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA where the
following itinerary was indicated:3
CARRIER FLIGHT DATE TIME STATUS

MANILA MNL PR 310 Y 16 APR. 1730 OK

HONGKONG HKG BA 20 M 16 APR. 2100 OK

BOMBAY BOM BA 19 M 23 APR. 0840 OK

HONGKONG HKG PR 311 Y

MANILA MNL

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon
arrival in Hongkong he had to take a connecting flight to Bombay on board BA.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his
clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA
flight bound for Bombay.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry
from the BA representatives, he was told that the same might have been diverted to London. After patiently waiting
for his luggage for one week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report." 4

Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages and attorney's
fees 5 against BA and Mr. Gumar before the trial court, docketed as Civil Case No. CEB-9076.

On September 4, 1990, BA filed its answer with counter claim6 to the complaint raising, as special and affirmative
defenses, that Mahtani did not have a cause of action against it. Likewise, on November 9, 1990, BA filed a third-party
complaint 7 against PAL alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival
in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for
Bombay.

On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing
that there was, in fact, adequate time to transfer the luggage to BA facilities in Hongkong. Furthermore, the transfer
of the luggage to Hongkong authorities should be considered as transfer to BA. 8

After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of
Mahtani, 9 the dispositive portion of which reads as follows:

WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendant for which
defendant is ordered to pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the value of the two (2)
suit cases; Four Hundred U.S. ($400.00) Dollars representing the value of the contents of plaintiff's luggage;
Fifty Thousand (P50,000.00) Pesos for moral and actual damages and twenty percent (20%) of the total amount
imposed against the defendant for attorney's fees and costs of this action.
The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED for lack of cause of
action.

SO ORDERED.

Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial court's findings. Thus:

WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed from to be in
accordance with law and evidence, the same is hereby AFFIRMED in toto, with costs against defendant-
appellant.

SO ORDERED. 10

BA is now before us seeking the reversal of the Court of Appeals' decision.

In essence, BA assails the award of compensatory damages and attorney's fees, as well as the dismissal of its third-
party complaint against PAL.11

Regarding the first assigned issue, BA asserts that the award of compensatory damages in the separate sum of
P7,000.00 for the loss of Mahtani's two pieces of luggage was without basis since Mahtani in his complaint 12 stated
the following as the value of his personal belongings:

8. On the said travel, plaintiff took with him the following items and its corresponding value, to wit:

1. personal belonging P10,000.00

2. gifts for his parents and relatives $5,000.00

Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided for in the ticket,
which reads:13

Liability for loss, delay, or damage to baggage is limited unless a higher value is declared in advance and
additional charges are paid:

1. For most international travel (including domestic corporations of international journeys) the liability limit is
approximately U.S. $9.07 per pound (U.S. $20.000) per kilo for checked baggage and U.S. $400 per passenger
for unchecked baggage.

Before we resolve the issues raised by BA, it is needful to state that the nature of an airline's contract of carriage
partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to
transport passengers to their destination. A business intended to serve the traveling public primarily, it is imbued with
public interest, hence, the law governing common carriers imposes an exacting standard. 14 Neglect or malfeasance
by the carrier's employees could predictably furnish bases for an action for damages.15

In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is
indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of cases 16 we have assessed
the airlines' culpability in the form of damages for breach of contract involving misplaced luggage.

In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily
prove during the trial the existence of the factual basis of the damages and its causal connection to defendant's acts.17
In this regard, the trial court granted the following award as compensatory damages:

Since plaintiff did not declare the value of the contents in his luggage and even failed to show receipts of the
alleged gifts for the members of his family in Bombay, the most that can be expected for compensation of his
lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or combined value of Four Hundred ($400.00)
U.S. Dollars for Twenty kilos representing the contents plus Seven Thousand (P7,000.00) Pesos representing
the purchase price of the two (2) suit cases.

However, as earlier stated, it is the position of BA that there should have been no separate award for the luggage and
the contents thereof since Mahtani failed to declare a separate higher valuation for the luggage, 18 and therefore, its
liability is limited, at most, only to the amount stated in the ticket.

Considering the facts of the case, we cannot assent to such specious argument.

Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater
amount. Article 22(1) of the Warsaw Convention,19 provides as follows:

xxx xxx xxx

(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of
250 francs per kilogram, unless the consignor has made, at time the package was handed over to the carrier,
a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that
case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is
greater than the actual value to the consignor at delivery.

American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the
limits specified in the tariff which was filed with the proper authorities, such tariff being binding, on the passenger
regardless of the passenger's lack of knowledge thereof or assent thereto.20 This doctrine is recognized in this
jurisdiction.21

Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the
facts and circumstances justify that they should be disregarded.22

In addition, we have held that benefits of limited liability are subject to waiver such as when the air carrier failed to
raise timely objections during the trial when questions and answers regarding the actual claims and damages
sustained by the passenger were asked.23

Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of limited liability when
it allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage, without
any objection. In this regard, we quote the pertinent transcript of stenographic notes of Mahtani's direct testimony:24

Q — How much are you going to ask from this court?

A — P100,000.00.

Q — What else?

A — Exemplary damages.

Q — How much?
A — P100,000.00.

Q — What else?

A — The things I lost, $5,000.00 for the gifts I lost and my personal belongings, P10,000.00.

Q — What about the filing of this case?

A — The court expenses and attorney's fees is 30%.

Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party
to be inadmissible for any reason, the latter has the right to object. However, such right is a mere privilege which can
be waived. Necessarily, the objection must be made at the earliest opportunity, lest silence when there is opportunity
to speak may operate as a waiver of objections.25 BA has precisely failed in this regard.

To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even conducted his own
cross-examination as well.26 In the early case of Abrenica v. Gonda,27 we ruled that:

. . . (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the admission
of any evidence must be made at the proper time, and that if not so made it will be understood to have been
waived. The proper time to make a protest or objection is when, from the question addressed to the witness,
or from the answer thereto, or from the presentation of proof, the inadmissibility of evidence is, or may be
inferred.

Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great
respect.28 Since the actual value of the luggage involved appreciation of evidence, a task within the competence of
the Court of Appeals, its ruling regarding the amount is assuredly a question of fact, thus, a finding not reviewable by
this Court.29

As to the issue of the dismissal of BA's third-party complaint against PAL, the Court of Appeals justified its ruling in
this wise, and we quote:30

Lastly, we sustain the trial court's ruling dismissing appellant's third-party complaint against PAL.

The contract of air transportation in this case pursuant to the ticket issued by appellant to plaintiff-appellee
was exclusively between the plaintiff Mahtani and defendant-appellant BA. When plaintiff boarded the PAL
plane from Manila to Hongkong, PAL was merely acting as a subcontractor or agent of BA. This is shown by the
fact that in the ticket issued by appellant to plaintiff-appellee, it is specifically provided on the "Conditions of
Contract," paragraph 4 thereof that:

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single


operation.

The rule that carriage by plane although performed by successive carriers is regarded as a single operation and that
the carrier issuing the passenger's ticket is considered the principal party and the other carrier merely subcontractors
or agent, is a settled issue.

We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko,31 we expounded on the nature of a third-party
complaint thus:
The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party nor
privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by
the defendant, who acts, as third-party plaintiff to enforce against such third-party defendant a right for
contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The third-party
complaint is actually independent of and separate and distinct from the plaintiff's complaint. Were it not for
this provision of the Rules of Court, it would have to be filed independently and separately from the original
complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party
defendant or so to speak, to litigate his separate cause of action in respect of plaintiff's claim against a third-
party in the original and principal case with the object of avoiding circuitry of action and unnecessary
proliferation of law suits and of disposing expeditiously in one litigation the entire subject matter arising from
one particular set of facts.

Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of carriage.
Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally denies. In other
words, BA and PAL are blaming each other for the incident.

In resolving this issue, it is worth observing that the contract of air transportation was exclusively between Mahtani
and BA, the latter merely endorsing the Manila to Hongkong leg of the former's journey to PAL, as its subcontractor
or agent. In fact, the fourth paragraph of the "Conditions of Contracts" of the ticket32issued by BA to Mahtani confirms
that the contract was one of continuous air transportation from Manila to Bombay.

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong
acted as the agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also
responsible for any negligence in the performance of its function.33 and is liable for damages which the principal may
suffer by reason of its negligent act.34 Hence, the Court of Appeals erred when it opined that BA, being the principal,
had no cause of action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA),
wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters
pertaining to their relationship.35 Therefore, in the instant case, the contractual relationship between BA and PAL is
one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter
the agent.

Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German Airlines v.Court of
Appeals.36 In that case, Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard different
airlines. Unfortunately, Air Kenya, one of the airlines which was to carry Antiporda to a specific destination "bumped"
him off.

An action for damages was filed against Lufthansa which, however, denied any liability, contending that its
responsibility towards its passenger is limited to the occurrence of a mishap on its own line. Consequently, when
Antiporda transferred to Air Kenya, its obligation as a principal in the contract of carriage ceased; from there on, it
merely acted as a ticketing agent for Air Kenya.

In rejecting Lufthansa's argument, we ruled:

In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda
and remains to be so, regardless of those instances when actual carriage was to be performed by various
carriers. The issuance of confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip
abroad successive carriers concretely attest to this.

Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL,
since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due
to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals,37 while not exactly in point, the case, however,
illustrates the principle which governs this particular situation. In that case, we recognized that a carrier (PAL), acting
as an agent of another carrier, is also liable for its own negligent acts or omission in the performance of its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of
ultimately determining who was primarily at fault as between them, is without legal basis. After all, such proceeding
is in accord with the doctrine against multiplicity of cases which would entail receiving the same or similar evidence
for both cases and enforcing separate judgments therefor. It must be borne in mind that the purpose of a third-party
complaint is precisely to avoid delay and circuitry of action and to enable the controversy to be disposed of in one
suit.38 It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is proven that the latter's
negligence was the proximate cause of Mahtani's unfortunate experience, instead of totally absolving PAL from any
liability.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 43309 dated September
7, 1995 is hereby MODIFIED, reinstating the third-party complaint filed by British Airways dated November 9, 1990
against Philippine Airlines. No costs.

SO ORDERED.

.R. No. 152122 July 30, 2003

CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent.

Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to reverse the
August 7, 2001 Decision2 and the February 7, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 45832.
The challenged Decision disposed as follows:

"WHEREFORE, premises considered, the assailed Decision dated July 5, 1991 of Branch 31, Regional Trial Court,
National Capital Judicial Region, Manila, in Civil Case No. 82-13690, is hereby MODIFIED by deleting that
portion regarding defendants-appellants’ liabilities for the payment of the actual damages amounting to
HK$14,128.80 and US$2,000.00 while all other respects are AFFIRMED. Costs against defendants-appellants."4

The assailed Resolution denied Petitioner’s Motion for Partial Reconsideration.

The Facts

The facts are narrated by the CA5 as follows:

"On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok) purchased from China Airlines, Ltd. (CAL
for brevity) airline passenger ticket number 297:4402:004:278:5 for air transportation covering Manila-Taipei-
Hongkong-Manila. Said ticket was exclusively endorseable to Philippine Airlines, Ltd. (PAL for brevity).

"Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei using [the] CAL ticket. Before
he left for said trip, the trips covered by the ticket were pre-scheduled and confirmed by the former. When he
arrived in Taipei, he went to the CAL office and confirmed his Hongkong to Manila trip on board PAL Flight No.
PR 311. The CAL office attached a yellow sticker appropriately indicating that his flight status was OK.
"When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight back to Manila.
The PAL office confirmed his return trip on board Flight No. PR 311 and attached its own sticker. On November
24, 1981, Chiok proceeded to Hongkong International Airport for his return trip to Manila. However, upon
reaching the PAL counter, Chiok saw a poster stating that PAL Flight No. PR 311 was cancelled because of a
typhoon in Manila. He was then informed that all the confirmed ticket holders of PAL Flight No. PR 311 were
automatically booked for its next flight, which was to leave the next day. He then informed PAL personnel that,
being the founding director of the Philippine Polysterene Paper Corporation, he ha[d] to reach Manila on
November 25, 1981 because of a business option which he ha[d] to execute on said date.

"On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok Chan (hereafter referred to
as Lok) ha[d] taken and received Chiok’s plane ticket and his luggage. Lok called the attention of Carmen Chan
(hereafter referred to as Carmen), PAL’s terminal supervisor, and informed the latter that Chiok’s name was
not in the computer list of passengers. Subsequently, Carmen informed Chiok that his name did not appear in
PAL’s computer list of passengers and therefore could not be permitted to board PAL Flight No. PR 307.

"Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he was not allowed to take
his flight. The latter then wrote the following, to wit: ‘PAL STAFF CARMEN CHAN CHKD WITH R/C KENNY AT
1005H NO SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25 NOV.’ The latter sought to recover his
luggage but found only 2 which were placed at the end of the passengers line. Realizing that his new Samsonite
luggage was missing, which contained cosmetics worth HK$14,128.80, he complained to Carmen.

"Thereafter, Chiok proceeded to PAL’s Hongkong office and confronted PAL’s reservation officer, Carie Chao
(hereafter referred to as Chao), who previously confirmed his flight back to Manila. Chao told Chiok that his
name was on the list and pointed to the latter his computer number listed on the PAL confirmation sticker
attached to his plane ticket, which number was ‘R/MN62’.

"Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5 and asked Chao if this ticket could
be used to book him for the said flight. The latter, once again, booked and confirmed the former’s trip, this
time on board PAL Flight No. PR 311 scheduled to depart that evening. Later, Chiok went to the PAL check-in
counter and it was Carmen who attended to him. As this juncture, Chiok had already placed his travel
documents, including his clutch bag, on top of the PAL check-in counter.

"Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion, Chiok lost his
clutch bag containing the following, to wit: (a) $2,000.00; (b) HK$2,000.00; (c) Taipei $8,000.00; (d) P2,000.00;
(e) a three-piece set of gold (18 carats) cross pens valued at P3,500; (f) a Cartier watch worth about P7,500.00;
(g) a tie clip with a garnet birthstone and diamond worth P1,800.00; and (h) a [pair of] Christian Dior reading
glasses. Subsequently, he was placed on stand-by and at around 7:30 p.m., PAL personnel informed him that
he could now check-in.

"Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for damages, against PAL and CAL,
as defendants, docketed as Civil Case No. 82-13690, with Branch 31, Regional Trial Court, National Capital
Judicial Region, Manila.

"He alleged therein that despite several confirmations of his flight, defendant PAL refused to accommodate
him in Flight No. 307, for which reason he lost the business option aforementioned. He also alleged that PAL’s
personnel, specifically Carmen, ridiculed and humiliated him in the presence of so many people. Further, he
alleged that defendants are solidarily liable for the damages he suffered, since one is the agent of the other." 6

The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to respondent. It did not,
however, rule on their respective cross-claims. It disposed as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendants to jointly and
severally pay:

1. Actual damages in the amount of HK$14,128.80 or its equivalent in Philippine Currency at the time of the
loss of the luggage consisting of cosmetic products;

2. US$2,000.00 or its equivalent at the time of the loss of the clutch bag containing the money;

3. P200,000.00 by way of moral damages;

4. P50,000.00 by way of exemplary damages or corrective damages;

5. Attorney[’]s fees equivalent to 10% of the amounts due and demandable and awarded in favor of the
plaintiff; and

6. The costs of this proceedings."7

The two carriers appealed the RTC Decision to the CA.

Ruling of the Court of Appeals

Affirming the RTC, the Court of Appeals debunked petitioner’s claim that it had merely acted as an issuing agent for
the ticket covering the Hong Kong-Manila leg of respondent’s journey. In support of its Decision, the CA quoted a
purported ruling of this Court in KLM Royal Dutch Airlines v. Court of Appeals8 as follows:

"Article 30 of the Warsaw providing that in case of transportation to be performed by various successive
carriers, the passenger can take action only against the carrier who performed the transportation during which
the accident or the delay occurred presupposes the occurrence of either an accident or delay in the course of
the air trip, and does not apply if the damage is caused by the willful misconduct on the part of the carrier’s
employee or agent acting within the scope of his employment.

"It would be unfair and inequitable to charge a passenger with automatic knowledge or notice of a condition
which purportedly would excuse the carrier from liability, where the notice is written at the back of the ticket
in letters so small that one has to use a magnifying glass to read the words. To preclude any doubt that the
contract was fairly and freely agreed upon when the passenger accepted the passage ticket, the carrier who
issued the ticket must inform the passenger of the conditions prescribed in the ticket or, in the very least,
ascertain that the passenger read them before he accepted the passage ticket. Absent any showing that the
carrier’s officials or employees discharged this responsibility to the passenger, the latter cannot be bound by
the conditions by which the carrier assumed the role of a mere ticket-issuing agent for other airlines and
limited its liability only to untoward occurrences in its own lines.

"Where the passage tickets provide that the carriage to be performed thereunder by several successive
carriers ‘is to be regarded as a single operation,’ the carrier which issued the tickets for the entire trip in effect
guaranteed to the passenger that the latter shall have sure space in the various carriers which would ferry him
through the various segments of the trip, and the ticket-issuing carrier assumes full responsibility for the entire
trip and shall be held accountable for the breach of that guaranty whether the breach occurred in its own lines
or in those of the other carriers."9

On PAL’s appeal, the appellate court held that the carrier had reneged on its obligation to transport respondent when,
in spite of the confirmations he had secured for Flight PR 311, his name did not appear in the computerized list of
passengers. Ruling that the airline’s negligence was the proximate cause of his excoriating experience, the appellate
court sustained the award of moral and exemplary damages.

The CA, however, deleted the RTC’s award of actual damages amounting to HK$14,128.80 and US$2,000.00, because
the lost piece of luggage and clutch bag had not actually been "checked in" or delivered to PAL for transportation to
Manila.

On August 28, 2001, petitioner filed a Motion for Partial Reconsideration, contending that the appellate court had
erroneously relied on a mere syllabus of KLM v. CA, not on the actual ruling therein. Moreover, it argued that
respondent was fully aware that the booking for the PAL sector had been made only upon his request; and that only
PAL, not CAL, was liable for the actual carriage of that segment. Petitioner likewise prayed for a ruling on its cross-
claim against PAL, inasmuch as the latter’s employees had acted negligently, as found by the trial court.

Denying the Motion, the appellate court ruled that petitioner had failed to raise any new matter or issue that would
warrant a modification or a reversal of the Decision. As to the alleged misquotation, the CA held that while the portion
it had cited appeared to be different from the wording of the actual ruling, the variance was "more apparent than real
since the difference [was] only in form and not in substance."10

CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3, 2001 Resolution, this Court denied
PAL’s appeal, docketed as GR No. 149544, for failure to serve the CA a copy of the Petition as required by Section 3,
Rule 45, in relation to Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No. 1-88 of this Court. PAL’s Motion
for Reconsideration was denied with finality on January 21, 2002.

Only the appeal of CAL11 remains in this Court.

Issues

In its Memorandum, petitioner raises the following issues for the Court’s consideration:

"1. The Court of Appeals committed judicial misconduct in finding liability against the petitioner on the basis
of a misquotation from KLM Royal Dutch Airlines vs. Court of Appeals, et al., 65 SCRA 237 and in magnifying
its misconduct by denying the petitioner’s Motion for Reconsideration on a mere syllabus, unofficial at that.

"2. The Court of Appeals committed an error of law when it did not apply applicable precedents on the case
before it.

"3. The Court of Appeals committed a non sequitur when it did not rule on the cross-claim of the petitioner."12

The Court’s Ruling

The Petition is not meritorious.

First Issue:

Alleged Judicial Misconduct

Petitioner charges the CA with judicial misconduct for quoting from and basing its ruling against the two airlines on
an unofficial syllabus of this Court’s ruling in KLM v. CA. Moreover, such misconduct was allegedly aggravated when
the CA, in an attempt to justify its action, held that the difference between the actual ruling and the syllabus was
"more apparent than real."13
We agree with petitioner that the CA committed a lapse when it relied merely on the unofficial syllabus of our ruling
in KLM v. CA. Indeed, lawyers and litigants are mandated to quote decisions of this Court accurately.14 By the same
token, judges should do no less by strictly abiding by this rule when they quote cases that support their judgments
and decisions. Canon 3 of the Code of Judicial Conduct enjoins them to perform official duties diligently by being
faithful to the law and maintaining their professional competence.

However, since this case is not administrative in nature, we cannot rule on the CA justices’ administrative liability, if
any, for this lapse. First, due process requires that in administrative proceedings, the respondents must first be given
an opportunity to be heard before sanctions can be imposed. Second, the present action is an appeal from the CA’s
Decision, not an administrative case against the magistrates concerned. These two suits are independent of and
separate from each other and cannot be mixed in the same proceedings.

By merely including the lapse as an assigned error here without any adequate and proper administrative case therefor,
petitioner cannot expect the imposition of an administrative sanction.

In the case at bar, we can only determine whether the error in quotation would be sufficient to reverse or modify the
CA Decision.

Applicability of KLM v. CA

In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for their world tour. The tour included a
Barcelona-Lourdes route, which was serviced by the Irish airline Aer Lingus. At the KLM office in Frankfurt, Germany,
they obtained a confirmation from Aer Lingus of their seat reservations on its Flight 861. On the day of their departure,
however, the airline rudely off-loaded them.

When sued for breach of contract, KLM sought to be excused for the wrongful conduct of Aer Lingus by arguing that
its liability for damages was limited only to occurrences on its own sectors. To support its argument, it cited Article 30
of the Warsaw Convention, stating that when transportation was to be performed by various successive carriers, the
passenger could take action only against the carrier that had performed the transportation when the accident or delay
occurred.

In holding KLM liable for damages, we ruled as follows:

"1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be sustained.
That article presupposes the occurrence of either an accident or a delay, neither of which took place at the
Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to
transport the respondents to their planned and contracted destination.

"2. The argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus because
of the provision printed on the respondents' tickets expressly limiting the KLM's liability for damages only to
occurrences on its own lines is unacceptable. As noted by the Court of Appeals that condition was printed in
letters so small that one would have to use a magnifying glass to read the words. Under the circumstances, it
would be unfair and inequitable to charge the respondents with automatic knowledge or notice of the said
condition so as to preclude any doubt that it was fairly and freely agreed upon by the respondents when they
accepted the passage tickets issued to them by the KLM. As the airline which issued those tickets with the
knowledge that the respondents would be flown on the various legs of their journey by different air carriers,
the KLM was chargeable with the duty and responsibility of specifically informing the respondents of
conditions prescribed in their tickets or, in the very least, to ascertain that the respondents read them before
they accepted their passage tickets. A thorough search of the record, however, inexplicably fails to show that
any effort was exerted by the KLM officials or employees to discharge in a proper manner this responsibility
to the respondents. Consequently, we hold that the respondents cannot be bound by the provision in question
by which KLM unilaterally assumed the role of a mere ticket-issuing agent for other airlines and limited its
liability only to untoward occurrences on its own lines.

"3. Moreover, as maintained by the respondents and the Court of Appeals, the passage tickets of the
respondents provide that the carriage to be performed thereunder by several successive carriers ‘is to be
regarded as a single operation,’ which is diametrically incompatible with the theory of the KLM that the
respondents entered into a series of independent contracts with the carriers which took them on the various
segments of their trip. This position of KLM we reject. The respondents dealt exclusively with the KLM which
issued them tickets for their entire trip and which in effect guaranteed to them that they would have sure
space in Aer Lingus flight 861. The respondents, under that assurance of the internationally prestigious KLM,
naturally had the right to expect that their tickets would be honored by Aer Lingus to which, in the legal sense,
the KLM had indorsed and in effect guaranteed the performance of its principal engagement to carry out the
respondents' scheduled itinerary previously and mutually agreed upon between the parties.

"4. The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of an official
of the Aer Lingus which the KLM had engaged to transport the respondents on the Barcelona-Lourdes segment
of their itinerary. It is but just and in full accord with the policy expressly embodied in our civil law which
enjoins courts to be more vigilant for the protection of a contracting party who occupies an inferior position
with respect to the other contracting party, that the KLM should be held responsible for the abuse, injury and
embarrassment suffered by the respondents at the hands of a supercilious boor of the Aer Lingus." 15

In the instant case, the CA ruled that under the contract of transportation, petitioner -- as the ticket-issuing carrier
(like KLM) -- was liable regardless of the fact that PAL was to perform or had performed the actual carriage. It
elucidated on this point as follows:

"By the very nature of their contract, defendant-appellant CAL is clearly liable under the contract of carriage
with [respondent] and remains to be so, regardless of those instances when actual carriage was to be
performed by another carrier. The issuance of a confirmed CAL ticket in favor of [respondent] covering his
entire trip abroad concretely attests to this. This also serves as proof that defendant-appellant CAL, in effect
guaranteed that the carrier, such as defendant-appellant PAL would honor his ticket, assure him of a space
therein and transport him on a particular segment of his trip."16

Notwithstanding the errant quotation, we have found after careful deliberation that the assailed Decision is supported
in substance by KLM v. CA. The misquotation by the CA cannot serve as basis for the reversal of its ruling.

Nonetheless, to avert similar incidents in the future, this Court hereby exhorts members of the bar and the bench to
refer to and quote from the official repository of our decisions, the Philippine Reports, whenever practicable.17 In the
absence of this primary source, which is still being updated, they may resort to unofficial sources like the SCRA. 18We
remind them that the Court’s ponencia, when used to support a judgment or ruling, should be quoted accurately.19

Second Issue:

Liability of the Ticket-Issuing Airline

We now come to the main issue of whether CAL is liable for damages. Petitioner posits that the CA Decision must be
annulled, not only because it was rooted on an erroneous quotation, but also because it disregarded jurisprudence,
notably China Airlines v. Intermediate Appellate Court20 and China Airlines v. Court of Appeals.21

Jurisprudence Supports CA Decision


It is significant to note that the contract of air transportation was between petitioner and respondent, with the former
endorsing to PAL the Hong Kong-to-Manila segment of the journey. Such contract of carriage has always been treated
in this jurisdiction as a single operation. This jurisprudential rule is supported by the Warsaw Convention,22to which
the Philippines is a party, and by the existing practices of the International Air Transport Association (IATA).

Article 1, Section 3 of the Warsaw Convention states:

"Transportation to be performed by several successive air carriers shall be deemed, for the purposes of this
Convention, to be one undivided transportation, if it has been regarded by the parties as a single operation,
whether it has been agreed upon under the form of a single contract or of a series of contracts, and it shall not
lose its international character merely because one contract or a series of contracts is to be performed entirely
within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting
Party."23

Article 15 of IATA-Recommended Practice similarly provides:

"Carriage to be performed by several successive carriers under one ticket, or under a ticket and any
conjunction ticket issued therewith, is regarded as a single operation."

In American Airlines v. Court of Appeals,24 we have noted that under a general pool partnership agreement, the ticket-
issuing airline is the principal in a contract of carriage, while the endorsee-airline is the agent.

"x x x Members of the IATA are under a general pool partnership agreement wherein they act as agent of each
other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time
provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world. Booking
and reservation among airline members are allowed even by telephone and it has become an accepted
practice among them. A member airline which enters into a contract of carriage consisting of a series of trips
to be performed by different carriers is authorized to receive the fare for the whole trip and through the
required process of interline settlement of accounts by way of the IATA clearing house an airline is duly
compensated for the segment of the trip serviced. Thus, when the petitioner accepted the unused portion of
the conjunction tickets, entered it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the conjunction tickets, i.e., Geneva to New York,
the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as agent of the
principal contracting airline, Singapore Airlines, as to the segment of the trip the petitioner agreed to
undertake. As such, the petitioner thereby assumed the obligation to take the place of the carrier originally
designated in the original conjunction ticket. The petitioner’s argument that it is not a designated carrier in
the original conjunction tickets and that it issued its own ticket is not decisive of its liability. The new ticket
was simply a replacement for the unused portion of the conjunction ticket, both tickets being for the same
amount of US$ 2,760 and having the same points of departure and destination. By constituting itself as an
agent of the principal carrier the petitioner’s undertaking should be taken as part of a single operation under
the contract of carriage executed by the private respondent and Singapore Airlines in Manila." 25

Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court of Appeals26 was held
liable, even when the breach of contract had occurred, not on its own flight, but on that of another airline. The
Decision followed our ruling in Lufthansa German Airlines v. Court of Appeals,27 in which we had held that the
obligation of the ticket-issuing airline remained and did not cease, regardless of the fact that another airline had
undertaken to carry the passengers to one of their destinations.

In the instant case, following the jurisprudence cited above, PAL acted as the carrying agent of CAL. In the same way
that we ruled against British Airways and Lufthansa in the aforementioned cases, we also rule that CAL cannot evade
liability to respondent, even though it may have been only a ticket issuer for the Hong Kong-Manila sector.
Moral and Exemplary Damages

Both the trial and the appellate courts found that respondent had satisfactorily proven the existence of the factual
basis for the damages adjudged against petitioner and PAL. As a rule, the findings of fact of the CA affirming those of
the RTC will not be disturbed by this Court.28 Indeed, the Supreme Court is not a trier of facts. As a rule also, only
questions of law -- as in the present recourse -- may be raised in petitions for review under Rule 45.

Moral damages cannot be awarded in breaches of carriage contracts, except in the two instances contemplated in
Articles 1764 and 2220 of the Civil Code, which we quote:

"Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of
this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach
of contract by a common carrier.

xxx xxx xxx

"Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should
find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad faith." (Italics supplied)

There is no occasion for us to invoke Article 1764 here. We must therefore determine if CAL or its agent (PAL) is guilty
of bad faith that would entitle respondent to moral damages.

In Lopez v. Pan American World Airways,29 we defined bad faith as a breach of a known duty through some motive of
interest or ill will.

In the case at bar, the known duty of PAL was to transport herein respondent from Hong Kong to Manila. That duty
arose when its agent confirmed his reservation for Flight PR 311,30 and it became demandable when he presented
himself for the trip on November 24, 1981.

It is true that due to a typhoon, PAL was unable to transport respondent on Flight PR 311 on November 24, 1981. This
fact, however, did not terminate the carrier’s responsibility to its passengers. PAL voluntarily obligated itself to
automatically transfer all confirmed passengers of PR 311 to the next available flight, PR 307, on the following
day.31 That responsibility was subsisting when respondent, holding a confirmed ticket for the former flight, presented
himself for the latter.

The records amply establish that he secured repeated confirmations of his PR 311 flight on November 24, 1981. Hence,
he had every reason to expect that he would be put on the replacement flight as a confirmed passenger. Instead, he
was harangued and prevented from boarding the original and the replacement flights. Thus, PAL breached its duty to
transport him. After he had been directed to pay the terminal fee, his pieces of luggage were removed from the
weighing-in counter despite his protestations.32

It is relevant to point out that the employees of PAL were utterly insensitive to his need to be in Manila on November
25, 1981, and to the likelihood that his business affairs in the city would be jeopardized because of a mistake on their
part. It was that mistake that had caused the omission of his name from the passenger list despite his confirmed flight
ticket. By merely looking at his ticket and validation sticker, it is evident that the glitch was the airline’s fault. However,
no serious attempt was made by PAL to secure the all-important transportation of respondent to Manila on the
following day. To make matters worse, PAL allowed a group of non-revenue passengers, who had no confirmed tickets
or reservations, to board Flight PR 307.33
Time and time again, this Court has stressed that the business of common carriers is imbued with public interest and
duty; therefore, the law governing them imposes an exacting standard.34 In Singson v. Court of Appeals,35 we said:

"x x x [T]he carrier's utter lack of care and sensitivity to the needs of its passengers, clearly constitutive of gross
negligence, recklessness and wanton disregard of the rights of the latter, [are] acts evidently indistinguishable
or no different from fraud, malice and bad faith. As the rule now stands, where in breaching the contract of
carriage the defendant airline is shown to have acted fraudulently, with malice or in bad faith, the award of
moral and exemplary damages, in addition to actual damages, is proper."36 (Italics supplied)

In Saludo v. Court of Appeals,37 the Court reminded airline companies that due to the nature of their business, they
must not merely give cursory instructions to their personnel to be more accommodating towards customers,
passengers and the general public; they must require them to be so.

The acts of PAL’s employees, particularly Chan, clearly fell short of the extraordinary standard of care that the law
requires of common carriers.38 As narrated in Chan’s oral deposition,39 the manner in which the airline discharged its
responsibility to respondent and its other passengers manifested a lack of the requisite diligence and due regard for
their welfare. The pertinent portions of the Oral Deposition are reproduced as follows:

Under the foregoing circumstances, we cannot apply our 1989 ruling in China Airlines v. Intermediate Appellate
Court,44 which petitioner urges us to adopt. In that case, the breach of contract and the negligence of the carrier in
effecting the immediate flight connection for therein private respondent was incurred in good faith. 45 Having found
no gross negligence or recklessness, we thereby deleted the award of moral and exemplary damages against it. 46

This Court’s 1992 ruling in China Airlines v. Court of Appeals47 is likewise inapplicable. In that case, we found no bad
faith or malice in the airline’s breach of its contractual obligation.48 We held that, as shown by the flow of telexes from
one of the airline’s offices to the others, petitioner therein had exercised diligent efforts in assisting the private
respondent change his flight schedule. In the instant case, petitioner failed to exhibit the same care and sensitivity to
respondent’s needs.

In Singson v. Court of Appeals,49 we said:

"x x x Although the rule is that moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the mishap results in the death of a passenger, or where the carrier is guilty of
fraud or bad faith, there are situations where the negligence of the carrier is so gross and reckless as to virtually
amount to bad faith, in which case, the passenger likewise becomes entitled to recover moral damages."

In the present case, we stress that respondent had repeatedly secured confirmations of his PR 311 flight on November
24, 1981 -- initially from CAL and subsequently from the PAL office in Hong Kong. The status of this flight was marked
"OK" on a validating sticker placed on his ticket. That sticker also contained the entry "RMN6V." Ms Chan explicitly
acknowledged that such entry was a computer reference that meant that respondent’s name had been entered in
PAL’s computer.

Since the status of respondent on Flight PR 311 was "OK," as a matter of right testified to by PAL’s witness, he should
have been automatically transferred to and allowed to board Flight 307 the following day. Clearly resulting from
negligence on the part of PAL was its claim that his name was not included in its list of passengers for the November
24, 1981 PR 311 flight and, consequently, in the list of the replacement flight PR 307. Since he had secured
confirmation of his flight -- not only once, but twice -- by personally going to the carrier’s offices where he was
consistently assured of a seat thereon -- PAL’s negligence was so gross and reckless that it amounted to bad faith.

In view of the foregoing, we rule that moral and exemplary50 damages were properly awarded by the lower courts.51
Third Issue:

Propriety of the Cross-Claim

We now look into the propriety of the ruling on CAL’s cross-claim against PAL. Petitioner submits that the CA should
have ruled on the cross-claim, considering that the RTC had found that it was PAL’s employees who had acted
negligently.

Section 8 of Rule 6 of the Rules of Court reads:

"Sec. 8. Cross-claim. - A cross claim is any claim by one party against a co-party arising out of the transaction
or occurrence that is the subject matter either of the original action or of a counterclaim therein. Such cross-
claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant
for all or part of a claim asserted in the action against the cross-claimant."

For purposes of a ruling on the cross-claim, PAL is an indispensable party. In BA Finance Corporation v. CA,52 the Court
stated:

"x x x. An indispensable party is one whose interest will be affected by the court’s action in the litigation, and
without whom no final determination of the case can be had. The party’s interest in the subject matter of the
suit and in the relief sought are so inextricably intertwined with the other parties that his legal presence as a
party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of
the parties before the court which is effective, complete, or equitable.

xxx xxx xxx

"Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real
finality."

PAL’s interest may be affected by any ruling of this Court on CAL’s cross-claim. Hence, it is imperative and in
accordance with due process and fair play that PAL should have been impleaded as a party in the present proceedings,
before this Court can make a final ruling on this matter.

Although PAL was petitioner’s co-party in the case before the RTC and the CA, petitioner failed to include the airline
in the present recourse. Hence, the Court has no jurisdiction over it. Consequently, to make any ruling on the cross-
claim in the present Petition would not be legally feasible because PAL, not being a party in the present case, cannot
be bound thereby.53

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.
G.R. No. 124110 April 20, 2001

UNITED AIRLINES, INC., Petitioner vs. COURT OF APPEALS, ANICETO FONTANILLA, in his personal capacity and in
behalf of his minor son MYCHAL ANDREW FONTANILLA, Respondents.

On March 1, 1989, private respondent Aniceto Fontanilla purchased from petitioner United Airlines, through the
Philippine Travel Bureau in Manila three (3) "Visit the U.S.A." tickets for himself, his wife and his minor son Mychal for
the following routes:

a. San Francisco to Washinton (15 April 1989);

b. Washington to Chicago (25 April 1989);

c. Chicago to Los Angeles (29 April 1989);

d. Los Angeles to San Francisco (01 may 1989 for petitioner’s wife and 05 May 1989 for petitioner and his
son). 1

All flights had been confirmed previously by United Airlines. 2

The Fontanillas proceeded to the United States as planned, where they used the first coupon from San Francisco to
Washington. On April 24, 1989, Aniceto Fontanilla bought two (2) additional coupons each for himself, his wife and
his son from petitioner at its office in Washington Dulles Airport. After paying the penalty for rewriting their tickets,
the Fontanillas were issued tickets with corresponding boarding passes with the words "CHECK-IN REQUIRED," for
United Airlines Flight No. 1108, set to leave from Los Angeles to San Francisco at 10:30 a.m. on May 5, 1989. 3

The cause of the non-boarding of the Fontanillas on United Airlines Flight No. 1108 makes up the bone of contention
of this controversy.1âwphi1.nêt

Private respondents’ version is as follows:

Aniceto Fontanilla and his son Mychal claim that on May 5, 1989, upon their arrival at the los Angeles Airport for their
flight, they proceeded to united Airlines counter where they were attended by an employee wearing a nameplate
bearing the name "LINDA." Linda examined their tickets, punched something into her computer and then told them
that boarding would be in fifteen minutes.4

When the flight was called, the Fontanillas proceeded to the plane. To their surprise, the stewardess at the gate did
not allow them to board the plane, as they had no assigned seat numbers. They were then directed to go back to the
"check-in" counter where Linda subsequently informed them that the flight had been overbooked and asked them to
wait.5

The Fontanillas tried to explain to Linda the special circumstances of their visit. However, Linda told them in arrogant
manner, "So what, I can not do anything about it."6

Subsequently, three other passengers with Caucasian features were graciously allowed to baord, after the Fontanillas
were told that the flight had been overbooked.7

The plane then took off with the Fontanillas’ baggage in tow, leaving them behind. 8
The Fontanillas then complained to Linda, who in turn gave them an ugly stare and rudely uttered, "it’s not my fault.
It’s the fault of the company. Just sit down and wait."9 When Mr. Fontanilla reminded Linda of the inconvenience
being caused to them, she bluntly retorted, "Who do you think you are? You lousy Flips are good for nothing beggars.
You always ask for American aid." After which she remarked "Don’t worry about your baggage. Anyway there is
nothing in there. What are you doing here anyway? I will report you to immigration. You Filipinos should go
home."10 Such rude statements were made in front of other people in the airport causing the Fontanillas to suffer
shame, humiliation and embarrassment. The chastening situation even caused the younger Fontanilla to break into
tears.11

After some time, Linda, without any explanation, offered the Fontanillas $50.00 each. She simply said "Take it or leave
it." This, the Fontanillas declined.12

The Fontanillas then proceeded to the United Airlines customer service counter to plead their case. The male
employee at the counter reacted by shouting that he was ready for it and left without saying anything. 13

The Fontanillas were not booked on the next flight, which departed for San Francisco at 11:00 a.m. It was only at 12:00
noon that they were able to leave Los Angeles on United Airlines Flight No. 803.

Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on May 5, 1989.

According to United Airlines, the Fontanillas did not initially go to the check-in counter to get their seat assignments
for UA Flight 1108. They instead proceeded to join the queue boarding the aircraft without first securing their seat
assignments as required in their ticket and boarding passes. Having no seat assignments, the stewardess at the door
of the plane instructed them to go to the check-in counter. When the Fontanillas proceeded to the check-in counter,
Linda Allen, the United Airlines Customer Representative at the counter informed them that the flight was
overbooked. She booked them on the next available flight and offered them denied boarding compensation. Allen
vehemently denies uttering the derogatory and racist words attributed to her by the Fontanillas. 14

The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages before the Regional Trial Court of
Makati. After trial on the merits, the trial court rendered a decision, the dispositive portion of which reads as follows:

WHEREFORE, judgment is rendered dismissing the complaint. The counterclaim is likewise dismissed
as it appears that plaintiffs were not actuated by legal malice when they filed the instant complaint. 15

On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate court found that there was an
admission on the part of United Airlines that the Fontanillas did in fact observe the check-in requirement. It ruled
further that even assuming there was a failure to observe the check-in requirement, United Airlines failed to comply
with the procedure laid down in cases where a passenger is denied boarding. The appellate court likewise gave
credence to the claim of Aniceto Fontanilla that the employees of United Airlines were discourteous and arbitrary
and, worse, discriminatory. In light of such treatment, the Fontanillas were entitled to moral damages. The dispositive
portion of the decision of the respondent Court of Appeals dated 29 September 1995, states as follows:

WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby REVERSED and SET
ASIDE, and a new judgment is entered ordering defendant-appellee to pay plaintiff-appellant the
following:

a. P200,000.00 as moral damages;


b. P200,000.00 as exemplary damages;
c. P50,000.00 as attorney’s fees;
No pronouncement as to costs.

SO ORDERED.16

Petitioner United Airlines now comes to this Court raising the following assignments of errors;

RESPONDENT COURT OF APPEALS GRVAELY ERRED IN RULING THAT THE TRIAL COURT
WAS WRONG IN FAILING TO CONSIDER THE ALLEGED ADMISSION THAT PRIVATE
RESPONDENT OBSERVED THE CHECK-IN REQUIREMENT.

II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE


RESPONDENT’S FAILURE TO CHECK-IN WILL NOT DEFEAT HIS CLAIMS BECAUSE THE
DENIED BOARDING RULES WERE NOT COMPLIED WITH.

III

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE


RESPONDENT IS ENTITLED TO MORAL DAMAGES OF P200,000.

IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE


RESPONDENT IS ENTITLED TO EXEMPLARY DAMAGES OF P200,000.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE


RESPONDENT IS ENTITLED TO ATTORNEY’S FEES OF P50,000.17

On the first issue raised by the petitioner, the respondent Court of Appeals ruled that when Rule 9, Section 1 of the
Rules of Court,18 there was an implied admission in petitioner’s answer in the allegations in the complaint that private
respondent and his son observed the "check-in requirement at the Los Angeles Airport." Thus:

A perusal of the above pleadings filed before the trial court disclosed that there exist a blatant
admission on the part of the defendant-appellee that the plaintiffs-appellants indeed observed the
"check-in" requirement at the Los Angeles Airport on May 5, 1989. In view of defendant-appellee’s
admission of plaintiffs-appellants’ material averment in the complaint. We find no reason why the trial
court should rule against such admission.19
We disagree with the above conclusion reached by respondent Court of Appeals. Paragraph 7 of private respondents’
complaint states:

7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendant’s designated counter at
the airport in Los Angeles for their scheduled flight to San Francisco on defendant’s Flight No. 1108.20

Responding to the above allegations, petitioner averred in paragraph 4 of its answer, thus:

4. Admits the allegation set forth in paragraph 7 of the complaint except to deny that plaintiff and his
son checked in at 9:45 a.m., for lack of knowledge or information at this point in time as to the truth
thereof.21

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 giving such answer is asserted is so plainly and necessarily within the defendant’s knowledge
that his averment of ignorance must be palpably untrue.22 Whether or not private respondents checked in at
petitioner’s designated counter at the airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioner’s
knowledge.

While there was no specific denial as to the fact of compliance with the "check-in" requirement by private
respondents, petitioner presented evidence to support its contention that there indeed was no compliance.

Private respondents then are said to have waived the rule on admission. It not only presented evidence to support its
contention that there was compliance with the check-in requirement, it even allowed petitioner to present rebutal
evidence. In the case of Yu Chuck vs. "Kong Li Po," we ruled that:

The object of the rule is to relieve a party of the trouble and expense in proving in the first instance an
alleged fact, the existence or non-existence of which is necessarily within the knowledge of the adverse
party, and of the necessity (to his opponent’s case) of establishing which such adverse party is notified
by his opponent’s pleadings.

The plaintiff may, of course, waive the rule and that is what must be considered to have done (sic) by
introducing evidence as to the execution of the document and failing to object to the defendant’s
evidence in refutation; all this evidence is now competent and the case must be decided thereupon.23

The determination of the other issues raised is dependent on whether or not there was a breach of contract in bad
faith on the part of the petitioner in not allowing the Fontanillas to board United Airlines Flight 1108.

It must be remembered that the general rule in civil cases is that the party having the burden of proof of an essential
fact must produce a preponderance of evidence thereon.24 Although the evidence adduced by the plaintiff is stronger
than that presented by the defendant, a judgment cannot be entered in favor of the former, if his evidence is not
sufficient to sustain his cause of action. The plaintiff must rely on the strength of his own evidence and not upon the
weakness of the defendant’s.25 Proceeding from this, and considering the contradictory findings of facts by the
Regional Trial Court and the Court of Appeals, the question before this Court is whether or not private respondents
were able to prove with adequate evidence his allegations of breach of contract in bad faith.

We rule in the negative.

Time and again, the Court has pronounced that appellate courts should not, unless for strong and cogent reasons,
reverse the findings of facts of trial courts. This is so because trial judges are in better position to examine real evidence
and at a vantage point to observe the actuation and the demeanor of the witnesses.26 While not the sole indicator of
the credibility of a witness, it is of such weight that it has been said to be the touchstone of credibility.27
Aniceto Fontanilla’s assertion that upon arrival at the airport at 9:45 a.m., he immediately proceeded to the check-in
counter, and that Linda Allen punched in something into the computer is specious and not supported by the evidence
on record. In support of their allegations, private respondents submitted a copy of the boarding pass. Explicitly printed
on the boarding pass are the words "Check-In Required." Curiously, the said pass did not indicate any seat number. If
indeed the Fontanillas checked in at the designated time as they claimed, why then were they not assigned seat
numbers? Absent any showing that Linda was so motivated, we do not buy into private respondents’ claim that Linda
intentionally deceived him, and made him the laughing stock among the passengers.28Hence, as correctly observed
by the trial court:

Plaintiffs fail to realize that their failure to check in, as expressly required in their boarding passes, is
they very reason why they were not given their respective seat numbers, which resulted in their being
denied boarding.29

Neither do we agree with the conclusion reached by the appellate court that private respondents’ failure to comply
with the check-in requirement will not defeat his claim as the denied boarding rules were not complied with. Notably,
the appellate court relied on the Code of Federal Regulation Part on Oversales which states:

250.6 Exceptions to eligibility for denied boarding compensation.

A passenger denied board involuntarily from an oversold flight shall not be eligible for denied board
compensation if:

a. The passenger does not comply with the carrier’s contract of carriage or tariff provisions
regarding ticketing, reconfirmation, check-in, and acceptability for transformation.

The appellate court, however, erred in applying the laws of the United States as, in the case at bar, Philippine law is
the applicable law. Although, the contract of carriage was to be performed in the United States, the tickets were
purchased through petitioner’s agent in Manila. It is true that the tickets were "rewritten" in Washington, D.C.
however, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila.

In the case of Zalanea vs. Court of Appeals,30 this Court applied the doctrine of lex loci contractus. According to the
doctrine, as a general rule, the law of the place where a contract is made or entered into governs with respect to its
nature and validity, obligation and interpretation. This has been said to be the rule even though the place where the
contract was made is different from the place where it is to be performed, and particularly so, if the place of the
making and the place of performance are the same. Hence, the court should apply the law of the place where the
airline ticket was issued, when the passengers are residents and nationals of the forum and the ticket is issued in such
State by the defendant airline.

The law of the forum on the subject matter is Economic Regulations No. 7 as amended by Boarding Priority and Denied
Board Compensation of the Civil Aeronautics Board which provides that the check-in requirement be complied with
before a passenger may claim against a carrier for being denied boarding:

Sec. 5. Amount of Denied Boarding Compensation Subject to the exceptions provided hereinafter
under Section 6, carriers shall pay to passengers holding confirmed reserved space and who have
presented themselves at the proper place and time and fully complied with the carrier’s check-in and
reconfirmation procedures and who are acceptable for carriage under the Carrier’s tariff but who have
been denied boarding for lack of space, a compensation at the rate of: xxx
Private respondents’ narration that they were subjected to harsh and derogatory remarks seems incredulous.
However, this Court will not attempt to surmise what really happened, suffice to say, private respondent was not able
to prove his cause of action, for as the trial court correctly observed:

xxx plaintiffs claim to have been discriminated against and insulted in the presence of several people.
Unfortunately, plaintiffs limited their evidence to the testimony of Aniceto Fontanilla, without any
corroboration by the people who saw or heard the discriminatory remarks and insults; while such
limited testimony could possibly be true, it does not enable the Court to reach the conclusion that
plaintiffs have, by a preponderance of evidence, proven that they are entitled to P1,650,000.00
damages from defendant.31

As to the award of moral and exemplary damages, we find error in the award of such by the Court of Appeals. For the
plaintiff 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 appellate court predicated its award on our pronouncement in the case
of Zalanea vs. Court of Appeals, supra, where we stated:

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling passengers
concerned to an award of moral damages. In Alitalia Airways vs. Court of Appeals, where passengers
with confirmed booking were refused carriage on the last minute, this Court held that when an airline
issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage
arises, and the passenger has every right to except that he would fly on that flight and on that date. If
he does not, then the carrier opens itself to a suit for breach of contract of carriage. 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 check in. For the indignity and inconvenience of being refused a
confirmed seat on the last minute, said passenger is entitled to moral damages. (Emphasis supplied).

However, the Court’s ruling in said case should be read in consonance with existing laws, particularly, Economic
Regulations No. 7, as amended, of the Civil Aeronautics Board:

Sec. 3. Scope. – This regulation shall apply to every Philippine and foreign air carrier with respect to its
operation of flights or portions of flights originating from or terminating at, or serving a point within
the territory of the Republic of the Philippines insofar as it denies boarding to a passenger on a flight,
or portion of a flight inside or outside the Philippines, for which he holds confirmed reserved space.
Furthermore, this Regulation is designed to cover only honest mistakes on the part of the carriers and
excludes deliberate and willful acts of non-accommodation. Provided, however, that overbooking not
exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful
act of non-accommodation.

What this Court considers as bad faith is the willful and deliberate overbooking on the part of the airline carrier. The
above-mentioned law clearly states that when the overbooking does not exceed ten percent (10%), it is not considered
as deliberate and therefore does not amount to bad faith. While there may have been overbooking in this case, private
respondents were not able to prove that the overbooking on United Airlines Flight 1108 exceeded ten percent.

As earlier stated, the Court is of the opinion that the private respondents were not able to prove that they were
subjected to coarse and harsh treatment by the ground crew of united Airlines. Neither were they able to show that
there was bad faith on part of the carrier airline. Hence, the award of moral and exemplary damages by the Court of
Appeals is improper. Corollarily, the award of attorney’s fees is, likewise, denied for lack of any legal and factual basis.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 37044 is
hereby REVERSED and SET ASIDE. The decision of the Regional Trial Court of Makati City in Civil Case No. 89-4268
dated April 8, 1991 is hereby REINSTATED.
SO ORDERED.

G.R. No. 146020 May 29, 2002

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. NORMAN PALARCA y MERCADO alias "Bong", accused-

The facts of the case as alleged by the prosecution are as follows: At the time of the incident, private complainant
Concepcion C. Javier, was a 70 year old widow who personally tended her 24-hour sari-sari store located at 101
Rosal Street, Alido Heights Subdivision, Bulacan. She was suffering from recurrent insomnia, thus, she regularly took
sleeping pills to ward off her sleeping problem.2

Twenty-eight year old accused-appellant, single, was then working as a keyboardist and sequencer of an
establishment that produces "minus one" music. He was a resident of the same subdivision and a frequent buyer at
private complainant’s store during the wee hours of the morning.3

On May 19, 1998, at 5:00 in the early morning, private complainant was tending her sari-sari store and waiting for her
two children to leave the house for Manila. At that time, accused-appellant was still in front of the store finishing the
two bottles of beer he bought from private complainant. After her children left, private complainant went to the
kitchen and took her regular dose of sleeping pill.4

Suddenly, accused-appellant entered through the kitchen door. He swiftly darted towards private complainant;
shoved her on the forehead and pushed her against the kitchen counter. When she attempted to run, he grabbed her
arm and punched her twice on the abdomen, causing her to fall to the ground. Though private complainant was reeling
from the physical assault as well as from the effects of the sleeping pill, she felt accused-appellant raise her duster
and remove her underwear. She saw him unzip his pants and pull down his briefs. Then, accused-appellant forced her
legs open and raped her. She felt pain and bled, but she could do nothing as she was feeling very weak. Moments
later, accused-appellant put on his pants and pointed the blood on the floor to private complainant. 5

After accused-appellant left, private complainant struggled to get up and wiped the blood on the floor. Then, she
proceeded to the bedroom where one of her daughters, Teresa, was sleeping. Teresa woke up and saw the bloodied
underwear of her mother. Private complainant told her that she was raped by accused-appellant but failed to give the
details as she dozed off to sleep.6

The following day, May 20, 1998, private complainant submitted herself for physical examination at the PNP Regional
Crime Laboratory in Malolos, Bulacan. Said examination yielded the following results:

xxx xxx xxx

PHYSICAL INJURIES: With contusion at the right upper arm. Contusion at the abdomen.

GENITAL:

PUBIC HAIR: moderate; white


LABIA MAJORA: gaping
LABIA MINORA: light brown
HYMEN: Transformed to caruncular.

EXTERNAL VAGINAL ORIFICE:

VAGINAL CANAL: With abrasions, multiple of the vaginal wall.


CERVIX: none
PERI-URETHRAL AND VAGINAL SMEARS:

REMARKS: With abrasions, multiple of vaginal wall.7

Accused-appellant, on the other hand, denied the accusation against him. He maintained that on the night of May 18,
1998, he and several others attended a "despedida" party in the house of his friend, Jonjon. At 2:00 in the early
morning of May 19, 1998, they decided to go home on board a tricycle. Accused-appellant dropped by the sari-
saristore of private complainant and bought two bottles of beer. As he was finishing his drink at 3:00 a.m., two
daughters of private complainant left for Manila. Not long after that, he went home. 8

Defense witness Paul Danlin Conejero testified that he was one of the companions of accused-appellant in the house
of a certain Jonjon on the night of May 18, 1998. At 2:00 in the early morning of May 19, 1998, they boarded a tricycle
and went home. Accused-appellant, who was first to get off the tricycle, alighted near the sari-sari store of private
complainant. Conejero admitted that he was no longer aware of the whereabouts of accused-appellant after they
parted.9

On November 10, 2000, the trial court rendered judgment, the dispositive portion of which reads:

WHEREFORE, finding herein accused Norman Palarca y Mercado @ "Bong" guilty as principal beyond
reasonable doubt of the crime of rape as charged in the information, without any circumstance, aggravating
or mitigating, found attendant to its commission, he is hereby sentenced to suffer the penalty of reclusion
perpetua as imposed by law, to indemnify private offended party Concepcion C. Javier in the amount of
P50,000.00 for moral damages subject to the corresponding filing fee as a first lien, and to pay the costs of the
proceedings.

SO ORDERED.10

Hence, the instant appeal, on the following assignment of errors:

I.

IT IS ERROR ON THE PART OF THE LOWER COURT TO HAVE CONVICTED ACCUSED-APPELLANT ON A MERE
POSSIBILITY OR SUSPICION OF GUILT. MORAL CERTAINTY IS GLARINGLY AND CLEARLY ABSENT IN
ESTABLISHING BEYOND REASONABLE DOUBT THE GUILT OF ACCUSED-APPELLANT.

II.

IT IS ERROR FOR THE LOWER COURT TO HAVE GIVEN CREDENCE AND VALUE TO THE SWORN STATEMENT OF
PLAINTIFF-APPELLEE (EXHIBIT "A"), DESPITE ITS INHERENT IMPROBABILITY AND HER CREDIBILITY, IMPAIRED.

III.

THE LOWER COURT ERRED TO HAVE ACCORDED WEIGHT AND VALUE TO BIOLOGY REPORTS B-98-658 AND B-
98-736 (EXHIBIT "B" AND "C") RESPECTIVELY, FINDING THE PRESENCE OF HUMAN BLOOD AND SEMINAL
STAINS ON THE DUSTER AND UNDERWEAR DESPITE THE INHERENT IMPROBABILITY OF THEIR FINDINGS AND
FAILURE OF PLAINTIFF-APPELLEE TO IDENTIFY THE OWNERSHIP OF SAID BLOOD AND SEMINAL STAINS. THE
INTEGRITY OF THESE PIECES OF EVIDENCE HAVE BEEN SERIOUSLY IMPAIRED.

IV.
THE LOWER COURT ERRED TO HAVE GIVEN WEIGHT AND VALUE TO EXHIBIT "D", THE MEDICO LEGAL REPORT,
FINDING INJURIES ON THE PERSON OF PLAINTIFF-APPELLE DESPITE THE FAILURE OF THIS MEDICAL REPORT TO
REFLECT COMPLETE MEDICAL FINDINGS OF THE ALLEGED INJURIES.11

The present review hinges on the following issues: (1) whether or not accused-appellant may be validly convicted
under the information charging him with rape; and (2) if so, whether the evidence for the prosecution established the
guilt of accused-appellant beyond reasonable doubt.

The information charging accused-appellant with rape, recites:

The undersigned Asst. Provincial Prosecutor, on complaint of Concepcion C. Javier, accuses Norman Palarca y
Mercado alias "Bong" of the crime of rape, penalized under the provisions of Article 266-B in relation to Art.
266-A, par. 2 of the Revised Penal Code, as amended, committed as follows:

That on or about the 19th of May, 1998, in the municipality of Malolos, province of Bulacan, Philippines, and
within the jurisdiction of this Honorable Court, the abovenamed accused did then and there willfully,
unlawfully and feloniously, with lewd designs, have carnal knowledge with said Concepcion C. Javier, 70 years
of age, against her will and consent.

Contrary to Law.

While the accusatory portion of the information failed to specifically allege that the rape was committed through
force or intimidation, the prosecution was able to establish by evidence that accused-appellant was guilty of rape as
defined under Article 266-A, paragraph (1)(a) of the Revised Penal Code, as amended. The statement in the preamble
of the information that accused-appellant was being charged with rape "penalized under the provisions of Article 266-
B in relation to Art. 266-A, par. 2 of the Revised Penal Code" made no difference. It is not the preamble or caption of
the information, but the actual recital of the facts alleged in the body of the information, that determines the validity
and real nature of the criminal charge.12

In any event, accused-appellant failed to interpose any objection to the presentation by the prosecution of evidence
which tended to prove that he committed the rape by force and intimidation. While generally an accused cannot be
convicted of an offense that is not clearly charged in the complaint or information, this rule is not without exception.
The right to assail the sufficiency of the information or the admission of evidence may be waived by the accused-
appellant. In People v. Lopez,13 we held that an information which lacks certain essential allegations may still sustain
a conviction when the accused fails to object to its sufficiency during the trial, and the deficiency was cured by
competent evidence presented therein. Thus -

[F]ailure to object was thus a waiver of the constitutional right to be informed of the nature and cause of the
accusation. It is competent for a person to waive a right guaranteed by the Constitution, and to consent to
action which would be invalid if taken against his will. (1 ARTURO M. TOLENTINO, CIVIL CODE OF THE
PHILIPPINES 31-32 [1983 ed.]). This Court has, on more than one occasion, recognized waivers of constitutional
rights, e.g., the right against unreasonable searches and seizures (People v. Malasugui, 63 Phil. 221 [1936];
Viuda de Gracia v. Locsin, 65 Phil. 689 [1938]); the right to counsel and to remain silent (People v. Royo, 114
SCRA 304 [1982]); the right to be heard (Abriol v. Homeres, 84 Phil. 525 [1949]; People v. Dichoso, 96 SCRA
957 [1980]); and the right to bail (People v. Donato, 198 SCRA 130 [1991]).

On the second issue, accused-appellant questions the trial court’s assessment of private complainant’s testimony.
Accused-appellant makes much of the finding of the investigating judge during the bail hearing that the evidence
against accused-appellant was not strong. It must be stressed, however, that the assessment of the evidence
presented during a bail hearing is intended only for the purpose of granting or denying an application for the
provisional release of the accused. Not being a final assessment, and merely for the purpose of determining the
necessity of confinement to avoid escape, courts tend to be fair and liberal in their appreciation of evidence. Thus
in People v. Baldoz, et al.,14 the Court made the following pronouncements:

"…The assessment of the evidence presented during a bail hearing is intended only for the purpose of granting
or denying an application for the provisional release of the accused. It is not a final assessment. Before
conviction, every one accused is entitled to bail, except when the offense charged is punishable by reclusion
perpetua, life imprisonment or death; and the evidence of guilt is strong. Needless to say, everyone enjoys the
presumption of innocence.

The denial of this fundamental right is justified only if there is a great probability of escape. Confinement prior
to conviction is warranted, in order to assure the presence of the accused at the trial. Thus, the natural
tendency of the courts has always been towards a fair and liberal appreciation of the evidence in the
determination of the degree of proof and in the presumption of guilt necessary to warrant a deprivation of
that right. Such appreciation is at best preliminary and should not prevent the trial judge from making a final
assessment of the evidence before him after full trial. It is not an uncommon occurrence that an accused
person granted bail is convicted in due course."

Accused-appellant next points out the alleged inconsistency in the narrations of private complainant. In her May 22,
1998 sworn statement before the investigating police, she stated that:

xxx xxx xxx

Q: Ano pa po ang sumunod na nangyari ng daganan kayo ni BONG PALARCA?

A: Ng patungan na nga niya ako ay mabilis po niyang ibinaba and zipper ng kaniyang pantalon at ipinasok
niya ang kanyang tit[i] sa ari ko.15

On the other hand, she testified before the investigating judge on the same day to the following effect:

Q. Ano pa ang ginawa niya ng itinulak kayo at dinaganan at ibinukas yong kanyang zipper?

A. Iyon na nga po passed out na ako hazy na yong tingin ko, lupaypay na ako bale.

Q. Paano nyo nalaman na narape kayo nitong si Bong?

A. Nakaramdam po ako ng sakit saka yong mahapdi.

Q Saan?

A Sa puert[a] ko.16

Contrary to the claim of accused-appellant, we find no inconsistency in the aforecited declarations. As correctly argued
by the Solicitor General, both statements actually confirmed that a sexual act was forced upon the victim, represented
by one, "ipinasok niya ang kanyang tit[i] sa ari ko" and the other, "Nakaramdam po ako ng sakit saka yong mahapdi, x
x x sa puert[a] ko." The first statement clearly pictured the sexual act itself, while the other referred to the physical
pain felt by private complainant. Both declarations corroborate and confirm the cause and effect of forced sexual
congress.

The only added disclosure depicted in the latter statement was the fact that when the sexual act was being made,
private complainant was reeling from mental inertia, ready to succumb to physical pain and to the effects of the
sleeping pill. Despite such condition, however, she was conscious and aware of the atrocity being committed against
her.

At any rate, private complainant’s thorough narration of the rape incident on the witness stand, which remained firm
and consistent under exhaustive cross-examination by the defense, convinces us that she was indeed raped. It is
settled jurisprudence that when a woman says that she has been raped, she says in effect all that is necessary to show
that rape has been committed.17 It is hard to believe that a 70-year old woman who was not shown to have any grudge
against accused-appellant would concoct a humiliating rape story and spend the remaining days of her life in sending
a man to prison if her motive was not to avenge her honor and have her ravisher punished. Bolstered by the medical
findings showing that private complainant sustained multiple abrasions on the vaginal wall, as well as bruises on the
abdomen and right arm which confirmed that she was indeed boxed and grabbed by accused-appellant, we see no
reason to doubt her testimony.

Likewise, we find no merit in accused-appellant’s attempt to discredit private complainant on account of ailing
memory triggered by an alleged terminal cancer disease and dose of sleeping pills which supposedly impaired her
mental faculties. The said physical ailment of private complainant was not shown to have affected her mind.

We find nothing contrary to human experience in the behavior of private complainant during the rape incident as well
as during the preliminary investigation. The lack of resistance by the victim during the rape can be explained by the
physical assault employed by accused-appellant, not to mention the effects of the sleeping pill. So also, the absence
of raging anger on the part of private complainant when she saw accused-appellant at the preliminary investigation
does not make her behavior unnatural. As a mature widow, her wisdom must have dictated her to remain composed
rather than be hysterical and expose herself to further ridicule. Furthermore, different people react differently to the
same or similar stimuli. There is no standard behavior for rape victims with which we can compare herein private
complainant’s comportment, as there is no model form of behavioral response when one is confronted with a strange,
startling or frightful experience.18

The delay of two days before private complainant and her family decided to report the rape incident to the authorities
does not diminish her credibility. As sufficiently explained by private complainant, she and her daughters had to
discuss what to do about her misfortune. It is indeed not easy for a rape victim, especially for one who is in her twilight
years, to decide whether to conceal her humiliation in secrecy or to bravely have the rapist punished, at the same
time bearing the inevitable and consequent public ridicule and embarrassment.

Then, too, the contention of accused-appellant that the duster and underwear of private complainant which were
found to be stained with human blood and semen were tampered deserves scant consideration. Suffice it to state
that even in the absence of said pieces of evidence, the lone testimony of private complainant is enough to produce
conviction of accused-appellant beyond reasonable doubt.

All told, the defenses of denial and alibi interposed by accused-appellant cannot prevail over the positive, direct and
categorical assertion of private complainant.19 Subjected to the severest scrutiny, we are convinced that the trial court
which had the unique opportunity to observe the demeanor of the witnesses as they testified, did not err in giving full
faith and credence to private complainant’s testimony.

Under Article 266-B in relation to Art. 266-A, paragraph 1, of the Revised Penal Code, as amended, rape committed
through the use of force, threat or intimidation is punishable by reclusion perpetua.

The Court sustains the award of P50,000.00 as moral damages which need no proof since it is presumed that the rape
victim suffered moral injuries.20 In addition, accused-appellant must also be ordered to pay the amount of P50,000.00
as civil indemnity for the offense. The payment of civil indemnity is mandatory upon a finding of rape; it is distinct
from any award for moral damages as the latter is based on a different jural foundation and is assessed at the trial
court’s sound discretion.21
WHEREFORE, in view of all the foregoing, the decision of the Regional Trial Court of Malolos, Bulacan, Branch 12, in
Criminal Case No. 605-M-99, finding accused-appellant Norman Palarca y Mercado alias "Bong" guilty beyond
reasonable doubt of the crime of rape and sentencing him to suffer the penalty of reclusion perpetua is AFFIRMED
with the MODIFICATION that in addition to the amount of P50,000.00 as moral damages, plus costs, accused-appellant
is further ordered to pay private complainant the amount of P50,000.00 as civil indemnity.

SO ORDERED.

G.R. No. 150843 March 14, 2003

CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL
VAZQUEZ, respondents.

Cathay is a common carrier engaged in the business of transporting passengers and goods by air. Among the many
routes it services is the Manila-Hongkong-Manila course. As part of its marketing strategy, Cathay accords its frequent
flyers membership in its Marco Polo Club. The members enjoy several privileges, such as priority for upgrading of
booking without any extra charge whenever an opportunity arises. Thus, a frequent flyer booked in the Business Class
has priority for upgrading to First Class if the Business Class Section is fully booked.

Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are frequent flyers of Cathay
and are Gold Card members of its Marco Polo Club. On 24 September 1996, the Vazquezes, together with their maid
and two friends Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for pleasure and business.

For their return flight to Manila on 28 September 1996, they were booked on Cathay’s Flight CX-905, with departure
time at 9:20 p.m. Two hours before their time of departure, the Vazquezes and their companions checked in their
luggage at Cathay’s check-in counter at Kai Tak Airport and were given their respective boarding passes, to wit,
Business Class boarding passes for the Vazquezes and their two friends, and Economy Class for their maid. They then
proceeded to the Business Class passenger lounge.

When boarding time was announced, the Vazquezes and their two friends went to Departure Gate No. 28, which was
designated for Business Class passengers. Dr. Vazquez presented his boarding pass to the ground stewardess, who in
turn inserted it into an electronic machine reader or computer at the gate. The ground stewardess was assisted by a
ground attendant by the name of Clara Lai Han Chiu. When Ms. Chiu glanced at the computer monitor, she saw a
message that there was a "seat change" from Business Class to First Class for the Vazquezes.

Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’ accommodations were upgraded to First Class.
Dr. Vazquez refused the upgrade, reasoning that it would not look nice for them as hosts to travel in First Class and
their guests, in the Business Class; and moreover, they were going to discuss business matters during the flight. He
also told Ms. Chiu that she could have other passengers instead transferred to the First Class Section. Taken aback by
the refusal for upgrading, Ms. Chiu consulted her supervisor, who told her to handle the situation and convince the
Vazquezes to accept the upgrading. Ms. Chiu informed the latter that the Business Class was fully booked, and that
since they were Marco Polo Club members they had the priority to be upgraded to the First Class. Dr. Vazquez
continued to refuse, so Ms. Chiu told them that if they would not avail themselves of the privilege, they would not be
allowed to take the flight. Eventually, after talking to his two friends, Dr. Vazquez gave in. He and Mrs. Vazquez then
proceeded to the First Class Cabin.

Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to Cathay’s Country Manager,
demanded that they be indemnified in the amount of P1million for the "humiliation and embarrassment" caused by
its employees. They also demanded "a written apology from the management of Cathay, preferably a responsible
person with a rank of no less than the Country Manager, as well as the apology from Ms. Chiu" within fifteen days
from receipt of the letter.
In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s Country Manager Argus Guy Robson,
informed the Vazquezes that Cathay would investigate the incident and get back to them within a week’s time.

On 8 November 1996, after Cathay’s failure to give them any feedback within its self-imposed deadline, the Vazquezes
instituted before the Regional Trial Court of Makati City an action for damages against Cathay, praying for the payment
to each of them the amounts of P250,000 as temperate damages; P500,000 as moral damages; P500,000 as exemplary
or corrective damages; and P250,000 as attorney’s fees.

In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that they preferred to stay in Business
Class, Ms. Chiu "obstinately, uncompromisingly and in a loud, discourteous and harsh voice threatened" that they
could not board and leave with the flight unless they go to First Class, since the Business Class was overbooked. Ms.
Chiu’s loud and stringent shouting annoyed, embarrassed, and humiliated them because the incident was witnessed
by all the other passengers waiting for boarding. They also claimed that they were unjustifiably delayed to board the
plane, and when they were finally permitted to get into the aircraft, the forward storage compartment was already
full. A flight stewardess instructed Dr. Vazquez to put his roll-on luggage in the overhead storage compartment.
Because he was not assisted by any of the crew in putting up his luggage, his bilateral carpal tunnel syndrome was
aggravated, causing him extreme pain on his arm and wrist. The Vazquezes also averred that they "belong to the
uppermost and absolutely top elite of both Philippine Society and the Philippine financial community, [and that] they
were among the wealthiest persons in the Philippine[s]."

In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade passengers to the next better
class of accommodation, whenever an opportunity arises, such as when a certain section is fully booked. Priority in
upgrading is given to its frequent flyers, who are considered favored passengers like the Vazquezes. Thus, when the
Business Class Section of Flight CX-905 was fully booked, Cathay’s computer sorted out the names of favored
passengers for involuntary upgrading to First Class. When Ms. Chiu informed the Vazquezes that they were upgraded
to First Class, Dr. Vazquez refused. He then stood at the entrance of the boarding apron, blocking the queue of
passengers from boarding the plane, which inconvenienced other passengers. He shouted that it was impossible for
him and his wife to be upgraded without his two friends who were traveling with them. Because of Dr. Vazquez’s
outburst, Ms. Chiu thought of upgrading the traveling companions of the Vazquezes. But when she checked the
computer, she learned that the Vazquezes’ companions did not have priority for upgrading. She then tried to book
the Vazquezes again to their original seats. However, since the Business Class Section was already fully booked, she
politely informed Dr. Vazquez of such fact and explained that the upgrading was in recognition of their status as
Cathay’s valued passengers. Finally, after talking to their guests, the Vazquezes eventually decided to take the First
Class accommodation.

Cathay also asserted that its employees at the Hong Kong airport acted in good faith in dealing with the Vazquezes;
none of them shouted, humiliated, embarrassed, or committed any act of disrespect against them (the Vazquezes).
Assuming that there was indeed a breach of contractual obligation, Cathay acted in good faith, which negates any
basis for their claim for temperate, moral, and exemplary damages and attorney’s fees. Hence, it prayed for the
dismissal of the complaint and for payment of P100,000 for exemplary damages and P300,000 as attorney’s fees and
litigation expenses.

During the trial, Dr. Vazquez testified to support the allegations in the complaint. His testimony was corroborated by
his two friends who were with him at the time of the incident, namely, Pacita G. Cruz and Josefina Vergel de Dios.

For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen; Ms. Chiu; Norma Barrientos,
Comptroller of its retained counsel; and Mr. Robson. Yuen and Robson testified on Cathay’s policy of upgrading the
seat accommodation of its Marco Polo Club members when an opportunity arises. The upgrading of the Vazquezes to
First Class was done in good faith; in fact, the First Class Section is definitely much better than the Business Class in
terms of comfort, quality of food, and service from the cabin crew. They also testified that overbooking is a widely
accepted practice in the airline industry and is in accordance with the International Air Transport Association (IATA)
regulations. Airlines overbook because a lot of passengers do not show up for their flight. With respect to Flight CX-
905, there was no overall overbooking to a degree that a passenger was bumped off or downgraded. Yuen and Robson
also stated that the demand letter of the Vazquezes was immediately acted upon. Reports were gathered from their
office in Hong Kong and immediately forwarded to their counsel Atty. Remollo for legal advice. However, Atty. Remollo
begged off because his services were likewise retained by the Vazquezes; nonetheless, he undertook to solve the
problem in behalf of Cathay. But nothing happened until Cathay received a copy of the complaint in this case. For her
part, Ms. Chiu denied that she shouted or used foul or impolite language against the Vazquezes. Ms. Barrientos
testified on the amount of attorney’s fees and other litigation expenses, such as those for the taking of the depositions
of Yuen and Chiu.

In its decision1 of 19 October 1998, the trial court found for the Vazquezes and decreed as follows:

WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby
rendered in favor of plaintiffs Vazquez spouses and against defendant Cathay Pacific Airways, Ltd., ordering
the latter to pay each plaintiff the following:

a) Nominal damages in the amount of P100,000.00 for each plaintiff;

b) Moral damages in the amount of P2,000,000.00 for each plaintiff;

c) Exemplary damages in the amount of P5,000,000.00 for each plaintiff;

d) Attorney’s fees and expenses of litigation in the amount of P1,000,000.00 for each plaintiff; and

e) Costs of suit.

SO ORDERED.

According to the trial court, Cathay offers various classes of seats from which passengers are allowed to choose
regardless of their reasons or motives, whether it be due to budgetary constraints or whim. The choice imposes a
clear obligation on Cathay to transport the passengers in the class chosen by them. The carrier cannot, without
exposing itself to liability, force a passenger to involuntarily change his choice. The upgrading of the Vazquezes’
accommodation over and above their vehement objections was due to the overbooking of the Business Class. It was
a pretext to pack as many passengers as possible into the plane to maximize Cathay’s revenues. Cathay’s actuations
in this case displayed deceit, gross negligence, and bad faith, which entitled the Vazquezes to awards for damages.

On appeal by the petitioners, the Court of Appeals, in its decision of 24 July 2001, 2 deleted the award for exemplary
damages; and it reduced the awards for moral and nominal damages for each of the Vazquezes to P250,000 and
P50,000, respectively, and the attorney’s fees and litigation expenses to P50,000 for both of them.

The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class, Cathay novated the contract of
carriage without the former’s consent. There was a breach of contract not because Cathay overbooked the Business
Class Section of Flight CX-905 but because the latter pushed through with the upgrading despite the objections of the
Vazquezes.

However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or meant to be discourteous to, Dr.
Vazquez, although it might seemed that way to the latter, who was a member of the elite in Philippine society and
was not therefore used to being harangued by anybody. Ms. Chiu was a Hong Kong Chinese whose fractured Chinese
was difficult to understand and whose manner of speaking might sound harsh or shrill to Filipinos because of cultural
differences. But the Court of Appeals did not find her to have acted with deliberate malice, deceit, gross negligence,
or bad faith. If at all, she was negligent in not offering the First Class accommodations to other passengers. Neither
can the flight stewardess in the First Class Cabin be said to have been in bad faith when she failed to assist Dr. Vazquez
in lifting his baggage into the overhead storage bin. There is no proof that he asked for help and was refused even
after saying that he was suffering from "bilateral carpal tunnel syndrome." Anent the delay of Yuen in responding to
the demand letter of the Vazquezes, the Court of Appeals found it to have been sufficiently explained.

The Vazquezes and Cathay separately filed motions for a reconsideration of the decision, both of which were denied
by the Court of Appeals.

Cathay seasonably filed with us this petition in this case. Cathay maintains that the award for moral damages has no
basis, since the Court of Appeals found that there was no "wanton, fraudulent, reckless and oppressive" display of
manners on the part of its personnel; and that the breach of contract was not attended by fraud, malice, or bad faith.
If any damage had been suffered by the Vazquezes, it was damnum absque injuria, which is damage without injury,
damage or injury inflicted without injustice, loss or damage without violation of a legal right, or a wrong done to a
man for which the law provides no remedy. Cathay also invokes our decision in United Airlines, Inc. v. Court of
Appeals3 where we recognized that, in accordance with the Civil Aeronautics Board’s Economic Regulation No. 7, as
amended, an overbooking that does not exceed ten percent cannot be considered deliberate and done in bad faith.
We thus deleted in that case the awards for moral and exemplary damages, as well as attorney’s fees, for lack of proof
of overbooking exceeding ten percent or of bad faith on the part of the airline carrier.

On the other hand, the Vazquezes assert that the Court of Appeals was correct in granting awards for moral and
nominal damages and attorney’s fees in view of the breach of contract committed by Cathay for transferring them
from the Business Class to First Class Section without prior notice or consent and over their vigorous objection. They
likewise argue that the issuance of passenger tickets more than the seating capacity of each section of the plane is in
itself fraudulent, malicious and tainted with bad faith.

The key issues for our consideration are whether (1) by upgrading the seat accommodation of the Vazquezes from
Business Class to First Class Cathay breached its contract of carriage with the Vazquezes; (2) the upgrading was tainted
with fraud or bad faith; and (3) the Vazquezes are entitled to damages.

We resolve the first issue in the affirmative.

A contract is a meeting of minds between two persons whereby one agrees to give something or render some service
to another for a consideration. There is no contract unless the following requisites concur: (1) consent of the
contracting parties; (2) an object certain which is the subject of the contract; and (3) the cause of the obligation which
is established.4 Undoubtedly, a contract of carriage existed between Cathay and the Vazquezes. They voluntarily and
freely gave their consent to an agreement whose object was the transportation of the Vazquezes from Manila to Hong
Kong and back to Manila, with seats in the Business Class Section of the aircraft, and whose cause or consideration
was the fare paid by the Vazquezes to Cathay.

The only problem is the legal effect of the upgrading of the seat accommodation of the Vazquezes. Did it constitute a
breach of contract?

Breach of contract is defined as the "failure without legal reason to comply with the terms of a contract." 5 It is also
defined as the "[f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract."6

In previous cases, the breach of contract of carriage consisted in either the bumping off of a passenger with confirmed
reservation or the downgrading of a passenger’s seat accommodation from one class to a lower class. In this case,
what happened was the reverse. The contract between the parties was for Cathay to transport the Vazquezes to
Manila on a Business Class accommodation in Flight CX-905. After checking-in their luggage at the Kai Tak Airport in
Hong Kong, the Vazquezes were given boarding cards indicating their seat assignments in the Business Class Section.
However, during the boarding time, when the Vazquezes presented their boarding passes, they were informed that
they had a seat change from Business Class to First Class. It turned out that the Business Class was overbooked in that
there were more passengers than the number of seats. Thus, the seat assignments of the Vazquezes were given to
waitlisted passengers, and the Vazquezes, being members of the Marco Polo Club, were upgraded from Business Class
to First Class.

We note that in all their pleadings, the Vazquezes never denied that they were members of Cathay’s Marco Polo Club.
They knew that as members of the Club, they had priority for upgrading of their seat accommodation at no extra cost
when an opportunity arises. But, just like other privileges, such priority could be waived. The Vazquezes should have
been consulted first whether they wanted to avail themselves of the privilege or would consent to a change of seat
accommodation before their seat assignments were given to other passengers. Normally, one would appreciate and
accept an upgrading, for it would mean a better accommodation. But, whatever their reason was and however odd it
might be, the Vazquezes had every right to decline the upgrade and insist on the Business Class accommodation they
had booked for and which was designated in their boarding passes. They clearly waived their priority or preference
when they asked that other passengers be given the upgrade. It should not have been imposed on them over their
vehement objection. By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes.

We are not, however, convinced that the upgrading or the breach of contract was attended by fraud or bad faith.
Thus, we resolve the second issue in the negative.

Bad faith and fraud are allegations of fact that demand clear and convincing proof. They are serious accusations that
can be so conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans
or mudslinging unless convincingly substantiated by whoever is alleging them.

Fraud has been defined to include an inducement through insidious machination. Insidious machination refers to a
deceitful scheme or plot with an evil or devious purpose. Deceit exists where the party, with intent to deceive,
conceals or omits to state material facts and, by reason of such omission or concealment, the other party was induced
to give consent that would not otherwise have been given.7

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity
and conscious doing of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of
the nature of fraud.8

We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were not induced to agree to the
upgrading through insidious words or deceitful machination or through willful concealment of material facts. Upon
boarding, Ms. Chiu told the Vazquezes that their accommodations were upgraded to First Class in view of their being
Gold Card members of Cathay’s Marco Polo Club. She was honest in telling them that their seats were already given
to other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to consider the
remedy of offering the First Class seats to other passengers. But, we find no bad faith in her failure to do so, even if
that amounted to an exercise of poor judgment.

Neither was the transfer of the Vazquezes effected for some evil or devious purpose. As testified to by Mr. Robson,
the First Class Section is better than the Business Class Section in terms of comfort, quality of food, and service from
the cabin crew; thus, the difference in fare between the First Class and Business Class at that time was $250. 9Needless
to state, an upgrading is for the better condition and, definitely, for the benefit of the passenger.

We are not persuaded by the Vazquezes’ argument that the overbooking of the Business Class Section constituted
bad faith on the part of Cathay. Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board, as amended,
provides:

Sec 3. Scope. – This regulation shall apply to every Philippine and foreign air carrier with respect to its operation
of flights or portions of flights originating from or terminating at, or serving a point within the territory of the
Republic of the Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside
or outside the Philippines, for which he holds confirmed reserved space. Furthermore, this Regulation is
designed to cover only honest mistakes on the part of the carriers and excludes deliberate and willful acts of
non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating capacity of the
aircraft shall not be considered as a deliberate and willful act of non-accommodation.

It is clear from this section that an overbooking that does not exceed ten percent is not considered deliberate and
therefore does not amount to bad faith.10 Here, while there was admittedly an overbooking of the Business Class,
there was no evidence of overbooking of the plane beyond ten percent, and no passenger was ever bumped off or
was refused to board the aircraft.

Now we come to the third issue on damages.

The Court of Appeals awarded each of the Vazquezes moral damages in the amount of P250,000. Article 2220 of the
Civil Code provides:

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should
find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad faith.

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Although incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of the defendant’s wrongful act or omission. 11 Thus, case
law establishes the following requisites for the award of moral damages: (1) there must be an injury clearly sustained
by the claimant, whether physical, mental or psychological; (2) there must be a culpable act or omission factually
established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the
claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 12

Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the
carrier is guilty of fraud or bad faith or where the mishap resulted in the death of a passenger.13 Where in breaching
the contract of carriage the airline is not shown to have acted fraudulently or in bad faith, liability for damages is
limited to the natural and probable consequences of the breach of the obligation which the parties had foreseen or
could have reasonably foreseen. In such a case the liability does not include moral and exemplary damages. 14

In this case, we have ruled that the breach of contract of carriage, which consisted in the involuntary upgrading of the
Vazquezes’ seat accommodation, was not attended by fraud or bad faith. The Court of Appeals’ award of moral
damages has, therefore, no leg to stand on.

The deletion of the award for exemplary damages by the Court of Appeals is correct. It is a requisite in the grant of
exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent or
malevolent manner.15 Such requisite is absent in this case. Moreover, to be entitled thereto the claimant must first
establish his right to moral, temperate, or compensatory damages.16 Since the Vazquezes are not entitled to any of
these damages, the award for exemplary damages has no legal basis. And where the awards for moral and exemplary
damages are eliminated, so must the award for attorney’s fees.17

The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of contract is an award for nominal
damages under Article 2221 of the Civil Code, which reads as follows:

Article 2221 of the Civil Code provides:


Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated
or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.

Worth noting is the fact that in Cathay’s Memorandum filed with this Court, it prayed only for the deletion of the
award for moral damages. It deferred to the Court of Appeals’ discretion in awarding nominal damages; thus:

As far as the award of nominal damages is concerned, petitioner respectfully defers to the Honorable Court of
Appeals’ discretion. Aware as it is that somehow, due to the resistance of respondents-spouses to the
normally-appreciated gesture of petitioner to upgrade their accommodations, petitioner may have disturbed
the respondents-spouses’ wish to be with their companions (who traveled to Hong Kong with them) at the
Business Class on their flight to Manila. Petitioner regrets that in its desire to provide the respondents-spouses
with additional amenities for the one and one-half (1 1/2) hour flight to Manila, unintended tension ensued.18

Nonetheless, considering that the breach was intended to give more benefit and advantage to the Vazquezes by
upgrading their Business Class accommodation to First Class because of their valued status as Marco Polo members,
we reduce the award for nominal damages to P5,000.

Before writing finis to this decision, we find it well-worth to quote the apt observation of the Court of Appeals
regarding the awards adjudged by the trial court:

We are not amused but alarmed at the lower court’s unbelievable alacrity, bordering on the scandalous, to award
excessive amounts as damages. In their complaint, appellees asked for P1 million as moral damages but the lower
court awarded P4 million; they asked for P500,000.00 as exemplary damages but the lower court cavalierly awarded
a whooping P10 million; they asked for P250,000.00 as attorney’s fees but were awarded P2 million; they did not ask
for nominal damages but were awarded P200,000.00. It is as if the lower court went on a rampage, and why it acted
that way is beyond all tests of reason. In fact the excessiveness of the total award invites the suspicion that it was the
result of "prejudice or corruption on the part of the trial court."

The presiding judge of the lower court is enjoined to hearken to the Supreme Court’s admonition in Singson
vs. CA (282 SCRA 149 [1997]), where it said:

The well-entrenched principle is that the grant of moral damages depends upon the discretion of the
court based on the circumstances of each case. This discretion is limited by the principle that the
amount awarded should not be palpably and scandalously excessive as to indicate that it was the result
of prejudice or corruption on the part of the trial court….

and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held:

Nonetheless, we agree with the injunction expressed by the Court of Appeals that passengers must not
prey on international airlines for damage awards, like "trophies in a safari." After all neither the social
standing nor prestige of the passenger should determine the extent to which he would suffer because
of a wrong done, since the dignity affronted in the individual is a quality inherent in him and not
conferred by these social indicators. 19

We adopt as our own this observation of the Court of Appeals.

WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the Court of Appeals of 24 July 2001 in
CA-G.R. CV No. 63339 is hereby MODIFIED, and as modified, the awards for moral damages and attorney’s fees are
set aside and deleted, and the award for nominal damages is reduced to P5,000.
No pronouncement on costs.

SO ORDERED.

G.R. No. 142305 December 10, 2003

SINGAPORE AIRLINES LIMITED, petitioner, vs. ANDION FERNANDEZ, respondent.

Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and abroad. At the time of the incident,
she was availing an educational grant from the Federal Republic of Germany, pursuing a Master’s Degree in Music
majoring in Voice.3

She was invited to sing before the King and Queen of Malaysia on February 3 and 4, 1991. For this singing engagement,
an airline passage ticket was purchased from petitioner Singapore Airlines which would transport her to Manila from
Frankfurt, Germany on January 28, 1991. From Manila, she would proceed to Malaysia on the next day.4 It was
necessary for the respondent to pass by Manila in order to gather her wardrobe; and to rehearse and coordinate with
her pianist her repertoire for the aforesaid performance.

The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27, leaving Frankfurt, Germany on
January 27, 1991 bound for Singapore with onward connections from Singapore to Manila. Flight No. SQ 27 was
scheduled to leave Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving at Singapore at 8:50 in the morning
of January 28, 1991. The connecting flight from Singapore to Manila, Flight No. SQ 72, was leaving Singapore at 11:00
in the morning of January 28, 1991, arriving in Manila at 2:20 in the afternoon of the same day. 5

On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours late or at about 11:00 in the
morning of January 28, 1991. By then, the aircraft bound for Manila had left as scheduled, leaving the respondent and
about 25 other passengers stranded in the Changi Airport in Singapore.6

Upon disembarkation at Singapore, the respondent approached the transit counter who referred her to the nightstop
counter and told the lady employee thereat that it was important for her to reach Manila on that day, January 28,
1991. The lady employee told her that there were no more flights to Manila for that day and that respondent had no
choice but to stay in Singapore. Upon respondent’s persistence, she was told that she can actually fly to Hong Kong
going to Manila but since her ticket was non-transferable, she would have to pay for the ticket. The respondent could
not accept the offer because she had no money to pay for it.7 Her pleas for the respondent to make arrangements to
transport her to Manila were unheeded.8

The respondent then requested the lady employee to use their phone to make a call to Manila. Over the employees’
reluctance, the respondent telephoned her mother to inform the latter that she missed the connecting flight. The
respondent was able to contact a family friend who picked her up from the airport for her overnight stay in Singapore.9

The next day, after being brought back to the airport, the respondent proceeded to petitioner’s counter which says:
"Immediate Attention To Passengers with Immediate Booking." There were four or five passengers in line. The
respondent approached petitioner’s male employee at the counter to make arrangements for immediate booking
only to be told: "Can’t you see I am doing something." She explained her predicament but the male employee
uncaringly retorted: "It’s your problem, not ours."10

The respondent never made it to Manila and was forced to take a direct flight from Singapore to Malaysia on January
29, 1991, through the efforts of her mother and travel agency in Manila. Her mother also had to travel to Malaysia
bringing with her respondent’s wardrobe and personal things needed for the performance that caused them to incur
an expense of about P50,000.11
As a result of this incident, the respondent’s performance before the Royal Family of Malaysia was below par. Because
of the rude and unkind treatment she received from the petitioner’s personnel in Singapore, the respondent was
engulfed with fear, anxiety, humiliation and embarrassment causing her to suffer mental fatigue and skin rashes. She
was thereby compelled to seek immediate medical attention upon her return to Manila for "acute urticaria." 12

On June 15, 1993, the RTC rendered a decision with the following dispositive portion:

ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay herein plaintiff Andion H. Fernandez
the sum of:

1. FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual damages;

2. TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral damages considering plaintiff’s
professional standing in the field of culture at home and abroad;

3. ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages;

4. SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorney’s fees; and

5. To pay the costs of suit.

SO ORDERED.13

The petitioner appealed the decision to the Court of Appeals.

On June 10, 1998, the CA promulgated the assailed decision finding no reversible error in the appealed decision of the
trial court.14

Forthwith, the petitioner filed the instant petition for review, raising the following errors:

THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION OF THE TRIAL COURT THAT
AWARDED DAMAGES TO RESPONDENT FOR THE ALLEGED FAILURE OF THE PETITIONER TO EXERCISE EXTRAORDINARY
DILIGENCE.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER ACTED IN BAD FAITH.

III

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONER’S COUNTERCLAIMS.15

The petitioner assails the award of damages contending that it exercised the extraordinary diligence required by law
under the given circumstances. The delay of Flight No. SQ 27 from Frankfurt to Singapore on January 28, 1991 for
more than two hours was due to a fortuitous event and beyond petitioner’s control. Inclement weather prevented
the petitioner’s plane coming from Copenhagen, Denmark to arrive in Frankfurt on time on January 27, 1991. The
plane could not take off from the airport as the place was shrouded with fog. This delay caused a "snowball effect"
whereby the other flights were consequently delayed. The plane carrying the respondent arrived in Singapore two (2)
hours behind schedule.16 The delay was even compounded when the plane could not travel the normal route which
was through the Middle East due to the raging Gulf War at that time. It had to pass through the restricted Russian
airspace which was more congested.17

Under these circumstances, petitioner therefore alleged that it cannot be faulted for the delay in arriving in Singapore
on January 28, 1991 and causing the respondent to miss her connecting flight to Manila.

The petitioner further contends that it could not also be held in bad faith because its personnel did their best to look
after the needs and interests of the passengers including the respondent. Because the respondent and the other 25
passengers missed their connecting flight to Manila, the petitioner automatically booked them to the flight the next
day and gave them free hotel accommodations for the night. It was respondent who did not take petitioner’s offer
and opted to stay with a family friend in Singapore.

The petitioner also alleges that the action of the respondent was baseless and it tarnished its good name and image
earned through the years for which, it was entitled to damages in the amount of ₱1,000,000; exemplary damages of
₱500,000; and attorney’s fees also in the amount of ₱500,000.18

The petition is barren of merit.

When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage
arises. The passenger then has every right to expect that he be transported on that flight and on that date. If he does
not, then the carrier opens itself to a suit for a breach of contract of carriage. 19

The contract of air carriage is a peculiar one. Imbued with public interest, the law requires common carriers to carry
the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious
persons with due regard for all the circumstances.20 In an action for breach of contract of carriage, the aggrieved party
does not have to prove that the common carrier was at fault or was negligent. All that is necessary to prove is the
existence of the contract and the fact of its non-performance by the carrier.21

In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip from Frankfurt
to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage with the petitioner, the
respondent certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28, 1991. Since the
petitioner did not transport the respondent as covenanted by it on said terms, the petitioner clearly breached its
contract of carriage with the respondent. The respondent had every right to sue the petitioner for this breach. The
defense that the delay was due to fortuitous events and beyond petitioner’s control is unavailing. In PAL vs. CA,22 we
held that:

.... Undisputably, PAL’s diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such
occurrence did not terminate PAL’s contract with its passengers. Being in the business of air carriage and the sole one
to operate in the country, PAL is deemed to be equipped to deal with situations as in the case at bar. What we said in
one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been
landed at the port of destination and has left the carrier’s premises. Hence, PAL necessarily would still have to exercise
extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have
reached their final destination...

...

"...If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the sole and only cause (Art.
1755 C.C., Art. 1733 C.C.). Since part of the failure to comply with the obligation of common carrier to deliver its
passengers safely to their destination lay in the defendant’s failure to provide comfort and convenience to its stranded
passengers using extraordinary diligence, the cause of non-fulfillment is not solely and exclusively due to fortuitous
event, but due to something which defendant airline could have prevented, defendant becomes liable to plaintiff."
Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill its obligation to transport the
respondent safely as scheduled as far as human care and foresight can provide to her destination. Tagged as a
premiere airline as it claims to be and with the complexities of air travel, it was certainly well-equipped to be able to
foresee and deal with such situation. The petitioner’s indifference and negligence by its absence and insensitivity was
exposed by the trial court, thus:

(a) Under Section 9.1 of its Traffic Manual (Exhibit 4) "…flights can be delayed to await the uplift of connecting
cargo and passengers arriving on a late in-bound flight…" As adverted to by the trial court,…"Flight SQ-27/28
maybe delayed for about half an hour to transfer plaintiff to her connecting flight. As pointed out above, delay
is normal in commercial air transportation" (RTC Decision, p. 22); or

(b) Petitioner airlines could have carried her on one of its flights bound for Hongkong and arranged for a
connecting flight from Hongkong to Manila all on the same date. But then the airline personnel who informed
her of such possibility told her that she has to pay for that flight. Regrettably, respondent did not have
sufficient funds to pay for it. (TSN, 30 March 1992, pp.8-9; RTC Decision, pp. 22-23) Knowing the predicament
of the respondent, petitioner did not offer to shoulder the cost of the ticket for that flight; or

(c) As noted by the trial court from the account of petitioner’s witness, Bob Khkimyong, that "a passenger such
as the plaintiff could have been accommodated in another international airline such as Lufthansa to bring the
plaintiff to Singapore early enough from Frankfurt provided that there was prior communication from that
station to enable her to catch the connecting flight to Manila because of the urgency of her business in
Manila…(RTC Decision, p. 23)

The petitioner’s diligence in communicating to its passengers the consequences of the delay in their flights was
wanting. As elucidated by the trial court:

It maybe that delay in the take off and arrival of commercial aircraft could not be avoided and may be caused by
diverse factors such as those testified to by defendant’s pilot. However, knowing fully well that even before the
plaintiff boarded defendant’s Jumbo aircraft in Frankfurt bound for Singapore, it has already incurred a delay of two
hours. Nevertheless, defendant did not take the trouble of informing plaintiff, among its other passengers of such a
delay and that in such a case, the usual practice of defendant airline will be that they have to stay overnight at their
connecting airport; and much less did it inquire from the plaintiff and the other 25 passengers bound for Manila
whether they are amenable to stay overnight in Singapore and to take the connecting flight to Manila the next day.
Such information should have been given and inquiries made in Frankfurt because even the defendant airline’s manual
provides that in case of urgency to reach his or her destination on the same date, the head office of defendant in
Singapore must be informed by telephone or telefax so as the latter may make certain arrangements with other
airlines in Frankfurt to bring such a passenger with urgent business to Singapore in such a manner that the latter can
catch up with her connecting flight such as S-27/28 without spending the night in Singapore…23

The respondent was not remiss in conveying her apprehension about the delay of the flight when she was still in
Frankfurt. Upon the assurance of petitioner’s personnel in Frankfurt that she will be transported to Manila on the
same date, she had every right to expect that obligation fulfilled. She testified, to wit:

Q: Now, since you were late, when the plane that arrived from Frankfurt was late, did you not make arrangements so
that your flight from Singapore to Manila would be adjusted?

A: I asked the lady at the ticket counter, the one who gave the boarding pass in Frankfurt and I asked her, "Since my
flight going to Singapore would be late, what would happen to my Singapore-Manila flight?" and then she said, "Don’t
worry, Singapore Airlines would be responsible to bring you to Manila on the same date." And then they have
informed the name of the officer, or whatever, that our flight is going to be late. 24
When a passenger contracts for a specific flight, he has a purpose in making that choice which must be respected.
This choice, once exercised, must not be impaired by a breach on the part of the airline without the latter incurring
any liability.25 For petitioner’s failure to bring the respondent to her destination, as scheduled, we find the petitioner
clearly liable for the breach of its contract of carriage with the respondent.

We are convinced that the petitioner acted in bad faith.1âwphi1 Bad faith means a breach of known duty through
some motive of interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may well have been
the motive; but it is malice nevertheless.26 Bad faith was imputed by the trial court when it found that the petitioner’s
employees at the Singapore airport did not accord the respondent the attention and treatment allegedly warranted
under the circumstances. The lady employee at the counter was unkind and of no help to her. The respondent further
alleged that without her threats of suing the company, she was not allowed to use the company’s phone to make long
distance calls to her mother in Manila. The male employee at the counter where it says: "Immediate Attention to
Passengers with Immediate Booking" was rude to her when he curtly retorted that he was busy attending to other
passengers in line. The trial court concluded that this inattentiveness and rudeness of petitioner’s personnel to
respondent’s plight was gross enough amounting to bad faith. This is a finding that is generally binding upon the Court
which we find no reason to disturb.

Article 2232 of the Civil Code provides that in a contractual or quasi-contractual relationship, exemplary damages may
be awarded only if the defendant had acted in a "wanton, fraudulent, reckless, oppressive or malevolent manner." In
this case, petitioner’s employees acted in a wanton, oppressive or malevolent manner. The award of exemplary
damages is, therefore, warranted in this case.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

G.R. No. 174364 July 30, 2009

NORTHWEST AIRLINES, Petitioner, vs. DELFIN S. CATAPANG,

Delfin S. Catapang (respondent), a lawyer and, at the time material to the case at bar, Assistant Vice President and
Head of the Special Projects Department, Corporate Services Division of the United Coconut Planters Bank (UCPB),
was directed by UCPB to go to Paris on a business trip. As he intended to proceed, after his trip to Paris, to the United
States to visit his siblings, he requested First United Travel, Inc. (FUT) to issue him a ticket that would allow rebooking
or rerouting of flights within the United States.

Complying with respondent’s requirement, FUT informed him, via telephone, that Northwest Airlines, Inc. (petitioner)
was willing to accommodate his request provided he would pay an additional US$50 for every rebooking or rerouting
of flight. Respondent agreed with the condition, hence, FUT, as petitioner’s authorized agent, issued respondent a
ticket covering the New York to Los Angeles via Detroit and the Los Angeles to Manila segments of his travel, indicating
thereon the following details of his itinerary:

xxxx
12MAR LV NYC/LAGUARDIA 0935 NORTHWEST
AR LOS ANGELES 1433
VIA DETROIT MI

xxxx
The rebooking/rerouting scheme was annotated on the restriction portion of the ticket issued to respondent bearing
No. 012 6832392670 5 as follows:

No end./7 days adv. Purchase


US$50 – rebooking/re-routing/cancellation fee (Underscoring supplied)

On respondent’s arrival in New York, he called up by telephone petitioner’s office which informed him that his ticket
was not "rebookable or reroutable." He was, nevertheless, advised to go to petitioner’s nearest branch office.

Respondent thus proceeded on March 10, 1992 to petitioner’s ticket office at the World Trade Center where he was
treated in a rude manner by an employee who informed him that his ticket was not rebookable or reroutable since it
was of a "restricted type," and that unless he upgraded it by paying US$644.00, he could not rebook. Left with no
choice, respondent paid that amount for rebooking.

Upon his return to the Philippines, respondent, by letter of March 24, 1992, wrote petitioner:

At about 9:30 in the morning of March 11, 1992, I went to the sales office in the World Trade Center where I explained
to your black woman representative my predicament. Your representative rudely told me that my ticket is the
restrictive type and that my flight can not be rebooked or rerouted. I explained that the only restriction on my ticket
is that I should pay US$50.00 if I have to rebook or reroute my flight and asked your representative to read the
restriction. Your representative rudely and impolitely retorted that I could not understand English and that unless I
pay the amount of US$644.00, I cannot get a rebooking and rerouting. Despite my appeal and protestation, she did
not reconsider her decision. As I was badly needed in Detroit on the evening of the same day and had to be back in
Manila on the 14th of March, I was compelled to pay, under protest, the amount of US$644.00 using my American
Express Card as my cash was insufficient to cover the amount. It was only then that I was issued ticket no.
012:4488:504:099.

Considering that my ticket was cleared with you prior to its issuance and that FUT is your duly accredited agent, you
are bound by the terms of the ticket issued by FUT in your behalf. You have no right to unilaterally change the tenor
of your contract during its effectivity without my consent.

Your airline’s willful breach of the terms and conditions of my ticket and the shabby treatment that I received from
your personnel hurt my feeling, humiliated and embarrassed me in the presence of my brother-in-law and other
people nearby who witnessed the incident. The fact that your employee did that to a bank officer and a lawyer like
me only shows that your airline can also do the same to others, not to mention the poor and hapless persons.

Because I could not bear my wounded feeling, the shabby treatment, the humiliation and the embarrassment that I
received from your employee, I asked for the cancellation and refund of my ticket covering my trip from Los Angeles
to the Philippines for which I was given a refund application slip no. 012 0230189256 3 by your ticket counter at the
Los Angeles airport on March 12, 1992.

To compensate me for the expenses that I incurred, and the wounded feeling, humiliation and embarrassment that
were caused by your airline’s willful breach of contract with me, I demand that you pay me damages in the amount
of ₱1,000,000.00 within a period of five (5) days from your receipt hereof. Otherwise, I shall have no alternative but
to seek redress from our court of justice and to hold you liable for all other expenses attendant thereto.1(Underscoring
supplied)

Respondent’s letter of demand remained unanswered, unheeded, drawing him to file on July 1, 1992 with the
Regional Trial Court (RTC) of Makati a complaint for damages against petitioner.
Petitioner claimed in its Answer that respondent’s ticket was a discounted one, subject to the rules which petitioner’s
agents have to abide by. Thus, with respect to the annotation on respondent’s ticket of the US$50.00 rebooking
charge, petitioner explained that the same was subject to the "rules of applicability," which rules could not be
reflected on the ticket.

By Decision of October 5, 2000,2 Branch 56 of the RTC Makati faulted petitioner for breach of contract of carriage,
disposing as follows:

WHEREFORE, all the foregoing considered, this Court declares defendant liable to pay plaintiff and orders the latter
to pay him the following sums:

1. US$ 823.00 or its Peso equivalent at the time of the payment with legal interest and Php7,372.50 for filing
fees as actual damages;

2. ₱800,000.00 as moral damages;

3. ₱100,000.00 as exemplary damages;

4. ₱200,000.00 as and for attorney’s fees; and

5. Cost of suit.

SO ORDERED.3

On appeal, the Court of Appeals, by Decision of June 30, 20064 affirmed the trial court’s Decision with
modification,thus:

WHEREFORE, except for the reduction of the award of moral damages from ₱800,000.00 to ₱400,000.00, the
appealed Decision dated October 5, 2000 is affirmed in all other respects.

SO ORDERED."5 (Underscoring supplied)

Hence, the present petition which assails the award to respondent of moral damages, petitioner positing that it was
not guilty of breach of contract. In any event, it assails the award to respondent of exemplary damages, it positing
that the same is not recoverable in cases of breach of contract of carriage unless the carrier is guilty of wanton,
fraudulent, reckless, oppressive or malevolent conduct of which it is not, so it claims.

Additionally, petitioner assails 1) the award of attorney’s fees, positing that under Article 2208 of the Civil Code,
attorney’s fees and expenses of litigation cannot, as a general rule, be recovered, and of actual damages for
respondent did not suffer any pecuniary loss; 2) the order for reimbursement of filing fees there being no basis; and
3) the award of a total of ₱700,000.00 in damages for being excessive and unprecedented.

The petition is bereft of merit.

When respondent inquired from petitioner’s agent FUT if he would be allowed to rebook/reroute his flight, FUT
advised him that he could, on the condition that he would pay $50 for every rebooking. He was not told by FUT and
the ticket did not reflect it that the ticket being issued to him was a "restricted type" to call for its upgrading before a
rebooking/rerouting.lawph!l

Petitioner’s reservation supervisor, Amelia Merris, in fact admitted that, as the above-quoted entry on the restriction
portion of the ticket reads, the only restriction on respondent’s ticket pertains only to non-endorsement.
ATTY. CATAPANG

Q. x x x Is it a fact that the only restriction on the first line is that no end./7days advance purchase, is that
correct? And what does that phrase no.end/7days purchase means?

A. "No end," means non endorsable, sir.

Q. When you say non endorsable you cannot transfer it to another airline?

A. That is right, sir.

xxxx

Q. Based on the restriction, there is no such restriction?

A. Yes, sir.6 (Underscoring supplied)

Petitioner’s breach in this case was aggravated by the undenied treatment received by respondent when he tried to
rebook his ticket. Instead of civilly informing respondent that his ticket could not be rebooked, petitioner’s agent in
New York exhibited rudeness in the presence of respondent’s brother-in-law and other customers, insulting
respondent by telling him that he could not understand English.

Passengers have the right to be treated by a carrier’s employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees. So it is that any discourteous conduct on the part of these employees toward a
passenger gives the latter an action for damages against the carrier.7

The award of moral and exemplary damages to respondent is thus justified.

The inclusion of filing fees as part of the actual damages is superfluous, if not erroneous, the same being chargeable
to the "cost of suit" awarded by the trial court and affirmed by the appellate court. Sections 8 and 10, Rule 142 of the
Rules of Court enlighten:

SEC. 8. Costs, how taxed. — In inferior courts, the costs shall be taxed by the justice of the peace or municipal judge
and included in the judgment. In superior courts, costs shall be taxed by the clerk of the corresponding court on five
days' written notice given by the prevailing party to the adverse party. With this notice shall be served a statement of
the items of costs claimed by the prevailing party, verified by his oath or that of his attorney. Objections to the taxation
shall be made in writing, specifying the items objected to. Either party may appeal to the court from the clerk's
taxation. The costs shall be inserted in the judgment if taxed before its entry, and payment thereof shall be enforced
by execution.

xxxx

SEC. 10. Costs in Courts of First Instance. — In an action or proceeding pending in a Court of First Instance, the
prevailing party may recover the following costs, and no other:

a) For the complaint or answer, fifteen pesos;

b) For his own attendance, and that of his attorney, down to and including final judgment, twenty pesos;
c) For each witness necessarily produced by him, for each day's necessary attendance of such witness at the
trial, two pesos, and his lawful traveling fees;

d) For each deposition lawfully taken by him, and produced in evidence, five pesos;

e) For original documents, deeds, or papers of any kind produced by him, nothing;

f) For official copies of such documents, deeds, or papers, the lawful fees necessarily paid for obtaining such
copies;

g) The lawful fees paid by him in entering and docketing the action or recording the proceedings, for the
service of any process in action, and all lawful clerk's fees paid by him." (Emphasis and underscoring supplied)

As for the award of attorney’s fees, the trial court did not state the factual and legal basis thereof. 8 The transcript of
stenographic notes of the lower court’s proceedings do not show that respondent adduced proof to sustain his general
averment of a retainer agreement in the amount of ₱200,000.00. The award must thus be deleted.

WHEREFORE, the Court of Appeals Decision of June 30, 2006 is AFFIRMED with MODIFICATION in that the award of
attorney’s fees is deleted for lack of basis. And the award of actual damages of ₱7,372.50 representing filing fees is
deleted.

SO ORDERED.

G.R. No. 116044-45 March 9, 2000

AMERICAN AIRLINES petitioner, vs. COURT OF APPEALS, HON. BERNARDO LL. SALAS and DEMOCRITO
MENDOZA, respondents.

Before us is a petition for review of the decision dated December 24, 1993 rendered by the Court of Appeals in the
consolidated cases docketed as CA-G.R. SP nos. 30946 and 31452 entitled American Airlines vs. The Presiding Judge
Branch 8 of the Regional Trial Court of Cebu and Democrito Mendoza, petitions for certiorari and prohibition. In SP
no. 30946, the petitioner assails the trial court's order denying the petitioner's motion to dismiss the action for
damages filed by the private respondent for lack of jurisdiction under section 28 (1) of the Warsaw Convention; and
in SP No. 31452 the petitioner challenges the validity of the trial court's order striking off the record the deposition of
the petitioner's security officer taken in Geneva, Switzerland for failure of the said security officer to answer the cross
interrogatories propounded by the private respondent.

The sole issue raised in SP No. 30946 is the questioned jurisdiction of the Regional Trial Court of Cebu to take
cognizance of the action for damages filed by the private respondent against herein petitioner in view of Art 28 (1) of
the Warsaw Convention. 1 It is undisputed that the private respondent purchased from Singapore Airlines in Manila
conjunction tickets for Manila-Singapore-Athens-Larnaca-Rome-Turin-Zurich-Geneva-Copenhagen-New York. The
petitioner was not a participating airline in any of the segments in the itinerary under the said conjunction tickets. In
Geneva the petitioner decided to forego his trip to Copenhagen and to go straight to New York and in the absence of
a direct flight under his conjunction tickets from Geneva to New York, the private respondent on June 7, 1989
exchanged the unused portion of the conjunction ticket for a one-way ticket from Geneva to New York from the
petitioner airline. Petitioner issued its own ticket to the private respondent in Geneva and claimed the value of the
unused portion of the conjunction ticket from the IATA 2 clearing house in Geneva.

In September 1989, private respondent filed an action for damages before the regional trial court of Cebu for the
alleged embarrassment and mental anguish he suffered at the Geneva Airport when the petitioner's security officers
prevented him from boarding the plane, detained him for about an hour and allowed him to board the plane only
after all the other passengers have boarded. The petitioner filed a motion to dismiss for lack of jurisdiction of
Philippine courts to entertain the said proceedings under Art. 28(1) of the Warsaw Convention. The trial court denied
the motion. The order of denial was elevated to the Court of Appeals which affirmed the ruling of the trial court. Both
the trial and the appellate courts held that the suit may be brought in the Philippines under the pool partnership
agreement among the IATA members, which include Singapore Airlines and American Airlines, wherein the members
act as agents of each other in the issuance of tickets to those who may need their services. The contract of carriage
perfected in Manila between the private respondent and Singapore Airlines binds the petitioner as an agent of
Singapore Airlines and considering that the petitioner has a place of business in Manila, the third option of the plaintiff
under the Warsaw Convention i.e. the action may be brought in the place where the contract was perfected and
where the airline has a place of business, is applicable. Hence this petition assailing the order upholding the jurisdiction
of Philippine courts over the instant action.

Both parties filed simultaneous memoranda pursuant to the resolution of this Court giving due course to the petition.

The petitioner's theory is as follows: Under Art 28 (1) of the Warsaw convention an action for damages must be
brought at the option of the plaintiff either before the court of the 1) domicile of the carrier; 2) the carrier's principal
place of business; 3) the place where the carrier has a place of business through which the contract was made; 4) the
place of destination. The petitioner asserts that the Philippines is neither the domicile nor the principal place of
business of the defendant airline; nor is it the place of destination. As regards the third option of the plaintiff, the
petitioner contends that since the Philippines is not the place where the contract of carriage was made between the
parties herein, Philippine courts do not have jurisdiction over this action for damages. The issuance of petitioner's
own ticket in Geneva in exchange for the conjunction ticket issued by Singapore Airlines for the final leg of the private
respondent's trip gave rise to a separate and distinct contract of carriage from that entered into by the private
respondent with Singapore Airlines in Manila. Petitioner lays stress on the fact that the plane ticket for a direct flight
from Geneva to New York was purchased by the private respondent from the petitioner by "exchange and cash" which
signifies that the contract of carriage with Singapore Airlines was terminated and a second contract was perfected.
Moreover, the second contract of carriage cannot be deemed to have been an extension of the first as the petitioner
airline is not a participating airline in any of the destinations under the first contract. The petitioner claims that the
private respondent's argument that the petitioner is bound under the IATA Rules as agent of the principal airline is
irrelevant and the alleged bad faith of the airline does not remove the case from the applicability of the Warsaw
Convention. Further the IATA Rule cited by the private respondent which is admittedly printed on the ticket issued by
the petitioner to him which states, "An air carrier issuing a ticket for carriage over the lines of another carrier does so
only as its agent" does not apply herein, as neither Singapore Airlines nor the petitioner issued a ticket to the private
respondent covering the route of the other. Since the conjunction tickets issued by Singapore Airlines do not include
the route covered by the ticket issued by the petitioner, the petitioner airline submits that it did not act as an agent
of Singapore Airlines.

Private respondent controverts the applicability of the Warsaw Convention in this case. He posits that under Article
17 of the Warsaw Convention 3 a carrier may be held liable for damages if the "accident" occurred on board the airline
or in the course of "embarking or disembarking" from the carrier and that under Article 25 (1) 4 thereof the provisions
of the convention will not apply if the damage is caused by the "willful misconduct" of the carrier. He argues that his
cause of action is based on the incident at the pre-departure area of the Geneva airport and not during the process
of embarking nor disembarking from the carrier and that security officers of the petitioner airline acted in bad faith.
Accordingly, this case is released from the terms of the Convention. Private respondent argues that assuming that the
Convention applies, his trip to nine cities in different countries performed by different carriers under the conjunction
tickets issued in Manila by Singapore Airlines is regarded as a single transaction; as such the final leg of his trip from
Geneva to New York with the petitioner airline is part and parcel of the original contract of carriage perfected in
Manila. Thus, the third option of the plaintiff under Art. 28 (1) e.g., where the carrier has a place of business through
which the contract of carriage was made, applies herein and the case was properly filed in the Philippines. The private
respondent seeks affirmance of the ruling of the lower courts that the petitioner acted as an agent of Singapore
Airlines under the IATA Rules and as an agent of the principal carrier the petitioner may be held liable under the
contract of carriage perfected in Manila, citing the judicial admission made by the petitioner that it claimed the value
of the unused portion of the private respondent's conjunction tickets from the IATA Clearing House in Geneva where
the accounts of both airlines are respectively credited and debited. Accordingly, the petitioner cannot now deny the
contract of agency with Singapore Airlines after it honored the conjunction tickets issued by the latter.

The petition is without merit.

The Warsaw Convention to which the Republic of the Philippines is a party and which has the force and effect of law
in this country applies to all international transportation of persons, baggage or goods performed by an aircraft
gratuitously or for hire. 5 As enumerated in the Preamble of the Convention, one of the objectives is "to regulate in a
uniform manner the conditions of international transportation by air". 6 The contract of carriage entered into by the
private respondent with Singapore Airlines, and subsequently with the petitioner, to transport him to nine cities in
different countries with New York as the final destination is a contract of international transportation and the
provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its
passengers. 7 This includes section 28 (1) which enumerates the four places where an action for damages may be
brought.

The threshold issue of jurisdiction of Philippine courts under Art 28 (1) must first be resolved before any
pronouncements may be made on the liability of the carrier thereunder. 8 The objections raised by the private
respondent that this case is released from the terms of the Convention because the incident on which this action is
predicated did not occur in the process of embarking and disembarking from the carrier under Art 17 9 and that the
employees of the petitioner airline acted with malice and bad faith under Art 25 (1) 10 pertain to the merits of the case
which may be examined only if the action has first been properly commenced under the rules on jurisdiction set forth
in Art. 28 (1).

Art 28 (1) of the Warsaw Convention states:

Art 28 (1) An action for damages must be brought at the option of the plaintiff, in the territory of one of the
High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of
business or where he has a place of business through which the contract has been made, or before the court
at the place of destination.

There is no dispute that petitioner issued the ticket in Geneva which was neither the domicile nor the principal place
of business of petitioner nor the respondent's place of destination.

The question is whether the contract of transportation between the petitioner and the private respondent would be
considered as a single operation and part of the contract of transportation entered into by the latter with Singapore
Airlines in Manila.

Petitioner disputes the ruling of the lower court that it is. Petitioner's main argument is that the issuance of a new
ticket in Geneva created a contract of carriage separate and distinct from that entered by the private respondent in
Manila.

We find the petitioner's argument without merit.

Art 1(3) of the Warsaw Convention which states:

Transportation to be performed by several successive carriers shall be deemed, for the purposes of this
convention, to be one undivided transportation, if it has been regarded by the parties as a single operation,
whether it has been agreed upon under the form of a single contract or a series of contracts, and it shall not
lose its international character merely because one contract or series of contracts is to be performed entirely
within the territory subject of the sovereignty, suzerainty, mandate or authority of the same High Contracting
Party.

The contract of carriage between the private respondent and Singapore Airlines although performed by different
carriers under a series of airline tickets, including that issued by the petitioner, constitutes a single operation.
Members of the IATA are under a general pool partnership agreement wherein they act as agent of each other in the
issuance of tickets 11 to contracted passengers to boost ticket sales worldwide and at the same time provide
passengers easy access to airlines which are otherwise inaccessible in some parts of the world. Booking and
reservation among airline members are allowed even by telephone and it has become an accepted practice among
them. 12 A member airline which enters into a contract of carriage consisting of a series of trips to be performed by
different carriers is authorized to receive the fare for the whole trip and through the required process of interline
settlement of accounts by way of the IATA clearing house an airline is duly compensated for the segment of the trip
serviced. 13 Thus, when the petitioner accepted the unused portion of the conjunction tickets, entered it in the IATA
clearing house and undertook to transport the private respondent over the route covered by the unused portion of
the conjunction tickets, i.e., Geneva to New York, the petitioner tacitly recognized its commitment under the IATA
pool arrangement to act as agent of the principal contracting airline, Singapore Airlines, as to the segment of the trip
the petitioner agreed to undertake. As such, the petitioner thereby assumed the obligation to take the place of the
carrier originally designated in the original conjunction ticket. The petitioner's argument that it is not a designated
carrier in the original conjunction tickets and that it issued its own ticket is not decisive of its liability. The new ticket
was simply a replacement for the unused portion of the conjunction ticket, both tickets being for the same amount
of US$2,760 and having the same points of departure and destination. 14 By constituting itself as an agent of the
principal carrier the petitioner's undertaking should be taken as part of a single operation under the contract of
carriage executed by the private respondent and Singapore Airlines in Manila.

The quoted provision of the Warsaw Convention Art. 1(3) clearly states that a contract of air transportation is taken
as a single operation whether it is founded on a single contract or a series of contracts. The number of tickets issued
does not detract from the oneness of the contract of carriage as long as the parties regard the contract as a single
operation. The evident purpose underlying this Article is to promote international air travel by facilitating the
procurement of a series of contracts for air transportation through a single principal and obligating different airlines
to be bound by one contract of transportation. Petitioner's acquiescence to take the place of the original designated
carrier binds it under the contract of carriage entered into by the private respondent and Singapore Airlines in Manila.

The third option of the plaintiff under Art 28 (1) of the Warsaw Convention e.g., to sue in the place of business of the
carrier wherein the contract was made, is therefore, Manila, and Philippine courts are clothed with jurisdiction over
this case. We note that while this case was filed in Cebu and not in Manila the issue of venue is no longer an issue as
the petitioner is deemed to have waived it when it presented evidence before the trial court.

The issue raised in SP No. 31452 which is whether or not the trial court committed grave abuse of discretion in ordering
the deposition of the petitioner's security officer taken in Geneva to be stricken off the record for failure of the said
security officer to appear before the Philippine consul in Geneva to answer the cross-interrogatories filed by the
private respondent does not have to be resolved. The subsequent appearance of the said security officer before the
Philippine consul in Geneva on September 19, 1994 and the answer to the cross-interrogatories propounded by the
private respondent was transmitted to the trial court by the Philippine consul in Geneva on September 23,
1994 15 should be deemed as full compliance with the requisites of the right of the private respondent to cross-
examine the petitioner's witness. The deposition filed by the petitioner should be reinstated as part of the evidence
and considered together with the answer to the cross-interrogatories.

WHEREFORE, the judgment of the appellate court in CA-G.R. SP No. 30946 is affirmed. The case is ordered remanded
to the court of origin for further proceedings. The decision of the appellate court in CA-G.R. SP. No. 31452 is set aside.
The deposition of the petitioner's security officer is reinstated as part of the evidence.

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