THIRD DIVISION

[G.R. No. 136048. January 23, 2001]

JOSE BARITUA and JB LINE, petitioners, vs. NIMFA DIVINA MERCADER in her capacity
and as guardian of DARWIN, GIOVANNI, RODEL and DENNIS, all surnamed
MERCADER; LEONIDA Vda. de MERCADER on her behalf and on behalf of her minor
child MARY JOY MERCADER; SHIRLEY MERCADER DELA CRUZ; MARIA
THERESA MERCADER-GARCIA; DANILO MERCADER; JOSE DANTE
MERCADER; and JOSEFINA MERCADER, respondents.

DECISION
PANGANIBAN, J.:

The Manchester ruling requiring the payment of docket and other fees as a condition for the acquisition of
jurisdiction has no retroactive effect and applies only to cases filed after its finality.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the April 17, 1998 Decision[1] and
the October 28, 1998 Resolution[2] of the Court of Appeals (CA) in CA-GR CV No. 40772. The decretal portion of said
Decision reads as follows:

WHEREFORE, upon all the foregoing premises considered, the DECISION appealed from is
AFFIRMED with the MODIFICATION that the loss of earnings of the late Dominador Mercader is
reduced to P798,000.00.[3]

The assailed Resolution denied petitioners Motion for Reconsideration.

The Court of Appeals sustained the Decision of the Regional Trial Court (RTC) of Laoang, Northern Samar (Branch
21). Except for the modification of the loss of earnings, it affirmed all the monetary damages granted by the trial court
to respondents. The decretal portion of the assailed RTC Decision reads as follows:[4]

WHEREFORE, on preponderance of evidence, judgment is for [herein respondents] and against [herein
petitioners], ordering the latter to pay the former:

(a) As compensatory damages for the death of Dominador Mercader -- P50,000.00;

(b) For the loss of earnings of the late Dominador Mercader -- P1,660,000.00, more or less, based on the
average life span of 75 years from the time of his death who earned a net income of P5,000.00 monthly
out of his business;

(c) Actual damages of P30,000.00 receipted purchases of goods in Manila; P5,750.00 for the first class
coffin and a 15-day wake services evidenced by a receipt marked Exh. D; [P]850.00 for the 50 x 60
headstone, receipt marked Exh. E and P1,590.00 -- Deed of Absolute Sale of a burial lot, marked Exh. F;
(d) 25% of whatever amount is collected by [respondents] from [petitioners] but no less than P50,000.00
plus P1,000.00 per hearing by way of attorneys fees;

(e) As moral damages -- P50,000.00;

(f) As exemplary damages -- P30,000.00; and

(g) To pay the costs.

The Facts

The antecedents of the case are succinctly summarized by the Court of Appeals in this wise:

The original complaint was filed against JB Lines, Inc. [Petitioner JB Lines, Inc.] filed a motion to
dismiss complaint, to strike out false-impertinent matters therefrom, and/or for bill of particulars on the
primary grounds that [respondents] failed to implead Jose Baritua as an indispensable party and that the
cause of action is a suit against a wrong and non-existent party. [Respondents] filed an opposition to the
said motion and an amended complaint.

In an Order dated December 11, 1984 the trial court denied the aforesaid motion and admitted the
amended complaint of [respondents] impleading Jose Baritua and alleged the following:

(10) The late Dominador Mercader is a [b]usinessman mainly engaged in the buy and sell of dry goods
in Laoang, N. Samar. He buys his goods from Manila and bring[s] them to Laoang, Northern Samar for
sale at his store located in the said locality;

(11) Sometime on March 16, 1983, the late Dominador Mercader boarded [petitioners] bus No. 142 with
Plate No. 484 EU at [petitioners] Manila Station/terminal, bound for Brgy. Rawis, Laoang Northern
Samar as a paying passenger;

(12) At that time, Dominador Mercader had with him as his baggage, assorted goods (i.e. long pants,
short pants, dusters, etc.) which he likewise loaded in [petitioners] bus;

(13) The late Dominador Mercader was not able to reach his destination considering that on March 17,
1983 at Beily (Bugco) Bridge, Barangay Roxas, Mondragon, Northern Samar, while he was on board
[petitioners] bus no. 142 with Plate No. 484 EU, the said bus fell into the river as a result of which the
late Dominador Mercader died. x x x.

(14) The accident happened because [petitioners] driver negligently and recklessly operated the bus at a
fast speed in wanton disregard of traffic rules and regulations and the prevailing conditions then existing
that caused [the] bus to fall into the river.

[Respondents] then filed a motion to declare [petitioners] in default which motion was opposed by
[petitioners]. [Respondents] withdrew the said motion prompting the trial court to cancel the scheduled
hearing of the said motion to declare [petitioners] in default in an Order dated January 23, 1985.

In its answer, [petitioners] denied specifically all the material allegations in the complaint and alleged the
following:
2. The alleged person of Dominador Mercader did not board bus 142 at [petitioners] Manila
station/terminal x x x as a (supposed paying passenger). There is even no statement in the complaint that
Dominador Mercader (if it were true that he was a passenger of bus 142 at the [petitioners] Manila
station/terminal) was issued any passenger-freight ticket conformably with law and practice. It is a fact
of public knowledge that, in compliance with existing rules and laws, [Petitioner] Baritua, as a public
utility operator, issues, thru his conductors, in appropriate situations, to a true passenger, the familiar and
known passenger and freight ticket which reads in part:

NOTICE

Baggage carried at owners risk x x x liability on prepaid freight otherwise declared.

xxxxxxxxx

Whole Fare Paid P ______________

Declared value ____________ x x x.

Description of Freight _____________________________

Signature of Owner.

3. It is also a fact of public knowledge that [Petitioner] Baritua does not have any Manila
station/terminal, because what he has is a Pasay city station.

4. [Petitioner] Baritua had no prior knowledge that, on or about March 17, 1983, and/or previous thereto,
the Bugko Bailey Bridge (across Catarman-Laoang road) in Barangay Roxas, Mondragon, Northern
Samar, was in virtual dilapida[ted] and dangerous condition, in a state of decay and disrepair, thus calling
for the concerned government and public officials performance of their coordinative and joint duties and
responsibilities, to repair, improve and maintain that bridge, in good and reasonably safe condition, but,
far from performing or complying with said subject duties and responsibilities, the adverted officials
concerned, without just cause, not only failed and neglected to cause such needed repair, improvement
and maintenance of the Bugko Bailey Bridge, on or prior to March 17, 1983, but also failed, and
neglected to either close the Bugko Bridge to public use and travel, and/or to put appropriate warning
and cautionary signs, for repair, improvement, maintenance, and safety purposes. So that, as a proximate
and direct consequence of the aggregate officials nonfeasance, bad faith, negligence, serious inefficiency,
and callous indifference to public safety, that Bugko Bridge collapsed inward and caved in ruin, on that
March 17, 1983, while Barituas bus 142 was cautiously and prudently passing and travelling across the
said bridge, as a result of which the bus fell into the river and sea waters, despite the exercise and
compliance by Baritua and his driver of their duties in the matter of their requisite degree of diligence,
caution and prudence, Baritua also exercised and complied with the requisite duty of diligence, care, and
prudence in the selection and supervision over his driver, contrary to the baseless imputation in
paragraphs 14 and 20 of the original and amended complaints. Moreover, Baritua and his driver did not
violate any traffic rule and regulation, contrary to plaintiffs insinuation.

5. Furthermore, [Petitioner] Baritua and his driver have no causative connection with the alleged death of
Dominador Mercader who, according to a reliable source, was already seriously suffering from a
lingering illness even prior to his alleged demise. Baritua also learned lately, and so it is herein alleged
that Dominador Mercader contributed considerably, to, and/or provided the proximate and direct cause of
his own death, hence, he himself is to be blamed for whatever may have happened to him or for whatever
may have been sustained by his supposed heirs, vis--vis the suit against the wrong party.

6. Baritua and his driver, as earlier stated, did not commit any actionable breach of contract with the
alleged Dominador Mercader or the latters supposed heirs.

7. There is no factual nor any legal basis for plaintiffs proffered claims for damages.

II. AFFIRMATIVE DEFENSES

8. Based on the preceding averments, plaintiffs have neither a cause nor a right of action against
[Petitioner] Baritua and his driver.

8.1. The allegation that supposedly the x x x [p]laintiffs are the compulsory heirs of the late
DOMINADOR MERCADER x x x (par. 8, complaint) is too vague and too broad, as the subject
allegation is a bare and pure conclusionary averment unaccompanied by the requisite statement of
ultimate facts constitutive of a cause or right of action.

8.2. Even assuming arguendo, without however conceding, plaintiffs statement of a cause of action, the
complaint is nonetheless replete with false and impertinent matters which fit the rule on striking out
pleadings or parts thereof. To mention only a glaring few:

8.2.a. The allegation on exemplary damages x x x is impertinent and immaterial in the complaint against
a supposed employer. For, even theoretically assuming, without however admitting a negligent act-
omission on the part of a driver, nevertheless, in such a hypothetical situation, the causative negligence,
if any there was, is personal to the wrongdoer, i.e., the employee-driver, to the exclusion of the employer.

8.2.b. The allegation on supposed minimum life of 75 years and on he expects to earn no less than
P1,680,000.00 x x x is false, a pure hyperbole, and bereft of factual and legal basis. Besides, what
jurisprudential rule refers to is only net earning. The law abhors a claim, akin to plaintiffs allegation,
which is manifestly speculative, as it may not exist at all. Furthermore, the questioned allegation in the
plaintiffs original and amended complaints is not preceded by the requisite statement of definitive facts,
nor of any specific fact, which could possibly afford a rational basis for a reasonable expectation of
supposed earning that could be lost, or impaired.

8.2.c. Likewise, the allegations that allegedly x x x the late Dominador Mercader boarded x x x Bus No.
142 x x x and that supposedly the latter had a baggage x x x containing drygoods x x x in which case
[petitioners have] to pay the value thereof in such amount as may be proven by [respondents] in court
during the trial x x x, apart from being false, are offensive to the rule on concise statement of ultimate
facts. The assailed allegations also contravene Interim Rule 11, (i)f any demand is for damages in a civil
action the amount thereof must be specifically alleged. In consequence of this averment, [respondents]
have not yet paid the correct docket fee, for which reason, [respondents] case may be dismissed on that
ground alone.

8.3. In violation also of the same Interim Rule 11, regarding the requisite definitive amount of claim, the
allegation on the supposed funeral expense x x x does not also indicate any specific amount. So with the
averment on supposed moral damage which may not be warranted because of absence of allegation of
fraud or bad faith, if any, there was, apart from want of causative connection with the defendant.
8.4. The allegation in paragraph 15 of the original and amended complaint is also a pure conclusionary
averment, without a factual premise.

9. [Petitioner] JB LINE, impleaded in the amended complaint, is merely a business name and sole
proprietorship of defendant Baritua. As such, JB Line is not a juridical person, nor an entity authorized
by law to sue and be sued, hence, it cannot legally be a party to any action. With this averment,
correlated with that in paragraphs 4-5 hereof, [respondents] amended complaint is essentially a suit
against a wrong party.[5]

The RTC, after due trial, rendered the aforesaid assailed Decision.

Ruling of the Court of Appeals

As earlier stated, the Court of Appeals affirmed the trial courts award of monetary damages in favor of respondents,
except the amount of Dominador Mercaders lost earnings, which it reduced to P798,000. It held that petitioners failed
to rebut the presumption that in the event a passenger died or was injured, the carrier had acted negligently.Petitioners,
it added, presented no sufficient proof that they had exercised extraordinary diligence.
Hence, this Petition.[6]

The Issues

In their Memorandum, petitioners submit the following issues for our consideration:
I

Did the honorable Court of Appeals (CA) gravely abuse its discretion when it allowed to pass sub
silencio the trial courts failure to rule frontally on petitioners plea for a bill of particulars, and ignored the
nature of respondents prayer in the complaint pleading for an award of --

a) P12,000.00 -- representing the death compensation;

b) An amount to be proven in court, representing actual damages;

c) P1,660,000.00 or more as may be proven during the trial, by way of loss of earnings;

d) An amount to be proven in court as and by way of funeral expenses;

e) An amount to be proven during the trial, representing moral damages;

f) An amount to be determined by this Honorable Court, representing exemplary damages;

g) An amount equivalent to 25% of whatever amount the plaintiffs would be able to collect from
the defendant but in no case less than P50,000.00 plus an additional amount of P1,000.00 per
hearing as and by way of Attorneys fees;
II
Did the CA also ignore the fact that the trial court was not paid the correct amount of the docket and
other lawful fees; hence, without jurisdiction over the original and amended complaints or over the
subject matter of the case;
III

Did the CA likewise arbitrarily disregard petitioners constitutional right to procedural due process and
fairness when it ignored and thrust aside their right to present evidence and to expect that their evidence
will be duly considered and appreciated; and
IV

In awarding excessive and extravagant damages, did the CA and the trial court adhere to the rule that
their assailed decision must state clearly and distinctly the facts and the laws on which they are based?[7]

Distilling the alleged errors cited above, petitioners raise two main issues for our consideration: (1) whether the CA
erred in holding that the RTC had jurisdiction over the subject matter of the case, and (2) whether the CA disregarded
petitioners procedural rights.

The Courts Ruling

The Petition is devoid of merit.

First Issue: Jurisdiction

Petitioners contend that since the correct amounts of docket and other lawful fees were not paid by respondents,
then the trial court did not acquire jurisdiction over the subject matter of the case.
The Court, in Manchester Development Corporation v. CA,[8] held that [t]he court acquires jurisdiction over any
case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not
thereby vest jurisdiction in the court, much less the payment of the docket fee based on the amounts sought in the
amended pleading. x x x.
Generally, the jurisdiction of a court is determined by the statute in force at the commencement of the
action,[9] unless such statute provides for its retroactive application.[10] Once the jurisdiction of a court attaches, it
continues until the case is finally terminated.[11] The trial court cannot be ousted therefrom by subsequent happenings or
events, although of a character that would have prevented jurisdiction from attaching in the first instance.[12]
The Manchester ruling, which became final in 1987, has no retroactive application and cannot be invoked in the
subject Complaint filed in 1984. The Court explicitly declared:

To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar
pleadings should specify the amount of damages being prayed for not only in the body of the pleading
but also in the prayer, and said damages shall be considered in the assessment of the filing fees in any
case. Any pleading that fails to comply with this requirement shall not be accepted nor admitted, or shall
otherwise be expunged from the record.[13] (emphasis supplied)

Second Issue: Petitioners Procedural Rights

Motion for a Bill of Particulars

Petitioners argue that the Court of Appeals erred when it passed sub silencio on the trial courts failure to rule
frontally on their plea for a bill of particulars.
We are not impressed. It must be noted that petitioners counsel manifested in open court his desire to file a motion
for a bill of particulars. The RTC gave him ten days from March 12, 1985 within which to do so. [14] He, however, filed
the aforesaid motion only on April 2, 1985 or eleven days past the deadline set by the trial court. [15] Moreover, such
motion was already moot and academic because, prior to its filing, petitioners had already filed their answer and several
other pleadings to the amended Complaint. Section 1, Rule 12 of the Rules of Court, provides:

Section 1. When applied for; purpose. -- Before responding to a pleading, a party may move for a more
definite statement or for a bill of particulars of any matter which is not averred with sufficient
definiteness or particularity to enable him properly to prepare his responsive pleading. If the pleading is a
reply, the motion must be filed within ten (10) days from service thereof. Such motion shall point out the
defects complained of, the paragraphs wherein they are contained, and the details desired. [16] (emphasis
supplied)

Petitioners Right to Adduce Evidence

Petitioners also argue that their right to present evidence was violated by the CA, because it did not consider their
contention that the trial judges who heard the case were biased and impartial. Petitioners contend, as they did before the
CA, that Judge Tomas B. Noynay based his Decision on certain chosen partial testimonies of [respondents] witnesses x
x x. They further maintain that Judge Fortunato Operario, who initially handled the case, questioned some witnesses in
an overzealous manner and assum[ed] the dual role of magistrate and advocate.[17]
These arguments are not meritorious. First, judges cannot be expected to rely on the testimonies of every witness. In
ascertaining the facts, they determine who are credible and who are not. In doing so, they consider all the evidence
before them. In other words, the mere fact that Judge Noynay based his decision on the testimonies of respondents
witnesses does not necessarily mean that he did not consider those of petitioners. Second, we find no sufficient showing
that Judge Operario was overzealous in questioning the witnesses. His questions merely sought to clarify their
testimonies. In all, we reject petitioners contention that their right to adduce evidence was violated.

Alleged Failure to State Clearly the Facts and the Law

We are not convinced by petitioners contention, either, that both the trial and the appellate courts failed to state
clearly and distinctly the facts and the law involved in the case. As can be gleaned from their Decisions, both courts
clearly laid down their bases for awarding monetary damages to respondents.
Both the RTC and the CA found that a contract of carriage existed between petitioners and Dominador Mercader
when he boarded Bus No. 142 in Pasay City on March 16, 1983. Petitioners failed to transport him to his destination,
because the bus fell into a river while traversing the Bugko Bailey Bridge. Although he survived the fall, he later died
of asphyxia secondary to drowning.
We agree with the findings of both courts that petitioners failed to observe extraordinary diligence [18] that fateful
morning. It must be noted that a common carrier, by the nature of its business and for reasons of public policy, is bound
to carry passengers safely as far as human care and foresight can provide. It is supposed to do so by using the utmost
diligence of very cautious persons, with due regard for all the circumstances.[19] In case of death or injuries to passengers,
it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence
as prescribed in Articles 1733 and 1755[20] of the Civil Code.
We sustain the ruling of the CA that petitioners failed to prove that they had observed extraordinary diligence.
 First, petitioners did not present evidence on the skill or expertise of the driver of Bus No. 142 or the condition of
that vehicle at the time of the incident.
Second, the bus was overloaded at the time. In fact, several individuals were standing when the incident occurred.[21]
Third, the bus was overspeeding. Its conductor testified that it had overtaken several buses before it reached the
Bugko Bailey Bridge.[22] Moreover, prior to crossing the bridge, it had accelerated and maintained its speed towards the
bridge.[23]
We therefore believe that there is no reason to overturn the assailed CA Decision, which affirmed that of the RTC. It
is a well-settled rule that the trial courts factual findings, when affirmed by the appellate court, are conclusive and
binding, if they are not tainted with arbitrariness or oversight of some fact or circumstance of significance and
influence.[24] As clearly discussed above, petitioners have not presented sufficient ground to warrant a deviation from
this rule.
Finally, we cannot fault the appellate court in its computation of the damages and lost earnings, since it effectively
computed only net earnings in accordance with existing jurisprudence.[25]
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED. Costs against petitioners.
SO ORDERED.
 THIRD DIVISION

[G.R. No. 118664. August 7, 1998]

JAPAN AIRLINES, petitioner, vs. THE COURT OF APPEALS ENRIQUE AGANA, MARIA
ANGELA NINA AGANA, ADALIA B. FRANCISCO and JOSE
MIRANDA, respondents.

DECISION
ROMERO, J.:

Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal of
the decision of the Court of Appeals,[1] which affirmed with modification the award of damages made by the
trial court in favor of herein private respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco
and Jose Miranda.
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San Francisco,
California bound for Manila. Likewise, on the same day private respondents Enrique Agana, Maria Angela
Nina Agana and Adelia Francisco left Los Angeles, California for Manila via JAL flight No. JL 061. As an
incentive for travelling on the said airline, both flights were to make an overnight stopover at Narita, Japan,
at the airlines expense, thereafter proceeding to Manila the following day.
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita
for the night. The next day, private respondents, on the final leg of their journey, went to the airport to take
their flight to Manila. However, due to the Mt. Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino
International Airport (NAIA), rendering it inaccessible to airline traffic. Hence, private respondents trip to
Manila was cancelled indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers
on flight No. 741 due to depart on June 16, 1991 and also paid for the hotel expenses for their unexpected
overnight stay. On June 16, 1991, much to the dismay of the private respondents, their long anticipated flight
to Manila was again cancelled due to NAIAs indefinite closure. At this point, JAL informed the private
respondents that it would no longer defray their hotel and accommodation expense during their stay in Narita.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to
pay for their accommodations and meal expenses from their personal funds from June 16 to June 21,
1991. Their unexpected stay in Narita ended on June 22, 1991 when they arrived in Manila on board JL flight
No. 741.
Obviously, still reeling from the experience, private respondents, on July 25, 1991, commenced an
action for damages against JAL before the Regional Trial Court of Quezon City, Branch 104.[2] To support
their claim, private respondents asserted that JAL failed to live up to its duty to provide care and comfort to
its stranded passengers when it refused to pay for their hotel and accommodation expenses from June 16 to
21, 1991 at Narita, Japan. In other words, they insisted that JAL was obligated to shoulder their expenses as
long as they were still stranded in Narita. On the other hand, JAL denied this allegation and averred that
airline passengers have no vested right to these amenities in case a flight is cancelled due to force majeure.
On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL liable
for damages, viz.:

WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant Japan Airlines
to pay the plaintiffs Enrique Agana, Adalia B. Francisco and Maria Angela Nina Agana the sum
of One million Two Hundred forty-six Thousand Nine Hundred Thirty-Six Pesos
(P1,246,936.00) and Jose Miranda the sum of Three Hundred Twenty Thousand Six Hundred
sixteen and 31/100 (P320,616.31) as actual, moral and exemplary damages and pay attorneys
fees in the amount of Two Hundred Thousand Pesos (P200,000.00), and to pay the costs of
suit.

Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the exception
of lowering the damages awarded affirmed the trial courts finding, [3] thus:

Thus, the award of moral damages should be as it is hereby reduced to P200,000.00 for each
of the plaintiffs, the exemplary damages to P300,000.00 and the attorneys fees to P100,000.00
plus the costs.

WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby
AFFIRMED in all other respects.

JAL filed a motion for reconsideration which proved futile and unavailing. [4]
Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
The issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the hotel
and meal expenses of its stranded passengers until they have reached their final destination, even if the
delay were caused by force majeure.
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to Manila
on schedule. Likewise, private respondents concede that such event can be considered as force majeure
since their delayed arrival in Manila was not imputable to JAL. [5]
However, private respondents contend that while JAL cannot be held responsible for the delayed arrival
in Manila, it was nevertheless liable for their living expenses during their unexpected stay in Narita since
airlines have the obligation to ensure the comfort and convenience of its passengers. While we sympathize
with the private respondents plight, we are unable to accept this contention.
We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a contract to
transport passengers is quite different in kind and degree from any other contractual relation. It is safe to
conclude that it is a relationship imbued with public interest. Failure on the part of the common carrier to live
up to the exacting standards of care and diligence renders it liable for any damages that may be sustained
by its passengers. However, this is not to say that common carriers are absolutely responsible for all injuries
or damages even if the same were caused by a fortuitous event. To rule otherwise would render the defense
of force majeure, as an exception from any liability, illusory and ineffective.
Accordingly, there is no question that when a party is unable to fulfill his obligation because of force
majeure, the general rule is that he cannot be held liable for damages for non-performance.[6] Corollarily,
when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption,
whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred,
cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of respondents for their
unexpected overnight stay on June 15, 1991.
Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for the
private respondents. To be sure, they underwent distress and anxiety during their unanticipated stay in
Narita, but their predicament was not due to the fault or negligence of JAL but the closure of NAIA to
international flights. Indeed, to hold JAL, in the absence of bad faith or negligence, liable for the amenities of
its stranded passengers by reason of a fortuitous event is too much of a burden to assume.
Furthermore, it has been held that airline passengers must take such risks incident to the mode of
travel.[7] In this regard, adverse weather conditions or extreme climatic changes are some of the perils
involved in air travel, the consequences of which the passenger must assume or expect. After all, common
carriers are not the insurer of all risks.[8]
Paradoxically, the Court of Appeals, despite the presence of force majeure, still ruled against JAL relying
in our decision in PAL v. Court of Appeals,[9] thus:

The position taken by PAL in this case clearly illustrates its failure to grasp the exacting
standard required by law. Undisputably, PALs diversion of its flight due to inclement weather
was a fortuitous event. Nonetheless, such occurrence did not terminate PALs contract with its
passengers. Being in the business of air carriage and the sole one to operate in the country,
PAL is deemed 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 carriers 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. On this score, PAL grossly failed considering the then ongoing battle between
government forces and Muslim rebels in Cotabato City and the fact that the private respondent
was a stranger to the place.

The reliance is misplaced. The factual background of the PAL case is different from the instant petition. In
that case there was indeed a fortuitous event resulting in the diversion of the PAL flight. However, the
unforeseen diversion was worsened when private respondents (passenger) was left at the airport and could
not even hitch a ride in a Ford Fiera loaded with PAL personnel,[10] not to mention the apparent apathy of the
PAL station manager as to the predicament of the stranded passengers. [11] In light of these circumstances,
we held that if the fortuitous event was accompanied by neglect and malfeasance by the carriers employees,
an action for damages against the carrier is permissible. Unfortunately, for private respondents, none of these
conditions are present in the instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any liability. It must be noted
that private respondents bought tickets from the United States with Manila as their final destination. While
JAL was no longer required to defray private respondents living expenses during their stay in Narita on
account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private
respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look
after the comfort and convenience of its passengers when it declassified private respondents from transit
passengers to new passengers as a result of which private respondents were obliged to make the necessary
arrangements themselves for the next flight to Manila. Private respondents were placed on the
waiting list from June 20 to June 24. To assure themselves of a seat on an available flight, they were
compelled to stay in the airport the whole day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid
date that they were advised that they could be accommodated in said flight which flew at about 9:00 a.m. the
next day.
We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21,
1991 caused considerable disruption in passenger booking and reservation. In fact, it would be unreasonable
to expect, considering NAIAs closure, that JAL flight operations would be normal on the days affected.
Nevertheless, this does not excuse JAL from its obligation to make the necessary arrangements to transport
private respondents on its first available flight to Manila. After all, it had a contract to transport private
respondents from the United States to Manila as their final destination.
Consequently, the award of nominal damages is in order. Nominal damages are adjudicated in order that
a right of a plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized
and not for the purpose of indemnifying any loss suffered by him.[12] The court may award nominal damages
in every obligation arising from any source enumerated in Article 1157, or in every case where any property
right has been invaded.[13]
 WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22, 1993
is hereby MODIFIED. The award of actual, moral and exemplary damages is hereby DELETED. Petitioner
JAL is ordered to pay each of the private respondents nominal damages in the sum of P100,000.00 each
including attorneys fees of P50,000.00 plus costs.
SO ORDERED.
 SECOND DIVISION

[G.R. No. 138060. September 1, 2004]

WILLIAM TIU, doing business under the name and style of D Rough Riders, and
VIRGILIO TE LAS PIAS petitioners, vs. PEDRO A. ARRIESGADO, BENJAMIN
CONDOR, SERGIO PEDRANO and PHILIPPINE PHOENIX SURETY AND
INSURANCE, INC., respondents.

DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court from the
Decision of the Court of Appeals in CA-G.R. CV No. 54354 affirming with modification the
[1]

Decision of the Regional Trial Court, 7th Judicial Region, Cebu City, Branch 20, in Civil Case
[2]

No. CEB-5963 for breach of contract of carriage, damages and attorneys fees, and the
Resolution dated February 26, 1999 denying the motion for reconsideration thereof.
The following facts are undisputed:
At about 10:00 p.m. of March 15, 1987, the cargo truck marked Condor Hollow Blocks and
General Merchandise bearing plate number GBP-675 was loaded with firewood in Bogo, Cebu
and left for Cebu City. Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the
truck passed over a bridge, one of its rear tires exploded. The driver, Sergio Pedrano, then
parked along the right side of the national highway and removed the damaged tire to have it
vulcanized at a nearby shop, about 700 meters away. Pedrano left his helper, Jose Mitante, Jr.
[3]

to keep watch over the stalled vehicle, and instructed the latter to place a spare tire six fathoms
away behind the stalled truck to serve as a warning for oncoming vehicles. The trucks tail lights
[4]

were also left on. It was about 12:00 a.m., March 16, 1987.
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724 driven by
Virgilio Te Laspias was cruising along the national highway of Sitio Aggies, Poblacion,
Compostela, Cebu. The passenger bus was also bound for Cebu City, and had come from Maya,
Daanbantayan, Cebu. Among its passengers were the Spouses Pedro A. Arriesgado and Felisa
Pepito Arriesgado, who were seated at the right side of the bus, about three (3) or four (4) places
from the front seat.
As the bus was approaching the bridge, Laspias saw the stalled truck, which was then about
25 meters away. He applied the breaks and tried to swerve to the left to avoid hitting the truck.
[5]

But it was too late; the bus rammed into the trucks left rear. The impact damaged the right side
of the bus and left several passengers injured. Pedro Arriesgado lost consciousness and suffered
a fracture in his right colles. His wife, Felisa, was brought to the Danao City Hospital. She was
[6]

later transferred to the Southern Island Medical Center where she died shortly thereafter. [7]

Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage,
damages and attorneys fees before the Regional Trial Court of Cebu City, Branch 20, against
the petitioners, D Rough Riders bus operator William Tiu and his driver, Virgilio Te Laspias on
May 27, 1987. The respondent alleged that the passenger bus in question was cruising at a fast
and high speed along the national road, and that petitioner Laspias did not take precautionary
measures to avoid the accident. Thus:[8]

6. That the accident resulted to the death of the plaintiffs wife, Felisa Pepito Arriesgado, as evidenced by
a Certificate of Death, a xerox copy of which is hereto attached as integral part hereof and marked as
ANNEX A, and physical injuries to several of its passengers, including plaintiff himself who suffered a
COLLES FRACTURE RIGHT, per Medical Certificate, a xerox copy of which is hereto attached as
integral part hereof and marked as ANNEX B hereof.

7. That due to the reckless and imprudent driving by defendant Virgilio Te Laspias of the said Rough
Riders passenger bus, plaintiff and his wife, Felisa Pepito Arriesgado, failed to safely reach their
destination which was Cebu City, the proximate cause of which was defendant-drivers failure to observe
utmost diligence required of a very cautious person under all circumstances.

8. That defendant William Tiu, being the owner and operator of the said Rough Riders passenger bus
which figured in the said accident, wherein plaintiff and his wife were riding at the time of the accident,
is therefore directly liable for the breach of contract of carriage for his failure to transport plaintiff and
his wife safely to their place of destination which was Cebu City, and which failure in his obligation to
transport safely his passengers was due to and in consequence of his failure to exercise the diligence of a
good father of the family in the selection and supervision of his employees, particularly defendant-driver
Virgilio Te Laspias. [9]

The respondent prayed that judgment be rendered in his favor and that the petitioners be
condemned to pay the following damages:

1). To pay to plaintiff, jointly and severally, the amount of P30,000.00 for the death and untimely demise
of plaintiffs wife, Felisa Pepito Arriesgado;

2). To pay to plaintiff, jointly and severally, the amount of P38,441.50, representing actual expenses
incurred by the plaintiff in connection with the death/burial of plaintiffs wife;

3). To pay to plaintiff, jointly and severally, the amount of P1,113.80, representing
medical/hospitalization expenses incurred by plaintiff for the injuries sustained by him;

4). To pay to plaintiff, jointly and severally, the amount of P50,000.00 for moral damages;

5). To pay to plaintiff, jointly and severally, the amount of P50,000.00 by way of exemplary damages;

6). To pay to plaintiff, jointly and severally, the amount of P20,000.00 for attorneys fees;

7). To pay to plaintiff, jointly and severally, the amount of P5,000.00 for litigation expenses.

PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN LAW AND
EQUITY. [10]

The petitioners, for their part, filed a Third-Party Complaint on August 21, 1987 against the
[11]

following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tius
insurer; respondent Benjamin Condor, the registered owner of the cargo truck; and respondent
Sergio Pedrano, the driver of the truck. They alleged that petitioner Laspias was negotiating the
uphill climb along the national highway of Sitio Aggies, Poblacion, Compostela, in a moderate
and normal speed. It was further alleged that the truck was parked in a slanted manner, its rear
portion almost in the middle of the highway, and that no early warning device was displayed.
Petitioner Laspias promptly applied the brakes and swerved to the left to avoid hitting the truck
head-on, but despite his efforts to avoid damage to property and physical injuries on the
passengers, the right side portion of the bus hit the cargo trucks left rear. The petitioners further
alleged, thus:

5. That the cargo truck mentioned in the aforequoted paragraph is owned and registered in the name of
the third-party defendant Benjamin Condor and was left unattended by its driver Sergio Pedrano, one of
the third-party defendants, at the time of the incident;

6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with marked (sic) Condor
Hollow Blocks & General Merchandise, with Plate No. GBP-675 which was recklessly and imprudently
parked along the national highway of Compostela, Cebu during the vehicular accident in question, and
third-party defendant Benjamin Condor, as the registered owner of the cargo truck who failed to exercise
due diligence in the selection and supervision of third-party defendant Sergio Pedrano, are jointly and
severally liable to the third-party plaintiffs for whatever liability that may be adjudged against said third-
party plaintiffs or are directly liable of (sic) the alleged death of plaintiffs wife;

7. That in addition to all that are stated above and in the answer which are intended to show reckless
imprudence on the part of the third-party defendants, the third-party plaintiffs hereby declare that during
the vehicular accident in question, third-party defendant was clearly violating Section 34, par. (g) of the
Land Transportation and Traffic Code

10. That the aforesaid passenger bus, owned and operated by third-party plaintiff William Tiu, is covered
by a common carrier liability insurance with Certificate of Cover No. 054940 issued by Philippine
Phoenix Surety and Insurance, Inc., Cebu City Branch, in favor of third-party plaintiff William Tiu
which covers the period from July 22, 1986 to July 22, 1987 and that the said insurance coverage was
valid, binding and subsisting during the time of the aforementioned incident (Annex A as part hereof);

11. That after the aforesaid alleged incident, third-party plaintiff notified third-party defendant Philippine
Phoenix Surety and Insurance, Inc., of the alleged incident hereto mentioned, but to no avail;

12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be adversely adjudged,
they stand to pay damages sought by the plaintiff and therefore could also look up to the Philippine
Phoenix Surety and Insurance, Inc., for contribution, indemnification and/or reimbursement of any
liability or obligation that they might [be] adjudged per insurance coverage duly entered into by and
between third-party plaintiff William Tiu and third-party defendant Philippine Phoenix Surety and
Insurance, Inc.; [12]

The respondent PPSII, for its part, admitted that it had an existing contract with petitioner Tiu,
but averred that it had already attended to and settled the claims of those who were injured during
the incident. It could not accede to the claim of respondent Arriesgado, as such claim was way
[13]

beyond the scheduled indemnity as contained in the contract of insurance. [14]

After the parties presented their respective evidence, the trial court ruled in favor of
respondent Arriesgado. The dispositive portion of the decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff as against
defendant William Tiu ordering the latter to pay the plaintiff the following amounts:

1 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;

2 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages;

3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE PESOS (P38,441.00)

as actual damages;

4 - The sum of TWENTY THOUSAND PESOS (P20,000.00) as attorneys fees;

5 - The sum of FIVE THOUSAND PESOS (P5,000.00) as costs of suit;

SO ORDERED. [15]

According to the trial court, there was no dispute that petitioner William Tiu was engaged in
business as a common carrier, in view of his admission that D Rough Rider passenger bus which
figured in the accident was owned by him; that he had been engaged in the transportation
business for 25 years with a sole proprietorship; and that he owned 34 buses. The trial court
ruled that if petitioner Laspias had not been driving at a fast pace, he could have easily swerved
to the left to avoid hitting the truck, thus, averting the unfortunate incident. It then concluded that
petitioner Laspias was negligent.
The trial court also ruled that the absence of an early warning device near the place where
the truck was parked was not sufficient to impute negligence on the part of respondent Pedrano,
since the tail lights of the truck were fully on, and the vicinity was well lighted by street lamps. It
[16]

also found that the testimony of petitioner Tiu, that he based the selection of his driver Laspias
on efficiency and in-service training, and that the latter had been so far an efficient and good
driver for the past six years of his employment, was insufficient to prove that he observed the
diligence of a good father of a family in the selection and supervision of his employees.
After the petitioners motion for reconsideration of the said decision was denied, the petitioners
elevated the case to the Court of Appeals on the following issues:
I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS AND IMPRUDENT WHEN
HE PARKED THE CARGO TRUCK IN AN OBLIQUE MANNER;
II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY LIABLE DIRECTLY TO
PLAINTIFF-APPELLEE OR TO DEFENDANTS-APPELLANTS FOR WHATEVER LIABILITY THAT MAY
BE ADJUDGED TO THE SAID DEFENDANTS-APPELLANTS;
III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIAS WAS GUILTY OF GROSS NEGLIGENCE;
IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE DUE DILIGENCE OF A
GOOD FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF HIS DRIVERS;
V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT WILLIAM TIU IS LIABLE
TO PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL AND FACTUAL BASIS IN AWARDING
EXCESSIVE MORAL DAMAGES, EX[E]MPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION
EXPENSES TO PLAINTIFF-APPELLEE;
VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. IS
LIABLE TO DEFENDANT- APPELLANT WILLIAM TIU.[17]
 The appellate court rendered judgment affirming the trial courts decision with the modification
that the awards for moral and exemplary damages were reduced to P25,000. The dispositive
portion reads:

WHEREFORE, the appealed Decision dated November 6, 1995 is hereby MODIFIED such that the
awards for moral and exemplary damages are each reduced to P25,000.00 or a total of P50,000.00 for
both. The judgment is AFFIRMED in all other respects.

SO ORDERED. [18]

According to the appellate court, the action of respondent Arriesgado was based not on quasi-
delict but on breach of contract of carriage. As a common carrier, it was incumbent upon
petitioner Tiu to prove that extraordinary diligence was observed in ensuring the safety of
passengers during transportation. Since the latter failed to do so, he should be held liable for
respondent Arriesgados claim. The CA also ruled that no evidence was presented against the
respondent PPSII, and as such, it could not be held liable for respondent Arriesgados claim, nor
for contribution, indemnification and/or reimbursement in case the petitioners were adjudged
liable.
The petitioners now come to this Court and ascribe the following errors committed by the
appellate court:
I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING RESPONDENTS BENJAMIN
CONDOR AND SERGIO PEDRANO GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO
RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONERS FOR WHATEVER LIABILITY THAT
MAY BE ADJUDGED AGAINST THEM.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF
NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A. ARRIESGADO.
III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER WILLIAM TIU LIABLE FOR
EXEMPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES.
IV.THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT
PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO OR TO PETITIONER WILLIAM TIU.[19]

According to the petitioners, the appellate court erred in failing to appreciate the absence of
an early warning device and/or built-in reflectors at the front and back of the cargo truck, in clear
violation of Section 34, par. (g) of the Land Transportation and Traffic Code. They aver that such
violation is only a proof of respondent Pedranos negligence, as provided under Article 2185 of
the New Civil Code. They also question the appellate courts failure to take into account that the
truck was parked in an oblique manner, its rear portion almost at the center of the road. As such,
the proximate cause of the incident was the gross recklessness and imprudence of respondent
Pedrano, creating the presumption of negligence on the part of respondent Condor in supervising
his employees, which presumption was not rebutted. The petitioners then contend that
respondents Condor and Pedrano should be held jointly and severally liable to respondent
Arriesgado for the payment of the latters claim.
The petitioners, likewise, aver that expert evidence should have been presented to prove that
petitioner Laspias was driving at a very fast speed, and that the CA could not reach such
conclusion by merely considering the damages on the cargo truck. It was also pointed out that
petitioner Tiu presented evidence that he had exercised the diligence of a good father of a family
in the selection and supervision of his drivers.
 The petitioners further allege that there is no legal and factual basis to require petitioner Tiu
to pay exemplary damages as no evidence was presented to show that the latter acted in a
fraudulent, reckless and oppressive manner, or that he had an active participation in the negligent
act of petitioner Laspias.
Finally, the petitioners contend that respondent PPSII admitted in its answer that while it had
attended to and settled the claims of the other injured passengers, respondent Arriesgados claim
remained unsettled as it was beyond the scheduled indemnity under the insurance contract. The
petitioners argue that said respondent PPSII should have settled the said claim in accordance
with the scheduled indemnity instead of just denying the same.
On the other hand, respondent Arriesgado argues that two of the issues raised by the
petitioners involved questions of fact, not reviewable by the Supreme Court: the finding of
negligence on the part of the petitioners and their liability to him; and the award of exemplary
damages, attorneys fees and litigation expenses in his favor. Invoking the principle of equity and
justice, respondent Arriesgado pointed out that if there was an error to be reviewed in the CA
decision, it should be geared towards the restoration of the moral and exemplary damages
to P50,000 each, or a total of P100,000 which was reduced by the Court of Appeals to P25,000
each, or a total of only P50,000.
Respondent Arriesgado also alleged that respondents Condor and Pedrano, and respondent
Phoenix Surety, are parties with whom he had no contract of carriage, and had no cause of action
against. It was pointed out that only the petitioners needed to be sued, as driver and operator of
the ill-fated bus, on account of their failure to bring the Arriesgado Spouses to their place of
destination as agreed upon in the contract of carriage, using the utmost diligence of very cautious
persons with due regard for all circumstances.
Respondents Condor and Pedrano point out that, as correctly ruled by the Court of Appeals,
the proximate cause of the unfortunate incident was the fast speed at which petitioner Laspias
was driving the bus owned by petitioner Tiu. According to the respondents, the allegation that
the truck was not equipped with an early warning device could not in any way have prevented
the incident from happening. It was also pointed out that respondent Condor had always
exercised the due diligence required in the selection and supervision of his employees, and that
he was not a party to the contract of carriage between the petitioners and respondent Arriesgado.
Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner Tiu, it settled
all the claims of those injured in accordance with the insurance contract. It further avers that it
did not deny respondent Arriesgados claim, and emphasizes that its liability should be within the
scheduled limits of indemnity under the said contract. The respondent concludes that while it is
true that insurance contracts are contracts of indemnity, the measure of the insurers liability is
determined by the insureds compliance with the terms thereof.

The Courts Ruling

At the outset, it must be stressed that this Court is not a trier of facts. Factual findings of the
[20]

Court of Appeals are final and may not be reviewed on appeal by this Court, except when the
lower court and the CA arrived at diverse factual findings. The petitioners in this case assail the
[21]

finding of both the trial and the appellate courts that petitioner Laspias was driving at a very fast
speed before the bus owned by petitioner Tiu collided with respondent Condors stalled truck.
This is clearly one of fact, not reviewable by the Court in a petition for review under Rule 45. [22]

On this ground alone, the petition is destined to fail.

However, considering that novel questions of law are likewise involved, the Court resolves to
examine and rule on the merits of the case.
Petitioner Laspias
Was negligent in driving
The Ill-fated bus

In his testimony before the trial court, petitioner Laspias claimed that he was traversing the
two-lane road at Compostela, Cebu at a speed of only forty (40) to fifty (50) kilometers per hour
before the incident occurred. He also admitted that he saw the truck which was parked in an
[23]

oblique position at about 25 meters before impact, and tried to avoid hitting it by swerving to the
[24]

left. However, even in the absence of expert evidence, the damage sustained by the truck itself [25]

supports the finding of both the trial court and the appellate court, that the D Rough Rider bus
driven by petitioner Laspias was traveling at a fast pace. Since he saw the stalled truck at a
distance of 25 meters, petitioner Laspias had more than enough time to swerve to his left to avoid
hitting it; that is, if the speed of the bus was only 40 to 50 kilometers per hour as he claimed. As
found by the Court of Appeals, it is easier to believe that petitioner Laspias was driving at a very
fast speed, since at 4:45 a.m., the hour of the accident, there were no oncoming vehicles at the
opposite direction. Petitioner Laspias could have swerved to the left lane with proper clearance,
and, thus, could have avoided the truck. Instinct, at the very least, would have prompted him to
[26]

apply the breaks to avert the impending disaster which he must have foreseen when he caught
sight of the stalled truck. As we had occasion to reiterate:

A man must use common sense, and exercise due reflection in all his acts; it is his duty to be cautious,
careful and prudent, if not from instinct, then through fear of recurring punishment. He is responsible for
such results as anyone might foresee and for acts which no one would have performed except through
culpable abandon. Otherwise, his own person, rights and property, and those of his fellow beings, would
ever be exposed to all manner of danger and injury. [27]

We agree with the following findings of the trial court, which were affirmed by the CA on
appeal:

A close study and evaluation of the testimonies and the documentary proofs submitted by the parties
which have direct bearing on the issue of negligence, this Court as shown by preponderance of evidence
that defendant Virgilio Te Laspias failed to observe extraordinary diligence as a driver of the common
carrier in this case. It is quite hard to accept his version of the incident that he did not see at a reasonable
distance ahead the cargo truck that was parked when the Rough Rider [Bus] just came out of the bridge
which is on an (sic) [more] elevated position than the place where the cargo truck was parked. With its
headlights fully on, defendant driver of the Rough Rider was in a vantage position to see the cargo truck
ahead which was parked and he could just easily have avoided hitting and bumping the same by
maneuvering to the left without hitting the said cargo truck. Besides, it is (sic) shown that there was still
much room or space for the Rough Rider to pass at the left lane of the said national highway even if the
cargo truck had occupied the entire right lane thereof. It is not true that if the Rough Rider would proceed
to pass through the left lane it would fall into a canal considering that there was much space for it to pass
without hitting and bumping the cargo truck at the left lane of said national highway. The records,
further, showed that there was no incoming vehicle at the opposite lane of the national highway which
would have prevented the Rough Rider from not swerving to its left in order to avoid hitting and
bumping the parked cargo truck. But the evidence showed that the Rough Rider instead of swerving to
the still spacious left lane of the national highway plowed directly into the parked cargo truck hitting the
latter at its rear portion; and thus, the (sic) causing damages not only to herein plaintiff but to the cargo
truck as well. [28]

Indeed, petitioner Laspias negligence in driving the bus is apparent in the records. By his own
admission, he had just passed a bridge and was traversing the highway of Compostela, Cebu at
a speed of 40 to 50 kilometers per hour before the collision occurred. The maximum speed
allowed by law on a bridge is only 30 kilometers per hour. And, as correctly pointed out by the
[29]

trial court, petitioner Laspias also violated Section 35 of the Land Transportation and Traffic
Code, Republic Act No. 4136, as amended:

Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a highway shall drive the
same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard
for the traffic, the width of the highway, and or any other condition then and there existing; and no
person shall drive any motor vehicle upon a highway at such speed as to endanger the life, limb and
property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within
the assured clear distance ahead. [30]

Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at
the time of the mishap, he was violating any traffic regulation. [31]

Petitioner Tiu failed to

Overcome the presumption
Of negligence against him as
One engaged in the business
Of common carriage

The rules which common carriers should observe as to the safety of their passengers are set
forth in the Civil Code, Articles 1733, 1755 and 1756. In this case, respondent Arriesgado
[32] [33] [34]

and his deceased wife contracted with petitioner Tiu, as owner and operator of D Rough Riders
bus service, for transportation from Maya, Daanbantayan, Cebu, to Cebu City for the price
of P18.00. It is undisputed that the respondent and his wife were not safely transported to the
[35]

destination agreed upon. In actions for breach of contract, only the existence of such contract,
and the fact that the obligor, in this case the common carrier, failed to transport his passenger
safely to his destination are the matters that need to be proved. This is because under the said
[36]

contract of carriage, the petitioners assumed the express obligation to transport the respondent
and his wife to their destination safely and to observe extraordinary diligence with due regard for
all circumstances. Any injury suffered by the passengers in the course thereof is immediately
[37]

attributable to the negligence of the carrier. Upon the happening of the accident, the
[38]

presumption of negligence at once arises, and it becomes the duty of a common carrier to prove
that he observed extraordinary diligence in the care of his passengers. It must be stressed that
[39]

in requiring the highest possible degree of diligence from common carriers and in creating a
presumption of negligence against them, the law compels them to curb the recklessness of their
drivers.[40]
 While evidence may be submitted to overcome such presumption of negligence, it must be
shown that the carrier observed the required extraordinary diligence, which means that the carrier
must show the utmost diligence of very cautious persons as far as human care and foresight can
provide, or that the accident was caused by fortuitous event. As correctly found by the trial court,
[41]

petitioner Tiu failed to conclusively rebut such presumption. The negligence of petitioner Laspias
as driver of the passenger bus is, thus, binding against petitioner Tiu, as the owner of the
passenger bus engaged as a common carrier. [42]

The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar

Contrary to the petitioners contention, the principle of last clear chance is inapplicable in the
instant case, as it only applies in a suit between the owners and drivers of two colliding vehicles. It
does not arise where a passenger demands responsibility from the carrier to enforce its
contractual obligations, for it would be inequitable to exempt the negligent driver and its owner
on the ground that the other driver was likewise guilty of negligence. The common law notion
[43]

of last clear chance permitted courts to grant recovery to a plaintiff who has also been negligent
provided that the defendant had the last clear chance to avoid the casualty and failed to do so.
Accordingly, it is difficult to see what role, if any, the common law of last clear chance doctrine
has to play in a jurisdiction where the common law concept of contributory negligence as an
absolute bar to recovery by the plaintiff, has itself been rejected, as it has been in Article 2179 of
the Civil Code. [44]

Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgados wife due
to the negligence of petitioner Laspias, his employee, on this score.
Respondents Pedrano and
Condor were likewise
Negligent

In Phoenix Construction, Inc. v. Intermediate Appellate Court, where therein respondent

[45]

Dionisio sustained injuries when his vehicle rammed against a dump truck parked askew, the
Court ruled that the improper parking of a dump truck without any warning lights or reflector
devices created an unreasonable risk for anyone driving within the vicinity, and for having created
such risk, the truck driver must be held responsible. In ruling against the petitioner therein, the
Court elucidated, thus:

In our view, Dionisios negligence, although later in point of time than the truck drivers negligence, and
therefore closer to the accident, was not an efficient intervening or independent cause. What the
petitioners describe as an intervening cause was no more than a foreseeable consequence of the risk
created by the negligent manner in which the truck driver had parked the dump truck. In other words, the
petitioner truck driver owed a duty to private respondent Dionisio and others similarly situated not to
impose upon them the very risk the truck driver had created. Dionisios negligence was not that of an
independent and overpowering nature as to cut, as it were, the chain of causation in fact between the
improper parking of the dump truck and the accident, nor to sever the juris vinculum of liability.

We hold that private respondent Dionisios negligence was only contributory, that the immediate and
proximate cause of the injury remained the truck drivers lack of due care.
[46]
 In this case, both the trial and the appellate courts failed to consider that respondent Pedrano
was also negligent in leaving the truck parked askew without any warning lights or reflector
devices to alert oncoming vehicles, and that such failure created the presumption of negligence
on the part of his employer, respondent Condor, in supervising his employees properly and
adequately. As we ruled in Poblete v. Fabros: [47]

It is such a firmly established principle, as to have virtually formed part of the law itself, that the
negligence of the employee gives rise to the presumption of negligence on the part of the employer. This
is the presumed negligence in the selection and supervision of employee. The theory of presumed
negligence, in contrast with the American doctrine of respondeat superior, where the negligence of the
employee is conclusively presumed to be the negligence of the employer, is clearly deducible from the
last paragraph of Article 2180 of the Civil Code which provides that the responsibility therein mentioned
shall cease if the employers prove that they observed all the diligence of a good father of a family to
prevent damages. [48]

The petitioners were correct in invoking respondent Pedranos failure to observe Article IV,
Section 34(g) of the Rep. Act No. 4136, which provides:

(g) Lights when parked or disabled. Appropriate parking lights or flares visible one hundred meters
away shall be displayed at a corner of the vehicle whenever such vehicle is parked on highways or in
places that are not well-lighted or is placed in such manner as to endanger passing traffic.

The manner in which the truck was parked clearly endangered oncoming traffic on both sides,
considering that the tire blowout which stalled the truck in the first place occurred in the wee
hours of the morning. The Court can only now surmise that the unfortunate incident could have
been averted had respondent Condor, the owner of the truck, equipped the said vehicle with
lights, flares, or, at the very least, an early warning device. Hence, we cannot subscribe to
[49]

respondents Condor and Pedranos claim that they should be absolved from liability because, as
found by the trial and appellate courts, the proximate cause of the collision was the fast speed at
which petitioner Laspias drove the bus. To accept this proposition would be to come too close to
wiping out the fundamental principle of law that a man must respond for the foreseeable
consequences of his own negligent act or omission. Indeed, our law on quasi-delicts seeks to
reduce the risks and burdens of living in society and to allocate them among its members. To
accept this proposition would be to weaken the very bonds of society. [50]

The Liability of
Respondent PPSII
as Insurer

The trial court in this case did not rule on the liability of respondent PPSII, while the appellate
court ruled that, as no evidence was presented against it, the insurance company is not liable.
A perusal of the records will show that when the petitioners filed the Third-Party Complaint
against respondent PPSII, they failed to attach a copy of the terms of the insurance contract
itself. Only Certificate of Cover No. 054940 issued in favor of Mr. William Tiu,
[51]

Lahug, Cebu City signed by Cosme H. Boniel was appended to the third-party complaint. The
date of issuance, July 22, 1986, the period of insurance, from July 22, 1986 to July 22, 1987, as
well as the following items, were also indicated therein:
 SCHEDULED VEHICLE

MODEL MAKE TYPE OF COLOR BLT FILE NO.

BODY

Isuzu Forward Bus blue mixed

PLATE NO. SERIAL/CHASSIS MOTOR NO. AUTHORIZED UNLADEN

PBP-724 NO. SER450- 677836 CAPACITY 50 WEIGHT
1584124 6Cyls. Kgs.

SECTION 1/11 *LIMITS OF LIABILITY PREMIUMS

P50,000.00 PAID
A. THIRD PARTY LIABILITY

B. PASSENGER LIABILITY Per Person Per Accident P540.0052

P12,000.00 P50,000

In its Answer to the Third-Party Complaint, the respondent PPSII admitted the existence of
53

the contract of insurance, in view of its failure to specifically deny the same as required under
then Section 8(a), Rule 8 of the Rules of Court, which reads:
54

Sec. 8. How to contest genuineness of such documents. When an action or defense is founded upon a
written instrument copied in or attached to the corresponding pleading as provided in the preceding
section, the genuineness and due execution of the instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but the
requirement of an oath does not apply when the adverse party does not appear to be a party to the
instrument or when compliance with an order for inspection of the original instrument is refused.

In fact, respondent PPSII did not dispute the existence of such contract, and admitted that it
was liable thereon. It claimed, however, that it had attended to and settled the claims of those
injured during the incident, and set up the following as special affirmative defenses:

Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby reiterates and incorporates
by way of reference the preceding paragraphs and further states THAT:-

8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali Palces who
sustained injuries during the incident in question. In fact, it settled financially their claims per vouchers
duly signed by them and they duly executed Affidavit[s] of Desistance to that effect, xerox copies of
which are hereto attached as Annexes 1, 2, 3, 4, 5, and 6 respectively;

9. With respect to the claim of plaintiff, herein answering third party defendant through its authorized
insurance adjuster attended to said claim. In fact, there were negotiations to that effect. Only that it
cannot accede to the demand of said claimant considering that the claim was way beyond the scheduled
indemnity as per contract entered into with third party plaintiff William Tiu and third party defendant
(Philippine Phoenix Surety and Insurance, Inc.). Third party Plaintiff William Tiu knew all along the
limitation as earlier stated, he being an old hand in the transportation business; 55
 Considering the admissions made by respondent PPSII, the existence of the insurance
contract and the salient terms thereof cannot be dispatched. It must be noted that after filing its
answer, respondent PPSII no longer objected to the presentation of evidence by respondent
Arriesgado and the insured petitioner Tiu. Even in its Memorandum before the Court, 56

respondent PPSII admitted the existence of the contract, but averred as follows:

Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification and/or
reimbursement. This has no basis under the contract. Under the contract, PPSII will pay all sums
necessary to discharge liability of the insured subject to the limits of liability but not to exceed the limits
of liability as so stated in the contract. Also, it is stated in the contract that in the event of accident
involving indemnity to more than one person, the limits of liability shall not exceed the aggregate
amount so specified by law to all persons to be indemnified. 57

As can be gleaned from the Certificate of Cover, such insurance contract was issued pursuant
to the Compulsory Motor Vehicle Liability Insurance Law. It was expressly provided therein that
the limit of the insurers liability for each person was P12,000, while the limit per accident was
pegged at P50,000. An insurer in an indemnity contract for third party liability is directly liable to
the injured party up to the extent specified in the agreement but it cannot be held solidarily liable
beyond that amount. The respondent PPSII could not then just deny petitioner Tius claim; it
58

should have paid P12,000 for the death of Felisa Arriesgado, and respondent Arriesgados
59

hospitalization expenses of P1,113.80, which the trial court found to have been duly supported
by receipts. The total amount of the claims, even when added to that of the other injured
passengers which the respondent PPSII claimed to have settled, would not exceed the P50,000
60

limit under the insurance agreement.

Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily
intended to provide compensation for the death or bodily injuries suffered by innocent third parties
or passengers as a result of the negligent operation and use of motor vehicles. The victims and/or
their dependents are assured of immediate financial assistance, regardless of the financial
capacity of motor vehicle owners. As the Court, speaking through Associate Justice Leonardo
61

A. Quisumbing, explained in Government Service Insurance System v. Court of Appeals: 62

However, although the victim may proceed directly against the insurer for indemnity, the third party
liability is only up to the extent of the insurance policy and those required by law. While it is true that
where the insurance contract provides for indemnity against liability to third persons, and such persons
can directly sue the insurer, the direct liability of the insurer under indemnity contracts against third party
liability does not mean that the insurer can be held liable in solidum with the insured and/or the other
parties found at fault. For the liability of the insurer is based on contract; that of the insured carrier or
vehicle owner is based on tort.

Obviously, the insurer could be held liable only up to the extent of what was provided for by the contract
of insurance, in accordance with the CMVLI law. At the time of the incident, the schedule of indemnities
for death and bodily injuries, professional fees and other charges payable under a CMVLI coverage was
provided for under the Insurance Memorandum Circular (IMC) No. 5-78 which was approved on
November 10, 1978. As therein provided, the maximum indemnity for death was twelve thousand
(P12,000.00) pesos per victim. The schedules for medical expenses were also provided by said IMC,
specifically in paragraphs (C) to (G). 63

Damages to be
Awarded

The trial court correctly awarded moral damages in the amount of P50,000 in favor of
respondent Arriesgado. The award of exemplary damages by way of example or correction of
the public good, is likewise in order. As the Court ratiocinated in Kapalaran Bus Line v.
64

Coronado: 65

While the immediate beneficiaries of the standard of extraordinary diligence are, of course, the
passengers and owners of cargo carried by a common carrier, they are not the only persons that the law
seeks to benefit. For if common carriers carefully observed the statutory standard of extraordinary
diligence in respect of their own passengers, they cannot help but simultaneously benefit pedestrians and
the passengers of other vehicles who are equally entitled to the safe and convenient use of our roads and
highways. The law seeks to stop and prevent the slaughter and maiming of people (whether passengers or
not) on our highways and buses, the very size and power of which seem to inflame the minds of their
drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary damages in
cases of quasi-delicts if the defendant acted with gross negligence.66

The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa Arriesgado,
is entitled to indemnity in the amount of P50,000.00. 67

The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly
and severally liable for said amount, conformably with the following pronouncement of the Court
in Fabre, Jr. vs. Court of Appeals: 68

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. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate
Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals, 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, thus:

Nor should it make 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.69

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision
of the Court of Appeals is AFFIRMED with MODIFICATIONS:
(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William Tiu
are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado the total amount
of P13,113.80;
(2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano
are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado P50,000.00 as
indemnity; P26,441.50 as actual damages; P50,000.00 as moral damages; P50,000.00 as
exemplary damages; and P20,000.00 as attorneys fees.
SO ORDERED.
 THIRD DIVISION

[G.R. No. 113003. October 17, 1997]

ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners, vs. COURT OF APPEALS,

LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY, respondents.

DECISION
ROMERO, J.:

In this petition for review on certiorari of the decision of the Court of Appeals, the issue is
whether or not the explosion of a newly installed tire of a passenger vehicle is a fortuitous event
that exempts the carrier from liability for the death of a passenger.
On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and
Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City. Along
Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus
fell into a ravine around three (3) feet from the road and struck a tree. The incident resulted in
the death of 28-year-old Tito Tumboy and physical injuries to other passengers.
On November 21, 1988, a complaint for breach of contract of carriage, damages and
attorneys fees was filed by Leny and her children against Alberta Yobido, the owner of the bus,
and Cresencio Yobido, its driver, before the Regional Trial Court of Davao City. When the
defendants therein filed their answer to the complaint, they raised the affirmative defense of caso
fortuito. They also filed a third-party complaint against Philippine Phoenix Surety and Insurance,
Inc. This third-party defendant filed an answer with compulsory counterclaim. At the pre-trial
conference, the parties agreed to a stipulation of facts. [1]

Upon a finding that the third party defendant was not liable under the insurance contract, the
lower court dismissed the third party complaint. No amicable settlement having been arrived at
by the parties, trial on the merits ensued.
The plaintiffs asserted that violation of the contract of carriage between them and the
defendants was brought about by the drivers failure to exercise the diligence required of the
carrier in transporting passengers safely to their place of destination. According to Leny Tumboy,
the bus left Mangagoy at 3:00 oclock in the afternoon. The winding road it traversed was not
cemented and was wet due to the rain; it was rough with crushed rocks. The bus which was full
of passengers had cargoes on top. Since it was running fast, she cautioned the driver to slow
down but he merely stared at her through the mirror. At around 3:30 p.m., in Trento, she heard
something explode and immediately, the bus fell into a ravine.
For their part, the defendants tried to establish that the accident was due to a fortuitous event.
Abundio Salce, who was the bus conductor when the incident happened, testified that the 42-
seater bus was not full as there were only 32 passengers, such that he himself managed to get
a seat. He added that the bus was running at a speed of 60 to 50 and that it was going slow
because of the zigzag road. He affirmed that the left front tire that exploded was a brand new tire
that he mounted on the bus on April 21, 1988 or only five (5) days before the incident. The Yobido
Liner secretary, Minerva Fernando, bought the new Goodyear tire from Davao Toyo Parts on
April 20, 1988 and she was present when it was mounted on the bus by Salce. She stated that
all driver applicants in Yobido Liner underwent actual driving tests before they were employed.
Defendant Cresencio Yobido underwent such test and submitted his professional drivers license
and clearances from the barangay, the fiscal and the police.
On August 29, 1991, the lower court rendered a decision dismissing the action for lack of
[2]

merit. On the issue of whether or not the tire blowout was a caso fortuito, it found that the falling
of the bus to the cliff was a result of no other outside factor than the tire blow-out. It held that the
ruling in the La Mallorca and Pampanga Bus Co. v. De Jesus that a tire blowout is a mechanical
[3]

defect of the conveyance or a fault in its equipment which was easily discoverable if the bus had
been subjected to a more thorough or rigid check-up before it took to the road that morning is
inapplicable to this case. It reasoned out that in said case, it was found that the blowout was
caused by the established fact that the inner tube of the left front tire was pressed between the
inner circle of the left wheel and the rim which had slipped out of the wheel. In this case, however,
the cause of the explosion remains a mystery until at present. As such, the court added, the tire
blowout was a caso fortuito which is completely an extraordinary circumstance independent of
the will of the defendants who should be relieved of whatever liability the plaintiffs may have
suffered by reason of the explosion pursuant to Article 1174 of the Civil Code.
[4]

Dissatisfied, the plaintiffs appealed to the Court of Appeals. They ascribed to the lower court
the following errors: (a) finding that the tire blowout was a caso fortuito; (b) failing to hold that the
defendants did not exercise utmost and/or extraordinary diligence required of carriers under
Article 1755 of the Civil Code, and (c) deciding the case contrary to the ruling in Juntilla v.
Fontanar, and Necesito v. Paras.
[5] [6]

On August 23, 1993, the Court of Appeals rendered the Decision reversing that of the lower
[7]

court. It held that:

To Our mind, the explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due
to a factory defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the other
hand, there may have been adverse conditions on the road that were unforeseeable and/or inevitable,
which could make the blow-out a caso fortuito. The fact that the cause of the blow-out was not known
does not relieve the carrier of liability. Owing to the statutory presumption of negligence against the
carrier and its obligation to exercise the utmost diligence of very cautious persons to carry the passenger
safely as far as human care and foresight can provide, it is the burden of the defendants to prove that the
cause of the blow-out was a fortuitous event. It is not incumbent upon the plaintiff to prove that the cause
of the blow-out is not caso-fortuito.

Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge defendants
burden. As enunciated in Necesito vs. Paras, the passenger has neither choice nor control over the carrier
in the selection and use of its equipment, and the good repute of the manufacturer will not necessarily
relieve the carrier from liability.

Moreover, there is evidence that the bus was moving fast, and the road was wet and rough. The driver
could have explained that the blow-out that precipitated the accident that caused the death of Toto
Tumboy could not have been prevented even if he had exercised due care to avoid the same, but he was
not presented as witness.

The Court of Appeals thus disposed of the appeal as follows:

WHEREFORE, the judgment of the court a quo is set aside and another one entered ordering defendants
to pay plaintiffs the sum of P50,000.00 for the death of Tito Tumboy, P30,000.00 in moral damages,
and P7,000.00 for funeral and burial expenses.

SO ORDERED.

The defendants filed a motion for reconsideration of said decision which was denied on
November 4, 1993 by the Court of Appeals. Hence, the instant petition asserting the position that
the tire blowout that caused the death of Tito Tumboy was a caso fortuito. Petitioners claim
further that the Court of Appeals, in ruling contrary to that of the lower court, misapprehended
facts and, therefore, its findings of fact cannot be considered final which shall bind this
Court. Hence, they pray that this Court review the facts of the case.
The Court did re-examine the facts and evidence in this case because of the inapplicability
of the established principle that the factual findings of the Court of Appeals are final and may not
be reviewed on appeal by this Court. This general principle is subject to exceptions such as the
one present in this case, namely, that the lower court and the Court of Appeals arrived at diverse
factual findings. However, upon such re-examination, we found no reason to overturn the
[8]

findings and conclusions of the Court of Appeals.

As a rule, when a passenger boards a common carrier, he takes the risks incidental to the
mode of travel he has taken. After all, a carrier is not an insurer of the safety of its passengers
and is not bound absolutely and at all events to carry them safely and without injury. However,
[9]

when a passenger is injured or dies while travelling, the law presumes that the common carrier
is negligent. Thus, the Civil Code provides:

Art. 1756. In case of death or injuries to passengers, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed
in articles 1733 and 1755.

Article 1755 provides that (a) common carrier is bound to 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. Accordingly, in culpa contractual, once a passenger
dies or is injured, the carrier is presumed to have been at fault or to have acted negligently. This
disputable presumption may only be overcome by evidence that the carrier had observed
extraordinary diligence as prescribed by Articles 1733, 1755 and 1756 of the Civil Code or that
[10]

the death or injury of the passenger was due to a fortuitous event. Consequently, the court need
[11]

not make an express finding of fault or negligence on the part of the carrier to hold it responsible
for damages sought by the passenger. [12]

In view of the foregoing, petitioners contention that they should be exempt from liability
because the tire blowout was no more than a fortuitous event that could not have been foreseen,
must fail. A fortuitous event is possessed of the following characteristics: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations,
must be independent of human will; (b) it must be impossible to foresee the event which
constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the
occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the obligor must be free from any participation in the aggravation of the
injury resulting to the creditor. As Article 1174 provides, no person shall be responsible for a
[13]
fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. In other
words, there must be an entire exclusion of human agency from the cause of injury or loss. [14]

Under the circumstances of this case, the explosion of the new tire may not be considered a
fortuitous event. There are human factors involved in the situation. The fact that the tire was new
did not imply that it was entirely free from manufacturing defects or that it was properly mounted
on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand
name noted for quality, resulting in the conclusion that it could not explode within five days
use. Be that as it may, it is settled that an accident caused either by defects in the automobile or
through the negligence of its driver is not a caso fortuito that would exempt the carrier from
liability for damages. [15]

Moreover, a common carrier may not be absolved from liability in case of force majeure or
fortuitous event alone. The common carrier must still prove that it was not negligent in causing
the death or injury resulting from an accident. This Court has had occasion to state:
[16]

While it may be true that the tire that blew-up was still good because the grooves of the tire were still
visible, this fact alone does not make the explosion of the tire a fortuitous event. No evidence was
presented to show that the accident was due to adverse road conditions or that precautions were taken by
the jeepney driver to compensate for any conditions liable to cause accidents. The sudden blowing-up,
therefore, could have been caused by too much air pressure injected into the tire coupled by the fact that
the jeepney was overloaded and speeding at the time of the accident. [17]

It is interesting to note that petitioners proved through the bus conductor, Salce, that the bus
was running at 60-50 kilometers per hour only or within the prescribed lawful speed
limit. However, they failed to rebut the testimony of Leny Tumboy that the bus was running so
fast that she cautioned the driver to slow down. These contradictory facts must, therefore, be
resolved in favor of liability in view of the presumption of negligence of the carrier in the law.
Coupled with this is the established condition of the road rough, winding and wet due to the
rain. It was incumbent upon the defense to establish that it took precautionary measures
considering partially dangerous condition of the road. As stated above, proof that the tire was
new and of good quality is not sufficient proof that it was not negligent. Petitioners should have
shown that it undertook extraordinary diligence in the care of its carrier, such as conducting daily
routinary check-ups of the vehicles parts. As the late Justice J.B.L. Reyes said:

It may be impracticable, as appellee argues, to require of carriers to test the strength of each and every
part of its vehicles before each trip; but we are of the opinion that a due regard for the carriers obligations
toward the traveling public demands adequate periodical tests to determine the condition and strength of
those vehicle portions the failure of which may endanger the safety of the passengers. [18]

Having failed to discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence, petitioners are hereby held liable for damages. Article 1764 in relation to [19]

Article 2206 of the Civil Code prescribes the amount of at least three thousand pesos as
[20]

damages for the death of a passenger. Under prevailing jurisprudence, the award of damages
under Article 2206 has been increased to fifty thousand pesos (P50,000.00). [21]

Moral damages are generally not recoverable in culpa contractual except when bad faith had
been proven. However, the same damages may be recovered when breach of contract of
carriage results in the death of a passenger, as in this case. Exemplary damages, awarded by
[22]

way of example or correction for the public good when moral damages are awarded, may [23]
likewise be recovered in contractual obligations if the defendant acted in wanton, fraudulent,
reckless, oppressive, or malevolent manner. Because petitioners failed to exercise the
[24]

extraordinary diligence required of a common carrier, which resulted in the death of Tito Tumboy,
it is deemed to have acted recklessly. As such, private respondents shall be entitled to
[25]

exemplary damages.
WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED subject to the
modification that petitioners shall, in addition to the monetary awards therein, be liable for the
award of exemplary damages in the amount of P20,000.00. Costs against petitioners.
SO ORDERED.
 SECOND DIVISION

[G.R. No. 116110. May 15,1996]

BALIWAG TRANSIT, INC., petitioner, vs. COURT OF APPEALS, SPOUSES ANTONIO

GARCIA & LETICIA GARCIA, A & J TRADING, AND JULIO
RECONTIQUE, respondents.
SYLLABUS
1. CIVIL LAW; CONTRACTS; SPECIAL CONTRACTS; COMMON CARRIERS; LIABILITY
FOR DAMAGES; ESTABLISHED IN CASE AT BAR. As a common carrier, Baliwag
breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan
Garcia to their destination safe and sound. A common carrier is bound to carry its passengers
safely as far as human care and foresight can provide, using the utmost diligence of a very
cautious person, with due regard for all the circumstances. In a contract of carriage, it is
presumed that the common carrier was at fault or was negligent when a passenger dies or is
injured. Unless the presumption is rebutted, the court need not even make an express finding
of fault or negligence on the part of the common carrier. This statutory presumption may only
be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in
Articles 1733 and 1755 of the Civil Code. The records are bereft of any proof to show that
Baliwag exercised extraordinary diligence. On the contrary, the evidence demonstrates its
driver's recklessness. Leticia Garcia testified that the bus was running at a very high speed
despite the drizzle and the darkness of the highway. The passengers pleaded for its driver to
slow down, but their plea was ignored. Leticia also revealed that the driver was smelling of
liquor. She could smell him as she was seated right behind the driver. Another passenger,
Felix Cruz testified that immediately before the collision, the bus driver was conversing with
a co-employee. All these prove the bus driver's wanton disregard for the physical safety of
his passengers, which make Baliwag as a common carrier liable for damages under Article
1759 of the Civil Code.
2. ID.; ID.; ID.; ID.; LAND TRANSPORTATION AND TRAFFIC CODE; SECTION 34(g)
THEREOF; SUBSTANTIALLY COMPLIED WITH IN CASE AT BAR. Baliwag cannot evade
its liability by insisting that the accident was caused solely by the negligence of A & J Trading
and Julio Recontique. It harps on their alleged non use of early warning device as testified to
by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva Ecija who investigated
the incident, and Francisco Romano, the bus conductor. The records do not bear out
Baliwag's contention. Col. dela Cruz and Romano testified that they did not see any early
warning device at the scene of the accident. They were referring to the triangular reflectorized
plates in red and yellow issued by the Land Transportation Office. However, the evidence
shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the road,
near the rear portion of the truck to serve as an early warning device. This substantially
complies with Section 34 (g) of the Land Transportation and Traffic Code, to wit: "(g) lights
and reflector when parked or disabled. Appropriate parking lights or flares visible one hundred
meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked
on highways or in places that are not well-lighted or, is placed in such manner as to endanger
passing traffic. Furthermore, every motor vehicle shall be provided at all times with built-in
 reflectors or other similar warning devices either pasted, painted or attached at its front and
back which shall likewise be visible at night at least one hundred meters away. No vehicle
not provided with any of the requirements mentioned in this subsection shall be registered."
Baliwag's argument that the kerosene lamp or torch does not substantially comply with the
law is untenable. The aforequoted law clearly allows the use not only of an early warning
device of the triangular reflectorized plates variety but also parking lights or flares visible one
hundred meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an
acceptable substitute for the reflectorized plates. No negligence, therefore, may be imputed
to A & J Trading and its driver, Recontique.
3. ID.; DAMAGES; To PROVE ACTUAL DAMAGES, THE BEST EVIDENCE AVAILABLE TO
THE PARTIES MUST BE PRESENTED. The propriety of the amount awarded as
hospitalization and medical fees. The award of P25,000.00 is not supported by the evidence
on record. The Garcias presented receipts marked as Exhibits "B-1 " to "B-42" but their total
amounted only to P5,017.74. To be sure, Leticia testified as to the extra amount spent for her
medical needs but without more reliable evidence, her lone testimony cannot justify the award
of P25,000.00. To prove actual damages, the best evidence available to the injured party
must be presented. The court cannot rely on uncorroborated testimony whose truth is
suspect, but must depend upon competent proof that damages have been actually
suffered. Thus, we reduce the actual damages for medical and hospitalization expenses to
P5,017.74.
4. ID.; ID.; MORAL DAMAGES; RECOVERABLE IF THE CARRIER THROUGH ITS AGENT,
ACTED FRAUDULENTLY OR IN BAD FAITH. The award of moral damages is in accord
with law. In a breach of contract of carriage, moral damages are recoverable if the carrier,
through its agent, acted fraudulently or in bad faith. The evidence shows the gross negligence
of the driver of Baliwag bus which amounted to bad faith. Without doubt, Leticia and Allan
experienced physical suffering, mental anguish and serious anxiety by reason of the accident.
APPEARANCES OF COUNSEL
Leopoldo C. Sta. Maria for Baliwag Transit, Inc.
Arturo D. Vallar for Sps. Antonio & Leticia Garcia.
Allan A. Leynes for A & J Trading, and Julio Recontique.

DECISION
PUNO, J.:

This is a petition for certiorari to review the Decision[1] of the Court of Appeals in CA-G.R. CV-
31246 awarding damages in favor of the spouses Antonio and Leticia Garcia for breach of
contract of carriage.[2] filed by the spouses Garcia questioning the same Court of Appeals'
Decision which reduced their award of damages. On November 13, 1995, we denied their petition
for review.
The records show that on July 31, 1980, Leticia Garcia, and her five-year old son, Allan
Garcia, boarded Baliwag Transit Bus No. 2036 bound for Cabanatuan City driven by Jaime
Santiago. They took the seat behind the driver.
At about 7:30 in the evening, in Malimba, Gapan, Nueva Ecija, the bus passengers saw a
cargo truck parked at the shoulder of the national highway. Its left rear portion jutted to the outer
lane, the shoulder of the road was too narrow to accommodate the whole truck. A kerosene lamp
appeared at the edge of the road obviously to serve as a warning device. The truck driver, Julio
Recontique, and his helper, Arturo Escala, were then replacing a flat tire. The truck is owned by
respondent A & J Trading.
Bus driver Santiago was driving at an inordinately fast speed and failed to notice the truck
and the kerosene lamp at the edge of the road. Santiago's passengers urged him to slow down
but he paid them no heed. Santiago even carried animated conversations with his co-employees
while driving. When the danger of collision became imminent, the bus passengers shouted
"Babangga tayo!". Santiago stepped on the brake, but it was too late. His bus rammed into the
stalled cargo truck. It caused the instant death of Santiago and Escala, and injury to several
others. Leticia and Allan Garcia were among the injured passengers.
Leticia suffered a fracture in her pelvis and right leg. They rushed her to the provincial hospital
in Cabanatuan City where she was given emergency treatment. After three days, she was
transferred to the National Orthopedic Hospital where she was confined for more than a
month.[3] She underwent an operation for partial hip prosthesis.[4]
Allan, on the other hand, broke a leg. He was also given emergency treatment at the
provincial hospital.
Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J Trading and Julio
Recontique for damages in the Regional Trial Court of Bulacan.[5] Leticia sued as an injured
passenger of Baliwag and as mother of Allan. At the time of the complaint, Allan was a minor,
hence, the suit initiated by his parents in his favor.
Baliwag, A & J Trading and Recontique disclaimed responsibility for the mishap. Baliwag
alleged that the accident was caused solely by the fault and negligence of A & J Trading and its
driver, Recontique. Baliwag charged that Recontigue failed to place an early warning device at
the corner of the disabled cargo truck to warn oncoming vehicles.[6] On the other hand, A & J
Trading and Recontique alleged that the accident was the result of the negligence and reckless
driving of Santiago, bus driver of Baliwag.[7]
After hearing, the trial court found all the defendants liable, thus:

xxxxxxxxx

"In view thereof, the Court holds that both defendants should be held liable; the defendant Baliwag
Transit, Inc. for having failed to deliver the plaintiff and her son to their point of destination safely in
violation of plaintiff's and defendant Baliwag Transit's contractual relation.

The defendant A & J and Julio Recontique for failure to provide its cargo truck with an early warning device in
violation of the Motor Vehicle Law."[8]

The trial court ordered Baliwag, A & J Trading and Recontique to pay jointly and severally the
Garcia spouses the following: (1) P25,000.00 hospitalization and medication fee, (2)
P450,000.00 loss of earnings in eight (8) years, (3) P2,000.00 for the hospitalization of their son
Allan Garcia, (4) P50,000.00 moral damages, and (5) P30,000.00 attorney's fee.[9]
On appeal, the Court of Appeals modified the trial court's Decision by absolving A & J Trading
from liability and by reducing the award of attorney's fees to P10,000.00 and loss of earnings to
P300,000.00, respectively.[10]
Baliwag filed the present petition for review raising the following issues:
1. Did the Court of Appeals err in absolving A & J Trading from liability and holding Baliwag solely
liable for the injuries suffered by Leticia and Allan Garcia in the accident?

2. Is the amount of damages awarded by the Court of Appeals to the Garcia spouses correct?

We affirm the factual findings of the Court of Appeals.

I
As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its
passengers, Leticia and Allan Garcia to their destination safe and sound. A common carrier is
bound to carry its passengers safely as far as human care and foresight can provide, using the
utmost diligence of a very cautious person, with due regard for all the circumstances. [11] In a
contract of carriage, it is presumed that the common carrier was at fault or was negligent when
a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make
an express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence as prescribed in Articles 1733 and 1755 of the Civil Code.[12]
The records are bereft of any proof to show that Baliwag exercised extraordinary
diligence. On the contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia
testified that the bus was running at a very high speed despite the drizzle and the darkness of
the highway. The passengers pleaded for its driver to slow down, but their plea was
ignored.[13] Leticia also revealed that the driver was smelling of liquor.[14] She could smell him as
she was seated right behind the driver. Another passenger, Felix Cruz testified that immediately
before the collision, the bus driver was conversing with a co-employee.[15] All these prove the bus
driver's wanton disregard for the physical safety of his passengers, which makes Baliwag as a
common carrier liable for damages under Article 1759 of the Civil Code:

Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or
willfull 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 do not cease upon proof that they exercised all the diligence of a
good father of a family in the selection or supervision of their employees.

Baliwag cannot evade its liability by insisting that the accident was caused solely by the
negligence of A & J Trading and Julio Recontique. It harps on their alleged non use of an early
warning device as testified to by Col. Demetrio dela Cruz, the station commander of Gapan,
Nueva Ecija who investigated the incident, and Francisco Romano, the bus conductor.
The records do not bear out Baliwag's contention. Col. dela Cruz and Romano testified that
they did not see any early warning device at the scene of the accident.[16] They were referring
to the triangular reflectorized plates in red and yellow issued by the Land Transportation
Office. However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch
at the edge of the road, near the rear portion of the truck to serve as an early warning
device.[17] This substantially complies with Section 34 (g) of the Land Transportation and Traffic
Code, to wit:

(g) Lights and reflector when parked or disabled. Appropriate parking lights or flares visible one
hundred meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked on
highways or in places that are not well-lighted or, is placed in such manner as to endanger passing
traffic. Furthermore, every motor vehicle shall be provided at all times with built-in reflectors or other
similar warning devices either pasted, painted or attached at its front and back which shall likewise be
visible at night at least one hundred meters away. No vehicle not provided with any of the requirements
mentioned in this subsection shall be registered. (Italics supplied)

Baliwag's argument that the kerosene lamp or torch does not substantially comply with the
law is untenable. The aforequoted law clearly allows the use not only of an early warning device
of the triangular reflectorized plates variety but also parking lights or flares visible one hundred
meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable
substitute for the reflectorized plates.[18] No negligence, therefore, may be imputed to A & J
Trading and its driver, Recontique.
Anent this factual issue, the analysis of evidence made by the Court of Appeals deserves our
concurrence, viz:
xxx xxx xxx

In the case at bar, both the injured passengers of the Baliwag involved in the accident testified that they
saw some sort of kerosene or a torch on the rear portion of the truck before the accident. Baliwag
Transit's conductor attempted to defeat such testimony by declaring that he noticed no early warning
device in front of the truck.

Among the testimonies offered by the witnesses who were present at the scene of the
accident, we rule to uphold the affirmative testimonies given by the two injured passengers and
give less credence to the testimony of the bus conductor who solely testified that no such early
warning device exists.
The testimonies of injured passengers who may well be considered as disinterested witness
appear to be natural and more probable than the testimony given by Francisco Romano who is
undoubtedly interested in the outcome of the case, being the conductor of the defendant-
appellant Baliwag Transit Inc.
It must be borne in mind that the situation then prevailing at the time of the accident was
admittedly drizzly and all dark. This being so, it would be improbable and perhaps impossible on
the part of the truck helper without the torch nor the kerosene to remove the flat tires of the truck.
Moreover, witness including the bits conductor himself admitted that the passengers shouted,
that they are going to bump before the collision which consequently caused the bus driver to
apply the brake 3 to 4 meters away from the truck. Again, without the kerosene nor the torch in
front of the truck, it would be improbable for the driver, more so the passengers to notice the
truck to be bumped by the bus considering the darkness of the place at the time of the accident.
xxxxxxxxx
While it is true that the investigating officer testified that he found no early warning device at
the time of his investigation, We rule to give less credence to such testimony insofar as he himself
admitted on cross examination that he did not notice the presence of any kerosene lamp at the
back of the truck because when he arrived at the scene of the accident, there were already many
people surrounding the place (TSN, Aug, 22, 1989, p. 13). He further admitted that there exists
a probability that the lights of the truck may have been smashed by the bus at the time of the
accident considering the location of the truck where its rear portion was connected with the front
portion of the bus (TSN, March 29, 1985, pp. 11-13). Investigator's testimony therefore did not
confirm nor deny the existence of such warning device, making his testimony of little probative
value.[19]
II
We now review the amount of damages awarded to the Garcia spouses.
First, the propriety of the amount awarded as hospitalization and medical fees. The award of
P25,000.00 is not supported by the evidence on record. The Garcias presented receipts marked
as Exhibits B-1 to B 42 but their total amounted only to P5,017.74. To be sure, Leticia testified
as to the extra amount spent for her medical needs but without more reliable evidence, her lone
testimony cannot justify the award of P25,000.00. To prove actual damages, the best evidence
available to the injured party must be presented. The court cannot rely on uncorroborated
testimony whose truth is suspect, but must depend upon competent proof that damages have
been actually suffered[20] Thus, we reduce the actual damages for medical and hospitalization
expenses to P5,017.74.
Second, we find as reasonable the award of P300,000.00 representing Leticia's lost
earnings. Before the accident, Leticia was engaged in embroidery, earning P5,000.00 per
month.[21] Her injuries forced her to stop working. Considering the nature and extent of her
injuries and the length of time it would take her to recover,[22] we find it proper that Baliwag should
compensate her lost income for five (5) years.[23]
Third, the award of moral damages is in accord with law. In a breach of contract of carriage,
moral damages are recoverable if the carrier, through its agent, acted fraudulently or in bad
faith.[24] The evidence shows the gross negligence of the driver of Baliwag bus which amounted
to bad faith. Without doubt, Leticia and Allan experienced physical suffering, mental anguish and
serious anxiety by reason of the accident. Leticia underwent an operation to replace her broken
hip bone with a metal plate. She was confined at the National Orthopedic Hospital for 45
days. The young Allan was also confined in the hospital for his foot injury.Contrary to the
contention of Baliwag, the decision of the trial court as affirmed by the Court of Appeals awarded
moral damages to Antonio and Leticia Garcia not in their capacity as parents of Allan. Leticia
was given moral damages as an injured party. Allan was also granted moral damages as an
injured party but because of his minority, the award in his favor has to be given to his father who
represented him in the suit.
Finally, we find the award of attorney's fees justified. The complaint for damages was
instituted by the Garcia spouses on December 15, 1982, following the unjustified refusal of
Baliwag to settle their claim. The Decision was promulgated by the trial court only on January 29,
1991 or about nine years later. Numerous pleadings were filed before the trial court, the appellate
court and to this Court. Given the complexity of the case and the amount of damages
involved,[25] the award of attorney's fee for P10,000.00 is just and reasonable.
IN VIEW WHEREOF, the Decision of the respondent Court of Appeals in CA-G.R. CV-31246
is AFFIRMED with the MODIFICATION reducing the actual damages for hospitalization and
medical fees to P5,017.74. No costs.
SO ORDERED.
 FIRST DIVISION

[G.R. No. 104685. March 14, 1996]

SABENA BELGIAN WORLD AIRLINES, petitioner, vs. HON. COURT OF APPEALS and
MA. PAULA SAN AGUSTIN, respondents.

DECISION
VITUG, J.:

The appeal before the Court involves the issue of an airlines liability for lost luggage. The
petition for review assails the decision of the Court Appeals, dated 27 February 1992, affirming
[1]

an award of damages made by the trial court in a complaint filed by private respondent against
petitioner.
The factual background of the case, narrated by the trial court and reproduced at length by
the appellate court, is hereunder quoted:

On August 21, 1987, plaintiff was a passenger on board Flight SN 284 of defendant airline originating
from Casablanca to Brussels, Belgium on her way back to Manila. Plaintiff checked in her luggage
which contained her valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00; shoes/bag
$150; accessories $75; luggage itself $10.00; or a total of $4,265.00, for which she was issued Tag No.
71423. She stayed overnight in Brussels and her luggage was left on board Flight SN 284.

Plaintiff arrived at Manila International Airport on September 2, 1987 and immediately submitted her
Tag No. 71423 to facilitate the release of her luggage hut the luggage was missing. She was advised to
accomplish and submit a property Irregularity Report which she submitted and filed on the same day.

She followed up her claim on September 14, 1987 but the luggage remained to be missing.

On September 15, 1987, she filed her formal complaint with the office of Ferge Massed, defendants
Local Manager, demanding immediate attention (Exh. A).

On September 30, 1987, on the occasion of plaintiffs following up of her luggage claim, she was
furnished copies of defendants telexes with an information that the Brussels Office of defendant found
the luggage and that they have broken the locks for identification (Exhibit B). Plaintiff was assured by
the defendant that it has notified its Manila Office that the luggage will be shipped to Manila on October
27, 1987. But unfortunately plaintiff was informed that the luggage was lost for the second time
(Exhibits C and C-1).

At the time of the filling of the complaint, the luggage with its content has not been found.

Plaintiff demanded from the defendant the money value of the luggage and its contents amounting to
$4,265.00 or its exchange value, but defendant refused to settle the claim.
Defendant asserts in its Answer and its evidence tend to show that while it admits that the plaintiff was a
passenger on board Flight No. SN 284 with a piece of checked in luggage bearing Tag No. 71423, the
loss of the luggage was due to plaintiffs sole if not contributory negligence; that she did not declare the
valuable items in her checked-in luggage at the flight counter when she checked in for her flight from
Casablanca to Brussels so that either the representative of the defendant at the counter would have
advised her to secure an insurance on the alleged valuable items and required her to pay additional
charges, or would have refused acceptance of her baggage as required by the generally accepted practices
of international carriers; that Section 9(a), Article IX of General Conditions of carriage requiring
passengers to collect their checked baggage at the place of stopover, plaintiff neglected to claim her
baggage at the Brussels Airport; that plaintiff should have retrieved her undeclared valuables from her
baggage at the Brussels Airport since her flight from Brussels to Manila will still have to visit for
confirmation inasmuch as only her flight from Casablanca to Brussels was confirmed; that defendant
incorporated in all Sabena Plane Tickets, including Sabena Ticket No. 082422-72502241 issued to
plaintiff in Manila on August 21, 1987, a warning that Items of value should be carried on your person
and that some carriers assume no liability for fragile, valuable or perishable articles and that further
information may he obtained from the carrier for guidance; that granting without conceding that
defendant is liable, its liability is limited only to US $20.00 per kilo due to plaintiffs failure to declare a
higher value on the contents of her checked in luggage and pay additional charges thereon. [2]

The trial court rendered judgment ordering petitioner Sabena Belgian World Airlines to pay
private respondent Ma. Paula San Agustin

(a) x x x US$4,265.00 or its legal exchange in Philippine pesos;

(b) x x x P30,000.00 as moral damages;

(c) x x x P10,000.00 as exemplary damages;

(d) x x x P10,000.00 attorneys fees; and

(e) (t)he costs of the suit. [3]

Sabena appealed the decision of the Regional Trial Court to the Court of Appeals. The
appellate court, in its decision of 27 February 1992, affirmed in toto the trial courts judgment.
Petitioner airline company, in contending that the alleged negligence of private respondent
should be considered the primary cause for the loss of her luggage, avers that, despite her
awareness that the flight ticket had been confirmed only for Casablanca and Brussels, and that
her flight from Brussels to Manila had yet to be confirmed, she did not retrieve the luggage upon
arrival in Brussels. Petitioner insists that private respondent, being a seasoned international
traveler, must have likewise been familiar with the standard provisions contained in her flight
ticket that items of value are required to be hand-carried by the passenger and that the liability
of the airline or loss, delay or damage to baggage would be limited, in any event, to only
US$20.00 per kilo unless a higher value is declared in advance and corresponding additional
charges are paid thereon. At the Casablanca International Airport, private respondent, in
checking in her luggage, evidently did not declare its contents or value. Petitioner cites Section
5(c), Article IX, of the General Conditions of Carriage, signed at Warsaw, Poland, on 02 October
1929, as amended by the Hague Protocol of 1955, generally observed by International carriers,
stating, among other things, that:
Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked
baggage, fragile or perishable articles, money, jewelry, precious metals, negotiable papers, securities or
other valuables.[4]

Fault or negligence consists in the omission of that diligence which is demanded by the nature
of an obligation and corresponds with the circumstances of the person, of the time, and of the
place. When the source of an obligation is derived from a contract, the mere breach or non-
fulfillment of the prestation gives rise to the presumption of fault on the part of the obligor. This
rule is not different in the case of common carriers in the carriage of goods which, indeed, are
bound to observe not just the due diligence of a good father of a family but that of extraordinary
care in the vigilance over the goods. The appellate court has aptly observed:

x x x Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reasons of
public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the
goods transported by them. This extraordinary responsibility, according to Art. 1736, lasts from the time
the goods are unconditionally placed in the possession of and received by the carrier until they are
delivered actually or constructively to the consignee or person who has the right to receive them. Art.
1737 states that the common carriers duty to observe extraordinary diligence in the vigilance over the
goods transported by them remains in full force and effect even when they are temporarily unloaded or
stored in transit. And Art. 1735 establishes the presumption that if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they had observed extraordinary diligence as required in Article 1733.

The only exceptions to the foregoing extraordinary responsibility of the common carrier is when the loss,
destruction, or deterioration of the goods is due to any of the following causes:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

Not one of the above excepted causes obtains in this case. [5]

The above rules remain basically unchanged even when the contract is breached by
tort although noncontradictory principles on quasi-delict may then be assimilated as also forming
[6]

part of the governing law. Petitioner is not thus entirely off track when it has likewise raised in its
defense the tort doctrine of proximate cause. Unfortunately for petitioner, however, the doctrine
cannot, in this particular instance, support its case. Proximate cause is that which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces injury and without
which the result would not have occurred. The exemplification by the Court in one case is simple[7]

and explicit; viz:

(T)he proximate legal cause is that acting first and producing the injury, either immediately or by setting
other events in motion, all constituting a natural and Continuous chain of events, each having a close
causal Connection with its immediate predecessor, the final event in the chain immediately affecting the
injury as a natural and probable result of the cause which first acted, under such circumstances that the
person responsible for the first event should, as an ordinarily prudent, and intelligent person, have
reasonable ground to expect at the moment of his act or default that an injury to some person might
probably result therefrom.

It remained undisputed that private respondents luggage was lost while it was in the custody
of petitioner. It was supposed to arrive on the same flight that private respondent took in returning
to Manila on 02 September 1987. When she discovered that the luggage was missing, she
promptly accomplished and filed a Property Irregularity Report. She followed up her claim on 14
September 1987, and filed, on the following day, a formal letter-complaint with petitioner. She felt
relieved when, on 23 October 1987, she was advised that her luggage had finally been found,
with its contents intact when examined, and that she could expect it to arrive on 27 October
1987. She then waited anxiously only to be told later that her luggage had been lost for the
second time. Thus, the appellate court, given all the facts before it, sustained the trial court in
finding petitioner ultimately guilty of gross negligence in the handling of private respondents
luggage.The loss of said baggage not only once by twice, said the appellate court, underscores
the wanton negligence and lack of care on the part of the carrier.

The above findings, which certainly cannot be said to be without basis, foreclose whatever rights
petitioner might have had to the possible limitation of liabilities enjoyed by international air carriers
under the Warsaw Convention (Convention for the Unification of Certain Rules Relating to International
Carriage by Air, as amended by the Hague Protocol of 1955, the Montreal Agreement of 1966, the
Guatemala Protocol of 1971 and the Montreal Protocols of 1975). In Alitalia vs. Intermediate Appellate
Court, now Chief Justice Andres R. Narvasa, speaking for the Court, has explained it well; he said:
[8]

The Warsaw Convention however denies to the carrier availment of the provisions which exclude or
limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is considered to be equivalent to wilful
misconduct, or if the damage is (similarly) caused x x x by any agent of the carrier acting within the
scope of his employment. The Hague Protocol amended the Warsaw Convention by removing the
provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself
completely, and declaring the stated limits of liability not applicable if it is proved that the damage
resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or
recklessly and with knowledge that damage would probably result. The same deletion was effected by
the Montreal Agreement of 1966, with the result that a passenger could recover unlimited damages upon
proof of wilful misconduct.

The Convention does not thus operate as an exclusive enumeration of the instances of an airlines
liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the
language of the Convention, as this Court has now, and at an earlier time, pointed out. Moreover, slight
reflection readily leads to the conclusion that it should be deemed a limit of liability only in those cases
where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its
transport is not attributable to or attended by any wilful misconduct, bad faith, recklessness or otherwise
improper conduct on the part of any official or employee for which the carrier is responsible, and there is
otherwise no special or extraordinary form of resulting injury. The Contentions provisions, in short, do
not regulate or exclude liability for other breaches of contract by the carrier or misconduct of its officers
and employees, or for some particular or exceptional type of damage. Otherwise, an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a
contract of carriage, which is absurd. Nor may it for a moment be supposed that if a member of the
aircraft complement should inflict some physical injury on a passenger, or maliciously destroy or damage
the latters property, the Convention might successfully be pleaded as the sole gauge to determine the
carriers liability to the passenger. Neither may the Convention be invoked to justify the disregard of
some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the
limits set by said Convention. It is in this sense that the Convention has been applied, or ignored,
depending on the peculiar facts presented by each case.

The Court thus sees no error in the preponderant application to the instant case by the
appellate court, as well as by the trial court, of the usual rules on the extent of recoverable
damages beyond the Warsaw limitations. Under domestic law and jurisprudence (the Philippines
being the country of destination), the attendance of gross negligence (given the equivalent of
fraud or bad faith) holds the common carrier liable for all damages which can be reasonably
attributed, although unforeseen, to the non-performance of the obligation, including moral and
[9]

exemplary damages. [10]

WHEREFORE, the decision appealed from is AFFIRMED. Costs against petitioner.

SO ORDERED.
 FIRST DIVISION

G.R. No. 144723 February 27, 2006

LARRY ESTACION, Petitioner,

vs.
NOE BERNARDO, thru and his guardian ad litem ARLIE BERNARDO, CECILIA BANDOQUILLO and GEMINIANO
QUINQUILLERA, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari filed by Larry Estacion (petitioner) seeking to annul the Decision dated April
17, 20001 of the Court of Appeals (CA) in CA-GR CV No. 41447 which affirmed in toto the decision of the Regional Trial
Court (RTC) of Dumaguete City, Branch 41, Negros Oriental, holding petitioner and his driver Bienvenido Gerosano
(Gerosano) liable for damages for the injury sustained by Noe Bernardo (respondent Noe). Also assailed is the appellate
court’s Resolution dated August 16, 20002 denying petitioner’s motion for reconsideration.

In the afternoon of October 16, 1982, respondent Noe was going home to Dumaguete from Cebu, via Bato and Tampi. At
Tampi, he boarded a Ford Fiera passenger jeepney with plate no. NLD 720 driven by respondent Geminiano Quinquillera
(Quinquillera), owned by respondent Cecilia Bandoquillo (Bandoquillo), and was seated on the extension seat placed at
the center of the Fiera. From San Jose, an old woman wanted to ride, so respondent Noe offered his seat. Since the Fiera
was already full, respondent Noe hung or stood on the left rear carrier of the vehicle. Somewhere along Barangay Sto.
Niño, San Jose, Negros Oriental, between kilometers 13 and 14, the Fiera began to slow down and then stopped by the
right shoulder of the road to pick up passengers. Suddenly, an Isuzu cargo truck, owned by petitioner and driven by
Gerosano, which was traveling in the same direction, hit the rear end portion of the Fiera where respondent Noe was
standing. Due to the tremendous force, the cargo truck smashed respondent Noe against the Fiera crushing his legs and
feet which made him fall to the ground. A passing vehicle brought him to the Silliman University Medical Center where his
lower left leg was amputated.

Police investigation reports showed that respondent Noe was one of the 11 passengers of the Fiera who suffered injuries;
that when the Fiera stopped to pick up a passenger, the cargo truck bumped the rear left portion of the Fiera; that only one
tire mark from the front right wheel of the cargo truck was seen on the road. A sketch of the accident was drawn by
investigator Mateo Rubia showing the relative positions of the two vehicles, their distances from the shoulder of the road
and the skid marks of the right front wheel of the truck measuring about 48 feet.

On February 18, 1993, respondent Noe, through his guardian ad litem Arlie Bernardo, filed with the RTC of Dumaguete
City a complaint3 for damages arising from quasi delict against petitioner as the registered owner of the cargo truck and his
driver Gerosano. He alleged that the proximate cause of his injuries and suffering was the reckless imprudence of
Gerosano and petitioner’s negligence in the selection of a reckless driver and for operating a vehicle that was not
roadworthy. He prayed for actual damages, loss of income, moral and exemplary damages, attorney’s fees, litigation
expenses and costs of suit.

Petitioner and his driver Gerosano filed their Answer4 denying the material allegations in the complaint. They, in turn, filed
a third party complaint5 against respondents Bandoquillo and Quinquillera, as owner and driver respectively of the Fiera.
They alleged that it was the reckless imprudence of respondent driver Quinquillera and his clear violation of the traffic rules
and regulations which was the proximate cause of the accident and asked for indemnification for whatever damages they
would be sentenced to pay. Respondents Bandoquillo and Quinquillera filed their Answer to the third party complaint
asking for the dismissal of the third party complaint and for payment of attorney’s fees.

Driver Gerosano was charged criminally for reckless imprudence resulting to multiple physical injuries with damage to
property before the Municipal Circuit Trial Court (MCTC) of Pamplona-Amlan and San Jose, Negros Oriental. On
November 16, 1987, the MCTC rendered its decision6 finding him guilty of the crime charged and was sentenced to four
months and one day to two years and four months and to pay the costs.

On February 18, 1993, the RTC rendered its judgment in the civil case,7 the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants Gerosano and Estacion, to pay
plaintiff, jointly or solidarily, the following:
 1. ₱129,584.20 for actual damages in the form of medical and hospitalization expenses;

2. ₱50,000.00 for moral damages, consisting of mental anguish, moral shock, serious anxiety and wounded
feelings;

3. ₱10,000.00 for attorney’s fees; and

4. ₱5,000.00 for litigation expenses.

SO ORDERED.8

The trial court ruled that the negligence of Gerosano, petitioner’s driver, is the direct and proximate cause of the incident
and of the injuries suffered by respondent Noe; that Gerosano’s gross negligence and reckless imprudence had been
confirmed by the Judgment in Criminal Case No. 463; that based on the findings of the police investigator, the faulty
brakes caused the cargo truck to bump the Fiera; that the Traffic Accident Report showed that the tire mark of the cargo
truck measuring 48 feet is visibly imprinted on the road where the incident took place indicating that the said vehicle was
speeding fast; that the existence of one tire mark of the cargo truck proved that the said vehicle had a faulty brake,
otherwise, it would have produced two tire marks on the road; and that the photographs taken right after the incident also
showed who the guilty party was.

The trial court did not give credence to the argument of petitioner and his driver that the truck was properly checked by a
mechanic before it was dispatched for a trip. It found that petitioner is negligent in maintaining his vehicle in good condition
to prevent any accident to happen; that petitioner is liable under Article 2180 of the Civil Code as employer of driver
Gerosano for being negligent in the selection and supervision of his driver as well as for maintaining and operating a
vehicle that was not roadworthy; and that petitioner and his driver are solidarily liable for all the natural and probable
consequences of their negligent acts or omissions. The trial court dismissed the third party complaint filed by petitioner and
his driver against respondents Bandoquillo and Quinquillera.

Dissatisfied, only petitioner appealed to the CA. On April 17, 2000, the CA rendered the assailed decision which affirmed in
toto the decision of the trial court. Petitioner’s motion for reconsideration was denied in a Resolution dated August 16,
2000.

Hence, the herein petition for review.

Petitioner submits the following issues for resolution:9

WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER LARRY ESTACION EXERCISED
THE DUE DILIGENCE OF A GOOD FATHER OF A FAMILY TO PREVENT DAMAGE DESPITE ABUNDANCE OF
EVIDENCE TO THAT EFFECT;

WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER LARRY ESTACION EXERCISED
DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF HIS EMPLOYEE AND IN MAINTAINING HIS CARGO
TRUCK ROADWORTHY AND IN GOOD OPERATING CONDITION;

WHETHER THE COURT OF APPEALS ERRED IN EXONERATING RESPONDENTS CECILIA BANDOQUILLO AND
GEMINIANO QUINQUILLERA.

In his Memorandum, petitioner contends that he was able to establish that he observed the diligence of a good father of a
family not only in the selection of his employees but also in maintaining his truck roadworthy and in good operating
condition; that the CA erred in exonerating respondents Bandoquillo and Quinquillera, owner and driver, respectively of the
Fiera from liability when their negligence was the proximate cause of respondent Noe’s injuries; that respondent Noe’s act
of standing in the rear carrier of the Fiera is in itself negligence on his part which was aggravated by the fact that
respondent Quinquillera overtook the cargo truck driven by Gerosano on the curve and suddenly cut into the latter’s lane;
that due to the overloading of passengers, Gerosano was not able to see the brake lights of the Fiera when it suddenly
stopped to pick up passengers; that overloading is in violation of the applicable traffic rules and regulations and Article
2185 is explicit when it provides that "unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation"; that since the Fiera driver
was negligent, there arises a presumption that respondent Bandoquillo, as owner of the Fiera, is negligent in the selection
and supervision of her employee; that assuming petitioner Estacion and his driver are not entirely blameless, the
negligence of Quinquillera is sufficient basis why the respective liabilities should be delineated vis-à-vis their degree of
negligence consistent with Article 217910 of the Civil Code.

Respondent Noe filed his Memorandum alleging that the first and second issues raised are factual in nature which are
beyond the ambit of a petition for review; that petitioner failed to overcome the presumption of negligence thus he is liable
for the negligence of his driver Gerosano; and that the third issue is best addressed to respondents Bandoquillo and
Quinquillera.

Respondents Bandoquillo and Quinquillera failed to file their memorandum despite receipt of our Resolution requiring them
to submit the same.

We find it apropos to resolve first the third issue considering that the extent of the liability of petitioner and his driver is
dependent on whether respondents Bandoquillo and Quinquillera are the ones negligent in the vehicular mishap that
happened in the afternoon of October 16, 1982 where respondent Noe was injured, resulting in the amputation of his left
leg.

At the outset, the issue raised is factual in nature. Whether a person is negligent or not is a question of fact which we
cannot pass upon in a petition for review on certiorari, as our jurisdiction is limited to reviewing errors of law.11As a rule,
factual findings of the trial court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal. The
established exceptions are: (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is
grave abuse of discretion; (3) when the findings are grounded entirely on speculations, surmises or conjectures; (4) when
the judgment of the CA is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the
CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both
appellant and appellee; (7) when the findings of fact are conclusions without citation of specific evidence on which they are
based; (8) when the CA manifestly overlooked certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion; and (9) when the findings of fact of the CA are premised on the absence of
evidence and are contradicted by the evidence on record.12

On the basis of the records of this case, we find that there is cogent reason for us to review the factual findings of the lower
courts to conform to the evidence on record and consider this case as an exception to the general rule.

The trial court and the appellate court had made a finding of fact that the proximate cause of the injury sustained by
respondent Noe was the negligent and careless driving of petitioner’s driver, Gerosano, who was driving at a fast speed
with a faulty brake when the accident happened. We see no cogent reason to disturb the trial court’s finding in giving more
credence to the testimony of respondent Noe than the testimony of Gerosano, petitioner’s truck driver.

The correctness of such finding is borne by the records. In his testimony, Gerosano said that he was driving the truck at a
speed of about 40 kilometers per hour;13 that the Fiera was behind him but upon reaching the curve, i.e.,after passing San
Jose going to Dumaguete, the Fiera overtook him and blocked his way;14 that he was 10 meters from the Fiera prior to the
impact15 when he applied the brakes16 and tried to evade the Fiera but he still hit it.17

We agree with the trial court and the appellate court when they found that the truck was running at a fast speed because if
Gerosano was really driving at a speed of 40 kilometers per hour and considering that the distance between the truck and
the Fiera in front was about 10 meters, he had more than enough time to slacken his speed and apply his break to avoid
hitting the Fiera. However, from the way the truck reacted to the application of the brakes, it showed that Gerosano was
driving at a fast speed because the brakes skidded a lengthy 48 feet as shown in the sketch of police investigator Rubia of
the tire marks visibly printed on the road.

Moreover, the photographs taken after the incident and the testimony of Gerosano as to the extent of damage to the
truck, i.e. the truck’s windshield was broken and its hood was damaged after the impact,18 further support the finding of
both courts that Gerosano was driving at a fast pace.

The accident was further caused by the faulty brakes of the truck. Based on the sketch report, there was only one tire mark
of the right tire of the cargo truck during the incident which, as testified to by police investigator Rubia, meant that the
brakes of the truck were not aligned otherwise there would be two tire marks impressions on the road.19 Although petitioner
contends that there are other factors to explain why only one skid mark was found at the place of the incident, such as the
angle and edges of the road as well as the balance of the weight of the cargo laden in the truck, he failed to show that
indeed those factors were present to prove his defense. Such claim cannot be given credence considering that investigator
Rubia testified that the body of the truck was very much on the road, i.e., not over the shoulder of the road,20 and the road
was straight.21 Indeed, it is the negligent act of petitioner’s driver of driving the cargo truck at a fast speed coupled with
faulty brakes which was the proximate cause of respondent Noe’s injury.

Petitioner’s claim that right after overtaking the cargo truck, the Fiera driver suddenly stopped to pick up three passengers
from the side of the road; that the overloading of passengers prevented his truck driver from determining that the Fiera had
pulled over to pick up passengers as the latter’s brakelights were obstructed by the passengers standing on the rear
portion of the Fiera were not substantiated at all. Respondent Quinquillera, the driver of the Fiera, testified that the
distance from the curve of the road when he stopped and picked up passengers was estimated to be about 80 to 90
feet.22 In fact, from the sketch drawn by investigator Rubia, it showed a distance of 145 feet from the curve of the road to
the speed tire mark (which measured about 48 feet) visibly printed on the road to the Fiera. This means that the Fiera
driver did not stop immediately after the curve as what petitioner claims. Moreover, Gerosano admitted that his truck was
at a distance of 10 meters prior to the impact. The distance between the two vehicles was such that it would be impossible
for Gerosano not to have seen that the Fiera had pulled over to pick up passengers.

However, we agree with petitioner that respondent Noe’s act of standing on the rear carrier of the Fiera exposing himself to
bodily injury is in itself negligence on his part. We find that the trial court and the CA erred when they failed to consider that
respondent Noe was also guilty of contributory negligence. Contributory negligence is conduct on the part of the injured
party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to
conform for his own protection. 23

It has been established by the testimony of respondent Noe that he was with four or five other persons standing on the
rear carrier of the Fiera since it was already full. Respondent Noe’s act of standing on the left rear carrier portion of the
Fiera showed his lack of ordinary care and foresight that such act could cause him harm or put his life in danger. It has
been held that "to hold a person as having contributed to his injuries, it must be shown that he performed an act that
brought about his injuries in disregard of warning or signs of an impending danger to health and body.24 Respondent Noe’s
act of hanging on the Fiera is definitely dangerous to his life and limb.

We likewise find merit in petitioner’s contention that respondent Quinquillera, the Fiera driver, was also negligent. There is
merit to petitioner’s claim that there was overloading which is in violation of traffic rules and regulations. Respondent Noe
himself had testified that he was standing at the rear portion of the Fiera because the Fiera was already full. Respondent
Quinquillera should not have taken more passengers than what the Fiera can accommodate. If the Fiera was not
overloaded, respondent Noe would not have been standing on the rear carrier and sustained such extent of injury.

Furthermore, we find that respondent Quinquillera was negligent in allowing respondent Noe to stand on the Fiera’s rear
portion. Section 32(c) of Article III of Republic Act No. 4136, otherwise known as "The Land Transportation and Traffic
Code" provides:

(c) Riding on running boards – No driver shall allow any person to ride on running board, step board or mudguard of his
motor vehicle for any purpose while the vehicle is in motion.

Respondent Quinquillera’s act of permitting respondent Noe to hang on the rear portion of the Fiera in such a dangerous
position creates undue risk of harm to respondent Noe. Quinquillera failed to observe that degree of care, precaution and
vigilance that the circumstances justly demand. Thus, respondent Noe suffered injury.25 Since respondent Quinquillera is
negligent, there arises a presumption of negligence on the part of his employer, respondent Bandoquillo, in supervising her
employees properly. Such presumption was not rebutted at all by Bandoquillo. Thus, the CA erred in affirming the
dismissal of the third party complaint filed by petitioner against respondents Quinquillera and Bandoquillo.

Petitioner contends that he was able to establish that he exercised the due diligence of a good father of a family in the
selection of his employees as well as in the maintenance of his cargo truck in good operating condition. He claims that in
addition to looking at Gerosano’s driver’s license, he accompanied the latter in his first two trips, during which he
ascertained Gerosano’s competence as a driver, petitioner being a driver himself; that the truck driven by Gerosano has
never figured in any accident prior to the incident involved; that upon his acquisition of the cargo truck on March 16, 1982,
only 7 months prior to the incident, the same was thoroughly checked up and reconditioned; and that he had in his employ
a mechanic who conducted periodic check-ups of the engine and brake system of the cargo truck.

We are not persuaded.

Article 2180 of the Civil Code provides:

Art. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for
those of persons for whom one is responsible.

xxx

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in any business or industry.

xxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.

As the employer of Gerosano, petitioner is primarily and solidarily liable for the quasi-delict committed by the former.
Petitioner is presumed to be negligent in the selection and supervision of his employee by operation of law and may be
relieved of responsibility for the negligent acts of his driver, who at the time was acting within the scope of his assigned
task, only if he can show that he observed all the diligence of a good father of a family to prevent damage.26

In Yambao v. Zuniga,27 we have clarified the meaning of the diligence of a good father of a family, thus:

The "diligence of a good father" referred to in the last paragraph of the aforecited statute means diligence in the selection
and supervision of employees. Thus, when an employee, while performing his duties, causes damage to persons or
property due to his own negligence, there arises the juris tantum presumption that the employer is negligent, either in the
selection of the employee or in the supervision over him after the selection. For the employer to avoid the solidary
liability for a tort committed by his employee, an employer must rebut the presumption by presenting adequate
and convincing proof that in the selection and supervision of his employee, he or she exercises the care and
diligence of a good father of a family. x x x

Petitioner’s claim that she exercised due diligence in the selection and supervision of her driver, Venturina, deserves but
scant consideration. Her allegation that before she hired Venturina she required him to submit his driver’s license
and clearances is worthless, in view of her failure to offer in evidence certified true copies of said license and
clearances. Bare allegations, unsubstantiated by evidence, are not equivalent to proof under the rules of evidence. x x x

In any case, assuming arguendo that Venturina did submit his license and clearances when he applied with petitioner in
January 1992, the latter still fails the test of due diligence in the selection of her bus driver. Case law teaches that for an
employer to have exercised the diligence of a good father of a family, he should not be satisfied with the
applicant’s mere possession of a professional driver’s license; he must also carefully examine the applicant for
employment as to his qualifications, his experience and record of service. Petitioner failed to present convincing
proof that she went to this extent of verifying Venturina’s qualifications, safety record, and driving history. The presumption
juris tantum that there was negligence in the selection of her bus driver, thus, remains unrebutted.

Nor did petitioner show that she exercised due supervision over Venturina after his selection. For as pointed out by the
Court of Appeals, petitioner did not present any proof that she drafted and implemented training programs and
guidelines on road safety for her employees. In fact, the record is bare of any showing that petitioner required
Venturina to attend periodic seminars on road safety and traffic efficiency. Hence, petitioner cannot claim exemption
from any liability arising from the recklessness or negligence of Venturina.

In sum, petitioner’s liability to private respondents for the negligent and imprudent acts of her driver, Venturina, under
Article 2180 of the Civil Code is both manifest and clear. Petitioner, having failed to rebut the legal presumption of
negligence in the selection and supervision of her driver, is responsible for damages, the basis of the liability being the
relationship of pater familias or on the employer’s own negligence. x x x28 (Emphasis supplied)

Petitioner failed to show that he examined driver Gerosano as to his qualifications, experience and service records. In fact,
the testimony of driver Gerosano in his cross-examination showed the non-observance of these requirements. Gerosano
testified that petitioner was his first employer in Dumaguete and that he was accepted by petitioner on the very day he
applied for the job;29 that his driver’s license was issued in Mindanao where he came from30 and that while petitioner asked
him about his driving record in Mindanao, he did not present any document of his driving record.31 Such admission clearly
established that petitioner did not exercise due diligence in the selection of his driver Gerosano.
Moreover, the fact that petitioner’s driver Gerosano was driving in an efficient manner when petitioner was with him in his
first two trips would not conclusively establish that Gerosano was not at all reckless. It could not be considered as due
diligence in the supervision of his driver to exempt petitioner from liability. In the supervision of his driver, petitioner must
show that he had formulated training programs and guidelines on road safety for his driver which the records failed to
show. We find that petitioner failed to rebut the presumption of negligence in the selection and supervision of his
employees.

Moreover, there was also no proof that he exercised diligence in maintaining his cargo truck roadworthy and in good
operating condition. While petitioner’s mechanic driver testified that he made a routine check up on October 15, 1982, one
day before the mishap happened, and found the truck operational, there was no record of such inspection.

Turning now to the award of damages, since there was contributory negligence on the part of respondent Noe, petitioner’s
liability should be mitigated in accordance with Article 2179 of the Civil Code which provides:

When the plaintiff’s own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But
if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant’s lack of due
care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.

The underlying precept of the above article on contributory negligence is that a plaintiff who is partly responsible for his
own injury should not be entitled to recover damages in full but must bear the consequences of his own negligence. The
defendant must thus be held liable only for the damages actually caused by his negligence.32

In Phoenix Construction, Inc., v. Intermediate Appellate Court,33 where we held that the legal and proximate cause of the
accident and of Dionisio’s injuries was the wrongful and negligent manner in which the dump truck was parked but found
Dionisio guilty of contributory negligence on the night of the accident, we allocated most of the damages on a 20-80 ratio.
In said case, we required Dionisio to bear 20% of the damages awarded by the appellate court, except as to the award of
exemplary damages, attorney’s fees and costs.

In the present case, taking into account the contributing negligence of respondent Noe, we likewise rule that the demands
of substantial justice are satisfied by distributing the damages also on a 20-80 ratio excluding attorney’s fees and litigation
expenses.34 Consequently, 20% should be deducted from the actual and moral damages awarded by the trial court in favor
of respondent Noe, that is: 20% of ₱129,584.20 for actual damages is ₱25,916.84 and 20% of ₱50,000.00 for moral
damages is ₱10,000.00. Thus, after deducting the same, the award for actual damages should be ₱103,667.36 and
₱40,000.00 for moral damages or 80% of the damages so awarded.

Petitioner and respondents Bandoquillo and Quinquillera are jointly and severally liable for the 80% of the damages as well
as attorney’s fees and litigation expenses conformably with our pronouncement in Tiu v. Arriesgado35 where we held:

The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly and severally liable for said
amount, conformably with the following pronouncement of the Court in Fabre, Jr. v. Court of Appeals:

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, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit
Corporation v. Court of Appeals, 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 latter’s heirs. The basis of this allocation of liability was
explained in Viluan v. Court of Appeals, thus:

"Nor should it make 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 v. 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."36

WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision of the Court of Appeals dated April
17, 2000 as well as its Resolution dated August 16, 2000 are AFFIRMED with MODIFICATION to the effect that the
dispositive portion of the Decision dated February 18, 1993 of the Regional Trial Court of Dumaguete City in Civil Case No.
8122, should read as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants Gerosano and Estacion, as
well as third party defendants Bandoquillo and Quinquillera, to pay plaintiff, jointly and solidarily, the following:

1. ₱103,667.36 for actual damages in the form of medical and hospitalization expenses;

2. ₱40,000.00 for moral damages, consisting of mental anguish, moral shock, serious anxiety and wounded
feelings;

3. ₱10,000.00 for attorney’s fees; and

4. ₱5,000.00 for litigation expenses. 1avvphil.net

SO ORDERED."

No pronouncement as to costs.

SO ORDERED.
 SECOND DIVISION

[G.R. No. 122039. May 31, 2000]

VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE SUNGA

and FRANCISCO SALVA, respondents.

D E C I S I ON

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals, dated March
[1]

31, 1991, reversing the contrary decision of the Regional Trial Court, Branch 36, Dumaguete
City, and awarding damages instead to private respondent Eliza Jujeurche Sunga as plaintiff in
an action for breach of contract of carriage.

The facts, as found by the Court of Appeals, are as follows:

At 10 oclock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga,
then a college freshman majoring in Physical Education at the Siliman University, took a
passenger jeepney owned and operated by petitioner Vicente Calalas. As the jeepney was
filled to capacity of about 24 passengers, Sunga was given by the conductor an "extension
seat," a wooden stool at the back of the door at the rear end of the vehicle. Sclaw

On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger
off. As she was seated at the rear of the vehicle, Sunga gave way to the outgoing passenger.
Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco
Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured. She
sustained a fracture of the "distal third of the left tibia-fibula with severe necrosis of the
underlying skin." Closed reduction of the fracture, long leg circular casting, and case wedging
were done under sedation. Her confinement in the hospital lasted from August 23 to September
7, 1989. Her attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she
would remain on a cast for a period of three months and would have to ambulate in crutches
during said period.

On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of
the contract of carriage by the former in failing to exercise the diligence required of him as a
common carrier. Calalas, on the other hand, filed a third-party complaint against Francisco
Salva, the owner of the Isuzu truck. Korte

The lower court rendered judgment against Salva as third-party defendant and absolved
Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for the
accident. It took cognizance of another case (Civil Case No. 3490), filed by Calalas against
Salva and Verena, for quasi-delict, in which Branch 37 of the same court held Salva and his
driver Verena jointly liable to Calalas for the damage to his jeepney. Rtcspped

On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground
that Sungas cause of action was based on a contract of carriage, not quasi-delict, and that the
common carrier failed to exercise the diligence required under the Civil Code. The appellate
court dismissed the third-party complaint against Salva and adjudged Calalas liable for
damages to Sunga. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE,
and another one is entered ordering defendant-appellee Vicente Calalas to pay
plaintiff-appellant:

(1) P50,000.00 as actual and compensatory damages;

(2) P50,000.00 as moral damages;

(3) P10,000.00 as attorneys fees; and

(4) P1,000.00 as expenses of litigation; and

(5) to pay the costs.

SO ORDERED.

Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the
negligence of Verena was the proximate cause of the accident negates his liability and that to
rule otherwise would be to make the common carrier an insurer of the safety of its passengers.
He contends that the bumping of the jeepney by the truck owned by Salva was a caso fortuito.
Petitioner further assails the award of moral damages to Sunga on the ground that it is not
supported by evidence. Sdaadsc

The petition has no merit.

The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and
the owner of the truck liable for quasi-delict ignores the fact that she was never a party to that
case and, therefore, the principle of res judicata does not apply. Missdaa

Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil
Case No. 3490 was whether Salva and his driver Verena were liable for quasi-delict for the
damage caused to petitioners jeepney. On the other hand, the issue in this case is whether
petitioner is liable on his contract of carriage. The first, quasi-delict, also known as culpa
aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor. The
second, breach of contract or culpa contractual, is premised upon the negligence in the
performance of a contractual obligation.

Consequently, in quasi-delict, the negligence or fault should be clearly established because it is

the basis of the action, whereas in breach of contract, the action can be prosecuted merely by
proving the existence of the contract and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his destination. In case of death or injuries to
[2]

passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have
been at fault or to have acted negligently unless they prove that they observed extraordinary
diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the
common carrier the burden of proof. Slxmis
There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva
and his driver Verena liable for the damage to petitioners jeepney, should be binding on Sunga.
It is immaterial that the proximate cause of the collision between the jeepney and the truck was
the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions
for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing
liability to a person where there is no relation between him and another party. In such a case,
the obligation is created by law itself. But, where there is a pre-existing contractual relation
between the parties, it is the parties themselves who create the obligation, and the function of
the law is merely to regulate the relation thus created. Insofar as contracts of carriage are
concerned, some aspects regulated by the Civil Code are those respecting the diligence
required of common carriers with regard to the safety of passengers as well as the presumption
of negligence in cases of death or injury to passengers. It provides: Slxsc

Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are 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.

Such extraordinary diligence in the vigilance over the goods is further expressed in
articles 1734, 1735, and 1746, Nos. 5,6, and 7, while the extraordinary diligence for
the safety of the passengers is further set forth in articles 1755 and 1756.

Art. 1755. A common carrier is bound 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.

Art. 1756. In case of death of or injuries to passengers, common carriers are

presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed by articles 1733 and 1755.

In the case at bar, upon the happening of the accident, the presumption of negligence at once
arose, and it became the duty of petitioner to prove that he had to observe extraordinary
diligence in the care of his passengers. Scslx

Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could
provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances" as required by Art. 1755? We do not think so. Several factors militate against
petitioners contention. Slx

First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion
being exposed about two meters from the broad shoulders of the highway, and facing the
middle of the highway in a diagonal angle. This is a violation of the R.A. No. 4136, as
amended, or the Land Transportation and Traffic Code, which provides:

Sec. 54. Obstruction of Traffic. - No person shall drive his motor vehicle in such a
manner as to obstruct or impede the passage of any vehicle, nor, while discharging
or taking on passengers or loading or unloading freight, obstruct the free passage
of other vehicles on the highway.
Second, it is undisputed that petitioners driver took in more passengers than the allowed
seating capacity of the jeepney, a violation of 32(a) of the same law. It provides: Mesm

Exceeding registered capacity. - No person operating any motor vehicle shall allow
more passengers or more freight or cargo in his vehicle than its registered capacity.

The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to
which the other passengers were exposed. Therefore, not only was petitioner unable to
overcome the presumption of negligence imposed on him for the injury sustained by Sunga, but
also, the evidence shows he was actually negligent in transporting passengers. Calrky

We find it hard to give serious thought to petitioners contention that Sungas taking an
"extension seat" amounted to an implied assumption of risk. It is akin to arguing that the injuries
to the many victims of the tragedies in our seas should not be compensated merely because
those passengers assumed a greater risk of drowning by boarding an overloaded ferry. This is
also true of petitioners contention that the jeepney being bumped while it was improperly
parked constitutes caso fortuito. A caso fortuito is an event which could not be foreseen, or
which, though foreseen, was inevitable. This requires that the following requirements be
[3]

present: (a) the cause of the breach is independent of the debtors will; (b) the event is
unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to
fulfill his obligation in a normal manner, and (d) the debtor did not take part in causing the injury
to the creditor. Petitioner should have foreseen the danger of parking his jeepney with its body
[4]

protruding two meters into the highway. Kycalr

Finally, petitioner challenges the award of moral damages alleging that it is excessive and
without basis in law. We find this contention well taken.

In awarding moral damages, the Court of Appeals stated: Kyle

Plaintiff-appellant at the time of the accident was a first-year college student in that
school year 1989-1990 at the Silliman University, majoring in Physical Education.
Because of the injury, she was not able to enroll in the second semester of that
school year. She testified that she had no more intention of continuing with her
schooling, because she could not walk and decided not to pursue her degree,
major in Physical Education "because of my leg which has a defect already."

Plaintiff-appellant likewise testified that even while she was under confinement, she
cried in pain because of her injured left foot. As a result of her injury, the
Orthopedic Surgeon also certified that she has "residual bowing of the fracture
side." She likewise decided not to further pursue Physical Education as her major
subject, because "my left leg x x x has a defect already."

Those are her physical pains and moral sufferings, the inevitable bedfellows of the
injuries that she suffered. Under Article 2219 of the Civil Code, she is entitled to
recover moral damages in the sum of P50,000.00, which is fair, just and
reasonable.

As a general rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract for it is not one of the items enumerated under Art. 2219 of the Civil
Code. As an exception, such damages are recoverable: (1) in cases in which the mishap
[5]

results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the
Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in
Art. 2220. [6]

In this case, there is no legal basis for awarding moral damages since there was no factual
finding by the appellate court that petitioner acted in bad faith in the performance of the
contract of carriage. Sungas contention that petitioners admission in open court that the driver
of the jeepney failed to assist her in going to a nearby hospital cannot be construed as an
admission of bad faith. The fact that it was the driver of the Isuzu truck who took her to the
hospital does not imply that petitioner was utterly indifferent to the plight of his injured
passenger. If at all, it is merely implied recognition by Verena that he was the one at fault for
the accident. Exsm

WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its resolution,
dated September 11, 1995, are AFFIRMED, with the MODIFICATION that the award of moral
damages is DELETED.

SO ORDERED.
 SECOND DIVISION

[G.R. No. 142305. December 10, 2003]

SINGAPORE AIRLINES LIMITED, petitioner, vs. ANDION FERNANDEZ, respondent.

DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari assailing the Decision of the Court of Appeals which
[1]

affirmed in toto the decision of the Regional Trial Court of Pasig City, Branch 164 in Civil Case
[2]

No. 60985 filed by the respondent for damages.

The Case for the 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 Masters 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. It was necessary for the
[4]

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 respondents 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. Her [7]

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 petitioners
counter which says: Immediate Attention To Passengers with Immediate Booking. There were
four or five passengers in line. The respondent approached petitioners male employee at the
counter to make arrangements for immediate booking only to be told: Cant you see I am doing
something. She explained her predicament but the male employee uncaringly retorted: Its 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 respondents
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 respondents performance before the Royal Family of Malaysia
was below par. Because of the rude and unkind treatment she received from the petitioners
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 plaintiffs 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 attorneys 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:
 I

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 PETITIONERS

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 petitioners control.Inclement weather prevented the petitioners 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. The delay was even compounded when
[16]

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 petitioners 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 P1,000,000; exemplary damages of P500,000; and attorneys fees also in the amount
of P500,000. [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. In [20]

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 petitioners control
is unavailing. In PAL vs. CA, we held that:
[22]

.... Undisputably, PALs diversion of its flight due to inclement weather was a fortuitous
event. Nonetheless, such occurrence did not terminate PALs 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 carriers 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 defendants 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 petitioners 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 petitioners 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 petitioners 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 defendants pilot. However, knowing fully well that
even before the plaintiff boarded defendants 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 airlines 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 petitioners 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, Dont 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. For petitioners failure to bring the
[25]

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. 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. Bad faith was [26]

imputed by the trial court when it found that the petitioners 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 companys 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 petitioners personnel
to respondents 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, petitioners 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.
 THIRD DIVISION

[G.R. No. 121824. January 29, 1998]

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

PHILIPPINE AIRLINES, respondents.

DECISION
ROMERO, J.:

In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of respondent
Court of Appeals[1] promulgated on September 7, 1995, which affirmed the award of damages and attorneys
fees made by the Regional Trial Court of Cebu, 7th Judicial Region, Branch 17, in favor of private respondent
GOP Mahtani as well as the dismissal of its third-party complaint against Philippine Airlines (PAL).[2]
The material and relevant facts are as follows:

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 310Y 16 APR 1730 OK

HONGKONG HKG BA 20 M 16 APR 2100 OK
BOMBAY BOM BA 19 M 23 APR 0840 OK
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
attorneys 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 claim [6] 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 latters late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtanis
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 plaintiffs 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 attorneys 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 courts 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 attorneys 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 Mahtanis 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 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. $20.00) 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 airlines 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 travelling public
primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting
standard.[14] Neglect or malfeasance by the carriers 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 defendants 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 a 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:

xxxxxxxxx

(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 the
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 passengers 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
Mahtanis 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 attorneys 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:
x x x (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 BAs third-party complaint against PAL, the Court of Appeals justified
its ruling in this wise, and we quote:[30]
Lastly, we sustain the trial courts ruling dismissing appellants 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. x x x 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 passengers 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 plaintiffs claim. The third-party complaint
is actually independent of and separate and distinct from the plaintiffs 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 plaintiffs 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 formers journey to PAL, as
its subcontractor or agent. In fact, the fourth paragraph of the Conditions of Contracts of the ticket [32]issued by
BA to Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay.
4. x x x 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 Lufthansas 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 aboard 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 circuity 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 latters negligence was the proximate cause of Mahtanis 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.
 FIRST DIVISION

[G.R. No. 123560. March 27, 2000]

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners, vs. PAN AMERICAN
WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA CANILAO and
CLAUDIA TAGUNICAR, respondents.

DECISION

PUNO, J.:

This petition for review seeks a reversal of the 31 August 1995 Decision and 11 January 1998
[1]

Resolution of the Court of Appeals holding private respondent Claudia Tagunicar solely liable
[2]

for moral and exemplary damages and attorneys fees, and deleting the trial courts award for
actual damages.

The facts as found by the trial court are as follows: Kycalr

"Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing.
In connection with [this] business, he travels from time to time to Malaysia, Taipei
and Hongkong. On July 10, 1976, plaintiffs bought plane tickets (Exhs. A & B) from
defendant Claudia Tagunicar who represented herself to be an agent of defendant
Tourist World Services, Inc. (TWSI). The destination[s] are Hongkong, Tokyo, San
Francisco, U.S.A., for the amount of P25,000.00 per computation of said defendant
Claudia Tagunicar (Exhs. C & C-1). The purpose of this trip is to go to Fairfield,
New Jersey, U.S.A. to buy two (2) lines of infrared heating system processing
textured plastic article (Exh. K).

"On said date, only the passage from Manila to Hongkong, then to Tokyo, were
confirmed. [PAA] Flight 002 from Tokyo to San Francisco was on "RQ" status,
meaning "on request". Per instruction of defendant Claudia Tagunicar, plaintiffs
returned after a few days for the confirmation of the Tokyo-San Francisco segment
of the trip. After calling up Canilao of TWSI, defendant Tagunicar told plaintiffs that
their flight is now confirmed all the way. Thereafter, she attached the confirmation
stickers on the plane tickets (Exhs. A & B).

"A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the
Pan Am office to verify the status of the flight. According to said Adrian Yu, a
personnel of defendant Pan Am told him over the phone that plaintiffs booking[s]
are confirmed.

"On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days.
They left Hongkong for Tokyo on July 28, 1978. Upon their arrival in Tokyo, they
called up Pan-Am office for reconfirmation of their flight to San Francisco. Said
office, however, informed them that their names are not in the manifest. Since
plaintiffs were supposed to leave on the 29th of July, 1978, and could not remain in
Japan for more than 72 hours, they were constrained to agree to accept airline
tickets for Taipei instead, per advise of JAL officials. This is the only option left to
them because Northwest Airlines was then on strike, hence, there was no chance
for the plaintiffs to obtain airline seats to the United States within 72 hours.
Plaintiffs paid for these tickets.

"Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they
were forced to return back to Manila on August 3, 1978, instead of proceeding to
the United States. [Japan] Air Lines (JAL) refunded the plaintiffs the difference of
the price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I & J) in the total
amount of P2,602.00.

"In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises,
Inc. cancelled Yu Eng Chos option to buy the two lines of infra-red heating system
(Exh. K). The agreement was for him to inspect the equipment and make final
arrangement[s] with the said company not later than August 7, 1978. From this
business transaction, plaintiff Yu Eng Cho expected to realize a profit of
P300,000.00 to P400,000.00."

"[A] scrutiny of defendants respective evidence reveals the following:

"Plaintiffs, who were intending to go to the United States, were referred to

defendant Claudia Tagunicar, an independent travel solicitor, for the purchase of
their plane tickets. As such travel solicitor, she helps in the processing of travel
papers like passport, plane tickets, booking of passengers and some assistance at
the airport. She is known to defendants Pan-Am, TWSI/Julieta Canilao, because
she has been dealing with them in the past years. Defendant Tagunicar advised
plaintiffs to take Pan-Am because Northwest Airlines was then on strike and
plaintiffs are passing Hongkong, Tokyo, then San Francisco and Pan-Am has a
flight from Tokyo to San Francisco. After verifying from defendant TWSI, thru
Julieta Canilao, she informed plaintiffs that the fare would be P25,093.93 giving
them a discount of P738.95 (Exhs. C, C-1). Plaintiffs, however, gave her a check in
the amount of P25,000.00 only for the two round trip tickets. Out of this transaction,
Tagunicar received a 7% commission and 1% commission for defendant TWSI.

Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets from
defendant Julieta Canilao with the following schedules:

Origin Destination Airline Date Time/Travel

Manila Hongkong CX900 7-23-78 1135/1325hrs

Hongkong Tokyo CS500 7-28-78 1615/2115hrs

Tokyo San Francisco PA002 7-29-78 1930/1640hrs

The use of another airline, like in this case it is Cathay Pacific out of Manila, is
allowed, although the tickets issued are Pan-Am tickets, as long as it is in
connection with a Pan-Am flight. When the two (2) tickets (Exhs. A & B) were
issued to plaintiffs, the letter "RQ" appears below the printed word "status" for the
flights from Tokyo to San Francisco which means "under request," (Exh. 3-A, 4-A
 Pan-Am). Before the date of the scheduled departure, defendant Tagunicar
received several calls from the plaintiffs inquiring about the status of their bookings.
Tagunicar in turn called up TWSI/Canilao to verify; and if Canilao would answer
that the bookings are not yet confirmed, she would relate that to the plaintiffs. Calrky

"Defendant Tagunicar claims that on July 13, 1978, a few days before the
scheduled flight, plaintiff Yu Eng Cho personally went to her office, pressing her
about their flight. She called up defendant Julieta Canilao, and the latter told her "o
sige Claudia, confirm na." She even noted this in her index card (Exh. L), that it
was Julieta who confirmed the booking (Exh. L-1). It was then that she allegedly
attached the confirmation stickers (Exhs. 2, 2-B TWSI) to the tickets. These
stickers came from TWSI.

Defendant Tagunicar alleges that it was only in the first week of August, 1978 that
she learned from Adrian Yu, son of plaintiffs, that the latter were not able to take
the flight from Tokyo to San Francisco, U.S.A. After a few days, said Adrian Yu
came over with a gentleman and a lady, who turned out to be a lawyer and his
secretary. Defendant Tagunicar claims that plaintiffs were asking for her help so
that they could file an action against Pan-Am. Because of plaintiffs promise she will
not be involved, she agreed to sign the affidavit (Exh. M) prepared by the
lawyer. Mesm

Defendants TWSI/Canilao denied having confirmed the Tokyo-San Francisco

segment of plaintiffs flight because flights then were really tight because of the on-
going strike at Northwest Airlines. Defendant Claudia Tagunicar is very much
aware that [said] particular segment was not confirmed, because on the very day of
plaintiffs departure, Tagunicar called up TWSI from the airport; defendant Canilao
asked her why she attached stickers on the tickets when in fact that portion of the
flight was not yet confirmed. Neither TWSI nor Pan-Am confirmed the flight and
never authorized defendant Tagunicar to attach the confirmation stickers. In fact,
the confirmation stickers used by defendant Tagunicar are stickers exclusively for
use of Pan-Am only. Furthermore, if it is the travel agency that confirms the
booking, the IATA number of said agency should appear on the validation or
confirmation stickers. The IATA number that appears on the stickers attached to
plaintiffs tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when in fact
TWSIs IATA number is 2-83-0770 (Exhs. 5, 5-A TWSI)." [3]

A complaint for damages was filed by petitioners against private respondents Pan American
World Airways, Inc.(Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao),
and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets and
hotel accommodations when petitioners were compelled to stay in Hongkong and then in Tokyo
by reason of the non-confirmation of their booking with Pan-Am. In a Decision dated November
14, 1991, the Regional Trial Court of Manila, Branch 3, held the defendants jointly and
severally liable, except defendant Julieta Canilao, thus: Scslx

"WHEREFORE, judgment is hereby rendered for the plaintiffs and ordering

defendants Pan American World Airways, Inc., Tourist World Services, Inc. and
Claudia Tagunicar, jointly and severally, to pay plaintiffs the sum of P200,000.00 as
 actual damages, minus P2,602.00 already refunded to the plaintiffs; P200,000.00
as moral damages; P100,000.00 as exemplary damages; an amount equivalent to
20% of the award for and as attorneys fees, plus the sum of P30,000.00 as
litigation expenses.

Defendants counterclaims are hereby dismissed for lack of merit.

SO ORDERED."

Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August
1995, the appellate court rendered judgment modifying the amount of damages awarded,
holding private respondent Tagunicar solely liable therefor, and absolving respondents Pan Am
and TWSI from any and all liability, thus: Slxs c

"PREMISES CONSIDERED, the decision of the Regional Trial Court is hereby SET
ASIDE and a new one entered declaring appellant Tagunicar solely liable for:

1) Moral damages in the amount of P50,000.00;

2) Exemplary damages in the amount of P25,000.00; and

3) Attorneys fees in the amount of P10,000.00 plus costs of suit.

The award of actual damages is hereby DELETED.

SO ORDERED."

In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not
a duly authorized agent or representative of either Pan Am or TWSI. It held that their business
transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as
its agent and sub-agent, respectively. It further held that Tagunicar was not authorized to
confirm the bookings of, nor issue validation stickers to, herein petitioners and hence, Pan Am
and TWSI cannot be held responsible for her actions. Finally, it deleted the award for actual
damages for lack of proof.

Hence this petition based on the following assignment of errors: slx mis

1. the Court of Appeals, in reversing the decision of the trial court, misapplied the
ruling in Nicos Industrial Corporation vs. Court of Appeals, et. al. [206 SCRA 127];
and

2. the findings of the Court of Appeals that petitioners ticket reservations in

question were not confirmed and that there is no agency relationship among PAN-
AM, TWSI and Tagunicar are contrary to the judicial admissions of PAN-AM, TWSI
and Tagunicar and likewise contrary to the findings of fact of the trial court.

We affirm.
I. The first issue deserves scant consideration. Petitioners contend that contrary to the ruling of
the Court of Appeals, the decision of the trial court conforms to the standards of an ideal
decision set in Nicos Industrial Corporation, et. al. vs. Court of Appeals, et. al., as "that which,
[4]

with welcome economy of words, arrives at the factual findings, reaches the legal conclusions,
renders its ruling and, having done so, ends." It is averred that the trial courts decision contains
a detailed statement of the relevant facts and evidence adduced by the parties which thereafter
became the bases for the courts conclusions.

A careful scrutiny of the decision rendered by the trial court will show that after narrating the
evidence of the parties, it proceeded to dispose of the case with a one-paragraph
generalization, to wit: Missdaa

"On the basis of the foregoing facts, the Court is constrained to conclude that
defendant Pan-Am is the principal, and defendants TWSI and Tagunicar, its
authorized agent and sub-agent, respectively. Consequently, defendants Pan-Am,
TWSI and Claudia Tagunicar should be held jointly and severally liable to plaintiffs
for damages. Defendant Julieta Canilao, who acted in her official capacity as Office
Manager of defendant TWSI should not be held personally liable." [5]

The trial courts finding of facts is but a summary of the testimonies of the witnesses and the
documentary evidence presented by the parties. It did not distinctly and clearly set forth, nor
substantiate, the factual and legal bases for holding respondents TWSI, Pan Am and Tagunicar
jointly and severally liable. In Del Mundo vs. CA, et al. where the trial court, after summarizing
[6]

the conflicting asseverations of the parties, disposed of the kernel issue in just two (2)
paragraphs, we held: Sda adsc

"It is understandable that courts, with their heavy dockets and time constraints,
often find themselves with little to spare in the preparation of decisions to the extent
most desirable. We have thus pointed out that judges might learn to synthesize and
to simplify their pronouncements. Nevertheless, concisely written such as they may
be, decisions must still distinctly and clearly express, at least in minimum essence,
its factual and legal bases."

For failing to explain clearly and well the factual and legal bases of its award of moral damages,
we set it aside in said case. Once more, we stress that nothing less than Section 14 of Article
VIII of the Constitution requires that "no decision shall be rendered by any court without
expressing therein clearly and distinctly the facts and the law on which it is based." This is
demanded by the due process clause of the Constitution. In the case at bar, the decision of the
trial court leaves much to be desired both in form and substance. Even while said decision
infringes the Constitution, we will not belabor this infirmity and rather examine the sufficiency of
the evidence submitted by the petitioners. Rtc spped

II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized
ticketing agent of Pan Am. Proceeding from this premise, they contend that TWSI and Pan Am
should be held liable as principals for the acts of Tagunicar. Petitioners stubbornly insist that
the existence of the agency relationship has been established by the judicial admissions
allegedly made by respondents herein, to wit: (1) the admission made by Pan Am in its Answer
that TWSI is its authorized ticket agent; (2) the affidavit executed by Tagunicar where she
admitted that she is a duly authorized agent of TWSI; and (3) the admission made by Canilao
that TWSI received commissions from ticket sales made by Tagunicar. Korte

We do not agree. By the contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another, with the consent or authority of the
latter. The elements of agency are: (1) consent, express or implied, of the parties to establish
[7]

the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3)
the agent acts as a representative and not for himself; (4) the agent acts within the scope of his
authority. It is a settled rule that persons dealing with an assumed agent are bound at their
[8]

peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of proof is upon
them to establish it. [9]

In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated
that she is an authorized agent of TWSI. This affidavit, however, has weak probative value in
light of respondent Tagunicars testimony in court to the contrary. Affidavits, being taken ex
parte, are almost always incomplete and often inaccurate, sometimes from partial suggestion,
or for want of suggestion and inquiries. Their infirmity as a species of evidence is a matter of
judicial experience and are thus considered inferior to the testimony given in court. Further, [10]

affidavits are not complete reproductions of what the declarant has in mind because they are
generally prepared by the administering officer and the affiant simply signs them after the same
have been read to her. Respondent Tagunicar testified that her affidavit was prepared and
[11]

typewritten by the secretary of petitioners lawyer, Atty. Acebedo, who both came with Adrian
Yu, son of petitioners, when the latter went to see her at her office. This was confirmed by
Adrian Yu who testified that Atty. Acebedo brought his notarial seal and notarized the affidavit
of the same day. The circumstances under which said affidavit was prepared put in doubt
[12]

petitioners claim that it was executed voluntarily by respondent Tagunicar. It appears that the
affidavit was prepared and was based on the answers which respondent Tagunicar gave to the
questions propounded to her by Atty. Acebedo. They never told her that the affidavit would be
[13]

used in a case to be filed against her. They even assured her that she would not be included
[14]

as defendant if she agreed to execute the affidavit. Respondent Tagunicar was prevailed upon
[15]

by petitioners son and their lawyer to sign the affidavit despite her objection to the statement
therein that she was an agent of TWSI. They assured her that "it is immaterial" and that "if we
[16]

file a suit against you we cannot get anything from you." This purported admission of
[17]

respondent Tagunicar cannot be used by petitioners to prove their agency relationship. At any
rate, even if such affidavit is to be given any probative value, the existence of the agency
relationship cannot be established on its sole basis. The declarations of the agent alone are
generally insufficient to establish the fact or extent of his authority. In addition, as between the
[18]

negative allegation of respondents Canilao and Tagunicar that neither is an agent nor principal
of the other, and the affirmative allegation of petitioners that an agency relationship exists, it is
the latter who have the burden of evidence to prove their allegation, failing in which, their
[19]

claim must necessarily fail. Sclaw

We stress that respondent Tagunicar categorically denied in open court that she is a duly
authorized agent of TWSI, and declared that she is an independent travel agent. We have [20]

consistently ruled that in case of conflict between statements in the affidavit and testimonial
declarations, the latter command greater weight. [21]
As further proofs of agency, petitioners call our attention to TWSIs Exhibits "7", "7-A", and "8"
which show that Tagunicar and TWSI received sales commissions from Pan Am. Exhibit "7" is [22]

the Ticket Sales Report submitted by TWSI to Pan Am reflecting the commissions received by
TWSI as an agent of Pan Am. Exhibit "7-A" is a listing of the routes taken by passengers who
[23]

were audited to TWSIs sales report. Exhibit "8" is a receipt issued by TWSI covering the
[24]

payment made by Tagunicar for the tickets she bought from TWSI. These documents cannot
justify the deduction that Tagunicar was paid a commission either by TWSI or Pan Am. On the
contrary, Tagunicar testified that when she pays TWSI, she already deducts in advance her
commission and merely gives the net amount to TWSI. From all sides of the legal prism, the
[25]

transaction is simply a contract of sale wherein Tagunicar buys airline tickets from TWSI and
then sells it at a premium to her clients. Sc lex

III. Petitioners included respondent Pan Am in the complaint on the supposition that since
TWSI is its duly authorized agent, and respondent Tagunicar is an agent of TWSI, then Pan
Am should also be held responsible for the acts of respondent Tagunicar. Our disquisitions
above show that this contention lacks factual and legal bases. Indeed, there is nothing in the
records to show that respondent Tagunicar has been employed by Pan Am as its agent, except
the bare allegation of petitioners. The real motive of petitioners in suing Pan Am appears in its
Amended Complaint that "[d]efendants TWSI, Canilao and Tagunicar may not be financially
capable of paying plaintiffs the amounts herein sought to be recovered, and in such event,
defendant Pan Am, being their ultimate principal, is primarily and/or subsidiarily liable to pay
said amounts to plaintiffs." This lends credence to respondent Tagunicars testimony that she
[26]

was persuaded to execute an affidavit implicating respondents because petitioners knew they
would not be able to get anything of value from her. In the past, we have warned that this Court
will not tolerate an abuse of the judicial process by passengers in order to pry on international
airlines for damage awards, like "trophies in a safari." [27]

This meritless suit against Pan Am becomes more glaring with petitioners inaction after they
were bumped off in Tokyo. If petitioners were of the honest belief that Pan Am was responsible
for the misfortune which beset them, there is no evidence to show that they lodged a protest
with Pan Ams Tokyo office immediately after they were refused passage for the flight to San
Francisco, or even upon their arrival in Manila. The testimony of petitioner Yu Eng Cho in this
regard is of little value, viz.:

"Atty. Jalandoni: x x x

q Upon arrival at the Tokyo airport, what did you do if any in connection with your
schedule[d] trip?

a I went to the Hotel, Holiday Inn and from there I immediately called up Pan Am
office in Tokyo to reconfirm my flight, but they told me that our names were not
listed in the manifest, so next morning, very early in the morning I went to the
airport, Pan Am office in the airport to verify and they told me the same and we
were not allowed to leave.

q You were scheduled to be in Tokyo for how long Mr. Yu?

a We have to leave the next day 29th.

 q In other words, what was your status as a passenger?

a Transient passengers. We cannot stay there for more than 72 hours.

xxxxxxxxx

q As a consequence of the fact that you claimed that the Pan Am office in Tokyo
told you that your names were not in the manifest, what did you do, if any?

a I ask[ed] them if I can go anywhere in the States? They told me I can go to LA via
Japan Airlines and I accepted it.

q Do you have the tickets with you that they issued for Los Angeles?

a It was taken by the Japanese Airlines instead they issue[d] me a ticket to Taipei.

xxxxxxxxx

q Were you able to take the trip to Los Angeles via Pan Am tickets that was issued
to you in lieu of the tickets to San Francisco?

a No, sir.

q Why not?

a The Japanese Airlines said that there were no more available seats.

q And as a consequence of that, what did you do, if any?

a I am so much scared and worried, so the Japanese Airlines advised us to

go to Taipei and I accepted it.

xxxxxxxxx

q Why did you accept the Japan Airlines offer for you to go to Taipei?

a Because there is no chance for us to go to the United States within 72 hours

because during that time Northwest Airlines [was] on strike so the seats are very
scarce. So they advised me better left (sic) before the 72 hours otherwise you will
have trouble with the Japanese immigration.

q As a consequence of that you were force[d] to take the trip to Taipei?

a Yes, sir." (emphasis supplied)

[28]

It grinds against the grain of human experience that petitioners did not insist that they be
allowed to board, considering that it was then doubly difficult to get seats because of the
ongoing Northwest Airlines strike. It is also perplexing that petitioners readily accepted
whatever the Tokyo office had to offer as an alternative. Inexplicably too, no demand letter was
sent to respondents TWSI and Canilao. Nor was a demand letter sent to respondent Pan Am.
[29]

To say the least, the motive of petitioners in suing Pan Am is suspect. x law

We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to board
to justify petitioners claim for damages. Mere refusal to accede to the passengers wishes does
not necessarily translate into damages in the absence of bad faith. The settled rule is that the
[30]

law presumes good faith such that any person who seeks to be awarded damages due to acts
of another has the burden of proving that the latter acted in bad faith or with ill motive. In the
[31]

case at bar, we find the evidence presented by petitioners insufficient to overcome the
presumption of good faith. They have failed to show any wanton, malevolent or reckless
misconduct imputable to respondent Pan Am in its refusal to accommodate petitioners in its
Tokyo-San Francisco flight. Pan Am could not have acted in bad faith because petitioners did
not have confirmed tickets and more importantly, they were not in the passenger manifest. Sc

In not a few cases, this Court did not hesitable to hold an airline liable for damages for having
acted in bad faith in refusing to accommodate a passenger who had a confirmed ticket and
whose name appeared in the passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines
Inc. we ruled that there was a valid and binding contract between the airline and its passenger
[32]

after finding that validating sticker on the passengers ticket had the letters "O.K." appearing in
the Res. Status box which means "space confirmed" and that the ticket is confirmed or
validated. In Pan American World Airways Inc. v. IAC, et al. where a would-be-passenger had
[33]

the necessary ticket, baggage claim and clearance from immigration all clearly showing that
she was a confirmed passenger and included in the passenger manifest and yet was denied
accommodation in said flight, we awarded damages. In Armovit, et al. v. CA, et al., we upheld
[34]

the award of damages made against an airline for gross negligence committed in the issuance
of tickets with erroneous entries as to the time of flight. In Alitalia Airways v. CA, et al., we held
[35]

that when 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. And finally, an award of damages was held proper in the case
of Zalamea, et al. v. CA, et al., where a confirmed passenger included in the manifest was
[36]

denied accommodation in such flight. Scmis

On the other hand, the respondent airline in Sarreal, Sr. v. Japan Airlines Co., Ltd., was held
[37]

not liable for damages where the passenger was not allowed to board the plane because his
ticket had not been confirmed. We ruled that "[t]he stub that the lady employee put on the
petitioners ticket showed among other coded items, under the column "status" the letters "RQ"
which was understood to mean "Request." Clearly, this does not mean a confirmation but only
a request. JAL Traffic Supervisor explained that it would have been different if what was written
on the stub were the letter "ok" in which case the petitioner would have been assured of a seat
on said flight. But in this case, the petitioner was more of a wait-listed passenger than a
regularly booked passenger." Mis sc

In the case at bar, petitioners ticket were on "RQ" status. They were not confirmed passengers
and their names were not listed in the passenger manifest. In other words, this is not a case
where Pan Am bound itself to transport petitioners and thereafter reneged on its obligation.
Hence, respondent airline cannot be held liable for damages. Mis spped
IV. We hold that respondent Court of Appeals correctly ruled that the tickets were never
confirmed for good reasons: (1) The persistent calls made by respondent Tagunicar to Canilao,
and those made by petitioners at the Manila, Hongkong and Tokyo offices of Pan Am, are
eloquent indications that petitioners knew that their tickets have not been confirmed. For, as
correctly observed by Pan Am, why would one continually try to have ones ticket confirmed if it
had already been confirmed? (2) The validation stickers which respondent Tagunicar attached
to petitioners tickets were those intended for the exclusive use of airline companies. She had
no authority to use them. Hence, said validation stickers, wherein the word "OK" appears in the
status box, are not valid and binding. (3) The names of petitioners do not appear in the
passenger manifest. (4) Respondent Tagunicars "Exhibit 1" shows that the status of the San
[38]

Francisco-New York segment was "Ok", meaning it was confirmed, but that the status of the
Tokyo-San Francisco segment was still "on request". (5) Respondent Canilao testified that on
the day that petitioners were to depart for Hongkong, respondent Tagunicar called her from the
airport asking for confirmation of the Tokyo-San Francisco flight, and that when she told
respondent Tagunicar that she should not have allowed petitioners to leave because their
tickets have not been confirmed, respondent Tagunicar merely said "Bahala na." This was
[39]

never controverted nor refuted by respondent Tagunicar. (6) To prove that it really did not
confirm the bookings of petitioners, respondent Canilao pointed out that the validation stickers
which respondent Tagunicar attached to the tickets of petitioners had IATA No. 2-82-0770
stamped on it, whereas the IATA number of TWSI is 28-30770. [40]

Undoubtedly, respondent Tagunicar should be liable for having acted in bad faith in
misrepresenting to petitioners that their tickets have been confirmed. Her culpability, however,
was properly mitigated. Petitioner Yu Eng Cho testified that he repeatedly tried to follow up on
the confirmation of their tickets with Pan Am because he doubted the confirmation made by
respondent Tagunicar. This is clear proof that petitioners knew that they might be bumped off
[41]

at Tokyo when they decided to proceed with the trip. Aware of this risk, petitioners exerted
efforts to confirm their tickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly, we
find the modification as to the amount of damages awarded just and equitable under the
circumstances. Spped

WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners. Jo
spped

SO ORDERED.
 FIRST DIVISION

[G.R. No. 127957. February 21, 2001]

COLLIN A. MORRIS and THOMAS P. WHITTIER, petitioners, vs. COURT OF APPEALS

(Tenth Division) and SCANDINAVIAN AIRLINES SYSTEM, respondents.

DECISION
PARDO, J.:

Petitioners appeal via certiorari from the decision[1] of the Court of Appeals, which reversed the decision of the trial
court and ordered the dismissal of petitioners complaint for damages against respondent for breach of contract of air
carriage.
On February 14, 1978, petitioners filed with the Regional Trial Court, Makati, Branch 143 an action for damages
for breach of contract of air carriage against respondent airline because they were bumped off from SAS Flight SK 893,
Manila-Tokyo, on February 14, 1978, despite a confirmed booking in the first class section of the flight.
Petitioners Collin A. Morris and Thomas P. Whittier were American citizens; the vice-president for technical
services and the director for quality assurance, respectively, of Sterling Asia, a foreign corporation with regional
headquarters at No. 8741 Paseo de Roxas, Makati City.
Respondent Scandinavian Airline System (SAS for brevity) is and at times material hereto has been engaged in the
commercial air transport of passengers globally.
Petitioner Morris and co-petitioner Whittier had a series of business meetings with Japanese businessmen in Japan
from February 14 to February 22, 1978. They requested their travel agent, Staats Travel Service, Inc. to book them as
first class passengers in SAS Manila-Tokyo flight on February 14, 1978. Respondent booked them as first-class
passengers on Flight SK 893, Manila-Tokyo flight on February 14, 1978, at 3:50 in the afternoon.
At 1:30 in the afternoon of February 14, 1978, a limousine service of the travel agency fetched petitioner Morris at
his house in Urdaneta Village, Makati City. Thereafter, they went to Merville Park, Paraaque and fetched petitioner
Whittier, arriving there at around 2:00 in the afternoon. From Paraaque, they went to the Manila International Airport
and arrived at 2:35 in the afternoon.
Upon arrival at the airport, representatives of the travel agency met petitioners. It took petitioners two to three
minutes to clear their bags at the customs section. After that, they proceeded to the SAS check-in counter and presented
their tickets, passports, immigration cards and travel documents to Ms. Erlinda Ponce at the reception desk.
After about fifteen (15) minutes, petitioners noticed that their travel documents were not being processed at the
check-in counter. They were informed that there were no more seats on the plane for which reason they could not be
accommodated on the flight.
Petitioner Morris contacted Staats Travel Service and asked the latter to contact the management of SAS to find
out what was the problem. After ten (10) minutes, Staats Travel Service called and confirmed their booking. Thereafter,
petitioners Morris and Whittier returned to respondents check-in counter anticipating that they would be allowed to
check-in. However, the check-in counter was closed. When they informed Ms. Ponce, in-charge at the check-in counter
that arrangements had been made with respondents office, she ignored them. Even respondents supervisor, Raul Basa,
ignored them and refused to answer their question why they could not be accommodated in the flight despite their
confirmed booking.
When petitioners went to the supervisors desk to check the flight manifest, they saw that their names on top of the
list of the first class section had been crossed out. They pressed the supervisor to allow them in the flight as they had
confirmed tickets. Mr. Basa informed them that it could not be done because the flight was closed and it was too late to
do anything. They checked in at exactly 3:10 in the afternoon and the flight was scheduled to leave Manila International
Airport at 3:50 in the afternoon.[2]
Petitioner Morris said that they were advised to be at the airport at least an hour before departure time. This has
been respondents policy in petitioners previous travels abroad.[3]
Ms. Erlinda Ponce, SAS employee on duty at the check-in counter on February 14, 1978 testified that the economy
class of SAS Flight SK 893 was overbooked; however, the first class section was open. She met petitioners, who were
booked in the first class section, when they approached the counter to check-in. They were not accommodated on the
flight because they checked-in after the flight manifest had been closed, forty (40) minutes prior to the planes
departure. Petitioners seats were given to economy class passengers who were upgraded to first class.[4]
Upon cross-examination, Ms. Ponce said that petitioners might have arrived at the airport earlier than 3:10 in the
afternoon when the flight manifest was closed; she was sure that they arrived at the check-in counter at past 3:10 in the
afternoon. The first class seats of petitioners were given to upgraded economy class passengers three (3) minutes before
the flight manifest was closed.[5]
Raul Cruz Basa, a supervisor of respondent airline company, testified that SAS Flight SK 893 on February 14, 1978
was overbooked in the economy class. Petitioner Morris and Whittier were among the names listed in the first class
section of the flight manifest. However, their names were crossed out and the symbols NOSH, meaning NO SHOW,
written after their names. The NO SHOW notation could mean either that the booked passengers or his travel documents
were not at the counter at the time of the closing of the flight manifest.
Mr. Basa said that he talked to petitioners at about 3:20 in the afternoon after receiving a radio call from the ground
staff at the check-in counter about complaints from passengers.
He learned from Ms. Ponce that petitioners checked in late after the flight manifest had been closed, after which
time waitlisted passengers from the economy class had been upgraded. He explained to petitioners that they could not
be accommodated on the plane because the seats were all filled up. He admitted that there were about six (6) passengers
in the counter who were refused boarding because waitlisted passengers had been accepted. Most of those who were
refused boarding came in late.[6]
Alice Magtulac, another witness of the respondent, testified that she was supervisor of ticketing and reservation
section. She said that petitioners Morris and Whittier had confirmed reservation tickets to the first class section of SAS
Flight SK 893, Manila-Tokyo flight, on February 14, 1978. She confirmed that Ms. Thelma Lorraine Sayer was one of
the economy class passengers who was not able to leave because the flight was overbooked on the economy class.
Ms. Magtulac said that it was not SAS policy to upgrade economy passengers to first class if passengers booked
for first class did not show up.[7]
On August 24, 1988, the trial court rendered a judgment against respondent and in favor of petitioners Morris and
Whittier. The dispositive portion reads:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiffs and
against defendant, ordering the latter to pay the former the following:

1) Moral damages to plaintiff Collin A. Morris in the amount of P1,000,000.00 and to plaintiff Thomas
P. Whittier the sum of P750,000.00;

2) Exemplary damages in the sum of P200,00.00;

3) Attorneys fees in the amount of P300,000.00, plus the costs of suit.

SO ORDERED.

Makati, Metro Manila, August 24, 1988.

[ORIGINAL SIGNED]
TEOFILO GUADIZ, JR.
J u d g e[8]
On October 5, 1988, respondent filed a notice of appeal.[9]
Meanwhile, on October 6, 1988, petitioners Morris and Whittier moved for reconsideration of the decision as
regards the award of damages.
On November 2, 1988, respondent opposed the motion for reconsideration.[10]
On February 26, 1992, the trial court issued an order granting petitioners motion for reconsideration, the decretal
portion of which is quoted herein, to wit:

WHEREFORE, in view of the foregoing, the Court hereby grants the Motion for Reconsideration. The
dispositive portion of the Decision is hereby amended with respect to the amount of moral damages,
ordering the defendant to pay moral damages to Collin Morris in the amount of P1,500,000.00 and to
Thomas Whittier the amount of P1,000,000.00.

SO ORDERED.

Makati, Metro Manila, February 26, 1992.

[ORIGINAL SIGNED]
TEOFILO GUADIZ, JR.
J u d g e[11]
Respondents appeal rested mainly on the ground that the trial court misappreciated the facts and evidence adduced
during the trial. The thrust of its defense was petitioners lack of cause of action, considering that they checked-in at the
SAS counter at the Manila International Airport after the flight manifest was closed and after their first class seats were
given to waitlisted economy class passengers.[12]
On January 21, 1997, the Court of Appeals promulgated a decision reversing the decision of the court a quo, and
ordering the dismissal of the complaint for damages. The dispositive portion of the decision provides:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another one rendered
dismissing plaintiffs-appellees complaint.

SO ORDERED.[13]

In reversing the trial courts decision, the Court of Appeals found petitioners statements self-serving. Petitioners
failed to prove that they checked-in on time. The appellate court lent credence to respondents claim that petitioners were
denied boarding on SAS Flight SK 893 because of their late arrival for check-in at the international airport.Respondents
employee, Ms. Erlinda Ponce, testified that petitioners checked in after the flight manifest was closed.
Hence, this petition.[14]
Petitioners allege that the Court of Appeals gravely erred in dismissing their complaint for damages and in finding
their testimonies self-serving. They contend that the trial court did not act arbitrarily in lending credence to their
testimonies and finding their evidence sufficient to warrant the award of damages against respondent. In sum, they
claim to be entitled to the award for damages because, as found by the trial court, they were wrongfully and in bad faith,
bumped-off from SAS Flight SK 893 on February 14, 1978, despite their timely arrival at the airport for check-in and
confirmed bookings as first class passengers.[15]
The petition has no merit.
 To begin with, it must be emphasized that a contract to transport passengers is quite different in kind and degree
from any other contractual relations, and this is because of the relation, which an air carrier sustains with the public. Its
business is mainly with the travelling public. It invites people to avail [themselves] of the comforts and advantages it
offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance
of the carriers employees naturally could give ground for an action for damages.[16]
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.[17] Where in breaching the contract of carriage the
defendant 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 obligation which the parties had foreseen or could have reasonably
foreseen. In that case, such liability does not include moral and exemplary damages.[18] Moral damages are generally not
recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered
when breach of contract of carriage results in the death of a passenger.[19]
The award of exemplary damages has likewise no factual basis. It is a requisite that the act must be accompanied
by bad faith or done in wanton, fraudulent or malevolent manner--circumstances which are absent in this case. In
addition, exemplary damages cannot be awarded as the requisite element of compensatory damages was not present."[20]
In the instant case, assuming arguendo that breach of contract of carriage may be attributed to respondent,
petitioners travails were directly traceable to their failure to check-in on time, which led to respondents refusal to
accommodate them on the flight.
The rule is that moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage
only where (a) the mishap results in the death of a passenger and (b) it is proved that the carrier was guilty of fraud and
bad faith even if death does not result.[21]
For having arrived at the airport after the closure of the flight manifest, respondents employee could not be faulted
for not entertaining petitioners tickets and travel documents for processing, as the checking in of passengers for SAS
Flight SK 893 was finished. There was no fraud or bad faith as would justify the courts award of moral damages.
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 known duty through some motive or interest or ill will that
partakes of the nature of fraud.[22]
In the instant case, respondents denial of petitioners boarding on SAS Flight SK 893 was not attended by bad faith
or malice.
To the contrary, facts revealed that they were not allowed to board the plane due to their failure to check-in on
time. Petitioner Morris admitted that they were at the check-in counter at around 3:10, exactly the same time that the
flight manifest was closed, but still too late to be accommodated on the plane. Respondents supervisor, Raul C. Basa,
testified that he met petitioners at about 3:20 in the afternoon after receiving a radio call from the ground staff regarding
petitioners complaints. Clearly, petitioners did not arrive on time for check-in.
As we find petitioners not entitled to moral damages, an award of exemplary damages is likewise baseless.[23] Where
the award of moral and exemplary damages is eliminated, so must the award for attorneys fees be deleted.[24]
WHEREFORE, the Court DENIES the petition for lack of merit. The Court AFFIRMS in toto the decision of the
Court of Appeals in CA-G. R. CV. No. 38684.
No costs.
SO ORDERED.
 FIRST DIVISION

[G.R. No. 161730. January 28, 2005]

JAPAN AIRLINES, petitioner, vs. MICHAEL ASUNCION and JEANETTE

ASUNCION, respondents.

DECISION
YNARES-SANTIAGO, J.:

This petition for review seeks to reverse and set aside the October 9, 2002 decision[1] of the
Court of Appeals and its January 12, 2004 resolution,[2] which affirmed in toto the June 10, 1997
decision of the Regional Trial Court of Makati City, Branch 61 in Civil Case No. 92-3635.[3]
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan
Airlines (JAL) Flight 742 bound for Los Angeles. Their itinerary included a stop-over in Narita and
an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko Etou-Higuchi of JAL
endorsed their applications for shore pass and directed them to the Japanese immigration
official.[4] A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay
in the neighborhood of the port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared shorter
than his height as indicated in his passport. Because of this inconsistency, respondents were
denied shore pass entries and were brought instead to the Narita Airport Rest House where they
were billeted overnight.
The immigration official also handed Mrs. Higuchi a Notice[5] where it was stated that
respondents were to be watched so as not to escape.
Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japans
Immigration Department to handle passengers who were denied shore pass entries, brought
respondents to the Narita Airport Rest House where they stayed overnight until their departure
the following day for Los Angeles. Respondents were charged US$400.00 each for their
accommodation, security service and meals.
On December 12, 1992, respondents filed a complaint for damages[6] claiming that JAL did
not fully apprise them of their travel requirements and that they were rudely and forcibly detained
at Narita Airport.
JAL denied the allegations of respondents. It maintained that the refusal of the Japanese
immigration authorities to issue shore passes to respondents is an act of state which JAL cannot
interfere with or prevail upon. Consequently, it cannot impose upon the immigration authorities
that respondents be billeted at Hotel Nikko instead of the airport resthouse.[7]
On June 10, 1997, the trial court rendered its decision, the dispositive portion of which reads:

WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiffs ordering

defendant JAL to pay plaintiffs as follows:
 1. the sum of US$800.00 representing the expenses incurred at the Narita Airport with interest at
12% per annum from March 27, 1992 until the sum is fully paid;

2. the sum of P200,000.00 for each plaintiff as moral damages;

3. the amount of P100,000.00 for each plaintiff as exemplary damages;

4. the amount of P100,000.00 as attorneys fees; and

5. costs of suit.

SO ORDERED.[8]

The trial court dismissed JALs counterclaim for litigation expenses, exemplary damages and
attorneys fees.
On October 9, 2002, the Court of Appeals affirmed in toto the decision of the trial court. Its
motion for reconsideration having been denied,[9] JAL now files the instant petition.
The basic issue for resolution is whether JAL is guilty of breach of contract.
Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its
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. 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 carriers obligation to carry him and his luggage safely to the agreed
destination.[10] 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.[11]
We find that JAL did not breach its contract of carriage with respondents. It may be true that
JAL has the duty to inspect whether its passengers have the necessary travel documents,
however, such duty does not extend to checking the veracity of every entry in these documents.
JAL could not vouch for the authenticity of a passport and the correctness of the entries therein.
The power to admit or not an alien into the country is a sovereign act which cannot be interfered
with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and
herein respondents. As such, JAL should not be faulted for the denial of respondents shore pass
applications.
Prior to their departure, respondents were aware that upon arrival in Narita, they must secure
shore pass entries for their overnight stay. Respondents mother, Mrs. Imelda Asuncion, insisted
though that Ms. Linda Villavicencio of JAL assured her that her children would be granted the
passes.[12] This assertion was satisfactorily refuted by Ms. Villavicencios testimony during the
cross examination, to wit:

ATTY. GONZAGA:

Q I will show to you Exh. 9 which is the TIM and on page 184 hereof, particularly number 10,
and I quote, Those holding tickets with confirmed seats and other documents for their
onward journey and continuing their journey to a third country provided that they obtain an
 indorsement with an application of shore pass or transit pass from the airline ground
personnel before clearing the immigration formality?

WITNESS:

A Yes, Sir.

Q Did you tell this provision to Mrs. Asuncion?

A Yes, Sir. I did.

Q Are you sure?

A Yes, Sir.

Q Did you give a copy?

A No, Sir, I did not give a copy but verbally I explained to her the procedure they have to
undergo when they get to narita airport.

Q And you read the contents of this [TIM]?

A No, Sir, I did not read it to her but I explained to her the procedure that each passenger has to
go through before when they get to narita airport before they line up in the immigration
counter.

Q In other words, you told Mrs. Asuncion the responsibility of securing shore passes bears solely
on the passengers only?

A Yes, Sir.

Q That the airline has no responsibility whatsoever with regards (sic) to the application for shore
passes?

A Yes, Sir.[13]

Next, respondents claimed that petitioner breached its contract of carriage when it failed to
explain to the immigration authorities that they had overnight vouchers at the Hotel Nikko Narita.
They imputed that JAL did not exhaust all means to prevent the denial of their shore pass entry
applications.
To reiterate, JAL or any of its representatives have no authority to interfere with or influence
the immigration authorities. The most that could be expected of JAL is to endorse respondents
applications, which Mrs. Higuchi did immediately upon their arrival in Narita.
As Mrs. Higuchi stated during her deposition:

ATTY. QUIMBO
 Q: Madam Witness, what assistance did you give, if any, to the plaintiffs during this interview?

A: No, I was not present during their interview. I cannot assist.

Q: Why not?

A: It is forbidden for a civilian personnel to interfere with the Immigration agents duties. [14]

Q: During the time that you were in that room and you were given this notice for you to sign, did
you tell the immigration agent that Michael and Jeanette Asuncion should be allowed to
stay at the Hotel Nikko Narita because, as passengers of JAL, and according to the plaintiff,
they had vouchers to stay in that hotel that night?

A: No, I couldnt do so.

Q: Why not?

A: This notice is evidence which shows the decision of immigration authorities. It shows there
that the immigration inspector also designated Room 304 of the Narita Airport Resthouse as
the place where the passengers were going to wait for their outbound flight. I cannot
interfere with that decision.[15]

Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the denial of
respondents applications, Mrs. Higuchi immediately made reservations for respondents at the
Narita Airport Rest House which is really more a hotel than a detention house as claimed by
respondents.[16]
More importantly, nowhere in respondent Michaels testimony did he state categorically that
Mrs. Higuchi or any other employee of JAL treated them rudely or exhibited improper behavior
throughout their stay. We therefore find JAL not remiss in its obligations as a common carrier.
Moral damages may be recovered in cases where one willfully causes injury to property, or
in cases of breach of contract where the other party acts fraudulently or in bad faith. Exemplary
damages are imposed by way of example or correction for the public good, when the party to a
contract acts in wanton, fraudulent, oppressive or malevolent manner. Attorneys fees are allowed
when exemplary damages are awarded and when the party to a suit is compelled to incur
expenses to protect his interest.[17] There being no breach of contract nor proof that JAL acted in
wanton, fraudulent or malevolent manner, there is no basis for the award of any form of damages.
Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It has
been sufficiently proven that the amount pertained to ISC, an agency separate and distinct from
JAL, in payment for the accommodations provided to respondents. The payments did not in any
manner accrue to the benefit of JAL.
However, we find that the Court of Appeals correctly dismissed JALs counterclaim for
litigation expenses, exemplary damages and attorneys fees. The action was filed by respondents
in utmost good faith and not manifestly frivolous. Respondents honestly believed that JAL
breached its contract. A persons right to litigate should not be penalized by holding him liable for
damages. This is especially true when the filing of the case is to enforce what he believes to be
his rightful claim against another although found to be erroneous.[18]
WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The
October 9, 2002 decision of the Court of Appeals and its January 12, 2004 resolution in CA-G.R.
CV No. 57440, are REVERSED and SET ASIDE insofar as the finding of breach on the part of
petitioner and the award of damages, attorneys fees and costs of the suit in favor of respondents
is concerned. Accordingly, there being no breach of contract on the part of petitioner, the award
of actual, moral and exemplary damages, as well as attorneys fees and costs of the suit in favor
of respondents Michael and Jeanette Asuncion, is DELETED for lack of basis. However, the
dismissal for lack of merit of petitioners counterclaim for litigation expenses, exemplary damages
and attorneys fees, is SUSTAINED. No pronouncement as to costs.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 170141 April 22, 2008

JAPAN AIRLINES, petitioner,

vs.
JESUS SIMANGAN, respondent.

DECISION

REYES R.T., J.:

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.1

The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by Japan
Airlines (JAL).2

In this petition for review on certiorari,3 petitioner JAL appeals the: (1) Decision4 dated May 31, 2005 of the Court of
Appeals (CA) ordering it to pay respondent Jesus Simangan moral and exemplary damages; and (2) Resolution5 of the
same court dated September 28, 2005 denying JAL's motion for reconsideration.

The Facts

In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in UCLA School of
Medicine in Los Angeles, California, U.S.A. Upon request of UCLA, respondent undertook a series of laboratory tests at
the National Kidney Institute in Quezon City to verify whether his blood and tissue type are compatible with
Loreto's.6 Fortunately, said tests proved that respondent's blood and tissue type were well-matched with Loreto's.7

Respondent needed to go to the United States to complete his preliminary work-up and donation surgery. Hence, to
facilitate respondent's travel to the United States, UCLA wrote a letter to the American Consulate in Manila to arrange for
his visa. In due time, respondent was issued an emergency U.S. visa by the American Embassy in Manila.8

Having obtained an emergency U.S. visa, respondent purchased a round trip plane ticket from petitioner JAL for
US$1,485.00 and was issued the corresponding boarding pass.9 He was scheduled to a particular flight bound for Los
Angeles, California, U.S.A. via Narita, Japan.10

On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport in the company of several
relatives and friends.11 He was allowed to check-in at JAL's counter.12 His plane ticket, boarding pass, travel authority and
personal articles were subjected to rigid immigration and security routines.13 After passing through said immigration and
security procedures, respondent was allowed by JAL to enter its airplane.14

While inside the airplane, JAL's airline crew suspected respondent of carrying a falsified travel document and imputed that
he would only use the trip to the United States as a pretext to stay and work in Japan.15 The stewardess asked respondent
to show his travel documents. Shortly after, the stewardess along with a Japanese and a Filipino haughtily ordered him to
stand up and leave the plane.16 Respondent protested, explaining that he was issued a U.S. visa. Just to allow him to
board the plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in Narita.17 His pleas
were ignored. He was then constrained to go out of the plane.18In a nutshell, respondent was bumped off the flight.

Respondent went to JAL's ground office and waited there for three hours. Meanwhile, the plane took off and he was left
behind.19 Afterwards, he was informed that his travel documents were, indeed, in order.20 Respondent was refunded the
cost of his plane ticket less the sum of US$500.00 which was deducted by JAL.21 Subsequently, respondent's U.S. visa
was cancelled.22
Displeased by the turn of events, respondent filed an action for damages against JAL with the Regional Trial Court (RTC)
in Valenzuela City, docketed as Civil Case No. 4195-V-93. He claimed he was not able to donate his kidney to Loreto; and
that he suffered terrible embarrassment and mental anguish.23 He prayed that he be awarded P3 million as moral
damages, P1.5 million as exemplary damages and P500,000.00 as attorney's fees.24

JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow respondent to fly on
his scheduled departure was due to "a need for his travel documents to be authenticated by the United States
Embassy"25 because no one from JAL's airport staff had encountered a parole visa before.26 It posited that the
authentication required additional time; that respondent was advised to take the flight the following day, July 30, 1992. JAL
alleged that respondent agreed to be rebooked on July 30, 1992.27

JAL also lodged a counterclaim anchored on respondent's alleged wrongful institution of the complaint. It prayed for
litigation expenses, exemplary damages and attorney's fees.28

On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of respondent (plaintiff),
disposing as follows:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the amount
of P1,000,000.00 as moral damages, the amount of P500,000.00 as exemplary damages and the amount
of P250,000.00 as attorney's fees, plus the cost of suit.29

The RTC explained:

In summarily and insolently ordering the plaintiff to disembark while the latter was already settled in his assigned
seat, the defendant violated the contract of carriage; that when the plaintiff was ordered out of the plane under the
pretext that the genuineness of his travel documents would be verified it had caused him embarrassment and
besmirched reputation; and that when the plaintiff was finally not allowed to take the flight, he suffered more
wounded feelings and social humiliation for which the plaintiff was asking to be awarded moral and exemplary
damages as well as attorney's fees.

The reason given by the defendant that what prompted them to investigate the genuineness of the travel
documents of the plaintiff was that the plaintiff was not then carrying a regular visa but just a letter does not appear
satisfactory. The defendant is engaged in transporting passengers by plane from country to country and is
therefore conversant with the travel documents. The defendant should not be allowed to pretend, to the prejudice
of the plaintiff not to know that the travel documents of the plaintiff are valid documents to allow him entry in the
United States.

The foregoing act of the defendant in ordering the plaintiff to deplane while already settled in his assigned seat
clearly demonstrated that the defendant breached its contract of carriage with the plaintiff as passenger in bad faith
and as such the plaintiff is entitled to moral and exemplary damages as well as to an award of attorney's fees.30

Disagreeing with the RTC judgment, JAL appealed to the CA contending that it is not guilty of breach of contract of
carriage, hence, not liable for damages.31 It posited that it is the one entitled to recover on its counterclaim.32

CA Ruling

In a Decision33 dated May 31, 2005, the CA affirmed the decision of the RTC with modification in that it lowered the amount
of moral and exemplary damages and deleted the award of attorney's fees. The fallo of the CA decision reads:

WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION. Appellant JAPAN AIR LINES is
ordered to pay appellee JESUS SIMANGAN the reduced sums, as follows: Five Hundred Thousand Pesos
(P500,000.00) as moral damages, and Two Hundred Fifty Thousand Pesos (P250,000.00) as exemplary damages.
The award of attorney's fees is hereby DELETED.34

The CA elucidated that since JAL issued to respondent a round trip plane ticket for a lawful consideration, "there arose a
perfected contract between them."35 It found that respondent was "haughtily ejected"36 by JAL and that "he was certainly
embarrassed and humiliated"37 when, in the presence of other passengers, JAL's airline staff "shouted at him to stand up
and arrogantly asked him to produce his travel papers, without the least courtesy every human being is entitled to";38 and
that "he was compelled to deplane on the grounds that his papers were fake."39
The CA ratiocinated:

While the protection of passengers must take precedence over convenience, the implementation of security measures
must be attended by basic courtesies.

In fact, breach of the contract of carriage creates against the carrier a presumption of liability, by a simple proof of
injury, relieving the injured passenger of the duty to establish the fault of the carrier or of his employees; and
placing on the carrier the burden to prove that it was due to an unforeseen event or to force majeure.

That appellee possessed bogus travel documents and that he might stay illegally in Japan are allegations without
substantiation. Also, appellant's attempt to rebook appellee the following day was too late and did not relieve it
from liability. The damage had been done. Besides, its belated theory of novation, i.e., that appellant's original
obligation to carry appellee to Narita and Los Angeles on July 29, 1992 was extinguished by novation when
appellant and appellant agreed that appellee will instead take appellant's flight to Narita on the following day, July
30, 1992, deserves little attention. It is inappropriate at bar. Questions not taken up during the trial cannot be raised
for the first time on appeal.40 (Underscoring ours and citations were omitted)

Citing Ortigas, Jr. v. Lufthansa German Airlines,41 the CA declared that "(i)n contracts of common carriage, inattention and
lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted
for amounts to bad faith or fraud which entitles the passengers to the award of moral damages in accordance with Article
2220 of the Civil Code."42

Nevertheless, the CA modified the damages awarded by the RTC. It explained:

Fundamental in the law on damages is that one injured by a breach of a contract, or by a wrongful or negligent act
or omission shall have a fair and just compensation commensurate to the loss sustained as consequence of the
defendant's act. Being discretionary on the court, the amount, however, should not be palpably and scandalously
excessive.

Here, the trial court's award of P1,000,000.00 as moral damages appears to be overblown. No other proof of
appellee's social standing, profession, financial capabilities was presented except that he was single and a
businessman. To Us, the sum of 500,000.00 is just and fair. For, moral damages are emphatically not intended to
enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain
means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by reason of the
defendant's culpable action.

Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced to a reasonable level. The award
of exemplary damages is designed to permit the courts to mould behavior that has socially deleterious
consequences and its imposition is required by public policy to suppress the wanton acts of the offender. Hence,
the sum of P250,000.00 is adequate under the circumstances.

The award of P250,000.00 as attorney's fees lacks factual basis. Appellee was definitely compelled to litigate in
protecting his rights and in seeking relief from appellant's misdeeds. Yet, the record is devoid of evidence to show
the cost of the services of his counsel and/or the actual expenses incurred in prosecuting his action.43(Citations
were omitted)

When JAL's motion for reconsideration was denied, it resorted to the petition at bar.

Issues

JAL poses the following issues -

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED
TO MORAL DAMAGES, CONSIDERING THAT:

A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT.

 B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF CONTRACT CASES ONLY WHEN THE
BREACH IS ATTENDED BY FRAUD OR BAD FAITH. ASSUMING ARGUENDO THAT JAL WAS GUILTY
OF BREACH, JAL DID NOT ACT FRAUDULENTLY OR IN BAD FAITH AS TO ENTITLE RESPONDENT
TO MORAL DAMAGES.

C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH EFFECTED IN GOOD FAITH FROM ONE
ATTENDED BY BAD FAITH.

II.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED
TO EXEMPLARY DAMAGES CONSIDERING THAT:

A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN BREACH OF CONTRACT OF CARRIAGE

UNLESS THE CARRIER IS GUILTY OF WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR
MALEVOLENT CONDUCT.

B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT IN A WANTON
FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER AS TO ENTITLE
RESPONDENT TO EXEMPLARY DAMAGES.

III.

ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN AWARD OF DAMAGES, WHETHER OR

NOT THE COURT OF APPEALS AWARD OF P750,000 IN DAMAGES WAS EXCESSIVEAND
UNPRECEDENTED.

IV.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING FOR JAL ON
ITS COUNTERCLAIM.44 (Underscoring Ours)

Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty of contract of carriage; (2) whether or
not respondent is entitled to moral and exemplary damages; and (3) whether or not JAL is entitled to its counterclaim for
damages.

Our Ruling

This Court is not a trier of facts.

Chiefly, the issues are factual. The RTC findings of facts were affirmed by the CA. The CA also gave its nod to the
reasoning of the RTC except as to the awards of damages, which were reduced, and that of attorney's fees, which was
deleted.

We are not a trier of facts. We generally rely upon, and are bound by, the conclusions on this matter of the lower courts,
which are better equipped and have better opportunity to assess the evidence first-hand, including the testimony of the
witnesses.45

We have repeatedly held that the findings of fact of the CA are final and conclusive and cannot be reviewed on appeal to
the Supreme Court provided they are based on substantial evidence.46 We have no jurisdiction, as a rule, to reverse their
findings.47 Among the exceptions to this rule are: (a) when the conclusion is a finding grounded entirely on speculations,
surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c) where there is
grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of facts
are conflicting; (f) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee.48

The said exceptions, which are being invoked by JAL, are not found here. There is no indication that the findings of the CA
are contrary to the evidence on record or that vital testimonies of JAL's witnesses were disregarded. Neither did the CA
commit misapprehension of facts nor did it fail to consider relevant facts. Likewise, there was no grave abuse of discretion
in the appreciation of facts or mistaken and absurd inferences.

We thus sustain the coherent facts as established by the courts below, there being no sufficient showing that the said
courts committed reversible error in reaching their conclusions.

JAL is guilty of breach of

contract of carriage.

That respondent purchased a round trip plane ticket from JAL and was issued the corresponding boarding pass is
uncontroverted.49 His plane ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration
and security procedure.50 After passing through said immigration and security procedure, he was allowed by JAL to enter
its airplane to fly to Los Angeles, California, U.S.A. via Narita, Japan.51 Concisely, there was a contract of carriage between
JAL and respondent.

Nevertheless, JAL made respondent get off the plane on his scheduled departure on July 29, 1992. He was not allowed by
JAL to fly. JAL thus failed to comply with its obligation under the contract of carriage.

JAL justifies its action by arguing that there was "a need to verify the authenticity of respondent's travel document."52 It
alleged that no one from its airport staff had encountered a parole visa before.53 It further contended that respondent
agreed to fly the next day so that it could first verify his travel document, hence, there was novation.54 It maintained that it
was not guilty of breach of contract of carriage as respondent was not able to travel to the United States due to his own
voluntary desistance.55

We cannot agree. JAL did not allow respondent to fly. It informed respondent that there was a need to first check the
authenticity of his travel documents with the U.S. Embassy.56 As admitted by JAL, "the flight could not wait for Mr.
Simangan because it was ready to depart."57

Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left
behind. The latter was unceremoniously bumped off despite his protestations and valid travel documents and
notwithstanding his contract of carriage with JAL. Damage had already been done when respondent was offered to fly the
next day on July 30, 1992. Said offer did not cure JAL's default.

Considering that respondent was forced to get out of the plane and left behind against his will, he could not have freely
consented to be rebooked the next day. In short, he did not agree to the alleged novation. Since novation implies a waiver
of the right the creditor had before the novation, such waiver must be express.58 It cannot be supposed, without clear proof,
that respondent had willingly done away with his right to fly on July 29, 1992.

Moreover, the reason behind the bumping off incident, as found by the RTC and CA, was that JAL personnel imputed that
respondent would only use the trip to the United States as a pretext to stay and work in Japan.59

Apart from the fact that respondent's plane ticket, boarding pass, travel authority and personal articles already passed the
rigid immigration and security routines,60 JAL, as a common carrier, ought to know the kind of valid travel documents
respondent carried. As provided in Article 1755 of the New Civil Code: "A common carrier is bound to 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."61 Thus, We find untenable JAL's defense of "verification of respondent's documents" in
its breach of contract of carriage.

It bears repeating that the power to admit or not an alien into the country is a sovereign act which cannot be interfered with
even by JAL.62

In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of such contract and
its non-performance by the carrier through the latter's failure to carry the passenger safely to his destination.63Respondent
has complied with these twin requisites.

Respondent is entitled to moral and exemplary damages and attorney's fees plus legal interest.
With reference to moral damages, JAL alleged that they are not recoverable in actions ex contractu except only when the
breach is attended by fraud or bad faith. It is contended that it did not act fraudulently or in bad faith towards respondent,
hence, it may not be held liable for moral damages.

As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is
not one of the items enumerated under Article 2219 of the Civil Code.64 As an exception, such damages are recoverable:
(1) in cases in which the mishap results in the death of a passenger, as provided in Article 1764, in relation to Article
2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Article
2220.65

The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached its contract of
carriage with respondent in bad faith. JAL personnel summarily and insolently ordered respondent to disembark while the
latter was already settled in his assigned seat. He was ordered out of the plane under the alleged reason that the
genuineness of his travel documents should be verified.

These findings of facts were upheld by the CA, to wit:

x x x he was haughtily ejected by appellant. He was certainly embarrassed and humiliated when, in the presence
of other passengers, the appellant's airline staff shouted at him to stand up and arrogantly asked him to produce
his travel papers, without the least courtesy every human being is entitled to. Then, he was compelled to deplane
on the grounds that his papers were fake. His protestation of having been issued a U.S. visa coupled with his plea
to appellant to closely monitor his movements when the aircraft stops over in Narita, were ignored. Worse, he was
made to wait for many hours at the office of appellant only to be told later that he has valid travel
documents.66 (Underscoring ours)

Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on
breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case.
Inattention to and lack of care for the interests 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. 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.67

JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and malevolent acts
against respondent. Exemplary damages, which are awarded by way of example or correction for the public good, may be
recovered in contractual obligations, as in this case, if defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.68

Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in
its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the
standard of extraordinary diligence, a standard which is, in fact, that of the highest possible degree of diligence, from
common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their
employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property.69

Neglect or malfeasance of the carrier's employees could give ground for an action for damages. Passengers have a right
to be treated by the carrier's employees with kindness, respect, courtesy and due consideration and are entitled to be
protected against personal misconduct, injurious language, indignities and abuses from such employees.70

The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary damages in respondent's favor is, in
Our view, reasonable and realistic. This award is reasonably sufficient to indemnify him for the humiliation and
embarrassment he suffered. This also serves as an example to discourage the repetition of similar oppressive acts.

With respect to attorney's fees, they may be awarded when defendant's act or omission has compelled plaintiff to litigate
with third persons or to incur expenses to protect his interest.71 The Court, in Construction Development Corporation of the
Philippines v. Estrella,72 citing Traders Royal Bank Employees Union-Independent v. National Labor Relations
Commission,73 elucidated thus:

There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In its
ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal
services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his
agreement with the client.
 In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid
by the losing party in a litigation. The basis of this is any of the cases provided by law where such award can be
made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client,
unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part
thereof.74

It was therefore erroneous for the CA to delete the award of attorney's fees on the ground that the record is devoid of
evidence to show the cost of the services of respondent's counsel. The amount is actually discretionary upon the Court so
long as it passes the test of reasonableness. They may be recovered as actual or compensatory damages when
exemplary damages are awarded and whenever the court deems it just and equitable,75 as in this case.

Considering the factual backdrop of this case, attorney's fees in the amount of P200,000.00 is reasonably modest.

The above liabilities of JAL in the total amount of P800,000.00 earn legal interest pursuant to the Court's ruling
in Construction Development Corporation of the Philippines v. Estrella,76 citing Eastern Shipping Lines, Inc. v. Court of
Appeals,77 to wit:

Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the complaint, we held
in Eastern Shipping Lines, Inc. v. Court of Appeals, that when an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of
interest in the concept of actual and compensatory damages, subject to the following rules, to wit -

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. 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 discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court
is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.78 (Emphasis supplied and citations omitted)

Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay respondent legal interest. Pursuant to
the above ruling of the Court, the legal interest is 6% and it shall be reckoned from September 21, 2000 when the RTC
rendered its judgment. From the time this Decision becomes final and executory, the interest rate shall be 12% until its
satisfaction.

JAL is not entitled to its counterclaim for damages.

The counterclaim of JAL in its Answer79 is a compulsory counterclaim for damages and attorney's fees arising from the
filing of the complaint. There is no mention of any other counter claims.

This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted inasmuch as the complaint
against it is obviously not malicious or unfounded. It was filed by respondent precisely to claim his right to damages
against JAL. Well-settled is the rule that the commencement of an action does not per se make the action wrongful and
subject the action to damages, for the law could not have meant to impose a penalty on the right to litigate.80
We reiterate case law that if damages result from a party's exercise of a right, it is damnum absque injuria.81 Lawful acts
give rise to no injury. Walang perhuwisyong maaring idulot ang paggamit sa sariling karapatan.

During the trial, however, JAL presented a witness who testified that JAL suffered further damages. Allegedly, respondent
caused the publications of his subject complaint against JAL in the newspaper for which JAL suffered damages.82

Although these additional damages allegedly suffered by JAL were not incorporated in its Answer as they arose
subsequent to its filing, JAL's witness was able to testify on the same before the RTC.83 Hence, although these issues
were not raised by the pleadings, they shall be treated in all respects as if they had been raised in the pleadings.

As provided in Section 5, Rule 10 of the Rules of Court, "(w)hen issues not raised by the pleadings are tried with the
express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings."

Nevertheless, JAL's counterclaim cannot be granted.

JAL is a common carrier. JAL's business is mainly with the traveling public. It invites people to avail themselves of the
comforts and advantages it offers.84 Since JAL deals with the public, its bumping off of respondent without a valid reason
naturally drew public attention and generated a public issue.

The publications involved matters about which the public has the right to be informed because they relate to a public issue.
This public issue or concern is a legitimate topic of a public comment that may be validly published.

Assuming that respondent, indeed, caused the publication of his complaint, he may not be held liable for damages for it.
The constitutional guarantee of freedom of the speech and of the press includes fair commentaries on matters of public
interest. This is explained by the Court in Borjal v. Court of Appeals,85 to wit:

To reiterate, fair commentaries on matters of public interest are privileged and constitute a valid defense in an
action for libel or slander. The doctrine of fair comment means that while in general every discreditable imputation
publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and
every false imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against a
public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a
public official may be actionable, it must either be a false allegation of fact or a comment based on a false
supposition. If the comment is an expression of opinion, based on established facts, then it is immaterial that the
opinion happens to be mistaken, as long as it might reasonably be inferred from the facts.86 (Citations omitted and
underscoring ours)

Even though JAL is not a public official, the rule on privileged commentaries on matters of public interest applies to it. The
privilege applies not only to public officials but extends to a great variety of subjects, and includes matters of public
concern, public men, and candidates for office.87

Hence, pursuant to the Borjal case, there must be an actual malice in order that a discreditable imputation to a public
person in his public capacity or to a public official may be actionable. To be considered malicious, the libelous statements
must be shown to have been written or published with the knowledge that they are false or in reckless disregard of whether
they are false or not.88

Considering that the published articles involve matters of public interest and that its expressed opinion is not malicious but
based on established facts, the imputations against JAL are not actionable. Therefore, JAL may not claim damages for
them.

WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Appeals is AFFIRMED WITH
MODIFICATION. As modified, petitioner Japan Airlines is ordered to pay respondent Jesus Simangan the following:
(1) P500,000.00 as moral damages; (2) P100,000.00 as exemplary damages; and (3) P200,000.00 as attorney's fees.

The total amount adjudged shall earn legal interest at the rate of 6% per annum from the date of judgment of the Regional
Trial Court on September 21, 2000 until the finality of this Decision. From the time this Decision becomes final and
executory, the unpaid amount, if any, shall earn legal interest at the rate of 12% per annum until its satisfaction.

SO ORDERED.
 FIRST DIVISION

[G.R. No. 150843. March 14, 2003]

CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. SPOUSES DANIEL VAZQUEZ and
MARIA LUISA MADRIGAL VAZQUEZ, respondents.

DECISION
DAVIDE, JR., C.J.:

Is an involuntary upgrading of an airline passengers accommodation from one class to a more

superior class at no extra cost a breach of contract of carriage that would entitle the passenger
to an award of damages? This is a novel question that has to be resolved in this case.
The facts in this case, as found by the Court of Appeals and adopted by petitioner Cathay
Pacific Airways, Ltd., (hereinafter Cathay) are as follows:
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 Cathays 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 Cathays 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
Cathays 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 Cathays Country Manager
Argus Guy Robson, informed the Vazquezes that Cathay would investigate the incident and get
back to them within a weeks time.
On 8 November 1996, after Cathays 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 attorneys 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. Chius 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, Cathays 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. Vazquezs 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 Cathays 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 attorneys fees. Hence, it prayed for the dismissal
of the complaint and for payment of P100,000 for exemplary damages and P300,000 as
attorneys 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 Cathays 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 attorneys fees and other litigation expenses, such as those for the
taking of the depositions of Yuen and Chiu.
In its decision of 19 October 1998, the trial court found for the Vazquezes and decreed as
[1]

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) Attorneys 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 Cathays revenues. Cathays 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, deleted
[2]

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 attorneys 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 formers 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 Appeals where we recognized that, in accordance with the
[3]

Civil Aeronautics Boards 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 attorneys 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 attorneys 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. Undoubtedly, a contract
[4]

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. It is also defined as the [f]ailure, without legal excuse, to perform any promise which
[5]

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 passengers 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
Cathays 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
Cathays 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. Needless to state, an
[9]

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. Here, while there was
[10]

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 defendants wrongful act or omission. Thus, case law establishes
[11]

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. Where in breaching the contract of carriage the airline is not shown to
[13]

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. Such requisite is absent in
[15]

this case. Moreover, to be entitled thereto the claimant must first establish his right to moral,
temperate, or compensatory damages. Since the Vazquezes are not entitled to any of these
[16]

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 attorneys fees. [17]
 The most that can be adjudged in favor of the Vazquezes for Cathays 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 Cathays 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 courts 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 attorneys 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 Courts 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 attorneys fees are set aside and deleted, and the award for
nominal damages is reduced to P5,000.
No pronouncement on costs.
SO ORDERED.
 FIRST DIVISION

[G.R. No. 135802. March 3, 2000]

PRISCILLA L. TAN, petitioner, vs. NORTHWEST AIRLINES, INC., respondent.

DECISION

PARDO, J.:

Petitioner Priscilla L. Tan appeals via certiorari from the decision of the Court of
Appeals affirming with modification the decision of the trial court, ordering respondent to pay
[1] [2] [3]

petitioner the following amounts: (1) P15,000.00, as actual damages; (2) P100,000.00, as
moral damages; (3) P50,000.00, as exemplary damages; (4) P30,000.00, as and for attorney's
fees; and (6) costs.

The case before the Court traces its roots from an action for damages for breach of contract of
air carrige for failure to deliver petitioner's baggages on the date of her arrival filed on June 29,
1994 with the Regional Trial Court, Makati, Branch 150 against respondent Northwest Airlines,
Inc., a foreign corporation engaged in the business of air transportation.

The antecedent facts are as follows:

On May 31, 1994, Priscilla L. Tan and Connie Tan boarded Northwest Airlines Flight 29 in
Chicago, U. S. A. bound for the Philippines, with a stop-over at Detroit, U. S. A. They arrived at
the Ninoy Aquino International Airport (NAIA) on June 1, 1994 at about 10:40 in the evening.

Upon their arrival, petitioner and her companion Connie Tan found that their baggages were
missing. They returned to the airport in the evening of the following day and they were informed
that their baggages might still be in another plane in Tokyo, Japan.

On June 3, 1994, they recovered their baggages and discovered that some of its contents were
destroyed and soiled.

Claiming that they "suffered mental anguish, sleepless nights and great damage" because of
Northwest's failure to inform them in advance that their baggages would not be loaded on the
same flight they boarded and because of their delayed arrival, they demanded from Northwest
Airlines compensation for the damages they suffered. On June 15, 1994 and June 22, 1994,
petitioner sent demand letter to Northwest Airlines, but the latter did not respond. Hence, the
filing of the case with the regional trial court.

In its answer to the complaint, respondent Northwest Airlines did not deny that the baggages of
petitioners were not loaded on Northwest Flight 29. Petitioner's baggages could not be carried
on the same flight because of "weight and balance restrictions." However, the baggages were
loaded in another Northwest Airlines flight, which arrived in the evening of June 2, 1994.

When petitioner received her baggages in damaged condition, Northwest offered to either (1)
reimburse the cost or repair of the bags; or (2) reimburse the cost for the purchase of new
bags, upon submission of receipts.
After due trial, on June 10, 1996, the trial court rendered decision finding respondent Northwest
Airlines, Inc. liable for damages, as follows:

"WHEREFORE, judgement is hereby rendered ordering the defendant to pay the

plaintiff the following amounts:

"1. P15,000.00, as actual damages;

"2. P100,000.00, as moral damages;

"3. P50,000.00, as exemplary damages;

"4. P30,000.00, as and for attorney's fees and

"5. Costs.

"SO ORDERED.

"Given this 10th day of June, 1996 at Makati City.

"ERNA FALLORAN ALIPOSA

"Judge" [4]

Respondent Northwest Airlines, Inc. appealed from the trial court's decision to the Court of
Appeals contending that the court a quo erred in finding it guilty of breach of contract of
carriage and of willful misconduct and awarded damages which had no basis in fact or were
otherwise excessive.

On September 30, 1998, the Court of Appeals promulgated its decision partially granting the
appeal by deleting the award of moral and exemplary damages and reducing the attorney's
fees, specifically providing that:

"WHEREFORE, PREMISES CONSIDERED, the appeal is

hereby GRANTED partially. The Decision of the lower court dated June 10, 1996
is AFFIRMED with the modification that the award of moral and exemplary
damages is deleted and the amount of attorney's fees is reduced to ten thousand
pesos (P10,000.00).

"No pronouncement as to costs.

"SO ORDERED." [5]

Hence, this appeal. [6]

The issue is whether respondent is liable for moral and exemplary damages for willful
misconduct and breach of the contract of air carriage.

The petition is without merit.

We agree with the Court of Appeals that respondent was not guilty of willful misconduct. "For
willful misconduct to exist there must be a showing that the acts complained of were impelled
by an intention to violate the law, or were in persistent disregard of one's rights. It must be
evidenced by a flagrantly or shamefully wrong or improper conduct." [7]

Contrary to petitioner's contention, there was nothing in the conduct of respondent which
showed that they were motivated by malice or bad faith in loading her baggages on another
plane. Due to weight and balance restrictions, as a safety measure, respondent airline had to
transport the baggages on a different flight, but with the same expected date and time of arrival
in the Philippines. As aptly explained by respondent:

"To ensure the safety of each flight, Northwest's personnel determine every flight's
compliance with "weight and balance restrictions." They check the factors like
weight of the aircraft used for the flight gas input, passenger and crew load,
baggage weight, all in relation to the wind factor anticipated on the flight. If there is
an overload, i.e., a perceived safety risk, the aircraft's load will be reduced by off-
loading cargo, which will then be placed on the next available flight." [8]

It is admitted that respondent failed to deliver petitioner's luggages on time. However, there
was no showing of malice in such failure. By its concern for safety, respondent had to ship the
baggages in another flight with same date of arrival.

Hence, the Court of Appeals correctly held that respondent did not act in bad faith. [9]

"Bad faith does not simply connnote bad judgment or negligence, it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty
through some motive or interest or ill-will that partakes of the nature of fraud." [10]

"Where in breaching the contract of carriage the defendant 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 obligation which the parties had foreseen or could have
reasonably foreseen. In that case, such liability does not include moral and exemplary
damages." [11]

Consequently, we have no reason to reverse the decision of the Court of Appeals.

WHEREFORE, the Court DENIES the petition for lack of merit. The Court AFFIRMS the
decision of the Court of Appeals deleting, however, the award of attorney's fees.

No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 101538 June 23, 1992

AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.

CRUZ, J.:

This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:

Art. 28. (1) An action for damage 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.

The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota,
U.S.A. and licensed to do business and maintain a branch office in the Philippines.

On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The
scheduled departure date from Tokyo was December 20, 1986. No date was specified for his return to San Francisco. 1

On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure to Manila. Despite a previous confirmation
and re-confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He therefore had to be wait-listed.

On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987, NOA moved to dismiss the complaint on the ground of
lack of jurisdiction. Citing the above-quoted article, it contended that the complaint could be instituted only in the territory of one of the High Contracting Parties, before:

1. the court of the domicile of the carrier;

2. the court of its principal place of business;

3. the court where it has a place of business through which the contract had been made;

4. the court of the place of destination.

The private respondent contended that the Philippines was not its domicile nor was this its principal place of business. Neither was the petitioner's ticket issued in this
country nor was his destination Manila but San Francisco in the United States.

On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner appealed to the Court of Appeals, which affirmed the decision of the
lower court. 3 On June 26, 1991, the petitioner filed a motion for reconsideration, but the same was denied. 4 The petitioner then came to this Court, raising substantially
the same issues it submitted in the Court of Appeals.

The assignment of errors may be grouped into two major issues, viz:

(1) the constitutionality of Article 28(1) of the Warsaw Convention; and

(2) the jurisdiction of Philippine courts over the case.

The petitioner also invokes Article 24 of the Civil Code on the protection of minors.

THE ISSUE OF CONSTITUTIONALITY

A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention violates the constitutional guarantees of
due process and equal protection.

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the
Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine
instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The
Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our
formal adherence thereto. "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and
the citizens thereof." 5

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country.

The petitioner contends that Article 28(1) cannot be applied in the present case because it is unconstitutional. He argues that there is no substantial distinction between a
person who purchases a ticket in Manila and a person who purchases his ticket in San Francisco. The classification of the places in which actions for damages may be
brought is arbitrary and irrational and thus violates the due process and equal protection clauses.

It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a judicial inquiry into such a question are
first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible of judicial determination; the constitutional question must
have been opportunely raised by the proper party; and the resolution of the question is unavoidably necessary to the decision of the case itself. 6

Courts generally avoid having to decide a constitutional question. This attitude is based on the doctrine of separation of powers, which enjoins upon the departments of the
government a becoming respect for each other's acts.

The treaty which is the subject matter of this petition was a joint legislative-executive act. The presumption is that it was first carefully studied and determined to be
constitutional before it was adopted and given the force of law in this country.

The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the Convention considered the four places designated in Article 28 the
most convenient forums for the litigation of any claim that may arise between the airline and its passenger, as distinguished from all other places. At any rate, we agree with
the respondent court that this case can be decided on other grounds without the necessity of resolving the constitutional issue.

B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention is inapplicable because of a fundamental
change in the circumstances that served as its basis.

The petitioner goes at great lengths to show that the provisions in the Convention were intended to protect airline companies under "the conditions prevailing then and
which have long ceased to exist." He argues that in view of the significant developments in the airline industry through the years, the treaty has become irrelevant. Hence,
to the extent that it has lost its basis for approval, it has become unconstitutional.

The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an attempt to formulate a legal principle which would justify non-
performance of a treaty obligation if the conditions with relation to which the parties contracted have changed so materially and so unexpectedly as to create a situation in
which the exaction of performance would be unreasonable." 7 The key element of this doctrine is the vital change in the condition of the contracting parties that they could
not have foreseen at the time the treaty was concluded.

The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8

The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air travel . . . The Warsaw delegates knew that, in
the years to come, civil aviation would change in ways that they could not foresee. They wished to design a system of air law that would be both
durable and flexible enough to keep pace with these changes . . . The ever-changing needs of the system of civil aviation can be served within the
framework they created.

It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However, that circumstance alone is not sufficient justification for the
rejection of the treaty at this time. The changes recited by the petitioner were, realistically, not entirely unforeseen although they were expected in a general sense only. In
fact, the Convention itself, anticipating such developments, contains the following significant provision:

Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming into force of this convention to call for the
assembling of a new international conference in order to consider any improvements which may be made in this convention. To this end, it will
communicate with the Government of the French Republic which will take the necessary measures to make preparations for such conference.

But the more important consideration is that the treaty has not been rejected by the Philippine government. The doctrine of rebus sic stantibus does not operate
automatically to render the treaty inoperative. There is a necessity for a formal act of rejection, usually made by the head of State, with a statement of the reasons why
compliance with the treaty is no longer required.

In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such denunciation is authorized under its Article 39, viz:

Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a notification addressed to the Government of the Republic of
Poland, which shall at once inform the Government of each of the High Contracting Parties.

(2) Denunciation shall take effect six months after the notification of denunciation, and shall operate only as regards the party which shall have
proceeded to denunciation.

Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a function of the courts but of the other branches of
government. This is a political act. The conclusion and renunciation of treaties is the prerogative of the political departments and may not be usurped by the judiciary. The
courts are concerned only with the interpretation and application of laws and treaties in force and not with their wisdom or efficacy.

C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United States, because this would deny him the right to
access to our courts.

The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a constructive denial of his right to access to our
courts for the protection of his rights. He would consequently be deprived of this vital guaranty as embodied in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It does not mean that a person can go
to any court for redress of his grievances regardless of the nature or value of his claim. If the petitioner is barred from filing his complaint before our courts, it is because
they are not vested with the appropriate jurisdiction under the Warsaw Convention, which is part of the law of our land.

II

THE ISSUE OF JURISDICTION.

A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention is a rule merely of venue and was waived
by defendant when it did not move to dismiss on the ground of improper venue.

By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire.

International transportation is defined in paragraph (2) of Article 1 as follows:

(2) For the purposes of this convention, the expression "international transportation" shall mean any transportation in which, according to the contract
made by the parties, the place of departure and the place of destination, whether or not there be a break in the transportation or a transshipment, are
situated [either] within the territories of two High Contracting Parties . . .

Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is the ticket. When the contract of carriage
provides for the transportation of the passenger between certain designated terminals "within the territories of two High Contracting Parties," the provisions of the
Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passenger.

Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to the United States, it is subject to the
provisions of the Warsaw Convention, including Article 28(1), which enumerates the four places where an action for damages may be brought.

Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the petitioner cites several cases holding that
Article 28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional. 10

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon d court which otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of an action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in
the wrong county may be waived by the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction
can never be left to the consent or agreement of the parties, whether or not a prohibition exists against their alteration. 11

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the
places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the
objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any
provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In
fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties
regardless of the time when the damage occurred.

This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was held:

. . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially when considered in the light of Article 32. Article 28(2) provides
that "questions of procedure shall be governed by the law of the court to which the case is submitted" (Emphasis supplied). Section (2) thus may be
read to leave for domestic decision questions regarding the suitability and location of a particular Warsaw Convention case.

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the international sense must be established in
accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable domestic law.
Only after the question of which court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the court to
which the case is submitted.

The petitioner submits that since Article 32 states that the parties are precluded "before the damages occurred" from amending the rules of Article 28(1) as to the place
where the action may be brought, it would follow that the Warsaw Convention was not intended to preclude them from doing so "after the damages occurred."

Article 32 provides:

Art. 32. Any clause contained in the contract and all special agreements entered into before the damage occurred by which the parties purport to
infringe the rules laid down by this convention, whether by deciding the law to be applied, or by altering the rules as to jurisdiction, shall be null and
void. Nevertheless for the transportation of goods, arbitration clauses shall be allowed, subject to this convention, if the arbitration is to take place
within one of the jurisdictions referred to in the first paragraph of Article 28.

His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have) occurred," the article should be regarded as possessing the character
of a "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss on the ground of lack of jurisdiction, the private respondent has waived improper venue as a
ground to dismiss.

The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any event, we agree that even granting arguendo that Article 28(1) is
a venue and not a jurisdictional provision, dismissal of the case was still in order. The respondent court was correct in affirming the ruling of the trial court on this matter,
thus:

Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is that NOA averred in its MOTION TO DISMISS that
the ground thereof is "the Court has no subject matter jurisdiction to entertain the Complaint" which SANTOS considers as equivalent to "lack of
jurisdiction over the subject matter . . ." However, the gist of NOA's argument in its motion is that the Philippines is not the proper place where
 SANTOS could file the action — meaning that the venue of the action is improperly laid. Even assuming then that the specified ground of the motion is
erroneous, the fact is the proper ground of the motion — improper venue — has been discussed therein.

Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are special circumstances justifying this conclusion, as in the petition at
bar. As we observed in Javier vs. Intermediate Court of Appeals: 13

Legally, of course, the lack of proper venue was deemed waived by the petitioners when they failed to invoke it in their original motion to dismiss.
Even so, the motivation of the private respondent should have been taken into account by both the trial judge and the respondent court in arriving at
their decisions.

The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where it was held that Article 28(1) is a venue provision. However, the
private respondent avers that this was in effect reversed by the case of Aranas v. United Airlines, 15 where the same court held that Article 28(1) is a jurisdictional
provision. Neither of these cases is binding on this Court, of course, nor was either of them appealed to us. Nevertheless, we here express our own preference for the later
case of Aranas insofar as its pronouncements on jurisdiction conform to the judgment we now make in this petition.

B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the Warsaw Convention, this case was properly filed in the
Philippines, because Manila was the destination of the plaintiff.

The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg purchased a round-trip ticket from
Montreal to Los Angeles and back to Montreal. The date and time of departure were specified but not of the return flight. The plane crashed while on route from Montreal to
Los Angeles, killing Mrs. Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S. District Court of California. The defendant moved to
dismiss for lack of jurisdiction but the motion was denied thus:

. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as evidenced by the ticket booklets and the Flight Coupon No.
1, was a contract for Air Canada to carry Mrs. Silverberg to Los Angeles on a certain flight, a certain time and a certain class, but that the time for her
to return remained completely in her power. Coupon No. 2 was only a continuing offer by Air Canada to give her a ticket to return to Montreal between
certain dates. . . .

The only conclusion that can be reached then, is that "the place of destination" as used in the Warsaw Convention is considered by both the Canadian
C.T.C. and the United States C.A.B. to describe at least two "places of destination," viz., the "place of destination" of a particular flight either an
"outward destination" from the "point of origin" or from the "outward point of destination" to any place in Canada.

Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on which Mrs. Silverberg was killed, was Los Angeles
according to the ticket, which was the contract between the parties and the suit is properly filed in this Court which has jurisdiction.

The Petitioner avers that the present case falls squarely under the above ruling because the date and time of his return flight to San Francisco were, as in the Aanestad
case, also left open. Consequently, Manila and not San Francisco should be considered the petitioner's destination.

The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States District Court (Eastern District of Pennsylvania) said:

. . . Although the authorities which addressed this precise issue are not extensive, both the cases and the commentators are almost unanimous in
concluding that the "place of destination" referred to in the Warsaw Convention "in a trip consisting of several parts . . . is the ultimate destination that
is accorded treaty jurisdiction." . . .

But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad; whether the return portion of the ticket is characterized
as an option or a contract, the carrier was legally bound to transport the passenger back to the place of origin within the prescribed time and. the
passenger for her part agreed to pay the fare and, in fact, did pay the fare. Thus there was mutuality of obligation and a binding contract of carriage,
The fact that the passenger could forego her rights under the contract does not make it any less a binding contract. Certainly, if the parties did not
contemplate the return leg of the journey, the passenger would not have paid for it and the carrier would not have issued a round trip ticket.

We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract of carriage or, specifically
in this case, the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows that his ultimate destination is San Francisco. Although the date
of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila
should therefore be considered merely an agreed stopping place and not the destination.

The petitioner submits that the Butz case could not have overruled the Aanestad case because these decisions are from different jurisdictions. But that is neither here nor
there. In fact, neither of these cases is controlling on this Court. If we have preferred the Butz case, it is because, exercising our own freedom of choice, we have decided
that it represents the better, and correct, interpretation of Article 28(1).

Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an "agreed stopping place" that controls for
purposes of ascertaining jurisdiction under the Convention.

The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The use of the singular in this expression
indicates the understanding of the parties to the Convention that every contract of carriage has one place of departure and one place of destination. An intermediate place
where the carriage may be broken is not regarded as a "place of destination."

C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the Warsaw Convention, this case was properly filed in the
Philippines because the defendant has its domicile in the Philippines.

The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its provisions, American courts have taken the broad view that the
French legal meaning must govern. 18 In French, he says, the "domicile" of the carrier means every place where it has a branch office.

The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held:
 The plaintiffs' first contention is that Air France is domiciled in the United States. They say that the domicile of a corporation includes any country
where the airline carries on its business on "a regular and substantial basis," and that the United States qualifies under such definition. The meaning
of domicile cannot, however, be so extended. The domicile of a corporation is customarily regarded as the place where it is incorporated, and the
courts have given the meaning to the term as it is used in article 28(1) of the Convention. (See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971),
452 F2d 798, 802; Nudo v. Societe Anonyme Belge d' Exploitation de la Navigation Aerienne Sabena Belgian World Airlines (E.D. pa. 1962). 207 F.
Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as
a whole, is also incompatible with the plaintiffs' claim. The article, in stating that places of business are among the bases of the jurisdiction, sets out
two places where an action for damages may be brought; the country where the carrier's principal place of business is located, and the country in
which it has a place of business through which the particular contract in question was made, that is, where the ticket was bought, Adopting the
plaintiffs' theory would at a minimum blur these carefully drawn distinctions by creating a third intermediate category. It would obviously introduce
uncertainty into litigation under the article because of the necessity of having to determine, and without standards or criteria, whether the amount of
business done by a carrier in a particular country was "regular" and "substantial." The plaintiff's request to adopt this basis of jurisdiction is in effect a
request to create a new jurisdictional standard for the Convention.

Furthermore, it was argued in another case 20 that:

. . . In arriving at an interpretation of a treaty whose sole official language is French, are we bound to apply French law? . . . We think this question and
the underlying choice of law issue warrant some discussion
. . . We do not think this statement can be regarded as a conclusion that internal French law is to be "applied" in the choice of law sense, to determine
the meaning and scope of the Convention's terms. Of course, French legal usage must be considered in arriving at an accurate English translation of
the French. But when an accurate English translation is made and agreed upon, as here, the inquiry into meaning does not then revert to a quest for a
past or present French law to be "applied" for revelation of the proper scope of the terms. It does not follow from the fact that the treaty is written in
French that in interpreting it, we are forever chained to French law, either as it existed when the treaty was written or in its present state of
development. There is no suggestion in the treaty that French law was intended to govern the meaning of Warsaw's terms, nor have we found any
indication to this effect in its legislative history or from our study of its application and interpretation by other courts. Indeed, analysis of the cases
indicates that the courts, in interpreting and applying the Warsaw Convention, have, not considered themselves bound to apply French law simply
because the Convention is written in French. . . .

We agree with these rulings.

Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article 28(1). By specifying the three other places, to wit, the
principal place of business of the carrier, its place of business where the contract was made, and the place of destination, the article clearly meant that these three other
places were not comprehended in the term "domicile."

D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention does not apply to actions based on tort.

The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in bad faith, discriminated against the petitioner, and committed a
willful misconduct because it canceled his confirmed reservation and gave his reserved seat to someone who had no better right to it. In short. the private respondent
committed a tort.

Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He argues that in at least two American cases, 21 it was held that
Article 28(1) of the Warsaw Convention does not apply if the action is based on tort.

This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was interpreted thus:

. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly excludes any relief not provided for in the Convention as
modified by the Montreal Agreement. It does not, however, limit the kind of cause of action on which the relief may be founded; rather it provides that
any action based on the injuries specified in Article 17 "however founded," i.e., regardless of the type of action on which relief is founded, can only be
brought subject to the conditions and limitations established by the Warsaw System. Presumably, the reason for the use of the phrase "however
founded," in two-fold: to accommodate all of the multifarious bases on which a claim might be founded in different countries, whether under code law
or common law, whether under contract or tort, etc.; and to include all bases on which a claim seeking relief for an injury might be founded in any one
country. In other words, if the injury occurs as described in Article 17, any relief available is subject to the conditions and limitations established by the
Warsaw System, regardless of the particular cause of action which forms the basis on which a plaintiff could seek
relief . . .

The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the
Warsaw Convention. The petitioner has apparently misconstrued the import of Article 25(l) of the Convention, which reads as follows:

Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability. if the damage is
caused by his willful misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered
to be equivalent to willful misconduct.

It is understood under this article that the court called upon to determine the applicability of the limitation provision must first be vested with the appropriate jurisdiction.
Article 28(1) is the provision in the Convention which defines that jurisdiction. Article 22 23 merely fixes the monetary ceiling for the liability of the carrier in cases covered
by the Convention. If the carrier is indeed guilty of willful misconduct, it can avail itself of the limitations set forth in this article. But this can be done only if the action has first
been commenced properly under the rules on jurisdiction set forth in Article 28(1).

III

THE ISSUE OF PROTECTION TO MINORS

The petitioner calls our attention to Article 24 of the Civil Code, which states:

Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.
Application of this article to the present case is misplaced. The above provision assumes that the court is vested with jurisdiction to rule in favor of the disadvantaged minor,
As already explained, such jurisdiction is absent in the case at bar.

CONCLUSION

A number of countries have signified their concern over the problem of citizens being denied access to their own courts because of the restrictive provision of Article 28(1)
of the Warsaw Convention. Among these is the United States, which has proposed an amendment that would enable the passenger to sue in his own domicile if the carrier
does business in that jurisdiction. The reason for this proposal is explained thus:

In the event a US citizen temporarily residing abroad purchases a Rome to New York to Rome ticket on a foreign air carrier which is generally subject
to the jurisdiction of the US, Article 28 would prevent that person from suing the carrier in the US in a "Warsaw Case" even though such a suit could
be brought in the absence of the Convention.

The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was adopted at Guatemala City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of contracting parties. Pending such ratification, the petitioner will still
have to file his complaint only in any of the four places designated by Article 28(1) of the Warsaw Convention.

The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the right to sue in his own courts simply because the defendant airline
has a place of business in his country.

The Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in his own country at least inconvenience. But we are
unable to grant him the relief he seeks because we are limited by the provisions of the Warsaw Convention which continues to bind us. It may not be amiss to observe at
this point that the mere fact that he will have to litigate in the American courts does not necessarily mean he will litigate in vain. The judicial system of that country in known
for its sense of fairness and, generally, its strict adherence to the rule of law.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
 SECOND DIVISION

[G.R. No. 119641. May 17, 1996]

PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS, DR. JOSEFINO

MIRANDA and LUISA MIRANDA, respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF AIR CARRIAGE; A
RELATION ATTENDED WITH PUBLIC DUTY; DISCOURTEOUS CONDUCT TOWARDS
A PASSENGER GIVES RISE FOR AN ACTION FOR DAMAGES. - The Court has time and
again ruled, and it cannot be over-emphasized, that a contract of air carriage generates a relation
attended with a public duty and any discourteous conduct on the part of a carriers employee toward a
passenger gives the latter an action for damages and, more so, where there is bad faith. While it may
be true that there was no direct evidence on record of blatant rudeness on the part of PAL employees
towards the Mirandas, the fact that private respondents were practically compelled to haggle for
accommodations, a situation unbefitting persons of their stature, is rather demeaning and it partakes of
discourtesy magnified by PALs condescending attitude. Moreover, it cannot be denied that the PAL
employees herein concerned were definitely less than candid, to put it mildly, when they withheld
information from private respondents that they could actually be accommodated in a hotel of their
choice.
2. REMEDIAL LAW; EVIDENCE; FINDINGS OF THE TRIAL AND APPELLATE COURT ON
THE EXISTENCE OF BAD FAITH ON THE PART OF THE CARRIER, GENERALLY NOT
DISTURBED ON APPEAL. - It is settled that bad faith must be duly proved and not merely
presumed. The existence of bad faith, being a factual question, and the Supreme Court not being a trier
of facts, the findings thereon of the trial court as well as of the Court of Appeals shall not be disturbed
on appeal and are entitled to great weight and respect. Said findings are final and conclusive upon the
Supreme Court except, inter alia, where the findings of the Court of Appeals and the trial court are
contrary to each other.
3. ID.; ID.; ID.; CASE AT BAR. - It is evident that the issues raised in this petition are the correctness of
the factual findings of the Court of Appeals of bad faith on the part of petitioner and the award of
damages against it. This Court has consistently held that the findings of the Court of Appeals and the
other lower courts are as a rule binding upon it, subject to certain exceptions created by case law. As
nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court
must be affirmed.
4. CIVIL LAW; DAMAGES; MORAL DAMAGES; RECOVERABLE IN A BREACH OF
CONTRACT ATTENDED WITH FRAUD OR BAD FAITH; INATTENTION TO AND LACK
OF CARE FOR INTERESTS OF PASSENGERS AMOUNTS TO BAD FAITH. - It is now firmly
settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where
it is proved that the carrier was guilty of fraud or bad faith. Inattention to and lack of care for the
interests 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. 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. Such unprofessional and prescribed conduct is attributable to
petitioner airline in the case at bar and the adverse doctrinal rule is accordingly applicable to it.
5. ID.; ID.; ID.; AWARDED TO COMPENSATE PLAINTIFFS INJURIES. - It must, of course, be
borne in mind that moral damages are not awarded to penalize the defendant but to compensate the
plaintiff for the injuries he may have suffered.
6. ID.; ID.; EXEMPLARY DAMAGES; AWARDED WHERE DEFENDANT ACTED IN
WANTON, FRAUDULENT AND OPPRESSIVE MANNER. - In a contractual or quasi-
contractual relationship, exemplary damages, on the other hand, may be awarded only if the defendant
had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.
7. ID.; ID.; ATTORNEYS FEES; AWARDED WHERE THERE IS A FINDING OF BAD FAITH;
CASE AT BAR. - Attorneys fees in the concept of damages may be awarded where there is a finding
of bad faith. The evidence on record amply sustains, and we correspondingly find, that the awards
assessed against petitioner on the aforestated items of damages are justified and reasonable.
8. ID.; OBLIGATIONS AND CONTRACTS; CONTRACT OF AIR CARRIAGE; LIABILITY OF
CARRIER NOT LIMITED BY THE PROVISIONS OF WARSAW CONVENTION. - Although
the Warsaw Convention has the force and effect of law in this country, being a treaty commitment
assumed by the Philippine government, said convention does not operate as an exclusive enumeration
of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit
of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated
cases and under certain limitations. However, it must not be construed to preclude the operation of the
Civil Code and pertinent laws. It does not regulate, much less exempt, the carrier from liability for
damages for violating the rights of its passengers under the contract of carriage, especially if willful
misconduct on the part of the carriers employees is found or established. (Cathay Pacific Airways,
Ltd. vs. Court of Appeals, et al., G.R. No. 60501, March 5, 1993)
APPEARANCES OF COUNSEL
Siguion Reyna Montecillo & Ongsiako for petitioner.
Noel P. Catre for private respondents.

DECISION
REGALADO, J.:

In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) assails the decision of respondent
Court of Appeals in CA-G.R. CV No. 291471 which affirmed the judgment of the trial court finding herein
petitioner liable as follows:

Wherefore, premises considered, judgment is hereby rendered ordering the defendant, Philippine Airlines
or PAL, to pay to the plaintiffs, Dr. Josefino Miranda and Luisa Miranda, the sum of P100,000.00 as
moral damages; P30,000.00 as exemplary or corrective damages; P 10,000.00 as attorneys fees; and the
costs.2

The factual antecedents of the present petition reveal that sometime in May, 1988, Dr. Josefino
Miranda and his wife, Luisa, who were residents of Surigao City, went to the United States of America on
a regular flight of Philippine Airlines, Inc. (PAL). On June 19, 1988, after a stay of over a month there,
they obtained confirmed bookings from PALs San Francisco Office for PAL Flight PR 101 from San
Francisco to Manila via Honolulu on June 21, 1988; PAL Flight PR 851 from Manila to Cebu on June 24,
1988; and PAL Flight PR 905 from Cebu to Surigao also on June 24, 1988.
Accordingly, on June 21, 1988, private respondents boarded PAL Flight PR 101 in San Francisco with
five (5) pieces of baggage. After a stopover at Honolulu, and upon arrival in Manila on June 23, 1988, they
were told by the PAL personnel that their baggage consisting of two balikbayan boxes, two pieces of
luggage and one fishing rod case were off-loaded at Honolulu, Hawaii due to weight limitations.
Consequently, private respondents missed their connecting flight from Manila to Cebu City, as originally
scheduled, since they had to wait for their baggage which arrived the following day, June 24, 1988, after
their pre-scheduled connecting flight had left. They consequently also missed their other scheduled
connecting flight from Cebu City to Surigao City.
On June 25, 1988, they departed for Cebu City and therefrom private respondents had to transfer to
PAL Flight 471 for Surigao City. On the way to Surigao City, the pilot announced that they had to return
to Mactan Airport due to some mechanical problem. While at Mactan Airport, the passengers were
provided by PAL with lunch and were booked for the afternoon flight to Surigao City. However, said flight
was also canceled.
Since there were no more flights for Surigao City that day, private respondents asked to be billeted at
the Cebu Plaza Hotel where they usually stay whenever they happen to be in Cebu City. They were,
however, told by the PAL employees that they could not be accommodated at said hotel supposedly
because it was fully booked. Contrarily, when Dr. Miranda called the hotel, he was informed that he and
his wife could be accommodated there. Although reluctant at first, PAL eventually agreed to private
respondents overnight stay at said hotel. Oscar Jereza, PAL duty manager, approved the corresponding
hotel authority with standard meals. It was only after private respondents insistence that their meals be
ordered a la carte that they were allowed to do so by PAL provided that they sign for their orders.
Inasmuch as the shuttle bus had already left by the time private respondents were ready to go to the
hotel, PAL offered them P 150.00 to include the fare for the return trip to the airport. Dr. Miranda asked
for P 150.00 more as he and his wife, along with all of their baggages, could not be accommodated in just
one taxi, aside from the need for tipping money for hotel boys. Upon refusal of this simple request, Dr.
Miranda then declared that he would forego the amenities offered by PAL. Thus, the voucher for P 150.00
and the authority for the hotel accommodations prepared by PAL were voided due to private respondents
decision not to avail themselves thereof.
To aggravate the muddled situation, when private respondents tried to retrieve their baggage, they were
told this time that the same were loaded on another earlier PAL flight to Surigao City. Thus, private
respondents proceeded to the hotel sans their baggage and of which they were deprived for the remainder
of their trip. Private respondents were finally able to leave on board the first PAL flight
to Surigao City only on June 26, 1988. Thereafter, they instituted an action for damages which, after trial
as well as on appeal, was decided in their favor.
Petitioner PAL has come to us via the instant petition for review on certiorari, wherein it challenges
the affirmatory decision of respondent Court of Appeals3 (1) for applying Articles 2220, 2232 and 2208 of
the Civil Code when it sustained the award of the court a quo for moral and exemplary damages and
attorneys fees despite absence of bad faith on its part; and (2) for not applying the express provisions of
the contract of carriage and pertinent provisions of the Warsaw Convention limiting its liability to
US$20.00 per kilo of baggage.
1. Anent the first issue, petitioner argues that there was no bad faith on its part for while there was
admittedly a delay in fulfilling its obligation under the contract of carriage with respect to the transport of
passengers and the delivery of their baggage, such delay was justified by the paramount consideration of
ensuring the safety of its passengers. It likewise maintains that its employees treated private respondents
fairly and with courtesy to the extent of acceding to most of their demands in order to mitigate the
inconvenience occasioned by the measures undertaken by the airline to ensure passenger safety.4
It reiterated its position that the off-loading of private respondents baggage was due to weight
limitations, as lengthily explained by petitioner from an aeronautically technical viewpoint, 5 taking into
consideration such variable factors as flight distance, weather, air resistance, runway condition and fuel
requirement. Given the variable weather conditions, it claimed that the weight limitation for each flight
can only be ascertained shortly before take-off. While admittedly there would be a resulting inconvenience
in the accommodations of the passengers and the handling of their cargo, the same is outweighed by the
paramount concern for the safety of the flight.
Petitioner moreover impugns the Court of Appeals allegedly improper reliance on the inaccurate
interpretation of the testimony of PALs baggage service representative, Edgar Mondejar, * that private
respondents baggage were off-loaded to give preference to baggage and/or cargo originating
from Honolulu. PAL argues that Mondejars knowledge of what transpired in Honolulu was merely based
on the telex report forwarded to PALs Manila station stating that the off-loading was due to weight
limitations.6
Petitioner enumerates the following incidents as indicative of its good faith in dealing with private
respondents: (1) The cancellation of the flight to Surigao City due to mechanical/engine trouble was to
ensure the safety of passengers and cargo; (2) PAL offered to shoulder private respondents preferred
accommodations, meals and transportation while in Cebu City with more than the usual amenities given
in cases of flight disruption, and gave them priority in the following days flight to Surigao City; (3) PAL
employees did not act rudely towards private respondents and its managerial personnel even gave them
special attention; (4) It was reasonable for PAL to limit the transportation expense to P150.00, considering
that the fare between the airport and the hotel was only P75.00, and they would be picked up by the shuttle
bus from the hotel to the airport, while the request for money for tips could not be justified; and (5) The
inadvertent loading of private respondents baggage on the replacement flight to Surigao City was at most
simple and excusable negligence due to the numerous flight disruptions and large number of baggages on
that day.
Petitioner strenuously, and understandably, insists that its employees did not lie to private respondents
regarding the want of accommodations at the latters hotel of preference. The only reason why Cebu Plaza
Hotel was not initially offered to them by PAL was because of the earlier advice of the hotel personnel
that not all the stranded PAL passengers could be accommodated therein. It claimed that it was in
accordance with the airlines policy of housing all affected passengers in one location for easy
communication and transportation, which accommodations in this instance could be provided by Magellan
Hotel. However, upon insistence of the Mirandas on their preference for Cebu Plaza Hotel, Jeremias
Tumulak, PALs passenger relations officer, told them that they could use the office phone and that if they
could arrange for such accommodation PAL would shoulder the expenses. This concession, so petitioner
avers, negates any malicious intent on its part.
Crucial to the determination of the propriety of the award of damages in this case is the lower courts
findings on the matter of bad faith, which deserves to be quoted at length:

These claims were reasonable and appeared to be supported by the evidence. Thus it cannot be denied
that plaintiffs had to undergo some personal inconveniences in Manila for lack of their baggage. It is also
highly probable that plaintiffs scheduled return to Surigao City was upset because of their having to wait
for one day for their missing things. Consequently, it was quite evident that the off-loading of plaintiffs
baggage in Honolulu was the proximate cause of plaintiffs subsequent inconveniences for which they
claimed to have suffered social humiliation, wounded feelings, frustration and mental anguish.

xxx xxx xxx

In the present case there was a breach of contract committed in bad faith by the defendant airlines. As
previously noted, plaintiffs had a confirmed booking on PAL Flight PR 101 from San
Francisco to Manila. Therefore plaintiffs were entitled to an assured passage not only for themselves but
for their baggage as well. They had a legal right to rely on this.

The evidence showed that plaintiffs baggage were properly loaded and stowed in the plane when it
left San Francisco for Honolulu. The off-loading or bumping off by defendant airlines of plaintiffs
baggage to give way to other passengers or cargo was an arbitrary and oppressive act which clearly
amounted to a breach of contract committed in bad faith and with malice. In the aforecited case, the
Supreme Court defined bad faith as a breach of a known duty through some motive of interest or ill will.
Self-enrichment or fraternal interest, and not personal ill will, may have been the motive, but it is malice
nevertheless (infra).

As correctly pointed out in the Memorandum for Plaintiffs dated June 18, 1990 (pp. 4-5), the following
excerpt from the testimony of Edgar Mondejar clearly demonstrated the act of discrimination perpetrated
by defendant on the herein plaintiffs (TSN, Edgar Mondejar, Feb. 28, 1990, pp. 26-28), thus:

Q: Before a plane departs, your office will see to it the plane loads the exact weight limitation insofar as the cargoes (sic)
and passengers are concerned, is that correct?
A: Yes.
Q: And so with the PR 101 flight starting mainland USA, it complied with the weight limitation, passengers and baggages
(sic) limitation, is that correct?
A: Yes.
Q: In other words the trip from the mainland USA started in Hawaii to off-load cargoes (sic), you complied with the
weight limitation and so on?
A: Yes.
Q: But you are saying upon arriving in Honolulu certain containers were off-loaded?
A: Yes.
Q: That would be therefore some containers were off-loaded to give way to some other containers starting
from Honolulu towards Manila?
A: Yes.
Q: In other words Mr. Mondejar, preference was given to cargoes (sic) newly loaded at Honolulu instead of the cargoes
(sic) already from mainland USA, is that correct?
A: Yes.

The aforesaid testimony constituted a clear admission in defendants evidence of facts amounting to a
breach of contract in bad faith. This being so, defendant must be held liable in damages for the
consequences of its action.7 (Corrections indicated in original text.)

The trial court further found that the situation was aggravated by the following incidents: the poor
treatment of the Mirandas by the PAL employees during the stopover at Mactan Airport in Cebu; the
cavalier and dubious response of petitioners personnel to the Miranda spouses request to be billeted at the
Cebu Plaza Hotel by denying the same allegedly because it was fully booked, which claim was belied by
the fact that Dr. Miranda was easily able to arrange for accommodations thereat; and, the PAL employees
negligent, almost malicious, act of sending off the baggage of private respondents to Surigao City, while
they were still in Cebu, without any explanation for this gross oversight.8
The Court of Appeals affirmed these findings of the trial court by stating that

While we recognize an airlines prerogative to off-load baggag(e) to conform with weight limitations for
the purpose of ensuring the safety of passengers, We, however, cannot sanction the motion (sic) and
manner it was carried out in this case.

It is uncontroverted that appellees baggag(e) were properly weighed and loaded in the plane when it
left San Francisco for Honolulu. When they reached Honolulu, they were not informed that their
baggag(e) would be off-loaded. Ironically, if the purpose of the off-loading was to conform with the
weight limitations, why were other containers loaded in Honolulu? The real reason was revealed by
Edgar Mondejar, baggage service representative of the appellant. x x x 9

xxx xxx xxx

As earlier noted, the off-loading of appellees baggag(e) was done in bad faith because it was not really
for the purpose of complying with weight limitations but to give undue preference to newly-loaded
baggag(e) in Honolulu. This was followed by another mishandling of said baggag(e) in the twice-
cancelled connecting flight from Cebu to Surigao. Appellees sad experience was further aggravated by
the misconduct of appellants personnel in Cebu, who lied to appellees in denying their request to be
billeted at Cebu Plaza Hotel.10

The Court has time and again ruled, and it cannot be over-emphasized, that a contract of air carriage
generates a relation attended with a public duty and any discourteous conduct on the part of a carriers
employee toward a passenger gives the latter an action for damages and, more so, where there is bad faith. 11
It is settled that bad faith must be duly proved and not merely presumed. The existence of bad faith,
being a factual question, and the Supreme Court not being a trier of facts, the findings thereon of the trial
court as well as of the Court of Appeals shall not be disturbed on appeal and are entitled to great weight
and respect.12 Said findings are final and conclusive upon the Supreme Court except, inter alia, where the
findings of the Court of Appeals and the trial court are contrary to each other.13
It is evident that the issues raised in this petition are the correctness of the factual findings of the Court
of Appeals of bad faith on the part of petitioner and the award of damages against it. This Court has
consistently held that the findings of the Court of Appeals and the other lower courts are as a rule binding
upon it, subject to certain exceptions created by case law. As nothing in the record indicates any of such
exceptions, the factual conclusions of the appellate court must be affirmed.14
It is now firmly settled that moral damages are recoverable in suits predicated on breach of a contract
of carriage where it is proved that the carrier was guilty of fraud or bad faith. 15 Inattention to and lack of
care for the interests 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. 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.16 Such unprofessional and proscribed conduct is attributable to petitioner airline in the
case at bar and the adverse doctrinal rule is accordingly applicable to it.
 In Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al.,17 a case which is virtually on all fours with
the present controversy, we stated:

In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent
and reckless when it failed to deliver the luggage of petitioner at the appointed place and time. We agree.
x x x. While the mere failure of CATHAY to deliver respondents luggage at the agreed place and time
did not ipso facto amount to willful misconduct since the luggage was eventually delivered to private
respondent, albeit belatedly, We are persuaded that the employees of CATHAY acted in bad faith. x x x

x x x if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and
exemplary damages is proper.

It must, of course, be borne in mind that moral damages are not awarded to penalize the defendant but
to compensate the plaintiff for the injuries he may have suffered.18 In a contractual or quasi-contractual
relationship, exemplary damages, on the other hand, may be awarded only if the defendant had acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.19 Attorneys fees in the concept of damages
may be awarded where there is a finding of bad faith.20 The evidence on record amply sustains, and we
correspondingly find, that the awards assessed against petitioner on the aforestated items of damages are
justified and reasonable.
At this juncture, it may also be pointed out that it is PALs duty to provide assistance to private
respondents and, for that matter, any other passenger similarly inconvenienced due to delay in the
completion of the transport and the receipt of their baggage. Therefore, its unilateral and voluntary act of
providing cash assistance is deemed part of its obligation as an air carrier, and is hardly anything to rave
about. Likewise, arrangements for and verification of requested hotel accommodations for private
respondents could and should have been done by PAL employees themselves, and not by Dr. Miranda. It
was rather patronizing of PAL to make much of the fact that they allowed Dr. Miranda to use its office
telephone in order to get a hotel room.
While it may be true that there was no direct evidence on record of blatant rudeness on the part of PAL
employees towards the Mirandas, the fact that private respondents were practically compelled to haggle
for accommodations, a situation unbefitting persons of their stature, is rather demeaning and it partakes of
discourtesy magnified by PALs condescending attitude. Moreover, it cannot be denied that the PAL
employees herein concerned were definitely less than candid, to put it mildly, when they withheld
information from private respondents that they could actually be accommodated in a hotel of their choice.
Indeed, the flambuoyant testimony of Oscar Jereza,* as PALs duty manager, merely pays lip-service
to, without putting into reality, the avowed company policy of invariably making available and always
granting the requests for the kind and standard of accommodations demanded by and appropriate for its
passengers.21 Certainly, a more efficient service, and not a lackadaisical and disorganized system, is
expected of the nations flag carrier, especially on an international flight.
For, on the picayune matter of transportation expenses, PAL was obviously and unduly scrimping even
on the small amount to be given to the Mirandas. PAL failed to consider that they were making
arrangements for two paying round-trip passengers, not penny-ante freeloaders, who had been
inconvenienced by the numerous delays in flight services and careless handling of their belongings by
PAL. The niggardly attitude of its personnel in this unfortunate incident, as well as their hair-splitting
attempts at justification, is a disservice to the image which our national airline seeks to project in its costly
advertisements.
 We agree with the findings of the lower court that the request of private respondents for monetary
assistance of P300.00 for taxi fare was indeed justified, considering that there were two of them and they
had several pieces of luggage which had to be ferried between the airport and the hotel. Also, the request
for a small additional sum for tips is equally reasonable since tipping, especially in a first-rate hotel, is an
accepted practice, of which the Court can take judicial notice. This is aside from the fact that private
respondents, having just arrived from an extended trip abroad, had already run out of Philippine currency,
which predicament was exacerbated by their additional stay in Manila due to the off-loading of their
baggage. All these inconveniences should have warranted a commonsensical and more understanding
treatment from PAL, considering that private respondents found themselves in this unpleasant situation
through no fault of theirs.
2. On its second issue, petitioner avers that the express provisions on private respondents tickets
stipulating that liability for delay in delivery of baggage shall be limited to US$20.00 per kilo of baggage
delayed, unless the passenger declares a higher valuation, constitutes the contract of carriage between PAL
and private respondents.
It further contends that these express provisions are in compliance with the provisions of the Warsaw
Convention for the Unification of Rules Relating to International Carrier by Air, to which the Philippines is
a signatory. Thereunder, it is asserted that PAL flight PR 101 from San
Francisco, U.S.A. to Manila, Philippines is an international transportation well within the coverage of the
Warsaw Convention.
Petitioner obstinately insists on the applicability of the provisions of the Warsaw Convention regarding
the carriers limited liability since the off-loading was supposedly justified and not attended by bad faith.
Neither was there any claim for loss of baggage as in fact private respondents baggage were, albeit delayed,
received by them in good condition.22
The court a quo debunked petitioners arguments by this holding:

The defense raised by defendant airlines that it can be held liable only under the terms of the Warsaw
Convention (Answer, Special and Affirmative Defenses, dated October 26, 1988) is of no moment. For it
has also been held that Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely declare the air
carriers liable for damages in the cases enumerated therein, if the conditions specified are present.
Neither the provisions of said articles nor others regulate or exclude liability for other breaches of
contract by air carriers (Northwest Airlines, Inc. vs. Nicolas Cuenca, et al., 14 SCRA 1063).23

This ruling of the trial court was affirmed by respondent Court of Appeals, thus:

We are not persuaded. Appellees do not seek payment for loss of any baggage. They are claiming
damages arising from the discriminatory off-loading of their baggag(e). That cannot be limited by the
printed conditions in the tickets and baggage checks. Neither can the Warsaw Convention exclude nor
regulate the liability for other breaches of contract by air carriers. A recognition of the Warsaw
Convention does not preclude the operation of our Civil Code and related laws in determining the extent
of liability of common carriers in breach of contract of carriage, particularly for willful misconduct of
their employees.24

The congruent finding of both the trial court and respondent court that there was discriminatory off-
loading being a factual question is, as stated earlier, binding upon and can no longer be passed upon by
this Court, especially in view of and in deference to the affirmance of the same by respondent appellate
court.
 There was no error on the part of the Court of Appeals when it refused to apply the provisions of the
Warsaw Convention, for in the words of this Court in the aforequoted Cathay Pacific case:

x x x although the Warsaw Convention has the force and effect of law in this country, being a treaty
commitment assumed by the Philippine government, said convention does not operate as an exclusive
enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an
absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable in the
enumerated cases and under certain limitations. However, it must not be construed to preclude the
operation of the Civil Code and pertinent laws. It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the contract of carriage, especially if
willful misconduct on the part of the carriers

employees is found or established, which is the case before Us. x x x

ACCORDINGLY, finding no reversible error, the challenged judgment of respondent Court of

Appeals is hereby AFFIRMED in toto.
SO ORDERED.
 SECOND DIVISION

[G.R. No. 119706. March 14, 1996]

PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS and GILDA C.

MEJIA, respondents.

DECISION
REGALADO, J.:

This is definitely not a case of first impression. The incident which eventuated in the present
controversy is a drama of common contentious occurrence between passengers and carriers
whenever loss is sustained by the former. Withal, the exposition of the factual ambience and the
legal precepts in this adjudication may hopefully channel the assertiveness of passengers and
the intransigence of carriers into the realization that at times a bad extrajudicial compromise
could be better than a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of Appeals in CA-G.R.
CV No. 42744 which affirmed the decision of the lower court finding petitioner Philippine Air
[1] [2]

Lines, Inc. (PAL) liable as follows:

ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines, Inc., to pay
plaintiff Gilda C. Mejia:

(1) P30,000.00 by way of actual damages of the microwave oven;

(2) P10,000.00 by way of moral damages;

(3) P20,000.00 by way of exemplary damages;

(4) P10,000.00 as attorneys fee;

all in addition to the costs of the suit.

Defendants counterclaim is hereby dismissed for lack of merit. [3]

The facts as found by respondent Court of Appeals are as follows:

On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one (1) unit
microwave oven, with a gross weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines.
Upon arrival, however, of said article in Manila, Philippines, plaintiff discovered that its front glass door
was broken and the damage rendered it unserviceable. Demands both oral and written were made by
plaintiff against the defendant for the reimbursement of the value of the damaged microwave oven, and
transportation charges paid by plaintiff to defendant company. But these demands fell on deaf ears.

On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against defendant in
the lower court.
In its answer, defendant Airlines alleged inter alia, by way of special and affirmative defenses, that the
court has no jurisdiction over the case; that plaintiff has no valid cause of action against defendant since
it acted only in good faith and in compliance with the requirements of the law, regulations, conventions
and contractual commitments; and that defendant had always exercised the required diligence in the
selection, hiring and supervision of its employees. [4]

What had theretofore transpired at the trial in the court a quo is narrated as follows:

Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took defendants plane from San
Francisco, U.S.A. for Manila, Philippines (Exh. F). Amongst her baggages (sic) was a slightly used
microwave oven with the brand name Sharp under PAL Air Waybill No. 0-79-1013008-3 (Exh. A).
When shipped, defendants office at San Franciscoinspected it. It was in good condition with its front
glass intact. She did not declare its value upon the advice of defendants personnel at San Francisco.

When she arrived in Manila, she gave her sister Concepcion C. Dio authority to claim her baggag(e)
(Exh. G) and took a connecting flight for Bacolod City.

When Concepcion C. Dino claimed the baggag(e) (Exh. B) with defendant, then with the Bureau of
Customs, the front glass of the microwave oven was already broken and cannot be repaired because of
the danger of radiation. They demanded from defendant thru Atty. Paco P30,000.00 for the damages
although a brand new one costs P40,000.00, but defendant refused to pay.

Hence, plaintiff engaged the services of counsel. Despite demand (Exh. E) by counsel, defendant still
refused to pay.

The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and restaurant
business. Hence, the necessity of the oven. Plaintiff suffered sleepless nights when defendant refused to
pay her (for) the broken oven and claims P 10,000.00 moral damages, P20,000.00 exemplary damages,
P10,000.00 attorneys fees plus P300.00 per court appearance and P15,000.00 monthly loss of income in
her business beginning February, 1990.

Defendant Philippine Airlines thru its employees Rodolfo Pandes and Vicente Villaruz posited that
plaintiffs claim was not investigated until after the filing of the formal claim on August 13, 1990 (Exh. 6
also Exh. E). During the investigations, plaintiff failed to submit positive proof of the value of the
cargo. Hence her claim was denied.

Also plaintiffs claim was filed out of time under paragraph 12, a(1) of the Air Waybill (Exh. A,
also Exh. 1) which provides: (a) the person entitled to delivery must make a complaint to the carrier in
writing in case: (1) of visible damage to the goods, immediately after discovery of the damage and at the
latest within 14 days from the receipt of the goods. [5]

As stated at the outset, respondent Court of Appeals similarly ruled in favor of private
respondent by affirming in full the trial courts judgment in Civil Case No. 6210, with costs against
petitioner. Consequently, petitioner now impugns respondent appellate courts ruling insofar as
[6]

it agrees with (1) the conclusions of the trial court that since the air waybill is a contract of
adhesion, its provisions should be strictly construed against herein petitioner; (2) the finding of
the trial court that herein petitioners liability is not limited by the provisions of the air waybill; and
(3) the award by the trial court to private respondent of moral and exemplary damages, attorneys
fees and litigation expenses.
 The trial court relied on the ruling in the case of Fieldmens Insurance Co., Inc. vs. Vda.
De Songco, et al. in finding that the provisions of the air waybill should be strictly construed
[7]

against petitioner. More particularly, the court below stated its findings thus:

In this case, it is seriously doubted whether plaintiff had read the printed conditions at the back of the Air
Waybill (Exh. 1), or even if she had, if she was given a chance to negotiate on the conditions for loading
her microwave oven. Instead she was advised by defendants employee at San Francisco, U.S.A., that
there is no need to declare the value of her oven since it is not brand new. Further, plaintiff testified that
she immediately submitted a formal claim for P30,000.00 with defendant. But their claim was referred
from one employee to another th(e)n told to come back the next day, and the next day, until she was
referred to a certain Atty. Paco. When they got tired and frustrated of coming without a settlement of
their claim in sight, they consulted a lawyer who demanded from defendant on August 13, 1990 (Exh. E,
an[d] Exh. 6).

The conclusion that inescapably emerges from the above findings of fact is to concede it with
credence. x x x.[8]

Respondent appellate court approved said findings of the trial court in this manner:

We cannot agree with defendant-appellants above contention. Under our jurisprudence, the Air Waybill
is a contract of adhesion considering that all the provisions thereof are prepared and drafted only by the
carrier (Sweet Lines v. Teves, 83 SCRA 361). The only participation left of the other party is to affix his
signature thereto (BPI Credit Corporation vs. Court of Appeals, 204 SCRA 601; Saludo, Jr. vs. C.A., 207
SCRA 498; Maersk vs. Court of Appeals, 222 SCRA 108, among the recent cases). In the earlier case of
Angeles v. Calasanz, 135 SCRA 323, the Supreme Court ruled that the terms of a contract (of adhesion)
must be interpreted against the party who drafted the same. x x x. [9]

Petitioner airlines argues that the legal principle enunciated in Fieldmens Insurance does not
apply to the present case because the provisions of the contract involved here are neither
ambiguous nor obscure. The front portion of the air waybill contains a simple warning that the
shipment is subject to the conditions of the contract on the dorsal portion thereof regarding the
limited liability of the carrier unless a higher valuation is declared, as well as
the reglementary period within which to submit a written claim to the carrier in case of damage
or loss to the cargo. Granting that the air waybill is a contract of adhesion, it has been ruled by
the Court that such contracts are not entirely prohibited and are in fact binding regardless of
whether or not respondent herein read the provisions thereof. Having contracted the services of
petitioner carrier instead of other airlines, private respondent in effect negotiated the terms of the
contract and thus became bound thereby. [10]

Counsel for private respondent refutes these arguments by saying that due to her eagerness
to ship the microwave oven to Manila, private respondent assented to the terms and conditions
of the contract without any opportunity to question or change its terms which are practically on a
take-it-or-leave-it basis, her only participation therein being the affixation of her
signature. Further, reliance on the Fieldmens insurance case is misplaced since it is not the
ambiguity or obscurity of the stipulation that renders necessary the strict interpretation of a
contract of adhesion against the drafter, but the peculiarity of the transaction wherein one party,
normally a corporation, drafts all the provisions of the contract without any participation
whatsoever on the part of the other party other than affixment of signature. [11]
 A review of jurisprudence on the matter reveals the consistent holding of the Court that
contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the
binding effect thereof. As explained in Ong Yiu vs. Court of Appeals, et al., supra:
[12]

x x x. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon
the passenger regardless of the latters lack of knowledge or assent to the regulation. It is what is known
as a contract of adhesion, in regards which it has been said that contracts of adhesion wherein one party
imposes a ready-made form of contract on the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. x x x, a contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against his own negligence.

As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:

x x x, it should be borne in mind that a contract of adhesion may be struck down as void and
unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in
dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on equal footing. x x x.

but subject to the caveat that

x x x. Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and
fully operative in this transaction, it does not mean, and let this serve as fair warning to respondent
carriers, that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of
said Condition No. 5 x x x.

The peculiar nature of such contracts behooves the Court to closely scrutinize the factual
milieu to which the provisions are intended to apply. Thus, just as consistently and unhesitatingly,
but without categorically invalidating such contracts, the Court has construed obscurities and
ambiguities in the restrictive provisions of contracts of adhesion strictly albeit not unreasonably
against the drafter thereof when justified in light of the operative facts and surrounding
circumstances. [13]

We find nothing objectionable about the lower courts reliance upon

the Fieldmens Insurance case, the principles wherein squarely apply to the present petition. The
parallelism between the aforementioned case and this one is readily apparent for, just as in the
instant case, it is the binding effect of the provisions in a contract of adhesion (an insurance policy
in Fieldmens Insurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the judgment of liability against
petitioner insurance company therein, and necessarily interpreting the provisions of the
insurance policy as ineffective, was the finding that the representations made by the agent of the
insurance company rendered it impossible to comply with the conditions of the contract in
question, rather than the mere ambiguity of its terms. The extended pronouncements regarding
strict construction of ambiguous provisions in an adhesion contract against its drafter, which
although made by the Court as an aside but has perforce evolved into a judicial tenet over time,
was actually an incidental statement intended to emphasize the duty of the court to protect the
weaker, as against the more dominant, party to a contract, as well as to prevent the iniquitous
situation wherein the will of one party is imposed upon the other in the course of negotiation.
 Thus, there can be no further question as to the validity of the terms of the air waybill, even
if the same constitutes a contract of adhesion. Whether or not the provisions thereof particularly
on the limited liability of the carrier are binding on private respondent in this instance must be
determined from the facts and circumstances involved vis-a-vis the nature of the provisions
sought to be enforced, taking care that equity and fair play should characterize the transaction
under review.
On petitioners insistence that its liability for the damage to private respondents microwave
oven, if any, should be limited by the provisions of the air waybill, the lower court had this to say:

By and large, defendants evidence is anchored principally on plaintiffs alleged failure to comply with
paragraph 12, a(1) (Exh. 1-C-2) of the Air waybill (Exh. A, also Exh. 1), by filing a formal claim
immediately after discovery of the damage. Plaintiff filed her formal claim only on August 13,
1990 (Exh. 6, also Exh. E). And, failed to present positive proof on the value of the damaged microwave
oven. Hence, the denial of her claim.

This Court has misgivings about these pretensions of defendant.

xxx xxx xxx

Finally, the Court finds no merit to defendants contention that under the Warsaw Convention, its liability
if any, cannot exceed U.S. $20.00 based on weight as plaintiff did not declare the contents of her
baggage nor pay additional charges before the flight.[14]

The appellate court declared correct the non-application by the trial court of the limited liability
of therein defendant-appellant under the Conditions of the Contract contained in the air waybill ,
based on the ruling in Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., which [15]

substantially enunciates the rule that while the Warsaw Convention has the force and effect of
law in the Philippines, being a treaty commitment by the government and as a signatory thereto,
the same does not operate as an exclusive enumeration of the instances when a carrier shall be
liable for breach of contract or as an absolute limit of the extent of liability, nor does it preclude
the operation of the Civil Code or other pertinent laws.
Petitioner insists that both respondent court and the trial court erred in finding that petitioners
liability, if any, is not limited by the provisions of the air waybill, for, as evidence of the contract
of carriage between petitioner and private respondent, it substantially states that the shipper
certifies to the correctness of the entries contained therein and accepts that the carriers liability
is limited to US$20 per kilogram of goods lost, damaged or destroyed unless a value is declared
and a supplementary charge paid. Inasmuch as no such declaration was made by private
respondent, as she admitted during cross-examination, the liability of petitioner, if any, should be
limited to 28 kilograms multiplied by US$20, or $560. Moreover, the validity of these conditions
has been upheld in the leading case of Ong Yiu vs. Court of Appeals, et al., supra, and
subsequent cases, for being a mere reiteration of the limitation of liability under the. Warsaw
Convention, which treaty has the force and effect of law. [16]

It is additionally averred that since private respondent was merely advised, not ordered, that
she need not declare a higher value for her cargo, the final decision of refraining from making
such a declaration fell on private respondent and should not put the petitioner in estoppel from
invoking its limited liability.
[17]
 In refutation, private respondent explains that the reason for the absence of a declaration of
a higher value was precisely because petitioners personnel in San Francisco, U.S.A. advised her
not to declare the value of her cargo, which testimony has not at all been rebutted by
petitioner. This being so, petitioner is estopped from faulting private respondent for her failure to
declare the value of the microwave oven. [18]

The validity of provisions limiting the liability of carriers contained in bills of lading have been
consistently upheld for the following reason:

x x x. The stipulation in the bill of lading limiting the common carriers liability to the value of goods
appearing in the bill, unless the shipper or owner declares a greater value, is valid and binding. The
limitation of the carriers liability is sanctioned by the freedom of the contracting parties to establish such
stipulations, clauses, terms, or conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs and public policy. x x x. [19]

However, the Court has likewise cautioned against blind reliance on adhesion contracts
where the facts and circumstances warrant that they should be disregarded. [20]

In the case at bar, it will be noted that private respondent signified an intention to declare the
value of the microwave oven prior to shipment, but was explicitly advised against doing so
by PALs personnel in San Francisco, U.S.A., as borne out by her testimony in court:
xxx xxx xxx
Q Did you declare the value of the shipment?
A No. I was advised not to.
Q Who advised you?
A At the PAL Air Cargo.[21]
It cannot be denied that the attention of PAL through its personnel in San Francisco was
sufficiently called to the fact that private respondents cargo was highly susceptible to breakage
as would necessitate the declaration of its actual value. Petitioner had all the opportunity to check
the condition and manner of packing prior to acceptance for shipment, as well as during the
[22]

preparation of the air waybill by PALs Acceptance Personnel based on information supplied by
the shipper, and to reject the cargo if the contents or the packing did not meet the companys
[23]

required specifications. Certainly, PAL could not have been otherwise prevailed upon to merely
accept the cargo.
While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of incident,
posited that there may have been inadequate and improper packing of the cargo, which by itself [24]

could be a ground for refusing carriage of the goods presented for shipment, he nonetheless
admitted on cross-examination that private respondents cargo was accepted by PAL in its San
Francisco office:
ATTY. VINCO
So that, be that as it may, my particular concern is that, it is the PAL personnel that accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
 Also, if he comes from abroad like in this particular case, it is the PAL personnel who accepts the
baggage?
WITNESS
Yes, sir.
ATTY. VINCO
And the PAL personnel may or may not accept the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
According to what is stated as in the acceptance of the cargo, it is to the best interest of the airlines, that
is, he want(s) also that the airlines would be free from any liability. Could that be one of the grounds for
not admitting a baggage?
WITNESS
Safety is number one (I)
xxx xxx xxx
ATTY. VINCO
So, this baggage was accepted and admitted in San Francisco?
WITNESS
Yes, sir.
ATTY. VINCO
And you could not show any document to the Court that would suggest that this baggage was denied
admittance by your office at San Francisco?
WITNESS
No, I cannot show.
ATTY. VINCO
Now, can you show any document that would suggest that there was insufficient pac(k)aging on this
particular baggage from abroad?
WITNESS
No, sir.[25]

In response to the trial courts questions during the trial, he also stated that while the
passengers declaration regarding the general or fragile character of the cargo is to a certain
extent determinative of its classification, PAL nevertheless has and exercises discretion as to the
manner of handling required by the nature of the cargo it accepts for carriage. He further opined
that the microwave oven was only a general, not a fragile, cargo which did not require any special
handling. [26]

There is no absolute obligation on the part of a carrier to accept a cargo. Where a common
carrier accepts a cargo for shipment for valuable consideration, it takes the risk of delivering it in
good condition as when it was loaded. And if the fact of improper packing is known to the carrier
or its personnel, or apparent upon observation but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. [27]
 The acceptance in due course by PAL of private respondents cargo as packed and its advice
against the need for declaration of its actual value operated as an assurance to private
respondent that in fact there was no need for such a declaration. Petitioner can hardly be faulted
for relying on the representations of PALs own personnel.
In other words, private respondent Mejia could and would have complied with the conditions
stated in the air waybill, i.e., declaration of a higher value and payment of supplemental
transportation charges, entitling her to recovery of damages beyond the stipulated limit of US$20
per kilogram of cargo in the event of loss or damage, had she not been effectively prevented
from doing so upon the advice of PALs personnel for reasons best known to themselves.
As pointed out by private respondent, the aforestated facts were not denied by PAL in any of
its pleadings nor rebutted by way of evidence presented in the course of the trial, and thus in
effect it judicially admitted that such an advice was given by its personnel in San
Francisco, U.S.A. Petitioner, therefore, is estopped from blaming private respondent for not
declaring the value of the cargo shipped and which would have otherwise entitled her to recover
a higher amount of damages. The Courts bidding in the Fieldmens Insurance case once again
rings true:

x x x. As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will
befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in
gross travesty of justice.

We likewise uphold the lower courts finding that private respondent complied with the
requirement for the immediate filing of a formal claim for damages as required in the air waybill
or, at least, we find that there was substantial compliance therewith.
Private respondent testified that she authorized her sister, Concepcion Dio, to claim her
cargo consisting of a microwave oven since the former had to take a connecting flight
to Bacolod City on the very same afternoon of the day of her arrival. As [28]

instructed, Concepcion Dio promptly proceeded to PALs Import Section the next day to claim the
oven. Upon discovering that the glass door was broken, she immediately filed a claim by way of
the baggage freight claim on which was duly annotated the damage sustained by the oven.
[29] [30]

Her testimony relates what took place thereafter:

ATTY. VINCO
So, after that inspection, what did you do?
WITNESS
After that annotation placed by Mr. Villaruz, I went home and I followed it up the next day with the Clerk
of PAL cargo office.
ATTY. VINCO
What did the clerk tell you?
WITNESS
She told me that the claim was being processed and I made several phone calls after that. I started my
follow-ups February up to June 1990.
ATTY. VINCO
And what results did those follow-ups produce?
 WITNESS
All they said (was) that the document was being processed, that they were waiting for Atty. Paco to report
to the office and they could refer the matter to Atty. Paco.
ATTY. VINCO
Who is this Atty. Paco?
WITNESS
He was the one in-charge of approving our claim.
ATTY. VINCO
Were you able to see Atty. Paco?
WITNESS
Yes, sir. I personally visited Atty. Paco together with my auntie who was a former PAL employee.
xxx xxx xxx
ATTY. VINCO
So, what did you do, did you make a report or did you tell Atty. Paco of your scouting around for a possible
replacement?
WITNESS
I did call him back at his office. I made a telephone call.
ATTY. VINCO
And what answer did Atty. Paco make after you have reported back to him?
WITNESS
They told me that they were going to process the claim based on the price that I gave them but there was
no definite result.
ATTY. VINCO
How many times did you go and see Atty. Paco regarding the claim of your sister?
WITNESS
I made one personal visit and several follow-up calls. With Atty. Paco, I made one phone call but I made
several phone calls with his secretary or the clerk at PAL cargo office and I was trying to locate him but
unfortunately, he was always out of his office.[31]
PAL claims processor, Rodolfo Pandes, confirmed having received the baggage freight claim
*

on January 30, 1990 and the referral to and extended pendency of the private respondents
[32]

claim with the office of Atty. Paco, to wit:

ATTY. VINCO:
Q And you did instruct the claimant to see the Claim Officer of the company, right?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q And the Claim Officer happened to be Atty. Paco?
WITNESS:
A Yes, sir.
ATTY. VINCO:
 Q And you know that the plaintiff thru her authorized representative Concepcion Dio, who is her sister had
many times gone to Atty. Paco, in connection with this claim of her sister?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q As a matter of fact even when the complaint was already filed here in Court the claimant had continued to
call about the settlement of her claim with Atty. Paco, is that correct?
xxx xxx xxx
WITNESS:
A Yes, sir.
ATTY. VINCO.
Q You know this fact because a personnel saw you in one of the pre-trial here when this case was heard
before the sala of Judge Moscardon, is that correct?
WITNESS:
A Yes.
ATTY. VINCO:
Q In other words, the plaintiff rather had never stop(ped) in her desire for your company to settle this claim,
right?
WITNESS
A Yes, sir.[33]
Considering the abovementioned incidents and private respondent Mejias own zealous
efforts in following up the claim, it was clearly not her fault that the letter of demand for damages
[34]

could only be filed, after months of exasperating follow-up of the claim, on August 13, 1990. If [35]

there was any failure at all to file the formal claim within the prescriptive period contemplated in
the air waybill, this was largely because of PALs own doing, the consequences of which cannot,
in all fairness, be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal claim, under
Article 1186 of the Civil Code that condition was deemed fulfilled, considering that the collective
action of PALs personnel in tossing around the claim and leaving it unresolved for an indefinite
period of time was tantamount to voluntarily preventing its fulfillment. On grounds of equity, the
filing of the baggage freight claim, which sufficiently informed PAL of the damage sustained by
private respondents cargo, constituted substantial compliance with the requirement in the
contract for the filing of a formal claim.
All told, therefore, respondent appellate court did not err in ruling that the provision on limited
liability is not applicable in this case. We, however, note in passing that while the facts and
circumstances of this case do not call for the direct application of the provisions of the Warsaw
Convention, it should be stressed that, indeed, recognition of the Warsaw Convention does not
preclude the operation of the Civil Code and other pertinent laws in the determination of the
extent of liability of the common carrier. [36]

The Warsaw Convention, being a treaty to which the Philippines is a signatory, is as much a
part of Philippine law as the Civil Code, Code of Commerce and other municipal special
laws. The provisions therein contained, specifically on the limitation of carriers liability, are
[37]

operative in the Philippines but only in appropriate situations.

 Petitioner ascribes ultimate error in the award of moral exemplary damages and attorneys
fees in favor of private respondent in that other than the statement of the trial court that petitioner
acted in bad faith in denying private respondents claim, which was affirmed by the Court of
Appeals, there is no evidence on record that the same is true. The denial of private respondents
claim was supposedly in the honest belief that the same had prescribed, there being no timely
formal claim filed; and despite having been given an opportunity to submit positive proof of the
value of the damaged microwave oven, no such proof was submitted. Petitioner insists that its
failure to deliver the oven in the condition in which it was shipped could hardly be considered as
amounting to bad faith. [38]

Private respondent counters that petitioners failure to deliver the microwave oven in the
condition in which it was received can be describe as gross negligence amounting to bad faith,
on the further consideration that it failed to prove that it exercised the extraordinary diligence
required by law, and that no explanation whatsoever was given as to why the front glass of the
oven was broken. [39]

The trial court justified its award of actual, moral and exemplary damages, and attorneys fees
in favor of private respondent in this wise:

Since the plaintiffs baggage destination was the Philippines, Philippine law governs the liability of the
defendant for damages for the microwave oven.

The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735 and 1753 x x x.

xxx xxx xxx

In this case, defendant failed to overcome, not only the presumption but more importantly, plaintiffs
evidence that defendants negligence was the proximate cause of the damages of the microwave
oven. Further, plaintiff has established that defendant acted in bad faith when it denied the formers claim
on the ground that the formal claim was filed beyond the period as provided in paragraph 12 (a-1)
(Exh. 1-C-2) of the Air Waybill (Exh. 1, also Exh A), when actually, Concepcion Dio, sister of plaintiff
has immediately filed the formal claim upon discovery of the damage. [40]

Respondent appellate court was in full agreement with the trial courts finding of bad faith on
the part of petitioner as a basis for the award of the aforestated damages, declaring that:

As to the last assigned error, a perusal of the facts and law of the case reveals that the lower courts award
of moral and exemplary damages, attorneys fees and costs of suit to plaintiff-appellee is in accordance
with current laws and jurisprudence on the matter. Indeed, aside from the fact that defendant-appellant
acted in bad faith in breaching the contract and in denying plaintiffs valid claim for damages, plaintiff-
appellee underwent profound distress, sleepless nights, and anxiety upon knowledge of her damaged
microwave oven in possession of defendant-appellant, entitling her to the award of moral and exemplary
damages (Cathay Pacific Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221, New Civil Code), and
certainly plaintiff-appellants unjust refusal to comply with her valid demand for payment, thereby also
entitling her to reasonable attorneys fees [Art. 2208 (2) and (11), id.].
[41]

It will be noted that petitioner never denied that the damage to the microwave oven was
sustained while the same was in its custody. The possibility that said damage was due to causes
beyond the control of PAL has effectively been ruled out since the entire process in handling of
the cargo - from the unloading thereof from the plane, the towing and transfer to the PAL
warehouse, the transfer to the Customs examination area, and its release thereafter to the
shipper - was done almost exclusively by, and with the intervention or, at the very least, under
the direct supervision of a responsible PAL personnel. [42]

The very admissions of PAL, through Vicente Villaruz of its Import Section, as follows:
ATTY. VINCO
So that, you now claim, Mr. Witness, that from the time the cargo was unloaded from the plane until the
time it reaches the Customs counter where it was inspected, all the way, it was the PAL personnel who
did all these things?
WITNESS
Yes, however, there is also what we call the Customs storekeeper and the Customs guard along with the
cargo.
ATTY. VINCO
You made mention about a locator?
WITNESS
Yes, sir.
ATTY. VINCO
This locator, is he an employee of the PAL or the Customs?
WITNESS
He is a PAL employee.[43]
lead to the inevitable conclusion that whatever damage may have been sustained by the cargo
is due to causes attributable to PALs personnel or, at all events, under their responsibility.
Moreover, the trial court underscored the fact that petitioner was not able to overcome the
statutory presumption of negligence in Article 1735 which, as a common carrier, it was laboring
under in case of loss, destruction or deterioration of goods, through proper showing of the
exercise of extraordinary diligence.Neither did it prove that the damage to the microwave oven
was because of any of the excepting causes under Article 1734, all of the same Code. Inasmuch
as the subject item was received in apparent good condition, no contrary notation or exception
having been made on the air waybill upon its acceptance for shipment, the fact that it was
delivered with a broken glass door raises the presumption that PALs personnel were negligent
in the carriage and handling of the cargo. [44]

Furthermore, there was glaringly no attempt what so ever on the part of petitioner to explain
the cause of the damage to the oven. The unexplained cause of damage to private respondents
cargo constitutes gross carelessness or negligence which by itself justifies the present award of
damages. The equally unexplained and inordinate delay in acting on the claim upon referral
[45]

thereof to the claims officer, Atty. Paco, and the noncommittal responses to private respondents
entreaties for settlement of her claim for damages belies petitioners pretension that there was no
bad faith on its part. This unprofessional indifference of PALs personnel despite full and actual
knowledge of the damage to private respondents cargo, just to be exculpated from liability on
pure technicality and bureaucratic subterfuge, smacks of willful misconduct and insensitivity to a
passengers plight tantamount to bad faith and renders unquestionable petitioners liability for
[46]

damages. In sum, there is no reason to disturb the findings of the trial court in this case, especially
with its full affirmance by respondent Court of Appeals.
 On this note, the case at bar goes into the annals of our jurisprudence after six years and
recedes into the memories of our legal experience as just another inexplicable inevitability. We
will never know exactly how many man-hours went into the preparation, litigation and adjudication
of this simple dispute over an oven, which the parties will no doubt insist they contested as a
matter of principle. One thing, however, is certain. As long as the first letter in principle is
somehow outplaced by the peso sign, the courts will always have to resolve similar controversies
although mutual goodwill could have dispensed with judicial recourse.
IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent Court of
Appeals is AFFIRMED in toto.
SO ORDERED.
 FIRST DIVISION

[G.R. No. 120334. January 20, 1998]

NORTHWEST AIRLINES, INC. petitioner, vs. COURT OF APPEALS and ROLANDO I.

TORRES respondents.

[G.R. No. 120337. January 20, 1998]

ROLANDO I. TORRES, petitioner, vs. COURT OF APPEALS and NORTHWEST

AIRLINES, INC., respondents.

DECISION
DAVIDE, JR., J.:

Unable to accept the decision of the Court of Appeals in CA-G.R. CV No. 24068,[1] petitioner Northwest
Airlines, Inc., (hereafter NORTHWEST) and petitioner Rolando I. Torres (hereafter TORRES) filed separate
petitions for review under Rule 45 of the Rules of Court, which were docketed as G.R. No. 120334 and G.R.
No. 120337 and thereafter consolidated.
The antecedents of these cases were summarized by the Court of Appeals as follows: [2]

The plaintiff, [Torres], allegedly on a special mission to purchase firearms for the Philippine
Senate, purchased a round trip ticket from defendant [Northwest] for his travel to Chicago and
back to Manila. Via defendants flight, plaintiff left for United States.

After purchasing firearms and on the way back to Manila, plaintiff checked-in and presented
before defendants representative his two identical baggage, one of which contained
firearms. Defendants representative required the baggage to be opened and the supporting
evidence to be presented. Plaintiff showed them his authorization from the Philippine
government and the purchase receipts. Plaintiff thereafter sealed the baggage and defendants
representative placed a red tag on the baggage with firearms with the marking "CONTAINS
FIREARMS".

Upon arrival in Manila on June 22, 1988 plaintiff was not able to claim one of his
baggages. Plaintiff was informed by defendants representative that his baggage containing
firearms was recalled back to Chicago by defendant for US Customs verification. A telex to this
effect was shown to plaintiff.

On June 28, 1988, after being advised of the arrival of his other baggage, plaintiff claimed and
opened the baggage in the presence of defendants representative and found out that the
firearms were missing. A Personal Property Missing Damage Report was issued by defendant
to plaintiff.
On account of the continuous refusal of defendant to settle amicably, plaintiff then prayed
before the trial court that defendant be ordered to pay actual damages, moral damages,
temperate damages, exemplary damages and attorney's fees (pp. 1-6, Complaint; p. 1,
Record).

In its answer, defendant pleaded: a) that it was the agents from the US Customs who ordered
for the return of the weapons which plaintiff checked-in; b) that when opened in the presence of
US Customs agents the box contained no firearms; and c) that since the baggage which was
returned back to Chicago did not contain any firearms, then the baggage which plaintiff
received upon arrival in Manila must have contained the firearms (pp. 3-5, Answer; pp. 32-34,
Record).

After plaintiff had presented its evidence, defendant filed a "Motion to Dismiss (By Way of
Demurrer to the Evidence with Motion for Summary Judgment)" dated April 24, 1989.

In said motion, defendant moved for the dismissal of the complaint in so far as it prays for
moral, exemplary and temperate damages and attorney's fees and further moved for "Summary
Judgment to be rendered awarding the plaintiff $640.00 as actual damages." (Motion to
Dismiss By Way of Demurrer to Evidence with Motion for Summary Judgment; p. 115,
Records).

Plaintiff on the other hand, offered no objection to the submission of the case for decision but
insisted that he is entitled to damages as prayed for (p. 1, Comment on Defendant's Motion to
Dismiss by Way of Demurrer to Evidence with Summary Judgment; pp. 136-169, Records).

We add to this summary the following relevant matters:

NORTHWEST argued in its motion for summary judgment that the Warsaw Convention and the contract
of carriage limited its liability to US$640 and that the evidence presented by TORRES did not entitle him to
moral, exemplary, and temperate damages and attorneys fees. [3]
Instead of just ruling on NORTHWESTs Motion to Dismiss (By Way of Demurrer to Evidence) with Motion
for Summary Judgment, which it considered submitted for resolution in the order of 14 June 1989,[4] the trial
court rendered on 13 September 1989 a full-blown decision[5] ordering NORTHWEST to pay TORRES the
following amounts:

1. The amount of $9,009.32, with legal interest thereon from the date of the filing of the
complaint, in its peso equivalent at the official rate of exchange at the time payment is
made, representing the value of the goods lost by the plaintiff;

2. The amount of P100,000.00 by way of attorney's fees;

3. The amount of P5,181.09 as filing fees paid by the plaintiff and the amount of P20,000.00
for expenses of litigation, representing travel expenses and hotel accommodations of
plaintiff's counsels; and

4. The amount of P50,000.00 as moral damages.

The award of US$9,009.32, representing the value of the lost firearms, was grounded on the trial courts
finding that the act of [NORTHWESTs] personnel in Tokyo or Narita Airport in just guessing which baggage
contained the firearms was careless and imprudent, amounting to careless disregard for the safety of the
luggage of the passenger. According to the trial court, such act constituted willful misconduct which brought
the case beyond the application of Section 22(2) of the Warsaw Convention, thereby depriving NORTHWEST
of the limitation of the liability provided for in said section.
The awards of attorneys fees and expenses of litigation were premised on NORTHWESTs having
ignored the demands of TORRES forcing the latter to litigate in order to assert his right. TORRES was also
awarded moral damages because of the inconvenience, anxiety and worry he suffered by reason of
NORTHWESTs unjustifiable refusal to settle his claim.
Both TORRES and NORTHWEST appealed from the decision to the Court of Appeals, which docketed
the case as CA-G.R. CV No. 24068. Torres assailed the failure of the trial court to award the actual, moral,
and exemplary damages prayed for by him.[6] Northwest, on the other hand, alleged that in prematurely
resolving the case on the merits the court prevented it from presenting evidence, thereby denying it due
process; and that even assuming that the trial court could resolve the entire case on the merits, it erred in
awarding damages, attorneys fees, and expenses of litigation. [7]
In its Decision[8] of 14 September 1994, the Court of Appeals sustained the trial courts judgment that
TORRES was entitled to actual damages, since NORTHWEST had, in effect, admitted the loss of the
firearms when it insisted that its liability was limited to $9.07 per pound or $20 per kilo. The appellate court
then concluded that NORTHWESTs guessing of which luggage contained the firearms amounted to willful
misconduct under Section 25(1) of the Warsaw Convention which entitled TORRES to claim actual damages
in excess of the limitation provided for under Section 22(2) of said Convention.
Nevertheless, the Court of Appeals held that while the trial court properly ruled on the right of TORRES
to actual damages, it erred in determining by way of summary judgment the amount of damages; for under
Section 3 of Rule 34 of the Rules of Court, a summary judgment may be rendered upon proper motion except
as to the amount of damages.
As to the trial courts act of disposing of the entire case by way of summary judgment, the Court of Appeals
noted that NORTHWEST categorically moved for summary judgment only on the issue of actual damages,
but not on the claims for moral damages and attorneys fees. NORTHWEST moved for the dismissal of the
latter claims by way of demurrer to evidence. That being so, the trial court could not, by way of summary
judgment, dispose of the case on its entirety. Section 2 of Rule 34 of the Rules of Court required that summary
judgment should be issued only after the motion therefor has been heard. Since there was no such motion
as to the claims for moral damages and attorneys fees, no summary judgment thereon could be made.
Anent the demurrer to evidence, the Court of Appeals held that the trial court had to either grant or deny
it. If granted, no award therefor could have been validly made. If denied, then under Section 1 of Rule 35 of
the Rules of Court, NORTHWEST should have been allowed to present its evidence, as it was not deemed
to have waived that right. This section provided:

SECTION 1. Effect of judgment on demurrer to evidence. -- After the plaintiff has completed the
presentation of his evidence, the defendant without waiving his right to offer evidence in the event the
motion is not granted, may move for a dismissal on the ground that upon facts and the law the plaintiff has
shown no right to relief. However, if the motion is granted and order of dismissal is reversed on appeal, the
movant loses his right to present evidence in his behalf.[9]

The Court of Appeals then held that since the demurrer was impliedly denied by the trial court,
NORTHWEST should have been allowed to present its evidence in accordance with the above rule.
Accordingly, the Court of Appeals affirmed the trial courts finding as to the right of TORRES to actual
damages but set aside the rest of the appealed decision. It then remanded the case to the court a quo for
further proceedings.
On 23 May 1995, the Court of Appeals denied [10] NORTHWESTs motion for a partial reconsideration of
the decision.
Hence, the present petitions.
 NORTHWEST contests the right of TORRES to actual damages on the following grounds: (1) the loss of
firearms was disputed; (2) the finding of willful misconduct was arbitrary; and (3) TORRES failed to produce
a United States license for the shipment of the firearms; hence, the importation was illegal and no damages
could arise therefrom.
TORRES, on the other hand, claims that the Court of Appeals erred (1) in setting aside the appealed
decision of the court a quo as to the awards of damages, attorneys fees, and cost of suit; (2) in remanding
the case to the court a quo for further proceedings; and (3) in failing to award other damages for breach of
contract and willful misconduct committed by Northwest for mishandling the cargo.
NORTHWESTs Motion to Dismiss (By Way of Demurrer to Evidence) with Motion for Summary Judgment
involved two distinct and separate processes, viz: (1) demurrer to evidence, which was then governed by
Rule 35, now by Rule 33; and (2) motion for summary judgment, which was then governed by Rule 34, now
Rule 35, of the Rules of Court. The subject of the demurrer were the claims for moral, exemplary, and
temperate damages and attorneys fees; while the target of the motion for summary judgment was the claim
for actual damages.
We agree with the Court of Appeals in its holding that the trial court erred in deciding the entire case on
its merits. Indeed, as to the demurrer to evidence, the trial court should have been solely guided by the
procedure laid down in the abovementioned rule on demurrer to evidence. It had no choice other than to
grant or to deny the demurrer. It could not, without committing grave abuse of discretion amounting to excess
of jurisdiction, deny the motion and then forthwith grant TORRES claims on a finding that TORRES has
established a preponderance of evidence in support of such claims. In the instant case, the trial court did just
that insofar as moral damages, attorneys fees, and expenses of litigation were concerned. What it should
have done was to merely deny the demurrer and set a date for the reception of NORTHWESTs evidence in
chief.
As to the motion for summary judgment, both the trial court and the Court of Appeals were in error
. Summary judgments were formerly governed by Rule 34 of the Rules of Court. The rule is now Rule 35 of
the 1987 Rules of Civil Procedure with the amendments allowing the parties to submit not only affidavits but
also depositions or admissions in support of their respective contentions.[11] Motions for summary judgment
may be filed by the claimant or by the defending party. Sections 1, 2, and 3 of the old Rule 34, the governing
law in this case, provided as follows:

SECTION 1. Summary judgment for claimant. -- A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading
in answer thereto has been served, move with supporting affidavits for a summary judgment in
his favor upon all or any part thereof.

SEC. 2. Summary judgment for defending party. -- A party against whom a claim, counterclaim,
or cross-claim is asserted or a declaratory relief is sought may, at any time, move with
supporting affidavits for a summary judgment in his favor as to all or any part thereof.

SEC. 3. Motion and proceedings thereon. -- The motion shall be served at least ten (10) days
before the time specified for the hearing. The adverse party prior to the day of hearing may
serve opposing affidavits. After the hearing, the judgment sought shall be rendered forthwith if
the pleadings, depositions, and admissions on file together with the affidavits, show that,
except as to the amount of damages, there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.

NORTHWEST, the defending party, moved for summary judgment on the claim for actual damages after
TORRES had presented his evidence in chief. This was allowed by Section 2 where the motion may be filed
at any time, as distinguished from section 1 where the claimant, like TORRES, may file the motion at any
time after the answer is filed.
 Summary judgment is allowed if, except as to the amount of damages, there is no genuine issue as to
any material fact and the moving party is entitled to a judgment as a matter of law.
In this case, NORTHWEST denied in its Answer the material allegations in the complaint and asserted,
in fact, that it was not liable for actual damages because the box containing the alleged lost firearms was the
one received by TORRES when he arrived in Manila. It likewise contended that, even granting that the
firearms were lost, its liability was limited by the Warsaw Convention and the contract of transportation to
$9.07 per pound, or a total of $640 as the box weighed 70 pounds.[12] It also denied having acted fraudulently
or in bad faith.[13]
In thus submitting for summary judgment the matter of its liability only to the maximum allowed in Section
22(2) of the Warsaw Convention, NORTHWEST was deemed to have hypothetically admitted arguendo that
the firearms were lost. It did not waive the presentation of evidence that it was not in fact liable for the alleged
loss of firearms. And even if it were so liable, NORTHWEST could still prove at the appropriate time that it
was not liable beyond the maximum provided in said Section 22(2). Notably, TORRES prayed for actual
damages in the amounts of (1) $9,009.32 representing the value of the lost firearms; and
(2) P39,065[14] representing the cost of his plane tickets.
Concretely then, there remained a genuine issue on the fact and amount of actual damages. The motion
for summary judgment was not therefore in order. NORTHWEST must have resorted to it, in like manner as
it did in filing the demurrer, to delay the progress of the trial of the case. Verily, it was grave abuse of discretion
on the part of the trial court to grant such motion and award TORRES actual damages commensurate to the
value of the firearms and based on his evidence alone.
We, however, agree with both the trial court and the Court of Appeals that NORTHWESTs liability for
actual damages may not be limited to that prescribed in Section 22(2) of the Warsaw Convention. In Alitalia
v. Intermediate Appellate Court,[15] we held:

The [Warsaw] Convention does not operate as an exclusive enumeration of the instances of an
airlines liability, or as an absolute limit of the extent of that liability. Such a proposition is not
borne out by the language of the Convention, as this Court has now, and at an earlier time,
pointed out. Moreover, slight reflection readily leads to the conclusion that it should be deemed
a limit of liability only in those cases where the cause of the death or injury to person, or
destruction, loss or damage to property or delay in its transport is not attributable to or attended
by any willful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of
any official or employee for which the carrier is responsible, and there is otherwise no special
or extraordinary form of resulting injury. The Conventions provisions, in short, do not regulate
or exclude liability for other breaches of contract by the carrier or misconduct of its officers and
employees, or for some particular or exceptional type of damage.

IN VIEW WHEREOF, judgment is hereby rendered (1) PARTLY GRANTING the petition in G.R. No.
120334 by setting aside that portion of the challenged decision of the Court of Appeals in CA-G.R. CV No.
24068 affirming the summary judgment as to the right of respondent ROLANDO I. TORRES to actual
damages; (2) DENYING for want of merit the petition in G.R. No. 120337; and (3) REMANDING this case to
the trial court for the reception of the evidence for Northwest Airlines, Inc. in Civil Case No. 88-46117 and,
thereafter, for the rendition of the judgment therein on the merits.
No pronouncement as to costs.
SO ORDERED.
 THIRD DIVISION

[G.R. No. 122308. July 8, 1997]

PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA, petitioners, vs. COURT
OF APPEALS and TRANS-WORLD AIRLINES INC., respondents.

DECISION
DAVIDE, JR., J.:

The main issue in this petition for review under Rule 45 of the Rules of Court is the
applicability of Article 28(1) of the Warsaw Convention, which provides as follows:
[1]

ARTICLE 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.

We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court of Appeals
in CA-G.R. CV No. 39896 affirming the 24 July 1992 Order of the Regional Trial Court of Quezon
[2]

City, Branch 102, which dismissed Civil Case No. Q-91-9620 on the ground of lack of jurisdiction
[3]

in view of the aforementioned Article 28(1) of the Warsaw Convention.

The antecedent facts, as summarized by the Court of Appeals, are as follows:

Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society. Mr. Mapa is an
established businessman and currently the Regional General Manager of Akerlund and Rausing, a
multinational packaging material manufacturer based in Manila. He was previously the Senior Vice
President of Phimco Industries, an affiliate company of Swedish Match Company. Mrs. Mapa is a
successful businesswoman engaged in the commercial transactions of high value antique and oriental arts
decor items originating from Asian countries. Carmina S. Mapa is the daughter of plaintiffs Purita and
Cornelio and is a graduate of the International School in Bangkok, Thailand, now presently enrolled at
the Boston University where she is majoring in communication.

Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidenced by TWA
ticket Nos. 015:9475:153:304 and 015:9475:153:305, purchased in Bangkok, Thailand. Said TWA
tickets are for Los Angeles-New York-Boston-St. Louis-Chicago ....

Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is Kansas City,
Missouri, USA. TWAs place of business through which the contracts were made is Bangkok,
Thailand. The place of destination is Chicago, USA.

On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104 for Los
Angeles. Carmina was to commence schooling and thus was accompanied by Purita to assist her in
settling down at the University.
They arrived in Los Angeles on the same date and stayed there until August 14, 1990 when they left for
New York City.

On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F. Kennedy (JFK)
Airport, New York, on TWA Flight No. 904.

On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a connecting
flight on TWAs carrier, TW 0901, from JFK Airport, New York, to Bostons Logan Airport, checking in
seven (7) pieces of luggage at the TWA counter in the JFK Airport. The seven baggages were received
by a porter who issued seven TWA baggage receipts numbered 17-8270, 71, 72, 73, 74, 75, and
76 therefor.

From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded to TWAs ticket
counter and presented their confirmed TWA tickets numbered 015:9475:153:304 and 015:9475:153:305
with a 3:00 p.m. departure time. They were issued their boarding passes and were instructed to proceed
to gate 35 for boarding. At about 2:40 p.m., plaintiffs noticed that there was still no instruction to board
the aircraft so they made inquiries. The TWA ground stewardess informed plaintiffs that they were at the
wrong gate because their flight was boarding at gate 1. Upon hearing this, plaintiffs rushed to gate 1
which was in another building terminal. At gate 1, they were told by a TWA ground stewardess that
flight 901 had just departed. However, they were consoled that another TWA flight was leaving for
Boston after 30 minutes and plaintiffs could use the same boarding pass for the next flight. At around
3:15 p.m., plaintiffs Purita and Carmina were able to board the next flight. However, the plane was not
immediately cleared for take off on account of a thunderstorm. The passengers were instructed to stay
inside the aircraft until 6:00 p.m. when the plane finally left for Boston.

Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim their baggages
and found only three out of the seven they checked in, to wit: one Samsonite on the carousel, another
Samsonite lying on the floor near the carousel and a third baggage, an American Tourister, inside the
unclaimed baggage office. Plaintiffs immediately reported the loss of their four baggages to the TWA
Baggage Office at Logan Airport. TWAs representative confidently assured them that their baggages
would be located within 24 hours and not more than 48 hours.

On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler, Customer
Relations-Baggage Service, apologizing for TWAs failure to locate the missing luggage and requesting
plaintiffs to accomplish a passenger property questionnaire to facilitate a further intensive and
computerized search for the lost luggage. Plaintiffs duly accomplished the passenger property
questionnaire, taking pains to write down in detail the contents of each missing baggage. The total value
of the lost items amounted to $11, 283.79.

On September 20, 1990, plaintiffs counsel wrote TWA thru its General Sales Manager in the Philippines,
Daniel Tuason, with office address at Ground Floor, Saville Building, Sen. Gil J. Puyat Avenue corner
Paseo de Roxas, Makati, Metro Manila demanding indemnification for the grave damage and injury
suffered by the plaintiffs.

TWA again assured plaintiffs that intensive search was being conducted.

On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffs-appellants two
options: (a) transportation credit for future TWA travel or (b) cash settlement. Five months lapsed
without any result on TWAs intensive search.
On January 3, 1991, plaintiffs-appellants opted for transportation credit for future TWA travel.

On January 11, 1991, TWA disregarded plaintiffs option and unilaterally declared the payment of
$2,560.00 as constituting full satisfaction of the plaintiffs claim.

On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the actual cost of
their lost baggages and their contents.

Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and redress
plaintiffs for the grave injury and damages they have suffered.[4]

Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then filed with
the trial court on 1 August 1991 a complaint for damages, which was docketed as Civil Case
[5] [6]

No. Q-91-9620. Before a responsive pleading was filed, the petitioners filed an Amended
Complaint. They prayed that after due trial private respondent Trans-World Airlines, Inc.
[7]

(hereafter, TWA), be ordered to pay them the following amounts: (1) US$8,723.79, or its
equivalent in Philippine currency, representing the cost of the lost luggage and its contents; (2)
US$2,949.50, or its equivalent in Philippine currency, representing the cost of hotel, board and
lodging, and communication expenses; (3) P1 million, by way of moral damages; (4) P1 million,
by way of exemplary damages, with legal interest on said amounts from the date of extrajudicial
demand thereof; and (5) P500,000.00 as attorney's fees, costs of the suit, and other expenses
of litigation.[8]

On 26 February 1992, TWA filed its Answer to the Amended Complaint raising, as special
and affirmative defense, lack of jurisdiction of Philippine courts over the action for damages in
that pursuant to Article 28(1) of the Warsaw Convention, the action could only be brought either
in Bangkok where the contract was entered into, or in Boston which was the place of destination,
or in Kansas City which is the carrier's domicile and principal place of business.
TWA further alleged that pursuant to the Warsaw Convention and the Notice of Baggage
Limitations at the back of the tickets, its liability to the petitioners is limited to US$9.07 per pound,
or US$20.00 per kilo, which is in lieu of actual and compensatory damages. Even assuming that
petitioners bag weighed the maximum acceptable weight of 70 pounds, TWAs maximum liability
is $640.00 per bag or $2,560.00 for the four pieces of baggage, which the petitioners have been
offered and have accepted. TWA also submitted that it could not be liable for moral and
exemplary damages and attorneys fees because it did not act in a wanton, fraudulent, reckless,
oppressive, or malevolent manner. [9]

On 7 February 1992, the petitioners filed their second Amended Complaint to include a [10]

claim of US$2,500, or its equivalent in Philippine Currency, representing the additional

replacement cost of the items and personal effects contained in their lost luggage; and US$4,500
representing the travel expenses, hotel, lodging, food and other expenses of petitioner Cornelio
Mapa, who was constrained to join his family in Boston to extend the necessary assistance in
connection with the lost luggage.
After the filing of TWAs Answer to the second Amended Complaint, and petitioners Reply
[11]

thereto, the trial court gave TWA ten days within which to submit a memorandum in support of
its affirmative defenses; after which the incident would be deemed submitted for
resolution. However, after TWA filed its Memorandum, the trial court gave the petitioners five
[12] [13]

days within which to file a reply memorandum; and TWA, two days from receipt of the latter to
file its comment thereon. The petitioners then filed their Opposition (by way of Reply
[14]

Memorandum) to which TWA filed a Reply. Thereafter, the petitioners submitted a Rejoinder ;
[15] [16] [17]

TWA, a Surrejoinder. [18]

On 24 July 1992, the trial court issued an Order dismissing the case for lack of jurisdiction
[19]

in light of Article 28(1) of the Warsaw Convention. Thus:

It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case because plaintiffs'
contract of transportation does not constitute "international transportation" as defined in said
convention. This however is belied by the Passenger Property Questionnaire which is Annex C of
plaintiffs' amended complaint. Page two of said questionnaire accomplished by plaintiffs under the
heading "Your Complete Itinerary" shows that the TWA tickets issued to the plaintiffs form part of the
contract of transportation to be performed from Manila to the United States. Since the Philippines and the
United States are parties to the convention, plaintiffs' contracts of transportation come within the
meaning of International Transportation.

...

On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to the case at
bar, even if the basis of plaintiffs' present action is breach of contract of carriage under the New Civil
Code.

The next question to be resolved is whether or not the Court has jurisdiction to try the present case in the
light of the provision of Art. 28(1) above-quoted.

Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted only in any of the
following places/courts:

(1) The court of the domicile of the carrier;

(2) The court of its principal place of business;
(3) The court where it has a place of business through which the contract had been made;
(4) The court of the place of destination.

In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in the same
case of Augusto Benedicto Santos vs. Northwest Airlines held:

"Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are
sharply divided. While the petitioner cites several cases holding that Article 28(1) refers to venue rather
that jurisdiction, there are later cases cited by the private respondent supporting the conclusion that the
provision is jurisdictional.

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or
waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action; but
the venue of an action as fixed by statute may be changed by the consent of the parties and an objection
that the plaintiff brought his suit in the wrong country may be waived by the failure of the defendant to
make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction
can never be left to the consent or agreement of the parties, whether or not a prohibition exists against
their alteration.
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a
venue provision. First, the wording of Article 32, which indicates the places where the action for
damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the objectives of the Convention, which is to "regulate in a
uniform manner the conditions of international transportation by air." Third, the Convention does not
contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the
phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last
sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as
"jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the
damage occurred.

...

It has been shown by the defendant that the domicile of the defendant Trans World Airlines, Inc. is
Kansas City, Missouri, its principal place of business is also in Kansas City, Missouri, the carrier's place
of business through which the contracts were made is Bangkok (Annexes A and A-1, Amended
Complaint), and the place of destination was Boston.

The Philippines not being one of the places specified in Art. 28(1) above-quoted where the complaint
may be instituted, this Court therefore, does not have jurisdiction over the present case.

Evidently discontented with the trial court's order, the petitioners appealed to the Court of
Appeals, contending that the lower court erred in not holding that (1) it has jurisdiction over the
instant case and (2) the Warsaw Convention is inapplicable in the instant case because the
subject matter of the case is not included within the coverage of the said convention. They [20]

claimed that their cause of action could be based on breach of contract of air carriage founded
on Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code governing common carriers
or Article 2176 of the same Code governing tort or quasi-delict.
The appellate court disagreed with the petitioners and affirmed the order of the trial court. It
held that the Warsaw Convention is the law which governs the dispute between the petitioners
and TWA because what is involved is international transportation defined by said Convention in
Article I(2). This holding is founded on its determination that the two TWA tickets for Los Angeles-
New York-Boston-St. Louis-Chicago purchased in Bangkok, Thailand, were issued in conjunction
with, and therefore formed part of, the contract of transportation performed from Manila,
Philippines, to the United States.
The respondent court further held that the cause of action of the petitioners arose from the
loss of the four checked pieces of baggage, which then falls under Article 18(1), Chapter III
(Liability of the Carrier) of the Warsaw Convention. Pursuant to Article 24(1) of the Convention,
[21]

all actions for damages, whether based on tort, code law or common law, arising from loss of
baggage under Article 18 of the Warsaw Convention, can only be brought subject to the
conditions and limits set forth in the Warsaw Convention. Article 28(1) thereof sets forth
conditions and limits in that the action for damages may be instituted only in the territory of one
of the High Contracting Parties, before the court of (1) the domicile of the carrier, (2) the carriers
principal place of business, (3) the place of business through which the contract has been made,
or (4) the place of destination. Since the Philippines is not one of these places, a Philippine Court,
like the RTC, has no jurisdiction over the complaint for damages.
 Respondent Court of Appeals likewise held that the petitioners could not claim application of
Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code on common carriers without
taking into consideration Article 1753 of the same Code, which provides that the law of the
country to which the goods are to be transported shall govern the liability of the common carrier
for their loss, destruction, or deterioration. Since the country of ultimate destination is Chicago,
the law of Chicago shall govern the liability of TWA for the loss of the four pieces of
baggage. Neither is Article 2176 of the New Civil Code on torts or quasi-delicts applicable in view
of the private international law principle of lex loci delicti commissi. In addition, comformably
[22]

with Santos III v. Northwest Orient Airlines, mere allegation of willful misconduct resulting in a
[23]

tort is insufficient to exclude the case from the comprehension of the Warsaw Convention.
Failing in their bid to reconsider the decision, the petitioners filed this petition. They aver that
respondent Court of Appeals gravely erred (1) in holding that the Warsaw Convention is
applicable to this case and (2) in applying Article 1753 of the Civil Code and the principle of lex
loci delicti commissi. [24]

We resolved to give due course to the petition after the filing by TWA of its Comment on the
petition and noted without action for the reasons stated in the resolution of 25 September 1996
petitioners Reply and Rejoinder. We then required the parties to submit their respective
memoranda. They did in due time.
The petitioners insist that the Warsaw Convention is not applicable to their case because the
contracts they had with TWA did not involve an international transportation. Whether the
contracts were of international transportation is to be solely determined from the TWA tickets
issued to them in Bangkok, Thailand, which showed that their itinerary was Los Angeles-New
York-Boston-St. Louis-Chicago. Accordingly, since the place of departure (Los Angeles) and the
place of destination (Chicago) are both within the territory of one High Contracting Party, with no
agreed stopping place in a territory subject to the sovereignty, mandate, suzerainty or authority
of another Power, the contracts did not constitute international transportation as defined by the
convention. They also claim to be without legal basis the contention of TWA that their
transportation contracts were of international character because of the handwritten notations in
the tickets re INTL TKT #079-4402956821-2 and INTL TKT #079-4402956819. Notwithstanding
such notations, the TWA tickets, viz., (a) No. 015.9475:153:304 and (b) No. 015:9475:153:305
did not cease to be for the itinerary therein designated. Besides, it is a fact that petitioners Purita
and Carmina Mapa traveled from Manila to Los Angeles via Philippine Airlines (PAL) by virtue of
PAL tickets issued independently of the TWA tickets.
The pith issue to be resolved under the petitioners first assigned error is whether the contracts
of transportation between Purita and Carmina Mapa, on the one hand, and TWA, on the other,
were contracts of international transportation under the Warsaw Convention. If they were, then
we should sustain the trial court and the Court of Appeals in light of our ruling in Santos v.
Northwest Orient Airlines. It appears clear to us that TWA itself, the trial court, and the Court of
[25]

Appeals impliedly admit that if the sole basis were the two TWA tickets for Los Angeles-New
York-Boston-St. Louis-Chicago, the contracts cannot be brought within the term international
transportation, as defined in Article I(2) of the Warsaw Convention. As provided therein, a
contract is one of international transportation only if

according to the contract made by the parties, the place of departure and the place of destination, whether
or not there be a break in the transportation or a transshipment, are situated either within the territories of
two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an
agreed stopping place within a territory subject to the sovereignty, mandate or authority of another
power, even though that power is not a party to this convention.

There are then two categories of international transportation, viz., (1) that where the place of
departure and the place of destination are situated within the territories of two High Contracting
Parties regardless of whether or not there be a break in the transportation or a transshipment;
and (2) that where the place of departure and the place of destination are within the territory of a
single High Contracting Party if there is an agreed stopping place within a territory subject to the
sovereignty, mandate, or authority of another power, even though the power is not a party to the
Convention.
The High Contracting Parties referred to in the Convention are the signatories thereto and
those which subsequently adhered to it. In the case of the Philippines, the Convention was
concurred in by the Senate, through Resolution No. 19, on 16 May 1950. The Philippine
instrument of accession was signed by President Elpidio Quirino on 13 October 1950 and was
deposited with the Polish Government on 9 November 1950. The Convention became applicable
to the Philippines on 9 February 1951. Then, on 23 September 1955, President Ramon
Magsaysay issued Proclamation No. 201, declaring the Philippines formal adherence thereto, to
the end that the same and every article and clause thereof may be observed and fulfilled in good
faith by the Republic of the Philippines and the citizens thereof. [26]

The contracts of transportation in this case are evidenced by the two TWA tickets, No.
015:9475:153:304 and No. 015:9475:153:305, both purchased and issued in Bangkok,
Thailand. On the basis alone of the provisions therein, it is obvious that the place of departure
and the place of destination are all in the territory of the United States, or of a single High
Contracting Party. The contracts, therefore, cannot come within the purview of the first category
of international transportation. Neither can it be under the second category since there was NO
agreed stopping place within a territory subject to the sovereignty, mandate, or authority of
another power.
The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and
TWA, on the other, within the first category of international transportation is to link them with, or
to make them an integral part of, the Manila-Los Angeles travel of Purita and Carmina through
PAL aircraft. The linkages which have been pointed out by the TWA, the trial court, and the Court
of Appeals are (1) the handwritten notations, viz., INTL TKT # 079-4402956821-2 and INTL TKT
# 079-4402956819, on the two TWA tickets; and (2) the entries made by petitioners Purita and
Carmina Mapa in column YOUR COMPLETE ITINERARY in TWAs Passenger Property
Questionnaire, wherein they mentioned their travel from Manila to Los Angeles in flight PR 102.
The alleged international tickets mentioned in the notations in conjunction with which the two
TWA tickets were issued were not presented. Clearly then, there is at all no factual basis of the
finding that the TWA tickets were issued in conjunction with the international tickets, which are
even, at least as of now, non-existent.
As regards the petitioners entry in YOUR COMPLETE ITINERARY column of the Passenger
Property Questionnaire wherein they included the Manila-Los Angeles travel, it must be pointed
out that this was made on 4 September 1990 by petitioners Purita and Carmina Mapa, and only
[27]

in connection with their claim for their lost pieces of baggage. The loss occurred much earlier, or
on 27 August 1990. The entry can by no means be considered as a part of, or supplement to,
their contracts of transportation evidenced by the TWA tickets which covered transportation
within the United States only.
 It must be underscored that the first category of international transportation under the
Warsaw Convention is based on the contract made by the parties. TWA does not claim that the
Manila-Los Angeles contracts of transportation which brought Purita and Carmina to Los Angeles
were also its contracts. It does not deny the assertion of the petitioners that those contracts
were independent of the TWA tickets issued in Bangkok, Thailand. No evidence was offered that
TWA and PAL had an agreement concerning transportation of passengers from points of
departures not served with aircrafts of one or the other. There could have been no difficulty for
such agreement, since TWA admitted without qualification in paragraph 1 of its Answer to the [28]

second Amended Complaint the allegation in paragraph 1.1 of the latter that TWA is a foreign
[29]

corporation licensed to do business in the Philippines with office address at Ground Floor, Saville
Building, Sen. Gil. J. Puyat Avenue, corner Paseo de Roxas, Makati, Metro Manila.
TWA relies on Article I(3) of the Convention, which provides as follows:
3. A carriage to be performed by several successive air carriers is deemed, for the purposes of this
Convention, to be one undivided carriage, if it has been regarded by the parties as a single operation,
whether it had 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.

It also points to Article 15 of the IATA Recommend Practice 1724, which provides: Carriage to
be performed by several successive carriers under one ticket, or under a ticket and any
conjunction ticket issued in connection therewith, is regarded as a single operation. [30]

The flaw of respondents position is the presumption that the parties have regarded as an
undivided carriage or as a single operation the carriage from Manila to Los Angeles through PAL
then to New York-Boston- St. Louis-Chicago through TWA. The dismissal then of the second
Amended Complaint by the trial court and the Court of Appeals affirmance of the dismissal were
not based on indubitable facts or grounds, but on inferences without established factual basis.
TWA should have offered evidence for its affirmative defenses at the preliminary hearing
therefor. Section 5 of Rule 16 of the Rules of Court expressly provides:

SEC. 5. Pleading grounds as affirmative defenses. -- Any of the grounds for dismissal provided for in
this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing
may be had thereon as if a motion to dismiss had been filed.

Without any further evidence as earlier discussed, the trial court should have denied the
affirmative defense of lack of jurisdiction because it did not appear to be indubitable. Section 3
of Rule 16 of the Rules of Court provides:

SEC. 3. Hearing and order. -- After hearing the court may deny or grant the motion or allow amendment
of pleading, or may defer the hearing and determination of the motion until the trial if the ground alleged
therein does not appear to be indubitable.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 31 May 1995
of respondent Court of Appeals in CA-G.R. CV No. 39896, as well as the Order of 24 July 1992
of the Regional Trial Court of Quezon City, Branch 102, in Civil Case No. Q-91-9620, is
REVERSED and SET ASIDE.
The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to proceed with
the pre-trial, if it has not been terminated, and with the trial on the merits of the case and then to
render judgment thereon, taking into account the foregoing observations on the issue of
jurisdiction.
SO ORDERED.
 THIRD DIVISION

[G.R. No. 116044-45. March 9, 2000]

AMERICAN AIRLINES, petitioner, vs. COURT OF APPEALS, HON. BERNARDO LL.

SALAS and DEMOCRITO MENDOZA, respondents. Oldmis o

DECISION

GONZAGA_REYES, J.:

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 courts order denying the petitioners 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
courts order striking off the record the deposition of the petitioners security officer taken in
Geneva, Switzerland for failure of the said security officer to answer the cross interrogatories
propounded by the private respondent. Ncm

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. It is undisputed that the
[1]

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 clearing house in Geneva. Ncmmis
[2]

In September 1989, private respondent filed an action for damages before the regional trial
court of Cebu for the alleged embarassment and mental anguish he suffered at the Geneva
Airport when the petitioners 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 that 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. Scnc m

Both parties filed simultaneous memoranda pursuant to the resolution of this Court giving due
course to the petition.

The petitioners 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 carriers 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 petitioners own ticket in Geneva in exchange for the
conjunction ticket issued by Singapore Airlines for the final leg of the private respondents 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 respondents 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. Sdaa miso

Private respondent controverts the applicability of the Warsaw Convention in this case. He
posits that under Article 17 of the Warsaw Convention a carrier may be held liable for
[3]

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) thereof the provisions of the
[4]

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 respondents 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. Sdaad

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. As enumerated in the
[5]

Preamble of the Convention, one of the objectives is "to regulate in a uniform manner the
conditions of international transportation by air". The contract of carriage entered into by the
[6]

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. This includes
[7]

section 28 (1) which enumerates the four places where an action for damages may be
brought. Scs daad

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. The [8]

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 and that the employees of the
[9]

petitioner airline acted with malice and bad faith under Art 25 (1) pertain to the merits of the
[10]

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: Sup rema

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 respondents 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. Petitioners 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 petitioners argument without merit. Juris

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." Sc juris

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
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 to [11]

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
[12]

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
[13]

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 petitioners
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
[14]

the principal carrier the petitioners 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 provisions 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. Petitioners
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. Juris sc

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 petitioners 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 should be deemed as full compliance
[15]

with the requisites of the right of the private respondent to cross-examine the petitioners
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 petitioners
security officer is reinstated as part of the evidence. Misj uris

SO ORDERED.
 SECOND DIVISION

[G.R. No. 127768. November 19, 1999]

UNITED AIRLINES, petitioner, vs. WILLIE J. UY, respondent.

DECISION
BELLOSILLO, J.:

UNITED AIRLINES assails in this petition for review on certiorari under Rule 45 the 29 August 1995
Decision of the Court of Appeals in CA-G.R. CV No. 39761 which reversed the 7 August 1992 order
issued by the trial court in Civil Case No. Q-92-12410[1] granting petitioner's motion to dismiss based on
prescription of cause of action. The issues sought to be resolved are whether the notice of appeal to the
appellate court was timely filed, and whether Art. 29 of the Warsaw Convention[2] should apply to the case
at bar.
On 13 October 1989 respondent Willie J. Uy, a revenue passenger on United Airlines Flight No. 819
for the San Francisco - Manila route, checked in together with his luggage one piece of which was found
to be overweight at the airline counter. To his utter humiliation, an employee of petitioner rebuked him
saying that he should have known the maximum weight allowance to be 70 kgs. per bag and that he should
have packed his things accordingly. Then, in a loud voice in front of the milling crowd, she told respondent
to repack his things and transfer some of them from the overweight luggage to the lighter ones. Not wishing
to create further scene, respondent acceded only to find his luggage still overweight. The airline then billed
him overweight charges which he offered to pay with a miscellaneous charge order (MCO) or an airline
pre-paid credit. However, the airlines employee, and later its airport supervisor, adamantly refused to honor
the MCO pointing out that there were conflicting figures listed on it. Despite the explanation from
respondent that the last figure written on the MCO represented his balance, petitioners employees did not
accommodate him. Faced with the prospect of leaving without his luggage, respondent paid the overweight
charges with his American Express credit card.
Respondents troubles did not end there. Upon arrival in Manila, he discovered that one of his bags had
been slashed and its contents stolen. He particularized his losses to be around US $5,310.00. In a letter
dated 16 October 1989 respondent bewailed the insult, embarrassment and humiliating treatment he
suffered in the hands of United Airlines employees, notified petitioner of his loss and requested
reimbursement thereof. Petitioner United Airlines, through Central Baggage Specialist Joan Kroll, did not
refute any of respondents allegations and mailed a check representing the payment of his loss based on the
maximum liability of US $9.70 per pound. Respondent, thinking the amount to be grossly inadequate to
compensate him for his losses, as well as for the indignities he was subjected to, sent two (2) more letters
to petitioner airline, one dated 4 January 1990 through a certain Atty. Pesigan, and another dated 28
October 1991 through Atty. Ramon U. Ampil demanding an out-of-court settlement
of P1,000,000.00. Petitioner United Airlines did not accede to his demands.
Consequently, on 9 June 1992 respondent filed a complaint for damages against United Airlines
alleging that he was a person of good station, sitting in the board of directors of several top 500 corporations
and holding senior executive positions for such similar firms;[3] that petitioner airline accorded him ill and
shabby treatment to his extreme embarrassment and humiliation; and, as such he should be paid moral
damages of at least P1,000,000.00, exemplary damages of at least P500,000.00, plus attorney's fees of at
least P50,000.00. Similarly, he alleged that the damage to his luggage and its stolen contents amounted to
around $5,310.00, and requested reimbursement therefor.
United Airlines moved to dismiss the complaint on the ground that respondents cause of action had
prescribed, invoking Art. 29 of the Warsaw Convention which provides -

Art. 29 (1) The right to damages shall be extinguished if an action is not brought within two (2) years,
reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have
arrived, or from the date on which the transportation stopped.

(2) The method of calculating the period of limitation shall be determined by the law of the court to
which the case is submitted.

Respondent countered that par. (1) of Art. 29 of the Warsaw Convention must be reconciled with par.
(2) thereof which states that "the method of calculating the period of limitation shall be determined by the
law of the court to which the case is submitted." Interpreting thus, respondent noted that according to
Philippine laws the prescription of actions is interrupted "when they are filed before the court, when there
is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the
debt by the debtor."[4] Since he made several demands upon United Airlines: first, through his personal
letter dated 16 October 1989; second, through a letter dated 4 January 1990 from Atty. Pesigan;
and, finally, through a letter dated 28 October 1991 written for him by Atty. Ampil, the two (2)-year period
of limitation had not yet been exhausted.
On 2 August 1992 the trial court ordered the dismissal of the action holding that the language of Art.
29 is clear that the action must be brought within two (2) years from the date of arrival at the destination. It
held that although the second paragraph of Art. 29 speaks of deference to the law of the local court in
"calculating the period of limitation," the same does not refer to the local forums rules in interrupting the
prescriptive period but only to the rules of determining the time in which the action may be deemed
commenced, and within our jurisdiction the action shall be deemed "brought" or commenced by the filing
of a complaint. Hence, the trial court concluded that Art. 29 excludes the application of our interruption
rules.
Respondent received a copy of the dismissal order on 17 August 1992. On 31 August 1992, or fourteen
(14) days later, he moved for the reconsideration of the trial courts order. The trial court denied the motion
and respondent received copy of the denial order on 28 September 1992. Two (2) days later, on 1 October
1992 respondent filed his notice of appeal.
United Airlines once again moved for the dismissal of the case this time pointing out that respondents
fifteen (15)-day period to appeal had already elapsed. Petitioner argued that having used fourteen (14) days
of the reglementary period for appeal, respondent Uy had only one (1) day remaining to perfect his appeal,
and since he filed his notice of appeal two (2) days later, he failed to meet the deadline.
In its questioned Decision dated 29 August 1995 [5] the appellate court gave due course to the appeal
holding that respondents delay of two (2) days in filing his notice of appeal did not hinder it from reviewing
the appealed order of dismissal since jurisprudence dictates that an appeal may be entertained despite
procedural lapses anchored on equity and justice.
On the applicability of the Warsaw Convention, the appellate court ruled that the Warsaw Convention
did not preclude the operation of the Civil Code and other pertinent laws. Respondents failure to file his
complaint within the two (2)-year limitation provided in the Warsaw Convention did not bar his action
since he could still hold petitioner liable for breach of other provisions of the Civil Code which prescribe
a different period or procedure for instituting an action. Further, under Philippine laws, prescription of
actions is interrupted where, among others, there is a written extrajudicial demand by the creditors, and
since respondent Uy sent several demand letters to petitioner United Airlines, the running of the two (2)-
year prescriptive period was in effect suspended. Hence, the appellate court ruled that respondents cause
of action had not yet prescribed and ordered the records remanded to the Quezon City trial court for further
proceedings.
Petitioner now contends that the appellate court erred in assuming jurisdiction over respondent's appeal
since it is clear that the notice of appeal was filed out of time. It argues that the courts relax the stringent
rule on perfection of appeals only when there are extraordinary circumstances, e.g., when the Republic
stands to lose hundreds of hectares of land already titled and used for educational purposes; when the
counsel of record was already dead; and wherein appellant was the owner of the trademark for more than
thirty (30) years, and the circumstances of the present case do not compare to the above exceptional cases.[6]
Section 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that "a party may appeal by
certiorari, from a judgment of the Court of Appeals, by filing with the Supreme Court a petition for
certiorari, within fifteen (15) days from notice of judgment or of the denial of his motion for
reconsideration filed in due time x x x x" This Rule however should not be interpreted as "to sacrifice the
substantial right of the appellant in the sophisticated altar of technicalities with impairment of the sacred
principles of justice."[7] It should be borne in mind that the real purpose behind the limitation of the period
of appeal is to forestall or avoid an unreasonable delay in the administration of justice. Thus, we have ruled
that delay in the filing of a notice of appeal does not justify the dismissal of the appeal where the
circumstances of the case show that there is no intent to delay the administration of justice on the part of
appellant's counsel,[8] or when there are no substantial rights affected,[9] or when appellant's counsel
committed a mistake in the computation of the period of appeal, an error not attributable to negligence or
bad faith.[10]
In the instant case, respondent filed his notice of appeal two (2) days later than the prescribed
period. Although his counsel failed to give the reason for the delay, we are inclined to give due course to
his appeal due to the unique and peculiar facts of the case and the serious question of law it poses. In the
now almost trite but still good principle, technicality, when it deserts its proper office as an aid to justice
and becomes its great hindrance and chief enemy, deserves scant consideration.[11]
Petitioner likewise contends that the appellate court erred in ruling that respondent's cause of action
has not prescribed since delegates to the Warsaw Convention clearly intended the two (2)-year limitation
incorporated in Art. 29 as an absolute bar to suit and not to be made subject to the various tolling provisions
of the laws of the forum.Petitioner argues that in construing the second paragraph of Art. 29 private
respondent cannot read into it Philippine rules on interruption of prescriptive periods and state that his
extrajudicial demand has interrupted the period of prescription.[12] American jurisprudence has declared
that "Art. 29 (2) was not intended to permit forums to consider local limitation tolling provisions but only
to let local law determine whether an action had been commenced within the two-year period, since the
method of commencing a suit varies from country to country."[13]
Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored,
depending on the peculiar facts presented by each case. [14] Thus, we have ruled that the Convention's
provisions do not regulate or exclude liability for other breaches of contract by the carrier or misconduct
of its officers and employees, or for some particular or exceptional type of damage. [15] Neither may the
Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond the limits set by said Convention.[16] Likewise, we have
held that the Convention does not preclude the operation of the Civil Code and other pertinent laws. [17] It
does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its
passengers under the contract of carriage, especially if willful misconduct on the part of the carrier's
employees is found or established.[18]
Respondent's complaint reveals that he is suing on two (2) causes of action: (a) the shabby and
humiliating treatment he received from petitioner's employees at the San Francisco Airport which caused
him extreme embarrassment and social humiliation; and, (b) the slashing of his luggage and the loss of his
personal effects amounting to US $5,310.00.
While his second cause of action - an action for damages arising from theft or damage to property or
goods - is well within the bounds of the Warsaw Convention, his first cause of action -an action for
damages arising from the misconduct of the airline employees and the violation of respondent's rights as
passenger - clearly is not.
Consequently, insofar as the first cause of action is concerned, respondent's failure to file his complaint
within the two (2)-year limitation of the Warsaw Convention does not bar his action since petitioner airline
may still be held liable for breach of other provisions of the Civil Code which prescribe a different period
or procedure for instituting the action, specifically, Art. 1146 thereof which prescribes four (4) years for
filing an action based on torts.
As for respondent's second cause of action, indeed the travaux preparatories of the Warsaw
Convention reveal that the delegates thereto intended the two (2)-year limitation incorporated in Art. 29 as
an absolute bar to suit and not to be made subject to the various tolling provisions of the laws of the
forum. This therefore forecloses the application of our own rules on interruption of prescriptive
periods. Article 29, par. (2), was intended only to let local laws determine whether an action had been
commenced within the two (2)-year period, and within our jurisdiction an action shall be deemed
commenced upon the filing of a complaint. Since it is indisputable that respondent filed the present action
beyond the two (2)-year time frame his second cause of action must be barred. Nonetheless, it cannot be
doubted that respondent exerted efforts to immediately convey his loss to petitioner, even employed the
services of two (2) lawyers to follow up his claims, and that the filing of the action itself was delayed
because of petitioner's evasion.
In this regard, Philippine Airlines, Inc. v. Court of Appeals[19] is instructive. In this case of PAL, private
respondent filed an action for damages against petitioner airline for the breakage of the front glass of the
microwave oven which she shipped under PAL Air Waybill No. 0-79-1013008-3. Petitioner averred that,
the action having been filed seven (7) months after her arrival at her port of destination, she failed to
comply with par. 12, subpar. (a) (1), of the Air Waybill which expressly provided that the person entitled
to delivery must make a complaint to the carrier in writing in case of visible damage to the goods,
immediately after discovery of the damage and at the latest within 14 days from receipt of the
goods. Despite non-compliance therewith the Court held that by private respondent's immediate
submission of a formal claim to petitioner, which however was not immediately entertained as it was
referred from one employee to another, she was deemed to have substantially complied with the
requirement. The Court noted that with private respondent's own zealous efforts in pursuing her claim it
was clearly not her fault that the letter of demand for damages could only be filed, after months of
exasperating follow-up of the claim, on 13 August 1990, and that if there was any failure at all to file the
formal claim within the prescriptive period contemplated in the Air Waybill, this was largely because of
the carrier's own doing, the consequences of which could not in all fairness be attributed to private
respondent.
In the same vein must we rule upon the circumstances brought before us. Verily, respondent filed his
complaint more than two (2) years later, beyond the period of limitation prescribed by the Warsaw
Convention for filing a claim for damages. However, it is obvious that respondent was forestalled from
immediately filing an action because petitioner airline gave him the runaround, answering his letters but
not giving in to his demands. True, respondent should have already filed an action at the first instance
when his claims were denied by petitioner but the same could only be due to his desire to make an out-of-
court settlement for which he cannot be faulted. Hence, despite the express mandate of Art. 29 of the
Warsaw Convention that an action for damages should be filed within two (2) years from the arrival at the
place of destination, such rule shall not be applied in the instant case because of the delaying tactics
employed by petitioner airline itself. Thus, private respondent's second cause of action cannot be
considered as time-barred under Art. 29 of the Warsaw Convention.
WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside the appealed
order of the trial court granting the motion to dismiss the complaint, as well as its Resolution denying
reconsideration, is AFFIRMED. Let the records of the case be remanded to the court of origin for further
proceedings taking its bearings from this disquisition.
SO ORDERED.