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LAWS ON TRANSPORTATION

CARRIAGE OF PASSENGERS
[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;

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(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

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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.

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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.

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Hence, this Petition.[6]

The Issues

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

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.

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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]

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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.

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[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.

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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]

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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

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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.

[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[1] of the Court of Appeals
in CA-G.R. CV No. 54354 affirming with modification the Decision[2] of the Regional Trial Court, 7th Judicial Region,
Cebu City, Branch 20, in Civil Case 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.[3] Pedrano left his helper, Jose Mitante, Jr. to keep watch over
the stalled vehicle, and instructed the latter to place a spare tire six fathoms away[4] behind the stalled truck to serve
as a warning for oncoming vehicles. The trucks tail lights 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.[5] He
applied the breaks and tried to swerve to the left to avoid hitting the truck. 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.[6] His wife, Felisa, was brought to the Danao City Hospital.
She was 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.[8] Thus:

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
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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[11] on August 21, 1987 against the 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;

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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.[13] It could not accede to the
claim of respondent Arriesgado, as such claim was way 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]

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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.[16] It 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

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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.

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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.[20] Factual findings of the 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.[21] The petitioners in this case assail the 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.[23] He
also admitted that he saw the truck which was parked in an oblique position at about 25 meters before impact,[24] and
tried to avoid hitting it by swerving to the left. However, even in the absence of expert evidence, the damage sustained
by the truck[25] itself 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.[26] Instinct, at the very least, would have prompted him to apply the breaks to avert the

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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.[29] And, as
correctly pointed out by the 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

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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,[32] 1755[33] and 1756.[34] In this case, respondent Arriesgado 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.[35] It is undisputed that the respondent and his wife were not safely
transported to the 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.[36] This is because under the said 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.[37] Any injury suffered by the passengers in the course thereof is
immediately attributable to the negligence of the carrier.[38] Upon the happening of the accident, the 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.[39] It must be stressed that 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.[41] As correctly found by the trial court, 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.[43] The common law notion
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

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Negligent

In Phoenix Construction, Inc. v. Intermediate Appellate Court,[45] where therein respondent 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.[49] Hence, we cannot subscribe to
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]

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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[51] issued
in favor of Mr. William Tiu, 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 BODY

COLOR

BLT FILE NO.

Isuzu Forward

Bus

blue mixed

PLATE NO. PBP-724

SERIAL/CHASSIS NO. SER450-1584124

MOTOR NO. 677836

AUTHORIZED CAPACITY 50

UNLADEN WEIGHT 6Cyls. Kgs.

SECTION 1/11

*LIMITS OF LIABILITY P50,000.00

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PREMIUMS PAID

A. THIRD PARTY LIABILITY

B. PASSENGER LIABILITY

Per Person P12,000.00

Per Accident P50,000

P540.0052

In its Answer53 to the Third-Party Complaint, the respondent PPSII admitted the existence of 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,54
which reads:

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 Memorandum56 before
the Court, 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

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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.58 The respondent PPSII could not then just deny petitioner Tius claim; it should have paid
P12,000 for the death of Felisa Arriesgado,59 and respondent Arriesgados 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,60 would not exceed the
P50,000 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.61 As the Court, speaking through Associate
Justice Leonardo 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,64 is likewise in order. As the Court
ratiocinated in Kapalaran Bus Line v. 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

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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.
[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

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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[2] dismissing the action for lack of 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[3]
that a tire blowout is a mechanical 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[4] of the Civil Code.

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,[5] and Necesito v. Paras.[6]

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

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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.[8] However, upon such re-examination, we found no reason to overturn the
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.[9] However, 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,[10] 1755 and 1756 of the Civil Code or that the death
or injury of the passenger was due to a fortuitous event.[11] Consequently, the court need 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

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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.[13] As Article 1174 provides, no person shall
be responsible for a 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.[16]
This Court has had occasion to state:

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[19] in relation to Article 2206[20] of the Civil Code
prescribes the amount of at least three thousand pesos as 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,[22] as
in this case. Exemplary damages, awarded by way of example or correction for the public good when moral damages
are awarded,[23] may likewise be recovered in contractual obligations if the defendant acted in wanton, fraudulent,
reckless, oppressive, or malevolent manner.[24] Because petitioners failed to exercise the extraordinary diligence

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

[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
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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

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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.

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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

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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]

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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.

[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,[1] dated 27 February 1992, affirming 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.

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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

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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[6] although noncontradictory
principles on quasi-delict may then be assimilated as also forming 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[7] is simple and explicit; viz:

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(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,[8] now Chief Justice Andres R. Narvasa, speaking for the Court, has explained it well;
he said:

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

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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,[9] including moral and exemplary damages.[10]

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

SO ORDERED.

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
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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.

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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.11 As a
rule, factual findings of the trial court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal.

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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

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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:

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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.

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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.

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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.

[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.:

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

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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.[2] In
case of death or injuries to 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.

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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.[3] This requires that the following requirements be 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.[4] Petitioner should have foreseen the danger of parking his jeepney with its body 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."

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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.[5] As an exception, such damages are
recoverable: (1) in cases in which the mishap 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.

[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[1] of the Court of Appeals which affirmed in toto the
decision[2] of the Regional Trial Court of Pasig City, Branch 164 in Civil Case 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.[4] It was
necessary for the respondent to pass by Manila in order to gather her wardrobe; and to rehearse and coordinate with
her pianist her repertoire for the aforesaid performance.
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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.[7] Her pleas for the respondent to make arrangements to transport
her to Manila were unheeded.[8]

The respondent then requested the lady employee to use their phone to make a call to Manila. Over the employees
reluctance, the respondent telephoned her mother to inform the latter that she missed the connecting flight. The
respondent was able to contact a family friend who picked her up from the airport for her overnight stay in Singapore.[9]

The next day, after being brought back to the airport, the respondent proceeded to 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;

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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:

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.[16] The delay was even compounded when the plane could not travel the normal route which was
through the Middle East due to the raging Gulf War at that time. It had to pass through the restricted Russian airspace
which was more congested.[17]

Under these circumstances, petitioner therefore alleged that it cannot be faulted for the delay in arriving in Singapore
on January 28, 1991 and causing the respondent to miss her connecting flight to Manila.

The petitioner further contends that it could not also be held in bad faith because its personnel did their best to look
after the needs and interests of the passengers including the respondent. Because the respondent and the other 25
passengers missed their connecting flight to Manila, the petitioner automatically booked them to the flight the next day
and gave them free hotel accommodations for the night. It was respondent who did not take 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]

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The petition is barren of merit.

When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage
arises. The passenger then has every right to expect that he be transported on that flight and on that date. If he does
not, then the carrier opens itself to a suit for a breach of contract of carriage.[19]

The contract of air carriage is a peculiar one. Imbued with public interest, the law requires common carriers to carry
the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious
persons with due regard for all the circumstances.[20] In an action for breach of contract of carriage, the aggrieved
party does not have to prove that the common carrier was at fault or was negligent. All that is necessary to prove is the
existence of the contract and the fact of its non-performance by the carrier.[21]

In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip from Frankfurt
to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage with the petitioner, the
respondent certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28, 1991. Since the petitioner
did not transport the respondent as covenanted by it on said terms, the petitioner clearly breached its contract of
carriage with the respondent. The respondent had every right to sue the petitioner for this breach. The defense that the
delay was due to fortuitous events and beyond petitioners control is unavailing. In PAL vs. CA,[22] we held that:

.... 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

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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.[25] For petitioners failure to bring the respondent to her destination, as scheduled, we find the petitioner clearly
liable for the breach of its contract of carriage with the respondent.

We are convinced that the petitioner acted in bad faith. Bad faith means a breach of known duty through some motive
of interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may well have been the motive; but it
is malice nevertheless.[26] Bad faith was imputed by the trial court when it found that the 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

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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.

[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.

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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

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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.

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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.

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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.

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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.

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[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[1] and 11 January 1998 Resolution[2] of the
Court of Appeals holding private respondent Claudia Tagunicar solely liable 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:

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"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

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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

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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.,[4] as "that which, 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.[6] where the
trial court, after summarizing 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.[7] The elements of agency are: (1)
consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act

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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.[8] It is a settled rule that persons dealing with an assumed agent are bound at their 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.[10] Further, 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.[11] Respondent Tagunicar testified that her affidavit
was prepared and 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.[12] The circumstances under which said
affidavit was prepared put in doubt 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.[13] They never told her that the affidavit would be used in a case to be filed
against her.[14] They even assured her that she would not be included as defendant if she agreed to execute the
affidavit.[15] Respondent Tagunicar was prevailed upon 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"[16] and
that "if we file a suit against you we cannot get anything from you."[17] This purported admission of 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.[18] In addition,
as between the 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,[19] failing in which, their 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.[20] We have 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"[22] is 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"[23] is a listing of the routes
taken by passengers who were audited to TWSIs sales report. Exhibit "8"[24] is a receipt issued by TWSI covering the
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.[25] From all sides
of the legal prism, the 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

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subsidiarily liable to pay said amounts to plaintiffs."[26] This lends credence to respondent Tagunicars testimony that
she 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?

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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."[28] (emphasis supplied)

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.[29] Nor was a demand letter sent to respondent Pan Am. 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.[30] The settled rule is that the 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.[31] In the 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.[32] we ruled that there was a valid and binding contract
between the airline and its passenger 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.[33] where a would-be-passenger had 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.,[34]
we upheld 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.,[35] we held 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.,[36] where a confirmed passenger included in the manifest was denied accommodation in such flight.
Scmis

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

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"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"[38] shows that the status of the San
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."[39] This was 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.[41] This is clear proof that petitioners knew that they might be bumped off 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.

[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.
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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

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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]

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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

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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.

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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.

[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:

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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?

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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?

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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.

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SO ORDERED.

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

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Narita.17 His pleas were ignored. He was then constrained to go out of the plane.18 In 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

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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

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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 EXCESSIVE AND UNPRECEDENTED.

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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.

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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.63
Respondent 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

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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.

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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.

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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

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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.

[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.
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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

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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[1] of 19 October 1998, the trial court found for the Vazquezes and decreed as follows:

WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby rendered in
favor of plaintiffs Vazquez spouses and against defendant Cathay Pacific Airways, Ltd., ordering the latter to pay each
plaintiff the following:

a) Nominal damages in the amount of P100,000.00 for each plaintiff;

b) Moral damages in the amount of P2,000,000.00 for each plaintiff;

c) Exemplary damages in the amount of P5,000,000.00 for each plaintiff;

d) Attorneys fees and expenses of litigation in the amount of P1,000,000.00 for each plaintiff; and

e) Costs of suit.

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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,[2] deleted the award for exemplary
damages; and it reduced the awards for moral and nominal damages for each of the Vazquezes to P250,000 and
P50,000, respectively, and the 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[3]
where we recognized that, in accordance with the 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.

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The key issues for our consideration are whether (1) by upgrading the seat accommodation of the Vazquezes from
Business Class to First Class Cathay breached its contract of carriage with the Vazquezes; (2) the upgrading was
tainted with fraud or bad faith; and (3) the Vazquezes are entitled to damages.

We resolve the first issue in the affirmative.

A contract is a meeting of minds between two persons whereby one agrees to give something or render some service
to another for a consideration. There is no contract unless the following requisites concur: (1) consent of the contracting
parties; (2) an object certain which is the subject of the contract; and (3) the cause of the obligation which is
established.[4] Undoubtedly, a contract of carriage existed between Cathay and the Vazquezes. They voluntarily and
freely gave their consent to an agreement whose object was the transportation of the Vazquezes from Manila to Hong
Kong and back to Manila, with seats in the Business Class Section of the aircraft, and whose cause or consideration
was the fare paid by the Vazquezes to Cathay.

The only problem is the legal effect of the upgrading of the seat accommodation of the Vazquezes. Did it constitute a
breach of contract?

Breach of contract is defined as the failure without legal reason to comply with the terms of a contract.[5] It is also
defined as the [f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract.[6]

In previous cases, the breach of contract of carriage consisted in either the bumping off of a passenger with confirmed
reservation or the downgrading of a 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.

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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.[9] Needless
to state, an upgrading is for the better condition and, definitely, for the benefit of the passenger.

We are not persuaded by the Vazquezes argument that the overbooking of the Business Class Section constituted bad
faith on the part of Cathay. Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board, as amended,
provides:

Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of flights
or portions of flights originating from or terminating at, or serving a point within the territory of the Republic of the
Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines,
for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only honest mistakes
on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided, however, that
overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful
act of non-accommodation.

It is clear from this section that an overbooking that does not exceed ten percent is not considered deliberate and
therefore does not amount to bad faith.[10] Here, while there was admittedly an overbooking of the Business Class,
there was no evidence of overbooking of the plane beyond ten percent, and no passenger was ever bumped off or was
refused to board the aircraft.

Now we come to the third issue on damages.

The Court of Appeals awarded each of the Vazquezes moral damages in the amount of P250,000. Article 2220 of the
Civil Code provides:

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

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Although incapable of pecuniary computation, moral

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damages may be recovered if they are the proximate result of the defendants wrongful act or omission.[11] Thus, case
law establishes the following requisites for the award of moral damages: (1) there must be an injury clearly sustained
by the claimant, whether physical, mental or psychological; (2) there must be a culpable act or omission factually
established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the
claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219 of the Civil Code.[12]

Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the carrier
is guilty of fraud or bad faith or where the mishap resulted in the death of a passenger.[13] Where in breaching the
contract of carriage the airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to
the natural and probable consequences of the breach of the obligation which the parties had foreseen or could have
reasonably foreseen. In such a case the liability does not include moral and exemplary damages.[14]

In this case, we have ruled that the breach of contract of carriage, which consisted in the involuntary upgrading of the
Vazquezes seat accommodation, was not attended by fraud or bad faith. The Court of Appeals award of moral damages
has, therefore, no leg to stand on.

The deletion of the award for exemplary damages by the Court of Appeals is correct. It is a requisite in the grant of
exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent or
malevolent manner.[15] Such requisite is absent in this case. Moreover, to be entitled thereto the claimant must first
establish his right to moral, temperate, or compensatory damages.[16] Since the Vazquezes are not entitled to any of
these damages, the award for exemplary damages has no legal basis. And where the awards for moral and exemplary
damages are eliminated, so must the award for 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:

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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.

[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[1] affirming with modification[2]
the decision of the trial court,[3] ordering respondent to pay 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.
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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]

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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]

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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.

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.

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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.

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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:

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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.

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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.

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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.

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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

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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.

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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:

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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.

[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.

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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.:

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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

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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

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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?

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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 x9

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

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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,

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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:

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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.

[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[1] which
affirmed the decision of the lower court[2] finding petitioner Philippine Air 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:

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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 Francisco
inspected 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.[6] Consequently, petitioner now impugns
respondent appellate courts ruling insofar as 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

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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.[7] in finding
that the provisions of the air waybill should be strictly construed 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.[12] As explained in Ong Yiu vs.
Court of Appeals, et al., supra:

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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:

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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.,[15] which 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]

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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,[22] as well as during the preparation of the air waybill by PALs Acceptance Personnel based on information
supplied by the shipper,[23] and to reject the cargo if the contents or the packing did not meet the companys 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,[24] which by itself 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.

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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]

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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.[28] As 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[29] on which was duly annotated the damage sustained by the oven.[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

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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

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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[32]
and the referral to and extended pendency of the private respondents 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:

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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,[34] 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 August 13, 1990.[35] 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 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.[37] The provisions therein contained, specifically
on the limitation of carriers liability, are 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:

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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.

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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.[45] The equally unexplained and inordinate delay in
acting on the claim upon referral 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[46] and renders unquestionable
petitioners liability for 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.

[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.

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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).

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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

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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.

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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:

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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.

[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,[1] which provides as follows:

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[2] affirming the 24 July 1992 Order of the Regional Trial Court of Quezon City, Branch 102, which dismissed
Civil Case No. Q-91-9620[3] on the ground of lack of jurisdiction 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

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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.

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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[5] for damages,[6] which was docketed as Civil Case No. Q-91-9620. Before a responsive pleading
was filed, the petitioners filed an Amended Complaint.[7] They prayed that after due trial private respondent Trans-
World Airlines, Inc. (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[10] to include a 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.

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After the filing of TWAs Answer to the second Amended Complaint,[11] and petitioners Reply 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.[12] However, after TWA filed its Memorandum,[13] the trial court gave the
petitioners five days within which to file a reply memorandum; and TWA, two days from receipt of the latter to file its
comment thereon.[14] The petitioners then filed their Opposition (by way of Reply Memorandum)[15] to which TWA
filed a Reply.[16] Thereafter, the petitioners submitted a Rejoinder[17]; TWA, a Surrejoinder.[18]

On 24 July 1992, the trial court issued an Order[19] dismissing the case for lack of jurisdiction 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.

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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.[20] They 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.[21] Pursuant to Article 24(1) of the Convention, 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

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commissi.[22] In addition, comformably with Santos III v. Northwest Orient Airlines,[23] mere allegation of willful
misconduct resulting in a 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.[25] It appears clear to us that TWA itself, the trial court, and the Court of
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.

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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[27] by petitioners Purita and Carmina Mapa, and only 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[28] to the second Amended Complaint the allegation in paragraph 1.1 of the
latter[29] that TWA is a foreign 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]

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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.
[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.[1] It is undisputed that the private respondent purchased from Singapore Airlines in Manila

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conjunction tickets for Manila - Singapore - Athens - Larnaca - Rome - Turin - Zurich - Geneva - Copenhagen - New
York. The petitioner was not a participating airline in any of the segments in the itinerary under the said conjunction
tickets. In Geneva the petitioner decided to forego his trip to Copenhagen and to go straight to New York and in the
absence of a direct flight under his conjunction tickets from Geneva to New York, the private respondent on June 7,
1989 exchanged the unused portion of the conjunction ticket for a one-way ticket from Geneva to New York from the
petitioner airline. Petitioner issued its own ticket to the private respondent in Geneva and claimed the value of the
unused portion of the conjunction ticket from the IATA[2] clearing house in Geneva. Ncmmis

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[3] a carrier may be held liable for damages if the "accident" occurred on board the airline or
in the course of "embarking or disembarking" from the carrier and that under Article 25 (1)[4] thereof the provisions of

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the convention will not apply if the damage is caused by the "willful misconduct" of the carrier. He argues that his cause
of action is based on the incident at the pre-departure area of the Geneva airport and not during the process of
embarking nor disembarking from the carrier and that security officers of the petitioner airline acted in bad faith.
Accordingly, this case is released from the terms of the Convention. Private respondent argues that assuming that the
convention applies, his trip to nine cities in different countries performed by different carriers under the conjunction
tickets issued in Manila by Singapore Airlines is regarded as a single transaction; as such the final leg of his trip from
Geneva to New York with the petitioner airline is part and parcel of the original contract of carriage perfected in Manila.
Thus, the third option of the plaintiff under Art. 28 (1) e.g., where the carrier has a place of business through which the
contract of carriage was made, applies herein and the case was properly filed in the Philippines. The private respondent
seeks affirmance of the ruling of the lower courts that the petitioner acted as an agent of Singapore Airlines under the
IATA Rules and as an agent of the principal carrier the petitioner may be held liable under the contract of carriage
perfected in Manila, citing the judicial admission made by the petitioner that it claimed the value of the unused portion
of the private 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.[5] As enumerated in the Preamble of the Convention, one of the objectives is "to regulate in a
uniform manner the conditions of international transportation by air".[6] The contract of carriage entered into by the
private respondent with Singapore Airlines, and subsequently with the petitioner, to transport him to nine cities in
different countries with New York as the final destination is a contract of international transportation and the provisions
of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its
passengers.[7] This includes section 28 (1) which enumerates the four places where an action for damages may be
brought. 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.[8] The objections raised by the private
respondent that this case is released from the terms of the Convention because the incident on which this action is
predicated did not occur in the process of embarking and disembarking from the carrier under Art 17[9] and that the
employees of the petitioner airline acted with malice and bad faith under Art 25 (1)[10] pertain to the merits of the case
which may be examined only if the action has first been properly commenced under the rules on jurisdiction set forth
in Art. 28 (1).

Art (28) (1) of the Warsaw Convention states: 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.

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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[11]
to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to
airlines which are otherwise inaccessible in some parts of the world. Booking and reservation among airline members
are allowed even by telephone and it has become an accepted practice among them.[12] A member airline which
enters into a contract of carriage consisting of a series of trips to be performed by different carriers is authorized to
receive the fare for the whole trip and through the required process of interline settlement of accounts by way of the
IATA clearing house an airline is duly compensated for the segment of the trip serviced.[13] Thus, when the petitioner
accepted the unused portion of the conjunction tickets, entered it in the IATA clearing house and undertook to transport
the private respondent over the route covered by the unused portion of the conjunction tickets, i.e., Geneva to New
York, the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as agent of the principal
contracting airline, Singapore Airlines, as to the segment of the trip the petitioner agreed to undertake. As such, the
petitioner thereby assumed the obligation to take the place of the carrier originally designated in the original conjunction
ticket. The 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.[14] By constituting itself as an agent of 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

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respondent does not have to be resolved. The subsequent appearance of the said security officer before the Philippine
consul in Geneva on September 19, 1994 and the answer to the cross-interrogatories propounded by the private
respondent was transmitted to the trial court by the Philippine consul in Geneva on September 23, 1994[15] should be
deemed as full compliance with the requisites of the right of the private respondent to cross-examine the 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.
[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.

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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.

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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

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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

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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.

DAMAGES

G.R. No. L-28512 February 28, 1973

PEDRO R. DAVILA and PRECIOSA C. TIRO, plaintiffs-appellants,


vs.
PHILIPPINE AIR LINES, defendant-appellant.

Dizon, De Guzman and Vitug and Pedro R. Davila for plaintiffs-appellants.

Siguion Reyna, Montecillo, Belo and Ongsiako for defendant-appellant.

MAKALINTAL, J.:

In Civil Case No. 5728 of the Court of First Instance of Iloilo (Pedro R. Davila and Preciosa C. Tirol, plaintiffs, vs.
Philippine Air Lines, Inc., defendant) judgment was rendered ordering the defendant to pay the plaintiffs various sums
of money, as follows:

(1) For the death of Pedro T. Davila, Jr. the amount of P6,000.00;

(2) For the loss of the earning capacity of the deceased at the rate of P12,000.00 per annum for five (5) years in
the amount of Sixty Thousand Pesos. (P60,000.00);

(3) For moral damages in favor of the plaintiffs Ten Thousand Pesos (P10,000.00);

(4) For exemplary damages in the amount of Ten Thousand Pesos (P10,000.00);

(5) For actual damages the amount of Five Thousand Pesos (P5,000.00) broken down to as follows: A rolex watch
valued at P600.00; a pistol worth P300.00; burial expenses P600.00; for the lot and the mausoleum P3,500.00;

(6) For Attorney's fees the amount of Ten Thousand Pesos (P10,000.00) or a total amount of One Hundred and
One Thousand Pesos (P101,000.00)

To pay the costs of this proceedings.

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Both parties appealed directly to this Court in view of the aggregate of the amounts awarded, the judgment having
been rendered before the effectivity of Rep. Act No. 5440. In this appeal the plaintiffs seek an increase in said amounts,
and the defendant, complete exoneration from, or at least mitigation of, liability.

The case arose from the tragic crash of a passenger plane of the defendant which took the lives of all its crew and
passengers. The plane, identified as PI-C133, was a DC-3 type of aircraft, manufactured in 1942 and acquired by the
defendant in 1948. It had flown almost 18,000 hours at the time of its ill-fated flight. Despite its age, however, it had
been certified as airworthy by the Civil Aeronautics Administration. On November 23, 1960, at 5:30 in the afternoon, it
took off from the Manduriao Airport, Iloilo, on its way to Manila, with 33 people on board, including the plane's
complement. It did not reach its destination, but crashed at Mt. Baco, Mindoro, one hour and fifteen minutes after take-
off. A massive search was undertaken by the defendant and by other parties as soon as it was realized that the plane's
arrival in Manila was overdue. The plaintiffs, parents of Pedro T. Davila, Jr., who was one of the passengers, had no
definite news of what had happened to their son, getting what information they could only from conflicting newspaper
reports, until they received, on December 19, 1960, a letter of condolence from the defendant's president Andres
Soriano, informing them that their son had died in the crash. And it was only on December 29 that his body was
recovered an taken back to Iloilo.

The issues before the trial court, and now before Us in this appeal, are whether or not the defendant is liable for violation
of its contract of carriage and if so, for how much. The provisions of the Civil Code on this substantive question of
liability are clear and explicit. Article 1733 binds common carriers, "from the nature of their business and by reasons of
public policy, ... to observe extraordinary diligence in the vigilance ... for the safety of the passengers transported by
them according to all the circumstances of each case." Article 1755 establishes the standard of care required of a
common carrier, which is, "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." Article 1756 fixes the burden of
proof by providing that "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 in Articles
1733 and 1755." Lastly, Article 1757 states that "the responsibility of a common carrier for the safety of passengers ...
cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise."

The route prescribed by the Civil Aeronautics Administration for the flight of plane PI-C113 in the afternoon of November
23, 1960 was Iloilo-Romblon-Manila, the latter stage, denominated as airway "Amber I," being a straight lane from
Romblon to Manila. The prescribed elevation of the flight was 6,000 ft. The plane reported its position after take-off and
again when it was abeam the Roxas homer. However, it did not intercept airway "Amber I" over Romblon as it was
supposed to do, and the pilot did not give his position then although Romblon was a compulsory checking point. The
fact was that the plane had deviated from the prescribed route by 32 miles to the west when it crashed at Mt. Baco.
The reading of the altimeter of the plane when its wreckage was found was 6,800 ft.

There is a suggestion that in the course of the flight between Romblon and Mindoro the aircraft was drifted westward
by the cross-winds then blowing in the region. The defendant, however, has not given a definite explanation as to why,
if such was the case, the pilot failed to make the necessary correction in his flight to compensate for the drift. According
to the defendant's witness, Maj. Mijares, Chief of the Aviation Safety Division of the Civil Aeronautics Administration
and Chairman of the CAA Investigating Committee, there was a navigational error, to which several factors contributed:
"the weather observation at that time from the Weather Bureau was not so good between Mt. Baco and Romblon and
the wind aloft was quite strong, which would be also one of the causes for the drifting of the aircraft; and the other
strong probability, I would say, would be the malfunction of the aircraft's navigational instrument." He further explained
that "a cross-wind can drift the plane if the pilot will not make the necessary correction, if his navigational instrument is
malfunctioning and the visual reference outside the aircraft could not make the necessary corrections."

There is nothing in the testimony of Maj. Mijares to show just how strong the cross-winds were in the region at the time,
although in the investigation of the accident by the Senate Committee on transportation there was testimony that the

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cross-winds had a velocity of either 20 to 25 knots or 25 to 35 knots an hour. Considering the relatively short distance
from Romblon to Mt. Baco and the brief span of time it would take to fly that distance, cross-winds with the velocity
stated could not have possibly deviated the plane by as much as 32 miles.

The defendant points out that the navigational instrument on board the plane consisted of two (2) sets of automatic
direction finders (ADF) which, when found after the crash, showed a reading that the aircraft was heading north, which
was the proper flight direction. This point, however, is of no vital significance in this case since it does not explain why
the aircraft was 32 miles off its prescribed route in the first place. It is suggested that the pilot did not notice the drift of
his plane because of poor visibility due to thick clouds, which prevented him from making the corresponding correction
on the basis of visual references to the terrain outside. But according to Maj. Mijares himself the report from the Weather
Bureau at the time showed that visibility was 15 miles between Romblon and Mt. Baco and that the clouds from 2,700
to 7,000 ft. elevation were "scattered." And the profile of the probable weather cross-section along airway "Amber I"
during the flight (Exh. 33-A) shows that at 6,000 ft. the airlane was clear and free of clouds. The suggestion therefore
that the pilot was practically flying blind and consequently failed to notice the drift of the aircraft is not justified by the
evidence. Indeed even the investigating team of the defendant under the chairmanship of Capt. Jaime Manzano
concluded in its report that "based on the limited evidences available, the board is of the opinion that the probable
cause was the inability of the pilot to intersect airway "Amber I" over Romblon and to maintain track within its designated
airway lane for reasons unknown."

What is undisputed therefore is that the pilot did not follow the route prescribed for his flight, at least between Romblon
and Manila. Since up to that point over Romblon, where he was supposed to intersect airway "Amber I" the weather
was clear, the most reasonable conclusion is that his failure to do so was intentional, and that he probably wanted to
fly on a straight line to Manila. It was a violation of air-craft traffic rules to which, under the circumstances, the accident
may be directly attributable.

In any case, absent a satisfactory explanation on the part of the defendant as to how and why the accident occurred,
the presumption is that it was at fault, under Article 1756 of the Civil Code.

The next question relates to the amount of damages that should be awarded to the plaintiffs, parents of the deceased.
The trial court fixed the indemnity for his death in the amount of P6,000.00. Pursuant to current jurisprudence on the
point it should be increased to P12,000.00.1

The deceased was employed as manager of a radio station2, from which he was earning P8,400.00 a year, consisting
of a monthly salary of P600.00 and allowance of P100.00. As a lawyer and junior partner of his father in the law office,
he had an annual income of P3,600.00. From farming he was getting an average of P3,000.00. All in all therefore the
deceased had gross earnings of P15,000.00 a year.

According to Article 2206, paragraph (1), of the Civil Code, "the defendant shall be liable for the loss of the earning
capacity of the deceased and indemnity shall be paid to the heirs of the latter." This Article, while referring to "damages
for death caused by crime or quasi-delict," is expressly made applicable by Article 1764 "to the death of a passenger
caused by the breach of contract by a common carrier."

The deceased, Pedro Davila, Jr., was single and 30 years of age when he died. At that age one's normal life expectancy
is 33-1/3 years, according to the formula (2/3 x [80-30]) adopted by this Court in the case of Villa Rey Transit, Inc. vs.
Court of Appeals3 on the basis of the American Expectancy Table of Mortality or the Actuarial of Combined Experience
Table of Mortality. However, although the deceased was in relatively good health, his medical history shows that he
had complained of and been treated for such ailments as backaches, chest pains and occasional feelings of tiredness.
It is reasonable to make an allowance for these circumstances and consider, for purposes of this case, a reduction of
his life expectancy to 25 years.

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In the same case of Villa Revenue Transit this Court stated:

"... earning capacity, as an element of damages to one's estate for his death by wrongful act is necessarily his net
earning capacity or his capacity to acquire money, less the necessary expense for his own living. Stated otherwise, the
amount recoverable is not loss of the entire earnings, but rather the loss of that portion of the earnings which the
beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is,
the total of the earnings less expenses necessary in the creation of such earnings or income and less living and other
incidental expenses."

Considering the fact that the deceased was getting his income from three (3) different sources, namely from managing
a radio station, from law practice and from farming, the expenses incidental to the generation of such income were
necessarily more than if he had only one source. Together with his living expenses, a deduction of P600.00 a month,
or P7,200.00 a year, seems to Us reasonable, leaving a net yearly income of P7,800.00. This amount, multiplied by 25
years, or P195,000.00 is the amount which should be awarded to the plaintiffs in this particular respect.

Actual losses sustained consist of the following, as found by the trial court: "Rolex Watch — P600.00; pistol — P300.00;
Burial Expenses — P600.00; and cost of cemetery lot and mausoleum - P3,500.00."

Under Article 2206, in relation to Article 1764, of the Civil Code, the parents of the deceased are entitled to moral
damages for their mental anguish. The trial court awarded P10,000.00 in this concept, and We find no justification to
change the award, considering the long period of uncertainty and suffering the plaintiffs underwent from November 23,
when the plane crash occurred, to December 19, when they received a letter from the defendant's president confirming
the death of their son, and again to the following December 29, when his body was finally recovered and taken back to
them.

With respect to the award of P10,000.00 as exemplary damages, it is Our opinion that the same should be eliminated.
According to Article 2232 of the Civil Code, in contracts and quasi-contracts the court may award exemplary damages
if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The failure of the defendant
here to exercise extraordinary diligence, as required by law, does not amount to anyone of the circumstances
contemplated in the said provision.

The trial court has awarded attorney's fees of P10,000.00. We do not find this award groundless or the amount thereof
unreasonable.

The total of the different items above enumerated is P232,000.00. The judgment of the court a quo is therefore modified
accordingly and the defendant is ordered to pay the said amount to the plaintiffs, with legal interest thereon from the
finality of this judgment. With costs against the defendant.

G.R. No. L-31150 July 22, 1975


KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., otherwise known as KLM ROYAL DUTCH AIRLINES,
petitioner,
vs.
THE HONORABLE COURT OF APPEALS, CONSUELO T. MENDOZA and RUFINO T. MENDOZA, respondents.

Picazo, Agcaoili, Santayana, Reyes and Tayao for petitioner.

Bengzon, Villegas, Zarraga, Narciso and Cudala for respondents.

CASTRO, J.:
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In this appeal by way of certiorari the Koninklijke Luchtvaart Maatschappij N.V., otherwise known as the KLM Royal
Dutch Airlines (hereinafter referred to as the KLM) assails the award of damages made by the Court of Appeals in CA-
G.R. 40620 in favor of the spouses Rufino T. Mendoza and Consuelo T. Mendoza (hereinafter referred to as the
respondents).1äwphï1.ñët

Sometime in March 1965 the respondents approached Tirso Reyes, manager of a branch of the Philippine Travel
Bureau, a travel agency, for consultations about a world tour which they were intending to make with their daughter
and a niece. Reyes submitted to them, after preliminary discussions, a tentative itinerary which prescribed a trip of
thirty-five legs; the respondents would fly on different airlines. Three segments of the trip, the longest, would be via
KLM. The respondents expressed a desire to visit Lourdes, France, and discussed with Reyes two alternate routes,
namely, Paris to Lourdes and Barcelona to Lourdes. The respondents decided on the Barcelona-Lourdes route with
knowledge that only one airline, Aer Lingus, serviced it.

The Philippine Travel Bureau to which Reyes was accredited was an agent for international air carriers which are
members of the International Air Transport Association, popularly known as the "IATA," of which both the KLM and the
Aer Lingus are members.

After about two weeks, the respondents approved the itinerary prepared for them, and asked Reyes to make the
necessary plane reservations. Reyes went to the KLM, for which the respondents had expressed preference. The KLM
thereafter secured seat reservations for the respondents and their two companions from the carriers which would ferry
them throughout their trip, with the exception of Aer Lingus. When the respondents left the Philippines (without their
young wards who had enplaned much earlier), they were issued KLM tickets for their entire trip. However, their coupon
for the Aer Lingus portion (Flight 861 for June 22, 1965) was marked "RQ" which meant "on request".

After sightseeing in American and European cities (they were in the meantime joined by their two young companions),
the respondents arrived in Frankfurt, Germany. They went to a KLM office there and obtained a confirmation from Aer
Lingus of seat reservations on flight 861. After meandering in London, Paris and Lisbon, the foursome finally took wing
to Barcelona for their trip to Lourdes, France.

In the afternoon of June 22, 1965 the respondents with their wards went to the Barcelona airport to take their plane
which arrived at 4:00 o'clock. At the airport, the manager of Aer Lingus directed the respondents to check in. They did
so as instructed and were accepted for passage. However, although their daughter and niece were allowed to take the
plane, the respondents were off-loaded on orders of the Aer Lingus manager who brusquely shoved them aside with
the aid of a policeman and who shouted at them, "Conos! Ignorantes Filipinos!"

Mrs. Mendoza later called up the manager of Aer Lingus and requested that they provide her and her husband means
to get to Lourdes, but the request was denied. A stranger, however, advised them to take a train, which the two did;
despite the third class accommodations and lack of food service, they reached Lourdes the following morning. During
the train trip the respondents had to suffer draft winds as they wore only minimum clothing, their luggage having gone
ahead with the Aer Lingus plane. They spent $50 for that train trip; their plane passage was worth $43.35.

On March 17, 1966 the respondents, referring to KLM as the principal of Aer Lingus, filed a complaint for damages with
the Court of First Instance of Manila arising from breach of contract of carriage and for the humiliating treatment
received by them at the hands of the Aer Lingus manager in Barcelona. After due hearing, the trial court awarded
damages to the respondents as follows: $43.35 or its peso equivalent as actual damages, P10,000 as moral damages,
P5,000 as exemplary damages, and P5,000 as attorney's fees, and expenses of litigation.

Both parties appealed to the Court of Appeals. The KLM sought complete exoneration; the respondents prayed for an
increase in the award of damages. In its decision of August 14, 1969 the Court of Appeals decreed as follows: "Appellant

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KLM is condemned to pay unto the plaintiffs the sum of $43.35 as actual damages; P50,000 as moral damages; and
P6,000 as attorney's fees and costs."

Hence, the present recourse by the KLM.

The KLM prays for exculpation from damages on the strength of the following particulars which were advanced to but
rejected by the Court of Appeals:

(a) The air tickets issued to the respondents stipulate that carriage thereunder is subject to the "Convention for
the Unification of Certain Rules Relating to International Transportation by Air," otherwise known as the "Warsaw
Convention," to which the Philippine Government is a party by adherence, and which pertinently provides.1

ART. 30. (1) In the case of transportation to be performed by various successive carriers and failing within the
definition set out in the third paragraph of Article I, each carrier who accepts passengers, baggage, or goods shall be
subject to the rules set out in the convention, and shall be deemed to be one of the contracting parties to the contract
of transportation insofar as the contract deals with that part of transportation which is performed under his supervision.2

(2) In the case of transportation of this nature, the passenger or his representative can take action only against
the carrier who performed the transportation during which the accident or the delay occured, save in the case where,
by express agreement, the first carrier has assumed liability for the whole journey. (emphasis supplied)

(b) On the inside front cover of each ticket the following appears under the heading "Conditions of Contract":

1 ... (a) Liability of carrier for damages shall be limited to occurrences on its own line, except in the case of checked
baggage as to which the passenger also has a right of action against the first or last carrier. A carrier issuing a ticket
or checking baggage for carriage over the lines of others does so only as agent..

(c) All that the KLM did after the respondents completed their arrangements with the travel agency was to request
for seat reservations among the airlines called for by the itinerary submitted to the KLM and to issue tickets for the
entire flight as a ticket-issuing agent.

The respondents rebut the foregoing arguments, thus:

(a) Article 30 of the Warsaw Convention has no application in the case at bar which involves, not an accident or
delay, but a willful misconduct on the part of the KLM's agent, the Aer Lingus. Under article 25 of the same Convention
the following is prescribed:

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.3

(2) Similarly, the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused under
the same circumstances by any agent of the carrier acting within the scope of his employment. (emphasis by
respondents)

(b) The condition in their tickets which purportedly excuse the KLM from liability appears in very small print, to
read which, as found by the Court of Appeals, one has practically to use a magnifying glass.

(c) The first paragraph of the "Conditions of Contract" appearing identically on the KLM tickets issued to them
idubitably shows that their contract was one of continuous air transportation around the world:

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1 ... "carriage" includes the air carrier issuing this ticket and all carriers that carry or undertake to carry the passenger
or his baggage hereunder or perform any other service incidental to such air carriage... Carriage to be performed
hereunder by several successive carrier is regarded as a single operation.

(d) The contract of air transportation was exclusively between the respondents and the KLM, the latter merely
endorsing its performance to other carriers, like Aer Lingus, as its subcontractors or agents, as evidenced by the
passage tickets themselves which on their face disclose that they are KLM tickets. Moreover, the respondents dealt
only with KLM through the travel agency.

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

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

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

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

ACCORDINGLY, the judgment of the Court of Appeals dated August 14, 1969 is affirmed, at KLM's cost.

[G.R. No. 124110. April 20, 2001]


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

DECISION

KAPUNAN, J.:

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

(a) San Francisco to Washington (15 April 1989);

(b) Washington to Chicago (25 April 1989);

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

(d) Los Angeles to San Francisco (01 May 1989 for petitioners wife and 05 May 1989 for petitioner and his son).[1]

All flights had been confirmed previously by United Airlines.[2]

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

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

Private respondents' version is as follows:

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

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

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

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

The plane then took off with the Fontanillas baggage in tow, leaving them behind.[8]

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

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

The Fontanillas then proceeded to the United Airlines customer service counter to plead their case. The male employee
at the counter reacted by shouting that he was ready for it and left without saying anything.[13]

The Fontanillas were not booked on the next flight, which departed for San Francisco at 11:00 a.m. It was only at 12:00
noon that they were able to leave Los Angeles on United Airlines Flight No. 803.

Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on May 5, 1989.

According to United Airlines, the Fontanillas did not initially go to the check-in counter to get their seat assignments for
UA Flight 1108. They instead proceeded to join the queue boarding the aircraft without first securing their seat
assignments as required in their ticket and boarding passes. Having no seat assignments, the stewardess at the door
of the plane instructed them to go to the check-in counter. When the Fontanillas proceeded to the check-in counter,
Linda Allen, the United Airlines Customer Representative at the counter informed them that the flight was overbooked.
She booked them on the next available flight and offered them denied boarding compensation. Allen vehemently denies
uttering the derogatory and racist words attributed to her by the Fontanillas.[14]

The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages before the Regional Trial Court of
Makati. After trial on the merits, the trial court rendered a decision, the dispositive portion of which reads as follows:

WHEREFORE, judgment is rendered dismissing the complaint. The counterclaim is likewise dismissed as it appears
that plaintiffs were not actuated by legal malice when they filed the instant complaint.[15]

On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate court found that there was an admission
on the part of United Airlines that the Fontanillas did in fact observe the check-in requirement. It ruled further that even
assuming there was a failure to observe the check-in requirement, United Airlines failed to comply with the procedure
laid down in cases where a passenger is denied boarding. The appellate court likewise gave credence to the claim of
Aniceto Fontanilla that the employees of United Airlines were discourteous and arbitrary and, worse, discriminatory. In
light of such treatment, the Fontanillas were entitled to moral damages. The dispositive portion of the decision of the
respondent Court of Appeals dated 29 September 1995, states as follows:

WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby REVERSED and SET ASIDE, and a
new judgment is entered ordering defendant-appellee to pay plaintiff-appellant the following:

a) P200,000.00 as moral damages;

b) P200,000.00 as exemplary damages;

c) P50, 000.00 as attorneys fees.

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No pronouncement as to costs.

SO ORDERED.[16]

Petitioner United Airlines now comes to this Court raising the following assignment of errors:

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE TRIAL COURT WAS WRONG IN
FAILING TO CONSIDER THE ALLEGED ADMISSION THAT PRIVATE RESPONDENT OBSERVED THE CHECK-IN
REQUIREMENT.

II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENTS FAILURE
TO CHECK-IN WILL NOT DEFEAT HIS CLAIMS BECAUSE THE DENIED BOARDING RULES WERE NOT
COMPLIED WITH.

III

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED
TO MORAL DAMAGES OF P200, 000.

IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED
TO EXEMPLARY DAMAGES OF P200,000.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED
TO ATTORNEYS FEES OF P50, 000.[17]

On the first issue raised by the petitioner, the respondent Court of Appeals ruled that when Rule 9, Section 1 of the
Rules of Court,[18] there was an implied admission in petitioner's answer in the allegations in the complaint that private
respondent and his son observed the check-in requirement at the Los Angeles Airport. Thus:

A perusal of the above pleadings filed before the trial court disclosed that there exists a blatant admission on the part
of the defendant-appellee that the plaintiffs-appellants indeed observed the check-in requirement at the Los Angeles
Airport on May 5, 1989. In view of defendant-appellees admission of plaintiffs-appellants material averment in the
complaint, We find no reason why the trial court should rule against such admission.[19]

We disagree with the above conclusion reached by respondent Court of Appeals. Paragraph 7 of private respondents'
complaint states:

7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendants designated counter at the airport in Los
Angeles for their scheduled flight to San Francisco on defendants Flight No. 1108.[20]

Responding to the above allegations, petitioner averred in paragraph 4 of its answer, thus:

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4. Admits the allegation set forth in paragraph 7 of the complaint except to deny that plaintiff and his son checked in at
9:45 a.m., for lack of knowledge or information at this point in time as to the truth thereof.[21]

The rule authorizing an answer that the defendant has no knowledge or information sufficient to form a belief as to the
truth of an averment and giving such answer the effect of a denial, does not apply where the fact as to which want of
knowledge is asserted is so plainly and necessarily within the defendant's knowledge that his averment of ignorance
must be palpably untrue.[22] Whether or not private respondents checked in at petitioner's designated counter at the
airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioner's knowledge.

While there was no specific denial as to the fact of compliance with the check-in requirement by private respondents,
petitioner presented evidence to support its contention that there indeed was no compliance.

Private respondents then are said to have waived the rule on admission. It not only presented evidence to support its
contention that there was compliance with the check-in requirement, it even allowed petitioner to present rebuttal
evidence. In the case of Yu Chuck vs. "Kong Li Po," we ruled that:

The object of the rule is to relieve a party of the trouble and expense in proving in the first instance an alleged fact, the
existence or non-existence of which is necessarily within the knowledge of the adverse party, and of the necessity (to
his opponents case) of establishing which such adverse party is notified by his opponents pleadings.

The plaintiff may, of course, waive the rule and that is what must be considered to have done (sic) by introducing
evidence as to the execution of the document and failing to object to the defendants evidence in refutation; all this
evidence is now competent and the case must be decided thereupon.[23]

The determination of the other issues raised is dependent on whether or not there was a breach of contract in bad faith
on the part of the petitioner in not allowing the Fontanillas to board United Airlines Flight 1108.

It must be remembered that the general rule in civil cases is that the party having the burden of proof of an essential
fact must produce a preponderance of evidence thereon.[24] Although the evidence adduced by the plaintiff is stronger
than that presented by the defendant, a judgment cannot be entered in favor of the former, if his evidence is not
sufficient to sustain his cause of action. The plaintiff must rely on the strength of his own evidence and not upon the
weakness of the defendants.[25] Proceeding from this, and considering the contradictory findings of facts by the
Regional Trial Court and the Court of Appeals, the question before this Court is whether or not private respondents
were able to prove with adequate evidence his allegations of breach of contract in bad faith.

We rule in the negative.

Time and again, the Court has pronounced that appellate courts should not, unless for strong and cogent reasons,
reverse the findings of facts of trial courts. This is so because trial judges are in a better position to examine real
evidence and at a vantage point to observe the actuation and the demeanor of the witnesses.[26] While not the sole
indicator of the credibility of a witness, it is of such weight that it has been said to be the touchstone of credibility.[27]

Aniceto Fontanillas assertion that upon arrival at the airport at 9:45 a.m., he immediately proceeded to the check-in
counter, and that Linda Allen punched in something into the computer is specious and not supported by the evidence
on record. In support of their allegations, private respondents submitted a copy of the boarding pass. Explicitly printed
on the boarding pass are the words Check-In Required. Curiously, the said pass did not indicate any seat number. If
indeed the Fontanillas checked in at the designated time as they claimed, why then were they not assigned seat
numbers? Absent any showing that Linda was so motivated, we do not buy into private respondents' claim that Linda

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intentionally deceived him, and made him the laughing stock among the passengers.[28] Hence, as correctly observed
by the trial court:

Plaintiffs fail to realize that their failure to check in, as expressly required in their boarding passes, is the very reason
why they were not given their respective seat numbers, which resulted in their being denied boarding.[29]

Neither do we agree with the conclusion reached by the appellate court that private respondents' failure to comply with
the check-in requirement will not defeat his claim as the denied boarding rules were not complied with. Notably, the
appellate court relied on the Code of Federal Regulation Part on Oversales, which states:

250.6 Exceptions to eligibility for denied boarding compensation.

A passenger denied board involuntarily from an oversold flight shall not be eligible for denied board compensation if:

(a) The passenger does not comply with the carriers contract of carriage or tariff provisions regarding ticketing,
reconfirmation, check-in, and acceptability for transformation.

The appellate court, however, erred in applying the laws of the United States as, in the case at bar, Philippine law is
the applicable law. Although, the contract of carriage was to be performed in the United States, the tickets were
purchased through petitioners agent in Manila. It is true that the tickets were rewritten in Washington, D.C. However,
such fact did not change the nature of the original contract of carriage entered into by the parties in Manila.

In the case of Zalamea vs. Court of Appeals,[30] this Court applied the doctrine of lex loci contractus. According to the
doctrine, as a general rule, the law of the place where a contract is made or entered into governs with respect to its
nature and validity, obligation and interpretation. This has been said to be the rule even though the place where the
contract was made is different from the place where it is to be performed, and particularly so, if the place of the making
and the place of performance are the same. Hence, the court should apply the law of the place where the airline ticket
was issued, when the passengers are residents and nationals of the forum and the ticket is issued in such State by the
defendant airline.

The law of the forum on the subject matter is Economic Regulations No. 7 as amended by Boarding Priority and Denied
Boarding Compensation of the Civil Aeronautics Board, which provides that the check-in requirement be complied with
before a passenger may claim against a carrier for being denied boarding:

SEC. 5. Amount of Denied Boarding Compensation Subject to the exceptions provided hereinafter under Section 6,
carriers shall pay to passengers holding confirmed reserved space and who have presented themselves at the proper
place and time and fully complied with the carriers check-in and reconfirmation procedures and who are acceptable for
carriage under the Carriers tariffs but who have been denied boarding for lack of space, a compensation at the rate of:
xx

Private respondents' narration that they were subjected to harsh and derogatory remarks seems incredulous. However,
this Court will not attempt to surmise what really happened. Suffice to say, private respondent was not able to prove
his cause of action, for as the trial court correctly observed:

xxx plaintiffs claim to have been discriminated against and insulted in the presence of several people. Unfortunately,
plaintiffs limited their evidence to the testimony [of] Aniceto Fontanilla, without any corroboration by the people who
saw or heard the discriminatory remarks and insults; while such limited testimony could possibly be true, it does not
enable the Court to reach the conclusion that plaintiffs have, by a preponderance of evidence, proven that they are
entitled to P1,650,000.00 damages from defendant.[31]

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As to the award of moral and exemplary damages, we find error in the award of such by the Court of Appeals. For the
plaintiff to be entitled to an award of moral damages arising from a breach of contract of carriage, the carrier must have
acted with fraud or bad faith. The appellate court predicated its award on our pronouncement in the case of Zalamea
vs. Court of Appeals, supra, where we stated:

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling passengers concerned to an
award of moral damages. In Alitalia Airways v. Court of Appeals, where passengers with confirmed booking were
refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to 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. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their
seats in case all of them would show up for check in. For the indignity and inconvenience of being refused a confirmed
seat on the last minute, said passenger is entitled to moral damages. (Emphasis supplied.)

However, the Courts ruling in said case should be read in consonance with existing laws, particularly, Economic
Regulations No. 7, as amended, of the Civil Aeronautics Board:

Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of flights
or portions of flights originating from or terminating at, or serving a point within the territory of the Republic of the
Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines,
for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only honest mistakes
on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided, however, that
overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful
act of non-accommodation.

What this Court considers as bad faith is the willful and deliberate overbooking on the part of the airline carrier. The
above-mentioned law clearly states that when the overbooking does not exceed ten percent (10%), it is not considered
as deliberate and therefore does not amount to bad faith. While there may have been overbooking in this case, private
respondents were not able to prove that the overbooking on United Airlines Flight 1108 exceeded ten percent.

As earlier stated, the Court is of the opinion that the private respondents were not able to prove that they were subjected
to coarse and harsh treatment by the ground crew of United Airlines. Neither were they able to show that there was
bad faith on part of the carrier airline. Hence, the award of moral and exemplary damages by the Court of Appeals is
improper. Corollarily, the award of attorney's fees is, likewise, denied for lack of any legal and factual basis.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 37044 is hereby
REVERSED and SET ASIDE. The decision of the Regional Trial Court of Makati City in Civil Case No. 89-4268 dated
April 8, 1991 is hereby REINSTATED.

SO ORDERED.

G.R. No. 104235 November 18, 1993

SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,


vs.
HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents.

Sycip, Salazar, Hernandez, Gatmaitan for petitioners.

Quisumbing, Torres & Evangelista for private-respondent.


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NOCON, J.:

Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007 departing from New York
to Los Angeles on June 6, 1984 despite possession of confirmed tickets, petitioners filed an action for damages before
the Regional Trial Court of Makati, Metro Manila, Branch 145. Advocating petitioner's position, the trial court
categorically ruled that respondent TransWorld Airlines (TWA) breached its contract of carriage with petitioners and
that said breach was "characterized by bad faith." On appeal, however, the appellate court found that while there was
a breach of contract on respondent TWA's part, there was neither fraud nor bad faith because under the Code of
Federal Regulations by the Civil Aeronautics Board of the United States of America it is allowed to overbook flights.

The factual backdrop of the case is as follows:

Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea, purchased three (3)
airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a flight to New York to Los Angeles on
June 6, 1984. The tickets of petitioners-spouses were purchased at a discount of 75% while that of their daughter was
a full fare ticket. All three tickets represented confirmed reservations.

While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their reservations for said flight.
On the appointed date, however, petitioners checked in at 10:00 a.m., an hour earlier than the scheduled flight at 11:00
a.m. but were placed on the wait-list because the number of passengers who had checked in before them had already
taken all the seats available on the flight. Liana Zalamea appeared as the No. 13 on the wait-list while the two other
Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names on the wait list, the first 22 names were
eventually allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The two others, on the other
hand, at No. 34, being ranked lower than 22, were not able to fly. As it were, those holding full-fare tickets were given
first priority among the wait-listed passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter, was
allowed to board the plane; while his wife and daughter, who presented the discounted tickets were denied boarding.
According to Mr. Zalamea, it was only later when he discovered the he was holding his daughter's full-fare ticket.

Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated because it
was also fully booked. Thus, they were constrained to book in another flight and purchased two tickets from American
Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars.

Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract of air carriage
before the Regional Trial Court of Makati, Metro Manila, Branch 145. As aforesaid, the lower court ruled in favor of
petitioners in its decision 1 dated January 9, 1989 the dispositive portion of which states as follows:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the following amounts:

(1) US $918.00, or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira
and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City;

(2) US $159.49, or its peso equivalent at the time of payment, representing the price of Suthira Zalamea's ticket
for TWA Flight 007;

(3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50, Philippine Currency,
representing the price of Liana Zalamea's ticket for TWA Flight 007,

(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral damages for all the plaintiffs'

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(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for attorney's fees; and

(6) The costs of suit.

SO ORDERED. 2

On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage suit predicated
upon a breach of contract of carriage only where there is fraud or bad faith. Since it is a matter of record that overbooking
of flights is a common and accepted practice of airlines in the United States and is specifically allowed under the Code
of Federal Regulations by the Civil Aeronautics Board, no fraud nor bad faith could be imputed on respondent
TransWorld Airlines.

Moreover, while respondent TWA was remiss in not informing petitioners that the flight was overbooked and that even
a person with a confirmed reservation may be denied accommodation on an overbooked flight, nevertheless it ruled
that such omission or negligence cannot under the circumstances be considered to be so gross as to amount to bad
faith.

Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with forty-eight (48) other
passengers where full-fare first class tickets were given priority over discounted tickets.

The dispositive portion of the decision of respondent Court of Appeals3 dated October 25, 1991 states as follows:

WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED in that the award of moral
and exemplary damages to the plaintiffs is eliminated, and the defendant-appellant is hereby ordered to pay the plaintiff
the following amounts:

(1) US$159.49, or its peso equivalent at the time of the payment, representing the price of Suthira Zalamea's ticket
for TWA Flight 007;

(2) US$159.49, or its peso equivalent at the time of the payment, representing the price of Cesar Zalamea's ticket
for TWA Flight 007;

(3) P50,000.00 as and for attorney's fees.

(4) The costs of suit.

SO ORDERED.4

Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and alleged the following
errors committed by the respondent Court of Appeals, to wit:

I.

. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF RESPONDENT TWA BECAUSE
IT HAS A RIGHT TO OVERBOOK FLIGHTS.

II.

. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.

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III.

. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND PAYMENT FOR THE AMERICAN
AIRLINES
TICKETS.5

That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight
for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or regulation allegedly authorizing
overbooking has never been proved. Foreign laws do not prove themselves nor can the courts take judicial notice of
them. Like any other fact, they must be alleged and proved.6 Written law may be evidenced by an official publication
thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied
with a certificate that such officer has custody. The certificate may be made by a secretary of an embassy or legation,
consul general, consul, vice-consul, or consular agent or by any officer in the foreign service of the Philippines stationed
in the foreign country in which the record is kept, and authenticated by the seal of his office.7

Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her deposition
dated January 27, 1986 that the Code of Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside
from said statement, no official publication of said code was presented as evidence. Thus, respondent court's finding
that overbooking is specifically allowed by the US Code of Federal Regulations has no basis in fact.

Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in
accordance with the principle of lex loci contractus which require that the law of the place where the airline ticket was
issued should be applied by the court where the passengers are residents and nationals of the forum and the ticket is
issued in such State by the defendant airline.8 Since the tickets were sold and issued in the Philippines, the applicable
law in this case would be Philippine law.

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to an
award of moral damages. In Alitalia Airways v. Court of Appeals,9 where passengers with confirmed bookings were
refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to 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. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their
seats in case all of them would show up for the check in. For the indignity and inconvenience of being refused a
confirmed seat on the last minute, said passenger is entitled to an award of moral damages.

Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not allowed to board the
plane because her seat had already been given to another passenger even before the allowable period for passengers
to check in had lapsed despite the fact that she had a confirmed ticket and she had arrived on time, this Court held that
petitioner airline acted in bad faith in violating private respondent's rights under their contract of carriage and is therefore
liable for the injuries she has sustained as a result.

In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts to bad faith. In
Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-be passenger had the necessary
ticket, baggage claim and clearance from immigration all clearly and unmistakably showing that she was, in fact,
included in the passenger manifest of said flight, and yet was denied accommodation in said flight, this Court did not
hesitate to affirm the lower court's finding awarding her damages.

A contract to transport passengers is quite different in kind and degree from any other contractual relation. So ruled
this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a contract of carriage generates a relation

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attended with public duty — a duty to provide public service and convenience to its passengers which must be
paramount to self-interest or enrichment. Thus, it was also held that the switch of planes from Lockheed 1011 to a
smaller Boeing 707 because there were only 138 confirmed economy class passengers who could very well be
accommodated in the smaller planes, thereby sacrificing the comfort of its first class passengers for the sake of
economy, amounts to bad faith. Such inattention and lack of care for the interest of its passengers who are entitled to
its utmost consideration entitles the passenger to an award of moral damages. 13

Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not informing its
passengers beforehand that it could breach the contract of carriage even if they have confirmed tickets if there was
overbooking. Respondent TWA should have incorporated stipulations on overbooking on the tickets issued or to
properly inform its passengers about these policies so that the latter would be prepared for such eventuality or would
have the choice to ride with another airline.

Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the name of the
passenger and the points of origin and destination, contained such a notice. An examination of Exhibit I does not bear
this out. At any rate, said exhibit was not offered for the purpose of showing the existence of a notice of overbooking
but to show that Exhibit I was used for flight 007 in first class of June 11, 1984 from New York to Los Angeles.

Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of giving less priority to
discounted tickets. While the petitioners had checked in at the same time, and held confirmed tickets, yet, only one of
them was allowed to board the plane ten minutes before departure time because the full-fare ticket he was holding was
given priority over discounted tickets. The other two petitioners were left behind.

It is respondent TWA's position that the practice of overbooking and the airline system of boarding priorities are
reasonable policies, which when implemented do not amount to bad faith. But the issue raised in this case is not the
reasonableness of said policies but whether or not said policies were incorporated or deemed written on petitioners'
contracts of carriage. Respondent TWA failed to show that there are provisions to that effect. Neither did it present any
argument of substance to show that petitioners were duly apprised of the overbooked condition of the flight or that there
is a hierarchy of boarding priorities in booking passengers. It is evident that petitioners had the right to rely upon the
assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets represented confirmed seats
without any qualification. The failure of respondent TWA to so inform them when it could easily have done so thereby
enabling respondent to hold on to them as passengers up to the last minute amounts to bad faith. Evidently, respondent
TWA placed its self-interest over the rights of petitioners under their contracts of carriage. Such conscious disregard of
petitioners' rights makes respondent TWA liable for moral damages. To deter breach of contracts by respondent TWA
in similar fashion in the future, we adjudge respondent TWA liable for exemplary damages, as well.

Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's ticket because the
ticket was used by her father. On this score, we uphold the respondent court. Petitioners had not shown with certainty
that the act of respondent TWA in allowing Mr. Zalamea to use the ticket of her daughter was due to inadvertence or
deliberate act. Petitioners had also failed to establish that they did not accede to said agreement. The logical
conclusion, therefore, is that both petitioners and respondent TWA agreed, albeit impliedly, to the course of action
taken.

The respondent court erred, however, in not ordering the refund of the American Airlines tickets purchased and used
by petitioners Suthira and Liana. The evidence shows that petitioners Suthira and Liana were constrained to take the
American Airlines flight to Los Angeles not because they "opted not to use their TWA tickets on another TWA flight"
but because respondent TWA could not accommodate them either on the next TWA flight which was also fully booked.
14 The purchase of the American Airlines tickets by petitioners Suthira and Liana was the consequence of respondent
TWA's unjustifiable breach of its contracts of carriage with petitioners. In accordance with Article 2201, New Civil Code,
respondent TWA should, therefore, be responsible for all damages which may be reasonably attributed to the non-

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performance of its obligation. In the previously cited case of Alitalia Airways v. Court of Appeals, 15 this Court explicitly
held that a passenger is entitled to be reimbursed for the cost of the tickets he had to buy for a flight to another airline.
Thus, instead of simply being refunded for the cost of the unused TWA tickets, petitioners should be awarded the actual
cost of their flight from New York to Los Angeles. On this score, we differ from the trial court's ruling which ordered not
only the reimbursement of the American Airlines tickets but also the refund of the unused TWA tickets. To require both
prestations would have enabled petitioners to fly from New York to Los Angeles without any fare being paid.

The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code which allows recovery
when the defendant's act or omission has compelled plaintiff to litigate or to incur expenses to protect his interest.
However, the award for moral damages and exemplary damages by the trial court is excessive in the light of the fact
that only Suthira and Liana Zalamea were actually "bumped off." An award of P50,000.00 moral damages and another
P50,000.00 exemplary damages would suffice under the circumstances obtaining in the instant case.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is hereby
MODIFIED to the extent of adjudging respondent TransWorld Airlines to pay damages to petitioners in the following
amounts, to wit:

(1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira
and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City;

(2) P50,000.00 as moral damages;

(3) P50,000.00 as exemplary damages;

(4) P50,000.00 as attorney's fees; and

(5) Costs of suit.

SO ORDERED.

G.R. No. L-28589 February 29, 1972

RAFAEL ZULUETA, ET AL., plaintiffs-appellees,


vs.
PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant.

Jose W. Diokno for plaintiffs-appellees.

Ross, Salcedo, Del Rosario, Bito and Misa for defendant-appellant.

CONCEPCION, C.J.:p

Appeal, taken by defendant Pan American World Airways, Inc., from a decision of the Court of First Instance of Rizal,
sentencing said defendant to pay herein plaintiffs — Rafael Zulueta, Telly Albert Zulueta and Carolinda Zulueta — "the
sum of P5,502.85, as actual damages; plus the further sum of P1,000,000.00 as moral damages; the further sum of
P400,000.00 as exemplary damages; and attorney's fees in the sum of P100,000.00" with the costs against said
defendant, hereinafter referred to as PANAM for the sake of brevity.

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It is not disputed that, on October 23, 1964, the spouse Rafael Zulueta and Telly Albert Zulueta — hereinafter referred
to as plaintiff and Mrs. Zulueta, respectively — as well as their daughter, Carolinda Zulueta — hereinafter referred to
as Miss Zulueta — were passengers aboard a PANAM plane, on Flight No. 841-23, from Honolulu to Manila, the first
leg of which was Wake Island. As the plane landed on said Island, the passengers were advised that they could
disembark for a stopover of about 30 minutes. Shortly before reaching that place, the flight was, according to the
plaintiffs, "very rough." Testifying for PANAM its purser, Miss Schmitz, asserted, however, that it was "very calm"; but
her notes, Exhibit 7 — prepared upon the request of Captain Zentner, on account of the incident involved in this case
— state that there was "unusually small amount of roughness," which His Honor, the Trial Judge, considered properly
as "an admission that there was roughness, only the degree thereof is in dispute." In any event, plaintiff testified that,
having found the need to relieve himself, he went to the men's comfort room at the terminal building, but found it full of
soldiers, in view of which he walked down the beach some 100 yards away.

Meanwhile, the flight was called and when the passengers had boarded the plane, plaintiff's absence was noticed. The
take-off was, accordingly, delayed and a search for him was conducted by Mrs. Zulueta, Miss Zulueta and other
persons. Minutes later, plaintiff was seen walking back from the beach towards the terminal. Heading towards the ramp
of the plane, plaintiff remarked, "You people almost made me miss your flight. You have a defective announcing system
and I was not paged." At this point, the decision appealed from has the following to say:

(1) Plaintiffs were on their way to the plane in order to board it, but defendant's employees — Kenneth Sitton,
defendants airport manager, according to plaintiffs; Wayne Pendleton, defendant's airport customer service supervisor,
according to defendant — stopped them at the gate. This is what the report of Wayne Pendleton the airport customer
service supervisor, says:

...I made no comment to the passenger but turned and led the group toward the ramp. Just as we reached the boarding
gate, Mr. Zulueta spoke to me for the first time saying, `You people almost made me miss your flight. You have a
defective announcing system and I was not paged."

I was about to make some reply when I noticed the captain of the flight standing on the ramp, midway between the
gate and the aircraft, and talking with the senior maintenance supervisor and several other persons. The captain
motioned for me to join him which I did, indicating to the Zulueta family that they should wait for a moment at the gate.

-- Exh. 5 .

(2) Thereafter, one of defendant's employees — Mr. Sitton, according to plaintiffs; Mr. Pendleton according to
defendants — asked plaintiffs to turn over their baggage claim checks. Plaintiffs did so, handing him four (4) claim
checks.

(3) However, only three (3) bags were located and segregated from the rest of the passenger's luggage. The items
hand-carried by plaintiffs, except for plaintiff's overcoat, were also brought down. These hand-carried items, however,
were not opened or inspected; later, plaintiffs Mrs. Zulueta and Miss Zulueta were permitted to reboard the plane with
their hand-carried luggage; and when the plane took off, about two and a half hours later, it carried plaintiff's fourth bag,
his overcoat and the hand-carried luggage.

(4) Once three bags had been identified, and while the search was going on for the fourth bag, Mr. Sitton,
defendant's airport manager, demanded that plaintiffs open the bags (actually, they were closed, but not locked) and
allow defendant's employees to inspect them. Plaintiff Rafael Zulueta refused and warned that defendant could open
the bags only by force and at its peril of a law suit.

(5) Mr. Sitton, defendant's manager, then told plaintiff that he would not be allowed to proceed to Manila on board
the plane and handed Zulueta the following letters:

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"'24 October 1964


Wake Island

"Mr. Zulueta:
Passenger aboard flight 84123
Honolulu/Manila .

Sir:

We are forced to off-load you from flight 84123 due to the fact that you have refused to open your checked baggage
for Inspection as requested.

During your stay on Wake Island, which will be for a minimum of one week, you will be charged $13.30 per day for
each member of your party.

K. Sitton
Airport Manager, Wake Island
Pan American World Airways, Inc."

— Exh. D

(6) All this happened in plain view and within earshot of the other passengers on the plane, many of whom were
Filipinos who knew plaintiffs;

The departure of the plane was delayed for about two hours

(7) Though originally all three plaintiffs had been off loaded, plaintiff requested that his wife and daughter be
permitted to continue with the flight. This was allowed but they were required to leave the three bags behind.
Nevertheless, the plane did fly with the Plaintiff's fourth bag; it was found among all other passengers' luggage flown
to Manila upon the plane's arrival here.

(8) Upon arrival at Manila, Mrs. Zulueta demanded of defendant's Manila office that it re-route plaintiff Rafael
Zulueta to Manila at the earliest possible time, by the fastest route, and at its expense; defendant refused; so plaintiffs
were forced to pay for his ticket and to send him money as he was without funds.

(9) On October 27, 1964, plaintiff Zulueta finally arrived at Manila, after spending two nights at Wake, going back
to Honolulu, and from Honolulu flying thru Tokyo to Manila.

(10) On December 21, 1964, plaintiffs demanded that defendant reimburse them in the sum of P1,505,502.85 for
damages but defendants refused to do so; hence this action.

In its brief, PANAM maintains that the trial court erred: (1) "in not granting defendant additional hearing dates (not a
postponement) for the presentation of its other witnesses"; (2) "in assuming it to be true that the reason plaintiff Rafael
Zulueta did not come aboard when the passengers were reboarded was that he had gone to the beach to relieve
himself"; (3) "in not holding that the real reason why plaintiff Rafael Zulueta did not reboard the plane, when the
announcement to do so was made, was that he had a quarrel with his wife and after he was found at the beach and
his intention to be left behind at Wake was temporarily thwarted he did everything calculated to compel Pan American
personnel to leave him behind"; (4) "in accepting as true plaintiff Rafael Zulueta's claim of what occurred when; he
arrived at the terminal after he was found at the beach"; (5) "in not holding that the captain was entitled to an explanation

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for Zulueta's failure to reboard and not having received a reasonable explanation and because of Zulueta's irrational
behavior and refusal to have his bags examined, the captain had the right and duty to leave Zulueta behind"; (6) "in
condemning the defendant to pay plaintiffs P5,502.85 as actual damages plus the further sum of P1,000,000.00 as
moral damages, and the further sum of P400,000.00 as exemplary damages, and attorneys' fees in the sum of
P100,000.00"; and (7) "in not granting defendant's counterclaim of attorney's fees and expenses of litigation." .

PANAM's first assignment of error refers to the denial of its motion, dated October 20, 1966, that it "be granted other
hearing dates about two months from today so as to be able to present defendant's other witnesses or their
depositions."

It appears that the complaint in this case was filed on September 30, 1965. It was amended on December 1, 1965, and
again on April 14, 1966. PANAM answered the second amended complaint on May 6, 1966. After a pre-trial conference,
held on May 28, 1966, the case was set for hearing on June 1, 2 and 3, 1966. By subsequent agreement of the parties,
the hearing was, on June 3, 1966, reset for August 1, 2 and 3, 1966. Plaintiffs rested their case on August 2, 1966,
whereupon it was agreed that PANAM's witnesses would be presented "at a later date," months later, because they
would "come from far-flung places like Wake Island, San Francisco, Seattle and it will take time to arrange for their
coming here." Accordingly the case was reset for October 17, 18 and 19, 1966, at 8:30 a.m. On motion of the plaintiffs,
the trial scheduled for October 17 was cancelled, without any objection on the part of PANAM but, to offset said action,
additional hearings were set for October 18 and 19, in the afternoon, apart from those originally set in the morning of
these dates. Before the presentation of PANAM's evidence, in the morning of October 18, 1966, plaintiffs' counsel
asked for the names of the former's witnesses, so that those not on the witness stand could be excluded from the
courtroom. PANAM's counsel announced that his witnesses were Marshall Stanley Ho, Kenneth Sitton, Michael
Thomas, Wayne S. Pendleton, Capt. Robert Zentner and Miss Carol Schmitz.

The defense then proceeded to introduce the testimony of said witnesses, and consumed therefor the morning and
afternoon of October 18 and the morning of October 19. Upon the conclusion, that morning, of the testimony of the last
witness for the defense, its counsel asked that it "be given an opportunity to present our other witnesses who are not
present today, at the convenience of the Court." The motion was denied, but, said counsel sought a reconsideration
and the court gave PANAM a last chance to present its "other witnesses" the next day, October 20. Instead of doing
so, PANAM filed a written motion reiterating its prayer for "other hearing dates about two months from today so as to
be able to present defendant's other witnesses or their depositions." Upon denial of this motion, PANAM made an offer
of the testimony it expected from one Edgardo Gavino, an unnamed meteorologist, either Sue Welby and/or Helga
Schley, and John C. Craig, Ida V. Pomeroy, Herman Jaffe, Gerry Cowles and Col. Nilo de Guia.

His Honor, the Trial Judge, did not commit a reversible error in denying said motion of October 20, 1966. PANAM knew,
as early as August 2, 1966, that its turn to present evidence would take place, as agreed upon, about two (2) months
and a half later, or on October 17, 18 and 19, 1966. PANAM has not offered any valid excuse for its failure to bring to
court the witnesses mentioned in said motion, despite the assurance given by its counsel, on August 2, 1966, that the
defense would "spare no effort to bring them here," or, if they could not be brought due to circumstances beyond
PANAM's control, to "submit their deposition." The records do not show that any such effort to bring the aforementioned
witnesses had been exerted. The defense has not even tried to explain why the deposition of said witnesses was not
taken. What is worse, the proffered explanation — that the six (6) persons who testified for the defense1 were believed,
by defense counsel, to be enough for the three (3) days of October set for the reception of his evidence2 — indicates
that no effort whatsoever had been made either to bring the "other witnesses"3 or to take and submit their depositions.

Besides, the testimony allegedly expected of said other witnesses for the defense — namely: (1) that there was,
according to official records, no turbulence in the flight from San Francisco to Honolulu, on which the testimony of Carol
Schmitz had touched; (2) that Ida V. Pomeroy and John C. Craig would say that the passengers were advised not to
go beyond the terminal and that the stopover would be for about 30 minutes only, on which duration of the stopover
Miss Schmitz had, also testified, as she could have similarly testified on said advice, had it been given; (3) that either

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Helga Schley or Sue Welby would narrate the sympathy with which Mrs. Zulueta was allegedly treated during the flight
from Wake Island to Manila, which is not particularly relevant or material in the case at bar; (4) that Herman Jaffe, Gerry
Cowles and Nilo de Guia were, also, expected to corroborate the testimony of Capt. Zentner; and (5) that Edgardo
Gavino was expected to corroborate Michael Thomas regarding the remarks made by the plaintiff to Mrs. Zulueta and
Miss Zulueta when they and other members of the searching party found him in the early morning of October 23, 1964
-- were merely cumulative in nature

Then, again, PANAM did not comply with section 4 of Rule 22 of the Rules of Court, reading:

SEC. 4. Requisites of motion to postpone trial for absence of evidence. — A motion to postpone a trial on the ground
of absence can be granted only upon affidavit showing the materiality of evidence expected to be obtained, and that
due diligence has been used to procure it. But if the adverse party admits the facts to be given in evidence, even if he
objects or reserves the right to object to their admissibility, the trial must not be postponed." .

Although this provision refers to motions "to postpone trial," it applies with equal force to motions like the one under
consideration, there being no plausible reason to distinguish between the same and a motion for postponement owing
to the "absence of evidence."

The second, third and fourth assignments of error are interrelated. They refer to the question whether the reason why
plaintiff went to the beach was to relieve himself, as testified to by him, or to remain in Wake Island because he had
quarreled with his wife, as contended by PANAM's counsel.

The latter contention however, is utterly devoid of merit. To begin with, plaintiff's testimony about what he did upon
reaching the beach is uncontradicted. Secondly, other portions of his testimony — such as, for instance, that the flight
was somewhat rough, shortly before reaching Wake Island; that there were quite a number of soldiers in the plane and,
later, in the terminal building; that he did not voluntarily remain in Wake Island, but was "off-loaded" by PANAM's agent
therein — are borne out by the very evidence for the defense. Thirdly, PANAM's efforts to show that plaintiff had decided
to remain in the Island because he had quarreled with Mrs. Zulueta — which is ridiculous — merely underscores the
artificious nature of PANAM's contention.

Fourthly, there is absolutely no direct evidence about said alleged quarrel. Nobody testified about it. Counsel for the
defense has, in effect, merely concluded that there must have been such quarrel because, when the searching party
located plaintiff, he — according to Stanley Ho — was "shouting in a loud tone of voice" — not at his wife, but —
"towards his wife and daughter," who headed said party and to which the words spoken were addressed, according to
plaintiff. Capt. Zentner said that plaintiff was "angry with them" — Mrs. Zulueta and Miss Zulueta — who Michael
Thomas affirmed — were saying "I am sorry, I am sorry"; whereas, Wayne S. Pendleton declared that Gavino told him
that this "seems to stem from a domestic issue" between Mr. and Mrs. Zulueta. Surely, this alleged surmise, not even
by Pendleton but by Gavino — who was not placed on the witness stand — cannot be taken as competent evidence
that plaintiff had quarreled with his wife, apart from the circumstance that such quarrel — if it took place and there is
absolutely no evidence or offer to prove that anything had transpired between husband and wife before reaching Wake
Island which may suggest a misunderstanding between them — does not warrant jumping at the conclusion that plaintiff
had decided to remain in the Island, for he would gain nothing thereby.

Needless to say, if plaintiff's purpose in going to the beach was to hide from Mrs. and Miss Zulueta and PANAM's
personnel, so that he may be left in the Island, he, surely, would not have walked back from the beach to the terminal,
before the plane had resumed its flight to Manila, thereby exposing his presence to the full view of those who were
looking for him.

Then, again, the words uttered by him as he saw the search party and approached the plane — "You people almost
made me miss your flight. You have a defective announcing system and I was not paged" — and the "belligerent"

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manner — according to Captain Zentner — in which he said it revealed his feeling of distress at the thought that the
plane could have left without him.4

The second, third and fourth assignments of error are thus clearly untenable.

In connection with the fifth assignment of error, PANAM's witness, Captain Zentner, testified that, while he was outside
the plane, waiting for the result of the search, a "man" approached him and expressed concern over the situation; that
the "man" said he was with the State Department; that he, his wife and their children, who were on board the aircraft,
would not want to continue the flight unless the missing person was found; that the "man" expressed fear of a "bomb,"
a word he used reluctantly, because he knew it is violative of a Federal law when said at the wrong time; that when
plaintiff came, Zentner asked him: "why did you not want to get on the airplane?"; that plaintiff then became "very angry"
and spoke to him "in a way I have not been spoken to in my whole adult life"; that the witness explained: "I am Captain
of the aircraft and it is my duty to see to the flight's safety"; that he (Zentner) then told Wayne Pendleton — PANAM's
Customer Service Supervisor — to get plaintiff's "bags off the plane to verify ... about the bomb"; that PANAM's airport
manager (K. Sitton) "got three bags of Mr. Zulueta"; that his fourth bag could not be located despite a thorough search;
that believing that it must have been left behind, in Honolulu, "we took off"; and that he (Zentner) would not have done
so had he thought it was still aboard.

The lower court did not err in giving no credence to this testimony.

Indeed, Captain Zentner did not explain why he seemingly assumed that the alleged apprehension of his informant
was justified. He did not ask the latter whether he knew anything in particular about plaintiff herein, although some
members of the crew would appear to have a notion that plaintiff is an impresario. Plaintiff himself intimated to them
that he was well known to the U.S. State Department. Apparently, Captain Zentner did not even know the informant's
name. Neither did the captain know whether the informant was really working for or in the State Department. In other
words, there was nothing — absolutely nothing — to justify the belief that the luggage of the missing person should be
searched, in order to ascertain whether there was a bomb in it; that, otherwise, his presence in the aircraft would be
inimical to its safety; and that, consequently, he should be off-loaded.

In fact, PANAM has not given the name of that "man" of the State Department. Neither has the defense tried to explain
such omission. Surely, PANAM's records would have disclosed the identity of said "man," if he were not a mere figment
of the imagination. The list of passengers has been marked as Exh. A, and yet PANAM has not pointed out who among
them is the aforementioned "man".

The trial court did not believe the testimony of Captain Zentner and rejected the theory of the defense, for the following
reasons:

(1) The defendant had contracted to transport plaintiff from Honolulu to Manila. It was its legal obligation to do so,
and it could be excused from complying with the obligation only, if the passenger had refused to continue with the trip
or it had become legally or physically impossible without the carrier's fault, to transport him.

(2) In this case, it is plain that Zulueta was desirous of continuing with the trip. Although defendant's witnesses
claim that Zulueta refused to board the plane, its own evidence belies this claim. The letter, Exh. "D", shows that it was
defendant who off-loaded Zulueta; not Zulueta who resisted from continuing the trip. In his testimony before the Court,
Capt. Zentner, defendant's pilot, said that if a passenger voluntarily left the plane, the term used would be `desistance'
but the term "off-load" means that it is the decision of the Captain not to allow the passenger or luggage to continue
the flight. However, Capt. Zentner admitted on his testimony that "his drunkenness... was of no consequence in my
report; (it) ... had nothing to do with his being belligerent and unfriendly in his attitude towards me and the rest of the
members of the crew." The written report of Capt. Zentner made in transit from Wake to Manila "intimated he might
possibly continue;" but "due to drinking, belligerent attitude, he was off-loaded along with his locked bags." (Exh. 10).

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In a later report, Zentner admitted, "The decision to leave Mr. Zulueta and his locked luggage in Wake was mine and
alone." (Exh. 9). Defendant's airport customer service supervisor, W.S. Pendleton, reported that:

"After the search for Mr. Zulueta had continued almost 20 minutes and it was apparent that he was not be found in the
terminal building or immediate vicinity, I proceeded to the parking lot and picked up my jeep continue the search in
more remote areas. Just as I was getting underway, a small group of persons approach from the direction of the beach
and a voice called out the passenger had been found. Having parked the jeep again, I walked toward the group and
was met by PAA fleet-serviceman E. Gavino who was walking somewhere ahead of the others. Mr. Gavino remarked
to me privately that the trouble seemed to have stemmed from some domestic difference between the Passenger and
his wife who was not at his side and returning with him to the gate.

"On hearing Mr. Gavino's remark, I made no comment to the passenger but turned and led the group toward the ramp.
Just as we reached the boarding gate, Mr. Zulueta spoke to me for the first time saying, "You people almost made me
miss your flight. You have a defective announcing system and I was not paged."

— Exh. 5

Evidently, these could not have been the words of a man who refused to board the plane.

(3) There was no legal or physical impossibility for defendant to transport plaintiff Zulueta from Wake to Manila as
it had contracted to do. Defendant claims that the safety of its craft and of the other passengers demanded that it
inspect Zulueta's luggage and when he refused to allow inspection that it had no recourse but to leave him behind. The
truth that, knowing that of plaintiff's four pieces of luggage, one could still have been — as it was — aboard, defendant's
plane still flew on to Manila. Surely, if the defendant's pilot and employees really believed that Zulueta had planted a
bomb in one of the bags they would not have flown on until they had made sure that the fourth bag had been left behind
at Honolulu until enough time had lapsed for the bomb to have been exploded, since presumably it had to have been
set to go off before they reached Manila.

"At any rate, it was quite evident that Zulueta had nothing to hide; for the report of defendant's witness, Mr. Stanley E.
Ho, U.S. Marshall on Wake, has this to say: "

"About twenty minutes later while an attempt was being made to locate another piece of Mr. Zulueta's luggage his
daughter, Carolinda approached her father and wanted to get some clothes from one of the suitcases. Mr. Zulueta
asked the undersigned if it was alright if he opened the suitcases and get the necessary clothes. To this I stated he
was free to open his luggage and obtain whatever he needed. Mr. Zulueta opened a suitcase and took the dress for
her then boarded the aircraft."

— Exh. 2B .

(4) What is evident to the Court is that defendant — acted in a manner deliberately calculated to humiliate and
shame plaintiffs. Although the plane was held up to wait for plaintiff — for, as the Captain admitted in his testimony, he
did so because he knew that it would be a week before another plane would come in for Manila (t.s.n., 18 Oct. 1966,
pp. 59-62) when plaintiff did come, he was met and treated roughly by defendant's manager Sitton. Here is what Zulueta
testified to:

"Q. — When you saw your wife and daughter what happened? A. — Then I started going towards the airplane. At the
ramp, I do not know what they call it, as soon as they arrived there, there was a man who subsequently identified
himself as Kenneth Sitton. He identified himself as the Airport Manager of Wake Island. He did not ask me what
happened, was I sick, he looked at me and said, what in the hell do you think you are? Get on that plane. Then I said,
what right have you to talk to me that way, I am a paying passenger. Do not treat me this way. And this started the

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altercation, and then he said, do you know you held up the plane? And I answered, this is not my fault, I was sick. Did
it not occur to you to ask me how I feel; then he said get on that plane.

"Q. — What happened? A. — we started discussing kept saying, "You get on that plane" and then I said, "I don't have
to get on that plane." After a prolonged discussion, he said, give me your baggage tags and I gave him four baggage
tickets or tags. I did not realize what he was up to until finally, I saw people coming down the airplane and police cars
arrived and people were coming down the ramp. I gave him the four baggage tags and a few minutes late, he brought
three baggages and said, open them up. I said, to begin with, there is one baggage missing and that missing bag is
my bag. Then I said you cannot make me open these baggages unless you are United States customs authorities and
when I arrive in the Philippines they can be opened by the Philippine Customs authorities. But an Airport Manager
cannot make me open my bags unless you do exactly the same thing to all the passengers. Open the bags of all the
other passengers and I will open my bag.

"Q. — What did he say: A. — He just kept on saying open your bag, and I drew up my hands and said, you want, you
open yourself or give me a search warrant I shall open this bag but give me a search warrant and then I asked, who is
the Chief of Police, and he said, "I am Chief of Police," then I said how can you be the Chief Police and Airport Manager
and then he started to talk about double compensation and by this time we were both quarreling and he was shouting
and so with me. Then there was a man who came around and said `open the bag' and I said, show the warrant of arrest
and do all the checking and the discussion kept on going, and finally I said look, my fourth bag is missing and he said,
"I don't give damn." People at the time were surrounding us and staring at us and also the passengers. My wife and
daughter all along had been made to sit on a railing and this man screaming and looking at my wife and daughter. Then
he said, will you pull these three monkeys out of here? then I said, will you send my wife and daughter up the plane
which he did. However, they have come down in their slippers and when they were allowed to return to the plane none
of the defendant's personnel who had brought down the overcoats, shoes and handcarried items of my wife and
daughter ever offered to bring back the items to the plane, until I demanded that one of the defendants should help my
wife and daughter which he did. And then one man told me, because you refused to open your bag, "we shall hold you
here in Wake Island." then I asked, are we under arrest? and the man answered, no. And further stated, your wife and
daughter can continue their flight but you will not go to this flight an we will charge you $13.30 a day. Then I said, who
are you to tell all these things, and he answered, I am the manager. I said, put it in writing, then left and in few minutes
he came back and handed me this letter (witness referring to Exhibit D)." .

— t.s.n., August 1, 1966, pp. 15-21

Anyone in Zulueta's position would have reached the same way if he had had a sense of dignity. Evidently, angered
by Zulueta's reaction, irked by the delay he had caused them, defendant's employees decided to teach him a lesson
by forcing him to open his bags when there was no justifiable reason to do so:

(a) Defendant did not make any attempt to inquire from any passenger or even the crew who knew Mr. Zulueta
what his character and reputation are, before demanding that he open the bags; if it had done so, Miss Schmitz, the
purser, and Col. Villamor would have vouched for plaintiffs; for Miss Schmitz believed she had flown before with the
Zulueta's and they had been very nice people.

(b) Worse, defendant's manager Sitton admits that Zulueta had told him who he was and his social position in
Manila; still he insisted that the bags be opened. Moreover, some passengers had informed the supervisor that Zulueta
was "the impresario"; but they persisted in their demands.

(c) Defendant never identified the alleged State Department men who reportedly approached the Captain and
expressed fear about a bomb, nor did they confront him — if he existed with Mr. Zulueta despite Mr. Zulueta's request.

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(d) Defendant did not take any steps to put the luggage off-loaded far from its passengers and plane, a strange
procedure if it really believed the luggage contained a bomb;

(e) Defendant continued with the flight knowing one bag -- Zulueta's bag himself — had not been located and
without verifying from Honolulu if the bag had been found there, nor even advising Honolulu that a bag possibly
containing a bomb had been left there, again an inexplicable procedure if they sincerely believed that Zulueta had
planted a bomb;

(f) Defendant's manager himself took Zulueta and his off-loaded bags, in his own car, from the terminal building
to the hotel, which is also inconsistent with a serious belief that the luggages contained a bomb;

(g) Defendant knew that while Zulueta's bags were on the ground, he had opened one of them with the permission
and in the presence of the U. S. Marshall in order to enable his daughter to get a dress from the bag; nothing suspicious
was seen; still, defendant insisted on refusing to allow Zulueta to continue unless he opened and allowed inspection of
the bags by them; .

(h) Defendant completely changed his tone and behavior towards the Zulueta's after the plane had arrived at
Manila and the Captain learned that its Manila manager, Mr. Oppenheimer, was a friend of Zulueta;

(i) Meantime, the attitude of Pan American towards the Zulueta's caused other passengers to resent Zulueta (See
reports of Stewardesses and of Captain Zentner, Exhs. 7, 8, 9 and 10). "Many passengers were angry towards the
`missing passenger," says Miss Schmitz's report. "A few inquisitive PA (passengers) — one woman quite rudely stared
once we were airborne and left Mr. Zulueta behind ... anyway I told the woman to sit down — so did Helga — so did
the man near her," say Miss Schmitz's personal notes. This confirms the testimony of plain plaintiffs that, all the while
the search and discussions were going on, they were the subject of stares, remarks and whisper comments from the
passengers and other persons around the plane.

(j) Defendant did not allow plaintiff Zulueta to board the plane at all, even though it was aware that some of his
personal belongings, such as his overcoat were on the plane. Plaintiffs so testified; and though defendant's witness
Mr. Sitton denied it, claiming that plaintiff was always free to board the plane, this denial is belied by the report of
defendant's own witness, U.S. Marshall Ho, who said that:

"Ten minutes later, Mr. Zulueta asked if he could talk to his wife who was aboard the aircraft. I then accompanied him
and as we got to the ramp, we met Mr. Sitton who stated he would summon Mrs. Zulueta from the aircraft. Mr. Sitton
summoned Mrs. Zulueta and she met her husband at the foot of the ramp. Mr. Zulueta then asked his wife and himself
to which I replied I was not concerned what he had to say."

— Exh. 2-B

(k) Finally, to add further humiliation and heap indignity on plaintiffs, when Mrs. Zulueta arrived at Manila and
appealed to defendant's Manila manager, Mr. Oppenheimer, to see to it that her husband got back as soon as possible
and was made as comfortable as possible, at defendant's expense, Mr. Oppenheimer refused to acknowledge any
obligation to transport Mr. Zulueta back to Manila and forcing Mrs. Zulueta to send her husband $100.00 for pocket
money and pay for his fare from Wake to Manila, thru Honolulu and Tokyo.

Upon a review of the record, We are satisfied that the foregoing findings of His Honor, the Trial Judge, are supported
by a preponderance of the evidence.

The last two (2) assignments of error are mere consequences of those already disposed of, and, hence, need no
extended discussion.

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It is urged, however, that plaintiff is, at most, entitled to actual damages only, because he was the first to commit a
breach of contract, for having gone over 200 yards away from the terminal, where he could not expect to be paged.
But, PANAM has not pointed out what part of the contract has been violated thereby, apart from the fact that the award
for damages made in the decision appealed from was due, not to PANAM's failure to so page the plaintiff, but to the
former's deliberate act of leaving him at Wake Island, and the embarrassment and humiliation caused to him and his
family in the presence of many other persons. Then, also, considering the flat nature of the terrain in Wake Island, and
the absence of buildings and structures, other than the terminal and a modest "hotel," as well as plaintiff's need of
relieving himself, he had to find a place beyond the view of the people and near enough the sea to wash himself up
before going back to the plane.

It is next argued that plaintiff was, also, guilty of contributory negligence for failure to reboard the plane within the 30
minutes announced before the passengers debarked therefrom. This might have justified a reduction of the damages,
had plaintiff been unwittingly left by the plane, owing to the negligence of PANAM personnel, or even, perhaps, wittingly,
if he could not be found before the plane's departure. It does not, and cannot have such justification in the case at bar,
plaintiff having shown up before the plane had taken off, and he having been off-loaded intentionally and with malice
aforethought, for his "belligerent" attitude, according to Captain Zentner; for having dared — despite his being one of
"three monkeys," — the term used by Captain Zentner to refer to the Zulueta family — to answer him back — when he
(Captain Zentner)5 said: "what in the hell do you think you are ?" — in a way he had "not been spoken to" in his "whole
adult life," in the presence of the passengers and other PANAM employees; for having responded to a command of
either Zentner or Sitton to open his (plaintiff's) bags, with a categorical refusal and a challenge for Zentner or Sitton to
open the bags without a search warrant therefor, thereby making manifest the lack of authority of the aforementioned
representative of PANAM to issue said command and exposing him to ridicule before said passengers and employees.
Besides, PANAM's own witness and employee, Wayne Pendleton, testified the plane could not take off at 4:30, as
scheduled, because "we were still waiting for two (2) local passengers."

Article 2201 of our Civil Code reads:

In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that
are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or
could reasonably foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation.

This responsibility applies to common carriers. Pursuant to Article 1759 of the same Code:

ART. 1759. Common carriers are liable for the death or injuries to passengers through the negligence or wilful acts
of the former's employees, although such employees may have acted beyond the scope of their authority or in violation
of the orders of the common carriers.

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

Referring now to the specific amounts to damages due to plaintiffs herein, We note that the sum of P5,502.85 awarded
to them as actual damages is not seriously disputed by PANAM.

As regards the moral and exemplary damages claimed by the plaintiffs, our Civil Code provides:

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ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs
or public policy shall compensate the latter for the damage.

ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result of defendant's wrongful act or omission.

ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in
addition to the moral, temperate liquidated or compensatory damages.

ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner.

The records amply establish plaintiffs' right to recover both moral and exemplary damages. Indeed, the rude and rough
reception plaintiff received at the hands of Sitton or Captain Zentner when the latter met him at the ramp ("what in the
hell do you think you are? Get on that plane"); the menacing attitude of Zentner or Sitton and the supercilious manner
in which he had asked plaintiff to open his bags ("open your bag," and when told that a fourth bag was missing, "I don't
give a damn"); the abusive language and highly scornful reference to plaintiffs as monkeys by one of PANAM's
employees (who turning to Mrs. Zulueta and Miss Zulueta remarked, "will you pull these three monkeys out of here?");
the unfriendly attitude, the ugly stares and unkind remarks to which plaintiffs were subjected, and their being cordoned
by men in uniform as if they were criminals, while plaintiff was arguing with Sitton; the airline officials' refusal to allow
plaintiff to board the plane on the pretext that he was hiding a bomb in his luggage and their arbitrary and high-handed
decision to leave him in Wake; Mrs. Zulueta's having suffered a nervous breakdown for which she was hospitalized as
a result of the embarrassment, insults and humiliations to which plaintiffs were exposed by the conduct of PANAM's
employees; Miss Zulueta's having suffered shame, humiliation and embarrassment for the treatment received by her
parents at the airport6 — all these justify an award for moral damages resulting from mental anguish, serious anxiety,
wounded feelings, moral shock, and social humiliation thereby suffered by plaintiffs.

The relation between carrier and passenger involves special and peculiar obligations and duties, differing in kind and
degree, from those of almost every other legal or contractual relation. On account of the peculiar situation of the parties
the law implies a promise and imposes upon the carrier the corresponding duty of protection and courteous treatment.
Therefore, the carrier is under the absolute duty of protecting his passengers from assault or insult by himself or his
servants. 7

A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this,
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 of the comforts and advantages it offers. The contract of air carriage, therefore, generates a
relation tended with a public duty. Neglect or malfeasance of the carrier's employees naturally could give ground for an
action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are titled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any rude or discourteous conduct on the
part of employees towards a passenger gives the latter an action for damages against the carrier. 8

A carrier of passengers is as much bound to protect them from humiliation and insult as from physical injury .. It is held
in nearly all jurisdictions, if not universally, that a carrier is liable to a passenger for humiliation and mental suffering
caused by abusive or insulting language directed at such passenger by an employee of the carrier. 9

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Where a conductor uses language to a passenger which is calculated to insult, humiliate, or wound the feelings of a
person of ordinary feelings and sensibilities, the carrier is liable, because the contract of carriage impliedly stipulates
for decent, courteous, and respectful treatment, at hands of the carrier's employees.10

The general rule that a carrier owes to a passenger highest degree of care has been held to include the duty to protect
the passenger from abusive language by the carrier's agents, or by others if under such circumstances that the carrier's
agents should have known about it and prevented it. Some of the courts have mentioned the implied duty of the carrier,
arising out of the contract of carriage, not to insult the passenger, or permit him to be insulted, and even where no
mention is made of this basis for liability, it is apparent that it is the ground upon which recovery is allowed. 11

The question is whether the award of P1,000,000 as moral damages was proper and justified by the circumstances. It
has been held that the discretion in fixing moral damages lies in the trial court. 12 Among the factors courts take into
account in assessing moral damages are the professional, social, political and financial standing of the offended parties
on one hand, and the business and financial position of the offender on the other. 13

In comparatively recent cases in this jurisdiction, also involving breach of contract of air carriage, this Court awarded
the amount of P25,000, where plaintiff, a first-class passenger in an Air France plane from Manila to Rome was, in
Bangkok, forced by the manager of the airline company to leave his first class accommodation after he was already
seated because there was a white man who, the manager alleged, had a "better right" to the seat 14 ;the amount of
P200,000, where plaintiffs, upon confirmation of their reservation in defendant airline's flight from Tokyo to San
Francisco were issued first class tickets, but upon arrival in Tokyo were informed that there was no accommodation for
them in the first class compartment and told they could not go unless they took the tourist class 15 — in both of which
cases the Court found the airline companies to have acted in bad faith, or in a wanton, reckless and oppressive manner,
justifying likewise the award of exemplary damages.

None of the passengers involved in said cases was, however, off-loaded, much less in a place as barren and isolated
as Wake Island, with the prospect of being stranded there for a week. The aforementioned passengers were merely
constrained to take a tourist or third class accommodation in lieu of the first class passage they were entitled to. Then,
also, in none of said cases had the agents of the carrier acted with the degree of malice or bad faith of those of PANAM
in the case at bar, or caused to the offended passengers a mental suffering arising from injuries to feelings, fright and
shock due to abusive, rude and insulting language used by the carrier's employees in the presence and within the
hearing of others, comparable to that caused by PANAM's employees to plaintiffs herein

To some extent, however, plaintiff had contributed to the gravity of the situation because of the extreme belligerence
with which he had reacted on the occasion. We do not over-look the fact that he justly believed he should uphold and
defend his dignity and that of the people of this country that the discomfort, the difficulties, and, perhaps, the ordeal
through which he had gone to relieve himself — which were unknown to PANAM's agents — were such as to put him
in no mood to be understanding of the shortcoming of others; and that said PANAM agents should have first inquired,
with an open mind, about the cause of his delay instead of assuming that he was at fault and of taking an arrogant and
overbearing attitude, as if they were dealing with an inferior. Just the same, there is every reason to believe that, in all
probability, things would not have turned out as bad as they became had he not allowed himself, in a way, to be dragged
to the level or plane on which PANAM's personnel had placed themselves.

In view of this circumstance, We feel that the moral and exemplary damages collectible by the plaintiffs should be
reduced to one-half of the amounts awarded by the lower court, that is, to P500,000 for moral damages, and P200,000
for exemplary damages, aside from the attorney's fees which should, likewise, be reduced to P75,000.

On April 22, 1971, Mrs. Zulueta filed a motion alleging that she had, for more than two (2) years, been actually living
separately from her husband, plaintiff Rafael Zulueta, and that she had decided to settle separately with PANAM and
had reached a full and complete settlement of all her differences with said defendant, and praying accordingly, that this

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case be dismissed insofar as she is concerned, Required to comment on said motion, PANAM expressed no objection
thereto.

Upon the other hand, plaintiff prayed that the motion be denied, upon the ground that the case at bar is one for damages
for breach of a contract of carriage, owing to the off-loading of plaintiff Rafael Zulueta, the husband and administrator
of the conjugal partnership, with the funds of which the PANAM had been paid under said contract; that the action was
filed by the plaintiffs as a family and the lower court had awarded damages to them as such family; that, although
PANAM had questioned the award of damages, it had not raised the question whether the lower court should have
specified what portion of the award should go to each plaintiff; that although Mr. and Mrs. Zulueta had, for sometime,
been living separately, this has been without judicial approval; that Mrs. Zulueta may not, therefore, bind the conjugal
partnership or settle this case separately; and that the sum given by PANAM to Mrs. Zulueta is believed to be P50,000,
which is less than 3-1/2% of the award appealed from, thereby indicating the advisability of denying her motion to
dismiss, for her own protection.

Pursuant to a resolution, dated June 10, 1971, deferring action on said motion to dismiss until the case is considered
on the merits. We now hold that the motion should be, as it is hereby denied. Indeed, "(t)he wife cannot bind the
conjugal partnership without the husband's consent, except in cases provided by law," 16 and it has not been shown
that this is one of the cases so provided. Article 113 of our Civil Code, pursuant to which "(t)he husband must be joined
in all suits by or against the wife, except: ... (2) If they have in fact been separated for at least one year ..." — relied
upon by PANAM — does not warrant the conclusion drawn therefrom by the latter. Obviously the suit contemplated in
subdivision (2) of said Article 113 is one in which the wife is the real party — either plaintiff or defendant — in interest,
and, in which, without being so, the hush must be joined as a party, by reason only of his relation of affinity with her.
Said provision cannot possibly apply to a case, like the one at bar, in which the husband is the main party in interest,
both as the person principally grieved and as administrator of the conjugal partnership. Moreover, he having acted in
this capacity in entering into the contract of carriage with PANAM and paid the amount due to the latter, under the
contract, with funds of conjugal partnership, the damages recoverable for breach of such contract belongs to said
partnership.

Modified, as above stated, in the sense that plaintiffs shall recover from defendant, Pan American World Airways, Inc.,
the sums of P500,000 as moral damages, P200,000 as exemplary damages, and P75,000 as attorney's fees, apart
from P5,502.85 as actual damages, and without prejudice to deducting the aforementioned sum of P50,000 already
paid Mrs. Zulueta, the decision appealed from is hereby affirmed in all other respects, with the costs against said
defendant.
G.R. No. L-22415 March 30, 1966

FERNANDO LOPEZ, ET AL., plaintiffs-appellants,


vs.
PAN AMERICAN WORLD AIRWAYS, defendant-appellant.

Ross, Selph and Carrascoso for the defendant-appellant.


Vicente J. Francisco for the plaintiffs-appellants.

BENGZON, J.P., J.:

Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal. Since the value in controversy
exceeds P200,000 the appeals were taken directly to this Court upon all questions involved (Sec. 17, par. 3[5], Judiciary
Act).

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Stated briefly the facts not in dispute are as follows: Reservations for first class accommodations in Flight No. 2 of Pan
American World Airways — hereinafter otherwise called PAN-AM — from Tokyo to San Francisco on May 24, 1960
were made with
PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for then Senator Fernando
Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano,
Jr., (Milagros Lopez Montelibano). PAN-AM's San Francisco head office confirmed the reservations on March 31, 1960.

First class tickets for the abovementioned flight were subsequently issued by
PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444 for all of them was
fully paid before the tickets were issued.

As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in Tokyo at 5:30
P.M. of that day. As soon as they arrived Senator Lopez requested Minister Busuego of the Philippine Embassy to
contact PAN-AM's Tokyo office regarding their first class accommodations for that evening's flight. For the given reason
that the first class seats therein were all booked up, however, PAN-AM's Tokyo office informed Minister Busuego that
PAN-AM could not accommodate Senator Lopez and party in that trip as first class passengers. Senator Lopez
thereupon gave their first class tickets to Minister Busuego for him to show the same to PAN-AM's Tokyo office, but
the latter firmly reiterated that there was no accommodation for them in the first class, stating that they could not go in
that flight unless they took the tourist class therein.

Due to pressing engagements awaiting Senator Lopez and his wife, in the United States — he had to attend a business
conference in San Francisco the next day and she had to undergo a medical check-up in Mayo Clinic, Rochester,
Minnesota, on May 28, 1960 and needed three days rest before that in San Francisco — Senator Lopez and party
were constrained to take PAN-AM's flight from Tokyo to San Francisco as tourist passengers. Senator Lopez however
made it clear, as indicated in his letter to PAN-AM's Tokyo office on that date (Exh. A), that they did so "under protest"
and without prejudice to further action against the airline.1äwphï1.ñët

Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM on June 2, 1960 in the Court of
First Instance of Rizal. Alleging breach of contracts in bad faith by defendant, plaintiffs asked for P500,000 actual and
moral damages, P100,000 exemplary damages, P25,000 attorney's fees plus costs. PAN-AM filed its answer on June
22, 1960, asserting that its failure to provide first class accommodations to plaintiffs was due to honest error of its
employees. It also interposed a counterclaim for attorney's fees of P25,000.

Subsequently, further pleadings were filed, thus: plaintiffs' answer to the counterclaim, on July 25, 1960; plaintiffs' reply
attached to motion for its admittance, on December 2, 1961; defendant's supplemental answer, on March 8, 1962;
plaintiffs' reply to supplemental answer, on March 10, 1962; and defendant's amended supplemental answer, on July
10, 1962.

After trial — which took twenty-two (22) days ranging from November 25, 1960 to January 5, 1963 — the Court of First
Instance rendered its decision on November 13, 1963, the dispositive portion stating:

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant,
which is accordingly ordered to pay the plaintiffs the following: (a) P100,000.00 as moral damages; (b) P20,000.00 as
exemplary damages; (c) P25,000.00 as attorney's fees, and the costs of this action.

So ordered.

Plaintiffs, however, on November 21, 1963, moved for reconsideration of said judgment, asking that moral damages
be increased to P400,000 and that six per cent (6%) interest per annum on the amount of the award be granted. And

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defendant opposed the same. Acting thereon the trial court issued an order on December 14, 1963, reconsidering the
dispositive part of its decision to read as follows:

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant,
which is accordingly ordered to pay the plaintiffs the following: (a) P150,000.00 as moral damages; (b) P25,000.00 as
exemplary damages; with legal interest on both from the date of the filing of the complaint until paid; and (c) P25,000.00
as attorney's fees; and the costs of this action.

So ordered.

It is from said judgment, as thus reconsidered, that both parties have appealed.

Defendant, as stated, has from the start admitted that it breached its contracts with plaintiffs to provide them with first
class accommodations in its Tokyo-San Francisco flight of May 24, 1960. In its appeal, however, it takes issue with the
finding of the court a quo that it acted in bad faith in the branch of said contracts. Plaintiffs, on the other hand, raise
questions on the amount of damages awarded in their favor, seeking that the same be increased to a total of P650,000.

Anent the issue of bad faith the records show the respective contentions of the parties as follows.

According to plaintiffs, defendant acted in bad faith because it deliberately refused to comply with its contract to provide
first class accommodations to plaintiffs, out of racial prejudice against Orientals. And in support of its contention that
what was done to plaintiffs is an oftrepeated practice of defendant, evidence was adduced relating to two previous
instances of alleged racial discrimination by defendant against Filipinos in favor of "white" passengers. Said previous
occasions are what allegedly happened to (1) Benito Jalbuena and (2) Cenon S. Cervantes and his wife.

And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first class ticket from PAN-AM on April
13, 1960; he confirmed it on April 15, 1960 as to the Tokyo-Hongkong flight of April 20, 1960; PAN-AM similarly
confirmed it on April 20, 1960. At the airport he and another Oriental — Mr. Tung — were asked to step aside while
other passengers - including "white" passengers — boarded PAN-AM's plane. Then PAN-AM officials told them that
one of them had to stay behind. Since Mr. Tung was going all the way to London, Jalbuena was chosen to be left
behind. PAN-AM's officials could only explain by saying there was "some mistake". Jalbuena thereafter wrote PAN-AM
to protest the incident (Exh. B).

As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on September 29, 1958 from Bangkok to
Hongkong, he and his wife had to take tourist class, although they had first class tickets, which they had previously
confirmed, because their seats in first class were given to "passengers from London."

Against the foregoing, however, defendant's evidence would seek to establish its theory of honest mistake, thus:

The first class reservations of Senator Lopez and party were made on March 29, 1960 together with those of four
members of the Rufino family, for a total of eight (8) seats, as shown in their joint reservation card (Exh. 1).
Subsequently on March 30, 1960, two other Rufinos secured reservations and were given a separate reservation card
(Exh. 2). A new reservation card consisting of two pages (Exhs. 3 and 4) was then made for the original of eight
passengers, namely, Senator Lopez and party and four members of the Rufino family, the first page (Exh. 3) referring
to 2 Lopezes, 2 Montelibanos and 1 Rufino and the second page (Exh. 4) referring to 3 Rufinos. On April 18, 1960
"Your Travel Guide" agency cancelled the reservations of the Rufinos. A telex message was thereupon sent on that
date to PAN-AM's head office at San Francisco by Mariano Herranz, PAN-AM's reservations employee at its office in
Escolta, Manila. (Annex A-Acker's to Exh. 6.) In said message, however, Herranz mistakenly cancelled all the seats
that had been reserved, that is, including those of Senator Lopez and party.

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The next day — April 1960 — Herranz discovered his mistake, upon seeing the reservation card newly prepared by his
co-employee Pedro Asensi for Sen. Lopez and party to the exclusion of the Rufinos (Exh. 5). It was then that Herranz
sent another telex wire to the San Francisco head office, stating his error and asking for the reinstatement of the four
(4) first class seats reserved for Senator Lopez and party (Annex A-Velasco's to Exh. 6). San Francisco head office
replied on April 22, 1960 that Senator Lopez and party are waitlisted and that said office is unable to reinstate them
(Annex B-Velasco's to Exh. 6).

Since the flight involved was still more than a month away and confident that reinstatement would be made, Herranz
forgot the matter and told no one about it except his co-employee, either Armando Davila or Pedro Asensi or both of
them (Tsn., 123-124, 127, Nov. 17, 1961).

Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations employee working in the same Escolta office
as Herranz, phoned PAN-AM's ticket sellers at its other office in the Manila Hotel, and confirmed the reservations of
Senator Lopez and party.

PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's mistake after "Your Travel Guide" phone on May
18, 1960 to state that Senator Lopez and party were going to depart as scheduled. Accordingly, Jose sent a telex wire
on that date to PAN-AM's head office at San Francisco to report the error and asked said office to continue holding the
reservations of Senator Lopez and party (Annex B-Acker's to Exh. 6). Said message was reiterated by Jose in his telex
wire of May 19, 1960 (Annex C-Acker's to Exh. 6). San Francisco head office replied on May 19, 1960 that it regrets
being unable to confirm Senator Lopez and party for the reason that the flight was solidly booked (Exh. 7). Jose sent a
third telex wire on May 20, 1960 addressed to PAN-AM's offices at San Francisco, New York (Idlewild Airport), Tokyo
and Hongkong, asking all-out assistance towards restoring the cancelled spaces and for report of cancellations at their
end (Annex D-Acker's to Exh. 6). San Francisco head office reiterated on May 20, 1960 that it could not reinstate the
spaces and referred Jose to the Tokyo and Hongkong offices (Exh. 8). Also on May 20, the Tokyo office of PAN-AM
wired Jose stating it will do everything possible (Exh. 9).

Expecting that some cancellations of bookings would be made before the flight time, Jose decided to withhold from
Senator Lopez and party, or their agent, the information that their reservations had been cancelled.

Armando Davila having previously confirmed Senator Lopez and party's first class reservations to PAN-AM's ticket
sellers at its Manila Hotel office, the latter sold and issued in their favor the corresponding first class tickets on the 21st
and 23rd of May, 1960.

From the foregoing evidence of defendant it is in effect admitted that defendant — through its agents — first cancelled
plaintiffs, reservations by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel
agent the fact of said cancellation, letting them go on believing that their first class reservations stood valid and
confirmed. In so misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed
reservations for the same, when in fact they had none, defendant wilfully and knowingly placed itself into the position
of having to breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation by other
passengers before flight time, as it turned out in this case. Such actuation of defendant may indeed have been prompted
by nothing more than the promotion of its self-interest in holding on to Senator Lopez and party as passengers in its
flight and foreclosing on their chances to seek the services of other airlines that may have been able to afford them first
class accommodations. All the time, in legal contemplation such conduct already amounts to action in bad faith. For
bad faith means a breach of a known duty through some motive of interest or ill-will (Spiegel vs. Beacon Participations,
8 NE 2d 895, 907). As stated in Kamm v. Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: "Self-enrichment or fraternal
interest, and not personal ill-will, may well have been the motive; but it is malice nevertheless."

As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew that plaintiffs' reservations had been
cancelled. As of May 20 he knew that the San Francisco head office stated with finality that it could not reinstate

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plaintiffs' cancelled reservations. And yet said reservations supervisor made the "decision" — to use his own, word —
to withhold the information from the plaintiffs. Said Alberto Jose in his testimony:

Q Why did you not notify them?

A Well, you see, sir, in my fifteen (15) years of service with the air lines business my experience is that even if the
flights are solidly booked months in advance, usually the flight departs with plenty of empty seats both on the first class
and tourist class. This is due to late cancellation of passengers, or because passengers do not show up in the airport,
and it was our hope others come in from another flight and, therefore, are delayed and, therefore, missed their
connections. This experience of mine, coupled with that wire from Tokyo that they would do everything possible
prompted me to withhold the information, but unfortunately, instead of the first class seat that I was hoping for and
which I anticipated only the tourists class was open on which Senator and Mrs. Lopez, Mr. and Mrs. Montelibano were
accommodated. Well, I fully realize now the gravity of my decision in not advising Senator and Mrs. Lopez, Mr. and
Mrs. Montelibano nor their agents about the erroneous cancellation and for which I would like them to know that I am
very sorry.

xxx xxx xxx

Q So it was not your duty to notify Sen. Lopez and parties that their reservations had been cancelled since May 18,
1960?

A As I said before it was my duty. It was my duty but as I said again with respect to that duty I have the power to make
a decision or use my discretion and judgment whether I should go ahead and tell the passenger about the cancellation.
(Tsn., pp. 17-19, 28-29, March 15, 1962.)

At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that
their reservation had not been cancelled. An additional indication of this is the fact that upon the face of the two tickets
of record, namely, the ticket issued to Alfredo Montelibano, Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs.
Alfredo Montelibano, Jr., on May 23, 1960 (Exh. 23), the reservation status is stated as "OK". Such willful-non-
disclosure of the cancellation or pretense that the reservations for plaintiffs stood — and not simply the erroneous
cancellation itself — is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in
this respect defendant clearly acted in bad faith.

As if to further emphasize its bad faith on the matter, defendant subsequently promoted the employee who cancelled
plaintiffs' reservations and told them nothing about it. The record shows that said employee — Mariano Herranz — was
not subjected to investigation and suspension by defendant but instead was given a reward in the form of an increase
of salary in June of the following year (Tsn., 86-88, Nov. 20, 1961).

At any rate, granting all the mistakes advanced by the defendant, there would at least be negligence so gross and
reckless as to amount to malice or bad faith (Fores vs. Miranda, L-12163, March 4, 1959; Necesito v. Paras, L-10605-
06, June 30, 1958). Firstly, notwithstanding the entries in the reservation cards (Exhs. 1 & 3) that the reservations
cancelled are those of the Rufinos only, Herranz made the mistake, after reading said entries, of sending a wire
cancelling all the reservations, including those of Senator Lopez and party (Tsn., pp. 108-109, Nov. 17, 1961).
Secondly, after sending a wire to San Francisco head office on April 19, 1960 stating his error and asking for
reinstatement, Herranz simply forgot about the matter. Notwithstanding the reply of San Francisco head Office on April
22, 1960 that it cannot reinstate Senator Lopez and party (Annex B-Velasco's to Exh. 6), it was assumed and taken for
granted that reinstatement would be made. Thirdly, Armando Davila confirmed plaintiff's reservations in a phone call
on April 27, 1960 to defendant's ticket sellers, when at the time it appeared in plaintiffs' reservation card (Exh. 5) that
they were only waitlisted passengers. Fourthly, defendant's ticket sellers issued plaintiffs' tickets on May 21 and 23,
1960, without first checking their reservations just before issuing said tickets. And, finally, no one among defendant's

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agents notified Senator Lopez and party that their reservations had been cancelled, a precaution that could have
averted their entering with defendant into contracts that the latter had already placed beyond its power to perform.

Accordingly, there being a clear admission in defendant's evidence of facts amounting to a bad faith on its part in regard
to the breach of its contracts with plaintiffs, it becomes unnecessary to further discuss the evidence adduced by plaintiffs
to establish defendant's bad faith. For what is admitted in the course of the trial does not need to be proved (Sec. 2,
Rule 129, Rules of Court).

Addressing ourselves now to the question of damages, it is well to state at the outset those rules and principles. First,
moral damages are recoverable in breach of contracts where the defendant acted fraudulently or in bad faith (Art. 2220,
New Civil Code). Second, in addition to moral damages, exemplary or corrective damages may be imposed by way of
example or correction for the public good, in breach of contract where the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner (Articles 2229, 2232, New Civil Code). And, third, a written contract for an
attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or
unreasonable (Sec. 24, Rule 138, Rules of Court).

First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs,
the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling
with first class tickets issued by defendant and yet they were given only the tourist class. At stop-overs, they were
expected to be among the first-class passengers by those awaiting to welcome them, only to be found among the
tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel
as such, contrary to what is rightfully to be expected from the contractual undertaking.

Senator Lopez was then Senate President Pro Tempore. International carriers like defendant know the prestige of such
an office. For the Senate is not only the Upper Chamber of the Philippine Congress, but the nation's treaty-ratifying
body. It may also be mentioned that in his aforesaid office Senator Lopez was in a position to preside in impeachment
cases should the Senate sit as Impeachment Tribunal. And he was former Vice-President of the Philippines. Senator
Lopez was going to the United States to attend a private business conference of the Binalbagan-Isabela Sugar
Company; but his aforesaid rank and position were by no means left behind, and in fact he had a second engagement
awaiting him in the United States: a banquet tendered by Filipino friends in his honor as Senate President Pro Tempore
(Tsn., pp. 14-15, Nov. 25, 1960). For the moral damages sustained by him, therefore, an award of P100,000.00 is
appropriate.

Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and therefore his humiliation. In addition she suffered
physical discomfort during the 13-hour trip,(5 hours from Tokyo to Honolulu and 8 hours from Honolulu to San
Francisco). Although Senator Lopez stated that "she was quite well" (Tsn., p. 22, Nov. 25, 1960) — he obviously meant
relatively well, since the rest of his statement is that two months before, she was attackedby severe flu and lost 10
pounds of weight and that she was advised by Dr. Sison to go to the United States as soon as possible for medical
check-up and relaxation, (Ibid). In fact, Senator Lopez stated, as shown a few pages after in the transcript of his
testimony, that Mrs. Lopez was sick when she left the Philippines:

A. Well, my wife really felt very bad during the entire trip from Tokyo to San Francisco. In the first place, she was sick
when we left the Philippines, and then with that discomfort which she [experienced] or suffered during that evening, it
was her worst experience. I myself, who was not sick, could not sleep because of the discomfort. (Tsn., pp. 27-28, Nov.
25, 1960).

It is not hard to see that in her condition then a physical discomfort sustained for thirteen hours may well be considered
a physical suffering. And even without regard to the noise and trepidation inside the plane — which defendant contends,
upon the strengh of expert testimony, to be practically the same in first class and tourist class — the fact that the seating
spaces in the tourist class are quite narrower than in first class, there beingsix seats to a row in the former as against

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four to a row in the latter, and that in tourist class there is very little space for reclining in view of the closer distance
between rows (Tsn., p. 24, Nov. 25, 1960), will suffice to show that the aforesaid passenger indeed experienced
physical suffering during the trip. Added to this, of course, was the painfull thought that she was deprived by defendant
— after having paid for and expected the same — of the most suitable, place for her, the first class, where evidently
the best of everything would have been given her, the best seat, service, food and treatment. Such difference in comfort
between first class and tourist class is too obvious to be recounted, is in fact the reason for the former's existence, and
is recognized by the airline in charging a higher fare for it and by the passengers in paying said higher rate Accordingly,
considering the totality of her suffering and humiliation, an award to Mrs. Maria J. Lopez of P50,000.00 for moral
damages will be reasonable.

Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate members of the family of Senator Lopez. They
formed part of the Senator's party as shown also by the reservation cards of PAN-AM. As such they likewise shared
his prestige and humiliation. Although defendant contends that a few weeks before the flight they had asked their
reservations to be charged from first class to tourist class — which did not materialize due to alleged full booking in the
tourist class — the same does not mean they suffered no shared in having to take tourist class during the flight. For by
that time they had already been made to pay for first class seats and therefore to expect first class accommodations.
As stated, it is one thing to take the tourist class by free choice; a far different thing to be compelled to take it
notwithstanding having paid for first class seats. Plaintiffs-appellants now ask P37,500.00 each for the two but we note
that in their motion for reconsideration filed in the court a quo, they were satisfied with P25,000.00 each for said persons.
(Record on Appeal, p. 102). For their social humiliation, therefore, the award to them of P25,000.00 each is reasonable.

The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for
public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary
damages in addition to moral damages (Articles 2229, 2232, New Civil Code).

In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of
contracts in the future by defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or
corrective damages.

Now, as to attorney's fees, the record shows a written contract of services executed on June 1, 1960 (Exh. F)
whereunder plaintiffs-appellants engaged the services of their counsel — Atty. Vicente J. Francisco — and agreedto
pay the sum of P25,000.00 as attorney's fees upon the termination of the case in the Court of First Instance, and an
additional sum of P25,000.00 in the event the case is appealed to the Supreme Court. As said earlier, a written contract
for attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or
unreasonable. A consideration of the subject matter of the present controversy, of the professional standing of the
attorney for plaintiffs-appellants, and of the extent of the service rendered by him, shows that said amount provided for
in the written agreement is reasonable. Said lawyer — whose prominence in the legal profession is well known —
studied the case, prepared and filed the complaint, conferred with witnesses, analyzed documentary evidence,
personally appeared at the trial of the case in twenty-two days, during a period of three years, prepared four sets of
cross-interrogatories for deposition taking, prepared several memoranda and the motion for reconsideration, filed a
joint record on appeal with defendant, filed a brief for plaintiffs as appellants consisting of 45 printed pages and a brief
for plaintiffs as appellees consisting of 265 printed pages. And we are further convinced of its reasonableness because
defendant's counsel likewise valued at P50,000.00 the proper compensation for his services rendered to defendant in
the trial court and on appeal.

In concluding, let it be stressed that the amount of damages awarded in this appeal has been determined by adequately
considering the official, political, social, and financial standing of the offended parties on one hand, and the business
and financial position of the offender on the other (Domingding v. Ng, 55 O.G. 10). And further considering the present
rate of exchange and the terms at which the amount of damages awarded would approximately be in U.S. dollars, this
Court is all the more of the view that said award is proper and reasonable.

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Wherefore, the judgment appealed from is hereby modified so as to award in favor of plaintiffs and against defendant,
the following: (1) P200,000.00 as moral damages, divided among plaintiffs, thus: P100,000.00 for Senate President
Pro Tempore Fernando Lopez; P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his son-in-law Alfredo
Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo Montelibano, Jr.; (2) P75,000.00 as exemplary or
corrective damages; (3) interest at the legal rate of 6% per annum on the moral and exemplary damages aforestated,
from December 14, 1963, the date of the amended decision of the court a quo, until said damages are fully paid; (4)
P50,000.00 as attorney's fees; and (5) the costs. Counterclaim dismissed.So ordered.

[G.R. No. 159636. November 25, 2004]

VICTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI ROZANO P.
GAMMAD and DIANA FRANCES P. GAMMAD, respondents.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for review on certiorari is the April 11, 2003 decision[1] of the Court of Appeals in CA-G.R. CV
No. 63290 which affirmed with modification the November 6, 1998 decision[2] of the Regional Trial Court of
Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of carriage in Civil
Case No. 5023.

The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace Pagulayan-
Gammad,[3] was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about
3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva
Vizcaya, which resulted in the death of Marie Grace and physical injuries to other passengers.[4]

On May 14, 1996, respondent heirs of the deceased filed a complaint[5] for damages arising from culpa contractual
against petitioner. In its answer,[6] the petitioner claimed that the incident was purely accidental and that it has always
exercised extraordinary diligence in its 50 years of operation.

After several re-settings,[7] pre-trial was set on April 10, 1997.[8] For failure to appear on the said date, petitioner was
declared as in default.[9] However, on petitioners motion[10] to lift the order of default, the same was granted by the
trial court.[11]

At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the deceased was a
passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket No. 977785.
Respondents, for their part, did not accept petitioners proposal to pay P50,000.00.[12]

After respondent Rosalito Gammad completed his direct testimony, cross-examination was scheduled for November
17, 1997[13] but moved to December 8, 1997,[14] because the parties and the counsel failed to appear. On December
8, 1997, counsel of petitioner was absent despite due notice and was deemed to have waived right to cross-examine
respondent Rosalito.[15]

Petitioners motion to reset the presentation of its evidence to March 25, 1998[16] was granted. However, on March 24,
1998, the counsel of petitioner sent the court a telegram[17] requesting postponement but the telegram was received
by the trial court on March 25, 1998, after it had issued an order considering the case submitted for decision for failure
of petitioner and counsel to appear.[18]

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On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive portion of which
reads:

WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered in favor of the plaintiffs
and against the defendant Victory Liner, Incorporated, ordering the latter to pay the following:

1. Actual Damages -------------------- P 122,000.00

2. Death Indemnity --------------------- 50,000.00

3. Exemplary and Moral Damages----- 400,000.00

4. Compensatory Damages ---------- 1,500,000.00

5. Attorneys Fees ------------ 10% of the total amount granted

6. Cost of the Suit.

SO ORDERED.[19]

On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification as follows:

[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the following are hereby adjudged in favor
of plaintiffs-appellees:

1. Actual Damages in the amount of P88,270.00;

2. Compensatory Damages in the amount of P1,135,536,10;

3. Moral and Exemplary Damages in the amount of P400,000.00; and

4. Attorneys fees equivalent to 10% of the sum of the actual, compensatory, moral, and exemplary damages herein
adjudged.

The court a quos judgment of the cost of the suit against defendant-appellant is hereby AFFIRMED.

SO ORDERED.[20]

Represented by a new counsel, petitioner on May 21, 2003 filed a motion for reconsideration praying that the case be
remanded to the trial court for cross- examination of respondents witness and for the presentation of its evidence; or in
the alternative, dismiss the respondents complaint.[21] Invoking APEX Mining, Inc. v. Court of Appeals,[22] petitioner
argues, inter alia, that the decision of the trial court should be set aside because the negligence of its former counsel,
Atty. Antonio B. Paguirigan, in failing to appear at the scheduled hearings and move for reconsideration of the orders
declaring petitioner to have waived the right to cross-examine respondents witness and right to present evidence,
deprived petitioner of its day in court.

On August 21, 2003, the Court of Appeals denied petitioners motion for reconsideration.[23]

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Hence, this petition for review principally based on the fact that the mistake or gross negligence of its counsel deprived
petitioner of due process of law. Petitioner also argues that the trial courts award of damages were without basis and
should be deleted.

The issues for resolution are: (1) whether petitioners counsel was guilty of gross negligence; (2) whether petitioner
should be held liable for breach of contract of carriage; and (3) whether the award of damages was proper.

It is settled that the negligence of counsel binds the client. This is based on the rule that any act performed by a counsel
within the scope of his general or implied authority is regarded as an act of his client. Consequently, the mistake or
negligence of counsel may result in the rendition of an unfavorable judgment against the client. However, the application
of the general rule to a given case should be looked into and adopted according to the surrounding circumstances
obtaining. Thus, exceptions to the foregoing have been recognized by the court in cases where reckless or gross
negligence of counsel deprives the client of due process of law, or when its application will result in outright deprivation
of the clients liberty or property or where the interests of justice so require, and accord relief to the client who suffered
by reason of the lawyers gross or palpable mistake or negligence.[24]

The exceptions, however, are not present in this case. The record shows that Atty. Paguirigan filed an Answer and
Pre-trial Brief for petitioner. Although initially declared as in default, Atty. Paguirigan successfully moved for the setting
aside of the order of default. In fact, petitioner was represented by Atty. Paguirigan at the pre-trial who proposed
settlement for P50,000.00. Although Atty. Paguirigan failed to file motions for reconsideration of the orders declaring
petitioner to have waived the right to cross-examine respondents witness and to present evidence, he nevertheless,
filed a timely appeal with the Court of Appeals assailing the decision of the trial court. Hence, petitioners claim that it
was denied due process lacks basis.

Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it as in default for not appearing at
the pre-trial, three notices (dated October 23, 1996,[25] January 30, 1997,[26] and March 26, 1997,[27]) requiring
attendance at the pre-trial were sent and duly received by petitioner. However, it was only on April 27, 1997, after the
issuance of the April 10, 1997 order of default for failure to appear at the pre-trial when petitioner, through its finance
and administrative manager, executed a special power of attorney[28] authorizing Atty. Paguirigan or any member of
his law firm to represent petitioner at the pre-trial. Petitioner is guilty, at the least, of contributory negligence and fault
cannot be imputed solely on previous counsel.

The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case at bar. In APEX, the negligent
counsel not only allowed the adverse decision against his client to become final and executory, but deliberately
misrepresented in the progress report that the case was still pending with the Court of Appeals when the same was
dismissed 16 months ago.[29] These circumstances are absent in this case because Atty. Paguirigan timely filed an
appeal from the decision of the trial court with the Court of Appeals.

In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted with the issue of whether or not the client
should bear the adverse consequences of its counsels negligence. In that case, Gold Line Transit, Inc. (Gold Line) and
its lawyer failed to appear at the pre-trial despite notice and was declared as in default. After the plaintiffs presentation
of evidence ex parte, the trial court rendered decision ordering Gold Line to pay damages to the heirs of its deceased
passenger. The decision became final and executory because counsel of Gold Line did not file any appeal. Finding
that Goldline was not denied due process of law and is thus bound by the negligence of its lawyer, the Court held as
follows

This leads us to the question of whether the negligence of counsel was so gross and reckless that petitioner was
deprived of its right to due process of law. We do not believe so. It cannot be denied that the requirements of due
process were observed in the instant case. Petitioner was never deprived of its day in court, as in fact it was afforded
every opportunity to be heard. Thus, it is of record that notices were sent to petitioner and that its counsel was able to

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file a motion to dismiss the complaint, an answer to the complaint, and even a pre-trial brief. What was irretrievably lost
by petitioner was its opportunity to participate in the trial of the case and to adduce evidence in its behalf because of
negligence.

In the application of the principle of due process, what is sought to be safeguarded against is not the lack of previous
notice but the denial of the opportunity to be heard. The question is not whether petitioner succeeded in defending its
rights and interests, but simply, whether it had the opportunity to present its side of the controversy. Verily, as petitioner
retained the services of counsel of its choice, it should, as far as this suit is concerned, bear the consequences of its
choice of a faulty option. Its plea that it was deprived of due process echoes on hollow ground and certainly cannot
elicit approval nor sympathy.

To cater to petitioners arguments and reinstate its petition for relief from judgment would put a premium on the
negligence of its former counsel and encourage the non-termination of this case by reason thereof. This is one case
where petitioner has to bear the adverse consequences of its counsels act, for a client is bound by the action of his
counsel in the conduct of a case and he cannot thereafter be heard to complain that the result might have been different
had his counsel proceeded differently. The rationale for the rule is easily discernible. If the negligence of counsel be
admitted as a reason for opening cases, there would never be an end to a suit so long as a new counsel could be hired
every time it is shown that the prior counsel had not been sufficiently diligent, experienced or learned.[31]

Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation employee charged with dishonesty was not
able to file an answer and position paper. He was found guilty solely on the basis of complainants evidence and was
dismissed with forfeiture of all benefits and disqualification from government service. Challenging the decision of the
Ombudsman, the employee contended that the gross negligence of his counsel deprived him of due process of law. In
debunking his contention, the Court said

Neither can he claim that he is not bound by his lawyers actions; it is only in case of gross or palpable negligence of
counsel when the courts can step in and accord relief to a client who would have suffered thereby. If every perceived
mistake, failure of diligence, lack of experience or insufficient legal knowledge of the lawyer would be admitted as a
reason for the reopening of a case, there would be no end to controversy. Fundamental to our judicial system is the
principle that every litigation must come to an end. It would be a clear mockery if it were otherwise. Access to the courts
is guaranteed, but there must be a limit to it.

Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument that it was denied due process of law due
to negligence of its counsel would set a dangerous precedent. It would enable every party to render inutile any adverse
order or decision through the simple expedient of alleging gross negligence on the part of its counsel. The Court will
not countenance such a farce which contradicts long-settled doctrines of trial and procedure.[33]

Anent the second issue, petitioner was correctly found liable for breach of contract of carriage. A common carrier 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 to 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.[34]

In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of Marie Graces
death was the negligence of petitioner. Hence, the courts below correctly ruled that petitioner was guilty of breach of
contract of carriage.

Nevertheless, the award of damages should be modified.

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Article 1764[35] in relation to Article 2206[36] of the Civil Code, holds the common carrier in breach of its contract of
carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for
loss of earning capacity, and (3) moral damages.

In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace which
under current jurisprudence is fixed at P50,000.00.[37]

The award of compensatory damages for the loss of the deceaseds earning capacity should be deleted for lack of
basis. As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning
capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under current
labor laws, and judicial notice may be taken of the fact that in the deceaseds line of work no documentary evidence is
available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current
labor laws.[38]

In People v. Oco,[39] the evidence presented by the prosecution to recover damages for loss of earning capacity was
the bare testimony of the deceaseds wife that her husband was earning P8,000.00 monthly as a legal researcher of a
private corporation. Finding that the deceased was neither self-employed nor employed as a daily-wage worker earning
less than the minimum wage under the labor laws existing at the time of his death, the Court held that testimonial
evidence alone is insufficient to justify an award for loss of earning capacity.

Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not awarded because the circumstances
of the 3 deceased did not fall within the recognized exceptions, and except for the testimony of their wives, no
documentary proof about their income was presented by the prosecution. Thus

The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio Castro Jr. were not self-employed
or employed as daily-wage workers earning less than the minimum wage under the labor laws existing at the time of
their death. Placido Agustin was a Social Security System employee who received a monthly salary of P5,000. Roberto
Raagas was the President of Sinclair Security and Allied Services, a family owned corporation, with a monthly
compensation of P30,000. Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily earning of P500
or a monthly earning of P7,500. Clearly, these cases do not fall under the exceptions where indemnity for loss of
earning capacity can be given despite lack of documentary evidence. Therefore, for lack of documentary proof, no
indemnity for loss of earning capacity can be given in these cases. (Emphasis supplied)

Here, the trial court and the Court of Appeals computed the award of compensatory damages for loss of earning
capacity only on the basis of the testimony of respondent Rosalito that the deceased was 39 years of age and a Section
Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a salary of P83,088.00 per annum when she
died.[41] No other evidence was presented. The award is clearly erroneous because the deceaseds earnings does not
fall within the exceptions.

However, the fact of loss having been established, temperate damages in the amount of P500,000.00 should be
awarded to respondents. Under Article 2224 of the Civil Code, temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has
been suffered but its amount can not, from the nature of the case, be proved with certainty.

In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of P200,000.00 as temperate damages in
lieu of actual damages for loss of earning capacity because the income of the victim was not sufficiently proven, thus

The trial court based the amounts of damages awarded to the petitioner on the following circumstances:

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As to the loss or impairment of earning capacity, there is no doubt that Pleno is an ent[re]preneur and the founder of
his own corporation, the Mayon Ceramics Corporation. It appears also that he is an industrious and resourceful person
with several projects in line, and were it not for the incident, might have pushed them through. On the day of the incident,
Pleno was driving homeward with geologist Longley after an ocular inspection of the site of the Mayon Ceramics
Corporation. His actual income however has not been sufficiently established so that this Court cannot award actual
damages, but, an award of temperate or moderate damages may still be made on loss or impairment of earning
capacity. That Pleno sustained a permanent deformity due to a shortened left leg and that he also suffers from double
vision in his left eye is also established. Because of this, he suffers from some inferiority complex and is no longer
active in business as well as in social life. In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165;
Coriage, et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et al., L-11394, Sept. 9,
1958, the proper award of damages were given.

We rule that the lower courts awards of damages are more consonant with the factual circumstances of the instant
case. The trial courts findings of facts are clear and well-developed. Each item of damages is adequately supported by
evidence on record.

Article 2224 of the Civil Code was likewise applied in the recent cases of People v. Singh[43] and People v.
Almedilla,[44] to justify the award of temperate damages in lieu of damages for loss of earning capacity which was not
substantiated by the required documentary proof.

Anent the award of moral damages, the same cannot be lumped with exemplary damages because they are based on
different jural foundations.[45] These damages are different in nature and require separate determination.[46] In culpa
contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was
guilty of gross negligence (amounting to bad faith) or in wanton disregard of contractual obligations and, as in this case,
when the act of breach of contract itself constitutes the tort that results in physical injuries. By special rule in Article
1764 in relation to Article 2206 of the Civil Code, moral damages may also be awarded in case the death of a passenger
results from a breach of carriage.[47] On the other hand, exemplary damages, which are awarded by way of example
or correction for the public good may be recovered in contractual obligations if the defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner.[48]

Respondents in the instant case should be awarded moral damages to compensate for the grief caused by the death
of the deceased resulting from the petitioners breach of contract of carriage. Furthermore, the petitioner failed to prove
that it exercised the extraordinary diligence required for common carriers, it is presumed to have acted recklessly.[49]
Thus, the award of exemplary damages is proper. Under the circumstances, we find it reasonable to award respondents
the amount of P100,000.00 as moral damages and P100,000.00 as exemplary damages. These amounts are not
excessive.[50]

The actual damages awarded by the trial court reduced by the Court of Appeals should be further reduced. In People
v. Duban,[51] it was held that only substantiated and proven expenses or those that appear to have been genuinely
incurred in connection with the death, wake or burial of the victim will be recognized. A list of expenses (Exhibit J),[52]
and the contract/receipt for the construction of the tomb (Exhibit F)[53] in this case, cannot be considered competent
proof and cannot replace the official receipts necessary to justify the award. Hence, actual damages should be further
reduced to P78,160.00,[54] which was the amount supported by official receipts.

Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be recovered in the case at bar where exemplary
damages are awarded. The Court finds the award of attorneys fees equivalent to 10% of the total amount adjudged
against petitioner reasonable.

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Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held 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. (Emphasis
supplied).

In the instant case, petitioner should be held liable for payment of interest as damages for breach of contract of carriage.
Considering that the amounts payable by petitioner has been determined with certainty only in the instant petition, the
interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, per
paragraph 3 of the aforecited rule.[57]

WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The April 11, 2003 decision of the
Court of Appeals in CA-G.R. CV No. 63290, which modified the decision of the Regional Trial Court of Tuguegarao,
Cagayan in Civil Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory Liner, Inc., is
ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death of Marie Grace Pagulayan-
Gammad; (2) P100,000.00 as moral damages; (3) P100,000.00 as exemplary damages; (4) P78,160.00 as actual
damages; (5) P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys fees; and the costs of suit.

Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12% per annum computed
from the finality of this decision until fully paid.

SO ORDERED.

G.R. No. 113578 July 14, 1995

SULPICIO LINES, INC., Petitioner,


vs.
The Honorable COURT OF APPEALS and TITO DURAN TABUQUILDE and ANGELINA DE PAZ TABUQUILDE,
respondents.

QUIASON, J.:
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This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the decision of the Court of
Appeals in CA-G.R. CV
No. 32864, which affirmed the decision of the Regional Trial Court, Branch 85, Quezon City in Civil Case No. Q-89-
3048.

The Court of Appeals found:

On October 23, 1988, plaintiff Tito Duran Tabuquilde (hereinafter, "Tito") and his three-year old daughter Jennifer Anne
boarded the M/V Dona Marilyn at North Harbor, Manila, bringing with them several pieces of luggage.

In the morning of October 24, 1988, the M/V Dona Marilyn, while in transit, encountered inclement weather which
caused huge waves due to Typhoon Unsang.

Notwithstanding the fact that Storm Signal No. 2 had been raised by the PAG-ASA authorities over Leyte as early as
5:30 P.M. of October 23, 1988 and which signal was raised to Signal No. 3 by 10 P.M. of the same day, the ship captain
ordered the vessel to proceed to Tacloban when prudence dictated that he should have taken it to the nearest port for
shelter, thus violating his duty to exercise extraordinary diligence in the carrying of passengers safely to their
destination.

At about the same time, plaintiff-appellee Angelina Tabuquilde (hereinafter, "Angelina") mother of Jennifer Anne,
contacted the Sulpicio Office to verify radio reports that the vessel M/V Dona Marilyn was missing. Employees of said
Sulpicio Lines assured her that the ship was merely "hiding" thereby assuaging her anxiety.

At around 2:00 P.M. of October 24, 1988, said vessel capsized, throwing plaintiff-appellee Tito and Jennifer Anne,
along with hundreds of passengers, into the tumultuous sea.

Tito tried to keep himself and his daughter afloat but to no avail as the waves got stronger and he was subsequently
separated from his daughter despite his efforts.

He found himself on Almagro Island in Samar the next day at round (sic) 11:00 A.M. and immediately searched for his
daughter among the survivors in the island, but the search proved fruitless.

In the meantime, Angelina tried to seek the assistance of the Sulpicio Lines in Manila to no avail, the latter refusing to
entertain her and hundreds of relatives of the other passengers who waited long hours outside the Manila Office.
Angelina spent sleepless nights worrying about her husband Tito and daughter Jennifer Anne in view of the refusal of
Sulpicio Lines to release a verification of the sinking of the ship.

On October 26, 1988, Tito and other survivors in the Almagro Island were fetched and were brought to Tacloban
Medical Center for treatment.

On October 31, 1988, Tito reported the loss of his daughter, was informed that the corpse of a child with his daughter's
description had been found. Subsequently, Tito wrote a letter to his wife, reporting the sad fact that Jennifer Anne was
dead. Angelina suffered from shock and severe grief upon receipt of the news.

On November 3, 1988, the coffin bearing the corpse of Jennifer Anne was buried in Tanauan, Leyte.

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On November 24, 1988, a claim for damages was filed by Tito with the defendant Sulpicio Lines in connection with the
death of the plaintiff-appellee's daughter and the loss of Tito's belongings worth P27,580.00. (Appellees' Brief, pp. 2-4)
( Rollo, pp. 52-54).

On January 3, 1991, the trial court rendered a decision in Civil Case No. Q-89-3048 in favor of the plaintiffs Tito Duran
Tabuquilde and Angelina de Paz Tabuquilde (private respondents herein) and against defendant Sulpicio Lines, Inc.
(petitioner herein) ordering defendant to pay P27,580.00 as actual damages, P30,000.00 for the death of Jennifer
Tabuquilde, P100,000.00 as moral damages, P50,000.00 as exemplary damages, and P50,000.00 as attorney's fees,
and costs.

Petitioner appealed to the Court of Appeals which affirmed the decision of the trial court. Petitioner then filed a motion
for reconsideration which was denied. Hence, this petition.

II

Generally, the findings of fact of the trial court are entitled to great weight and not disturbed except for cogent reasons
(Gatmaitan v. Court of Appeals, 200 SCRA 37 [1991]). One of the accepted reasons is when the findings of fact are
not supported by the evidence (Sandoval Shipyard, Inc. v. Clave, 94 SCRA 472 [1979]). Corollary to this is the rule that
actual or compensatory damages, to be recovered, must be proved; otherwise, if the proof is flimsy, no damages will
be awarded (Dichoso v. Court of Appeals, 192 SCRA 169 [1990]).

In the case at bench, the trial court merely mentioned the fact of the loss and the value of the contents of the pieces of
baggage without stating the evidence on which it based its findings. There is no showing that the value of the contents
of the lost pieces of baggage was based on the bill of lading or was previously declared by respondent Tito D.
Tabuquilde before he boarded the ship. Hence, there can be no basis to award actual damages in the amount of
P27,850.00.

The Court of Appeals was correct in confirming the award of damages for the death of the daughter of private
respondents, a passenger on board the stricken vessel of petitioner. It is true that under Article 2206 of the Civil Code
of the Philippines, only deaths caused by a crime as quasi delict are entitled to actual and compensatory damages
without the need of proof of the said damages. Said Article provides:

The amount of damages for death caused by a crime or quasi delict shall be at least Three Thousand Pesos, even
though there may have been mitigating circumstances. . . .

Deducing alone from said provision, one can conclude that damages arising from culpa contractual are not
compensable without proof of special damages sustained by the heirs of the victim.

However, the Civil Code, in Article 1764 thereof, expressly makes Article 2206 applicable "to the death of a passenger
caused by the breach of contract by a common carrier." Accordingly, a common carrier is liable for actual or
compensatory damages under Article 2206 in relation to Article 1764 of the Civil Code for deaths of its passengers
caused by the breach of the contract of transportation.

The trial court awarded an indemnity of P30,000.00 for the death of the daughter of private respondents. The award of
damages under Article 2206 has been increased to P50,000.00 (People v. Flores, 237 SCRA 653 [1994]).

With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa
contractual except when the presence of bad faith was proven (Trans World Air Lines v. Court of Appeals, 165 SCRA
143 [1988]). However, in breach of contract of carriage, moral damages may be recovered when it results in the death

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of a passenger (Philippine Rabbit Bus Lines, Inc. v. Esguerra, 117 SCRA 741 [1982]; Vasquez v. Court of Appeals,
138 SCRA 553 [1985]).

With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the Court the
discretion to grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless
manner (Air France v. Carrascoso, 18 SCRA 155 [1966]).

Furthermore, in the case of Mecenas v. Court of Appeals, 180 SCRA 83 (1989), we ruled that:

. . . . The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our
waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that
notwithstanding the frequent sinking of passenger in our waters, crowds of people continue to travel by sea. This Court
is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those
instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state
like the Philippines, is the safe and reliable carriage of people and goods by sea. . . . (at p. 100).

A common carrier is obliged to transport its passengers to their destinations with the utmost diligence of a very cautious
person (Laguna Tayabas Bus Co. v. Tiongson, 16 SCRA 940 [1966]). The trial court found that petitioner failed to
exercise the extraordinary diligence required of a common carrier, which resulted in the sinking of the M/V Dona Marilyn.

The trial court correctly concluded that the sinking of M/V Dona Marilyn was due to gross negligence, thus:

. . . [i]t is undisputed that Typhoon Unsang entered the Philippine Area of Responsibility on October 21, 1988. The rain
in Metro Manila started after lunch of October 23, 1988, and at about 5:00 p.m. Public Storm Signal No. 1 was hoisted
over Metro Manila, Signal No. 2 in Leyte and Signal No. 3 in Samar. But at 10:00 o'clock (sic) in the morning of October
23, 1988, Public Storm Signal No. 1 was already hoisted over the province of Leyte, which is the destination of M/V
Dona Marilyn. This was raised to Signal No. 2 at 4:00 p.m. and Signal No. 3 at 10:00 p.m. on the same date. The
following day, October 24, 1988, at 4:00 a.m. and 10:00 a.m., Storm Signal No. 3 remained hoisted in Leyte. At 4 p.m.
on October 24, 1988, Storm Signal No. 3 remained hoisted in Leyte but was reduced to Storm Signal No. 2 (Exh. G).
Signal No. 1 has maximum winds at 60 kph within 36 hours; Signal No. 2 has maximum winds of from 60 kph to 100
kph within a period of 24 hours; and Signal No. 3 has maximum winds of 100 kph and above within a period of 12
hours.

Warnings of the storm signal are issued by PAG-ASA thru DZZA, Office of Civil Defense, Philippine Navy, Coast Guard,
Radio Stations, and other offices, every six (6) hours as soon as a cyclone enters the Philippine Area of Responsibility.

At 10:30 a.m. on October 24, 1988, the vessel was estimated to be between Mindoro and Masbate, and the center of
the typhoon then was around 130 degrees longitude with maximum winds of 65 kph (Exh. G-3), with a "radius of rough
to phenomenal sea at that time of 450 kms. North and 350 kms. elsewhere; 350 kms. North center and all throughout
the rest" (p. 12, TSN, Lumalda, Feb. 19, 1990).

xxx xxx xxx

In the same manner, (referring to the negligence of the crew of the ship that sank in Vasquez v. Court of Appeals, 138
SCRA 553 [1985]) the crew of the vessel M/V Dona Marilyn took a calculated risk when it proceeded despite the
typhoon brewing somewhere in the general direction to which the vessel was going. The crew assumed a greater risk
when, instead of dropping anchor in or at the periphery of the Port of Calapan, or returning to the port of Manila which
is nearer, proceeded on its voyage on the assumption that it will be able to beat and race with the typhoon and reach
its destination before it (Unsang) passes ( Rollo, pp. 45-47).

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The award of attorney's fees by the trial court to respondents is also assailed by petitioner, citing Mirasol v. De la Cruz,
84 SCRA 337 (1978). In this case, the petitioner filed before the Municipal Court an action for forcible entry against the
private respondent. The said court dismissed the complaint. On appeal, the Court of First Instance of Camarines Sur
sustained the decision of the lower court, dismissed the appeal and awarded attorney's fees in the sum of not less than
P500.00 in favor of private respondent. Upon appeal to us, we deleted the award of attorney's fees because the text of
the appealed decision was bereft of any findings of fact and law to justify such an award. Moreover, there was no proof,
other than the bare allegation of harassment that the adverse party had acted in bad faith. The aforementioned decision
is inapposite to the instant case where the decision clearly mentions the facts and the law upon which the award of
attorney's fees were based.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the award of
P27,580.00 as actual damages for the loss of the contents of the pieces of baggage is deleted and that the award of
P30,000.00 under Article 2206 in relation Article 1764 is increased to P50,000.00.

SO ORDERED.

[G.R. No. 128820. December 23, 1999]

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. GAUDIOSO MORE, ERNESTO, MORE and JERWIN MORE,
accused-appellants.

DECISION

BELLOSILLO, J.:

GAUDIOSO, ERNESTO and JERWIN, all surnamed MORE, were found guilty of murder by the trial court for the killing
of Valentino Pagumay on 22 February 1994 and sentenced to reclusion perpetua with all its accessory penalties and
to pay P28,977.00 for funeral services and other expenses, P133,333.00 for loss of income for five (5) years,
P100,000.00 for moral damages, and the costs.[1] They now come to us appealing their conviction.

The factual backdrop: On 22 February 1994 at about six o'clock in the evening, Valentino Pagumay and Romeo Muralla
were walking along the river in Brgy. Igsoligue, Miag-ao, Iloilo, on their way to nearby Brgy. Igbogo to get some tuba
when they chanced upon the More brothers Gaudioso alias "Nono," Ernesto alias "Didoy" and Jerwin alias "Max" some
three hundred (300) meters away. As they drew near, the accused who were armed with a gun and knives, inexplicably
shouted why Valentino and Romeo were pointing guns at them. Both Valentino and Romeo were unarmed. When
Valentino nervously told Romeo, who had no quarrel with the accused, that the More brothers were going to kill him,
the duo ran as fast as they could. But the accused chased them.

About three hundred (300) meters from where the chase began, the accused led by Jerwin finally caught up with
Valentino who was lagging behind Romeo. Jerwin stabbed Valentino at the left side of his mouth. Ernesto followed by
stabbing the victim in the chest. While Jerwin and Ernesto were stabbing Valentino Gaudioso held their captive by the
shoulders. Gaudioso then took his turn and stabbed Valentino on the chest causing the latter to fall to the ground. The
three (3) accused persisted in their criminal design and pinned their victim down with their hands and knees. They took
turns in stabbing him again several times.

As the stabbing progressed Romeo was having an unobstructed view of the occurrence some ten (10) meters away.
After they were through with Valentino the accused turned to Romeo and warned him against telling anybody about
the incident and ordered him to go home. The three (3) More brothers then ran away.

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When the More brothers were already farther down the river Romeo noticed Juanito Faromal standing a few meters
away from the crime scene. After seeing Valentino already lifeless Romeo left to inform the victim's wife, but on the
way he met Sgt. Romeo Gersa so he reported the matter to him.[2] Sgt. Gersa pursued the accused but could not
apprehend them as he already got tired. When he fired a warning shot the three (3) accused retaliated and fired three
(3) shots instead. Juanito corroborated the testimony of Romeo regarding the assault except that according to him it
was only Gaudioso who stabbed the victim while his brothers Jerwin and Ernesto only assisted in restraining the victim.

The accused, on their part, invoked self defense. The version of Ernesto and Jerwin was that at about six o'clock in the
evening of 22 February 1994 they were walking along a road in Brgy. Igsoligue about ten (10) arms' length ahead of
their brother Gaudioso when they heard someone ask the latter for a light for his cigarette. Ernesto and Jerwin did not
recognize the voice. About two (2) minutes later they heard a gun explode. They looked back and saw Gaudioso and
Valentino already on the ground wrestling with each other. Gaudioso was sitting astride Valentino as he stabbed the
latter.[3] Ernesto and Jerwin rushed towards the two (2) - Gaudioso and Valentino - entreating Gaudioso to stop, but
to no avail. Gaudioso only stopped when Valentino was already dead. Gaudioso then explained to his brothers that he
stabbed Valentino because the latter was going to shoot him. Afterwards they went home and did not report the incident
anymore to the barangay captain since it was already late.

Gaudioso claimed that when he handed his cigarette to Valentino upon the latter's request he, instead of taking the
cigarette, suddenly drew a .38 caliber gun and pointed it at him with the words: "I will shoot you.[4] Reacting
immediately, Gaudioso, using both hands, frustrated Valentino's attempt by grabbing the latter's right hand that was
holding the gun, twisted it, and then used his foot to outbalance Valentino sending the latter to the ground. Thus
Valentino was not able to fire his gun. Gaudioso then straddled Valentino and pinned his left hand with his right knee
while his left hand held Valentino's right that was clutching the gun. In this position, Gaudioso repeatedly stabbed
Valentino until the latter died.[5]

On 9 May 1996 the trial court found all three (3) accused, Gaudioso, Ernesto and Jerwin More, guilty as principals by
conspiracy for the murder of Valentino Pagumay, qualified by abuse of superior strength. The trial court sustained the
version of the prosecution and rejected the theory of self-defense primarily in view of the eighteen (18) stab wounds
sustained by the victim and the fact that they were caused by at least two (2) different knives, one single-bladed and
the other double-bladed, indicating that there were at least two (2) assailants. The three (3) accused were accordingly
sentenced to suffer the penalty of reclusion perpetua with all its accessory penalties, and to pay damages in the total
amount of P262,310.00 plus the costs.

Accused-appellants contend in this appeal that the trial court erred: (a) in not appreciating in their favor the justifying
circumstance of self-defense, insisting that all the elements thereof were successfully established, and, (b) in finding
them guilty beyond reasonable doubt of murder notwithstanding the inconsistencies in the testimonies of prosecution
witnesses Romeo Muralla, Juanito Faromal and Sgt. Gersa.

We find no merit in the appeal. When self-defense is invoked by an accused charged with murder or homicide he
necessarily owns up to the killing but may escape criminal liability by proving that it was justified and that he incurred
no criminal liability therefor.[6] Hence, the three (3) elements of self-defense, namely: (a) unlawful aggression on the
part of the victim; (b) reasonable necessity of the means employed to prevent or repel the aggression; and, (c) lack of
sufficient provocation on the part of the person defending himself, which must be proved by clear and convincing
evidence.[7] However, without unlawful aggression there can be no self-defense, either complete or incomplete.[8]

In the instant case, accused-appellants sought to establish unlawful aggression on the part of Valentino Pagumay by
testifying that the latter, after asking Gaudioso for a light for his cigarette, suddenly and for no reason at all, drew his
gun and pointed it at Gaudioso with the threatening words, "I will shoot you." However, quite an enlightening and
revealing narrative follows thus:

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Q: When Valentino Pagumay drew his gun from his waist what did you do?

A: Both my hands caught his hand holding the firearm x x x x

Q: When you were able to grab the hand of Valentino Pagumay what happened next?

A: He fell to the ground.

Q: So you want to tell the Court that immediately after you grabbed or took hold of his hand he immediately fell to the
ground?

A: Yes sir because he wrestled with me when I took hold both of his hand (sic) and twisted his arm.

Q: When Valentino Pagumay fell to the ground what did you do?

A: After he fell to the ground I sat on his abdomen. My right knee was pinning down his left hand while my left hand
was pinning on the ground his right hand and then I delivered several successive stab blows on his breast x x x x

Q: And how many times did you stab him?

A: I was not able to count the number of times because I was stabbing him successively.

Q: And you cannot estimate the number of stab blows you delivered to him?

A: I was not able to count the number of blows because I was stabbing and hitting him until his death (underscoring
ours).[9]

Clearly, the unlawful aggression allegedly started by Valentino - assuming it to be true - had already ceased by the
time Gaudioso repeatedly stabbed Valentino to death. Gaudioso himself testified that after Valentino threatened to
shoot him, he was able to grab Valentino's right hand which was holding the gun, outbalance him, and then pin both
his hands while the latter was lying prone on the ground. Having thus immobilized Valentino, there was obviously no
more reason for Gaudioso to stab Valentino eighteen (18) times as he did because the alleged unlawful aggression
from Valentino had stopped. In legitimate self-defense the aggression must still be existing or continuing when the
person making the defense attacks or injures the aggressor.[10] Thus when the unlawful aggression ceases to exist,
the one making the defense has no more right to kill the former aggressor.[11] In such cases, less violent means would
have sufficed; hence, if not resorted to, the plea of self-defense must fail.[12]

In the instant case Valentino was already effectively immobilized by Gaudioso, hence, the latter could have either
simply boxed the former with his free right hand, hit him on a non-vital part of his body,[13] or better yet, summoned
his brothers Ernesto and Jerwin who were just standing a few meters away to help him in ensuring no further aggression
from Valentino. However, quite inconsistent with his plea of self-defense, Gaudioso did none of these things. Instead,
he even ignored his brothers' entreaties for him to stop, rebuffed their efforts to the extent of even accidentally hitting
Jerwin as claimed by the latter,[14] and continued stabbing Valentino successively until the latter died.[15] Considering
all these, the plea of self-defense cannot but be received with incredulity and disbelief.

In addition to the foregoing, several other circumstances exist to further undermine the plea of self-defense and
establish accused-appellants' collective guilt.

First, the trial court correctly noted that the victim sustained a total of eighteen (18) stab wounds, fourteen (14) of which
were inflicted on the anterior chest alone, and four (4) of which were fatal. It is an oft-repeated rule that the presence

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of a large number of wounds on the part of the victim negates self-defense because, rather than suggest an effort to
defend oneself, it instead strongly indicates a determined effort to kill the victim.[16] Second, the claim that Gaudioso
alone killed Valentino in self-defense and that Ernesto and Jerwin had nothing to do with the killing was disproved not
only by Romeo and Juanito's positive identification of Ernesto and Jerwin as co-conspirators (at least) to the crime but,
more importantly, by the fact that the stab wounds themselves indicated that there was actually more than one
assailant. As testified to by Dr. Mary Joyce M. Faeldan, the Acting Municipal Health Officer of Miag-ao who autopsied
the cadaver, the eighteen (18) stab wounds sustained by the victim were not all caused by a single weapon but by two
(2) kinds of knives, i.e., one single-bladed, and the other, double-bladed. While three (3) stab wounds had blunt and
contussed extremities indicating that they were inflicted with the use of a blunt single-bladed knife, the remaining
fourteen (14) stab wounds had regular distinct clean-cut edges and sharp extremities indicating a sharp double-bladed
knife as the murder weapon.[17] Since only Gaudioso's right hand was free to hold a weapon, his left hand already
gripping Valentino's right hand, then it is quite obvious that his brothers likewise participated in the assault as claimed
by the prosecution witnesses because Gaudioso, evidently, could not have managed two (2) weapons at the same
time with only his right hand free.

Third, accused-appellants did not inform the authorities about the incident. If they were really innocent as they claimed
to be, they should have told the authorities about the accidental killing.[18] Their excuse that it was already late is not
only shallow but quite incredible considering three (3) factors: (a) accused-appellants managed to get home at the
relatively early hour of 6:30 in the evening;[19] (b) the house of the barangay captain to whom they could have reported
the incident was a mere fifty (50) meters away from their own house;[20] and, (c) Gaudioso was himself a barangay
official making it easier for him to approach the other barangay authorities who were but his colleagues.[21]

Fourth, accused-appellants do not deny that they did not surrender to Sgt. Gersa when the latter saw them immediately
after the killing. In fact, they ignored his warning shot and ran away. Worse, accused-appellants even returned fire with
three (3) gunshots of their own, continued their flight until Sgt. Gersa gave up the chase through sheer exhaustion, and
yielded only when they were already invited for questioning by the police after having been identified as the killers by
eyewitnesses Romeo Muralla and Juanito Faromal.

On the alleged inconsistencies in the testimonies of the prosecution witnesses, suffice it to say that inconsistencies on
minor and trivial matters do not diminish but rather bolster a witness's credibility as they in fact manifest spontaneity
and lack of scheming.[22] In other words, they are badges of truth rather than indicia of falsehood.[23] Thus the alleged
contradictions on the relative positions of Romeo and Valentino while the latter was being stabbed, whether it was
Romeo or Juanito who informed the victim's wife about the incident, and whether Juanito was indeed taken by Sgt.
Gersa to Camp Monteclaro after the incident, are but trivial and minor inconsistencies which neither detract from the
essential integrity of the prosecution's evidence nor strengthen accused-appellants' flagging plea of self-defense.
Having already pleaded self-defense, accused-appellants could not invoke the alleged weakness of the prosecution's
evidence, for, even if the latter were weak (which is certainly not so in the instant case), it could not be disbelieved in
view of their open admission of responsibility for the killing.[24]

On the civil liabilities of accused-appellants a modification of the amounts awarded by the trial court is in order. By way
of moral damages, the trial court awarded P100,000.00. Since the award is not meant to enrich the heirs of the victim
but only to compensate them for injuries sustained to their feelings we reduce the amount to P50,000.00 consistent
with prevailing jurisprudence.[25] A reduction of the actual damages awarded is likewise proper. The trial court awarded
P28,977.00 for various expenses incurred by the victim's widow as a result of the killing. However, since only the costs
of the tomb, coffin, embalming and funeral services in the total amount of P8,977.00 were properly receipted[26] the
estimated amount of P20,000.00 allegedly spent for food and drinks consumed during the wake must be disallowed for
not having been competently proved. The Court can only give credit to expenses which have been duly
substantiated.[27]

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On the victim's loss of earning capacity, Victoria Pagumay testified that her husband, a farmer, was 53 years old when
he was killed, with an average annual income of P40,000.00 to P50,000.00.[28] Using P40,000.00 as the deceased's
average annual income while still alive, the trial court awarded P133,333.00 for loss of earning capacity after multiplying
two-thirds (P26,666.67) of the victim's average annual income[29]by five (5) years. No reason was given, and no legal
basis exists, why lost income was awarded for only five (5) years. On the contrary, the victim's lost earnings are to be
computed according to the formula adopted by the Court in several decided cases,[30] to wit: net earning capacity ("X")
equals life expectancy[31] multiplied by gross annual income[32] less living expenses.[33] Thus, the victim's lost
earning capacity amounted to P405,000.00 as may be shown hereunder -

X = 2(80-53) x [P45,000 - P22,500]

X = 2 (27) x P22,500

X = 54 x P22,500

X = 18 x P22, 500

X = P405,000.00

Finally, an award of another P50,000.00 is warranted as civil indemnity for the death of the victim without need of
evidence or proof of damages.[34]

WHEREFORE, the appealed Decision dated 9 May 1996 of the Regional Trial Court of Iloilo City, Branch 25, finding
accused-appellants GAUDIOSO MORE, ERNESTO MORE and JERWIN MORE guilty beyond reasonable doubt of
Murder is AFFIRMED. Accused-appellants are ordered to pay, jointly and severally, the heirs of Valentino Pagumay
the following amounts: (a) P50,000.00 as civil indemnity; (b) P50,000.00 as moral damages; (c) P8,977.00 as actual
damages; and, (d) P405,000.00 for loss of earning capacity. Costs against accused-appellants.

SO ORDERED.

[G.R. No. 120874. July 31, 2003]

NAPOLEON TUGADE, SR., and RIZALINA FABRO-TUGADE, substituted by her heirs, namely, Napoleon Sr.,
Napoleon Jr., and Zenaida, all surnamed TUGADE, petitioners, vs. COURT OF APPEALS and PANGASINAN
ELECTRIC COOPERATIVE, INC., respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

While this Court is not a trier of facts, there are instances however when we are called upon to re-examine the factual
findings of the trial court and the Court of Appeals and weigh, after considering the records of the case, which of the
conflicting findings is more in accord with law and justice.[1] Such is the case at bar.

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The antecedent facts of this case are as follows:

On June 12, 1980 at around 12:00 noon, Engr. Henry Tugade of the Pangasinan Electric Cooperative, Inc. (Panelco)
rode in a company rover jeep together with four other employees bound from the Panelco compound in Bani to Bolinao,
Pangasinan. Somewhere in Tiep, Pangasinan, a Dagupan bus that was also headed for Bolinao, began to follow the
rover jeep. While the bus was trying to overtake the jeep, the latter turned turtle and caused four of its five occupants
to fall out of the jeep causing the death of Tugade and another passenger by the name of Consuelo Estolonio.[2]

Separate cases for damages, docketed as Civil Cases Nos. A-1368 and A-1384 were filed by the heirs of the two
deceased before the Regional Trial Court of Pangasinan against Panelco and Dagupan Bus Co. and their respective
drivers, Honorato Areola and Renato Quiambao. It is Civil Case No. A-1368 filed by the heirs of Henry Tugade, which
is now the subject of the present petition.

The Regional Trial Court of Pangasinan (Branch 55) held Panelco and its driver liable, thus:

As a consequence and in view of the evidence on record, the Court holds and so finds that the accident occurred due
to the fault or negligence of Panelco and its driver Honorato Areola. The negligence of Panelco consists in having
allowed its rover jeep which is mechanically defective, unsafe and not roadworthy to be operated on a highway. On the
other hand, the defendant-driver Honorato Areola was likewise, negligent in driving a vehicle which was not roadworthy,
unsafe and with a mechanical defect.

The Court finds that the defendants Panelco and Honorato Areola are liable to pay to the plaintiffs in Civil Case No. A-
1368 damages, as follows: actual damages, P99,131.00 (Exhibits H to H-3, I to I-4 and K), attorneys fees, P20,000.00,
moral damages, P20,000.00 and exemplary damages, P10,000.00

As to loss of earning capacity, it has been held in Villa-Rey Transit vs. Court of Appeals, 31 SCRA 511, that this is
based on net earnings and not gross earnings. No evidence was introduced to show the net earnings. However, under
the Circumstances, the Court holds that a monthly net earning of P500.00 would be reasonable. Using the formula in
the Villa-Rey case, the life expectancy of the late Henry Tugade would be 36 years, hence the Court awards
P216,000.00 for loss of earning capacity.

WHEREFORE, the Court hereby renders judgment:

1. Dismissing the complaint and cross-claim as against Dagupan Bus in Civil Case No. A-1368;

2. Dismissing the complaint in Civil Case No. A-1384;

3. In Civil Case No. A-1368, ordering the defendants Pangasinan Electric Cooperative, Inc., and Honorato Areola to
pay, jointly and severally, to the plaintiffs, the following:

P 99,131.00 as actual damages;

216,000.00 for loss of earning capacity;

20,000.00 moral damages; and

10,000.00 exemplary damages; and

20,000.00 attorneys fees

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With costs against said defendants.[3]

In arriving at its decision, the trial court explained that:

xxx Rosie Castrence, a passenger of Bus No. 244 who saw the accident testified categorically that the rover jeep turned
turtle in front of the Dagupan Bus when the jeep was about 5 meters in front of the Bus and the jeep turned turtle even
without being bumped by the Dagupan Bus. The Court considers this witness as an unbiased witness as she appears
not to be an interested party. She was also in a good position to observe in detail what actually happened at the scene
of the accident as she was seated on the right front seat of the bus. The Court believes this witness more than the
other witnesses who do not appear to be disinterested.

Furthermore, it is not credible that if the rover jeep was hit on its left rear, it will turn turtle on its left side. The natural
effect or tendency is for the jeep to be pushed or even thrown towards its right side. If the jeep turned turtle towards
the left, it must have been due to some other cause than being hit by the bus on its left side.

The physical facts which do not lie as well as testimonial evidence support the stand of Dagupan Bus that the bus did
not hit the left rear of the rover jeep.

If the bus did not hit the left rear of the jeep what then caused the latter to turn turtle. There is merit in the contention of
defendant Dagupan Bus that the cause was due to some mechanical defect. By Defendant Areolas own admission,
the rover jeep was being fixed by the Chief mechanic at the motor pool of Panelco, when he arrived at their compound,
and that the jeep was Quite old.

Likewise, Rosie Castrence also testified that when she first saw the Panelco jeep at Tiep, Bani, Pangasinan, the jeep
was already zig-zagging and wiggling, a sign that indeed the jeep had some mechanical defect.

Another mark of a mechanical defect in the jeep was the fact that the right front wheel and rear wheel of the jeep were
detached because their spindles were broken. This came from the mouth of Panelcos witness Florencio Celeste.

The next issue to be resolved is what was the cause of death of Henry Tugade? Plaintiffs theory is, of course, that
Henry Tugade died because he was run over and pinned under the left front wheel of Dagupan Bus No. 244 crushing
his head and upper body. This is the same theory of defendants Panelco and Areola. Defendants Dagupan Bus and
Quiambao deny this claim and their theory is that Henry Tugades death was caused by the violent impact of his head
against the hard pavement of the road when he was thrown out of the rover jeep.

The plaintiffs theory is, however, contradicted by their own medico legal expert Dr. Wilfredo Nazareno who testified
positively that the fatal injury which caused the death of Henry Tugade were the fractures on his head which could have
been due to the impact of the head against the asphalted road.

Again plaintiffs theory is contradicted by Panelcos own witness Florencio Celeste, Chief Engineer, who was the only
one who did not fall out of the jeep, when he testified that the left front wheel of the bus did not rest on the head of
Henry Tugade and the wheel of the bus did not run over the head of the victim.

Rosie Castrence, a disinterested witness, also declared that the left front tire of the bus did not run over the head of
Henry Tugade.[4]

Petitioners went to the Court of Appeals questioning only the award of damages and attorneys fees.[5] They claimed
that the lower court erred in: finding that the monthly earnings of the late Henry Tugade at the time of his death was
only P500.00; disregarding the evidence on record showing the monthly earnings of the late Henry Tugade; not

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considering the social, educational and economic status of the plaintiffs in its assessment of the moral and exemplary
damages; and setting the sum of P20,000.00 as attorneys fees.[6]

Respondent Panelco also appealed to the Court of Appeals from the decision of the trial court and assailed its ruling
that the negligence of Panelco and its driver was the proximate cause of the accident.[7]

In its decision dated September 7, 1994,[8] the Court of Appeals reversed the findings of the trial court, declared that
Dagupan Bus, as an employer, had exercised due diligence in the selection and supervision of its employees and
disposed of the case in this wise:

WHEREFORE, in view of all the foregoing, the decision of the court a quo is reversed, but only insofar as it holds
defendant Pangasinan Electric Cooperative, Inc. liable, and defendant Renato Quiambao is ordered to pay to
defendant-appellant Pangasinan Electric Cooperative, Inc., P7,500.00 as temperate damages, P10,000.00 as
attorneys fees and costs of suit.[9]

The appellate court explained, thus:

The testimony of Castrence, on which the court a quo heavily relied in its finding of facts, is contradicted by the greater
weight of evidence on record.

First, there is no evidence whatsoever --- for either one of the parties --- of a blown-out tire. What the evidence on
record indicates is that the two right wheels of the jeep were detached. The testimony regarding a blown-out tire is not
even in consonance with the theory of Dagupan, that is, that the wheels were detached due to mechanical defects.

Second, her testimony that the jeep was wiggling and zigzagging is contradicted by the testimonies of Florencio Celeste
and Cipriano Nacar, passengers of the jeep and witnesses for plaintiffs Tugade, to the effect that their ride was smooth
and normal. (TSN, September 29, 1983, pp. 10, 43 & 66; November 20, 1984, p. 7)

Third, her testimony regarding the sitting arrangement of passengers of the jeep is contradicted by the testimony of
Cipriano Nacar, passenger of the jeep and witness for plaintiffs Tugade. According to Nacar, he and Estolonio were
seated at the rear of the jeep; the driver Areola was behind the steering wheel, with Celeste to his right and Tugade on
the rightmost. In other words, Celeste was between Areola and Tugade, and no one was seated to the left of the driver.
(TSN, September 29, 1983, pp. 9-10)

Fourth, her testimony that Tugades head was about one foot from the left front tire of the bus is likewise contradicted
by the testimonies of Cipriano Nacar and Honorato Areola that the tire of the bus was partly resting on the head of
Tugade. In fact, the bus driver Renato Quiambao even had to back up the bus so that Tugades body may be pulled
out from below. (ibid., pp. 22-23)

Fifth, her testimony that Tugades shirt was checkered is also contradicted by Exhibit G, a photograph of the deceased
as he lay on the ground. The photograph shows Tugade wearing a plain white shirt.

Finally, her testimony that she did not see Estolonio after the accident because the latter was inside the jeep is again
contradicted by the finding of the court a quo that all the passengers of the rover jeep were thrown out of the vehicle
except Florencio Celeste and the body of Henry Tugade landed on the left lane of the road and was in front of the left
front wheel of Bus No. 244. (underscoring ours, Decision, p. 2) In other words, Estolonio, just like Tugade, was sprawled
on the ground. (ibid., p. 22)

Castrences testimony is also marred by improbabilities.

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First, she claims to have noticed the color of Tugades pants who was seated --- in the front of the jeep. It is quite
improbable that Castrence, being seated inside the bus, could see the color of the pants of Tugade who was seated
on the front seat of the jeep. Second, while she noticed the passengers in the front of the jeep --- indeed she even
noticed the color of the pants one of them was wearing --- she could not tell whether or not there were passengers at
the back. Third, it is also improbable that the driver and the passengers of the jeep simply continued with their journey,
oblivious to the wiggling and zigzagging of their vehicle.

Moreover, even disregarding the incredibility of Castrences testimony, still the version that the accident was due to a
mechanical defect that allowed the wheels to be detached cannot be given credence. If the cause of the accident was
that both wheels on the right side were detached, then the jeep would not have turned turtle to its left, but to its right. If
there had been no wheels to support its right side, the jeep should have turned turtle to its right, but it turned to its left
instead.

The court a quo reasons that it is not credible that if the rover jeep was hit on its left rear, it will turn turtle on its left side.
The natural effect or tendency is for the jeep to be pushed or even thrown towards its right side. (Decision, p. 3) The
court a quo, however, seems to have disregarded the testimony of Honorato Areola that the jeep first swerved to the
right, then to the left. (TSN, October 15, 1984, p. 48) To be noted also is that a jeep is inherently maneuverable, and
may easily swerve from side to side when hit from its left rear portion. Moreover, after the accident, both the jeep and
the bus were at the left side of the highway. If the bus were not attempting to overtake the jeep, why then was it at the
left side of the highway?

As may be seen from the foregoing, the court a quo failed to take into account the discrepancies and inconsistencies
of Castrences testimony vis--vis established facts and other evidence on record.

Moreover, the court a quo misappreciated the testimony of Areola that the jeep was being checked up at the Panelco
motor pool, and interpreted such testimony to mean that the jeep was being fixed or repaired due to a mechanical
defect. First, the mere fact that the jeep was at the motor pool does not mean that it was there due to a mechanical
defect. As testified by Areola, it was being subjected to a check-up (TSN, October 9, 1984, pp. 41-42), which may have
been simply routinary. Second, even assuming that the jeep had a mechanical defect, its presence at the motor pool
may also mean that such defect had been repaired and that the jeep was quite old does not necessarily mean that it
had a mechanical defect. That two wheels were detached from the jeep and that its spindle was broken can be just as
reasonably explained by the fact that the jeep turned turtle after being sideswiped by an overtaking bus.

On the contrary, Celeste and Nacar, witnesses for the plaintiffs Tugade, consistently testified that their ride was normal
and smooth.

In light of the foregoing, the conclusion must be that the accident was caused by the negligence of Quiambao in driving
Bus No. 244, as testified to by Areola, Nacar and Celeste, for which he must be held civilly liable.[10]xxx

Hence, petitioner filed the present petition for certiorari[11] of the decision of the Court of Appeals and the resolution
dated June 27, 1995 denying petitioners motion for reconsideration.

Petitioners contend that the Court of Appeals:

COMMITTED AN ERROR OF LAW AND VIOLATED THE RULES OF EVIDENCE BY REJECTING THE TESTIMONY
OF A DISINTERESTED WITNESS AND ADMITTED THE BIASED TESTIMONIES OF THE EMPLOYEES-
WITNESSES FOR PRIVATE RESPONDENT PANELCO.

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II

COMMITTED AN ERROR OF LAW BY SUBSTITUTING ITS FINDINGS OF FACTS TO THAT OF THE TRIAL COURT
WHICH WAS IN A BETTER POSITION TO EVALUATE AT FIRST HAND THE EVIDENCE ADDUCED BY THE
PARTIES, PARTICULARLY THE SITUATION, DEMEANOR AND SINCERITY OF THE WITNESSES.

III

MISINTERPRETED, IF NOT DELIBERATELY DISREGARDED, THE BREAKING OF THE SPINDLE AND THE
DETACHMENTS OF THE FRONT RIGHT AND REAR WHEELS OF THE ROVER JEEP OF PRIVATE RESPONDENT
PANELCO WHICH ARE CONCLUSIVE PROOF OF THE ROAD UNWORTHINESS OF THE ROVER JEEP THAT
TURNED TURTLE CAUSING THE DEATH OF THE LATE HENRY TUGADE.

IV

ERRED IN ARRIVING AT A CONCLUSION THAT PRIVATE RESPONDENT WAS NOT NEGLIGENT AT THE TIME
OF THE ACCIDENT AND IS NOT THEREFORE LIABLE FOR THE UNTIMELY DEATH OF HENRY TUGADE.

ERRED IN NOT APPLYING PERTINENT JURISPRUDENCE AND PROVISIONS OF LAWS IN REVERSING THE
DECISION OF THE TRIAL COURT.[12]

Petitioners stress that they only questioned before the Court of Appeals the amount of damages, loss of earning
capacity and attorneys fees awarded by the trial court in its decision, but the appellate court disregarded the factual
findings and conclusions of the trial court and substituted its own findings of fact. Petitioners claim that this violates the
doctrine that the findings of the trial court on the credibility of witnesses are entitled to great weight on appeal as it is in
a better position to decide the question on credibility having seen and heard the witnesses themselves. Petitioners
further claim that: the Court of Appeals erroneously disregarded the testimony of Rosie Castrence which the trial court
found to be a disinterested party, based on minor and trivial inconsistencies;[13] the appellate court overlooked or failed
to consider the breaking of the spindles and the detachment of the front and rear wheels of the rover jeep owned by
and belonging to respondent Panelco which led the trial court to conclude that the accident was due to the negligence
of private respondent as it allowed its rover jeep which is mechanically defective and not roadworthy to be operated on
a highway and due to the negligence of defendant Honorato Areola in driving a vehicle which was not roadworthy.[14]

In its Comment, respondent Panelco points out that the factual findings of the Court of Appeals is not reviewable by
the Supreme Court.[15]

Petitioners in their Reply, meanwhile, argue that where the findings of the Court of Appeals and the trial court are
contrary to each other, such as in this case, the Supreme Court may scrutinize the evidence on record.[16]

In its Rejoinder, respondent Panelco reiterates that: the petitioners raised only factual issues which in effect will make
this Court a trier of facts; the Court of Appeals, contrary to the contention of petitioners, actually set the record straight
by carefully scrutinizing the factual evidence; the appellate court pointed out in detail the inconsistencies in the findings
of the lower court unlike the haphazard way by which the lower court reached its conclusions.[17]

We find the petition to be impressed with merit.

As mentioned earlier, it is settled that as a rule, our jurisdiction in cases brought to us from the Court of Appeals is
limited to the review and revision of errors of law allegedly committed by the appellate court, as its findings of fact are

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deemed conclusive and we are not duty-bound to analyze and weigh all over again the evidence already considered
in the proceedings below.[18]

However, we have consistently enunciated that we may review the findings of fact of the Court of Appeals:

(a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or
conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the
Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain relevant facts
not disputed by the parties and which, if properly considered, would justify a different conclusion; and, (h) where the
findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation
of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the
findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence
on record.[19] [Emphasis ours]

In this case, the factual findings of the trial court and the Court of Appeals are conflicting. Thus, it behooves this Court
to review the findings of facts of the lower courts.

The trial court gave weight to the testimony of Rosie Castrence, a passenger of Dagupan bus who testified that the
Panelco rover jeep turned turtle without being hit by the bus from behind; while the Court of Appeals pointed out
inconsistencies in her testimony and gave weight to the version of the employees of Panelco that the jeep turned turtle
because it was hit by the bus from behind.

The trial court reasoned that Castrence, a fish vendor who happened to be a passenger at the time of the accident,
was credible and unbiased being a disinterested witness, unlike the other witnesses who are employees of Panelco. It
also explained that she was in a good position to observe in detail what actually happened at the scene of the accident
as she was seated at the right front seat of the bus.[20]

On the other hand, the Court of Appeals considered her testimony not worthy of belief because of inconsistencies
especially vis-a-vis the testimonies of the employees of Panelco, namely: Areola, Nacar and Celeste,[21] to which the
appellate court gave greater weight and on which basis it concluded that the accident was caused by the negligence
of Quiambao in driving Bus No. 244 for which he must be held civilly liable.[22]

In ascertaining the facts of the case, it would have greatly aided the courts if photographs of the vehicles were presented
during the trial. However, none was presented. Hence, we are constrained to rely mainly on the testimonies of the
witnesses.

After reviewing the entire records of the case, we find compelling reasons to reverse the findings of the Court of
Appeals, and affirm the appreciation of facts of the trial court.

It is basic that findings of facts of trial courts are accorded by appellate courts with great, if not conclusive effect. This
is because of the unique advantage enjoyed by trial courts of observing at close range the demeanor, deportment and
conduct of witnesses as they give their testimonies.[23] Trial courts have the unique advantage of being able to observe
that elusive and incommunicable evidence of the witness deportment on the stand while testifying --- the brazen face
of the liar, the glibness of the schooled witness in reciting a lesson, the itching over-eagerness of the swift witness, as
well as the honest face of the truthful one.[24] Indeed, assignment of values to declarations on the witness stand is
best done by the trial judge who, unlike appellate magistrates, can weigh firsthand the testimony of a witness.[25]

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While there may be inaccuracies in Castrences testimony as pointed out by the appellate court---the mention of a blown
out tire, the seating arrangement of the passengers of the rover jeep, the color of the shirt of the deceased, and the
location of all the passengers of the jeep after it turned turtle---we deem such discrepancies negligible considering the
totality of her testimony. Records show that she was called to the witness stand six years after the accident happened.
It is therefore understandable that she would miss recalling some details. As we held in the recent case of People vs.
Delim:

The inconsistencies in the testimonies of [witnesses] do not render them incredible or their testimonies barren of
probative weight. It must be borne in mind that human memory is not as unerring as a photograph and a persons sense
of observation is impaired by many factors A truth-telling witness is not always expected to give an error-free testimony
considering the lapse of time and the treachery of human memory. What is primordial is that the mass of testimony
jibes on material points, the slight clashing of statements dilute neither the witnesses credibility nor the veracity of his
testimonyInconsistencies on minor and trivial matters only serve to strengthen rather than weaken the credibility of
witnesses for they erase the suspicion of rehearsed testimony.[26]

In her testimony, Rosie Castrence said that she saw the jeep turn turtle in front of their bus.

Q Mrs. Witness, you testified that the PANELCO jeep turned turtle infront of the Dagupan Bus, how close was the
Dagupan Bus to the PANELCO jeep when you saw it turn turtle?

A About five (5) meters infront the Dagupan Bus when it turn (sic) turtle, sir.

Q In other words, the jeep turned turtle even without being bumped by the Dagupan Bus?

A Yes, sir.[27]

She also testified that before the jeep turned turtle she saw that it was wiggling.

A When we were still at Barangay Tiep I have seen already that jeep.

xxx xxx xxx

Q What did you observe if any about the jeep that you were following?

A The jeep was already wiggling and was zigzagging along the way.[28]

We find this testimony not only credible but also consistent with the physical evidence as well as the testimonies of
Panelcos own employees.

Engr. Florencio Celeste, who was seated beside Henry Tugade, testified that after the jeep turned turtle he saw that
the right wheels were detached and that the spindle was broken.

Q If it turned turtle, did you observe the jeep suffered (sic) any mechanical defect or parts were broken?

A After the jeep turned turtle, I noticed that the right front wheel and rear wheel of the jeep were detached, sir.

xxx xxx xxx

Q Did you see how the wheels were detached?

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A The spindle were (sic) broken, sir.[29]

Engr. Agustin Erezo, the Officer In Charge of the Motorpool of Panelco at the time of the accident, also admitted in his
testimony that the rover jeep was merely assembled in their motorpool, thus:

Q You mentioned that the rover jeep was assembled in February 1980, if it was assembled in February 1980, what
was the condition before you assembled? (sic)

A We put all the spare parts new, we bought all the spare parts new, all spare parts are new.

Q So you want to make us understand that it was almost a junk at the time you repair it?

A We bought the chassis, the engine and everything so all the spare parts are new.

Q At the time you repaired it in 1980 (interruption)

A I assembled it.[30]

xxx xxx xxx

Q Before you repaired it in February 1980, was it in running condition?

A Before we repaired it, it was not in running condition, there was no jeep before the repair, they are all spare parts
and we assembled it.[31]

The driver of the jeep and one of the defendants, Honorato Areola, also admitted that the engine of the jeep at the time
of the accident was already old.

Q And what year Mr. Witness is the model of the rover jeep if you really know the model of the different vehicles?

A I already forgot, sir. It is diesel model.

Q To make specific Mr. Witness, what year was this model, was it the model 69, 65 or what?

A I cannot remember, sir.

Q But in your experience as driver, did this rover jeepney, new or old, at the time you drove it on June 12, 1980.

A Quite old already, sir.

Q What about the body of the jeepney, also old like the engine?

A The body is newly assembled, sir.[32]

Worth noting also is the admission of Engr. Celeste that the jeep did not have a speedometer.

Q Now, you estimated the speed of the jeep at 45 to 50 kilometers per hour, because according to you you are also a
driver and you always look at the speedometer is that correct?

A Yes, sir.

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Q This rover jeep having been made, home made at the Panelco Motor pool, did not have speedometer, is that correct?

A It does not have speedometer, so the speedometer does not function, sir.

Q Aside from the speedometer there were many parts of the jeep which were not functioning is that correct?

A All of those parts in the Panel board except its speedometer cable.

Q And so, when you said that the jeep was running about 45 to 50 kilometers the truth is the speed could have been
even less than 45 kilometers or more than 50 kilometers.

A That is approximate, sir.[33]

In sum, we find that with the testimony of Castrence, the broken spindle of the rover jeep and the admissions of
Panelcos own employees that the jeep was merely assembled, had an old engine, and did not have any speedometer,
manifest gross negligence on the part of Panelco and its driver Honorato Areola for which they should be held liable to
pay damages. The trial court correctly held both Panelco and its driver liable for using an unsafe vehicle in transporting
Panelcos employees.

As provided for in the New Civil Code:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for
the damage done

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

xxx xxx xxx

Employers shall be liable for the damage 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 xxx 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.

Areola, as driver of the vehicle, did not personally check the condition of the vehicle before using it.

Q And when you arrive at the Panelco compound this jeep was already ready to be driven?

A It was in the motor pool we were checking up.

Q But you yourself did not go to the motor pool to get the jeep?

A I just see the jeep but I did not go under the jeep, sir.

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Q You mean to say that the jeep was in an elevated flat (sic) form at the time when you saw it at the Panelco compound
being checked up?

A Its not in the elevated place but it was in the Panelco compound, I am looking for the Chief Mechanic checking up
the jeep. I was looking at the jeep being checked up by the Chief Mechanic, sir.

Q How many mechanics were attending this rover jeep at the time you were looking at the jeep?

A They were many but who was looking after was the Chief Mechanic, sir.

xxx xxx xxx

Q And these mechanics of the Panelco were helping or attending the Chief Mechanic?

A I do not know, sir, because they were doing something.

Q So all these persons were working on the rover jeep, is that correct?

A No, sir.[34] (sic)

What was admitted was the fact that it was his first time to drive said vehicle[35] and that he did not know whether or
not the vehicle was registered at the time of the accident.

Q xxx You are aware that the rover jeep was not registered for that year 1980, the jeep you were driving, is that correct?

A That is what I do not know, sir.

xxx xxx xxx

Q Is it a matter of your practice, that when you drive a vehicle you do not determine and find out anymore whether the
registration certificate is found in the vehicle?

A I relied that the papers are complete, sir.

Q But you yourself do not examine anymore whether the vehicle that you are driving, that you are going to drive has
with the registration certificate.

A No more, sir.[36]

Panelco meanwhile is liable both as owner of the mechanically defective vehicle under Art. 2176 and as employer of
the negligent driver under Art. 2180.

Under Art. 2180, Panelco as employer of Areola is primarily and solidarily liable for the quasi-delict committed by the
latter. It is presumed to be negligent in the selection and supervision of its employees by operation of law and may be
relieved of responsibility for the negligent acts of its driver, who at the time was acting within the scope of his assigned
task, only if it can show that it observed all the diligence of a good father of a family to prevent damage.[37]

In this case, Panelco failed to show that it exercised the diligence of a good father of a family to prevent the damage
and that it was diligent in the selection and supervision of its employees.

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Areola in his testimony admitted that he did not undergo physical examination when he was hired as driver of the
company[38] and that there were no records of his examination and interview during his application for employment.[39]
He also admitted that Panelco never gave them seminars regarding driving but only received personal advice from the
managers.[40]

The use of a vehicle with a defective speedometer has been held by this Court as an indication of the owners laxity in
the operation of its business and in the supervision of its employees; clearly, a conduct below the diligence required by
law.[41] In this case, the rover jeep of Panelco did not have a speedometer at all.

Finding both Panelco and its driver liable for the death of Henry Tugade, we now consider the amount of damages that
should be awarded to the heirs of the deceased.

Following Art. 2206 of the Civil Code and recent jurisprudence, the heirs of the victim in this case are automatically
entitled to P50,000.00 as indemnity for the death of Henry Tugade.[42]

Actual damages to be recoverable, must actually be proved and supported by receipts. In this case, the petitioners
failed to present any receipt to prove the expenses they incurred. Nonetheless, temperate damages may still be given
to the heirs of the victim under Art. 2224 of the Civil Code.[43] Based on prevailing jurisprudence, the amount of
P25,000.00 as temperate damages is in order.[44]

We also find that petitioners are entitled to the award of attorneys fees which is proper where the acts and omissions
of a party have compelled another to litigate or incur expenses to protect his rights and when deemed by the court as
just and equitable.[45] We find no cogent reason to disturb the award of P20,000.00 as attorneys fees fixed by the trial
court.

Moral damages should also be awarded for the mental anguish and moral suffering suffered by the heirs of Henry
Tugade brought about by his untimely demise. As held by this Court, the award of moral damages is aimed at a
restoration, within the limits possible, of the spiritual status quo ante and therefore must be proportionate to the suffering
inflicted.[46]

In this case, Napoleon Tugade, father of the deceased, testified as follows:

Q How many children do you have?

A We have three (3), sir.

xxx xxx xxx

Q about your second child, what is his profession or employment at present, will you name your second child?

A He is the late Henry Tugade, an Agricultural Engineer.

xxx xxx xxx

Q At the time you learn the death of your son Henry, how did you feel?

A I was shocked and had a little mental torture because its a shock that he is still young to die and professional and he
is the only one earning among my children, so there was mental torture also to my wife and to my family.[47]

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Rizalina Tugade, mother of the victim, also testified as follows:

Q And Mrs. Witness, at the time your son died do you know if he was a member of some civic organizations or
associations?

A During his lifetime when he was studying, when he was student, at the Araneta Univeristy, he was the President of
the Engineers Club Society.

Q And of course as a mother, having his son that caliber, if said Henry your son, how did you feel on those occasions,
as he was a member of some organizations.

A I had a feeling of great pride, sir.

Q This pride enjoyed as a mother, did it continue to be still in you as a pride enjoyed by a mother.

A Well, my pride is no more sir, he already died.

Q And when at the time you learned for the first time of the death of your son Mrs. Witness, how did you feel as mother.

A I was miserably shocked, sir.

Q Aside from the shock, what else.

A Well, I lost my hope, my pride and happiness.[48]

Under Art. 2206 of the Civil Code, the ascendants of the deceased may demand moral damages for mental anguish
by reason of the death of the deceased. Under the circumstances of the case at bar an award of P100,000.00 would
be appropriate.[49]

As to indemnity for loss of earning capacity, we take note of Exh. L-1[50] showing Henry Tugades compensation to be
Eight Hundred Three Pesos (P803.00) a month which amounts to an annual income of P9,636.00. He was 26 years
old at the time of his death. Using the formula enunciated in People vs. Napalit,[51] we compute his lost earning capacity
thus:

Net earning capacity = 2/3 x (80-26) x [P9,636.00 (P9,636.00)]

= 2/3 x (54) x P4,818.00

= 36 x P4,818.00

= P 173,448.00

WHEREFORE, we REVERSE and SET ASIDE the decision of the Court of Appeals; AFFIRM the decision of the
Regional Trial Court dated July 24, 1990 with the MODIFICATION that Pangasinan Electric Cooperative, Inc.
(PANELCO) and Honorato Areola are ordered to pay jointly and severally the following amounts to the heirs of Henry
Tugade:

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

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2. Temperate damages in the amount of Twenty-Five Thousand Pesos (P25,000.00);

3. Attorneys fees in the amount of Twenty Thousand Pesos (P20,000.00);

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

5. Loss of earning capacity in the amount of One Hundred Seventy Three Thousand, Three Hundred and Forty Eight
Pesos (P173,448.00); and

6. the costs of suit.

SO ORDERED.

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