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Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 171092 March 15, 2010

EDNA DIAGO LHUILLIER, Petitioner,


vs.
BRITISH AIRWAYS, Respondent.

DECISION

DEL CASTILLO, J.:

Jurisdictio est potestas de publico introducta cum necessitate juris dicendi. Jurisdiction is a power introduced for the public good, on account
of the necessity of dispensing justice.1

Factual Antecedents

On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint 2 for damages against respondent British Airways before the Regional
Trial Court (RTC) of Makati City. She alleged that on February 28, 2005, she took respondent’s flight 548 from London, United Kingdom
to Rome, Italy. Once on board, she allegedly requested Julian Halliday (Halliday), one of the respondent’s flight attendants, to assist her in
placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and assist her, and even sarcastically
remarked that "If I were to help all 300 passengers in this flight, I would have a broken back!"

Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight attendant, Nickolas Kerrigan (Kerrigan),
singled her out from among all the passengers in the business class section to lecture on plane safety. Allegedly, Kerrigan made her appear
to the other passengers to be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and regulations of the plane.
Affronted, petitioner assured Kerrigan that she knew the plane’s safety regulations being a frequent traveler. Thereupon, Kerrigan allegedly
thrust his face a mere few centimeters away from that of the petitioner and menacingly told her that "We don’t like your attitude."

Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an apology. However, the latter declared that
the flight stewards were "only doing their job."

Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay ₱5 million as moral damages, ₱2 million as
nominal damages, ₱1 million as exemplary damages, ₱300,000.00 as attorney’s fees, ₱200,000.00 as litigation expenses, and cost of the
suit.

On May 16, 2005, summons, together with a copy of the complaint, was served on the respondent through Violeta Echevarria, General
Manager of Euro-Philippine Airline Services, Inc.3

On May 30, 2005, respondent, by way of special appearance through counsel, filed a Motion to Dismiss 4 on grounds of lack of jurisdiction
over the case and over the person of the respondent. Respondent alleged that only the courts of London, United Kingdom or Rome, Italy,
have jurisdiction over the complaint for damages pursuant to the Warsaw Convention, 5 Article 28(1) of which provides:

An action for damages must be brought at the option of the plaintiff, either before the court of domicile of the carrier or his principal place
of business, or where he has a place of business through which the contract has been made, or before the court of the place of destination.

Thus, since a) respondent is domiciled in London; b) respondent’s principal place of business is in London; c) petitioner bought her ticket in
Italy (through Jeepney Travel S.A.S, in Rome);6 and d) Rome, Italy is petitioner’s place of destination, then it follows that the complaint
should only be filed in the proper courts of London, United Kingdom or Rome, Italy.

Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over the person of the respondent because the summons was
erroneously served on Euro-Philippine Airline Services, Inc. which is not its resident agent in the Philippines.

On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her Comment/Opposition on the Motion to Dismiss within
10 days from notice thereof, and for respondent to file a Reply thereon. 7 Instead of filing a Comment/Opposition, petitioner filed on June 27,
2005, an Urgent Ex-Parte Motion to Admit Formal Amendment to the Complaint and Issuance of Alias Summons. 8 Petitioner alleged that
upon verification with the Securities and Exchange Commission, she found out that the resident agent of respondent in the Philippines is
Alonzo Q. Ancheta. Subsequently, on September 9, 2005, petitioner filed a Motion to Resolve Pending Incident and Opposition to Motion to
Dismiss.9

Ruling of the Regional Trial Court


On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order 10 granting respondent’s Motion to Dismiss. It ruled that:

The Court sympathizes with the alleged ill-treatment suffered by the plaintiff. However, our Courts have to apply the principles of
international law, and are bound by treaty stipulations entered into by the Philippines which form part of the law of the land. One of this is
the Warsaw Convention. Being a signatory thereto, the Philippines adheres to its stipulations and is bound by its provisions including the
place where actions involving damages to plaintiff is to be instituted, as provided for under Article 28(1) thereof. The Court finds no
justifiable reason to deviate from the indicated limitations as it will only run counter to the provisions of the Warsaw Convention. Said
adherence is in consonance with the comity of nations and deviation from it can only be effected through proper denunciation as enunciated
in the Santos case (ibid). Since the Philippines is not the place of domicile of the defendant nor is it the principal place of business, our
courts are thus divested of jurisdiction over cases for damages. Neither was plaintiff’s ticket issued in this country nor was her destination
Manila but Rome in Italy. It bears stressing however, that referral to the court of proper jurisdiction does not constitute constructive denial of
plaintiff’s right to have access to our courts since the Warsaw Convention itself provided for jurisdiction over cases arising from
international transportation. Said treaty stipulations must be complied with in good faith following the time honored principle of pacta sunt
servanda.

The resolution of the propriety of service of summons is rendered moot by the Court’s want of jurisdiction over the instant case.

WHEREFORE, premises considered, the present Motion to Dismiss is hereby GRANTED and this case is hereby ordered DISMISSED.

Petitioner filed a Motion for Reconsideration but the motion was denied in an Order 11 dated January 4, 2006.

Petitioner now comes directly before us on a Petition for Review on Certiorari on pure questions of law, raising the following issues:

Issues

I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A TORTIOUS CONDUCT COMMITTED AGAINST A
FILIPINO CITIZEN AND RESIDENT BY AIRLINE PERSONNEL OF A FOREIGN CARRIER TRAVELLING BEYOND THE
TERRITORIAL LIMIT OF ANY FOREIGN COUNTRY; AND THUS IS OUTSIDE THE AMBIT OF THE WARSAW CONVENTION.

II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN FILING ITS MOTION TO DISMISS BASED ON LACK OF
JURISDICTION OVER THE SUBJECT MATTER OF THE CASE AND OVER ITS PERSON MAY BE DEEMED AS HAVING IN
FACT AND IN LAW SUBMITTED ITSELF TO THE JURISDICTION OF THE LOWER COURT, ESPECIALLY SO, WHEN THE
VERY LAWYER ARGUING FOR IT IS HIMSELF THE RESIDENT AGENT OF THE CARRIER.

Petitioner’s Arguments

Petitioner argues that her cause of action arose not from the contract of carriage, but from the tortious conduct committed by airline
personnel of respondent in violation of the provisions of the Civil Code on Human Relations. Since her cause of action was not predicated
on the contract of carriage, petitioner asserts that she has the option to pursue this case in this jurisdiction pursuant to Philippine laws.

Respondent’s Arguments

In contrast, respondent maintains that petitioner’s claim for damages fell within the ambit of Article 28(1) of the Warsaw Convention. As
such, the same can only be filed before the courts of London, United Kingdom or Rome, Italy.

Our Ruling

The petition is without merit.

The Warsaw Convention has the force and effect of law in this country.

It is settled that the Warsaw Convention has the force and effect of law in this country. In Santos III v. Northwest Orient Airlines,12 we held
that:

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."

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.13
The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was between the United Kingdom and
Italy, which are both signatories to the Warsaw Convention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft for reward. It applies
equally to gratuitous carriage by aircraft performed by an air transport undertaking.

2. For the purposes of this Convention the expression "international carriage" means any carriage 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 carriage or
a transhipment, 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, suzerainty, mandate or
authority of another Power, even though that Power is not a party to this Convention. A carriage without such an agreed stopping
place between territories subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party is not
deemed to be international for the purposes of this Convention. (Emphasis supplied)

Thus, when the place of departure and the place of destination in a contract of carriage are situated within the territories of two High
Contracting Parties, said carriage is deemed an "international carriage". The High Contracting Parties referred to herein were the signatories
to the Warsaw Convention and those which subsequently adhered to it. 14

In the case at bench, petitioner’s place of departure was London, United Kingdom while her place of destination was Rome, Italy. 15 Both the
United Kingdom16 and Italy17 signed and ratified the Warsaw Convention. As such, the transport of the petitioner is deemed to be an
"international carriage" within the contemplation of the Warsaw Convention.

Since the Warsaw Convention applies in the instant case, then the jurisdiction over the subject matter of the action is governed by the
provisions of the Warsaw Convention.

Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

1. the court where the carrier is domiciled;

2. the court where the carrier has its principal place of business;

3. the court where the carrier has an establishment by which the contract has been made; or

4. the court of the place of destination.

In this case, it is not disputed that respondent is a British corporation domiciled in London, United Kingdom with London as its principal
place of business. Hence, under the first and second jurisdictional rules, the petitioner may bring her case before the courts of London in the
United Kingdom. In the passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the ticket was
issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the option to bring her case before the courts of
Rome in Italy. Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy, which is properly designated
given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the courts of
Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed by the petitioner.

Santos III v. Northwest Orient Airlines18 applies in this case.

Petitioner contends that Santos III v. Northwest Orient Airlines19 cited by the trial court is inapplicable to the present controversy since the
facts thereof are not similar with the instant case.

We are not persuaded.

In Santos III v. Northwest Orient Airlines,20 Augusto Santos III, a resident of the Philippines, purchased a ticket from Northwest Orient
Airlines in San Francisco, for transport between San Francisco and Manila via Tokyo and back to San Francisco. He was wait-listed in the
Tokyo to Manila segment of his ticket, despite his prior reservation. Contending that Northwest Orient Airlines acted in bad faith and
discriminated against him when it canceled his confirmed reservation and gave his seat to someone who had no better right to it, Augusto
Santos III sued the carrier for damages before the RTC. Northwest Orient Airlines moved to dismiss the complaint on ground of lack of
jurisdiction citing Article 28(1) of the Warsaw Convention. The trial court granted the motion which ruling was affirmed by the Court of
Appeals. When the case was brought before us, we denied the petition holding that under Article 28(1) of the Warsaw Convention, Augusto
Santos III must prosecute his claim in the United States, that place being the (1) domicile of the Northwest Orient Airlines; (2) principal
office of the carrier; (3) place where contract had been made (San Francisco); and (4) place of destination (San Francisco). 21

We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus:

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.

xxxx

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.22

Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines 23 is analogous to the instant case because (1) the domicile of
respondent is London, United Kingdom;24 (2) the principal office of respondent airline is likewise in London, United Kingdom; 25 (3) the
ticket was purchased in Rome, Italy;26 and (4) the place of destination is Rome, Italy.27 In addition, petitioner based her complaint on Article
217628 of the Civil Code on quasi-delict and Articles 1929 and 2130 of the Civil Code on Human Relations. In Santos III v. Northwest Orient
Airlines,31 Augusto Santos III similarly posited that Article 28 (1) of the Warsaw Convention did not apply if the action is based on tort.
Hence, contrary to the contention of the petitioner, the factual setting of Santos III v. Northwest Orient Airlines 32 and the instant case are
parallel on the material points.

Tortious conduct as ground for the petitioner’s complaint is within the purview of the Warsaw Convention.

Petitioner contends that in Santos III v. Northwest Orient Airlines,33 the cause of action was based on a breach of contract while her cause of
action arose from the tortious conduct of the airline personnel and violation of the Civil Code provisions on Human Relations.34 In addition,
she claims that our pronouncement in Santos III v. Northwest Orient Airlines 35 that "the allegation of willful misconduct resulting in a tort is
insufficient to exclude the case from the comprehension of the Warsaw Convention," is more of an obiter dictum rather than the ratio
decidendi.36 She maintains that the fact that said acts occurred aboard a plane is merely incidental, if not irrelevant.37

We disagree with the position taken by the petitioner. Black defines obiter dictum as "an opinion entirely unnecessary for the decision of the
case" and thus "are not binding as precedent."38 In Santos III v. Northwest Orient Airlines,39 Augusto Santos III categorically put in issue the
applicability of Article 28(1) of the Warsaw Convention if the action is based on tort.

In the said case, we held that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the realm of the
Warsaw Convention. In fact, our ruling that a cause of action based on tort did not bring the case outside the sphere of the Warsaw
Convention was our ratio decidendi in disposing of the specific issue presented by Augusto Santos III. Clearly, the contention of the herein
petitioner that the said ruling is an obiter dictum is without basis.

Relevant to this particular issue is the case of Carey v. United Airlines, 40 where the passenger filed an action against the airline arising from
an incident involving the former and the airline’s flight attendant during an international flight resulting to a heated exchange which
included insults and profanity. The United States Court of Appeals (9th Circuit) held that the "passenger's action against the airline carrier
arising from alleged confrontational incident between passenger and flight attendant on international flight was governed exclusively by the
Warsaw Convention, even though the incident allegedly involved intentional misconduct by the flight attendant." 41

In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action against the airline in the state court, arising from a confrontation
with the flight attendant during an international flight to Mexico. The United States Court of Appeals (9th Circuit) held that the "Warsaw
Convention governs actions arising from international air travel and provides the exclusive remedy for conduct which falls within its
provisions." It further held that the said Convention "created no exception for an injury suffered as a result of intentional conduct" 43 which
in that case involved a claim for intentional infliction of emotional distress.

It is thus settled that allegations of tortious conduct committed against an airline passenger during the course of the international carriage do
not bring the case outside the ambit of the Warsaw Convention.

Respondent, in seeking remedies from the trial court through special appearance of counsel, is not deemed to have voluntarily submitted
itself to the jurisdiction of the trial court.

Petitioner argues that respondent has effectively submitted itself to the jurisdiction of the trial court when the latter stated in its
Comment/Opposition to the Motion for Reconsideration that "Defendant [is at a loss] x x x how the plaintiff arrived at her erroneous
impression that it is/was Euro-Philippines Airlines Services, Inc. that has been making a special appearance since x x x British Airways x x
x has been clearly specifying in all the pleadings that it has filed with this Honorable Court that it is the one making a special appearance."44

In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v. Court of Appeals 45 where we held that even if a party
"challenges the jurisdiction of the court over his person, as by reason of absence or defective service of summons, and he also invokes other
grounds for the dismissal of the action under Rule 16, he is not deemed to be in estoppel or to have waived his objection to the jurisdiction
over his person."46
This issue has been squarely passed upon in the recent case of Garcia v. Sandiganbayan,47 where we reiterated our ruling in La Naval Drug
Corporation v. Court of Appeals48 and elucidated thus:

Special Appearance to Question a Court’s Jurisdiction Is Not

Voluntary Appearance

The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly provides:

Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service of summons. The
inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a
voluntary appearance.

Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his person, together with other grounds raised
therein, is not deemed to have appeared voluntarily before the court. What the rule on voluntary appearance – the first sentence of the above-
quoted rule – means is that the voluntary appearance of the defendant in court is without qualification, in which case he is deemed to have
waived his defense of lack of jurisdiction over his person due to improper service of summons.

The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that she voluntarily appeared without qualification.
Petitioner filed the following pleadings in Forfeiture I: (a) motion to dismiss; (b) motion for reconsideration and/or to admit answer; (c)
second motion for reconsideration; (d) motion to consolidate forfeiture case with plunder case; and (e) motion to dismiss and/or to quash
Forfeiture I. And in Forfeiture II: (a) motion to dismiss and/or to quash Forfeiture II; and (b) motion for partial reconsideration.

The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely for special appearance with the purpose of
challenging the jurisdiction of the SB over her person and that of her three children. Petitioner asserts therein that SB did not acquire
jurisdiction over her person and of her three children for lack of valid service of summons through improvident substituted service of
summons in both Forfeiture I and Forfeiture II. This stance the petitioner never abandoned when she filed her motions for reconsideration,
even with a prayer to admit their attached Answer Ex Abundante Ad Cautelam dated January 22, 2005 setting forth affirmative defenses
with a claim for damages. And the other subsequent pleadings, likewise, did not abandon her stance and defense of lack of jurisdiction due
to improper substituted services of summons in the forfeiture cases. Evidently, from the foregoing Sec. 20, Rule 14 of the 1997 Revised
Rules on Civil Procedure, petitioner and her sons did not voluntarily appear before the SB constitutive of or equivalent to service of
summons.

Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant case. Said case elucidates the current view in our
jurisdiction that a special appearance before the court––challenging its jurisdiction over the person through a motion to dismiss even if the
movant invokes other grounds––is not tantamount to estoppel or a waiver by the movant of his objection to jurisdiction over his person; and
such is not constitutive of a voluntary submission to the jurisdiction of the court.1avvphi1

Thus, it cannot be said that petitioner and her three children voluntarily appeared before the SB to cure the defective substituted services of
summons. They are, therefore, not estopped from questioning the jurisdiction of the SB over their persons nor are they deemed to have
waived such defense of lack of jurisdiction. Consequently, there being no valid substituted services of summons made, the SB did not
acquire jurisdiction over the persons of petitioner and her children. And perforce, the proceedings in the subject forfeiture cases, insofar as
petitioner and her three children are concerned, are null and void for lack of jurisdiction. (Emphasis supplied)

In this case, the special appearance of the counsel of respondent in filing the Motion to Dismiss and other pleadings before the trial court
cannot be deemed to be voluntary submission to the jurisdiction of the said trial court. We hence disagree with the contention of the
petitioner and rule that there was no voluntary appearance before the trial court that could constitute estoppel or a waiver of respondent’s
objection to jurisdiction over its person.

WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the Regional Trial Court of Makati City, Branch 132, dismissing
the complaint for lack of jurisdiction, is AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO


Associate Justice

WE CONCUR:

Republic of the Philippines


SUPREME COURT
Baguio City

FIRST DIVISION

G.R. No. 124110 April 20, 2001


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

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 Washinton (15 April 1989);

b. Washington to Chicago (25 April 1989);

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

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

All flights had been confirmed previously by United Airlines. 2

The Fontanillas proceeded to the United States as planned, where they used the first coupon from San Francisco to Washington. On April
24, 1989, Aniceto Fontanilla bought two (2) additional coupons each for himself, his wife and his son from petitioner at its office in
Washington Dulles Airport. After paying the penalty for rewriting their tickets, the Fontanillas were issued tickets with corresponding
boarding passes with the words "CHECK-IN REQUIRED," for United Airlines Flight No. 1108, set to leave from Los Angeles to San
Francisco at 10:30 a.m. on May 5, 1989.3

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

Private respondents’ version is as follows:

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

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

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

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

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

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

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

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

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

Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on May 5, 1989.
According to United Airlines, the Fontanillas did not initially go to the check-in counter to get their seat assignments for UA Flight 1108.
They instead proceeded to join the queue boarding the aircraft without first securing their seat assignments as required in their ticket and
boarding passes. Having no seat assignments, the stewardess at the door of the plane instructed them to go to the check-in counter. When the
Fontanillas proceeded to the check-in counter, Linda Allen, the United Airlines Customer Representative at the counter informed them that
the flight was overbooked. She booked them on the next available flight and offered them denied boarding compensation. Allen vehemently
denies uttering the derogatory and racist words attributed to her by the Fontanillas. 14

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

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

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

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

a. P200,000.00 as moral damages;


b. P200,000.00 as exemplary damages;
c. P50,000.00 as attorney’s fees;

No pronouncement as to costs.

SO ORDERED.16

Petitioner United Airlines now comes to this Court raising the following assignments of errors;

RESPONDENT COURT OF APPEALS GRVAELY ERRED IN RULING THAT THE


TRIAL COURT WAS WRONG IN FAILING TO CONSIDER THE ALLEGED ADMISSION
THAT PRIVATE RESPONDENT OBSERVED THE CHECK-IN REQUIREMENT.

II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE


RESPONDENT’S FAILURE TO CHECK-IN WILL NOT DEFEAT HIS CLAIMS BECAUSE
THE DENIED BOARDING RULES WERE NOT COMPLIED WITH.

III

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE


RESPONDENT IS ENTITLED TO MORAL DAMAGES OF P200,000.

IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE


RESPONDENT IS ENTITLED TO EXEMPLARY DAMAGES OF P200,000.

V
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE
RESPONDENT IS ENTITLED TO ATTORNEY’S FEES OF P50,000.17

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

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

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

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

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

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

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

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

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

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

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

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

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

We rule in the negative.

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

Aniceto Fontanilla’s assertion that upon arrival at the airport at 9:45 a.m., he immediately proceeded to the check-in counter, and that Linda
Allen punched in something into the computer is specious and not supported by the evidence on record. In support of their allegations,
private respondents submitted a copy of the boarding pass. Explicitly printed on the boarding pass are the words "Check-In
Required." Curiously, the said pass did not indicate any seat number. If indeed the Fontanillas checked in at the designated time as they
claimed, why then were they not assigned seat numbers? Absent any showing that Linda was so motivated, we do not buy into private
respondents’ claim that Linda intentionally deceived him, and made him the laughing stock among the passengers. 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 they very reason
why they were not given their respective seat numbers, which resulted in their being denied boarding. 29

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

250.6 Exceptions to eligibility for denied boarding compensation.

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

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

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

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

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

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

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

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

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

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling passengers concerned to an
award of moral damages. In Alitalia Airways vs. Court of Appeals, where passengers with confirmed booking were
refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to except that he
would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of
carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their
seats in case all of them would show up for check in. For the indignity and inconvenience of being refused a
confirmed seat on the last minute, said passenger is entitled to moral damages. (Emphasis supplied).

However, the Court’s ruling in said case should be read in consonance with existing laws, particularly, Economic Regulations No. 7, as
amended, of the Civil Aeronautics Board:
Sec. 3. Scope. – This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of
flights or portions of flights originating from or terminating at, or serving a point within the territory of the Republic
of the Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the
Philippines, for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only
honest mistakes on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided,
however, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a
deliberate and willful act of non-accommodation.

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

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

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

SO ORDERED.

Davide Jr., Puno, Pardo, Ynares-Santiago. JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 60501. March 5, 1993.

CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and TOMAS L. ALCANTARA, respondents.

Siguion-Reyna, Montecillo & Ongsiako and Tomacruz, Manguiat & Associates for petitioner.

Tanjuatco, Oreta, Tanjuatco, Berenger & Corpus for private respondent.

SYLLABUS

1. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF; PETITIONER BREACHED ITS CONTRACT OF CARRIAGE
WITH PRIVATE RESPONDENT WHEN IT FAILED TO DELIVER HIS LUGGAGE AT THE DESIGNATED PLACE AND TIME. —
Petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time, it
being the obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to
delay their transportation, and the evidence shows that petitioner acted fraudulently or in bad faith.

2. DAMAGES; MORAL AND EXEMPLARY DAMAGES PREDICATED UPON A BREACH OF CONTRACT OF CARRIAGE;
RECOVERABLE ONLY IN INSTANCES WHERE THE MISHAP RESULTS IN DEATH OF A PASSENGER, OR WHERE THE
CARRIER IS GUILTY OF FRAUD OR BAD FAITH; THE CONDUCT OF PETITIONER'S REPRESENTATIVE TOWARDS
RESPONDENT JUSTIFIES THE GRANT OF MORAL AND EXEMPLARY DAMAGES IN CASE AT BAR. — Moral damages
predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in death of a passenger, or
where the carrier is guilty of fraud or bad faith. The language and conduct of petitioner's representative towards respondent Alcantara was
discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was
also rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that was not sincere because the representative
knew that the passenger was limited only to $20.00 which, certainly, was not enough to purchase comfortable clothings appropriate for an
executive conference. Considering that Alcantara was not only a revenue passenger but even paid for a first class airline accommodation and
accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in his problem, petitioner or its
agents should have been more courteous and accommodating to private respondent, instead of giving him a curt reply, "What can we do, the
baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific." 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. Conversely, if the defendant airline is shown to have acted fraudulently or in bad
faith, the award of moral and exemplary damages is proper.

3. TEMPERATE DAMAGES; RECOVERABLE ONLY UPON PROOF THAT THE CLAIMANT SUSTAINED SOME PECUNIARY
LOSS. — However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in the absence of
any showing that he sustained some pecuniary loss. It cannot be gainsaid that respondent's luggage was ultimately delivered to him without
serious or appreciable damage.

4. WARSAW 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; DOES NOT PRECLUDE THE OPERATION OF THE CIVIL CODE AND OTHER PERTINENT
LAWS. — As We have repeatedly held, 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 for damages in the enumerated cases and under certain limitations. However, it must not be construed to preclude
the operation of the Civil Code and other 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 wilfull misconduct on the part of the carrier's employees is
found or established, which is clearly the case before Us.

DECISION

BELLOSILLO, J p:

This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed with modification that of the trial court by
increasing the award of damages in favor of private respondent Tomas L. Alcantara.

The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara was a first class passenger of petitioner Cathay Pacific
Airways, Ltd. (CATHAY for brevity) on its Flight No. CX-900 from Manila to Hongkong and onward from Hongkong to Jakarta on Flight
No. CX-711. The purpose of his trip was to attend the following day, 20 October 1975, a conference with the Director General of Trade of
Indonesia, Alcantara being the Executive Vice-President and General Manager of Iligan Cement Corporation, Chairman of the Export
Committee of the Philippine Cement Corporation, and representative of the Cement Industry Authority and the Philippine Cement
Corporation. He checked in his luggage which contained not only his clothing and articles for personal use but also papers and documents he
needed for the conference.

Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When he inquired about his luggage from CATHAY's
representative in Jakarta, private respondent was told that his luggage was left behind in Hongkong. For this, respondent Alcantara was
offered $20.00 as "inconvenience money" to buy his immediate personal needs until the luggage could be delivered to him.

His luggage finally reached Jakarta more than twenty four (24) hours after his arrival. However, it was not delivered to him at his hotel but
was required by petitioner to be picked up by an official of the Philippine Embassy.

On 1 March 1976, respondent filed his complaint against petitioner with the Court of First Instance (now Regional Trial Court) of Lanao del
Norte praying for temperate, moral and exemplary damages, plus attorney's fees.

On 18 April 1976, the trial court rendered its decision ordering CATHAY to pay Plaintiff P20,000.00 for moral damages, P5,000.00 for
temperate damages, P10,000.00 for exemplary damages, and P25,000.00 for attorney's fees, and the costs. 1

Both parties appealed to the Court of Appeals. CATHAY assailed the conclusion of the trial court that it was accountable for breach of
contract and questioned the non-application by the court of the Warsaw Convention as well as the excessive damages awarded on the basis
of its finding that respondent Alcantara was rudely treated by petitioner's employees during the time that his luggage could not be found. For
his part, respondent Alcantara assigned as error the failure of the trial court to grant the full amount of damages sought in his complaint.

On 11 November 1981, respondent Court of Appeals rendered its decision affirming the findings of fact of the trial court but modifying its
award by increasing the moral damages to P80,000.00, exemplary damages to P20,000.00 and temperate or moderate damages to
P10,000.00. The award of P25,000.00 for attorney's fees was maintained.

The same grounds raised by petitioner in the Court of Appeals are reiterated before Us. CATHAY contends that: (1) the Court of Appeals
erred in holding petitioner liable to respondent Alcantara for moral, exemplary and temperate damages as well as attorney's fees; and, (2) the
Court of Appeals erred in failing to apply the Warsaw Convention on the liability of a carrier to its passengers.

On its first assigned error, CATHAY argues that although it failed to transport respondent Alcantara's luggage on time, the one-day delay
was not made in bad faith so as to justify moral, exemplary and temperate damages. It submits that the conclusion of respondent appellate
court that private respondent was treated rudely and arrogantly when he sought assistance from CATHAY's employees has no factual basis,
hence, the award of moral damages has no leg to stand on.

Petitioner's first assigned error involves findings of fact which are not reviewable by this Court. 2 At any rate, it is not impressed with merit.
Petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time, it
being the obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to
delay their transportation, 3 and the evidence shows that petitioner acted fraudulently or in bad faith.

Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in death of a
passenger, 4 or where the carrier is guilty of fraud or bad faith. 5

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. CATHAY alleges that as a result of mechanical trouble, all
pieces of luggage on board the first aircraft bound for Jakarta were unloaded and transferred to the second aircraft which departed an hour
and a half later. Yet, as the Court of Appeals noted, petitioner was not even aware that it left behind private respondent's luggage until its
attention was called by the Hongkong Customs authorities. More, bad faith or otherwise improper conduct may be attributed to the
employees of petitioner. While the mere failure of CATHAY to deliver respondent's 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, 6 We are persuaded that the
employees of CATHAY acted in bad faith. We refer to the deposition of Romulo Palma, Commercial Attache of the Philippine Embassy at
Jakarta, who was with respondent Alcantara when the latter sought assistance from the employees of CATHAY. This deposition was the
basis of the findings of the lower courts when both awarded moral damages to private respondent. Hereunder is part of Palma's testimony —

"Q: What did Mr. Alcantara say, if any?

A. Mr. Alcantara was of course . . . . I could understand his position. He was furious for the experience because probably he was thinking he
was going to meet the Director-General the following day and, well, he was with no change of proper clothes and so, I would say, he was
not happy about the situation.

Q: What did Mr. Alcantara say?

A: He was trying to press the fellow to make the report and if possible make the delivery of his baggage as soon as possible.

Q: And what did the agent or duty officer say, if any?

A: The duty officer, of course, answered back saying 'What can we do, the baggage is missing. I cannot do anything.' something like it.
'Anyhow you can buy anything you need, charged to Cathay Pacific.'

Q: What was the demeanor or comportment of the duty officer of Cathay Pacific when he said to Mr. Alcantara 'You can buy anything
chargeable to Cathay Pacific'?

A: If I had to look at it objectively, the duty officer would like to dismiss the affair as soon as possible by saying indifferently 'Don't worry.
It can be found.'" 7

Indeed, the aforequoted testimony shows that the language and conduct of petitioner's representative towards respondent Alcantara was
discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was
also rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that was not sincere because the representative
knew that the passenger was limited only to $20.00 which, certainly, was not enough to purchase comfortable clothings appropriate for an
executive conference. Considering that Alcantara was not only a revenue passenger but even paid for a first class airline accommodation and
accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in his problem, petitioner or its
agents should have been more courteous and accommodating to private respondent, instead of giving him a curt reply, "What can we do, the
baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific." CATHAY's employees
should have been more solicitous to a passenger in distress and assuaged his anxieties and apprehensions. To compound matters, CATHAY
refused to have the luggage of Alcantara delivered to him at his hotel; instead, he was required to pick it up himself and an official of the
Philippine Embassy. Under the circumstances, it is evident that petitioner was remiss in its duty to provide proper and adequate assistance to
a paying passenger, more so one with first class accommodation.

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

However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in the absence of any showing
that he sustained some pecuniary loss. 9 It cannot be gainsaid that respondent's luggage was ultimately delivered to him without serious or
appreciable damage.

As regards its second assigned error, petitioner airline contends that the extent of its liability for breach of contract should be limited
absolutely to that set forth in the Warsaw Convention. We do not agree. As We have repeatedly held, 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. 10 The Warsaw Convention declares the carrier liable for damages in the enumerated cases and under certain
limitations. 11 However, it must not be construed to preclude the operation of the Civil Code and other 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, 12 especially
if wilfull misconduct on the part of the carrier's employees is found or established, which is clearly the case before Us. For, the Warsaw
Convention itself provides in Art. 25 that —

"(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 wilfull 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 wilfull misconduct."

(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."

When petitioner airline misplaced respondent's luggage and failed to deliver it to its passenger at the appointed place and time, some special
species of injury must have been caused to him. For sure, the latter underwent profound distress and anxiety, and the fear of losing the
opportunity to fulfill the purpose of his trip. In fact, for want of appropriate clothings for the occasion brought about by the delay of the
arrival of his luggage, to his embarrassment and consternation respondent Alcantara had to seek postponement of his pre-arranged
conference with the Director General of Trade of the host country.

In one case, 13 this Court observed that a traveller would naturally suffer mental anguish, anxiety and shock when he finds that his luggage
did not travel with him and he finds himself in a foreign land without any article of clothing other than what he has on.

Thus, respondent is entitled to moral and exemplary damages. We however find the award by the Court of Appeals of P80,000.00 for moral
damages excessive, hence, We reduce the amount to P30,000.00. The exemplary damages of P20,000.00 being reasonable is maintained, as
well as the attorney's fees of P25,000.00 considering that petitioner's act or omission has compelled Alcantara to litigate with third persons
or to incur expenses to protect his interest. 14

WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with the exception of the award of temperate damages
of P10,000.00 which is deleted, while the award of moral damages of P80,000.00 is reduced to P30,000.00. The award of P20,000.00 for
exemplary damages is maintained as reasonable together with the attorney's fees of P25,000.00. The moral and exemplary damages shall
earn interest at the legal rate from 1 March 1976 when the complaint was filed until full payment.

SO ORDERED.

Cruz, Griño-Aquino and Quiason, JJ ., concur.

Footnotes

1. Record on Appeal, pp. 12-23; Rollo, p. 30.

2. Philippine Air Lines v. Court of Appeals, G.R. No. 92501, 6 March 1992, 207 SCRA 100.

3. Tan Liao v. American President Lines, 98 Phil 203.

4. Arts. 1764 and 2206, New Civil Code.

5. Art. 2220, New Civil Code; China Airlines, Ltd. v. IAC, G.R. No. 73835, 17 January 1989, 169 SCRA 226.

6. Alitalia v. IAC, G.R. No. 71929, 4 December 1990, 192 SCRA 9.

7. Records, pp. 12-13.

8. China Airlines Limited v. Court of Appeals, G.R. No. 94590, 29 July 1992.

9. Art. 2224, New Civil Code.

10. See Note 6; Northwest Airlines, Inc. v. Cuenca, No. L-22425, 31 August 1965, 14 SCRA 1063.

11. Art. 22. 1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of 250,000 francs. . . .
Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability.

"2.a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of 250 francs per kilogramme, unless
the passenger or consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in
delivery at destination 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.

"2.b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained therein, the weight to be taken
into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the package or
packages concerned. Nevertheless, when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained
therein, affects the value of other packages covered by the same baggage check or the same air way bill, the total weight of such package or
packages shall also be taken into consideration in determining the limit of liability."

12. See Note 6.

13. Pan American World Airways, Inc. v. IAC, G.R. No. 68988, 21 June 1990, 186 SCRA 687.

14. Art. 2208, par. (2), New Civil Code.

Republic of the Philippines


SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 165266 December 15, 2010

AIR FRANCE, Petitioner,


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

DECISION

VILLARAMA, JR., J.:

For review is the Decision1 dated June 30, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 56587 which affirmed the
Decision2 dated January 3, 1996 of the Regional Trial Court (RTC) of Makati City, Branch 137 in Civil Case No. 93-2328.

The facts follow:

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

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

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

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

On July 13, 1993, respondent filed a complaint7 for damages against the petitioner alleging that by reason of its negligence and breach of
obligation to transport and deliver his luggage, respondent suffered inconvenience, serious anxiety, physical suffering and sleepless nights. It
was further alleged that due to the physical, mental and emotional strain resulting from the loss of his luggage, aggravated by the fact that he
failed to take his regular medication, respondent had to be taken to a medical clinic in Tokyo, Japan for emergency treatment. Respondent
asserted that as a common carrier which advertises and offers its services to the public, petitioner is under obligation to observe
extraordinary diligence in the vigilance over checked-in luggage and to see to it that respondent’s luggage entrusted to petitioner’s custody
would accompany him on his flight and/or could be claimed by him upon arrival at his point of destination or delivered to him without
delay. Petitioner should therefore be held liable for actual damages ($2,000.00 or ₱40,000.00), moral damages (₱1,000,000.00), exemplary
damages (₱500,000.00), attorney’s fees (₱50,000.00) and costs of suit.

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

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

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

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

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

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

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

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

4. The costs.

SO ORDERED.10

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

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

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

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

I.

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

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

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

Comparing the situation in this case to other cases awarding similar damages to the aggrieved passenger as a result of breaches of contract
by international carriers, petitioner argues that even assuming that respondent was entitled to moral and exemplary damages, the sums
adjudged should be modified or reduced. It is stressed that petitioner or its agents were never rude or discourteous toward respondent; he
was not subjected to humiliating treatment or comments as in the case of Lopez, et al. v. Pan American World Airways, 15 Ortigas, Jr. v.
Lufthansa German Airlines16 and Zulueta v. Pan American World Airways, Inc. 17. The mere fact that respondent was a Congressman should
not result in an automatic increase in the moral and exemplary damages recoverable. As held in Kierulf v. Court of Appeals 18 the social and
financial standing of a claimant may be considered only if he or she was subjected to contemptuous conduct despite the offender’s
knowledge of his or her social and financial standing.19

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

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

The petition is partly meritorious.

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

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

In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible
acted fraudulently or with malice or bad faith.25 Not every case of mental anguish, fright or serious anxiety calls for the award of moral
damages.26 Where in breaching the contract of carriage the airline is not shown to have acted fraudulently or in bad faith, liability for
damages is limited to the natural and probable consequences of the breach of the obligation which the parties had foreseen or could have
reasonably foreseen. In such a case the liability does not include moral and exemplary damages. 27
Bad faith should be established by clear and convincing evidence. The settled rule is that the law always presumes good faith such that any
person who seeks to be awarded damages due to the acts of another has the burden of proving that the latter acted in bad faith or with ill
motive.28

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

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

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

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

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

While respondent failed to cite any act of discourtesy, discrimination or rudeness by petitioner’s employees, this did not make his loss and
moral suffering insignificant and less deserving of compensation. In repeatedly ignoring respondent’s inquiries, petitioner’s employees
exhibited an indifferent attitude without due regard for the inconvenience and anxiety he experienced after realizing that his luggage was
missing. Petitioner was thus guilty of bad faith in breaching its contract of carriage with the respondent, which entitles the latter to the award
of moral damages.1awphi1

However, we agree with petitioner that the sum of ₱1,000,000.00 awarded by the trial court is excessive and not proportionate to the loss or
suffering inflicted on the passenger under the circumstances. As in Trans World Airlines v. Court of Appeals 35 where this Court after
considering the social standing of the aggrieved passenger who is a lawyer and director of several companies, the amount of ₱500,000.00
awarded by the trial court as moral damages was still reduced to ₱300,000.00, the moral damages granted to herein respondent should
likewise be adjusted.

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

Where as in this case the air carrier failed to act timely on the passenger’s predicament caused by its employees’ mistake and more than
ordinary inadvertence or inattention, and the passenger failed to show any act of arrogance, discourtesy or rudeness committed by the air
carrier’s employees, the amounts of ₱200,000.00, ₱50,000.00 and ₱30,000.00 as moral damages, exemplary damages and attorney’s fees
would be sufficient and justified.38
WHEREFORE, the petition is DENIED. The Decision dated June 30, 2004 of the Court of Appeals in CA-G.R. CV No. 56587 is hereby
AFFIRMED with MODIFICATION in that the award of moral damages, exemplary damages and attorney’s fees are hereby reduced to
₱200,000.00, ₱50,000.00 and ₱30,000.00, respectively.

With costs against the petitioner.

SO ORDERED.

MARTIN S. VILLARAMA, JR.


Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES


Associate Justice
Chairperson

LUCAS P. BERSAMIN JOSE CATRAL MENDOZA*


Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO


Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

CONCHITA CARPIO MORALES


Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

Republic of the Philippines


SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 168081 October 17, 2008

ARMANDO G. YRASUEGUI, petitioners,


vs.
PHILIPPINE AIRLINES, INC., respondents.

DECISION

REYES, R.T., J.:

THIS case portrays the peculiar story of an international flight steward who was dismissed because of his failure to adhere to the weight
standards of the airline company.

He is now before this Court via a petition for review on certiorari claiming that he was illegally dismissed. To buttress his stance, he argues
that (1) his dismissal does not fall under 282(e) of the Labor Code; (2) continuing adherence to the weight standards of the company is not a
bona fide occupational qualification; and (3) he was discriminated against because other overweight employees were promoted instead of
being disciplined.
After a meticulous consideration of all arguments pro and con, We uphold the legality of dismissal. Separation pay, however, should be
awarded in favor of the employee as an act of social justice or based on equity. This is so because his dismissal is not for serious
misconduct. Neither is it reflective of his moral character.

The Facts

Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight
inches (5’8") with a large body frame. The proper weight for a man of his height and body structure is from 147 to 166 pounds, the ideal
weight being 166 pounds, as mandated by the Cabin and Crew Administration Manual1 of PAL.

The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an extended vacation leave from December 29,
1984 to March 4, 1985 to address his weight concerns. Apparently, petitioner failed to meet the company’s weight standards, prompting
another leave without pay from March 5, 1985 to November 1985.

After meeting the required weight, petitioner was allowed to return to work. But petitioner’s weight problem recurred. He again went on
leave without pay from October 17, 1988 to February 1989.

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with company policy, he was removed from
flight duty effective May 6, 1989 to July 3, 1989. He was formally requested to trim down to his ideal weight and report for weight checks
on several dates. He was also told that he may avail of the services of the company physician should he wish to do so. He was advised that
his case will be evaluated on July 3, 1989.2

On February 25, 1989, petitioner underwent weight check. It was discovered that he gained, instead of losing, weight. He was overweight
at 215 pounds, which is 49 pounds beyond the limit. Consequently, his off-duty status was retained.

On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his residence to check on the progress of his
effort to lose weight. Petitioner weighed 217 pounds, gaining 2 pounds from his previous weight. After the visit, petitioner made a
commitment3 to reduce weight in a letter addressed to Cabin Crew Group Manager Augusto Barrios. The letter, in full, reads:

Dear Sir:

I would like to guaranty my commitment towards a weight loss from 217 pounds to 200 pounds from today until 31 Dec. 1989.

From thereon, I promise to continue reducing at a reasonable percentage until such time that my ideal weight is achieved.

Likewise, I promise to personally report to your office at the designated time schedule you will set for my weight check.

Respectfully Yours,

F/S Armando Yrasuegui4

Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained overweight. On January 3, 1990, he was
informed of the PAL decision for him to remain grounded until such time that he satisfactorily complies with the weight standards. Again,
he was directed to report every two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was given one more month to comply with the weight requirement. As usual,
he was asked to report for weight check on different dates. He was reminded that his grounding would continue pending satisfactory
compliance with the weight standards.5

Again, petitioner failed to report for weight checks, although he was seen submitting his passport for processing at the PAL Staff Service
Division.

On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight check would be dealt with accordingly. He
was given another set of weight check dates.6 Again, petitioner ignored the directive and did not report for weight checks. On June 26, 1990,
petitioner was required to explain his refusal to undergo weight checks. 7

When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was still way over his ideal weight of 166 pounds.

From then on, nothing was heard from petitioner until he followed up his case requesting for leniency on the latter part of 1992. He weighed
at 219 pounds on August 20, 1992 and 205 pounds on November 5, 1992.

On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for violation of company standards on weight
requirements. He was given ten (10) days from receipt of the charge within which to file his answer and submit controverting evidence. 8
On December 7, 1992, petitioner submitted his Answer.9 Notably, he did not deny being overweight. What he claimed, instead, is that his
violation, if any, had already been condoned by PAL since "no action has been taken by the company" regarding his case "since 1988." He
also claimed that PAL discriminated against him because "the company has not been fair in treating the cabin crew members who are
similarly situated."

On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was undergoing a weight reduction program to
lose at least two (2) pounds per week so as to attain his ideal weight.10

On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal weight, "and considering the utmost
leniency" extended to him "which spanned a period covering a total of almost five (5) years," his services were considered terminated
"effective immediately."11

His motion for reconsideration having been denied,12 petitioner filed a complaint for illegal dismissal against PAL.

Labor Arbiter, NLRC and CA Dispositions

On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled 13 that petitioner was illegally dismissed. The dispositive part of the Arbiter
ruling runs as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring the complainant’s dismissal illegal, and ordering the
respondent to reinstate him to his former position or substantially equivalent one, and to pay him:

a. Backwages of Php10,500.00 per month from his dismissal on June 15, 1993 until reinstated, which for purposes of appeal is hereby set
from June 15, 1993 up to August 15, 1998 at ₱651,000.00;

b. Attorney’s fees of five percent (5%) of the total award.

SO ORDERED.14

The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature of the job of petitioner. 15 However, the weight
standards need not be complied with under pain of dismissal since his weight did not hamper the performance of his duties. 16 Assuming that
it did, petitioner could be transferred to other positions where his weight would not be a negative factor.17 Notably, other overweight
employees, i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were promoted instead of being disciplined.18

Both parties appealed to the National Labor Relations Commission (NLRC). 19

On October 8, 1999, the Labor Arbiter issued a writ of execution directing the reinstatement of petitioner without loss of seniority rights and
other benefits.20

On February 1, 2000, the Labor Arbiter denied 21 the Motion to Quash Writ of Execution22 of PAL.

On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC. 23

On June 23, 2000, the NLRC rendered judgment24 in the following tenor:

WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18 November 1998 as modified by our findings herein, is hereby
AFFIRMED and that part of the dispositive portion of said decision concerning complainant’s entitlement to backwages shall be deemed to
refer to complainant’s entitlement to his full backwages, inclusive of allowances and to his other benefits or their monetary
equivalent instead of simply backwages, from date of dismissal until his actual reinstatement or finality hereof. Respondent is enjoined to
manifests (sic) its choice of the form of the reinstatement of complainant, whether physical or through payroll within ten (10) days from
notice failing which, the same shall be deemed as complainant’s reinstatement through payroll and execution in case of non-payment shall
accordingly be issued by the Arbiter. Both appeals of respondent thus, are DISMISSED for utter lack of merit.25

According to the NLRC, "obesity, or the tendency to gain weight uncontrollably regardless of the amount of food intake, is a disease in
itself."26 As a consequence, there can be no intentional defiance or serious misconduct by petitioner to the lawful order of PAL for him to
lose weight.27

Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable. However, it found as unnecessary the Labor Arbiter
holding that petitioner was not remiss in the performance of his duties as flight steward despite being overweight. According to the NLRC,
the Labor Arbiter should have limited himself to the issue of whether the failure of petitioner to attain his ideal weight constituted willful
defiance of the weight standards of PAL.28

PAL moved for reconsideration to no avail.29 Thus, PAL elevated the matter to the Court of Appeals (CA) via a petition for certiorari under
Rule 65 of the 1997 Rules of Civil Procedure.30
By Decision dated August 31, 2004, the CA reversed 31 the NLRC:

WHEREFORE, premises considered, we hereby GRANT the petition. The assailed NLRC decision is declared NULL and VOID and is
hereby SET ASIDE. The private respondent’s complaint is hereby DISMISSED. No costs.

SO ORDERED.32

The CA opined that there was grave abuse of discretion on the part of the NLRC because it "looked at wrong and irrelevant
considerations"33 in evaluating the evidence of the parties. Contrary to the NLRC ruling, the weight standards of PAL are meant to be
a continuing qualification for an employee’s position.34 The failure to adhere to the weight standards is an analogous cause for the dismissal
of an employee under Article 282(e) of the Labor Code in relation to Article 282(a). It is not willful disobedience as the NLRC seemed to
suggest.35 Said the CA, "the element of willfulness that the NLRC decision cites is an irrelevant consideration in arriving at a conclusion on
whether the dismissal is legally proper."36 In other words, "the relevant question to ask is not one of willfulness but one of reasonableness of
the standard and whether or not the employee qualifies or continues to qualify under this standard."37

Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of PAL are reasonable. 38 Thus, petitioner was legally
dismissed because he repeatedly failed to meet the prescribed weight standards. 39 It is obvious that the issue of discrimination was only
invoked by petitioner for purposes of escaping the result of his dismissal for being overweight. 40

On May 10, 2005, the CA denied petitioner’s motion for reconsideration. 41 Elaborating on its earlier ruling, the CA held that the weight
standards of PAL are a bona fide occupational qualification which, in case of violation, "justifies an employee’s separation from the
service."42

Issues

In this Rule 45 petition for review, the following issues are posed for resolution:

I.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER’S OBESITY CAN BE A
GROUND FOR DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES;

II.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER’S DISMISSAL FOR
OBESITY CAN BE PREDICATED ON THE "BONA FIDE OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE";

III.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER WAS NOT UNDULY
DISCRIMINATED AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHT CABIN ATTENDANTS WERE
EITHER GIVEN FLYING DUTIES OR PROMOTED;

IV.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED ASIDE PETITIONER’S CLAIMS FOR
REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING MOOT AND ACADEMIC.43 (Underscoring supplied)

Our Ruling

I. The obesity of petitioner is a ground for dismissal under Article 282(e) 44 of the Labor Code.

A reading of the weight standards of PAL would lead to no other conclusion than that they constitute a continuing qualification of an
employee in order to keep the job. Tersely put, an employee may be dismissed the moment he is unable to comply with his ideal weight as
prescribed by the weight standards. The dismissal of the employee would thus fall under Article 282(e) of the Labor Code. As explained by
the CA:

x x x [T]he standards violated in this case were not mere "orders" of the employer; they were the "prescribed weights" that a cabin crew
must maintain in order to qualify for and keep his or her position in the company. In other words, they were standards that
establish continuing qualifications for an employee’s position. In this sense, the failure to maintain these standards does not fall under
Article 282(a) whose express terms require the element of willfulness in order to be a ground for dismissal. The failure to meet the
employer’s qualifying standards is in fact a ground that does not squarely fall under grounds (a) to (d) and is therefore one that falls under
Article 282(e) – the "other causes analogous to the foregoing."
By its nature, these "qualifying standards" are norms that apply prior to and after an employee is hired. They apply prior to
employment because these are the standards a job applicant must initially meet in order to be hired. They apply after hiring because an
employee must continue to meet these standards while on the job in order to keep his job. Under this perspective, a violation is not one of
the faults for which an employee can be dismissed pursuant to pars. (a) to (d) of Article 282; the employee can be dismissed simply because
he no longer "qualifies" for his job irrespective of whether or not the failure to qualify was willful or intentional. x x x 45

Petitioner, though, advances a very interesting argument. He claims that obesity is a "physical abnormality and/or illness." 46 Relying
on Nadura v. Benguet Consolidated, Inc.,47 he says his dismissal is illegal:

Conscious of the fact that Nadura’s case cannot be made to fall squarely within the specific causes enumerated in subparagraphs 1(a) to (e),
Benguet invokes the provisions of subparagraph 1(f) and says that Nadura’s illness – occasional attacks of asthma – is a cause analogous to
them.

Even a cursory reading of the legal provision under consideration is sufficient to convince anyone that, as the trial court said, "illness cannot
be included as an analogous cause by any stretch of imagination."

It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the others expressly enumerated in the law are due to the voluntary
and/or willful act of the employee. How Nadura’s illness could be considered as "analogous" to any of them is beyond our understanding,
there being no claim or pretense that the same was contracted through his own voluntary act.48

The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from the case at bar. First, Nadura was not
decided under the Labor Code. The law applied in that case was Republic Act (RA) No. 1787. Second, the issue of flight safety is absent
in Nadura, thus, the rationale there cannot apply here. Third, in Nadura, the employee who was a miner, was laid off from work because of
illness, i.e., asthma. Here, petitioner was dismissed for his failure to meet the weight standards of PAL. He was not dismissed due to
illness. Fourth, the issue in Nadura is whether or not the dismissed employee is entitled to separation pay and damages. Here, the issue
centers on the propriety of the dismissal of petitioner for his failure to meet the weight standards of PAL. Fifth, in Nadura, the employee
was not accorded due process. Here, petitioner was accorded utmost leniency. He was given more than four (4) years to comply with the
weight standards of PAL.

In the case at bar, the evidence on record militates against petitioner’s claims that obesity is a disease. That he was able to reduce his weight
from 1984 to 1992 clearly shows that it is possible for him to lose weight given the proper attitude, determination, and self-discipline.
Indeed, during the clarificatory hearing on December 8, 1992, petitioner himself claimed that "[t]he issue is could I bring my weight down to
ideal weight which is 172, then the answer is yes. I can do it now."49

True, petitioner claims that reducing weight is costing him "a lot of expenses."50 However, petitioner has only himself to blame. He could
have easily availed the assistance of the company physician, per the advice of PAL. 51 He chose to ignore the suggestion. In fact, he
repeatedly failed to report when required to undergo weight checks, without offering a valid explanation. Thus, his fluctuating weight
indicates absence of willpower rather than an illness.

Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation and Hospitals,52 decided by the United
States Court of Appeals (First Circuit). In that case, Cook worked from 1978 to 1980 and from 1981 to 1986 as an institutional attendant for
the mentally retarded at the Ladd Center that was being operated by respondent. She twice resigned voluntarily with an unblemished record.
Even respondent admitted that her performance met the Center’s legitimate expectations. In 1988, Cook re-applied for a similar position. At
that time, "she stood 5’2" tall and weighed over 320 pounds." Respondent claimed that the morbid obesity of plaintiff compromised her
ability to evacuate patients in case of emergency and it also put her at greater risk of serious diseases.

Cook contended that the action of respondent amounted to discrimination on the basis of a handicap. This was in direct violation of Section
504(a) of the Rehabilitation Act of 1973,53 which incorporates the remedies contained in Title VI of the Civil Rights Act of 1964.
Respondent claimed, however, that morbid obesity could never constitute a handicap within the purview of the Rehabilitation Act. Among
others, obesity is a mutable condition, thus plaintiff could simply lose weight and rid herself of concomitant disability.

The appellate Court disagreed and held that morbid obesity is a disability under the Rehabilitation Act and that respondent discriminated
against Cook based on "perceived" disability. The evidence included expert testimony that morbid obesity is a physiological disorder. It
involves a dysfunction of both the metabolic system and the neurological appetite – suppressing signal system, which is capable of causing
adverse effects within the musculoskeletal, respiratory, and cardiovascular systems. Notably, the Court stated that "mutability is relevant
only in determining the substantiality of the limitation flowing from a given impairment," thus "mutability only precludes those conditions
that an individual can easily and quickly reverse by behavioral alteration."

Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the District of Rhode Island, Cook was
sometime before 1978 "at least one hundred pounds more than what is considered appropriate of her height." According to the Circuit Judge,
Cook weighed "over 320 pounds" in 1988. Clearly, that is not the case here. At his heaviest, petitioner was only less than 50 pounds over his
ideal weight.

In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight attendant, becomes an analogous cause under
Article 282(e) of the Labor Code that justifies his dismissal from the service. His obesity may not be unintended, but is nonetheless
voluntary. As the CA correctly puts it, "[v]oluntariness basically means that the just cause is solely attributable to the employee without any
external force influencing or controlling his actions. This element runs through all just causes under Article 282, whether they be in the
nature of a wrongful action or omission. Gross and habitual neglect, a recognized just cause, is considered voluntary although it lacks the
element of intent found in Article 282(a), (c), and (d)."54
II. The dismissal of petitioner can be predicated on the bona fide occupational qualification defense.

Employment in particular jobs may not be limited to persons of a particular sex, religion, or national origin unless the employer can show
that sex, religion, or national origin is an actual qualification for performing the job. The qualification is called a bona fide occupational
qualification (BFOQ).55 In the United States, there are a few federal and many state job discrimination laws that contain an exception
allowing an employer to engage in an otherwise unlawful form of prohibited discrimination when the action is based on a BFOQ necessary
to the normal operation of a business or enterprise.56

Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute providing for it.57 Further, there is no existing
BFOQ statute that could justify his dismissal.58

Both arguments must fail.

First, the Constitution,59 the Labor Code,60 and RA No. 727761 or the Magna Carta for Disabled Persons62 contain provisions similar to
BFOQ.

Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British Columbia Government and Service
Employee’s Union (BCGSEU),63 the Supreme Court of Canada adopted the so-called "Meiorin Test" in determining whether an employment
policy is justified. Under this test, (1) the employer must show that it adopted the standard for a purpose rationally connected to the
performance of the job;64 (2) the employer must establish that the standard is reasonably necessary65 to the accomplishment of that work-
related purpose; and (3) the employer must establish that the standard is reasonably necessary in order to accomplish the legitimate work-
related purpose. Similarly, in Star Paper Corporation v. Simbol,66 this Court held that in order to justify a BFOQ, the employer must prove
that (1) the employment qualification is reasonably related to the essential operation of the job involved; and (2) that there is factual basis for
believing that all or substantially all persons meeting the qualification would be unable to properly perform the duties of the job. 67

In short, the test of reasonableness of the company policy is used because it is parallel to BFOQ.68 BFOQ is valid "provided it reflects an
inherent quality reasonably necessary for satisfactory job performance."69

In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc.,70 the Court did not hesitate to pass upon the validity of
a company policy which prohibits its employees from marrying employees of a rival company. It was held that the company policy is
reasonable considering that its purpose is the protection of the interests of the company against possible competitor infiltration on its trade
secrets and procedures.

Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting statute. Too, the Labor Arbiter,71 NLRC,72 and
CA73 are one in holding that the weight standards of PAL are reasonable. A common carrier, from the nature of its business and for reasons
of public policy, is bound to observe extraordinary diligence for the safety of the passengers it transports. 74 It 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.75

The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only logical to hold that the weight standards of
PAL show its effort to comply with the exacting obligations imposed upon it by law by virtue of being a common carrier.

The business of PAL is air transportation. As such, it has committed itself to safely transport its passengers. In order to achieve this, it must
necessarily rely on its employees, most particularly the cabin flight deck crew who are on board the aircraft. The weight standards of PAL
should be viewed as imposing strict norms of discipline upon its employees.

In other words, the primary objective of PAL in the imposition of the weight standards for cabin crew is flight safety. It cannot be gainsaid
that cabin attendants must maintain agility at all times in order to inspire passenger confidence on their ability to care for the passengers
when something goes wrong. It is not farfetched to say that airline companies, just like all common carriers, thrive due to public confidence
on their safety records. People, especially the riding public, expect no less than that airline companies transport their passengers to their
respective destinations safely and soundly. A lesser performance is unacceptable.

The task of a cabin crew or flight attendant is not limited to serving meals or attending to the whims and caprices of the passengers. The
most important activity of the cabin crew is to care for the safety of passengers and the evacuation of the aircraft when an emergency
occurs. Passenger safety goes to the core of the job of a cabin attendant. Truly, airlines need cabin attendants who have the necessary
strength to open emergency doors, the agility to attend to passengers in cramped working conditions, and the stamina to withstand grueling
flight schedules.

On board an aircraft, the body weight and size of a cabin attendant are important factors to consider in case of emergency. Aircrafts have
constricted cabin space, and narrow aisles and exit doors. Thus, the arguments of respondent that "[w]hether the airline’s flight attendants
are overweight or not has no direct relation to its mission of transporting passengers to their destination"; and that the weight standards "has
nothing to do with airworthiness of respondent’s airlines," must fail.

The rationale in Western Air Lines v. Criswell76 relied upon by petitioner cannot apply to his case. What was involved there were two (2)
airline pilots who were denied reassignment as flight engineers upon reaching the age of 60, and a flight engineer who was forced to retire at
age 60. They sued the airline company, alleging that the age-60 retirement for flight engineers violated the Age Discrimination in
Employment Act of 1967. Age-based BFOQ and being overweight are not the same. The case of overweight cabin attendants is another
matter. Given the cramped cabin space and narrow aisles and emergency exit doors of the airplane, any overweight cabin attendant would
certainly have difficulty navigating the cramped cabin area.

In short, there is no need to individually evaluate their ability to perform their task. That an obese cabin attendant occupies more space than
a slim one is an unquestionable fact which courts can judicially recognize without introduction of evidence.77 It would also be absurd to
require airline companies to reconfigure the aircraft in order to widen the aisles and exit doors just to accommodate overweight cabin
attendants like petitioner.

The biggest problem with an overweight cabin attendant is the possibility of impeding passengers from evacuating the aircraft, should the
occasion call for it. The job of a cabin attendant during emergencies is to speedily get the passengers out of the aircraft safely. Being
overweight necessarily impedes mobility. Indeed, in an emergency situation, seconds are what cabin attendants are dealing with, not
minutes. Three lost seconds can translate into three lost lives. Evacuation might slow down just because a wide-bodied cabin attendant is
blocking the narrow aisles. These possibilities are not remote.

Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made known to him prior to his employment. He is
presumed to know the weight limit that he must maintain at all times. 78 In fact, never did he question the authority of PAL when he was
repeatedly asked to trim down his weight. Bona fides exigit ut quod convenit fiat. Good faith demands that what is agreed upon shall be
done. Kung ang tao ay tapat kanyang tutuparin ang napagkasunduan.

Too, the weight standards of PAL provide for separate weight limitations based on height and body frame for both male and female cabin
attendants. A progressive discipline is imposed to allow non-compliant cabin attendants sufficient opportunity to meet the weight standards.
Thus, the clear-cut rules obviate any possibility for the commission of abuse or arbitrary action on the part of PAL.

III. Petitioner failed to substantiate his claim that he was discriminated against by PAL.

Petitioner next claims that PAL is using passenger safety as a convenient excuse to discriminate against him. 79 We are constrained, however,
to hold otherwise. We agree with the CA that "[t]he element of discrimination came into play in this case as a secondary position for the
private respondent in order to escape the consequence of dismissal that being overweight entailed. It is a confession-and-avoidance position
that impliedly admitted the cause of dismissal, including the reasonableness of the applicable standard and the private respondent’s failure to
comply."80 It is a basic rule in evidence that each party must prove his affirmative allegation.81

Since the burden of evidence lies with the party who asserts an affirmative allegation, petitioner has to prove his allegation with
particularity. There is nothing on the records which could support the finding of discriminatory treatment. Petitioner cannot establish
discrimination by simply naming the supposed cabin attendants who are allegedly similarly situated with him. Substantial proof must be
shown as to how and why they are similarly situated and the differential treatment petitioner got from PAL despite the similarity of his
situation with other employees.

Indeed, except for pointing out the names of the supposed overweight cabin attendants, petitioner miserably failed to indicate their
respective ideal weights; weights over their ideal weights; the periods they were allowed to fly despite their being overweight; the particular
flights assigned to them; the discriminating treatment they got from PAL; and other relevant data that could have adequately established a
case of discriminatory treatment by PAL. In the words of the CA, "PAL really had no substantial case of discrimination to meet."82

We are not unmindful that findings of facts of administrative agencies, like the Labor Arbiter and the NLRC, are accorded respect, even
finality.83 The reason is simple: administrative agencies are experts in matters within their specific and specialized jurisdiction. 84 But the
principle is not a hard and fast rule. It only applies if the findings of facts are duly supported by substantial evidence. If it can be shown that
administrative bodies grossly misappreciated evidence of such nature so as to compel a conclusion to the contrary, their findings of facts
must necessarily be reversed. Factual findings of administrative agencies do not have infallibility and must be set aside when they fail the
test of arbitrariness.85

Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We thus annul their findings.

To make his claim more believable, petitioner invokes the equal protection clause guaranty86 of the Constitution. However, in the absence of
governmental interference, the liberties guaranteed by the Constitution cannot be invoked.87 Put differently, the Bill of Rights is not meant to
be invoked against acts of private individuals.88 Indeed, the United States Supreme Court, in interpreting the Fourteenth
Amendment,89 which is the source of our equal protection guarantee, is consistent in saying that the equal protection erects no shield against
private conduct, however discriminatory or wrongful.90 Private actions, no matter how egregious, cannot violate the equal protection
guarantee.91

IV. The claims of petitioner for reinstatement and wages are moot.

As his last contention, petitioner avers that his claims for reinstatement and wages have not been mooted. He is entitled to reinstatement and
his full backwages, "from the time he was illegally dismissed" up to the time that the NLRC was reversed by the CA.92

At this point, Article 223 of the Labor Code finds relevance:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is
concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms
and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting
of a bond by the employer shall not stay the execution for reinstatement provided herein.

The law is very clear. Although an award or order of reinstatement is self-executory and does not require a writ of execution,93 the option to
exercise actual reinstatement or payroll reinstatement belongs to the employer. It does not belong to the employee, to the labor tribunals, or
even to the courts.

Contrary to the allegation of petitioner that PAL "did everything under the sun" to frustrate his "immediate return to his previous
position,"94 there is evidence that PAL opted to physically reinstate him to a substantially equivalent position in accordance with the order of
the Labor Arbiter.95 In fact, petitioner duly received the return to work notice on February 23, 2001, as shown by his signature. 96

Petitioner cannot take refuge in the pronouncements of the Court in a case97 that "[t]he unjustified refusal of the employer to reinstate the
dismissed employee entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite the issuance
of a writ of execution"98 and ""even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the
employer to reinstate and pay the wages of the employee during the period of appeal until reversal by the higher court." 99 He failed to prove
that he complied with the return to work order of PAL. Neither does it appear on record that he actually rendered services for PAL from the
moment he was dismissed, in order to insist on the payment of his full backwages.

In insisting that he be reinstated to his actual position despite being overweight, petitioner in effect wants to render the issues in the present
case moot. He asks PAL to comply with the impossible. Time and again, the Court ruled that the law does not exact compliance with the
impossible.100

V. Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.

Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced from the language of Article 279 of the
Labor Code that "[a]n employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement." Luckily for petitioner, this is not an ironclad rule.

Exceptionally, separation pay is granted to a legally dismissed employee as an act "social justice,"101 or based on "equity."102 In both
instances, it is required that the dismissal (1) was not for serious misconduct; and (2) does not reflect on the moral character of the
employee.103

Here, We grant petitioner separation pay equivalent to one-half (1/2) month’s pay for every year of service.104 It should include regular
allowances which he might have been receiving.105 We are not blind to the fact that he was not dismissed for any serious misconduct or to
any act which would reflect on his moral character. We also recognize that his employment with PAL lasted for more or less a decade.

WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui
is entitled to separation pay in an amount equivalent to one-half (1/2) month’s pay for every year of service, which should include his
regular allowances.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 170141 April 22, 2008

JAPAN AIRLINES, petitioner,


vs.
JESUS SIMANGAN, respondent.

DECISION

REYES R.T., J.:

WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a certain date, a contract of carriage arises, and the
passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for
breach of contract of carriage.1
The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by Japan Airlines (JAL).2

In this petition for review on certiorari,3 petitioner JAL appeals the: (1) Decision4 dated May 31, 2005 of the Court of Appeals (CA)
ordering it to pay respondent Jesus Simangan moral and exemplary damages; and (2) Resolution 5 of the same court dated September 28,
2005 denying JAL's motion for reconsideration.

The Facts

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

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

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

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

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

CA Ruling

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

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

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

The CA ratiocinated:

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

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

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

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

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

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

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

Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced to a reasonable level. The award of exemplary
damages is designed to permit the courts to mould behavior that has socially deleterious consequences and its imposition is
required by public policy to suppress the wanton acts of the offender. Hence, the sum of P250,000.00 is adequate under the
circumstances.
The award of P250,000.00 as attorney's fees lacks factual basis. Appellee was definitely compelled to litigate in protecting his
rights and in seeking relief from appellant's misdeeds. Yet, the record is devoid of evidence to show the cost of the services of his
counsel and/or the actual expenses incurred in prosecuting his action.43 (Citations were omitted)

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

Issues

JAL poses the following issues -

I.

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

A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT.

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

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

II.

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

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


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

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

III.

ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN AWARD OF DAMAGES, WHETHER OR NOT
THE COURT OF APPEALS AWARD OF P750,000 IN DAMAGES WAS EXCESSIVE AND UNPRECEDENTED.

IV.

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

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

Our Ruling

This Court is not a trier of facts.

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

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

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

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

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

JAL is guilty of breach of


contract of carriage.

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

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

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

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

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

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

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

Apart from the fact that respondent's plane ticket, boarding pass, travel authority and personal articles already passed the rigid immigration
and security routines,60 JAL, as a common carrier, ought to know the kind of valid travel documents respondent carried. As provided in
Article 1755 of the New Civil Code: "A common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances."61 Thus, We find untenable JAL's
defense of "verification of respondent's documents" in its breach of contract of carriage.

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

In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of such contract and its non-
performance by the carrier through the latter's failure to carry the passenger safely to his destination. 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
The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached its contract of carriage with
respondent in bad faith. JAL personnel summarily and insolently ordered respondent to disembark while the latter was already settled in his
assigned seat. He was ordered out of the plane under the alleged reason that the genuineness of his travel documents should be verified.

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

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

Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on breach of a contract of
carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack of care for the interests of
its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the
passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages
would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of
deceit.67

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

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

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

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

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

There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In its ordinary concept,
an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter.
The basis of this compensation is the fact of his employment by and his agreement with the client.

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the losing
party in a litigation. The basis of this is any of the cases provided by law where such award can be made, such as those
authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the
award shall pertain to the lawyer as additional compensation or as part thereof.74

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

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

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

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

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

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

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

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

JAL is not entitled to its counterclaim for damages.

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

This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted inasmuch as the complaint against it is
obviously not malicious or unfounded. It was filed by respondent precisely to claim his right to damages against JAL. Well-settled is the
rule that the commencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not
have meant to impose a penalty on the right to litigate.80

We reiterate case law that if damages result from a party's exercise of a right, it is damnum absque injuria.81 Lawful acts give rise to no
injury. Walang perhuwisyong maaring idulot ang paggamit sa sariling karapatan.

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

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

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

Nevertheless, JAL's counterclaim cannot be granted.

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

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

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

To reiterate, fair commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or
slander. The doctrine of fair comment means that while in general every discreditable imputation publicly made is deemed false,
because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed malicious,
nevertheless, when the discreditable imputation is directed against a public person in his public capacity, it is not necessarily
actionable. In order that such discreditable imputation to a public official may be actionable, it must either be a false allegation of
fact or a comment based on a false supposition. If the comment is an expression of opinion, based on established facts, then it is
immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred from the facts.86 (Citations omitted
and underscoring ours)
Even though JAL is not a public official, the rule on privileged commentaries on matters of public interest applies to it. The privilege applies
not only to public officials but extends to a great variety of subjects, and includes matters of public concern, public men, and candidates for
office.87

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

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

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

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

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 185891 June 26, 2013

CATHAY PACIFIC AIRWAYS, Petitioner,


vs.
JUANITA REYES, WILFREDO REYES, MICHAEL ROY REYES, SIXTA LAPUZ, and SAMPAGUITA TRAVEL
CORP., Respondents.

DECISION

PEREZ, J.:

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

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

Sometime in March 1997, respondent Wilfredo Reyes (Wilfredo) made a travel reservation with Sampaguita Travel for his family’s trip to
Adelaide, Australia scheduled from 12 April 1997 to 4 May 1997. Upon booking and confirmation of their flight schedule, Wilfredo paid for
the airfare and was issued four (4) Cathay Pacific round-trip airplane tickets for Manila-HongKong-Adelaide-HongKong-Manila with the
following record locators:

1âwphi1
Name of Passenger PNR OR RECORD LOCATOR NOS.3

Reyes, Wilfredo J76TH

Reyes, Juanita HDWC3

Reyes, Michael Roy H9VZF

Lapuz, Sixta HTFMG4

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

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

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

On 16 June 1997, respondents as passengers, through counsel, sent a letter to Cathay Pacific advising the latter of the incident and
demanding payment of damages.

After a series of exchanges and with no resolution in sight, respondents filed a Complaint for damages against Cathay Pacific and
Sampaguita Travel and prayed for the following relief: a) ₱1,000,000.00 as moral damages; b) ₱300,000.00 as actual damages; c)
₱100,000.00 as exemplary damages; and d) ₱100,000.00 as attorney’s fees.5

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

1. PNR No. H9V15

Agent: Sampaguita Travel Corp.

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

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

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

2. PNR No. HTFMG

Agent: Sampaguita Travel Corp.

Party: Mrs. Sixta Lapuz

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

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

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

3. PNR No. J9R6E

Agent: Rajah Travel Corp.

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

Mr. Michael Roy Reyes, Mr. Wilfredo Reyes.

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

The party was confirmed initially on CX900/12 Apr, CX105/12 Apr, CX104/CX9095 07 May and on waiting list for CX902/12 Apr,
CX104/CX905 04 May.

However, on 31 Mar., the booking was cancelled by the agent.


4. PNR No. J76TH

Agent: Sampaguita Travel Corp.

Party: Mr. W Reyes

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

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

This PNR was split from another PNR record, H9VSE.

5. PNR No. H9VSE

Agent: Sampaguita Travel Corp.

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

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

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

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

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

On the other hand, Sampaguita Travel, in its Answer, denied Cathay Pacific’s claim that it was the cause of the cancellation of the bookings.
Sampaguita Travel maintained that it made the necessary reservation with Cathay Pacific for respondents’ trip to Adelaide. After getting
confirmed bookings with Cathay Pacific, Sampaguita Travel issued the corresponding tickets to respondents. Their confirmed bookings
were covered with the following PNRs:

PASSENGER NAME PNR No.

Lapuz, Sixta H9V15/ J76TH

Reyes, Wilfredo H9V15/HDWC3

Reyes, Michael Roy H9V15/H9VZF

Reyes, Juanita HTFMG7

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Respondents appealed to the Court of Appeals. On 22 October 2008, the Court of Appeals ordered Cathay Pacific to pay ₱25,000.00 each to
respondents as nominal damages.

Upon denial of their motion for reconsideration, Cathay Pacific filed the instant petition for review assigning the following as errors
committed by the Court of Appeals:

A.

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

B.

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

C.

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

D.

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

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

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

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

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

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

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

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

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

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

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

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

As further elucidated by the Court of Appeals:

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

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

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

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

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

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

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

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

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

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

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

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

Considering that the three respondents were denied boarding their return flight from HongKong to Manila and that they had to wait in the
airport overnight for their return flight, they are deemed to have technically suffered injury. Nonetheless, they failed to present proof of
actual damages. Consequently, they should be compensated in the form of nominal damages.
The amount to be awarded as nominal damages shall be equal or at least commensurate to the injury sustained by respondents considering
the concept and purpose of such damages. The amount of nominal damages to be awarded may also depend on certain special reasons extant
in the case.22

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

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

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

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

Lapuz is DISMISSED for lack of cause of action.

SO ORDERED.

JOSE PORTUGAL PEREZ


Associate Justice

WE CONCUR:

G.R. No. 152122 July 30, 2003

CHINA AIRLINES, petitioner,


vs.
DANIEL CHIOK, respondent.

PANGANIBAN, J.:

A common carrier has a peculiar relationship with and an exacting responsibility to its passengers. For reasons of public interest and policy,
the ticket-issuing airline acts as principal in a contract of carriage and is thus liable for the acts and the omissions of any errant carrier to
which it may have endorsed any sector of the entire, continuous trip.

The Case

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

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

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

The Facts

The facts are narrated by the CA5 as follows:

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

"Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei using [the] CAL ticket. Before he left for said
trip, the trips covered by the ticket were pre-scheduled and confirmed by the former. When he arrived in Taipei, he went to the
CAL office and confirmed his Hongkong to Manila trip on board PAL Flight No. PR 311. The CAL office attached a yellow
sticker appropriately indicating that his flight status was OK.

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

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

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

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

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

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

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

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

The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to respondent. It did not, however, rule on their
respective cross-claims. It disposed as follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendants to jointly and severally pay:

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

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

3. P200,000.00 by way of moral damages;

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

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

6. The costs of this proceedings."7

The two carriers appealed the RTC Decision to the CA.


Ruling of the Court of Appeals

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

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

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

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

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

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

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

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

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

Only the appeal of CAL11 remains in this Court.

Issues

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

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

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

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

The Court’s Ruling

The Petition is not meritorious.


First Issue:

Alleged Judicial Misconduct

Petitioner charges the CA with judicial misconduct for quoting from and basing its ruling against the two airlines on an unofficial syllabus
of this Court’s ruling in KLM v. CA. Moreover, such misconduct was allegedly aggravated when the CA, in an attempt to justify its action,
held that the difference between the actual ruling and the syllabus was "more apparent than real."13

We agree with petitioner that the CA committed a lapse when it relied merely on the unofficial syllabus of our ruling in KLM v. CA. Indeed,
lawyers and litigants are mandated to quote decisions of this Court accurately.14 By the same token, judges should do no less by strictly
abiding by this rule when they quote cases that support their judgments and decisions. Canon 3 of the Code of Judicial Conduct enjoins them
to perform official duties diligently by being faithful to the law and maintaining their professional competence.

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

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

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

Applicability of KLM v. CA

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

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

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

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

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

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

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

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

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

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

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

Second Issue:

Liability of the Ticket-Issuing Airline

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

Jurisprudence Supports CA Decision

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

Article 1, Section 3 of the Warsaw Convention states:

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

Article 15 of IATA-Recommended Practice similarly provides:

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

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

"x x x Members of the IATA are under a general pool partnership agreement wherein they act as agent of each other in the
issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access
to airlines which are otherwise inaccessible in some parts of the world. Booking and reservation among airline members are
allowed even by telephone and it has become an accepted practice among them. A member airline which enters into a contract of
carriage consisting of a series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and
through the required process of interline settlement of accounts by way of the IATA clearing house an airline is duly
compensated for the segment of the trip serviced. Thus, when the petitioner accepted the unused portion of the conjunction
tickets, entered it in the IATA clearing house and undertook to transport the private respondent over the route covered by the
unused portion of the conjunction tickets, i.e., Geneva to New York, the petitioner tacitly recognized its commitment under the
IATA pool arrangement to act as agent of the principal contracting airline, Singapore Airlines, as to the segment of the trip the
petitioner agreed to undertake. As such, the petitioner thereby assumed the obligation to take the place of the carrier originally
designated in the original conjunction ticket. The petitioner’s argument that it is not a designated carrier in the original
conjunction tickets and that it issued its own ticket is not decisive of its liability. The new ticket was simply a replacement for the
unused portion of the conjunction ticket, both tickets being for the same amount of US$ 2,760 and having the same points of
departure and destination. By constituting itself as an agent of the principal carrier the petitioner’s undertaking should be taken as
part of a single operation under the contract of carriage executed by the private respondent and Singapore Airlines in Manila."25
Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court of Appeals26 was held liable, even when the
breach of contract had occurred, not on its own flight, but on that of another airline. The Decision followed our ruling in Lufthansa German
Airlines v. Court of Appeals,27 in which we had held that the obligation of the ticket-issuing airline remained and did not cease, regardless of
the fact that another airline had undertaken to carry the passengers to one of their destinations.

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

Moral and Exemplary Damages

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

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

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

xxx xxx xxx

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

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

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

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

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

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

It is relevant to point out that the employees of PAL were utterly insensitive to his need to be in Manila on November 25, 1981, and to the
likelihood that his business affairs in the city would be jeopardized because of a mistake on their part. It was that mistake that had caused the
omission of his name from the passenger list despite his confirmed flight ticket. By merely looking at his ticket and validation sticker, it is
evident that the glitch was the airline’s fault. However, no serious attempt was made by PAL to secure the all-important transportation of
respondent to Manila on the following day. To make matters worse, PAL allowed a group of non-revenue passengers, who had no confirmed
tickets or reservations, to board Flight PR 307.33

Time and time again, this Court has stressed that the business of common carriers is imbued with public interest and duty; therefore, the law
governing them imposes an exacting standard.34 In Singson v. Court of Appeals,35 we said:

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

In Saludo v. Court of Appeals,37 the Court reminded airline companies that due to the nature of their business, they must not merely give
cursory instructions to their personnel to be more accommodating towards customers, passengers and the general public; they must require
them to be so.
The acts of PAL’s employees, particularly Chan, clearly fell short of the extraordinary standard of care that the law requires of common
carriers.38 As narrated in Chan’s oral deposition,39 the manner in which the airline discharged its responsibility to respondent and its other
passengers manifested a lack of the requisite diligence and due regard for their welfare. The pertinent portions of the Oral Deposition are
reproduced as follows:

"Q Now you said that flight PR 311 on 24th November was cancelled due to [a] typhoon and naturally the passengers on
said flight had to be accommodated on the first flight the following day or the first flight subsequently. [W]ill you tell the
Honorable Deposition Officer the procedure followed by Philippine Airlines in the handling of passengers of cancelled flight[s]
like that of PR 311 which was cancelled due to [a] typhoon?

A The procedure will be: all the confirmed passengers from [PR] 311 24th November [are] automatically transfer[red] to
[PR] 307, 25th November[,] as a protection for all disconfirmed passengers.

Q Aside from this procedure[,] what do you do with the passengers on the cancelled flight who are expected to check-in on
the flights if this flight is cancelled or not operating due to typhoon or other reasons[?] In other words, are they not notified of the
cancellation?

A I think all these passengers were not notified because of a typhoon and Philippine Airlines Reservation were [sic] not able
to call every passenger by phone.

Atty. Fruto:

Q Did you say ‘were not notified?’

A I believe they were not, but believe me, I was on day-off.

Atty. Calica:

Q Per procedure, what should have been done by Reservations Office when a flight is cancelled for one reason or another?

A If there is enough time, of course, Reservations Office x x x call[s] up all the passengers and tell[s] them the reason. But if
there [is] no time[,] then the Reservations Office will not be able to do that."40

xxx xxx xxx

"Q I see. Miss Chan, I [will] show you a ticket which has been marked as Exh. A and A-1. Will you please go over this
ticket and tell the court whether this is the ticket that was used precisely by Mr. Chiok when he checked-in at [F]light 307, 25
November ‘81?

A [Are you] now asking me whether he used this ticket with this sticker?

Q No, no, no. That was the ticket he used.

A Yes, [are you] asking me whether I saw this ticket?

Atty. Fruto: Yes.

A I believe I saw it.

Q You saw it, O.K. Now of course you will agree with me Miss Chan that this yellow stub here which has been marked as
Exh. A-1-A, show[s] that the status on flight 311, 24th November, is O.K., correct?

A Yes.

Q You agree with me. And you will also agree with me that in this ticket of flight 311, on this, another sticker Exh. A-1-B
for 24 November is O.K.?

A May I x x x look at them. Yes, it says O.K. x x x, but [there is] no validation.

Q O.K. Miss Chan what do you understand by these entries here R bar M N 6 V?41

A This is what we call a computer reference.


Q I see. This is a computer reference showing that the name of Mr. Chiok has been entered in Philippine Airline’s computer,
and this is his computer number.

A Yes.

Q Now you stated in your answer to the procedure taken, that all confirmed passengers on flight 311, 24 November[,] were
automatically transferred to 307 as a protection for the passengers, correct?

A Correct.

Q So that since following the O.K. status of Mr. Chiok’s reservation [on] flight 311, [he] was also automatically transferred
to flight 307 the following day?

A Should be.

Q Should be. O.K. Now do you remember how many passengers x x x were transferred from flight 311, 24 November to
flight 307, 25 November 81?

A I can only give you a very brief idea because that was supposed to be air bus so it should be able to accommodate 246
people; but how many [exactly], I don’t know."42

xxx xxx xxx

"Q So, between six and eight o’clock in the evening of 25 November ‘81, Mr. Chiok already told you that he just [came]
from the Swire Building where Philippine Airlines had [its] offices and that he told you that his space for 311 25 November 81
was confirmed?

A Yes.

Q That is what he told you. He insisted on that flight?

A Yes.

Q And did you not try to call up Swire Building-- Philippine Airlines and verify indeed if Mr. Chiok was there?

A Swire House building is not directly under Philippine Airlines. it is just an agency for selling Philippine Airlines ticket.
And besides around six o’ clock they’re close[d] in Central.

Q So this Swire Building is an agency authorized by Philippine Airlines to issue tickets for and on behalf of Philippine
Airlines and also...

A Yes.

Q And also to confirm spaces for and on behalf of Philippine Airlines.

A Yes."43

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

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

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

"x x x Although the rule is that moral damages predicated upon a breach of contract of carriage may only be recoverable in
instances where the mishap results in the death of a passenger, or where the carrier is guilty of fraud or bad faith, there are
situations where the negligence of the carrier is so gross and reckless as to virtually amount to bad faith, in which case, the
passenger likewise becomes entitled to recover moral damages."
In the present case, we stress that respondent had repeatedly secured confirmations of his PR 311 flight on November 24, 1981 -- initially
from CAL and subsequently from the PAL office in Hong Kong. The status of this flight was marked "OK" on a validating sticker placed on
his ticket. That sticker also contained the entry "RMN6V." Ms Chan explicitly acknowledged that such entry was a computer reference that
meant that respondent’s name had been entered in PAL’s computer.

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

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

Third Issue:

Propriety of the Cross-Claim

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

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

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

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

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

xxx xxx xxx

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

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

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

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.

Puno, Corona, and Carpio-Morales, JJ., concur.


Sandoval-Gutierrez, J., on official leave.

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 161282 February 23, 2011

FGU INSURANCE CORPORATION (Now BPI/MS INSURANCE CORPORATION), Petitioner,


vs.
REGIONAL TRIAL COURT OF MAKATI CITY, BRANCH 66, and G.P. SARMIENTO TRUCKING
CORPORATION, Respondents.
DECISION

MENDOZA, J.:

This is a petition for mandamus praying that the July 1, 2003 and November 3, 2003 orders 1 of the Regional Trial Court Branch 66, Makati
City (RTC), which granted the Motion To Set Case For Hearing filed by private respondent G.P. Sarmiento Trucking Corporation (GPS), be
set aside and, in lieu thereof, "a decision be rendered ordering the lower court to issue the Writ of Execution in Civil Case No. 94-3009 in
consonance with the decision of this venerable court dated August 6, 2002."2

Records show that on June 18, 1994, GPS agreed to transport thirty (30) units of Condura S.D. white refrigerators in one of its Isuzu trucks,
driven by Lambert Eroles (Eroles), from the plant site of Concepcion Industries, Inc. (CII) in Alabang, to the Central Luzon Appliances in
Dagupan City. On its way to its destination, however, the Isuzu truck collided with another truck resulting in the damage of said appliances.

FGU Insurance Corporation (FGU), the insurer of the damaged refrigerators, paid CII, the insured, the value of the covered shipment in the
sum of ₱204,450.00. FGU, in turn, as subrogee of the insured’s rights and interests, sought reimbursement of the amount it paid from GPS.

The failure of the GPS to heed FGU’s claim for reimbursement, led the latter to file a complaint for damages and breach of contract of
carriage against the former and its driver, Eroles, with the RTC. During the hearing of the case, FGU presented evidence establishing its
claim against GPS. For its part, GPS filed a motion to dismiss by way of demurrer to evidence, which was granted by the RTC.

The RTC ruled, among others, that FGU failed to adduce evidence that GPS was a common carrier and that its driver was negligent, thus,
GPS could not be made liable for the damages of the subject cargoes. On appeal, the Court of Appeals (CA) affirmed the ruling of the RTC.
The case was then elevated to this Court. On August 6, 2002, the Court rendered a decision 3 agreeing with the lower courts that GPS was not
a common carrier but nevertheless held it liable under the doctrine of culpa contractual. Thus, the dispositive portion of the Court’s decision
reads as follows:

WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the decision, dated 10 June
1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the
trial court and decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking Corporation which, instead, is hereby
ordered to pay FGU Corporation the value of the damaged and lost cargoes in the amount of ₱204,450.00. No costs.

SO ORDERED.

On September 18, 2002, this Court denied GPS’ motion for reconsideration with finality. 4 In due course, an entry of judgment5 was issued
certifying that the August 6, 2002 decision of this Court became final and executory on October 3, 2002.

On October 14, 2002, FGU filed a motion for execution6 with the RTC praying that a writ of execution be issued to enforce the August 6,
2002 judgment award of this Court in the amount of ₱204,450.00.

On November 5, 2002, GPS filed its Opposition to Motion for Execution 7 praying that FGU’s motion for execution be denied on the ground
that the latter’s claim was unlawful, illegal, against public policy and good morals, and constituted unjust enrichment. GPS alleged that it
discovered, upon verification from the insured, that after the insured’s claim was compensated in full, the insured transferred the ownership
of the subject appliances to FGU. In turn, FGU sold the same to third parties thereby receiving and appropriating the consideration and
proceeds of the sale. GPS believed that FGU should not be allowed to "doubly recover" the losses it suffered.

Thereafter, on January 13, 2003, GPS filed its Comment with Motion to Set Case for Hearing on the Merits. 8

On July 1, 2003, the RTC issued an order granting GPS motion to set case for hearing. Its order, in its pertinent parts, reads:

X x x.

The defendant, however, contends that it has already turned over to the consignee the 30 refrigerator units subject[s] of the case. It also
appears from the record that the Accounting/Administrative Manager of Concepcion Industries has executed a certification to the effect that
the assured company has turned over the refrigerator units in question to plaintiff.

In view of the foregoing and considering that plaintiff may not be allowed to recover more than what it is entitled to, there is a need for the
parties to clarify the following issues to allow a fair and judicious resolution of plaintiff’s motion for issuance of a writ of execution:

1) Was there an actual turn-over of 30 refrigerators to the plaintiff?

2) In the affirmative, what is the salvage value of the 30 refrigerators?

WHEREFORE, the Court hereby orders both parties to present evidence in support of their respective positions on these issues.

SO ORDERED.9 [Italicization in the original]


Upon denial of its motion for reconsideration, FGU filed this petition for mandamus directly with this Court on the following

GROUNDS

THE REGIONAL TRIAL COURT OF MAKATI CITY, BRANCH 66 UNLAWFULLY NEGLECTED THE PERFORMANCE OF
ITS DUTY WHEN IT RE-OPENED A CASE, THE DECISION OF WHICH HAD ALREADY ATTAINED FINALITY.

THE REGIONAL TRIAL COURT OF MAKATI CITY, BRANCH 66 UNLAWFULLY NEGLECTED THE PERFORMANCE OF
ITS MINISTERIAL DUTY WHEN IT DENIED THE ISSUANCE OF A WRIT OF EXECUTION.

In advocacy of its position, FGU argues that the decision is already final and executory and, accordingly, a writ of execution should issue.
The lower court should not be allowed to hear the matter of turnover of the refrigerators to FGU because it was not an issue raised in the
Answer of GPS. Neither was it argued by GPS in the CA and in this Court. It was only brought out after the decision became final and
executory.

Indeed, a writ of mandamus lies to compel a judge to issue a writ of execution when the judgment had already become final and executory
and the prevailing party is entitled to the same as a matter of right.10

Fundamental is the rule that where the judgment of a higher court has become final and executory and has been returned to the lower court,
the only function of the latter is the ministerial act of carrying out the decision and issuing the writ of execution. 11 In addition, a final and
executory judgment can no longer be amended by adding thereto a relief not originally included. In short, once a judgment becomes final,
the winning party is entitled to a writ of execution and the issuance thereof becomes a court's ministerial duty. The lower court cannot vary
the mandate of the superior court or reexamine it for any other purpose other than execution; much less may it review the same upon any
matter decided on appeal or error apparent; nor intermeddle with it further than to settle so much as has been demanded.12

Under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired finality becomes immutable and
unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and
law, and whether it be made by the court that rendered it or by the Highest Court of the land. Any act which violates this principle must
immediately be struck down.

But like any other rule, it has exceptions, namely: (1) the correction of clerical errors; (2) the so-called nunc pro tunc entries which cause no
prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire after the finality of the decision rendering its execution
unjust and inequitable.13 The exception to the doctrine of immutability of judgment has been applied in several cases in order to serve
substantial justice. The early case of City of Butuan vs. Ortiz14 is one where the Court held as follows:

Obviously a prevailing party in a civil action is entitled to a writ of execution of the final judgment obtained by him within five years from
its entry (Section 443, Code of Civil Procedure). But it has been repeatedly held, and it is now well-settled in this jurisdiction, that when
after judgment has been rendered and the latter has become final, facts and circumstances transpire which render its execution impossible or
unjust, the interested party may ask the court to modify or alter the judgment to harmonize the same with justice and the facts (Molina vs.
De la Riva, 8 Phil. 569; Behn, Meyer & Co. vs. McMicking, 11 Phil. 276; Warner, Barnes & Co. vs. Jaucian, 13 Phil. 4; Espiritu vs.
Crossfield and Guash, 14 Phil. 588; Flor Mata vs. Lichauco and Salinas, 36 Phil. 809). In the instant case the respondent Cleofas alleged that
subsequent to the judgment obtained by Sto. Domingo, they entered into an agreement which showed that he was no longer indebted in the
amount claimed of P995, but in a lesser amount. Sto. Domingo had no right to an execution for the amount claimed by him.’ (De la Costa
vs. Cleofas, 67 Phil. 686-693).

Shortly after City of Butuan v. Ortiz, the case of Candelario v. Cañizares15 was promulgated, where it was written that:

After a judgment has become final, if there is evidence of an event or circumstance which would affect or change the rights of the parties
thereto, the court should be allowed to admit evidence of such new facts and circumstances, and thereafter suspend execution thereof and
grant relief as the new facts and circumstances warrant. We, therefore, find that the ruling of the court declaring that the order for the
payment of ₱40,000.00 is final and may not be reversed, is erroneous as above explained.

These rulings were reiterated in the cases of Abellana vs. Dosdos,16 The City of Cebu vs. Mendoza17 and PCI Leasing and Finance, Inc. v
Antonio Milan.18 In these cases, there were compelling circumstances which clearly warranted the exercise of the Court’s equity
jurisdiction.1avvphil

In the case at bench, the Court agrees with the RTC that there is indeed a need to find out the whereabouts of the subject refrigerators. For
this purpose, a hearing is necessary to determine the issue of whether or not there was an actual turnover of the subject refrigerators to FGU
by the assured CII. If there was an actual turnover, it is very important to find out whether FGU sold the subject refrigerators to third parties
and profited from such sale. These questions were brought about by the contention of GPS in its Opposition to Motion for Execution19 that
after the assured, CII, was fully compensated for its claim on the damaged refrigerators, it delivered the possession of the subject
refrigerators to FGU as shown in the certification of the Accounting/Administrative Manager of CII. Thereafter, the subject refrigerators
were sold by FGU to third parties and FGU received and appropriated the consideration and proceeds of the sale. GPS claims that it verified
the whereabouts of the subject refrigerators from the CII because it wanted to repair and sell them to compensate FGU.

If, indeed, there was an actual delivery of the refrigerators and FGU profited from the sale after the delivery, there would be an unjust
enrichment if the realized profit would not be deducted from the judgment amount. "The Court is not precluded from rectifying errors of
judgment if blind and stubborn adherence to the doctrine of immutability of final judgments would involve the sacrifice of justice for
technicality."20

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

JOSE CATRAL MENDOZA


Associate Justice

WE CONCUR:

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-82619 September 15, 1993

PHILIPPINE AIRLINES, INC., petitioner,


vs.
COURT OF APPEALS and PEDRO ZAPATOS, respondents.

Leighton R. Liazon for petitioner.

Balmes L. Ocampo for private respondent.

BELLOSILLO, J.:

This petition for review in certiorari seeks to annul and set aside the decision of the then Intermediate Appellant Court, 1 now Court of
Appeals, dated 28 February 1985, in AC-G.R. CV No. 69327 ("Pedro Zapatos v. Philippine Airlines, Inc.") affirming the decision of the
then Court of first Instance, now Regional Trial Court, declaring Philippine Airlines, Inc., liable in damages for breach of contract.

On 25 November 1976, private respondent filed a complaint for damages for breach of contract of carriage 2 against Philippine Airlines, Inc.
(PAL), before the then Court of First Instance, now Regional Trial Court, of Misamis Occidental, at Ozamiz City. According to him, on 2
August 1976, he was among the twenty-one (21) passengers of PAL Flight 477 that took off from Cebu bound for Ozamiz City. The routing
of this flight was Cebu-Ozamiz-Cotabato. While on flight and just about fifteen (15) minutes before landing at Ozamiz City, the pilot
received a radio message that the airport was closed due to heavy rains and inclement weather and that he should proceed to Cotabato City
instead.

Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of their options to return to Cebu on flight 560 of the same
day and thence to Ozamiz City on 4 August 1975, or take the next flight to Cebu the following day, or remain at Cotabato and take the next
available flight to Ozamiz City on 5 August 1975.3 The Station Agent likewise informed them that Flight 560 bound for Manila would make
a stop-over at Cebu to bring some of the diverted passengers; that there were only six (6) seats available as there were already confirmed
passengers for Manila; and, that the basis for priority would be the check-in sequence at Cebu.

Private respondent chose to return to Cebu but was not accommodated because he checked-in as passenger No. 9 on Flight 477. He insisted
on being given priority over the confirmed passengers in the accommodation, but the Station Agent refused private respondent's demand
explaining that the latter's predicament was not due to PAL's own doing but to be a force majeure.4

Private respondent tried to stop the departure of Flight 560 as his personal belongings, including a package containing a camera which a
certain Miwa from Japan asked him to deliver to Mrs. Fe Obid of Gingoog City, were still on board. His plea fell on deaf ears. PAL then
issued to private respondent a free ticket to Iligan city, which the latter received under protest. 5 Private respondent was left at the airport and
could not even hitch a ride in the Ford Fiera loaded with PAL personnel. 6 PAL neither provided private respondent with transportation from
the airport to the city proper nor food and accommodation for his stay in Cotabato City.

The following day, private respondent purchased a PAL ticket to Iligan City. He informed PAL personnel that he would not use the free
ticket because he was filing a case against PAL.7 In Iligan City, private respondent hired a car from the airport to Kolambugan, Lanao del
Norte, reaching Ozamiz City by crossing the bay in a launch.8 His personal effects including the camera, which were valued at P2,000.00
were no longer recovered.
On 13 January 1977, PAL filed its answer denying that it unjustifiably refused to accommodate private respondent.9 It alleged that there was
simply no more seat for private respondent on Flight 560 since there were only six (6) seats available and the priority of accommodation on
Flight 560 was based on the check-in sequence in Cebu; that the first six (6) priority passengers on Flight 477 chose to take Flight 560; that
its Station Agent explained in a courteous and polite manner to all passengers the reason for PAL's inability to transport all of them back to
Cebu; that the stranded passengers agreed to avail of the options and had their respective tickets exchanged for their onward trips; that it was
only the private respondent who insisted on being given priority in the accommodation; that pieces of checked-in baggage and had carried
items of the Ozamiz City passengers were removed from the aircraft; that the reason for their pilot's inability to land at Ozamis City airport
was because the runway was wet due to rains thus posing a threat to the safety of both passengers and aircraft; and, that such reason of force
majeure was a valid justification for the pilot to bypass Ozamiz City and proceed directly to Cotabato City.

On 4 June 1981, the trial court rendered its decision 10 the dispositive portion of which states:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Philippine AirLines,
Inc. ordering the latter to pay:

(1) As actual damages, the sum of Two Hundred Pesos (P200.00) representing plaintiff's expenses for transportation,
food and accommodation during his stranded stay at Cotabato City; the sum of Forty-Eight Pesos (P48.00)
representing his flight fare from Cotabato City to Iligan city; the sum of Five Hundred Pesos (P500.00) representing
plaintiff's transportation expenses from Iligan City to Ozamiz City; and the sum of Five Thousand Pesos (P5,000.00)
as loss of business opportunities during his stranded stay in Cotabato City;

(2) As moral damages, the sum of Fifty Thousand Pesos (P50,000.00) for plaintiff's hurt feelings, serious anxiety,
mental anguish and unkind and discourteous treatment perpetrated by defendant's employees during his stay as
stranded passenger in Cotabato City;

(3) As exemplary damages, the sum of Ten Thousand Pesos (P10,000.00) to set a precedent to the defendant airline
that it shall provide means to give comfort and convenience to stranded passengers;

(4) The sum of Three Thousand Pesos (P3,000.00) as attorney's fees;

(5) To pay the costs of this suit.

PAL appealed to the Court of Appeals which on 28 February 1985, finding no reversible error, affirmed the judgment of the court a quo. 11

PAL then sought recourse to this Court by way of a petition for review on certiorari 12 upon the following issues: (1) Can the Court of
Appeals render a decision finding petitioner (then defendant-appellant in the court below) negligent and, consequently, liable for damages
on a question of substance which was neither raised on a question nor proved at the trial? (2) Can the Court of Appeals award actual and
moral damages contrary to the evidence and established jurisprudence? 13

An assiduous examination of the records yields no valid reason for reversal of the judgment on appeal; only a modification of its disposition.

In its petition, PAL vigorously maintains that private respondent's principal cause of action was its alleged denial of private respondent's
demand for priority over the confirmed passengers on Flight 560. Likewise, PAL points out that the complaint did not impute to PAL
neglect in failing to attend to the needs of the diverted passengers; and, that the question of negligence was not and never put in issue by the
pleadings or proved at the trial.

Contrary to the above arguments, private respondent's amended complaint touched on PAL's indifference and inattention to his predicament.
The pertinent portion of the amended complaint 14 reads:

10. That by virtue of the refusal of the defendant through its agent in Cotabato to accommodate (sic) and allow the
plaintiff to take and board the plane back to Cebu, and by accomodating (sic) and allowing passengers from Cotabato
for Cebu in his stead and place, thus forcing the plaintiff against his will, to be left and stranded in Cotabato, exposed
to the peril and danger of muslim rebels plundering at the time, the plaintiff, as a consequence, (have) suffered mental
anguish, mental torture, social humiliation, bismirched reputation and wounded feeling, all amounting to a
conservative amount of thirty thousand (P30,000.00) Pesos.

To substantiate this aspect of apathy, private respondent testified 15

A I did not even notice that I was I think the last passenger or the last person out of the PAL
employees and army personnel that were left there. I did not notice that when I was already
outside of the building after our conversation.

Q What did you do next?

A I banished (sic) because it seems that there was a war not far from the airport. The sound of
guns and the soldiers were plenty.
Q After that what did you do?

A I tried to look for a transportation that could bring me down to the City of Cotabato.

Q Were you able to go there?

A I was at about 7:00 o'clock in the evening more or less and it was a private jeep that I
boarded. I was even questioned why I and who am (sic) I then. Then I explained my side that I
am (sic) stranded passenger. Then they brought me downtown at Cotabato.

Q During your conversation with the Manager were you not offered any vehicle or
transportation to Cotabato airport downtown?

A In fact I told him (Manager) now I am by-passed passenger here which is not my destination
what can you offer me. Then they answered, "it is not my fault. Let us forget that."

Q In other words when the Manager told you that offer was there a vehicle ready?

A Not yet. Not long after that the Ford Fiera loaded with PAL personnel was passing by going
to the City of Cotabato and I stopped it to take me a ride because there was no more available
transportation but I was not accommodated.

Significantly, PAL did not seem to mind the introduction of evidence which focused on its alleged negligence in caring for its stranded
passengers. Well-settled is the rule in evidence that the protest or objection against the admission of evidence should be presented at the time
the evidence is offered, and that the proper time to make protest or objection to the admissibility of evidence is when the question is
presented to the witness or at the time the answer thereto is given. 16 There being no objection, such evidence becomes property of the case
and all the parties are amenable to any favorable or unfavorable effects resulting from the evidence. 17

PAL instead attempted to rebut the aforequoted testimony. In the process, it failed to substantiate its counter allegation for want of concrete
proof 18 —

Atty. Rubin O. Rivera — PAL's counsel:

Q You said PAL refused to help you when you were in Cotabato, is that right?

Private respondent:

A Yes.

Q Did you ask them to help you regarding any offer of transportation or of any other matter
asked of them?

A Yes, he (PAL PERSONNEL) said what is? It is not our fault.

Q Are you not aware that one fellow passenger even claimed that he was given Hotel
accommodation because they have no money?

xxx xxx xxx

A No, sir, that was never offered to me. I said, I tried to stop them but they were already riding
that PAL pick-up jeep, and I was not accommodated.

Having joined in the issue over the alleged lack of care it exhibited towards its passengers, PAL cannot now turn around and feign surprise
at the outcome of the case. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be
treated in all respects as if they had been raised in the pleadings. 19

With regard to the award of damages affirmed by the appellate court, PAL argues that the same is unfounded. It asserts that it should not be
charged with the task of looking after the passengers' comfort and convenience because the diversion of the flight was due to a fortuitous
event, and that if made liable, an added burden is given to PAL which is over and beyond its duties under the contract of carriage. It submits
that granting arguendo that negligence exists, PAL cannot be liable in damages in the absence of fraud or bad faith; that private respondent
failed to apprise PAL of the nature of his trip and possible business losses; and, that private respondent himself is to be blamed for
unreasonably refusing to use the free ticket which PAL issued.
The contract of air carriage is a peculiar one. Being 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 Air France v. Carrascoso, 21 we held that —

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 attended with a public duty . . . . ( emphasis supplied).

The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PAL's
diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with
its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with
situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues
until the latter has been landed at the port of destination and has left the carrier's premises. 22 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. As the appellate court correctly ruled —

While the failure of plaintiff in the first instance to reach his destination at Ozamis City in accordance with the
contract of carriage was due to the closure of the airport on account of rain and inclement weather which was radioed
to defendant 15 minutes before landing, it has not been disputed by defendant airline that Ozamis City has no all-
weather airport and has to cancel its flight to Ozamis City or by-pass it in the event of inclement weather. Knowing
this fact, it becomes the duty of defendant to provide all means of comfort and convenience to its passengers when
they would have to be left in a strange place in case of such by-passing. The steps taken by defendant airline company
towards this end has not been put in evidence, especially for those 7 others who were not accommodated in the return
trip to Cebu, only 6 of the 21 having been so accommodated. It appears that plaintiff had to leave on the next flight 2
days later. 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 CC., Art. 1733 C.C.) Since part of the failure to comply with the obligation of common carrier to
deliver its passengers safely to their destination lay in the defendant's failure to provide comfort and convenience to
its stranded passengers using extra-ordinary 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. 23

While we find PAL remiss in its duty of extending utmost care to private respondent while being stranded in Cotabato City, there is no
sufficient basis to conclude that PAL failed to inform him about his non-accommodation on Flight 560, or that it was inattentive to his
queries relative thereto.

On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato City that —

3. Of the fifteen stranded passengers two pax elected to take F478 on August 05, three pax opted to take F442 August
03. The remaining ten (10) including subject requested that they be instead accommodated (sic) on F446 CBO-IGN
the following day where they intended to take the surface transportation to OZC. Mr. Pedro Zapatos had by then been
very vocal and boiceterous (sic) at the counter and we tactfully managed to steer him inside the Station Agent's office.
Mr. Pedro Zapatos then adamantly insisted that all the diverted passengers should have been given priority over the
originating passengers of F560 whether confirmed or otherwise. We explained our policies and after awhile he
seemed pacified and thereafter took his ticket (in-lieued (sic) to CBO-IGN, COCON basis), at the counter in the
presence of five other passengers who were waiting for their tickets too. The rest of the diverted pax had left earlier
after being assured their tickets will be ready the following day. 24

Aforesaid Report being an entry in the course of business is prima facie evidence of the facts therein stated. Private respondent, apart from
his testimony, did not offer any controverting evidence. If indeed PAL omitted to give information about the options available to its diverted
passengers, it would have been deluged with complaints. But, only private respondent complained —

Atty. Rivera (for PAL)

Q I understand from you Mr. Zapatos that at the time you were waiting at Cotabato Airport for
the decision of PAL, you were not informed of the decision until after the airplane left is that
correct?

A Yes.

COURT:

Q What do you mean by "yes"? You meant you were not informed?

A Yes, I was not informed of their decision, that they will only accommodate few passengers.

Q Aside from you there were many other stranded passengers?


A I believed, yes.

Q And you want us to believe that PAL did not explain (to) any of these passengers about the
decision regarding those who will board the aircraft back to Cebu?

A No, Sir.

Q Despite these facts Mr. Zapatos did any of the other passengers complained (sic) regarding
that incident?

xxx xxx xxx

A There were plenty of argument and I was one of those talking about my case.

Q Did you hear anybody complained (sic) that he has not been informed of the decision before
the plane left for Cebu?

A No. 25

Admittedly, private respondent's insistence on being given priority in accommodation was unreasonable considering the fortuitous event and
that there was a sequence to be observed in the booking, i.e., in the order the passengers checked-in at their port of origin. His intransigence
in fact was the main cause for his having to stay at the airport longer than was necessary.

Atty. Rivera:

Q And, you were saying that despite the fact that according to your testimony there were at
least 16 passengers who were stranded there in Cotabato airport according to your testimony,
and later you said that there were no other people left there at that time, is that correct?

A Yes, I did not see anyone there around. I think I was the only civilian who was left there.

Q Why is it that it took you long time to leave that place?

A Because I was arguing with the PAL personnel. 26

Anent the plaint that PAL employees were disrespectful and inattentive toward private respondent, the records are bereft of evidence to
support the same. Thus, the ruling of respondent Court of Appeals in this regard is without basis. 27 On the contrary, private respondent was
attended to not only by the personnel of PAL but also by its Manager." 28

In the light of these findings, we find the award of moral damages of Fifty Thousand Pesos (P50,000.00) unreasonably excessive; hence, we
reduce the same to Ten Thousand Pesos (P10,000.00). Conformably herewith, the award of exemplary damages is also reduced to five
Thousand Pesos (5,000.00). Moral damages are not intended to enrich the private respondent. They are awarded only to enable the injured
party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendant's
culpable action. 29

With regard to the award of actual damages in the amount of P5,000.00 representing private respondent's alleged business losses occasioned
by his stay at Cotabato City, we find the same unwarranted. Private respondent's testimony that he had a scheduled business "transaction of
shark liver oil supposedly to have been consummated on August 3, 1975 in the morning" and that "since (private respondent) was out for
nearly two weeks I missed to buy about 10 barrels of shark liver oil,"30 are purely speculative. Actual or compensatory damages cannot be
presumed but must be duly proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the
fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 31

WHEREFORE the decision appealed from is AFFIRMED with modification however that the award of moral damages of Fifty Thousand
Pesos (P50,000.00) is reduced to Ten Thousand Pesos (P10,000.00) while the exemplary damages of Ten Thousand Pesos (P10,000.00) is
also reduced to Five Thousand Pesos (P5,000.00). The award of actual damages in the amount Five Thousand Pesos (P5,000.00)
representing business losses occasioned by private respondent's being stranded in Cotabato City is deleted.

SO ORDERED.

Cruz, Griño-Aquino, Davide, Jr. and Quiason, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 87434 August 5, 1992

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS, INC., petitioners,
vs.
SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES, INC. and HON. COURT OF
APPEALS, respondents.

De Lara, De Lunas & Rosales for petitioners.

Carlo L. Aquino for Sweet Lines, Inc.

REGALADO, J.:

A maritime suit 1 was commenced on May 12, 1978 by herein Petitioner Philippine American General Insurance Co., Inc. (Philamgen) and
Tagum Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre and Port Services, Inc.
(DVAPSI), along with S.C.I. Line (The Shipping Corporation of India Limited) and F.E. Zuellig, Inc., as co-defendants in the court a quo,
seeking recovery of the cost of lost or damaged shipment plus exemplary damages, attorney's fees and costs allegedly due to defendants'
negligence, with the following factual backdrop yielded by the findings of the court below and adopted by respondent court:

It would appear that in or about March 1977, the vessel SS "VISHVA YASH" belonging to or operated by the foreign
common carrier, took on board at Baton Rouge, LA, two (2) consignments of cargoes for shipment to Manila and
later for transhipment to Davao City, consisting of 600 bags Low Density Polyethylene 631 and another 6,400 bags
Low Density Polyethylene 647, both consigned to the order of Far East Bank and Trust Company of Manila, with
arrival notice to Tagum Plastics, Inc., Madaum, Tagum, Davao City. Said cargoes were covered, respectively, by Bills
of Lading Nos. 6 and 7 issued by the foreign common carrier (Exhs. E and F). The necessary packing or Weight List
(Exhs. A and B), as well as the Commercial Invoices (Exhs. C and D) accompanied the shipment. The cargoes were
likewise insured by the Tagum Plastics Inc. with plaintiff Philippine American General Insurance Co., Inc., (Exh. G).

In the course of time, the said vessel arrived at Manila and discharged its cargoes in the Port of Manila for
transhipment to Davao City. For this purpose, the foreign carrier awaited and made use of the services of the vessel
called M/V "Sweet Love" owned and operated by defendant interisland carrier.

Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were commingled with similar
cargoes belonging to Evergreen Plantation and also Standfilco.

On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody of the consignee. A
later survey conducted on July 8, 1977, upon the instance of the plaintiff, shows the following:

Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain 6,400 bags of Low Density Polyethylene
647 originally inside 160 pallets, there were delivered to the consignee 5,413 bags in good order condition. The
survey shows shortages, damages and losses to be as follows:

Undelivered/Damaged bags as tallied during discharge from vessel-173 bags; undelivered and
damaged as noted and observed whilst stored at the pier-699 bags; and shortlanded-110 bags
(Exhs. P and P-1).

Of the 600 bags of Low Density Polyethylene 631, the survey conducted on the same day shows an actual delivery to
the consignee of only 507 bags in good order condition. Likewise noted were the following losses, damages and
shortages, to wit:

Undelivered/damaged bags and tally sheets during discharge from vessel-17 bags.

Undelivered and damaged as noted and observed whilst stored at the pier-66 bags; Shortlanded-
10 bags.

Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets, only a total of 5,820 bags were
delivered to the consignee in good order condition, leaving a balance of 1,080 bags. Such loss from this particular
shipment is what any or all defendants may be answerable to (sic).
As already stated, some bags were either shortlanded or were missing, and some of the 1,080 bags were torn, the
contents thereof partly spilled or were fully/partially emptied, but, worse, the contents thereof contaminated with
foreign matters and therefore could no longer serve their intended purpose. The position taken by the consignee was
that even those bags which still had some contents were considered as total losses as the remaining contents were
contaminated with foreign matters and therefore did not (sic) longer serve the intended purpose of the material. Each
bag was valued, taking into account the customs duties and other taxes paid as well as charges and the conversion
value then of a dollar to the peso, at P110.28 per bag (see Exhs. L and L-1 M and O). 2

Before trial, a compromise agreement was entered into between petitioners, as plaintiffs, and defendants S.C.I. Line and F.E. Zuellig, upon
the latter's payment of P532.65 in settlement of the claim against them. Whereupon, the trial court in its order of August 12, 1981 3 granted
plaintiffs' motion to dismiss grounded on said amicable settlement and the case as to S.C.I. Line and F.E. Zuellig was consequently
"dismissed with prejudice and without pronouncement as to costs."

The trial court thereafter rendered judgment in favor of herein petitioners on this dispositive portion:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff Philippine General American Insurance
Company Inc. and against the remaining defendants, Sweet Lines Inc. and Davao Veterans Arrastre Inc. as follows:

Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sum of P34,902.00, with legal interest thereon from
date of extrajudicial demand on April 28, 1978 (Exh. M) until fully paid;

Defendant Sweet Lines Inc. and Davao Veterans Arrastre and (Port) Services Inc. are directed to pay jointly and
severally, the plaintiff the sum of P49,747.55, with legal interest thereon from April 28, 1978 until fully paid;

Each of said defendants are ordered to pay the plaintiffs the additional sum of P5,000 is reimbursable attorney's fees
and other litigation expenses;

Each of said defendants shall pay one-fourth (1/4) costs. 4

Due to the reversal on appeal by respondent court of the trial court's decision on the ground of prescription, 5 in effect dismissing the
complaint of herein petitioners, and the denial of their motion for reconsideration, 6 petitioners filed the instant petition for review
on certiorari, faulting respondent appellate court with the following errors: (1) in upholding, without proof, the existence of the so-called
prescriptive period; (2) granting arguendo that the said prescriptive period does exist, in not finding the same to be null and void; and (3)
assuming arguendo that the said prescriptive period is valid and legal, in failing to conclude that petitioners substantially complied
therewith. 7

Parenthetically, we observe that herein petitioners are jointly pursuing this case, considering their common interest in the shipment subject
of the present controversy, to obviate any question as to who the real party in interest is and to protect their respective rights as insurer and
insured. In any case, there is no impediment to the legal standing of Petitioner Philamgen, even if it alone were to sue herein private
respondents in its own capacity as insurer, it having been subrogated to all rights of recovery for loss of or damage to the shipment insured
under its Marine Risk Note No. 438734 dated March 31, 1977 8 in view of the full settlement of the claim thereunder as evidenced by the
subrogation receipt 9 issued in its favor by Far East Bank and Trust Co., Davao Branch, for the account of petitioner TPI.

Upon payment of the loss covered by the policy, the insurer's entitlement to subrogation pro tanto, being of the highest equity, equips it with
a cause of action against a third party in case of contractual breach. 10 Further, the insurer's subrogatory right to sue for recovery under the
bill of lading in case of loss of or damage to the cargo is jurisprudentially upheld. 11 However, if an insurer, in the exercise of its subrogatory
right, may proceed against the erring carrier and for all intents and purposes stands in the place and in substitution of the consignee, a
fortiori such insurer is presumed to know and is just as bound by the contractual terms under the bill of lading as the insured.

On the first issue, petitioners contend that it was error for the Court of Appeals to reverse the appealed decision on the supposed ground of
prescription when SLI failed to adduce any evidence in support thereof and that the bills of lading said to contain the shortened periods for
filing a claim and for instituting a court action against the carrier were never offered in evidence. Considering that the existence and tenor of
this stipulation on the aforesaid periods have allegedly not been established, petitioners maintain that it is inconceivable how they can
possibly comply therewith. 12 In refutation, SLI avers that it is standard practice in its operations to issue bills of lading for shipments
entrusted to it for carriage and that it in fact issued bills of lading numbered MD-25 and MD-26 therefor with proof of their existence
manifest in the records of the case. 13 For its part, DVAPSI insists on the propriety of the dismissal of the complaint as to it due to
petitioners' failure to prove its direct responsibility for the loss of and/or damage to the cargo. 14

On this point, in denying petitioner's motion for reconsideration, the Court of Appeals resolved that although the bills of lading were not
offered in evidence, the litigation obviously revolves on such bills of lading which are practically the documents or contracts sued upon,
hence, they are inevitably involved and their provisions cannot be disregarded in the determination of the relative rights of the parties
thereto. 15

Respondent court correctly passed upon the matter of prescription, since that defense was so considered and controverted by the parties. This
issue may accordingly be taken cognizance of by the court even if not inceptively raised as a defense so long as its existence is plainly
apparent on the face of relevant pleadings. 16 In the case at bar, prescription as an affirmative defense was seasonably raised by SLI in its
answer, 17 except that the bills of lading embodying the same were not formally offered in evidence, thus reducing the bone of contention to
whether or not prescription can be maintained as such defense and, as in this case, consequently upheld on the strength of mere references
thereto.
As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills of lading, such bills of
lading can be categorized as actionable documents which under the Rules must be properly pleaded either as causes of action or
defenses, 18 and the genuineness and due execution of which are deemed admitted unless specifically denied under oath by the adverse
party. 19 The rules on actionable documents cover and apply to both a cause of action or defense based on said documents. 20

In the present case and under the aforestated assumption that the time limit involved is a prescriptive period, respondent carrier duly raised
prescription as an affirmative defense in its answer setting forth paragraph 5 of the pertinent bills of lading which comprised the stipulation
thereon by parties, to wit:

5. Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if container shows
exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss or damage must be filed within 30
days from accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted within
60 days from date of accrual of right of action. Failure to file claims or institute judicial proceedings as herein
provided constitutes waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery,
misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier. 21

In their reply thereto, herein petitioners, by their own assertions that —

2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s Answer, plaintiffs state that such agreements
are what the Supreme Court considers as contracts of adhesion (see Sweet Lines, Inc. vs. Hon. Bernardo Teves, et al.,
G.R. No. L-37750, May 19, 1978) and, consequently, the provisions therein which are contrary to law and public
policy cannot be availed of by answering defendant as valid defenses. 22

thereby failed to controvert the existence of the bills of lading and the aforequoted provisions therein, hence they impliedly admitted the
same when they merely assailed the validity of subject stipulations.

Petitioners' failure to specifically deny the existence, much less the genuineness and due execution, of the instruments in question amounts
to an admission. Judicial admissions, verbal or written, made by the parties in the pleadings or in the course of the trial or other proceedings
in the same case are conclusive, no evidence being required to prove the same, and cannot be contradicted unless shown to have been made
through palpable mistake or that no such admission was made. 23 Moreover, when the due execution and genuineness of an instrument are
deemed admitted because of the adverse party's failure to make a specific verified denial thereof, the instrument need not be presented
formally in evidence for it may be considered an admitted fact. 24

Even granting that petitioners' averment in their reply amounts to a denial, it has the procedural earmarks of what in the law on pleadings is
called a negative pregnant, that is, a denial pregnant with the admission of the substantial facts in the pleading responded to which are not
squarely denied. It is in effect an admission of the averment it is directed to. 25 Thus, while petitioners objected to the validity of such
agreement for being contrary to public policy, the existence of the bills of lading and said stipulations were nevertheless impliedly admitted
by them.

We find merit in respondent court's comments that petitioners failed to touch on the matter of the non-presentation of the bills of lading in
their brief and earlier on in the appellate proceedings in this case, hence it is too late in the day to now allow the litigation to be overturned
on that score, for to do so would mean an over-indulgence in technicalities. Hence, for the reasons already advanced, the non-inclusion of
the controverted bills of lading in the formal offer of evidence cannot, under the facts of this particular case, be considered a fatal procedural
lapse as would bar respondent carrier from raising the defense of prescription. Petitioners' feigned ignorance of the provisions of the bills of
lading, particularly on the time limitations for filing a claim and for commencing a suit in court, as their excuse for non-compliance
therewith does not deserve serious attention.

It is to be noted that the carriage of the cargo involved was effected pursuant to an "Application for Delivery of Cargoes without Original
Bill of Lading" issued on May 20, 1977 in Davao City 26 with the notation therein that said application corresponds to and is subject to the
terms of bills of lading MD-25 and MD-26. It would be a safe assessment to interpret this to mean that, sight unseen, petitioners
acknowledged the existence of said bills of lading. By having the cargo shipped on respondent carrier's vessel and later making a claim for
loss on the basis of the bills of lading, petitioners for all intents and purposes accepted said bills. Having done so they are bound by all
stipulations contained therein. 27 Verily, as petitioners are suing for recovery on the contract, and in fact even went as far as assailing its
validity by categorizing it as a contract of adhesion, then they necessarily admit that there is such a contract, their knowledge of the
existence of which with its attendant stipulations they cannot now be allowed to deny.

On the issue of the validity of the controverted paragraph 5 of the bills of lading above quoted which unequivocally prescribes a time frame
of thirty (30) days for filing a claim with the carrier in case of loss of or damage to the cargo and sixty (60) days from accrual of the right of
action for instituting an action in court, which periods must concur, petitioners posit that the alleged shorter prescriptive period which is in
the nature of a limitation on petitioners' right of recovery is unreasonable and that SLI has the burden of proving otherwise, citing the earlier
case of Southern Lines, Inc. vs. Court of Appeals, et al. 28 They postulate this on the theory that the bills of lading containing the same
constitute contracts of adhesion and are, therefore, void for being contrary to public policy, supposedly pursuant to the dictum in Sweet
Lines, Inc. vs. Teves, et al. 29

Furthermore, they contend, since the liability of private respondents has been clearly established, to bar petitioners' right of recovery on a
mere technicality will pave the way for unjust enrichment. 30 Contrarily, SLI asserts and defends the reasonableness of the time limitation
within which claims should be filed with the carrier; the necessity for the same, as this condition for the carrier's liability is uniformly
adopted by nearly all shipping companies if they are to survive the concomitant rigors and risks of the shipping industry; and the
countervailing balance afforded by such stipulation to the legal presumption of negligence under which the carrier labors in the event of loss
of or damage to the cargo. 31
It has long been held that Article 366 of the Code of Commerce applies not only to overland and river transportation but also to maritime
transportation. 32 Moreover, we agree that in this jurisdiction, as viewed from another angle, it is more accurate to state that the filing of a
claim with the carrier within the time limitation therefor under Article 366 actually constitutes a condition precedent to the accrual of a right
of action against a carrier for damages caused to the merchandise. The shipper or the consignee must allege and prove the fulfillment of the
condition and if he omits such allegations and proof, no right of action against the carrier can accrue in his favor. As the requirements in
Article 366, restated with a slight modification in the assailed paragraph 5 of the bills of lading, are reasonable conditions precedent, they
are not limitations of action. 33 Being conditions precedent, their performance must precede a suit for enforcement 34 and the vesting of the
right to file spit does not take place until the happening of these conditions. 35

Now, before an action can properly be commenced all the essential elements of the cause of action must be in existence, that is, the cause of
action must be complete. All valid conditions precedent to the institution of the particular action, whether prescribed by statute, fixed by
agreement of the parties or implied by law must be performed or complied with before commencing the action, unless the conduct of the
adverse party has been such as to prevent or waive performance or excuse non-performance of the condition. 36

It bears restating that a right of action is the right to presently enforce a cause of action, while a cause of action consists of the operative facts
which give rise to such right of action. The right of action does not arise until the performance of all conditions precedent to the action and
may be taken away by the running of the statute of limitations, through estoppel, or by other circumstances which do not affect the cause of
action. 37 Performance or fulfillment of all conditions precedent upon which a right of action depends must be sufficiently
alleged, 38 considering that the burden of proof to show that a party has a right of action is upon the person initiating the suit. 39

More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the goods, the
giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Such requirement is
not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but
reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to
examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while
the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims. 40

Stipulations in bills of lading or other contracts of shipment which require notice of claim for loss of or damage to goods shipped in order to
impose liability on the carrier operate to prevent the enforcement of the contract when not complied with, that is, notice is a condition
precedent and the carrier is not liable if notice is not given in accordance with the stipulation, 41 as the failure to comply with such a
stipulation in a contract of carriage with respect to notice of loss or claim for damage bars recovery for the loss or damage suffered. 42

On the other hand, the validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the statutory period
therefor has generally been upheld as such stipulation merely affects the shipper's remedy and does not affect the liability of the carrier. In
the absence of any statutory limitation and subject only to the requirement on the reasonableness of the stipulated limitation period, the
parties to a contract of carriage may fix by agreement a shorter time for the bringing of suit on a claim for the loss of or damage to the
shipment than that provided by the statute of limitations. Such limitation is not contrary to public policy for it does not in any way defeat the
complete vestiture of the right to recover, but merely requires the assertion of that right by action at an earlier period than would be
necessary to defeat it through the operation of the ordinary statute of limitations. 43

In the case at bar, there is neither any showing of compliance by petitioners with the requirement for the filing of a notice of claim within the
prescribed period nor any allegation to that effect. It may then be said that while petitioners may possibly have a cause of action, for failure
to comply with the above condition precedent they lost whatever right of action they may have in their favor or, token in another sense, that
remedial right or right to relief had prescribed.44

The shipment in question was discharged into the custody of the consignee on May 15, 1977, and it was from this date that petitioners' cause
of action accrued, with thirty (30) days therefrom within which to file a claim with the carrier for any loss or damage which may have been
suffered by the cargo and thereby perfect their right of action. The findings of respondent court as supported by petitioners' formal offer of
evidence in the court below show that the claim was filed with SLI only on April 28, 1978, way beyond the period provided in the bills of
lading 45 and violative of the contractual provision, the inevitable consequence of which is the loss of petitioners' remedy or right to sue.
Even the filing of the complaint on May 12, 1978 is of no remedial or practical consequence, since the time limits for the filing thereof,
whether viewed as a condition precedent or as a prescriptive period, would in this case be productive of the same result, that is, that
petitioners had no right of action to begin with or, at any rate, their claim was time-barred.

What the court finds rather odd is the fact that petitioner TPI filed a provisional claim with DVAPSI as early as June 14, 1977 46 and, as
found by the trial court, a survey fixing the extent of loss of and/or damage to the cargo was conducted on July 8, 1977 at the instance of
petitioners. 47 If petitioners had the opportunity and awareness to file such provisional claim and to cause a survey to be conducted soon after
the discharge of the cargo, then they could very easily have filed the necessary formal, or even a provisional, claim with SLI itself 48 within
the stipulated period therefor, instead of doing so only on April 28, 1978 despite the vessel's arrival at the port of destination on May 15,
1977. Their failure to timely act brings us to no inference other than the fact that petitioners slept on their rights and they must now face the
consequences of such inaction.

The ratiocination of the Court of Appeals on this aspect is worth reproducing:

xxx xxx xxx

It must be noted, at this juncture, that the aforestated time limitation in the presentation of claim for loss or damage, is
but a restatement of the rule prescribed under Art. 366 of the Code of Commerce which reads as follows:
Art. 366. Within the twenty-four hours following the receipt of the merchandise, the claim
against the carrier for damage or average which may be found therein upon opening the
packages, may be made, provided that the indications of the damage or average which gives
rise to the claim cannot be ascertained from the outside part of the packages, in which case the
claims shall be admitted only at the time of the receipt.

After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.

Gleanable therefrom is the fact that subject stipulation even lengthened the period for presentation of claims
thereunder. Such modification has been sanctioned by the Supreme Court. In the case of Ong Yet (M)ua Hardware
Co., Inc. vs. Mitsui Steamship Co., Ltd., et al., 59 O.G. No. 17, p. 2764, it ruled that Art. 366 of the Code of
Commerce can be modified by a bill of lading prescribing the period of 90 days after arrival of the ship, for filing of
written claim with the carrier or agent, instead of the 24-hour time limit after delivery provided in the aforecited legal
provision.

Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that the commencement of the instant suit on
May 12, 1978 was indeed fatally late. In view of the express provision that "suits arising from
. . . damage or loss shall be instituted within 60 days from date of accrual of right of action," the present action
necessarily fails on ground of prescription.

In the absence of constitutional or statutory prohibition, it is usually held or recognized that it is


competent for the parties to a contract of shipment to agree on a limitation of time shorter than
the statutory period, within which action for breach of the contract shall be brought, and such
limitation will be enforced if reasonable . . . (13 C.J.S. 496-497)

A perusal of the pertinent provisions of law on the matter would disclose that there is no constitutional or statutory
prohibition infirming paragraph 5 of subject Bill of Lading. The stipulated period of 60 days is reasonable enough for
appellees to ascertain the facts and thereafter to sue, if need be, and the 60-day period agreed upon by the parties
which shortened the statutory period within which to bring action for breach of contract is valid and binding. . . .
(Emphasis in the original text.) 49

As explained above, the shortened period for filing suit is not unreasonable and has in fact been generally recognized to be a valid business
practice in the shipping industry. Petitioners' advertence to the Court's holding in the Southern Lines case, supra, is futile as what was
involved was a claim for refund of excess payment. We ruled therein that non-compliance with the requirement of filing a notice of claim
under Article 366 of the Code of Commerce does not affect the consignee's right of action against the carrier because said requirement
applies only to cases for recovery of damages on account of loss of or damage to cargo, not to an action for refund of overpayment, and on
the further consideration that neither the Code of Commerce nor the bills of lading therein provided any time limitation for suing for refund
of money paid in excess, except only that it be filed within a reasonable time.

The ruling in Sweet Lines categorizing the stipulated limitation on venue of action provided in the subject bill of lading as a contract of
adhesion and, under the circumstances therein, void for being contrary to public policy is evidently likewise unavailing in view of the
discrete environmental facts involved and the fact that the restriction therein was unreasonable. In any case, Ong Yiu vs. Court of Appeals, et
al., 50 instructs us that "contracts of adhesion wherein one party imposes a ready-made form of contract on the other . . . 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." In the
present case, not even an allegation of ignorance of a party excuses non-compliance with the contractual stipulations since the responsibility
for ensuring full comprehension of the provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be.

While it is true that substantial compliance with provisions on filing of claim for loss of or damage to cargo may sometimes suffice, the
invocation of such an assumption must be viewed vis-a-vis the object or purpose which such a provision seeks to attain and that is to afford
the carrier a reasonable opportunity to determine the merits and validity of the claim and to protect itself against unfounded
impositions. 51 Petitioners' would nevertheless adopt an adamant posture hinged on the issuance by SLI of a "Report on Losses and
Damages," dated May 15, 1977, 52 from which petitioners theorize that this charges private respondents with actual knowledge of the loss
and damage involved in the present case as would obviate the need for or render superfluous the filing of a claim within the stipulated
period.

Withal, it has merely to be pointed out that the aforementioned report bears this notation at the lower part thereof: "Damaged by Mla. labor
upon unloading; B/L noted at port of origin," as an explanation for the cause of loss of and/or damage to the cargo, together with an iterative
note stating that "(t)his Copy should be submitted together with your claim invoice or receipt within 30 days from date of issue otherwise
your claim will not be honored."

Moreover, knowledge on the part of the carrier of the loss of or damage to the goods deducible from the issuance of said report is not
equivalent to nor does it approximate the legal purpose served by the filing of the requisite claim, that is, to promptly apprise the carrier
about a consignee's intention to file a claim and thus cause the prompt investigation of the veracity and merit thereof for its protection. It
would be an unfair imposition to require the carrier, upon discovery in the process of preparing the report on losses or damages of any and
all such loss or damage, to presume the existence of a claim against it when at that time the carrier is expectedly concerned merely with
accounting for each and every shipment and assessing its condition. Unless and until a notice of claim is therewith timely filed, the carrier
cannot be expected to presume that for every loss or damage tallied, a corresponding claim therefor has been filed or is already in existence
as would alert it to the urgency for an immediate investigation of the soundness of the claim. The report on losses and damages is not the
claim referred to and required by the bills of lading for it does not fix responsibility for the loss or damage, but merely states the condition of
the goods shipped. The claim contemplated herein, in whatever form, must be something more than a notice that the goods have been lost or
damaged; it must contain a claim for compensation or indicate an intent to claim. 53

Thus, to put the legal effect of respondent carrier's report on losses or damages, the preparation of which is standard procedure upon
unloading of cargo at the port of destination, on the same level as that of a notice of claim by imploring substantial compliance is definitely
farfetched. Besides, the cited notation on the carrier's report itself makes it clear that the filing of a notice of claim in any case is imperative
if carrier is to be held liable at all for the loss of or damage to cargo.

Turning now to respondent DVAPSI and considering that whatever right of action petitioners may have against respondent carrier was lost
due to their failure to seasonably file the requisite claim, it would be awkward, to say the least, that by some convenient process of
elimination DVAPSI should proverbially be left holding the bag, and it would be pure speculation to assume that DVAPSI is probably
responsible for the loss of or damage to cargo. Unlike a common carrier, an arrastre operator does not labor under a presumption of
negligence in case of loss, destruction or deterioration of goods discharged into its custody. In other words, to hold an arrastre operator liable
for loss of and/or damage to goods entrusted to it there must be preponderant evidence that it did not exercise due diligence in the handling
and care of the goods.

Petitioners failed to pinpoint liability on any of the original defendants and in this seemingly wild goose-chase, they cannot quite put their
finger down on when, where, how and under whose responsibility the loss or damage probably occurred, or as stated in paragraph 8 of their
basic complaint filed in the court below, whether "(u)pon discharge of the cargoes from the original carrying vessel, the SS VISHVA
YASH," and/or upon discharge of the cargoes from the interisland vessel the MV "SWEET LOVE," in Davao City and later while in the
custody of defendant arrastre operator. 54

The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and Aviation Claims Manager of petitioner Philamgen, was
definitely inconclusive and the responsibility for the loss or damage could still not be ascertained therefrom:

Q In other words, Mr. Cabato, you only computed the loss on the basis of the figures submitted
to you and based on the documents like the survey certificate and the certificate of the arrastre?

A Yes, sir.

Q Therefore, Mr. Cabato, you have no idea how or where these losses were incurred?

A No, sir.

xxx xxx xxx

Q Mr. Witness, you said that you processed and investigated the claim involving the shipment
in question. Is it not a fact that in your processing and investigation you considered how the
shipment was transported? Where the losses could have occurred and what is the extent of the
respective responsibilities of the bailees and/or carriers involved?

xxx xxx xxx

A With respect to the shipment being transported, we have of course to get into it in order to
check whether the shipment coming in to this port is in accordance with the policy condition,
like in this particular case, the shipment was transported to Manila and transhipped through an
interisland vessel in accordance with the policy. With respect to the losses, we have a general
view where losses could have occurred. Of course we will have to consider the different bailees
wherein the shipment must have passed through, like the ocean vessel, the interisland vessel
and the arrastre, but definitely at that point and time we cannot determine the extent of each
liability. We are only interested at that point and time in the liability as regards the underwriter
in accordance with the policy that we issued.

xxx xxx xxx

Q Mr. Witness, from the documents, namely, the survey of Manila Adjusters and Surveyors
Company, the survey of Davao Arrastre contractor and the bills of lading issued by the
defendant Sweet Lines, will you be able to tell the respective liabilities of the bailees and/or
carriers concerned?

A No, sir. (Emphasis ours.) 55

Neither did nor could the trial court, much less the Court of Appeals, precisely establish the stage in the course of the shipment when the
goods were lost, destroyed or damaged. What can only be inferred from the factual findings of the trial court is that by the time the cargo
was discharged to DVAPSI, loss or damage had already occurred and that the same could not have possibly occurred while the same was in
the custody of DVAPSI, as demonstrated by the observations of the trial court quoted at the start of this opinion.

ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the dismissal of the complaint in the court a quo as
decreed by respondent Court of Appeals in its challenged judgment is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Padilla and Nocon, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. L-7311 September 30, 1955

NEW ZEALAND INSURANCE CO., LTD., plaintiff-appellant,


vs.
ADRIANO CHOA JOY, ETC., defendant-appellee.

Nicodemus L. Dasig for appellant.


Alberto M. K. Jamir for appellee.

BAUTISTA ANGELO, J.:

This is an action for the recovery of the sum of P5,196.20 with legal interest thereon from the date of the filing of the complaint.

On May 20, 1950, the ship "Jupiter", on her voyage No. 149, received on board at Carangian, Samar, in good order and condition, 107
bundles of first class loose weight hemp weighing 8,273 kilos, of 130.80 piculs, valued at P6,736.20, from Lee Teh & Co., Inc., for
transportation and delivery to Manila, under a bill of lading issued by the carrier to the shipper. The ship was owned by Adriano Choa Joy,
doing business under the name of South Sea Shipping Line, while the cargo was shipped by the branch office of Lee Teh & Co., Inc. at
Carangian, Samar, for transportation and delivery to its main office at Manila.

The cargo failed to arrive in Manila because the vessel ran aground while entering the Laoang Bay, Samar, on May 20, 1950, due to the
negligence of its captain, Jose Molina, who, in the investigation conducted by the Marine Board of Inquiry, was found negligent of his
duties and was suspended from office for a period of three months. Of the cargo, only 7,590 kilos, or 120 piculs of hemp, were saved and
because of their damaged condition, they were sold for the sum of P2,040, the consignor having spent P500 for their salvage, thereby
causing Lee Teh & Co., Inc. losses in the sum of P5,196.20.

The cargo was insured by the New Zealand Insurance Co., Ltd., and because of the damage caused to said cargo while in transit, the losses
were paid by said company to the shipper. The carrier having refused to reimburse these damages despite demands made to that effect, the
insurance company, as subrogee of the shipper instituted the present action before the Court of First Instance of Manila.

After the parties had presented their evidence, the court found that, while the shipper had suffered damages because of the inability of the
carrier to transport the cargo as agreed upon, however, the liability of the carrier did not attach because of the failure of the shipper or of the
consignee to file its claim for damages within 24 hours from receipt of the cargo as required by law. Consequently, the court dismissed the
case, with costs against the plaintiff. Plaintiff brought this case on appeal directly to this Court.

Appellant poses in this appeal the following issue: "Whether Lee Teh & Co., Inc, of Manila, as consignee, or Lee Teh & Co., Inc. of
Catarman, Samar, as consignor, should have filed its claim for damages to the cargo with the shipping company, herein defendant, within
twenty four hours from the date the said cargo was salvaged by the consignor, in accordance with Article 366 of the Code of Commerce for
this action to prosper, or that neither the said consignee nor the said consignor was under the obligation to file the said claim within the said
period, as they are not bound by the provisions of Article 366 of the Code of Commerce."

Article 366 of the Code of Commerce, which was applied by the court, provides:

Within twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or average which
may be found therein upon opening the packages, may be made, provided that the indications of the damage or average which
gives rise to the claim cannot be ascertained from the outside part of such packages, in which case the claim shall be admitted
only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the
carrier with regard to the condition in which the goods transported were delivered.

It would appear from the above that in order that the condition therein provided may be demanded there should be a consignment of goods,
through a common carrier, by a consignor in one place to a consignee in another place. And said article provides that the claim for damages
must be made "within twenty-four hours following the receipt of the merchandise" by the consignee from the carrier. In other words, there
must be delivery of the merchandise by the carrier to the consignee at the place of destination. In the instant case, the consignor is the branch
office of Lee Teh & Co., Inc., at Catarman, Samar, which placed the cargo on board the ship Jupiter, and the consignee, its main office at
Manila. The lower court found that the cargo never reached Manila, its destination, nor was it ever delivered to the consignee, the office of
the shipper in Manila, because the ship ran aground upon entering Laoang Bay, Samar on the same day of the shipment. Such being the case,
it follows that the aforesaid article 366 does not have application because the cargo was never received by the consignee. Moreover, under
the bill of lading issued by the carrier (Exhibit C), it was the letter's undertaking to bring the cargo to its destination—Manila,—and deliver
it to consignee, which undertaking was never complied with. The carrier, therefore, breached its contract, and, as such, it forfeited its right to
invoke in its favor the conditions required by article 366.

One case parallel to the present is Roldan vs. Lim Ponzo & Co., 37 Phil., 285. In that case, plaintiff sought to recover damages for failure of
defendant to transport 2,244 packages of sugar from plaintiff's hacienda to Iloilo. It was proven that the cargo did not reach its destination
because the lorcha carrying it was wrecked in the river Jalaud through the negligence and lack of skill of the master of the lorcha. And of
the total cargo of 2,244 packages of sugar, only 1,022 were saved in damaged condition through the efforts made by the shipper. Because
plaintiff failed to comply with the requirement of article 366 of the Code of Commerce, the lower court found for defendant and dismissed
the case. But this Court held that said article "is limited to cases of claims for damages to goods actually received by the consignee; it has no
application in cases wherein the goods entrusted to the carrier are not delivered to the consignee by the carrier in pursuance of the terms of
the carriage contract." Elaborating on this point, this Court commented:

Article 366 of the Commercial Code is limited to cases of claims for damages to goods actually turned over by the carrier and
received by the consignee, whether those damages be apparent from an examination of the packages in which the goods are
delivered, or of such character that the nature and extend of the damage is not apparent until the packages are opened and the
contents examined. Clearly it has no application in cases wherein the goods entrusted to the carrier are not delivered by the
carrier to the consignee. In such cases there can be no question of a claim for damages suffered by the goods while in transport,
since the claim for damages arises exclusively out of the failure to make delivery. . . .

We are of opinion, however, that the necessity for making the claim in accordance with that article did not arise if, as it is
alleged, these 1,022 packages, of sugar were recovered from the wreck by the plaintiff, himself, in an effort, by his own
activities, to save his property from total loss. The measures to be taken under the terms of Article 367 of the Code when the
parties are unable to arrive at an amicable settlement of claims for damages set up in accordance with Article 366, quite clearly
indicate that the necessity for the presentation of claims under this article arises only in those cases wherein the carrier makes
delivery and the consignee receives the goods in pursuance of the terms of the contract.

It is true that in the instant case there is some disagreement as to whether the salvage of the portion of the cargo that was saved was due to
the efforts of the carrier itself or to the combined efforts of the latter and the shipper as a result of which the salvaged cargo was placed in
possession of the shipper who sold it and deducted its proceeds from the liability of the carrier. But this discrepancy, in our opinion, would
seem to be immaterial because the law as well as the contract contemplates delivery of the cargo to the consignee at its port of destination in
order that the benefit of the law may be availed of. The liability of the carrier must be determined in the light of the carriage contract, and
since that contract calls for reciprocal obligations, the carrier cannot demand fulfillment of its part from the shipper or consignee unless it
first complies with its own obligation. (Article 1100, old Civil Code.) The fact that the consignor is but the branch office of the company
that shipped the goods, and the consignee is the main office at Manila, is of no moment, because the duties of each party under the law are
different. Moreover, even if the consignor and the consignee be considered as one and the same party, still the carrier cannot disclaim
responsibility under its contract for the simple reason that it failed to comply with its obligation to bring the cargo to its destination. This
breach alone justifies its liability under the carriage contract.

Wherefore, the decision appealed from is hereby reversed, and another one will be entered ordering the defendant to pay the plaintiff the
sum of P5,196.20, with legal interest thereon from the filing of the complaint, with costs against appellee.1âwphïl.nêt

Bengzon, Acting C. J., Padilla, Montemayor, Jugo, Labrador, Concepcion, and Reyes, J. B. L., JJ., concur.

Separate Opinions

REYES, A., J., dissenting:

I dissent. While there is dispute as to whether the cargo of hemp was salvage through the effort of the shipper or through those of the carrier,
the lower court found that what was saved of the hemp was actually received by the shipper's agent at Catarman, who, however, did not file
a claim for damages within 24 hours thereafter as provided in Article 366 of the Code of Commerce. The appellant contends that this article
did not apply because "there was no delivery of goods by the carrier to the consignee." Upholding the contention, the majority opinion holds
that the article has application only when the goods transported are delivered to the consignee at the port of destination but not otherwise,
this on the theory that where the carrier breaches his contract by failing to take the goods to their destination he forfeits his right to invoke
the article. To this I cannot agree.
The Article reads:

ART. 366. Within the twenty-four hours following the receipt of the merchandise, the claim against the carrier for damages or
average which may be found therein upon opening of the packages, may be made, provided that the indications of the damage or
average which gives rise to the claim cannot be ascertained from the outside part of such packages in which case the claim shall
be admitted only at the time of receipt.

After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the
carrier with regard to the condition in which the goods transported were delivered.

Nowhere in this article is it said or even hinted that prompt claim with regard to the condition in which the goods transported were delivered
is required only when the delivery is made to the consignee at destination. And on principle I do not see why the article should not apply
also where delivery is made to the shipper or consignor whether at the port of destination or of embarkation or at any other place where the
cargo is discharged. Especially would this be true in the present case where consignor and consignee are the same person or entity and where
damage to the cargo was not necessarily to be expected because the ship did not sink but merely ran aground, so that if any such damages
was in fact noted upon delivery the same should have been promptly brought to the attention of the carrier.

The majority cites the case of Roldan vs. Lim Ponzo, 37 Phil., 255. That case should be authority against rather than in favor of their
conclusion. For it is to be noted that in that case the claim was for 2,244 bayones of sugar of which 1,222 bayones did not reach destination
because the lorcha on which it was loaded was wrecked on the way, while the remaining 1,022 bayones were saved in a more or less
damage condition, and this Court there held that as to the part of the sugar totally lost article 366 did not apply, but that as to be the 1,022
bayones of sugar that were saved, although in a damaged condition, there was need for determining under what conditions the same came
into the possession of the plaintiff, because while there was allegation that the said 1,022 bayones of sugar "were recovered from the wreck
by the plaintiff himself, in an effort, by his own activities, to save his property from total loss", the defendant had not had an opportunity to
submit his evidence to the court. This court, therefor, remanded the case to the court below for a new trial in order to determine whether it
was the carrier or the shipper that salvaged the sugar. The reason for this is to be found in the following excepts from the decision:

In so far as this action is founded on a claim for damages resulting from the wetting of the 1,022 packages of sugar which were
saved from the wreck, it seems clear that if these 1,022 packages of sugar were delivered by the carrier and received by the
consignee under and in pursuance of the terms of the contract, this claim for damages could be defeated by the plaintiff's failure
to make claim therefor in accordance with the term of article 366 of the Code.

xxx xxx xxx

Until the defendant has had an opportunity to submit his evidence it is impossible to determine under what conditions these 1,022
packages of sugar came into the possession of the plaintiff, or to determine whether his claims for damages by the wetting of this
sugar, if well founded in every other respect, is or should be defeated by his failure to make claim for such damages in the
manner and from indicated in Article 366 of the Commercial Code.

If we really mean to follow the decision of this Court in that former case, I think the proper thing to do is to first determine whether the
hemp in this case was salvaged by the carrier or by the shipper. But as that is a disputed question of fact, the case should be certified to the
Court of Appeals since it does not involve a purely legal question.

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 111127 July 26, 1996

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

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

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

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

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

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

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

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar with the area and he could not
have seen the curve despite the care he took in driving the bus, because it was dark and there was no sign on the road. He said that he saw
the curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too late.

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding they filed a criminal complaint
against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano
P1,500.00 for the damage to the latter's fence. On the basis of Escano's affidavit of desistance the case against petitioners Fabre was
dismissed.

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

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

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

Accordingly, it gave judgment for private respondents holding:

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

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

1) P93,657.11 as compensatory and actual damages;

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

3) P20,000.00 as moral damages;


4) P20,000.00 as exemplary damages; and

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

6) Costs of suit.

SO ORDERED.

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

1) P93,657.11 as actual damages;

2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

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

6) Costs of suit.

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

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

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

III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP


TO WHAT EXTENT.

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

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

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

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

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

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were
themselves negligent in the selection and supervisions of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver's license. The employer
should also examine the applicant for his qualifications, experience and record of service. 5 Due diligence in supervision, on the other hand,
requires the formulation of rules and regulations for the guidance of employees and issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance with the rules. 6

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

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

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

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

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

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

As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe transportation of the
passengers to their destination. This duty of care is not excused by proof that they exercise the diligence of a good
father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides:

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

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

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

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

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

The award of exemplary damages and attorney's fees was also properly made. However, for the same reason that it was error for the
appellate court to increase the award of compensatory damages, we hold that it was also error for it to increase the award of moral damages
and reduce the award of attorney's fees, inasmuch as private respondents, in whose favor the awards were made, have not appealed. 13
As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that of breach of contract.
The question is whether, as the two courts below held, petitioners, who are the owners and driver of the bus, may be made to respond jointly
and severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals, 14 on facts similar to those in
this case, this Court held the bus company and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again,
in Bachelor Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a fellow passenger ran amuck, as a result of
which the passengers jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable with the bus company
to the injured passengers.

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

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

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

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

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

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

1) P93,657.11 as actual damages;

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

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

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

6) costs of suit.

SO ORDERED.

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

FIRST DIVISION

G.R. No. 145956 May 29, 2002

NORTHWEST AIRLINES, petitioner,


vs.
DR. JAIME F. LAYA, respondent.
KAPUNAN, J.:

This is a petition for review of the decision, promulgated on August 16, 2000, and the resolution, promulgated on November 14, 2000, of the
Court of Appeals in CA-G.R. No. 45688.1âwphi1.nêt

The facts of the case, as stated in the appellate court's decision, are as follows:

On May 3, 1991, herein respondent Dr. Jaime F. Laya, a medical practitioner, was bound for San Francisco via a first class booking with
Northwest Airlines (NWA) where, being a frequent passenger, he was a member of the World Perks Club. After is luggage passed, and was
cleared, through the x-ray machine of the Ninoy Aquino International Airport (NAIA), Dr. Laya proceeded to NWA's check-in counter and
was issued a boarding pass. However, while on his way to the first class waiting lounge, Dr. Laya was approached by a NWA employee who
requested him to proceed to a long table where passengers were lined up. There, the passengers' Samsonite hand-carried attaché cases were
being subjected to further inspection. Since he noticed that he was carrying an attaché case similar to those being inspected, Dr. Laya
acceded to the request. However, in the course of the inspection, Dr. Laya noticed that his attaché case was treated differently. While the
other passengers were eventually allowed to carry their cases on board the plane, Dr. Laya was asked to place his attaché case in a black
garbage bag and he was given two (2) paper envelopes where he could put its contents.

Since Dr. Laya felt that he was singled out for this extraordinary treatment, he requested that he be allowed to talk with the manager to
discuss his situation, and a certain Mr. Barreto approached him. While Dr. Laya was explaining his plight, Mr. Rommel Evangelista, NWA's
assistant manager, told him that "even if you are the President of the Philippines or the President of the United States we are going to do the
same."

Dr. Laya's situation was aggravated when the two (2) paper envelopes proved to be too fragile for the contents of his attaché case. The
envelopes were eventually torn. Dr. Laya asked for a replacement and was provided with a used Duty-Free bag.

Upon his arrival at San Francisco, Dr. Laya was accorded VIP1 treatment by NWA's ground personnel. Two (2) ground stewardesses asked
for his travel documents and declarations and they took care of his clearance and admission papers. Dr. Laya was spared the trouble of
having to fall in line to have his papers processed. When he proceeded to the baggage claim area, his check-in luggage and his Samsonite
attaché case were already ready for pick up.

On May 25, 1991, Dr. Laya wrote to NWA and reported the rude treatment accorded him by its personnel. An exchange of communication
ensued but NWA did not heed his complaint. On October 9, 1991, Dr. Laya's counsel sent a demand letter to NWA. NWA responded by
apologizing for whatever inconvenience Dr. Laya suffered but it refused Dr. Laya's demand for indemnity. Instead, on October 31, 1991, the
NWA Customer Relations Office sent Dr. Laya a letter with a transportation credit voucher worth US$100.00. Dr. Laya refused to accept
the voucher but kept it for evidentiary purposes, and he promptly filed a complaint for damages against NWA before the Regional Trial
Court of Quezon City, Branch 84.

After trial, judgment was rendered in favor of Dr. Laya, and against NWA, as follows:

VIEWED IN THE LIGHT OF THE ENTIRE RECORD, judgment is hereby rendered ordering defendant to pay unto plaintiff:

1. moral damages in the sum of P1Million;

2. exemplary damages of P500,000.00; and

3. attorney's fees of P50,000.00, plus costs.

SO ORDERED.2

Both parties appealed the decision. NWA appealed the unfavorable ruling against it while Dr. Laya appealed the award in his favor of only
P1,000,000.00 moral damages and P500,000.00 exemplary damages.

In its decision, promulgated on August 16, 2000, the Court of Appeals affirmed the trial court's decision with modifications by reducing the
award of moral damages to P500,000.00 and the exemplary damages to P250,000.00. 3

Its motion for reconsideration having been denied, NWA came to this Court for relief, alleging that:

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENT IS ENTITLED TO THE AWARD OF
DAMAGES.

THE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT THE LOWER COURT ERRED IN FINDING
THAT UNITED STATES FEDERAL AVIATION ADMINISTRATION ("FAA") SECURITY DIRECTIVE NO. 91-11 IS
UNREASONABLE AND DID NOT COINCIDE WITH THE CARRIER'S PROMISE OF POLITE AND GRACIOUS
SERVICE.
THE COURT OF APPEALS GRAVELY (ERRED) IN AWARDING RESPONDENT MORAL DAMAGES OF P500,000.00,
AND EXEMPLARY DAMAGES OF P250,000.00 AND IN AFFIRMING THE AWARD OF ATTORNEY'S FEES OF
P50,000.00 AND PAYMENT OF COSTS. THE DAMAGES AWARDED BY THE COURT OF APPEALS TO RESPONDENT
ARE EXORBITANT AND CONSTITUTE IMPERMISSIBLE UNJUST ENRICHMENT.

THE COURT OF APPEALS GRAVELY ERRED IN NOT AWARDING NORTHWEST EXEMPLARY DAMAGES,
ATTORNEY'S FEES AND EXPENSES OF LITIGATION AS PRAYED FOR.4

The tragic event that unfolded on September 11, 2001 underscored, more than ever, that airport and airline personnel could not afford any
lapse in the implementation of security measures meant to ensure the safety of airplane crew and passengers. Airline carriers hold the lives
of passengers in their hands and they must at all times be vigilant on matters affecting their safety.

After a careful review of the records of this case, the Court finds that the security procedures adopted by NWA was only the result of a
directive issued by the Federal Aviation Administration (FAA) of which NWA, being a U.S. carrier, is subject to. FAA Security Directive
No. 91-11, which was in effect at the time of the incident, states:

Threat Information:

A. SD 91-06 provided the following information: FAA has received information stating that two-man terrorist teams have been
trained in the use of briefcase bombs. The bombs are concealed in brown Samsonite briefcases which contain a total of two (2)
kilograms of high explosives concealed throughout the briefcase under the liner. The devise is armed by attaching a battery to a
nine-volt battery connector concealed behind the briefcases' combination lock.

Several members of the terms are Middle Easterners in their 20s selected due to their athletic ability, and were either well-
travelled or had business experience. The teams may be targeting areas in Asia, Africa, and possibly Western Europe.

B. SC 91-09 provided additional information which indicated that there were at least two additional devices which might be used
in terrorist attacks. The additional devices also contain two kilograms of high explosives in the briefcase liners.

- A second bomb may be concealed in a black Samsonite briefcase. Detonation of the explosive concealed in this device requires
the use of a timer, blasting cap, and power supply.

- A third type of bomb is concealed in a burgundy Samsonite briefcase. This configuration has an ANTI-DISTURBANCE type
device which is activated by pulling an arming pin concealed either near the briefcase handle or one of the lock latches. Once the
pin is pulled, the bomb arms after a short delay. The duration of the delay was not specified.

x x x

Action required by U.S. Air Carriers:

A. The following procedures shall be applied to all hard-shell black, brown, or burgundy Samsonite briefcases by all U.S.
air carriers on flights departing Asia, Africa and Europe.

1. If the briefcase is discovered unattended in an airport or in the terminal area, isolate the briefcase, ensure that the briefcase is
not moved or opened, and immediately notify local police/security authorities, proving them with the information in this
Directive.1âwphi1.nêt

2. All black, brown, or burgundy Samsonite Briefcases shall only be transported as checked baggage. All such briefcases
shall be externally examined for signs of alteration. If at any time during this initial examination the briefcase is suspected of
having been altered or appears to conceal a battery, blasting cap, or electrical component, isolate the briefcase, ensure that the
briefcase is not moved or opened, and immediately notify local police/security authorities, providing them with the information
in this Directive.

3. Briefcases which exhibit no signs of alteration shall be x-rayed. The briefcase shall then be emptied, all batteries (C, D, AA,
AAA, 9v and 6v lantern) shall be removed, the empty briefcase shall be internally examined for signs of alteration and excess
weight, and the empty briefcase shall be subjected to a two-lane x-ray examination. If at any time during this inspection process
the briefcase is suspected of having been altered or appear to conceal a battery, blasting cap, or electrical component, isolate the
briefcase and immediately notify local police/security authorities, providing them with the information in this directive.

4. The air carrier shall deny the passenger any access to the briefcase after it has been tendered until the briefcase is
claimed by the passenger upon arrival at destination. Following the application of the procedures above, the briefcase
shall be transported as checked baggage. However, the contents of the briefcase may be returned to the passenger for
personal use aboard the flight.5

It may be true that Dr. Laya was greatly inconvenienced by the act of NWA when his attaché case was subjected to further inspection and he
was not allowed to bring it on board the plane. However, it does not appear that he was singled out and discriminated by the employees of
NWA. According to Dr. Laya himself, other Caucasians and Asian passengers carrying attaché case similar to his were also required to
undergo further inspection.6

The Court disagrees with both the trial court and the appellate court that the letter of NWA to Dr. Laya was an admission of guilt as there
was nothing in the tenor of the letter that would support such conclusion. The letter read:

Dear Dr. Laya:

Thank you for your letter to Northwest Airlines. I am terribly sorry it has taken me longer than I had hoped to personally reply to
your correspondence.

Our goal at Northwest is to be the carrier of distinct preference, and feedback like yours is critical to our success. Customer
observations, suggestions, and experiences form the basis for improved operations. With that in mind, I have shared your
comments with my colleagues in the responsible departments.

We hope to have another chance to show that we can provide the high quality of service our customers expect and deserve. As a
gesture of goodwill, I am enclosing transportation credit which may be applied to travel on our airline within twelve months from
the date of issue.

We recognize that travelers have a choice a airlines, and we deeply appreciate those who choose Northwest. We hope to have the
privilege of serving your future travel needs.

Sincerely,

(Sgd.) Erin P. Dunn


Manager
Customer Relations7

Indeed, the credit voucher appears nothing more than a "gesture of goodwill" rather than an acknowledgment of guilt.

Nevertheless, while the protection of passengers must take precedence over convenience, the implementation of security measures must be
attended by basic courtesies. The Court is inclined to believe the testimony of Dr. Laya that the personnel who examined his attaché case
were rude, brusque, arrogant and domineering8 and that the manager who attended to him answered his queries in a reprehensible
manner,9 thus causing him humiliation as the other passengers were already looking at him. 10 Hence:

ATTY. ERMITAÑO:

Q. Now, who removed the contents as you claimed that the contents of black Samsonite attaché case was ransacked by
whom?

A. Well, they said, they were employees of the Northwest Airlines and they said there was an instruction to examine my
luggage which I readily consented. For I believed, it's for security reason.

ATTY. ERMITAÑO:

Q. How was the examination conducted?

A. That's precisely, the problem, Sir, it's the manner it was conducted.

COURT:

Q. How?

A. They were rude to me, brusque, arrogant and they were domineering, they don't even like to listen to what I was saying
and they were autocratic.

ATTY. ERMITAÑO:

Q. Why do you say that they were domineering and autocratic?

A. Because I wanted these things (my personal effects) to be placed in the briefcase after thorough examination, but they said
in a loud voice – No. That's an order they said and you cannot go against them and everything I say or explain they say no.
ATTY. ERMITAÑO:

Q. In what tone of voice was this reply "no" made to you?

A. Well, in a loud voice attracting other passengers while others were looking at them with dismay and I was so embarrassed
because as I said, I was singled out. The others I saw did not have the same experience before me.

x x x

ATTY. ERMITAÑO:

Q. So you said that the contents of your attaché case were placed in these two (2) paper envelopes which are now quite torn
was this in the same condition at the time that the contents of your attaché case was placed in the envelopes or in the different
condition?

A. No, it looks brand new when it was first given to me but when they put the contents (my personal effects) and it was
bulging I have to carry it on my breast on my way to the VIP room that's why it started a little bit one by one falling apart. That's
why I have to call the attention of the lady in waiting there in the VIP room so that I could talk to the manager.

Q. Was the manager as requested by you attended to you?

A. No, it was not the manager but the assistant managers by the name of Barreto and Evangelista one after the other in that
order.

COURT:

Q. Manager of whom?

A. Manager of Northwest Airlines.

ATTY. ERMITAÑO:

Q. How do you know that they were officers of the Northwest Airlines?

A. Because they were called by the lady on the World Perk Club room upon my request. And when I told Barreto about the
incident he cannot answer and suddenly Evangelista barged in who was arrogant, brusque and rude.

Q. What transpired, if any, between you and Evangelista?

A. Well, that's where again I was so infuriated because I was explaining to him what happened and I was trying to show that
bulging bag that I placed in one corner of the VIP room while the other passengers were watching it. While I was continuously
explaining to him what happened, he told me, look, Dr. Laya even if you are the president of the Philippines or president of the
United States you are going to undergo the same.

Q. In what tone of voice made by Mr. Evangelista?

A. It's exactly a loud voice with unwarranted pride. It's a reprehensible way of talking.

ATTY. ERMITAÑO:

Q. At that particular instance of conversation was going on between you and Evangelista defendant corporation, did you
notice, if any, what the other passengers were doing in the lounge?

A. Precisely, Sir, they were watching me and some of them are trying to hold his head this way. (Witness turning his head
from one to the other). And I don't know what that mean. Anyway, they were just curious looking and no one was smiling. They
were turning their head this way with a facial expression of pity. Some of them were busy arranging their personal effects on
their respective briefcases.

x x x.11

On this score, we agree with the trial court and the Court of Appeals in saying that "(a)ny security measure must coincide with the
passenger's right to be treated by the carrier with kindness, respect and utmost consideration in all matters relative to their trip."12 The Court
is satisfied that Dr. Laya suffered mental anguish and serious anxiety because of his experience with NWA personnel for which he should be
awarded moral damages. Dr. Laya is also entitled to exemplary damages by way of correction to the NWA for the public good 13 and in view
of the malevolent manner by which the NWA personnel treated Dr. Laya.1âwphi1.nêt

Still, the Court wishes to reiterate that damages are not intended to enrich a plaintiff at the expense of the defendant. 14 Hence, we are further
reducing the award of moral damages from P500,000.00 to P100,000.00 and the amount of exemplary damages is reduced from
P250,000.00 to P50,000.00. The Court, likewise, awards the attorney's fees in the amount of P25,000.00. 15

WHEREFORE, the petition is PARTIALLY GRANTED by ordering Northwest Airlines to pay Dr. Jaime F. Laya the sum of P100,000.00
as moral damages, P50,000.00 as exemplary damages and P25,000.00 representing attorney's fees.

SO ORDERED.

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