3rd Assignment a. Common Provisions( Art 17464 to 1766 of Ncc

TRANSPORTATION AND PUBLIC UTILITIES

ASSIGNMENT NO .3

A. Common provisions Art 1764 to 1766 of NCC

G.R. Nos. 66102-04 August 30, 1990

PHILIPPINE RABBIT BUS LINES, INC., petitioner, vs.THE HONORABLE INTERMEDIATE APPELLATE COURT AND CASIANO PASCUA, ET AL., respondents.

Santiago & Santiago for petitioner.

Federico R. Vinluan for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now Court of Appeals) dated July 29, 1983 in AC-G.R. Nos. CV-65885, CV-65886 and CV-65887 which reversed the decision of the Court of First Instance (now Regional Trial Court) of Pangasinan dated December 27, 1978; and its resolution dated November 28, 1983 denying the motion for reconsideration.

It is an established principle that the factual findings of the Court of Appeals are final and may not be reviewed by this Court on appeal. However, this principle is subject to certain exceptions. One of these is when the findings of the appellate court are contrary to those of the trial court (see Sabinosa v. The Honorable Court of Appeals, et al., G.R. No. L-47981, July 24, 1989) in which case, a re-examination of the facts and evidence may be undertaken. This is Our task now.

The antecedent facts are as follows:

About 11:00 o'clock in the morning on December 24, 1966, Catalina Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes Lorenzo, Alejandro Morales and Zenaida Parejas boarded the jeepney owned by spouses Isidro Mangune and Guillerma Carreon and

driven by Tranquilino Manalo at Dau, Mabalacat, Pampanga bound for Carmen, Rosales, Pangasinan to spend Christmas at their respective homes. Although they usually ride in buses, they had to ride in a jeepney that day because the buses were full. Their contract with Manalo was for them to pay P24.00 for the trip. The private respondents' testimonial evidence on this contractual relationship was not controverted by Mangune, Carreon and Manalo, nor by Filriters Guaranty Assurance Corporation, Inc., the insurer of the jeepney, with contrary evidence. Purportedly riding on the front seat with Manalo was Mercedes Lorenzo. On the left rear passenger seat were Caridad Pascua, Alejandro Morales and Zenaida Parejas. On the right rear passenger seat were Catalina Pascua, Adelaida Estomo, and Erlinda Meriales. After a brief stopover at Moncada, Tarlac for refreshment, the jeepney proceeded towards Carmen, Rosales, Pangasinan.

Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the jeepney was detached, so it was running in an unbalanced position. Manalo stepped on the brake, as a result of which, the jeepney which was then running on the eastern lane (its right of way) made a U-turn, invading and eventually stopping on the western lane of the road in such a manner that the jeepney's front faced the south (from where it came) and its rear faced the north (towards where it was going). The jeepney practically occupied and blocked the greater portion of the western lane, which is the right of way of vehicles coming from the north, among which was Bus No. 753 of petitioner Philippine Rabbit Bus Lines, Inc. (Rabbit) driven by Tomas delos Reyes. Almost at the time when the jeepney made a sudden U-turn and encroached on the western lane of the highway as claimed by Rabbit and delos Reyes, or after stopping for a couple of minutes as claimed by Mangune, Carreon and Manalo, the bus bumped from behind the right rear portion of the jeepney. As a result of the collision, three passengers of the jeepney (Catalina Pascua, Erlinda Meriales and Adelaida Estomo) died while the other jeepney passengers sustained physical injuries. What could have been a festive Christmas turned out to be tragic.

The causes of the death of the three jeepney passengers were as follows (p. 101, Record on Appeal):

The deceased Catalina Pascua suffered the following injuries, to wit: fracture of the left parietal and temporal regions of the skull; fracture of the left mandible; fracture of the right humenous; compound fracture of the left radious and ullma middle third and lower third; fracture of the upper third

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ASSIGNMENT NO .3

of the right tibia and fillnea; avulsion of the head, left internal; and multiple abrasions. The cause of her death was shock, secondary to fracture and multiple hemorrhage. The fractures were produced as a result of the hitting of the victim by a strong force. The abrasions could be produced when a person falls from a moving vehicles (sic) and rubs parts of her body against a cement road pavement. . . .

Erlinda Mariles (sic) sustained external lesions such as contusion on the left parietal region of the skull; hematoma on the right upper lid; and abrasions (sic) on the left knee. Her internal lesions were: hematoma on the left thorax; multiple lacerations of the left lower lobe of the lungs; contusions on the left lower lobe of the lungs; and simple fractures of the 2nd, 3rd, 4th, 5th, 6th, 7th, and 8th ribs, left. The forcible impact of the jeep caused the above injuries which resulted in her death. . . .

The cause of death of Erlinda or Florida Estomo (also called as per autopsy of Dr. Panlasiqui was due to shock due to internal hemorrhage, ruptured spleen and trauma. . . .

Caridad Pascua suffered physical injuries as follows (p. 101, Record on Appeal):

. . . lacerated wound on the forehead and occipital region, hematoma on the forehead, multiple abrasions on the forearm, right upper arm, back and right leg. . . .

The police investigators of Tacpal and policemen of San Manuel, Tarlac, Tarlac, upon arrival at the scene of the mishap, prepared a sketch (common exhibit "K" for private respondents "19" for Rabbit) showing the relative positions of the two vehicles as well as the alleged point of impact (p. 100, Record on Appeal):

. . . The point of collision was a cement pave-portion of the Highway, about six (6) meters wide, with narrow shoulders with grasses beyond which are canals on both sides. The road was straight and points 200 meters north and south of the point of collision are visible and unobstructed. Purportedly, the

point of impact or collision (Exh. "K-4", Pascua on the sketch Exh. "K"-Pascua) was on the western lane of the highway about 3 feet (or one yard) from the center line as shown by the bedris (sic), dirt and soil (obviously from the undercarriage of both vehicles) as well as paint, marron (sic) from the Rabbit bus and greenish from the jeepney. The point of impact encircled and marked with the letter "X" in Exh. "K"-4 Pascua, had a diameter of two meters, the center of which was about two meters from the western edge of cement pavement of the roadway. Pictures taken by witness Bisquera in the course of the investigation showed the relative positions of the point of impact and center line (Exh. "P"-Pascua) the back of the Rabbit bus (Exh. "P"-1-Pascua"), the lifeless body of Catalina Pascua (Exh. "P-2 Pascua"), and the damaged front part of the Rabbit bus (Exh. "P-3 Pascua"). No skid marks of the Rabbit bus was found in the vicinity of the collision, before or after the point of impact. On the other hand, there was a skid mark about 45 meters long purportedly of the jeepney from the eastern shoulder of the road south of, and extending up to the point of impact.

At the time and in the vicinity of the accident, there were no vehicles following the jeepney, neither were there oncoming vehicles except the bus. The weather condition of that day was fair.

After conducting the investigation, the police filed with the Municipal Court of San Manuel, Tarlac, a criminal complaint against the two drivers for Multiple Homicide. At the preliminary investigation, a probable cause was found with respect to the case of Manalo, thus, his case was elevated to the Court of First Instance. However, finding no sufficiency of evidence as regards the case of delos Reyes, the Court dismissed it. Manalo was convicted and sentenced to suffer imprisonment. Not having appealed, he served his sentence.

Complaints for recovery of damages were then filed before the Court of First Instance of Pangasinan. In Civil Case No. 1136, spouses Casiano Pascua and Juana Valdez sued as heirs of Catalina Pascua while Caridad Pascua sued in her behalf. In Civil Case No. 1139, spouses Manuel Millares and Fidencia Arcica sued as heirs of Erlinda Meriales. In Civil Case No. 1140, spouses Mariano Estomo and Dionisia Sarmiento also sued as heirs of Adelaida Estomo.

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In all three cases, spouses Mangune and Carreon, Manalo, Rabbit and delos Reyes were all impleaded as defendants. Plaintiffs anchored their suits against spouses Mangune and Carreon and Manalo on their contractual liability. As against Rabbit and delos Reyes, plaintiffs based their suits on their culpability for a quasi-delict. Filriters Guaranty Assurance Corporation, Inc. was also impleaded as additional defendant in Civil Case No. 1136 only.

For the death of Catalina Pascua, plaintiffs in Civil Case No. 1136 sought to collect the aggregate amount of P70,060.00 in damages, itemized as follows: P500.00 for burial expenses; P12,000.00 for loss of wages for 24 years; P10,000.00 for exemplary damages; P10,000.00 for moral damages; and P3,000.00 for attorney's fees. In the same case, plaintiff Caridad Pascua claimed P550.00 for medical expenses; P240.00 for loss of wages for two months; P2,000.00 for disfigurement of her face; P3,000.00 for physical pain and suffering; P2,500.00 as exemplary damages and P2,000.00 for attorney's fees and expenses of litigation.

In Civil Case No. 1139, plaintiffs demanded P500.00 for burial expenses; P6,000.00 for the death of Erlinda, P63,000.00 for loss of income; P10,000.00 for moral damages and P3,000.00 for attorney's fees or total of P80,000.00.

In Civil Case No. 1140, plaintiffs claimed P500.00 for burial expenses; P6,000.00 for the death of Adelaide, P56,160.00 for loss of her income or earning capacity; P10,000.00 for moral damages; and P3,000.00 for attorney's fees.

Rabbit filed a cross-claim in the amount of P15,000.00 for attorney's fees and expenses of litigation. On the other hand, spouses Mangune and Carreon filed a cross-claim in the amount of P6,168.00 for the repair of the jeepney and P3,000.00 for its non-use during the period of repairs.

On December 27, 1978, the trial court rendered its decision finding Manalo negligent, the dispositive portion of which reads (pp. 113-114, Record on Appeal):

PREMISES CONSIDERED, this Court is of the opinion and so holds:

1) That defendants Isidro Mangune, Guillerma Carreon and Tranquilino Manalo thru their negligence, breached contract of carriage with their

passengers the plaintiffs' and/or their heirs, and this Court renders judgment ordering said defendants, jointly and severally, to pay the plaintiffs —

a) In Civil Case No. 1136, for the death of Catalina Pascua, to pay her heirs the amounts of P12,000.00 for indemnity for loss of her life; P41,760.00 for loss of earnings; P324.40 for actual expenses and P2,000.00 for moral damages;

b) In the same Civil Case No.1136 for the injuries of Caridad Pascua, to pay her the amounts of P240.00 for loss of wages, P328.20 for actual expenses and P500.00 for moral damages;

c) In Civil Case No.1139 for the death of Erlinda Meriales, to pay her heirs (the plaintiffs) the amount of P12,000.00 — for indemnity for loss of her life; P622.00 for actual expenses, P60,480.00 for loss of wages or income and P2,000.00 for moral damages;

d) In Civil Case No. 1140, for the death of Erlinda (also called Florida or Adelaida Estomo), to pay her heirs (the plaintiff the amount of P12,000.00 for indemnity for the loss of her life; P580.00 for actual expenses; P53,160.00 for loss of wages or income and P2,000.00 for moral damages.

2) The defendant Filriters Guaranty Insurance Co., having contracted to ensure and answer for the obligations of defendants Mangune and Carreon for damages due their passengers, this Court renders judgment against the said defendants Filriters Guaranty Insurance Co., jointly and severally with said defendants (Mangune and Carreon) to pay the plaintiffs the amount herein above adjudicated in their favor in Civil Case No. 1136 only. All the amounts awarded said plaintiff, as set forth in paragraph one (1) hereinabove;

3) On the cross claim of Phil. Rabbit Bus Lines, Inc. ordering the defendant, Isidro Mangune, Guillerma Carreon and Tranquilino Manalo, to pay jointly and severally, cross-claimant Phil. Rabbit Bus Lines, Inc., the amounts of

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ASSIGNMENT NO .3

P216.27 as actual damages to its Bus No. 753 and P2,173.60 for loss of its earning.

All of the above amount, shall bear legal interest from the filing of the complaints.

Costs are adjudged against defendants Mangune, Carreon and Manalo and Filriters Guaranty.

SO ORDERED

On appeal, the Intermediate Appellate Court reversed the above-quoted decision by finding delos Reyes negligent, the dispositive portion of which reads (pp. 55-57, Rollo):

WHEREFORE, PREMISES CONSIDERED, the lower court's decision is hereby REVERSED as to item No. 3 of the decision which reads:

3) On the cross claim of Philippine Rabbit Bus Lines, Inc. ordering the defendants Isidro Mangune, Guillerma Carreon and Tranquilino Manalo, to pay jointly and severally, the amounts of P216.27 as actual damages to its Bus No. 753 and P2,173.60 for loss of its earnings.

and another judgment is hereby rendered in favor of plaintiffs-appellants Casiana Pascua, Juan Valdez and Caridad Pascua, ordering the Philippine Rabbit Bus Lines, Inc. and its driver Tomas delos Reyes to pay the former jointly and severally damages in amounts awarded as follows:

For the death of Catalina Pascua, the parents and/or heirs are awarded

Civil Case No. 1136 —

a) Indemnity for the loss of life — P12,000.00

b) Loss of Salaries or earning capacity — 14,000.00

c) Actual damages (burial expenses) — 800.00

d) For moral damages — 10,000.00

e) Exemplary damages — 3,000.00

f) For attorney's fees — 3,000.00

—————

Total — P38,200.00 (sic)

For the physical injuries suffered by Caridad Pascua:

Civil Case No. 1136

a) Actual damages (hospitalization expenses) — P550.00

b) Moral damages (disfigurement of the

face and physical suffering — 8,000.00

c) Exemplary damages — 2,000.00

—————

Total — P10,550.00

For the death of Erlinda Arcega Meriales. the parents and/or heirs:

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Civil Case No. 1139

a) Indemnity for loss of life — P12,000.00

b) Loss of Salary or Earning Capacity — 20,000.00


d) Moral damages — 15,000.00


f) Attorney's fees — 3,000.00

—————

Total — P65,500.00

For the death of Florida Sarmiento Estomo:

Civil Case No. 1140

a) Indemnity for loss of life — P12,000.00

b) Loss of Salary or Earning capacity — 20,000.00


d) Moral damages — 3,000.00


f) Attorney's fees — 3,000.00

—————

Total — P41,500.00

With costs against the Philippine Rabbit Bus Lines, Inc.

SO ORDERED.

The motion for reconsideration was denied. Hence, the present petition.

The issue is who is liable for the death and physical injuries suffered by the passengers of the jeepney?

The trial court, in declaring that Manalo was negligent, considered the following (p. 106, Record on Appeal):

(1) That the unrebutted testimony of his passenger plaintiff Caridad Pascua that a long ways (sic) before reaching the point of collision, the Mangune jeepney was "running fast" that his passengers cautioned driver Manalo to slow down but did not heed the warning: that the right rear wheel was detached causing the jeepney to run to the eastern shoulder of the road then back to the concrete pavement; that driver Manalo applied the brakes after which the jeepney made a U-turn (half-turn) in such a manner that it inverted its direction making it face South instead of north; that the jeepney stopped on the western lane of the road on the right of way of the oncoming Phil. Rabbit Bus where it was bumped by the latter;

(2) The likewise unrebutted testimony of Police Investigator Tacpal of the San Manuel (Tarlac) Police who, upon responding to the reported collission, found the real evidence thereat indicate in his sketch (Exh. K, Pascua ), the tracks of the jeepney of defendant Mangune and Carreon

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ASSIGNMENT NO .3

running on the Eastern shoulder (outside the concrete paved road) until it returned to the concrete road at a sharp angle, crossing the Eastern lane and the (imaginary) center line and encroaching fully into the western lane where the collision took place as evidenced by the point of impact;

(3) The observation of witness Police Corporal Cacalda also of the San Manuel Police that the path of the jeepney they found on the road and indicated in the sketch (Exh. K-Pascua) was shown by skid marks which he described as "scratches on the road caused by the iron of the jeep, after its wheel was removed;"

(4) His conviction for the crime of Multiple Homicide and Multiple Serious Physical Injuries with Damage to Property thru Reckless Imprudence by the Court of First Instance of Tarlac (Exh. 24-Rabbit) upon the criminal Information by the Provincial Fiscal of Tarlac (Exh. 23-Rabbit), as a result of the collision, and his commitment to prison and service of his sentence (Exh. 25-Rabbit) upon the finality of the decision and his failure to appeal therefrom; and

(5) The application of the doctrine of res-ipsa loquitar (sic) attesting to the circumstance that the collision occured (sic) on the right of way of the Phil. Rabbit Bus.

The respondent court had a contrary opinion. Applying primarily (1) the doctrine of last clear chance, (2) the presumption that drivers who bump the rear of another vehicle guilty and the cause of the accident unless contradicted by other evidence, and (3) the substantial factor test. concluded that delos Reyes was negligent.

The misappreciation of the facts and evidence and the misapplication of the laws by the respondent court warrant a reversal of its questioned decision and resolution.

We reiterate that "[t]he principle about "the last clear" chance, would call for application in a suit between the owners and drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it

would be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of negligence." This was Our ruling in Anuran, et al. v. Buño et al., G.R. Nos. L-21353 and L-21354, May 20, 1966, 17 SCRA 224. 1

Thus, the respondent court erred in applying said doctrine.

On the presumption that drivers who bump the rear of another vehicle guilty and the cause of the accident, unless contradicted by other evidence, the respondent court said (p. 49, Rollo):

. . . the jeepney had already executed a complete turnabout and at the time of impact was already facing the western side of the road. Thus the jeepney assumed a new frontal position vis a vis, the bus, and the bus assumed a new role of defensive driving. The spirit behind the presumption of guilt on one who bumps the rear end of another vehicle is for the driver following a vehicle to be at all times prepared of a pending accident should the driver in front suddenly come to a full stop, or change its course either through change of mind of the front driver, mechanical trouble, or to avoid an accident. The rear vehicle is given the responsibility of avoiding a collision with the front vehicle for it is the rear vehicle who has full control of the situation as it is in a position to observe the vehicle in front of it.

The above discussion would have been correct were it not for the undisputed fact that the U-turn made by the jeepney was abrupt (Exhibit "K," Pascua). The jeepney, which was then traveling on the eastern shoulder, making a straight, skid mark of approximately 35 meters, crossed the eastern lane at a sharp angle, making a skid mark of approximately 15 meters from the eastern shoulder to the point of impact (Exhibit "K" Pascua). Hence, delos Reyes could not have anticipated the sudden U-turn executed by Manalo. The respondent court did not realize that the presumption was rebutted by this piece of evidence.

With regard to the substantial factor test, it was the opinion of the respondent court that (p. 52, Rollo):

. . . It is the rule under the substantial factor test that if the actor's conduct is a substantial factor in bringing about harm to another, the fact that the actor neither foresaw nor should have foreseen the extent of the harm or the

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manner in which it occurred does not prevent him from being liable (Restatement, Torts, 2d). Here, We find defendant bus running at a fast speed when the accident occurred and did not even make the slightest effort to avoid the accident, . . . . The bus driver's conduct is thus a substantial factor in bringing about harm to the passengers of the jeepney, not only because he was driving fast and did not even attempt to avoid the mishap but also because it was the bus which was the physical force which brought about the injury and death to the passengers of the jeepney.

The speed of the bus was calculated by respondent court as follows (pp. 54-55, Rollo):

According to the record of the case, the bus departed from Laoag, Ilocos Norte, at 4:00 o'clock A.M. and the accident took place at approximately around 12:30 P.M., after travelling roughly for 8 hours and 30 minutes. Deduct from this the actual stopover time of two Hours (computed from the testimony of the driver that he made three 40-minute stop-overs), We will have an actual travelling time of 6 hours and 30 minutes.

Under the circumstances, We calculate that the Laoag-Tarlac route (365 kms.) driving at an average of 56 km. per hour would take 6 hours and 30 minutes. Therefore, the average speed of the bus, give and take 10 minutes, from the point of impact on the highway with excellent visibility factor would be 80 to 90 kms. per hour, as this is the place where buses would make up for lost time in traversing busy city streets.

Still, We are not convinced. It cannot be said that the bus was travelling at a fast speed when the accident occurred because the speed of 80 to 90 kilometers per hour, assuming such calculation to be correct, is yet within the speed limit allowed in highways. We cannot even fault delos Reyes for not having avoided the collision. As aforestated, the jeepney left a skid mark of about 45 meters, measured from the time its right rear wheel was detached up to the point of collision. Delos Reyes must have noticed the perilous condition of the jeepney from the time its right rear wheel was detached or some 90 meters away, considering that the road was straight and points 200 meters north and south of the point of collision, visible and unobstructed. Delos Reyes admitted that he was running more or less 50 kilometers per hour

at the time of the accident. Using this speed, delos Reyes covered the distance of 45 meters in 3.24 seconds. If We adopt the speed of 80 kilometers per hour, delos Reyes would have covered that distance in only 2.025 seconds. Verily, he had little time to react to the situation. To require delos Reyes to avoid the collision is to ask too much from him. Aside from the time element involved, there were no options available to him. As the trial court remarked (pp. 107-108, Record on Appeal):

. . . They (plaintiffs) tried to impress this Court that defendant de los Reyes, could have taken either of two options: (1) to swerve to its right (western shoulder) or (2) to swerve to its left (eastern lane), and thus steer clear of the Mangune jeepney. This Court does not so believe, considering the existing exigencies of space and time.

As to the first option, Phil. Rabbit's evidence is convincing and unrebutted that the Western shoulder of the road was narrow and had tall grasses which would indicate that it was not passable. Even plaintiffs own evidence, the pictures (Exhs. P and P-2, Pascua) are mute confirmation of such fact. Indeed, it can be noticed in the picture (Exh. P-2, Pascua) after the Rabbit bus came to a full stop, it was tilted to right front side, its front wheels resting most probably on a canal on a much lower elevation that of the shoulder or paved road. It too shows that all of the wheels of the Rabbit bus were clear of the roadway except the outer left rear wheel. These observation appearing in said picture (Exh P-2, Pascua) clearly shows coupled with the finding the Rabbit bus came to a full stop only five meters from the point of impact (see sketch, Exh. K-Pascua) clearly show that driver de los Reyes veered his Rabbit bus to the right attempt to avoid hitting the Mangune's jeepney. That it was not successful in fully clearing the Mangune jeepney as its (Rabbit's) left front hit said jeepney (see picture Exh. 10-A-Rabbit) must have been due to limitations of space and time.

Plaintiffs alternatively claim that defendant delos Reyes of the Rabbit bus could also have swerved to its left (eastern lane) to avoid bumping the Mangune jeepney which was then on the western lane. Such a claim is premised on the hypothesis (sic) that the eastern lane was then empty. This claim would appear to be good copy of it were based alone on the sketch

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made after the collision. Nonetheless, it loses force it one were to consider the time element involved, for moments before that, the Mangune jeepney was crossing that very eastern lane at a sharp angle. Under such a situation then, for driver delos Reyes to swerve to the eastern lane, he would run the greater risk of running smack in the Mangune jeepney either head on or broadside.

After a minute scrutiny of the factual matters and duly proven evidence, We find that the proximate cause of the accident was the negligence of Manalo and spouses Mangune and Carreon. They all failed to exercise the precautions that are needed precisely pro hac vice.

In culpa contractual, the moment a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently, and this disputable presumption may only be overcome by evidence that he had observed extra-ordinary diligence as prescribed in Articles 1733, 1755 and 1756 of the New Civil Code 2 or that the death or injury of the passenger was due to a fortuitous event 3 (Lasam v. Smith, Jr., 45 Phil. 657).

The negligence of Manalo was proven during the trial by the unrebutted testimonies of Caridad Pascua, Police Investigator Tacpal, Police Corporal Cacalda, his (Manalo's) conviction for the crime of Multiple Homicide and Multiple Serious Injuries with Damage to Property thru Reckless Imprudence, and the application of the doctrine of res ipsa loquitur supra. The negligence of spouses Mangune and Carreon was likewise proven during the trial (p. 110, Record on Appeal):

To escape liability, defendants Mangune and Carreon offered to show thru their witness Natalio Navarro, an alleged mechanic, that he periodically checks and maintains the jeepney of said defendants, the last on Dec. 23, the day before the collision, which included the tightening of the bolts. This notwithstanding the right rear wheel of the vehicle was detached while in transit. As to the cause thereof no evidence was offered. Said defendant did not even attempt to explain, much less establish, it to be one caused by a caso fortuito. . . .

In any event, "[i]n an action for damages against the carrier for his failure to safely carry his passenger to his destination, an accident caused either by defects in the automobile or through the negligence of its driver, is not a caso fortuito which would avoid the carriers liability for damages (Son v. Cebu Autobus Company, 94 Phil. 892 citing Lasam, et al. v. Smith, Jr., 45 Phil. 657; Necesito, etc. v. Paras, et al., 104 Phil. 75).

The trial court was therefore right in finding that Manalo and spouses Mangune and Carreon 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 the 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 and the passenger, and in the event of contractual liability, 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). In other words, the carrier can neither shift his liability on the contract to his driver nor share it with him, for his driver's negligence is his. 4 Secondly, if We make the driver jointly and severally liable with the carrier, that would make the carrier's liability personal instead of merely vicarious and consequently, entitled to recover only the share which corresponds to the driver, 5 contradictory to the explicit provision of Article 2181 of the New Civil Code. 6

We affirm the amount of damages adjudged by the trial court, except with respect to the indemnity for loss of life. Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for the death of a passenger is at least three thousand pesos (P3,000.00). The prevailing jurisprudence has increased the amount of P3,000.00 to P30,000.00 (see Heirs of Amparo delos Santos, et al. v. Honorable Court of Appeals, et al., G.R. No. 51165, June 21, 1990 citing De Lima v. Laguna Tayabas Co., G.R. Nos. L-35697-99, April 15, 1988, 160 SCRA 70).

ACCORDINGLY, the petition is hereby GRANTED. The decision of the Intermediate Appellate Court dated July 29, 1983 and its resolution dated November 28, 1983 are SET ASIDE. The decision of the Court of First Instance dated December 27, 1978 is REINSTATED MODIFICATION that only Isidro Mangune, Guillerma Carreon and Filriters Guaranty Assurance Corporation, Inc. are liable to the victims or their heirs and that the amount of indemnity for loss of life is increased to thirty thousand pesos (P30,000.00).

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SO ORDERED.

Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino JJ., concur.

G.R. No. L-30309 November 25, 1983

CLEMENTE BRIÑAS, petitioner, vs.THE PEOPLE OF THE PHILIPPINES and HONORABLE COURT OF APPEALS, respondents.

Mariano R. Abad for petitioner.

The Solicitor General for respondents.

GUTIERREZ, JR., J.:

This is a petition to review the decision of respondent Court of Appeals, now Intermediate Appellate Court, affirming the decision of the Court of First Instance of Quezon, Ninth Judicial District, Branch 1, which found the accused Clemente Briñas guilty of the crime of DOUBLE HOMICIDE THRU RECKLESS IMPRUDENCE prior the deaths of Martina Bool and Emelita Gesmundo.

The information charged the accused-appellant. and others as follows:

That on or about the 6th day of January, 1957, in the Municipality of Tiaong, Province of Quezon, Philippines, and within the jurisdiction of this Hon. Court, the said accused Victor Milan, Clemente Briñas and Hermogenes Buencamino, being then persons in charge of passenger Train No. 522-6 of the Manila Railroad Company, then running from Tagkawayan to San Pablo City, as engine driver, conductor and assistant conductor, respectively, wilfully and unlawfully drove and operated the same in a negligent, careless and imprudent manner,

without due regard to existing laws, regulations and ordinances, that although there were passengers on board the passenger coach, they failed to provide lamps or lights therein, and failed to take the necessary precautions for the safety of passengers and to prevent accident to persons and damage to property, causing by such negligence, carelessness and imprudence, that when said passenger Train No. 522-6 was passing the railroad tracks in the Municipality of Tiaong, Quezon, two of its passengers, Martina Bool, an old woman, and Emelita Gesmundo, a child about three years of age, fell from the passenger coach of the said train, as a result of which, they were over run, causing their instantaneous death. "

The facts established by the prosecution and accepted by the respondent court as basis for the decision are summarized as follows:

The evidence of the prosecution tends to show that in the afternoon of January 6, 1957, Juanito Gesmundo bought a train ticket at the railroad station in Tagkawayan, Quezon for his 55-year old mother Martina Bool and his 3-year old daughter Emelita Gesmundo, who were bound for Barrio Lusacan, Tiaong, same province. At about 2:00 p.m., Train No. 522 left Tagkawayan with the old woman and her granddaughter among the passengers. At Hondagua the train's complement were relieved, with Victor Millan taking over as engineman, Clemente Briñas as conductor, and Hermogenes Buencamino as assistant conductor. Upon approaching Barrio Lagalag in Tiaong at about 8:00 p.m. of that same night, the train slowed down and the conductor shouted 'Lusacan', 'Lusacan'. Thereupon, the old woman walked towards the left front door facing the direction of Tiaong, carrying the child with one hand and holding her baggage with the other. When Martina and Emelita were near the door, the train suddenly picked up speed. As a result the old woman and the child stumbled and they were seen no more. It took three minutes more before the train stopped at the next barrio, Lusacan, and the victims were not among the passengers who disembarked thereat .têñ.£îhqwâ£

Next morning, the Tiaong police received a report that two corpses were found along the railroad tracks at Barrio Lagalag. Repairing to the scene to investigate, they found the lifeless body of a female child, about 2 feet from the railroad tracks, sprawled to the ground with her belly down, the hand resting on the forehead, and with the back portion of the head crushed. The investigators also found the corpse of an old woman about 2 feet away from the railroad tracks with the head and both legs severed and the left hand missing. The head was located farther west between the rails. An arm was

9


ASSIGNMENT NO .3

found midway from the body of the child to the body of the old woman. Blood, pieces of scattered brain and pieces of clothes were at the scene. Later, the bodies were Identified as those of Martina Bool and Emelita Gesmundo. Among the personal effects found on Martina was a train ticket (Exhibits "B").

On January 7, 1957, the bodies of the deceased were autopsied by Dr. Pastor Huertas, the Municipal Health Officer of Tiaong. Dr. Huertas testified on the cause of death of the victims as follows: têñ.£îhqwâ£

FISCAL YNGENTE:

Q What could have caused the death of those women?

A Shock.

Q What could have caused that shock?

A Traumatic injury.

Q What could have caused traumatic injury?

A The running over by the wheel of the train.

Q With those injuries, has a person a chance to survive?

A No chance to survive.

Q What would you say death would come?

A Instantaneous.

Q How about the girl, the young girl about four years old, what could have caused the death?

A Shock too.

Q What could have caused the shock?

A Compound fracture of the skull and going out of the brain.

Q What could have caused the fracture of the skull and the going out of the brain?

A That is the impact against a steel object. (TSN., pp. 81-82, July 1, 1959)

The Court of First Instance of Quezon convicted defendant-appellant Clemente Briñas for double homicide thru reckless imprudence but acquitted Hermogenes Buencamino and Victor Millan The dispositive portion of the decision reads: têñ.£îhqwâ£

WHEREFORE, the court finds the defendant Clemente Briñas guilty beyond doubt of the crime of double homicide thru reckless imprudence, defined and punished under Article 305 in connection with Article 249 of the Revised Penal Code, and sentences him to suffer six (6) months and one (1) day of prision correccional to indemnify the heirs of the deceased Martina Bool and Emelita Gesmundo in the amounts of P6,000 and P3,000, respectively, with subsidiary imprisonment in case of insolvency not to exceed one-third of the principal penalty, and to pay the costs.

For lack of sufficient evidence against the defendant Hermogenes Buencamino and on the ground of reasonable doubt in the case of defendant Victor Millan the court hereby acquits them of the crime charged in the information and their bail bonds declared cancelled.

10


ASSIGNMENT NO .3

As to the responsibility of the Manila Railroad Company in this case, this will be the subject of court determination in another proceeding.

On appeal, the respondent Court of Appeals affirmed the judgment of the lower court.

During the pendency of the criminal prosecution in the Court of First Instance of Quezon, the heirs of the deceased victims filed with the same court, a separate civil action for damages against the Manila Railroad Company entitled "Civil Case No. 5978, Manaleyo Gesmundo, et al., v. Manila Railroad Company". The separate civil action was filed for the recovery of P30,350.00 from the Manila Railroad Company as damages resulting from the accident.

The accused-appellant alleges that the Court of Appeals made the following errors in its decision:

I têñ.£îhqwâ£

THE HONORABLE COURT OF APPEALS ERRED IN CONVICTING PETITIONER-APPELLANT UNDER THE FACTS AS FOUND BY SAID COURT; and

II têñ.£îhqwâ£

THE HONORABLE COURT OF APPEALS ERRED IN INCLUDING THE PAYMENT OF DEATH INDEMNITY BY THE PETITIONER- APPELLANT, WITH SUBSIDIARY IMPRISONMENT IN CASE OF INSOLVENCY, AFTER THE HEIRS OF THE DECEASED HAVE ALREADY COMMENCED A SEPARATE CIVIL ACTION FOR DAMAGES AGAINST THE RAILROAD COMPANY ARISING FROM THE SAME MISHAP.

We see no error in the factual findings of the respondent court and in the conclusion drawn from those findings.

It is undisputed that the victims were on board the second coach where the petitioner-appellant was assigned as conductor and that when the train slackened its speed and the conductor shouted "Lusacan, Lusacan", they stood up and proceeded to the nearest exit. It is also undisputed that the train unexpectedly resumed its regular speed and as a result "the old woman and the child stumbled and they were seen no more.

In finding petitioner-appellant negligent, respondent Court têñ.£îhqwâ£

xxx xxx xxx

The appellant's announcement was premature and erroneous, for it took a full three minutes more before the next barrio of Lusacan was reached. In making the erroneous and premature announcement, appellant was negligent. He ought to have known that train passengers invariably prepare to alight upon notice from the conductor that the destination was reached and that the train was about to stop. Upon the facts, it was the appellant's negligent act which led the victims to the door. Said acts virtually exposed the victims to peril, for had not the appellant mistakenly made the announcement, the victims would be safely ensconced in their seats when the train jerked while picking up speed, Although it might be argued that the negligent act of the appellant was not the immediate cause of, or the cause nearest in time to, the injury, for the train jerked before the victims stumbled, yet in legal contemplation appellant's negligent act was the proximate cause of the injury. As this Court held in Tucker v. Milan, CA G.R. No. 7059-R, June 3, 1953: 'The proximate cause of the injury is not necessarily the immediate cause of, or the cause nearest in time to, the injury. It is only when the causes are independent of each other that the nearest is to be charged with the disaster. So long as there is a natural, direct and continuous sequence between the negligent act the injury (sic) that it can reasonably be said that but for the act the injury could not have occurred, such negligent act is the proximate cause of the injury, and whoever is responsible therefore is liable for damages resulting therefrom. One who negligently creates a dangerous condition cannot escape liability for the natural and probable consequences thereof, although the act of a

11


ASSIGNMENT NO .3

third person, or an act of God for which he is not responsible intervenes to precipitate the loss.

xxx xxx xxx

It is a matter of common knowledge and experience about common carriers like trains and buses that before reaching a station or flagstop they slow down and the conductor announces the name of the place. It is also a matter of common experience that as the train or bus slackens its speed, some passengers usually stand and proceed to the nearest exit, ready to disembark as the train or bus comes to a full stop. This is especially true of a train because passengers feel that if the train resumes its run before they are able to disembark, there is no way to stop it as a bus may be stopped.

It was negligence on the conductor's part to announce the next flag stop when said stop was still a full three minutes ahead. As the respondent Court of Appeals correctly observed, "the appellant's announcement was premature and erroneous.

That the announcement was premature and erroneous is shown by the fact that immediately after the train slowed down, it unexpectedly accelerated to full speed. Petitioner-appellant failed to show any reason why the train suddenly resumed its regular speed. The announcement was made while the train was still in Barrio Lagalag.

The proximate cause of the death of the victims was the premature and erroneous announcement of petitioner' appelant Briñas. This announcement prompted the victims to stand and proceed to the nearest exit. Without said announcement, the victims would have been safely seated in their respective seats when the train jerked as it picked up speed. The connection between the premature and erroneous announcement of petitioner-appellant and the deaths of the victims is direct and natural, unbroken by any intervening efficient causes.

Petitioner-appellant also argues that it was negligence per se for Martina Bool to go to the door of the coach while the train was still in motion and that it was this negligence that was the proximate cause of their deaths.

We have carefully examined the records and we agree with the respondent court that the negligence of petitioner-appellant in prematurely and erroneously announcing the next flag stop was the proximate cause of the deaths of Martina Bool and Emelita Gesmundo. Any negligence of the victims was at most contributory and does not exculpate the accused from criminal liability.

With respect to the second assignment of error, the petitioner argues that after the heirs of Martina Bool and Emelita Gesmundo had actually commenced the separate civil action for damages in the same trial court during the pendency of the criminal action, the said court had no more power to include any civil liability in its judgment of conviction.

The source of the obligation sought to be enforced in Civil Case No. 5978 is culpa contractual, not an act or omission punishable by law. We also note from the appellant's arguments and from the title of the civil case that the party defendant is the Manila Railroad Company and not petitioner-appellant Briñas Culpa contractual and an act or omission punishable by law are two distinct sources of obligation.

The petitioner-appellant argues that since the information did not allege the existence of any kind of damages whatsoever coupled by the fact that no private prosecutors appeared and the prosecution witnesses were not interrogated on the issue of damages, the trial court erred in awarding death indemnity in its judgment of conviction.

A perusal of the records clearly shows that the complainants in the criminal action for double homicide thru reckless imprudence did not only reserve their right to file an independent civil action but in fact filed a separate civil action against the Manila Railroad Company.

The trial court acted within its jurisdiction when, despite the filing with it of the separate civil action against the Manila Railroad Company, it still awarded death indemnity in the judgment of conviction against the petitioner-appellant.

It is well-settled that when death occurs as a result of the commission of a crime, the following items of damages may be recovered: (1) an indemnity for the death of the victim; (2) an indemnity for loss of earning capacity of the deceased; (3) moral damages; (4)

12


ASSIGNMENT NO .3

exemplary damages; (5) attorney's fees and expenses of litigation, and (6) interest in proper cases.

The indemnity for loss of earning capacity, moral damages, exemplary damages, attorney's fees, and interests are recoverable separately from and in addition to the fixed slim of P12,000.00 corresponding to the indemnity for the sole fact of death. This indemnity arising from the fact of death due to a crime is fixed whereas the others are still subject to the determination of the court based on the evidence presented. The fact that the witnesses were not interrogated on the issue of damages is of no moment because the death indemnity fixed for death is separate and distinct from the other forms of indemnity for damages.

WHEREFORE, the judgment appealed from is modified in that the award for death indemnity is increased to P12,000.00 for the death of Martina Bool instead of P6,000.00 and P12,000.00 for the death of Emelita Gesmundo instead of P3,000.00, but deleting the subsidiary imprisonment in case of insolvency imposed by the lower court. The judgment is AFFIRMED in all other respects.

SO ORDERED.1äwphï1.ñët

Teehankee (Chairman), Melencio-Herrera; Plana and Relova, JJ., concur.

EN BANC

G.R. No. L-20916-17 December 23, 1964

PANGASINAN TRANSPORTATION CO., INC., (PANTRANCO), petitioner, vs.HON. GREGORIO A. LEGASPI, Judge of the Court of First Instance of Pangasinan, PUA PIAN, ROLLY PUA, AIDA PUA, GLORIA PUA, CHUA TECK and CRISPINA BREGUERA respondents.

Chuidian Law Offices for petitioner.Rodolfo B. Aquino for respondents.

REGALA, J.:

The issue is whether, in an action for damages for breach of contract of carriage, proof of the financial standing of the defendant is necessary so as to justify a request for the production of the financial statements relating to the business of the defendant under Rule 27 of the Revised Rules of Court.

Civil Case No. A-247 and Civil Case No. A-248 were filed against the Pangasinan Transportation Co., Inc. (Pantranco) in the Court of First Instance of Pangasinan, for the recovery of damages for the death of Aurora Breguera and Welly Pua, wife and one-year old child, respectively, of respondent Pua Pian, and for the death of Memia Chua, 18-year old daughter of respondents Chua Teck and Crispina Breguera.

In separate complaints, respondents Pua Pian and his children Rolly, Aida and Gloria, as plaintiffs in Civil Case No. A-247, and Chua Teck and Crispina Breguera as plaintiffs in Civil Case No. A-248, alleged that Aurora Breguera, Welly Pua and Memia Chua boarded at Dasol, Pangasinan, Pantranco Bus No. 334, bound for the town of Alaminos of the same province. They averred that before reaching Alaminos and just after rounding a blind curve, the bus driver, Arsenio Osorio, "by reason of his gross negligence, serious imprudence and wanton recklessness, collided with another oncoming passenger truck bus No. 306, likewise owned and operated by defendant (Pantranco)," causing Bus No. 334 to turn turtle several times and that as a result of the accident, Aurora Breguera and the child Welly Pua suffered injuries from which they died shortly after the accident, while Memia Chua died instantaneously.

Respondents prayed for various amounts of damages and alleged in their complaints "that defendant (Pantranco) is financially well-established having enormous assets and a huge income."

Answering the complaint, Pantranco contended that the accident was purely a force majeure beyond its control. It also alleged that "it is an established concern."

The issues having been joined, the cases were tried jointly. During the trial, respondents asked the court to order the office manager of Pantranco to produce in court on December 5, 6 and 7, 1962, between 8 a.m. and 4 p.m., the company's general ledgers and financial statements

13


ASSIGNMENT NO .3

for the years 1959, 1960 and 1961, for respondents to inspect, examine or photograph. The motion was opposed by Pantranco on the ground that its financial capacity is not in issue.

In an order dated January 18, 1963, the court directed Pantranco to make the documents available in its office on January 29 and 30, 1963, without the need of producing them in court.

Pantranco asked for a reconsideration, but its motion was denied by the court in an order dated February 7, 1963, the court stating:

The court has no quarrel with counsel for the defendant that, under the above-quoted section 1, Rule 21 (now Rule 27) of the Rules of Court, and decided cases, only documents, papers, books, letters, photographs, objects of tangible things "not privileged which constitute or contain evidence material to any matter involved in the action" and which are in the possession of the party concerned may, upon motion of any party, be ordered produced, inspected, copied or photographed. The Court, however, is of the opinion that while the financial capacity of the defendant in these cases may not be necessary in the determination of the bare fact of whether or not it is liable for the death of three victims, but that such financial capacity becomes relevant and necessary in determining a reasonable equitable amount of compensation or damages that may be awarded to the heirs of the victims should the court be convinced that the defendant company is liable thereof. ... .

And so Pantranco filed this petition for certiorari, charging grave abuse of discretion on the part of the court.

We gave due course to the petition and upon the filing of a bond for P1,000 issued a writ of preliminary injunction.

Under Section 1 of Rule 27 of the Revised Rules of Court., a party may ask for the production of documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, "which constitute or contain evidence material to any matter involved in the action and which are in his possession, custody or control."

The objection here is that the documents, consisting of general ledgers and financial statements of the company, are immaterial and irrelevant to the issue of negligence and that to allow their production would be to sanction inquisition or "fishing expedition" into the financial records of the company.

We do not agree with petitioner. To be sure, Rule 27 permits "fishing" for evidence (2 Moran, Comments on the Rules of Court 109 [1963]), the only limitation being that the documents, papers, etc. sought to be produced are not privileged, that they are in the possession of the party ordered to produce them and that they are material to any matter involved in the action.

This brings us to the main issue, namely, the materiality of the evidence of defendant's financial standing in an action for breach of contract of carriage. Article 2206 of the Civil Code states:

The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. ...

Article 2206 applies in case of death caused by the breach of contract by the common carrier (Art. 1764). It fixes the minimum indemnity for death at P3,000, which the courts may increase according to the circumstances. It is in fixing a greater amount of indemnity that courts may consider the financial capacity of the common carrier, along with such other factors as (1) the life expectancy of the deceased or of the beneficiary, whichever is shorter, (2) pecuniary loss to the plaintiff or beneficiary, (3) loss of support, (4) loss of service, (5) loss of society, (6) mental suffering of beneficiaries, and (7) medical and funeral expenses. (See Alcantara v. Surro and Manila Electric Co., 93 Phil. 472 and Art. 2206, Civil Code.)

Indeed, under Commonwealth Act No. 284, it is provided that —

SECTION 1. — The civil liability or the death of a person shall be fixed by the competent court at a reasonable sum, upon consideration of the pecuniary situation of the party liable and other circumstances, but it shall in no case be less than two thousand pesos. (Emphasis ours)

14


ASSIGNMENT NO .3

Of course the minimum amount of P2,000 as fixed in this law (Commonwealth Act No. 284) must now be deemed increased to P3,000, but the point is that in fixing a greater amount of indemnity, the pecuniary situation of the party liable may well be considered along with other elements (See Alcantara v. Surro and Manila Electric Co., 93 Phil. 472). This point should dispose of petitioner's contention that the liability of the common carrier cannot be made to depend on its pecuniary capacity. Of course, independently of its financial capacity, the common carrier, if liable, must be made to pay the minimum amount. But if its financial ability is such that it can pay a greater amount of indemnity as demanded by the circumstances of the case, then certainly it should be made to pay more than P3,000. Its financial standing in such a case is material.

Parenthetically, it may be added that a study of the revised Civil Code shows that a new title on damages (Title XVIII, Articles 2195-2235) has been added. This evidences a great expansion of the classes of damages under the revised Civil Code in line with the modern trend on social legislation. These new provisions embody some principles of the American law on the subject (See Vicente G. Sinco, Civil Code of the Philippine pp. 882-886).

This is what respondents, as plaintiffs in the civil cases below, have sought to do. As earlier stated, they sought the production of the ledgers and financial statements of Pantranco in connection with their allegation that "defendant (Pantranco) is financially well-established having enormous assets and a huge income." That is why in the prayer of their complaints, they asked the court, not for the minimum indemnity of P3,000, but for such indemnity for the death of Aurora Breguera, Welly Pua and Memia Chua, as the Court may find proper and reasonable." Their request therefore was for a good cause and the respondent Judge committed no abuse of discretion in granting it.

WHEREFORE, the petition for certiorari is dismissed and the writ of preliminary injunction is dissolved without pronouncement as to costs.

Bengzon, C.J., Paredes, Dizon, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.

Bautista Angelo and Concepcion, JJ., concur in the result.

Barrera, J., took no part.

Separate Opinions

REYES J.B.L., J., concurring and dissenting:

I concur in the denial of the writ but solely on the basis that the original complaint for damages (Answer, Annex "I") expressly pleaded (paragraph V) "gross negligence, serious imprudence and wanton recklessness" of the driver of the petitioner company as cause of the mishap that occasioned the death of passenger Aurora Breguera and the serious injuries of passenger Welly Pua. The circumstances thus averred, if duly proved, would justify the award of damages "by way of example or correction, for the public good, in addition to the moral ... or compensatory damages" (Art. 2229 in connection with Art. 2232). Since such additional corrective damages are at the discretion of the Court (Art. 2233), the latter may properly inquire in this case into the pecuniary ability of the defendant in order to determine what amount should be added to the normal indemnity, to serve as effective deterrent to induce defendant to exert more diligence and care in the future. A small award of corrective damages would be ineffective for the purpose if the defendant possessed ample means; or it might prove excessive if the defendant were poor.

But I must dissent in so far as the decision implies that inquiries into the resources of a defendant would be permissible whenever damages, pecuniary or moral, are sought . We cannot lose sight of the fact that the purpose of moral damages is essentially indemnity or reparation, not punishment or correction. Moral damages are emphatically not intended to enrich a complainant at the expense of a defendant; they are awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendant's culpable action. As stated by Enoch Aguiar (Hechos y Actos Juridicos, Tomo IV, Vol. 1, p. 247), "predomina en el resarcimiento del daño moral un caracter eminentemente reparativo, en cuanto el dinero con el cual se opera puede procurar al lesionado satisfacciones morales o' materiales que atenuen o' hagan desaparecer las molestias que lo constituyeron." In other words, the award of moral damages is aimed at a restoration, within the limits of the possible, of the spiritual status quo ante: and, therefore, it must be proportionate to the suffering inflicted. The intensity of the pain experienced by the relatives of the victim is proportionate to the intensity of the affection for

15


ASSIGNMENT NO .3

him and bears no relation whatever with the wealth or means of the offender. The death caused by a beggar is felt by the parents of the victim as intensely as that caused by the scion of a wealthy family.

To recapitulate: compensatory and moral damages can only be awarded to indemnify the victim or his relatives for the prejudice suffered, and the financial standing of the person responsible is irrelevant to their evaluation. The omission in the Civil Code of any reference to the defendant's pecuniary ability, as was heretofore done by Commonwealth Act No. 284, confirms this thesis. The ruling in Alcantara vs. Surro, 93 Phil. 472, is predicated precisely on that Commonwealth Act, and not on the Civil Code now in force, and is inapplicable. In so far as the award exceeds indemnification, it trenches on the sphere of corrective damages that are justified by other special circumstances set out by the Civil Code.

I am constrained to insist on these principles, because the cases brought to this Court show a lamentable disregard of the carefully structured system of damages of our Civil Code. A prime illustration is the complaint that initiated this case in the court below, where nominal and compensatory damages are both prayed for; yet a modicum of common sense ought to show that damages cannot be both nominal and actual at the same time (Civil Code, Article 2221).

Concepcion, J., concurs.

G.R. No. L-21438 September 28, 1966

AIR FRANCE, petitioner, vs.RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.

Lichauco, Picazo and Agcaoili for petitioner.Bengzon Villegas and Zarraga for respondent R. Carrascoso.

SANCHEZ, J.:

The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20 representing the difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome, these various amounts with interest at the legal rate, from the date of the filing of the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of suit.

On appeal,2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from P393.20 to P383.10, and voted to affirm the appealed decision "in all other respects", with costs against petitioner.

The case is now before us for review on certiorari.

The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:

Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on March 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines, Inc., issued to plaintiff a "first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok, plaintiff travelled in "first class", but at Bangkok, the Manager of the defendant airline forced plaintiff to vacate the "first class" seat that he was occupying because, in the words of the witness Ernesto G. Cuento, there was a "white man", who, the Manager alleged, had a "better right" to the seat. When asked to vacate his "first class" seat, the plaintiff, as was to be expected, refused, and told defendant's Manager that his seat would be taken over his dead body; a commotion ensued, and, according to said Ernesto G. Cuento, "many of the Filipino passengers got nervous in the tourist class; when they found out that Mr. Carrascoso was having a hot discussion with the white man [manager], they came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the white man" (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff reluctantly gave his "first class" seat in the plane.3

16


ASSIGNMENT NO .3

1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent Court of Appeals. Petitioner charges that respondent court failed to make complete findings of fact on all the issues properly laid before it. We are asked to consider facts favorable to petitioner, and then, to overturn the appellate court's decision.

Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record without expressing therein clearly and distinctly the facts and the law on which it is based". 5 This is echoed in the statutory demand that a judgment determining the merits of the case shall state "clearly and distinctly the facts and the law on which it is based";

6 and that "Every decision of the Court of Appeals shall contain complete findings of fact on all issues properly raised before it". 7

A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law, however, solely insists that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn. 9 A court of justice is not hidebound to write in its decision every bit and piece of evidence 10 presented by one party and the other upon the issues raised. Neither is it to be burdened with the obligation "to specify in the sentence the facts" which a party "considered as proved". 11 This is but a part of the mental process from which the Court draws the essential ultimate facts. A decision is not to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court of Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom "any specific finding of facts with respect to the evidence for the defense". Because as this Court well observed, "There is no law that so requires". 12 Indeed, "the mere failure to specify (in the decision) the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the same contrary to the requirements of the provisions of law and the Constitution". It is in this setting that in Manigque, it was held that the mere fact that the findings "were based entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant's side in the controversy as shown by his own testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the testimony of each witness for, or each item of evidence presented by, the defeated party, it does not mean that the court has overlooked such testimony or such item of evidence. 14 At any rate, the legal presumptions are that official duty has been regularly performed, and that all the matters within an issue in a case were laid before the court and passed upon by it. 15

Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written statement of the ultimate facts as found by the court ... and essential to support the decision and judgment rendered thereon". 16 They consist of the court's "conclusions" with respect to the determinative facts in issue". 17 A question of law, upon the other hand, has been declared as "one which does not call for an examination of the probative value of the evidence presented by the parties." 18

2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court of Appeals. 19 That judgment is conclusive as to the facts. It is not appropriately the business of this Court to alter the facts or to review the questions of fact. 20

With these guideposts, we now face the problem of whether the findings of fact of the Court of Appeals support its judgment.

3. Was Carrascoso entitled to the first class seat he claims?

It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first class ticket. But petitioner asserts that said ticket did not represent the true and complete intent and agreement of the parties; that said respondent knew that he did not have confirmed reservations for first class on any specific flight, although he had tourist class protection; that, accordingly, the issuance of a first class ticket was no guarantee that he would have a first class ride, but that such would depend upon the availability of first class seats.

These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of Appeals under its third assignment of error, which reads: "The trial court erred in finding that plaintiff had confirmed reservations for, and a right to, first class seats on the "definite" segments of his journey, particularly that from Saigon to Beirut". 21

And, the Court of Appeals disposed of this contention thus:

Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that the passenger to whom the same had been issued, would be accommodated in the first-class compartment, for as in the case of plaintiff he had

17


ASSIGNMENT NO .3

yet to make arrangements upon arrival at every station for the necessary first-class reservation. We are not impressed by such a reasoning. We cannot understand how a reputable firm like defendant airplane company could have the indiscretion to give out tickets it never meant to honor at all. It received the corresponding amount in payment of first-class tickets and yet it allowed the passenger to be at the mercy of its employees. It is more in keeping with the ordinary course of business that the company should know whether or riot the tickets it issues are to be honored or not.22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention, thus:

On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question. Apart from his testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and defendant's own witness, Rafael Altonaga, confirmed plaintiff's testimony and testified as follows:

Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?

A. That the space is confirmed.

Q. Confirmed for first class?

A. Yes, "first class". (Transcript, p. 169)

x x x x x x x x x

Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that although plaintiff paid for, and was issued a "first class" airplane ticket, the ticket was subject to confirmation in Hongkong. The court cannot give credit to the testimony of said witnesses. Oral evidence cannot prevail over written evidence, and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and "C-1" belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and paid for, a first class ticket without any reservation whatever.

Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the reservation for a "first class" accommodation for the plaintiff was confirmed. The court cannot believe that after such confirmation defendant had a verbal understanding with plaintiff that the "first class" ticket issued to him by defendant would be subject to confirmation in Hongkong. 23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the Court of Appeals in all other respects. We hold the view that such a judgment of affirmance has merged the judgment of the lower court. 24 Implicit in that affirmance is a determination by the Court of Appeals that the proceeding in the Court of First Instance was free from prejudicial error and "all questions raised by the assignments of error and all questions that might have been raised are to be regarded as finally adjudicated against the appellant". So also, the judgment affirmed "must be regarded as free from all error". 25 We reached this policy construction because nothing in the decision of the Court of Appeals on this point would suggest that its findings of fact are in any way at war with those of the trial court. Nor was said affirmance by the Court of Appeals upon a ground or grounds different from those which were made the basis of the conclusions of the trial court. 26

If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding the fact that seat availability in specific flights is therein confirmed, then an air passenger is placed in the hollow of the hands of an airline. What security then can a passenger have? It will always be an easy matter for an airline aided by its employees, to strike out the very stipulations in the ticket, and say that there was a verbal agreement to the contrary. What if the passenger had a schedule to fulfill? We have long learned that, as a rule, a written document speaks a uniform language; that spoken word could be notoriously unreliable. If only to achieve stability in the relations between passenger and air carrier, adherence to the ticket so issued is desirable. Such is the case here. The lower courts refused to believe the oral evidence intended to defeat the covenants in the ticket.

The foregoing are the considerations which point to the conclusion that there are facts upon which the Court of Appeals predicated the finding that respondent Carrascoso had a first class ticket and was entitled to a first class seat at Bangkok, which is a stopover in the Saigon to Beirut leg of the flight. 27 We perceive no "welter of distortions by the Court of Appeals of petitioner's statement of its position", as charged by petitioner. 28 Nor do we subscribe to

18


ASSIGNMENT NO .3

petitioner's accusation that respondent Carrascoso "surreptitiously took a first class seat to provoke an issue". 29 And this because, as petitioner states, Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat and because from Saigon I was told again to see the Manager". 30 Why, then, was he allowed to take a first class seat in the plane at Bangkok, if he had no seat? Or, if another had a better right to the seat?

4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that Carrascoso's action is planted upon breach of contract; that to authorize an award for moral damages there must be an averment of fraud or bad faith;31 and that the decision of the Court of Appeals fails to make a finding of bad faith. The pivotal allegations in the complaint bearing on this issue are:

3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable consideration, the latter acting as general agents for and in behalf of the defendant, under which said contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff, First Class passage on defendant's plane during the entire duration of plaintiff's tour of Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila, ... .

4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok, defendant furnished to the plaintiff First Class accommodation but only after protestations, arguments and/or insistence were made by the plaintiff with defendant's employees.

5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff only Tourist Class accommodations from Bangkok to Teheran and/or Casablanca, ... the plaintiff has been compelled by defendant's employees to leave the First Class accommodation berths at Bangkok after he was already seated.

6. That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought by defendant's breach of contract was forced to take a Pan American World Airways plane on his return trip from Madrid to Manila.32

x x x x x x x x x

2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid, plaintiff suffered inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental anguish, serious anxiety, wounded feelings, social humiliation, and the like injury, resulting in moral damages in the amount of P30,000.00. 33

x x x x x x x x x

The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a first class passage covering, amongst others, the Bangkok-Teheran leg; Second, That said contract was breached when petitioner failed to furnish first class transportation at Bangkok; and Third, that there was bad faith when petitioner's employee compelled Carrascoso to leave his first class accommodation berth "after he was already, seated" and to take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing him mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral damages. It is true that there is no specific mention of the term bad faith in the complaint. But, the inference of bad faith is there, it may be drawn from the facts and circumstances set forth therein. 34 The contract was averred to establish the relation between the parties. But the stress of the action is put on wrongful expulsion.

Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed petitioner on guard on what Carrascoso intended to prove: That while sitting in the plane in Bangkok, Carrascoso was ousted by petitioner's manager who gave his seat to a white man; 35 and (b) evidence of bad faith in the fulfillment of the contract was presented without objection on the part of the petitioner. It is, therefore, unnecessary to inquire as to whether or not there is sufficient averment in the complaint to justify an award for moral damages. Deficiency in the complaint, if any, was cured by the evidence. An amendment thereof to conform to the evidence is not even required. 36 On the question of bad faith, the Court of Appeals declared:

That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the defendant Air France while at Bangkok, and was transferred to the tourist class not only without his consent but against his will, has been sufficiently established by plaintiff in his testimony before the court,

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ASSIGNMENT NO .3

corroborated by the corresponding entry made by the purser of the plane in his notebook which notation reads as follows:

"First-class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene",

and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain of the plane who was asked by the manager of defendant company at Bangkok to intervene even refused to do so. It is noteworthy that no one on behalf of defendant ever contradicted or denied this evidence for the plaintiff. It could have been easy for defendant to present its manager at Bangkok to testify at the trial of the case, or yet to secure his disposition; but defendant did neither. 37

The Court of appeals further stated —

Neither is there evidence as to whether or not a prior reservation was made by the white man. Hence, if the employees of the defendant at Bangkok sold a first-class ticket to him when all the seats had already been taken, surely the plaintiff should not have been picked out as the one to suffer the consequences and to be subjected to the humiliation and indignity of being ejected from his seat in the presence of others. Instead of explaining to the white man the improvidence committed by defendant's employees, the manager adopted the more drastic step of ousting the plaintiff who was then safely ensconsced in his rightful seat. We are strengthened in our belief that this probably was what happened there, by the testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaning of the letters "O.K." appearing on the tickets of plaintiff, said "that the space is confirmed for first class. Likewise, Zenaida Faustino, another witness for defendant, who was the chief of the Reservation Office of defendant, testified as follows:

"Q How does the person in the ticket-issuing office know what reservation the passenger has arranged with you?

A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19, 1959)

In this connection, we quote with approval what the trial Judge has said on this point:

Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better right" to the seat occupied by Mr. Carrascoso? The record is silent. The defendant airline did not prove "any better", nay, any right on the part of the "white man" to the "First class" seat that the plaintiff was occupying and for which he paid and was issued a corresponding "first class" ticket.

If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant could have easily proven it by having taken the testimony of the said Manager by deposition, but defendant did not do so; the presumption is that evidence willfully suppressed would be adverse if produced [Sec. 69, par (e), Rules of Court]; and, under the circumstances, the Court is constrained to find, as it does find, that the Manager of the defendant airline in Bangkok not merely asked but threatened the plaintiff to throw him out of the plane if he did not give up his "first class" seat because the said Manager wanted to accommodate, using the words of the witness Ernesto G. Cuento, the "white man".38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term "bad faith". But can it be doubted that the recital of facts therein points to bad faith? The manager not only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment - just to give way to another passenger whose right thereto has not been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different from what is understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive design or with some motive of self-interest or will or for ulterior purpose." 39

And if the foregoing were not yet sufficient, there is the express finding of bad faith in the judgment of the Court of First Instance, thus:

20


ASSIGNMENT NO .3

The evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith, with the aggravating circumstances that defendant's Manager in Bangkok went to the extent of threatening the plaintiff in the presence of many passengers to have him thrown out of the airplane to give the "first class" seat that he was occupying to, again using the words of the witness Ernesto G. Cuento, a "white man" whom he (defendant's Manager) wished to accommodate, and the defendant has not proven that this "white man" had any "better right" to occupy the "first class" seat that the plaintiff was occupying, duly paid for, and for which the corresponding "first class" ticket was issued by the defendant to him.40

5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is well settled in law. 41 For the willful malevolent act of petitioner's manager, petitioner, his employer, must answer. Article 21 of the Civil Code says:

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

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the provisions of Article 2219 (10), Civil Code, moral damages are recoverable. 42

6. A contract to transport passengers is quite different in kind and degree from any other contractual relation. 43 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. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any rule or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier. 44

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of contract and a tort, giving a right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand payment under threat of ejection, though the language used was not insulting and she was not ejected." 46 And this, because, 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". 47 And in another case, "Where a passenger on a railroad train, when the conductor came to collect his fare tendered him the cash fare to a point where the train was scheduled not to stop, and told him that as soon as the train reached such point he would pay the cash fare from that point to destination, there was nothing in the conduct of the passenger which justified the conductor in using insulting language to him, as by calling him a lunatic," 48 and the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said passenger.1awphîl.nèt

Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action as we have said, is placed upon his wrongful expulsion. This is a violation of public duty by the petitioner air carrier — a case of quasi-delict. Damages are proper.

7. Petitioner draws our attention to respondent Carrascoso's testimony, thus —

Q You mentioned about an attendant. Who is that attendant and purser?

A When we left already — that was already in the trip — I could not help it. So one of the flight attendants approached me and requested from me my ticket and I said, What for? and she said, "We will note that you transferred to the tourist class". I said, "Nothing of that kind. That is tantamount to accepting my transfer." And I also said, "You are not going to note anything there because I am protesting to this transfer".

Q Was she able to note it?

A No, because I did not give my ticket.

Q About that purser?

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ASSIGNMENT NO .3

A Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I stood up and I went to the pantry that was next to me and the purser was there. He told me, "I have recorded the incident in my notebook." He read it and translated it to me — because it was recorded in French — "First class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene."

Mr. VALTE —

I move to strike out the last part of the testimony of the witness because the best evidence would be the notes. Your Honor.

COURT —

I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook reading "First class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene" is predicated upon evidence [Carrascoso's testimony above] which is incompetent. We do not think so. The subject of inquiry is not the entry, but the ouster incident. Testimony on the entry does not come within the proscription of the best evidence rule. Such testimony is admissible. 49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the startling occurrence was still fresh and continued to be felt. The excitement had not as yet died down. Statements then, in this environment, are admissible as part of the res gestae. 50 For, they grow "out of the nervous excitement and mental and physical condition of the declarant". 51 The utterance of the purser regarding his entry in the notebook was spontaneous, and related to the circumstances of the ouster incident. Its trustworthiness has been guaranteed. 52 It thus escapes the operation of the hearsay rule. It forms part of the res gestae.

At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have been an easy matter for petitioner to have contradicted Carrascoso's

testimony. If it were really true that no such entry was made, the deposition of the purser could have cleared up the matter.

We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.

8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant exemplary damages — in contracts and quasi- contracts. The only condition is that defendant should have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." 53 The manner of ejectment of respondent Carrascoso from his first class seat fits into this legal precept. And this, in addition to moral damages.54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a similar judgment for attorneys' fees. The least that can be said is that the courts below felt that it is but just and equitable that attorneys' fees be given. 55 We do not intend to break faith with the tradition that discretion well exercised — as it was here — should not be disturbed.

10. Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals, thus: P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and P3,000.00 as attorneys' fees. The task of fixing these amounts is primarily with the trial court. 56 The Court of Appeals did not interfere with the same. The dictates of good sense suggest that we give our imprimatur thereto. Because, the facts and circumstances point to the reasonableness thereof.57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We accordingly vote to affirm the same. Costs against petitioner. So ordered.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar and Castro, JJ., concur.Bengzon, J.P., J., took no part.

G.R. No. L-68988 June 21, 1990

22


ASSIGNMENT NO .3

PAN AMERICAN WORLD AIRWAYS, INC., petitioners, vs.INTERMEDIATE APPELLATE COURT, and EDMUNDO P. ONGSIAKO, respondents.

Guerrero and Torres for petitioner.

Emmanuel C. Ongsiako for private respondent.

NARVASA, J.:

Upon the following facts, found to have been satisfactorily established by the evidence, to wit:

1) that Edmundo P. Ongsiako, "with one piece of checked-in luggage, was a paying passenger on the ... PAN AM Flight 842 that left Manila for Honolulu, Hawaii, U.S.A., at about 12:30 p.m. on June 8, 1978, with Los Angeles, California, as his ultimate destination:" 1

2) that at Honolulu, Ongsiako "discovered that his luggage was not carried on board ...; (i)t was left at ... PAN AM's airport office in Manila where it was found a week later;" 2

3) "a PAN AM employee in Honolulu, instead of helping him search for his bag, arrogantly threatened to "bump him off in Honolulu should he persist in looking for his bag;" 3

4) that "(o)ffers to forward the luggage to .. (Ongsiako) in Los Angeles or San Francisco were refused, f s because, by the time it was found, ... (Ongsiako) was about to leave Los Angeles, and secondly, ... (Ongsiako) was not sure where he would be staying in San Francisco;

5) that "(v)erbal complaint was made first at PAN AM's Honolulu airport office, then at Los Angeles, but written complaint was made on July 20, 1978; and

6) that "(o)vertures towards settlement were rejected for being too inconsequential," 5

PAN AM (Pan American World Airways, Inc.) was sentenced by the Court of First Instance of Rizal 6 on complaint of Ongsiako, to pay to the latter:

1. P9,629.50 representing cost of plaintiffs plane ticket as actual damages;

2. The equivalent in pesos of $400 at the current exchange rate as temperate or moderate damages;

3. P350,000.00 as moral damages;

4. P100,000.00 as exemplary damages;

5. P26,000.00 as attorney's fees;

6. Costs.

On appeal taken by PAN AM, 7 the Trial Court's judgment was affirmed by the Intermediate Appellate Court, with the sole modification that the award of actual damages was reduced to P4,814.75 and that of exemplary damages, eliminated. 8

From this judgment of the appellate tribunal, in turn, PAN AM has taken an appeal on certiorari to this Court. After receiving the private respondent's comment on the appeal petition, the reply thereto and the rejoinder to the reply, the Court resolved on March 4, 1985 to give limited due course to the petition as regards the sole issue of moral damages and required simultaneous memoranda from the parties, 9 which have since been submitted.

Article 2220 of the Civil Code says that moral damages may be awarded in "breaches of contract where the defendant acted fraudulently or in bad faith." So, proof of infringement of an agreement by a party, standing alone, will not justify an award of moral damages. 10 There must, in addition, as the law points out, be competent evidence of fraud of bad faith by that party. 11 If the plaintiff, for instance, fails to take the witness stand and testify as to his social

23


ASSIGNMENT NO .3

humiliation, wounded feelings, anxiety, etc., moral damages cannot be recovered. 12 The rule applies, of course, to common carriers. 13

This Court finds that these basic legal principles have been correctly applied by both the Trial Court and the Intermediate Appellate Court, in light of the proven facts. Said the latter, on this precise matter: 14

In the present case, men of reasonable perceptions will not disagree with the conclusion that plaintiff suffered mental anguish, anxiety and shock when he found that his luggage did not travel with him. What traveller would not suffer from such feelings if he found himself in a foreign land without any article of clothing other than what he had on? The injury thus suffered by plaintiff is one that would arise generally, in the special circumstances of this case; it follows as a matter of course. PAN AM breach of the contract was the substantial cause in bringing about the harm or injury to the plaintiff. We adopt here the ruling of the court a quo:

"The Court believes and so holds that there is sufficient evidence of gross and reckless negligence amounting to bad faith on the part of defendant. If defendant was not sure that it could transport plaintiff and his luggage to Los Angeles, it should not have accepted plaintiff who was a waitlisted passenger. It is not a valid excuse on its part to claim that plaintiff checked in at the last minute and that there was insufficient time to load his bag in the plane. In fact, that makes the position of defendant even more untenable, because in accepting and holding on to plaintiff as its passenger, probably to fill in cancelled bookings, although it knew or must have known that the bag of plaintiff might not be loaded on time, it was guilty of conduct amounting to bad faith. ... Accepting last minute passengers and their baggage with no definite assurance that the carrier can comply with its obligation due to lack of time amounts to "negligence so gross and reckless as to amount to malice or bad faith (Fores vs. Miranda, L-12163, March 4,1959; Necesito vs. Paras, L-1060606, June 30, 1958, cited in Lopez, et al. vs. PAN AM, supra) (Record on Appeal, pp. 23-25)

Also a propos and also not otherwise shown to be erroneous are the observations of the Trial Court on this precise point:

... (A) PAN AM employee in Honolulu, instead of helping him (Ongsiako) search for his bag, arrogantly threatened to "bump him off" in Honolulu should he persist in looking for his bag. This happened in the presence of several people, thereby subjecting plaintiff to indignity, embarrassment and humiliation, which aggravated his health-his blood pressure, in this case. It is difficult enough to be in a foreign country, worse if one's belongings are missing, and worst, if instead of being helped, he is shouted at and threatened to be "bumped off" as in this case. This must have been a very distressing and painful experience to plaintiff which justifies a finding of bad faith and an award for moral damages in his favor. Considering the financial standing of plaintiff who heads a corporation with a paid-up capital of 2-1/2 Millon Pesos and the anguish, anxiety, wounded feelings, shame and humiliation which he suffered as heretofore discussed, the Court assesses moral damages in his favor in the amount of P350,000.00.

PAN AM assails this award of moral damages as without evidentiary foundation, or at the very least, excessive. It argues that no such arrogance or boorishness was displayed by the PAN AM people at the Honolulu Airport, that what simply happened was, citing Ongsiako's own testimony, that when Ongsiako could not find his luggage and asked for help, showing them his baggage tag and ticket, one of the PAN AM employees there, "instead of helping ... (him) looked at their watch and said, you better get up or you will be late on your flight, I am sorry I cannot help you, there are so many people waiting for their turn. ..." 15 It claims, too, that even the Court of Appeals itself declared that it was "not satisfied with the adequacy of the evidence related to the ill-treatment suffered by the plaintiff at the hands of PAN AM Honolulu airport office employees. ..." 16 The quotations from the transcript and judgment of the Appellate Court are out of context. The record of Ongsiako's testimony reveals that he did say that "the PAN AM employee embarrassed ... (him) in Honolulu by shouting at x x (him)," a statement that he reaffirmed twice, 17 and that employee even refused to look at his baggage tag. 18 As regards the Intermediate Appellate Court, it also did say that it was sustaining "the fun award of moral damages,' but that it did not find that the evidence was adequate to establish that the conduct of PAN AM was so "wanton, reckless, oppressive or malevolent" as to justify an award of exemplary damages, a ruling that is not essentially inconsistent with

24


ASSIGNMENT NO .3

Ongsiako's version of the occurrence. In any event, even accepting PAN AM's version of the occurrence at face value, it is clear that none of the PAN AM employees exerted the least effort to assist Ongsiako in his predicament, despite his appeal for help; that not one of them even deigned to look at Ongsiako's baggage tag, or listen to his problem, or give assurances that something would be done about his difficulties, or otherwise show any sign of sympathy or commiseration; that instead, they looked at their watches-an impolite and dismaying gesture of impatience, to be sure, considering the circumstances-and told him he could not be helped because there were other people waiting for their turn-to be served, of course, like Ongsiako, as they had a right to expect as paying passengers-and that it was best if he just went to his plane so as not to miss his flight. Surely, these acts of callous indifference to the plight of a person in a foreign land could not be less distressing, depressing or disheartening to the latter, or judged less harshly, simply because not attended by any shouted remarks.

All things considered, the Court is satisfied that moral damages have been correctly granted.

WHEREFORE, the petitioner's appeal is DISMISSED, and the judgment of the Intermediate Appellate Court, AFFIRMED in toto. Costs against the petitioner.

Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

G.R. No. 119756 March 18, 1999

FORTUNE EXPRESS, INC., petitioner, vs.COURT OF APPEALS, PAULIE U.CAORONG, and minor childrenYASSER KING CAORONG, ROSE HEINNI and PRINCE ALEXANDER, all surnamed CAORONG, and represented by their mother PAULIE U. CAORONG, respondents.

MENDOZA, J.:

This is an appeal by petition for review on certiorari of the decision, dated July 29, 1994, of the Court of Appeals, which reversed the decision of the Regional Trial Court, Branch VI,

Iligan City. The aforesaid decision of the trial court dismissed the complaint of public respondents against petitioner for damages for breach of contract of carriage filed on the ground that petitioner had not exercised the required degree of diligence in the operation of one of its buses. Atty. Talib Caorong, whose heirs are private respondents herein, was a passenger of the bus and was killed in the ambush involving said bus.

The facts of the instant case are as follows:

Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of Atty. Caorong, while private respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children.

On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional Security Unit No. X, conducted an investigation of the accident. He found that the owner of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and that certain Maranaos were planning to take revenge on the petitioner by burning some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to see Diosdado Bravo, operations manager of petitioner, its main office in Cagayan de Oro City. Bravo assured him that the necessary precautions to insure the safety of lives and property would be taken. 1

At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner at Linamon, Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot Cabatuan on the arm, which caused him to slump on the steering wheel. The one of the companions of Mananggolo started pouring gasoline inside the bus, as the other held the passenger at bay with a handgun. Mananggolo then ordered the passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus and went behind the bushes in a field some distance from the highway. 2

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ASSIGNMENT NO .3

However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of the armed men was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living. The armed men were, however, adamant as they repeated the warning that they were going to burn the bus along with its driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing operation. 3

The private respondents brought this suit for breach of contract of carriage in the Regional Trial Court, Branch VI, Iligan City. In its decision, dated December 28, 1990, the trial court dismissed the complaint, holding as follows:

The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the "rumors" that the Moslems intended to take revenge by burning five buses of defendant is established since the latter also utilized Crisanto Generalao as a witness. Yet despite this information, the plaintiffs charge, defendant did not take proper precautions. . . . Consequently, plaintiffs now fault the defendant for ignoring the report. Their position is that the defendant should have provided its buses with security guards. Does the law require common carriers to install security guards in its buses for the protection and safety of its passengers? Is the failure to post guards on omission of the duty to "exercise the diligence of a good father of the family" which could have prevented the killing of Atty. Caorong? To our mind, the diligence demanded by law does not include the posting of security guard in buses. It is an obligation that properly belongs to the State. Besides, will the presence of one or two security guards suffice to deter a determined assault of the lawless and thus prevent the injury complained of? Maybe so, but again, perhaps not. In other words, the presence of a security guard is not a guarantee that the killing of Atty. Caorong would have been definitely avoided.

xxx xxx xxx

Accordingly, the failure of defendant to accord faith and credit to the report of Mr. Generalao and the fact that it did not provide security to its buses cannot, in the light of the circumstances, be characterized as negligence.

Finally, the evidence clearly shows that the assalants did not have the least intention of the harming any of the passengers. They ordered all the passengers to alight and set fire on the bus only after all the passengers were out of danger. The death of Atty. Caorong was an unexpected and unforseen occurrense over which defendant had no control. Atty. Caorong performed an act of charity and heroism in coming to the succor of the driver even in the face of danger. He deserves the undying gratitude of the driver whose life he saved. No one should blame him for an act of extraordinary charity and altruism which cost his life. But neither should any blame be laid on the doorstep of defendant. His death was solely due to the willfull acts of the lawless which defendant could neither prevent nor to stop.

WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of merit, the counter-claim is likewise dismissed. No costs. 4

On appeal, however, the Court of Appeals reversed. It held:

In the case at bench, how did defendant-appellee react to the tip or information that certain Maranao hotheads were planning to burn five of its buses out of revenge for the deaths of two Maranaos in an earlier collision involving appellee's bus? Except for the remarks of appellee's operations manager that "we will have our action . . . . and I'll be the one to settle it personally," nothing concrete whatsoever was taken by appellee or its employees to prevent the execution of the threat. Defendant-appellee never adopted even a single safety measure for the protection of its paying passengers. Were there available safeguards? Of course, there were: one was frisking passengers particularly those en route to the area where the threats were likely to be carried out such as where the earlier accident

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ASSIGNMENT NO .3

occurred or the place of influence of the victims or their locality. If frisking was resorted to, even temporarily, . . . . appellee might be legally excused from liabilty. Frisking of passengers picked up along the route could have been implemented by the bus conductor; for those boarding at the bus terminal, frisking could have been conducted by him and perhaps by additional personnel of defendant-appellee. On hindsight, the handguns and especially the gallon of gasoline used by the felons all of which were brought inside the bus would have been discovered, thus preventing the burning of the bus and the fatal shooting of the victim.

Appellee's argument that there is no law requiring it to provide guards on its buses and that the safety of citizens is the duty of the government, is not well taken. To be sure, appellee is not expected to assign security guards on all its buses; if at all, it has the duty to post guards only on its buses plying predominantly Maranaos areas. As discussed in the next preceding paragraph, least appellee could have done in response to the report was to adopt a system of verification such as the frisking of passengers boarding at its buses. Nothing, and no repeat, nothing at all, was done by defendant-appellee to protect its innocent passengers from the danger arising from the "Maranao threats." It must be observed that frisking is not a novelty as a safety measure in our society. Sensitive places — in fact, nearly all important places — have applied this method of security enhancement. Gadgets and devices are avilable in the market for this purpose. It would not have weighed much against the budget of the bus company if such items were made available to its personnel to cope up with situations such as the "Maranaos threats."

In view of the constitutional right to personal privacy, our pronouncement in this decision should not be construed as an advocacy of mandatory frisking in all public conveyances. What we are saying is that given the circumstances obtaining in the case at bench that: (a) two Maranaos died because of a vehicular collision involving one of appellee's vehicles; (b) appellee received a written report from a member of the Regional Security Unit, Constabulary Security Group, that the tribal/ethnic group of the two deceased were planning to burn five buses of appellee out of revenge; and

(c) appelle did nothing — absolutely nothing — for the safety of its passengers travelling in the area of influence of the victims, appellee has failed to exercise the degree of dilegence required of common carriers. Hence, appellee must be adjudge liable.

xxx xxx xxx

WHEREFORE the decision appealed from is hereby REVERSED and another rendered ordering defendant-appellee to pay plaintiffs-appellants the following:

1) P3,399,649.20 as death indemnity;

2) P50,000.00 and P500.00 per appearance as attorney's fee and

Costs against defendant-appellee. 5

Hence, this appeal. Petitioner contends:

(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT DATED DECEMBER 28, 1990 DISMISSING THE COMPLAINT AS WELL AS THE COUNTERCLAIM, AND FINDING FOR PRIVATE RESPONDENTS BY ORDERING PETITIONER TO PAY THE GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES, AS WELL AS DENYING PETITIONERS MOTION FRO

27


ASSIGNMENT NO .3

RECONSIDERATION AND THE SUPPLEMENT TO SAID MOTION, WHILE HOLDING, AMONG OTHERS, THAT THE PETITIONER BREACHED THE CONTRACT OF THE CARRIAGE BY ITS FAILURE TO EXCERCISE THE REQUIRED DEGREE OF DILIGENCE;

(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTABLE, VIOLENT, AND FORCEFULL, AS TO BE REGARDED AS CASO FORTUITO; AND

(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER COULD HAVE PROVIDED ADEQUATE SECURITY IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A COMMON CARRIER.

The instant has no merit.

First. Petitioner's Breach of the Contract of Carriage.

Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a

family. In the present case, it is clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was made possible.

Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers.

Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been employed without violating the passenger's constitutional rights. As this Court amended in Gacal v. Philippine Air Lines, Inc., 6 a common carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggages.

From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's buses because they did not exercise the diligence of a good father of a family. Hence, petitioner should be held liable for the death of Atty. Caorong.

Second. Seizure of Petitioner's Bus not a Case of Force Majeure

The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be held liable.

Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido v. Court of Appeals, 7 we held that to considered as force majeure, it is necessary that (1) the cause of the breach of the obligation must be independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurence must be render it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be free of participation in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above would prevent the obligor from being excused from liability.

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ASSIGNMENT NO .3

Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable for its failure to take the necessary precautions against an approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers. The event was forseeable, and, thus, the second requisite mentioned above was not fulfilled. This ruling applies by analogy to the present case. Despite the report of PC agent Generalao that the Maranaos were going to attack its buses, petitioner took no steps to safeguard the lives and properties of its passengers. The seizure of the bus of the petitioner was foreseeable and, therefore, was not a fortuitous event which would exempt petitioner from liabilty.

Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court of Appeals, 10 in support of its contention that the seizure of its bus by the assailants constitutes force majeure. In Pilapil v. Court of Appeals, 11 it was held that a common carrier is not liable for failing to install window grills on its buses to protect the passengers from injuries cause by rocks hurled at the bus by lawless elements. On the other hand, in De Guzman v. Court of Appeals, 12 it was ruled that a common carriers is not responsible for goods lost as a result of a robbery which is attended by grave or irresistable threat, violence, or force.

It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil Code provides that "a common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." Thus, we held in Pilapil and De Guzman that the respondents therein were not negligent in failing to take special precautions against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third persons. In the present case, this factor of unforeseeability (the second requisite for an event to be considered force majeure) is lacking. As already stated, despite the report of PC agent Generalao that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety of passengers.

Third. Deceased not Guilty of Contributory Negligence

The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something. But Atty. Caorong did not act recklessly. It should be pointed out that the intended targets of the violence were petitioners and its employees, not its

passengers. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot considered an act of negligence, let alone recklessness.

Fourth. Petitioner Liable to Private Respaondents for Damages

We now consider the question of damages that the heirs of Atty. Caorong, private respondents herein, are entitled to recover from the petitioner.

Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides for the payment of indemnity for the death of passengers caused by the breach of contract of carriage by a common carrier. Initially fixed in Art. 2206 at P3,000.00, the amount of the said indemnity for death has through the years been gradually increased in view of the declining value of the peso. It is presently fixed at P50,000.00. 13 Private respondents are entitled to this amount.

Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as has duly proved." The trial court found that the private respondents spent P30,000.00 for the wake and burial of Atty. Caorong. 14 Since petitioner does not question this finding of the trial court, it is liable to private respondent in the said amount as actual damages.

Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased." The trial court found that private respondent Paulie Caorong suffered pain from the death of her husband and worry on how to provide support for their minor children, private respondents Yasser King, Rose Heinni, and Prince Alexander. 15 The petitioner likewise does not question this finding of the trial court. Thus, in accordance with

29


ASSIGNMENT NO .3

recent decisions of this Court, 16 we hold that the petitioner is liable to the private respondents in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.

Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent reckless manner." In the present case, the petitioner acted in a wanton and reckless manner. Despite warning that the Maranaos were planning to take revenge against the petitioner by burning some of its buses, and contary to the assurance made by its operations manager that the necessary precautions would be take, the petitioner and its employees did nothing to protect the safety of passengers. Under the circumtances, we deem it reasonable to award private respondents exemplary damages in the amount of P100,000.00.

17

Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case, exemplary damages are awarded. In the recent case of Sulpicio Lines, Inc. v. Court of Appeals, 18 we held an award of P50,000.00 as attorney's fees to be reasonable. Hence, the private respondents are entitled to attorney's fees in that amount.

Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides that in addition to the indemnity for death arising from the breach of contrtact of carriage by a common carrier, the "defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter." The formula established in decided cases for computing net earning capacity is as follows: 19

Gross Necessary

Net Earning = Life x Annual — Living

Capacity Expectancy Income Expenses

Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the deceased. 20 Since Atty. Caorong was 37 years old at that time of his death, 21 he had a life expectancy of 28 2/3 more years. 22 His projected gross annual income, computed based on his monthly salary of P11,385.00. 23 as a lawyer in the Department of

Agrarian Reform at the time of his death, was P148,005.00. 24 Allowing for necessary living expenses of fifty percent (50%) 25 of his projected gross annual income, his total earning capacity amounts to P2,121,404.90. 26 Hence, the petitioner is liable to the private respondents in the said amount as a compensation for loss of earning capacity.

WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that petitioner Fortune Express, Inc. is ordered to pay the following amounts to private respondents Paulie, Yasser King, Rose Heinni, and Prince Alexander Caorong:

1. death indemnity in the amount of fifty thousand pesos (P50,000.00);

2. actual damages in the amount of thirty thousand pesos (P30,000.00);

3. moral damages in the amount of one hundred thousand pesos (P100,000.00);

4. exemplary damages in the amount of one hundred thousand pesos (P100,000.00);

5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);

6. compensation for loss of earning capacity in the amount of two million one hundred twenty-one thousand four hundred four pesos and ninety centavos (P2,121,404.90); and

7. cost of suits.

SO ORDERED.

Bellosillo, Puno and Buena, JJ., concur.

Quisumbing, J., abroad on official business.

G.R. No. L-28589 January 8, 1973

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ASSIGNMENT NO .3

RAFAEL ZULUETA, ET AL., plaintiffs-appellees, vs.PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant.

Alfredo L. Benipayo for plaintiffs-appellee Rafael Zulueta and Carolina Zulueta.

Justo L. Albert for plaintiff-appellee Telly Albert Zulueta.

V.E. del Rosario and Associates and Salcedo, Del Rosario, Bito, Misa and Lozada for defendant-appellant.

R E S O L U T I O N

CONCEPCION, C.J.:

Both parties in this case have moved for the reconsideration of the decision of this Court promulgated on February 29, 1972. Plaintiffs maintain that the decision appealed from should be affirmed in toto. The defendant, in turn, prays that the decision of this Court be "set aside ... with or without a new trial, ... and that the complaint be dismissed, with costs; or, in the alternative, that the amount of the award embodied therein be considerably reduced." .

Subsequently to the filing of its motion for reconsideration, the defendant filed a "petition to annul proceedings and/or to order the dismissal of plaintiffs-appellees' complaint" upon the ground that "appellees' complaint actually seeks the recovery of only P5,502.85 as actual damages, because, for the purpose of determining the jurisdiction of the lower court, the unspecified sums representing items of alleged damages, may not be considered, under the settled doctrines of this Honorable Court," and "the jurisdiction of courts of first instance when the complaint in the present case was filed on Sept. 30, 1965" was limited to cases "in which the demand, exclusive of interest, or the value of the property in controversy amounts to more than ten thousand pesos" and "the mere fact that the complaint also prays for unspecified moral damages and attorney's fees, does not bring the action within the jurisdiction of the lower court."

We find no merit in this contention. To begin with, it is not true that "the unspecified sums representing items or other alleged damages, may not be considered" — for the purpose of determining the jurisdiction of the court — "under the settled doctrines of this Honorable Court." In fact, not a single case has been cited in support of this allegation.

Secondly, it has been held that a clam for moral damages is one not susceptible of pecuniary estimation. 1 In fact, Article 2217 of the Civil Code of the Philippines explicitly provides that "(t)hough incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission." Hence, "(n)o proof pecuniary loss necessary" — pursuant to Article 2216 of the same Code — "in order that moral ... damages may be adjudicated." And "(t)he assessment of such damages ... is left to the discretion of the court" - said article adds - "according to the circumstances of each case." Appellees' complaint is, therefore, within the original jurisdiction of courts of first instance, which includes "all civil actions in which the subject of the litigation is not capable of pecuniary estimation." 2

Thirdly, in its answer to plaintiffs' original and amended complainants, defendant had set up a counterclaim in the aggregate sum of P12,000, which is, also, within the original jurisdiction of said courts, thereby curing the alleged defect if any, in plaintiffs' complaint. 3

We need not consider the jurisdictional controversy as to the amount the appellant sues to recover because the counterclaim interposed establishes the jurisdiction of the District Court. Merchants' Heat & Light Co. v. James B. Clow & Sons, 204 U.S. 286, 27 S. Ct. 285, 51 L. Ed. 488; O. J. Lewis Mercantile Co. v. Klepner, 176 F. 343 (C.C.A. 2), certiorari denied 216 U.S. 620, 30 S Ct. 575, 54 L. Ed. 641. ... . 4

... courts have said that "when the jurisdictional amount is in question, the tendering of a counterclaim in an amount which in itself, or added to the amount claimed in the petition, makes up a sum equal to the amount necessary to the jurisdiction of this court, jurisdiction is established, whatever may be the state of the plaintiff's complaint." American Sheet & Tin Plate Co. v. Winzeler (D.C.) 227 F. 321, 324. 5

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ASSIGNMENT NO .3

Thus, in Ago v. Buslon, 6 We held:

... . Then, too, petitioner's counterclaim for P37,000.00 was, also, within the exclusive original jurisdiction of the latter courts, and there are ample precedents to the effect that "although the original claim involves less than the jurisdictional amount, ... jurisdiction can be sustained if the counterclaim (of the compulsory type)" — such as the one set up by petitioner herein, based upon the damages allegedly suffered by him in consequence of the filing of said complaint — "exceeds the jurisdictional amount." (Moore Federal Practice, 2nd ed. [1948], Vol. 3, p. 41; Ginsburg vs. Pacific Mutual Life Ins. Co. of California, 69 Fed. [2d] 97; Home Life Ins. Co. vs. Sipp., 11 Fed. [2d]474; American Sheet & Tin Plate Co. vs. Winzeler [D.C.], 227 Fed. 321, 324; Brix vs. People's Mutual Life Ins. Co., 41 P. 2d. 537, 2 Cal. 2d. 446; Emery vs. Pacific Employees Ins. Co., 67 P. 2d. 1046, 8 Cal. 2d. 663).

Needless to say, having not only failed to question the jurisdiction of the trial court — either in that court or in this Court, before the rendition of the latter's decision, and even subsequently thereto, by filing the aforementioned motion for reconsideration and seeking the reliefs therein prayed for — but, also, urged both courts to exercise jurisdiction over the merits of the case, defendant is now estopped from impugning said jurisdiction. 7

Before taking up the specific questions raised in defendant's motion for reconsideration, it should be noted that the same is mainly predicated upon the premise that plaintiffs' version is inherently incredible, and that this Court should accept the theory of the defense to the effect that petitioner was off-loaded because of a bomb-scare allegedly arising from his delay in boarding the aircraft and subsequent refusal to open his bags for inspection. We need not repeat here the reasons given in Our decision for rejecting defendant's contention and not disturbing the findings of fact of His Honor, the Trial Judge, who had the decided advantage — denied to Us — of observing the behaviour of the witnesses in the course of the trial and found those of the plaintiffs worthy of credence, not the evidence for the defense.

It may not be amiss however, to stress the fact that, in his written report, made in transit from Wake to Manila — or immediately after the occurrence and before the legal implications or

consequences thereof could have been the object of mature deliberation, so that it could, in a way, be considered as part of the res gestae — Capt. Zentner stated that Zulueta had been off-loaded "due to drinking" and "belligerent attitude," thereby belying the story of the defense about said alleged bomb-scare, and confirming the view that said agent of the defendant had acted out of resentment because his ego had been hurt by Mr. Zulueta's adamant refusal to be bullied by him. Indeed, had there been an iota of truth in said story of the defense, Capt. Zentner would have caused every one of the passengers to be frisked or searched and the luggage of all of them examined — as it is done now — before resuming the flight from Wake Island. His failure to do so merely makes the artificious nature of defendant's version more manifest. Indeed, the fact that Mrs. Zulueta and Miss Zulueta were on board the plane shows beyond doubt that Mr. Zulueta could not possibly have intended to blow it up.

The defense tries to explain its failure to introduce any evidence to contradict the testimony of Mr. Zulueta as to why he had gone to the beach and what he did there, alleging that, in the very nature of things, nobody else could have witnessed it. Moreover, the defense insists, inter alia, that the testimony of Mr. Zulueta is inherently incredible because he had no idea as to how many toilets the plane had; it could not have taken him an hour to relieve himself in the beach; there were eight (8) commodes at the terminal toilet for men ; if he felt the need of relieving himself, he would have seen to it that the soldiers did not beat him to the terminal toilets; he did not tell anybody about the reason for going to the beach, until after the plane had taken off from Wake.

We find this pretense devoid of merit. Although Mr. Zulueta had to look for a secluded place in the beach to relieve himself, beyond the view of others, defendant's airport manager, whom Mr. Zulueta informed about it, soon after the departure of the plane, could have forthwith checked the veracity of Mr. Zulueta's statement by asking him to indicate the specific place where he had been in the beach and then proceeding thereto for purposes of verification.

Then, again, the passenger of a plane seldom knows how many toilets it has. As a general rule, his knowledge is limited to the toilets for the class — first class or tourist class — in which he is. Then, too, it takes several minutes for the passengers of big aircrafts, like those flying from the U.S. to the Philippines, to deplane. Besides, the speed with which a given passenger may do so depends, largely, upon the location of his seat in relation to the exit door. He cannot go over the heads of those nearer than he thereto. Again, Mr. Zulueta may have stayed in the toilet terminal for some time, expecting one of the commodes therein to be

32


ASSIGNMENT NO .3

vacated soon enough, before deciding to go elsewhere to look for a place suitable to his purpose. But he had to walk, first, from the plane to the terminal building and, then, after vainly waiting therein for a while, cover a distance of about 400 yards therefrom to the beach, and seek there a place not visible by the people in the plane and in the terminal, inasmuch as the terrain at Wake Island is flat. What is more, he must have had to takeoff part, at least, of his clothing, because, without the facilities of a toilet, he had to wash himself and, then, dry himself up before he could be properly attired and walk back the 400 yards that separated him from the terminal building and/or the plane. Considering, in addition to the foregoing, the fact that he was not feeling well, at that time, We are not prepared to hold that it could not have taken him around an hour to perform the acts narrated by him.

But, why — asks the defendant — did he not reveal the same before the plane took off? The record shows that, even before Mr. Zulueta had reached the ramp leading to the plane, Capt. Zentner was already demonstrating at him in an intemperate and arrogant tone and attitude ("What do you think you are?), thereby impelling Mr. Zulueta to answer back in the same vein. As a consequence, there immediately ensued an altercation in the course of which each apparently tried to show that he could not be cowed by the other. Then came the order of Capt. Zentner to off-load all of the Zuluetas, including Mrs. Zulueta and the minor Miss Zulueta, as well as their luggage, their overcoats and other effects handcarried by them; but, Mr. Zulueta requested that the ladies be allowed to continue the trip. Meanwhile, it had taken time to locate his four (4) pieces of luggage. As a matter of fact, only three (3) of them were found, and the fourth eventually remained in the plane. In short, the issue between Capt. Zentner and Mr. Zulueta had been limited to determining whether the latter would allow himself to be browbeaten by the former. In the heat of the altercation, nobody had inquired about the cause of Mr. Zulueta's delay in returning to the plane, apart from the fact that it was rather embarrassing for him to explain, in the presence and within the hearing of the passengers and the crew, then assembled around them, why he had gone to the beach and why it had taken him some time to answer there a call of nature, instead of doing so in the terminal building.

Defendant's motion for reconsideration assails: (1) the amount of damages awarded as excessive; (2) the propriety of accepting as credible plaintiffs' theory; (3) plaintiffs' right to recover either moral or exemplary damages; (4) plaintiffs' right to recover attorney's fees; and (5) the non-enforcement of the compromise agreement between the defendant and plaintiff's wife, Mrs. Zulueta. Upon the other hand, plaintiffs' motion for reconsideration contests the

decision of this Court reducing the amount of damages awarded by the trial court to approximately one-half thereof, upon the ground, not only that, contrary to the findings of this Court, in said decision, plaintiff had not contributed to the aggravation of his altercation or incident with Capt. Zentner by reacting to his provocation with extreme belligerency thereby allowing himself to be dragged down to the level on which said agent of the defendant had placed himself, but, also, because the purchasing power of our local currency is now much lower than when the trial court rendered its appealed decision, over five (5) years ago, on July 5, 1967, which is an undeniable and undisputed fact. Precisely, for this reason, defendant's characterization as exorbitant of the aggregate award of over P700,000 by way of damages, apart from attorney's fees in the sum of P75,000, is untenable. Indeed, said award is now barely equivalent to around 100,000 U. S. dollars.

It further support of its contention, defendant cites the damages awarded in previous cases to passengers of airlines, 8 as well as in several criminal cases, and some cases for libel and slander. None of these cases is, however, in point. Said cases against airlines referred to passengers who were merely constrained to take a tourist class accommodation, despite the fact that they had first class tickets, and that although, in one of such cases, there was proof that the airline involved had acted as it did to give preference to a "white" passenger, this motive was not disclosed until the trial in court. In the case at bar, plaintiff Rafael Zulueta was "off-loaded" at Wake Island, for having dared to retort to defendant's agent in a tone and manner matching, if not befitting his intemperate language and arrogant attitude. As a consequence, Capt. Zentner's attempt to humiliate Rafael Zulueta had boomeranged against him (Zentner), in the presence of the other passengers and the crew. It was, also, in their presence that defendant's agent had referred to the plaintiffs as "monkeys," a racial insult not made openly and publicly in the abovementioned previous cases against airlines.

In other words, Mr. Zulueta was off-loaded, not to protect the safety of the aircraft and its passengers, but to retaliate and punish him for the embarrassment and loss of face thus suffered by defendant's agent. This vindictive motive is made more manifest by the note delivered to Mr. Zulueta by defendant's airport manager at Wake Island, Mr. Sitton, stating that the former's stay therein would be "for a minimum of one week," during which he would be charged $13.30 per day. This reference to a "minimum of one week" revealed the intention to keep him there stranded that long, for no other plane, headed for Manila, was expected within said period of time, although Mr. Zulueta managed to board, days later, a plane that brought him to Hawaii, whence he flew back to the Philippines, via Japan.

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ASSIGNMENT NO .3

Neither may criminal cases, nor the cases for libel and slander cited in the defendant's motion for reconsideration, be equated with the present case. Indeed, in ordinary criminal cases, the award for damages is, in actual practice, of purely academic value, for the convicts generally belong to the poorest class of society. There is, moreover, a fundamental difference between said cases and the one at bar. The Zuluetas had a contract of carriage with the defendant, as a common carrier, pursuant to which the latter was bound, for a substantial monetary consideration paid by the former, not merely to transport them to Manila, but, also, to do so with "extraordinary diligence" or "utmost diligence." 9 The responsibility of the common carrier, under said contract, as regards the passenger's safety, is of such a nature, affecting as it does public interest, that it "cannot be dispensed with" or even "lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise." 10 In the present case, the defendant did not only fail to comply with its obligation to transport Mr. Zulueta to Manila, but, also, acted in a manner calculated to humiliate him, to chastise him, to make him suffer, to cause to him the greatest possible inconvenience, by leaving him in a desolate island, in the expectation that he would be stranded there for a "minimum of one week" and, in addition thereto, charged therefor $13.30 a day.

It is urged by the defendant that exemplary damages are not recoverable in quasi-delicts, pursuant to Article 2231 of our Civil Code, except when the defendant has acted with "gross negligence," and that there is no specific finding that it had so acted. It is obvious, however, that in off-loading plaintiff at Wake Island, under the circumstances heretofore adverted to, defendant's agents had acted with malice aforethought and evident bad faith. If "gross negligence" warrants the award of exemplary damages, with more reason is its imposition justified when the act performed is deliberate, malicious and tainted with bad faith. Thus, in Lopez v. PANAM, 11 We held:

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

Similarly, in NWA v. Cuenca, 12 this Court declared that an award for exemplary damages was justified by the fact that the airline's "agent had acted in a wanton, reckless and oppressive manner" in compelling Cuenca, upon arrival at Okinawa, to transfer, over his objection, from

the first class, where he was accommodated from Manila to Okinawa, to the tourist class, in his trip to Japan, "under threat of otherwise leaving him in Okinawa," despite the fact that he had paid in full the first class fare and was issued in Manila a first class ticket.

Defendant cites Rotea v. Halili, 13 in support of the proposition that a principal is not liable for exemplary damages owing to acts of his agent unless the former has participated in said acts or ratified the same. Said case involved, however, the subsidiary civil liability of an employer arising from criminal acts of his employee, and "exemplary damages ... may be imposed when the crime was committed with one or more aggravating circumstances." 14 Accordingly, the Rotea case is not in point, for the case at bar involves a breach of contract, as well as a quasi-delict.

Neither may the case of Palisoc v. Brillantes, 15 invoked by the defendant, be equated with the case at bar. The Palisoc case dealt with the liability of school officials for damages arising from the death of a student (Palisoc) due to fist blows given by another student (Daffon), in the course of a quarrel between them, while in a laboratory room of the Manila Technical Institute. In an action for damages, the head thereof and the teacher in charge of said laboratory were held jointly and severally liable with the student who caused said death, for failure of the school to provide "adequate supervision over the activities of the students in the school premises," to protect them "from harm, whether at the hands of fellow students or other parties." Such liability was predicated upon Article 2180 of our Civil Code, the pertinent part of which reads:

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

xxx xxx xxx

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody.

xxx xxx xxx

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ASSIGNMENT NO .3

Obviously, the amount of damages warded in the Palisoc case is not and cannot serve as the measure of the damages recoverable in the present case, the latter having been caused directly and intentionally by an employee or agent of the defendant, whereas the student who killed the young Palisoc was in no wise an agent of the school. Moreover, upon her arrival in the Philippines, Mrs. Zulueta reported her husband's predicament to defendant's local manager and asked him to forthwith have him (Mr. Zulueta) brought to Manila, which defendant's aforementioned manager refused to do, thereby impliedly ratifying the off-loading of Mr. Zulueta at Wake Island.

It is next urged that, under the contract of carriage with the defendant, Mr. Zulueta was bound to be present at the time scheduled for the departure of defendant's plane and that he had, consequently, violated said contract when he did not show up at such time. This argument might have had some weight had defendant's plane taken off before Mr. Zulueta had shown up. But the fact is that he was ready, willing and able to board the plane about two hours before it actually took off, and that he was deliberately and maliciously off-loaded on account of his altercation with Capt. Zentner. It should, also, be noted that, although Mr. Zulueta was delayed some 20 to 30 minutes, the arrival or departure of planes is often delayed for much longer periods of time. Followed to its logical conclusion, the argument adduced by the defense suggests that airlines should be held liable for damages due to the inconvenience and anxiety, aside from actual damages, suffered by many passengers either in their haste to arrive at the airport on scheduled time just to find that their plane will not take off until later, or by reason of the late arrival of the aircraft at its destination.

PANAM impugns the award of attorney's fees upon the ground that no penalty should be imposed upon the right to litigate; that, by law, it may be awarded only in exceptional cases; that the claim for attorney's fees has not been proven; and that said defendant was justified in resisting plaintiff's claim "because it was patently exorbitant."

Nothing, however, can be farther from the truth. Indeed apart from plaintiff's claim for actual damages, the amount of which is not contested, plaintiffs did not ask any specific sum by way of exemplary and moral damages, as well as attorney's fees, and left the amount thereof to the "sound discretion" of the lower court. This, precisely, is the reason why PANAM, now, alleges — without justification that the lower court had no jurisdiction over the subject matter of the present case.

Moreover, Article 2208 of our Civil Code expressly authorizes the award of attorney's fees "when exemplary damages are awarded," — as they are in this case —as well as "in any other case where the court deems it just and equitable that attorney's fees ... be recovered," and We so deem it just and equitable in the present case, considering the "exceptional" circumstances obtaining therein, particularly the bad faith with which defendant's agent had acted, the place where and the conditions under which Rafael Zulueta was left at Wake Island, the absolute refusal of defendant's manager in Manila to take any step whatsoever to alleviate Mr. Zulueta's predicament at Wake and have him brought to Manila — which, under their contract of carriage, was defendant's obligation to discharge with "extra-ordinary" or "utmost" diligence — and, the "racial" factor that had, likewise, tainted the decision of defendant's agent, Capt. Zentner, to off-load him at Wake Island.

As regards the evidence necessary to justify the sum of P75,000 awarded as attorney's fees in this case, suffice it to say that the quantity and quality of the services rendered by plaintiffs' counsel appearing on record, apart from the nature of the case and the amount involved therein, as well as his prestige as one of the most distinguished members of the legal profession in the Philippines, of which judicial cognizance may be taken, amply justify said award, which is a little over 10% of the damages (P700,000) collectible by plaintiffs herein. Indeed, the attorney's fees in this case is proportionally much less than that adjudged in Lopez v. PANAM 16 in which the judgment rendered for attorney's fees (P50,000) was almost 20% of the damages (P275,000) recovered by the plaintiffs therein.

The defense assails the last part of the decision sought to be reconsidered, in which — relying upon Article 172 of our Civil Code, which provides that "(t)he wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law," and it is not claimed that this is one of such cases — We denied a motion, filed by Mrs. Zulueta, for the dismissal of this case, insofar as she is concerned - she having settled all her differences with the defendant, which appears to have paid her the sum of P50,000 therefor - "without prejudice to this sum being deducted from the award made in said decision." Defendant now alleges that this is tantamount to holding that said compromise agreement is both effective and ineffective.

This, of course, is not true. The payment is effective, insofar as it is deductible from the award, and, because it is due (or part of the amount due) from the defendant, with or without its compromise agreement with Mrs. Zulueta. What is ineffective is the compromise

35


ASSIGNMENT NO .3

agreement, insofar as the conjugal partnership is concerned. Mrs. Zulueta's motion was for the dismissal of the case insofar as she was concerned, and the defense cited in support thereof Article 113 of said Code, pursuant to which "(t)he husband must be joined in all suits by or against the wife except: ... (2) If they have in fact been separated for at least one year." This provision, We held, however, refers to suits in which the wife is the principal or real party in interest, not to the case at bar, "in which the husband is the main party in interest, both as the person principally aggrieved and as administrator of the conjugal partnership ... he having acted in this capacity in entering into the contract of carriage with PANAM and paid the amount due to the latter, under the contract, with funds of the conjugal partnership," to which the amounts recoverable for breach of said contract, accordingly, belong. The damages suffered by Mrs. Zulueta were mainly an in accident of the humiliation to which her husband had been subjected. The Court ordered that said sum of P50,00 paid by PANAM to Mrs. Zulueta be deducted from the aggregate award in favor of the plaintiffs herein for the simple reason that upon liquidation of the conjugal partnership, as provided by law, said amount would have to be reckoned with, either as part of her share in the partnership, or as part of the support which might have been or may be due to her as wife of Rafael Zulueta. It would surely be inane to sentence the defendant to pay the P700,000 due to the plaintiffs and to direct Mrs. Zulueta to return said P50,000 to the defendant.

In this connection, it is noteworthy that, for obvious reasons of public policy, she is not allowed by law to waive her share in the conjugal partnership, before the dissolution thereof. 17 She cannot even acquire any property by gratuitous title, without the husband's consent, except from her ascendants, descendants, parents-in-law, and collateral relatives within the fourth degree. 18

It is true that the law favors and encourages the settlement of litigations by compromise agreement between the contending parties, but, it certainly does not favor a settlement with one of the spouses, both of whom are plaintiffs or defendants in a common cause, such as the defense of the rights of the conjugal partnership, when the effect, even if indirect, of the compromise is to jeopardize "the solidarity of the family" — which the law 19 seeks to protect — by creating an additional cause for the misunderstanding that had arisen between such spouses during the litigation, and thus rendering more difficult a reconciliation between them.

It is urged that there is no proof as to the purpose of the trip of the plaintiffs, that neither is there any evidence that the money used to pay the plane tickets came from the conjugal funds and that the award to Mrs. Zulueta was for her personal suffering or injuries. There was, however, no individual or specific award in favor of Mrs. Zulueta or any of the plaintiffs. The award was made in their favor collectively. Again, in the absence of said proof, the presumption is that the purpose of the trip was for the common benefit of the plaintiffs and that the money had come from the conjugal funds, for, unless there is proof to the contrary, it is presumed "(t)hat things have happened according to the ordinary course of nature and the ordinary habits of life." 20 In fact Manresa maintains 21 that they are deemed conjugal, when the source of the money used therefor is not established, even if the purchase had been made by the wife. 22 And this is the rule obtaining in the Philippines. Even property registered, under the Torrens system, in the name of one of the spouses, or in that of the wife only, if acquired during the marriage, is presumed to belong to the conjugal partnership, unless there is competent proof to the contrary. 23

PANAM maintains that the damages involved in the case at bar are not among those forming part of the conjugal partnership pursuant to Article 153 of the Civil Code, reading:

ART. 153. The following are conjugal partnership property:

(1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;

(2) That which is obtained by the industry, or work, or as salary of the spouses, or of either of them;

(3) The fruits, rents or interests received or due during the marriage, coming from the common property or from the exclusive property of each spouse.

Considering that the damages in question have arisen from, inter alia, a breach of plaintiffs' contract of carriage with the defendant, for which plaintiffs paid their fare with funds presumably belonging to the conjugal partnership, We hold that said damages fall under paragraph (1) of said Article 153, the right thereto having been "acquired by onerous title

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ASSIGNMENT NO .3

during the marriage ... ." This conclusion is bolstered up by Article 148 of our Civil Code, according to which:

ART. 148. The following shall be the exclusive property of each spouse:

(1) That which is brought to the marriage as his or her own;

(2) That which each acquires, during the marriage, by lucrative title;

(3) That which is acquired by right of redemption or by exchange with other property belonging to only one of the spouses;

(4) That which is purchased with exclusive money of the wife or of the husband.

The damages involved in the case at bar do not come under any of these provisions or of the other provisions forming part of Chapter 3, Title VI, of Book I of the Civil Code, which chapter is entitled "Paraphernal Property." What is more, if "(t)hat which is acquired by right of redemption or by exchange with other property belonging to only one of the spouses," and "(t)hat which is purchased with exclusive money of the wife or of the husband," 24 belong exclusively to such wife or husband, it follows necessarily that that which is acquired with money of the conjugal partnership belongs thereto or forms part thereof. The rulings in Maramba v. Lozano 25 and Perez v. Lantin, 26 cited in defendant's motion for reconsideration, are, in effect, adverse thereto. In both cases, it was merely held that the presumption under Article 160 of our Civil Code — to the effect that all property of the marriage belong to the conjugal partnership — does not apply unless it is shown that it was acquired during marriage. In the present case, the contract of carriage was concededly entered into, and the damages claimed by the plaintiffs were incurred, during marriage. Hence, the rights accruing from said contract, including those resulting from breach thereof by the defendant, are presumed to belong to the conjugal partnership of Mr. and Mrs. Zulueta. The fact that such breach of contract was coupled, also, with a quasi-delict constitutes an aggravating circumstance and can not possibly have the effect of depriving the conjugal partnership of such property rights.

Defendant insists that the use of conjugal funds to redeem property does not make the property redeemed conjugal if the right of redemption pertained to the wife. In the absence, however, of proof that such right of redemption pertains to the wife — and there is no proof that the contract of carriage with PANAM or the money paid therefor belongs to Mrs. Zulueta — the property involved, or the rights arising therefrom, must be presumed, therefore, to form part of the conjugal partnership.

It is true that in Lilius v. Manila Railroad Co., 27 it was held that the "patrimonial and moral damages" awarded to a young and beautiful woman by reason of a scar — in consequence of an injury resulting from an automobile accident — which disfigured her face and fractured her left leg, as well as caused a permanent deformity, are her paraphernal property. Defendant cites, also, in support of its contention the following passage from Colin y Capitant:

No esta resuelta expresamente en la legislacion española la cuestion de si las indemnizaciones debidas por accidentes del trabaho tienen la consideracion de gananciales, o son bienes particulares de los conyuges.

Inclinan a la solucion de que estas indemnizaciones deben ser consideradas como gananciales, el hecho de que la sociedad pierde la capacidad de trabajocon el accidente, que a ella le pertenece, puesto que de la sociedad son losfrutos de ese trabajo; en cambio, la consideracion de que igual manera que losbienes que sustituyen a los que cada conyuge lleva al matrimonio como propiostienen el caracter de propios, hace pensar que las indemnizaciones que vengana suplir la capacidad de trabajo aportada por cada conyuge a la sociedad, debenser juridicamente reputadas como bienes propios del conyuge que haya sufrido elaccidente. Asi se llega a la misma solucion aportada por la jurisprudencia francesca. 28

This opinion is, however, undecisive, to say the least. It should be noted that Colin y Capitant were commenting on the French Civil Code; that their comment referred to indemnities due in consequence of "accidentes del trabajo "resulting in physical injuries sustained by one of the spouses (which Mrs. Zulueta has not suffered); and that said commentators admit that the question whether or not said damages are paraphernal property or belong to the conjugal partnership is not settled under the Spanish law. 29 Besides, the French law and jurisprudence

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ASSIGNMENT NO .3

— to which the comments of Planiol and Ripert, likewise, refer — are inapposite to the question under consideration, because they differ basically from the Spanish law in the treatment of the property relations between husband and wife. Indeed, our Civil Code, like the Spanish Civil Code, favors the system of conjugal partnership of gains. Accordingly, the former provides that, "(i)n the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains ... shall govern the property relations between" the spouses. 30 Hence, "(a)ll property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife." 31

No similar rules are found in the French Civil Code. What is more, under the provisions thereof, the conjugal partnership exists only when so stipulated in the "capitulaciones matrimoniales" or by way of exception. In the language of Manresa —

Prescindimos de los preceptos de los Condigos de Francia, Italia, Holanda, Portugal, Alemania y Suiza, porsue solo excepcionalmente, o cuando asi se pacta en las capitulaciones, admiten el sistema de gananciales. 32

Again, Colin y Capitant, as well as the Lilius case, refer to damages recovered for physical injuries suffered by the wife. In the case at bar, the party mainly injured, although not physically, is the husband.

Accordingly, the other Philippine cases 33 and those from Louisiana — whose civil law is based upon the French Civil Code — cited by the defendant, which similarly refer to moral damages due to physical injuries suffered by the wife, are, likewise, inapplicable to the case at bar.

We find, therefore, no plausible reason to disturb the views expressed in Our decision promulgated on February 29, 1972.

WHEREFORE, the motions for reconsideration above-referred to should be, as they are hereby denied.

Makalintal, Zaldivar, Fernando, Makasiar, Antonio and Esguerra, JJ., concur.

Castro and Teehankee, JJ., took no part.

Barredo, J., voted to modify the judgment by reducing the amount of the awarded damages and individualizing the same, and now reserves the filing of a separate concurring and dissenting opinion in support of his vote.

G.R. No. L-61418 September 24, 1987

KOREAN AIRLINES CO., LTD., petitioner, vs.HON. COURT OF APPEALS, THE HON. EDUARDO C. TUTAAN, Presiding Judge, Court of First Instance of Rizal, Branch V. Quezon City, AZUCENA and JANUARIO TOMAS, respondents.

CRUZ, J.:

This is one of the many cases that have unnecessarily clogged the dockets of this Court because they should not have been brought to us in the first place.

The issues are mainly factual. They have been resolved by the trial court, which has been affirmed by the respondent court, except as to the award of damages, which has been reduced. We see no reason why the decision had to be elevated to us.

Time and again we have stressed that this Court is not a trier of facts. 1 We leave these matters to the lower courts, which have more opportunity and facilities to examine these matters. We have no jurisdiction as a rule to reverse their findings. 2 The exception invoked is that there is a clear showing of a grave abuse of discretion on their part, but we do not see it here.

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ASSIGNMENT NO .3

We are satisfied from the findings of the respondent court (and of the trial court) that the private respondent was, in the language of the airline industry, "bumped off." She had a confirmed ticket. She arrived at the airport on time. However, she was not allowed to board because her seat had already been given to another passenger. As a result, she suffered damages for which the petitioner should be held liable.

Specifically, petitioner Korean Airlines (hereinafter called KAL) issued to Azucena Tomas a plane ticket to Los Angeles, California, U.S.A., on Flight No. KE 612 departing from the Manila International Airport on July 29, 1977, at 2:20 p.m. She paid the fare of P2,587.88 3 She and her husband arrived at the KAL check-in counter at 1.:50 p.m. of that date 4 and presented her ticket to Augusto Torres, Jr., who was in charge. Torres refused to check her in, saying that the Immigration Office was already closed. 5 Januario Tomas, her husband, rushed to the said office, which was still open, and was told by the immigration officer on duty that his wife could still be cleared for departure. Januario rushed back to Torres to convey this information and asked that his wife be checked in. Torres said this was no longer possible because her seat had already been given to another passenger. His reason was that Azucena had arrived late and had not checked in within forty minutes before departure time. 6

There is no evidence in the record of any rule requiring passengers to check in at least forty minutes before departure time, as invoked by Torres. KAL admits that it has not been able to cite any statutory or administrative requirement to this effect. 7 In fact, the alleged rule is not even a condition of the plane ticket purchased by Azucena.

At the same time, KAL invokes the memorandum-circular of February 24, 1975, issued by the Commission on Immigration and Deportation which says that "all passengers authorized to leave for abroad shall be required to check in with the Immigration Departure Control Officer at least thirty minutes before the scheduled departure." The record shows that Azucena was ready to comply.

If, as Torres said, he gave Azucena's seat to a chance passenger thirty-eight minutes before departure time 8 instead of waiting for Azucena, then he was intentionally violating the said circular. Significantly, it was proved he was not telling the truth when he said the Immigration Office was already closed although it was in fact still open at the time the private respondents arrived. Moreover, the immigration officer on duty expressed his willingness to clear Azucena

Tomas for departure, thus indicating that she was well within the provisions of the memorandum-circular. Torres' refusal to check her in was clearly unjustified.

As it appeared later, the real reason why she could not be checked in was not her supposed tardiness but the circumstance that Torres had prematurely given her seat to a chance passenger. That person certainly had less right to prior accommodation than the private respondent herself.

The claim that the real party in interest is the Gold N. Apparel Manufacturing Corporation and not the private respondent 9 is also untenable. Counsel for Azucena Tomas declared at the trial that she was suing in her personal capacity. 10 In testifying about her participation in the said corporation, she was only stressing her status as a respected and well-connected businesswoman to show the extent of the prejudice caused to her interests by the unjustified acts of the petitioner.

It is clear that the petitioner acted in bad faith in violating the private respondent's rights under their contract of carriage and is therefore liable for the injuries she has sustained as a result. We agree with the Court of Appeals, however, that the award should be reduced to P50,000.00 for actual and compensatory damages, P30,000.00 for moral damages, and P20,000.00 for attorney's fees, the exemplary damages to be eliminated altogether.

WHEREFORE, the appealed decision of the respondent court is AFFIRMED in toto, with costs against the petitioner.

SO ORDERED.

Teehankee, C.J., Narvasa and Paras, JJ., concur.

Gancayco, J., is on leave.

G.R. No. 50504-05 August 13, 1990 chanrobles virtual law library

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ASSIGNMENT NO .3

PHILIPPINE AIRLINES, INC., Petitioner, chanrobles virtual law library

vs.

COURT OF APPEALS, ADELINA BAGADIONG and ROSARIO STO. TOMAS, Respondents.

Ricardo V. Puno, Jr., Wilfredo M. Chato & Marceliano C. Calica for petitioner.chanroblesvirtualawlibrary chanrobles virtual law library

Antonio N. Gerona for private respondents.chanroblesvirtualawlibrary chanrobles virtual law library

Romeo N. Gumba for Sto. Tomas.

chanrobles virtual law library

REGALADO, JR.:

Petitioner seeks the review of the decision of the Court of Appeals, 1 promulgated on April 25, 1979 in CA-G.R. Nos. 58345-46-R, affirming with modifications the decision of the Court of First Instance of Camarines Sur, Branch 1, under the following decretal portion:

WHEREFORE, the dispositive part of the decision appealed from is modified as follows: chanrobles virtual law library

WHEREFORE, judgment is hereby rendered: chanrobles virtual law library

(A) Defendant Philippine Airlines, Inc. in Civil Case No. 7047, is ordered to pay the plaintiffs, Adelina Bagadiong and Rosario Sto. Tomas, the sum of P30,000.00, Philippine Currency, each, as moral damages and exemplary damages; and the sum of P6,000.00, Philippine Currency, as attorney's fees; chanrobles virtual law library

(B) Defendant Philippine Airlines, Inc. in Civil Case No. 7307 is ordered to pay the plaintiff Ladislao Santos the sum of P30,000.00, Philippine Currency, as moral damages and exemplary damages; and the sum of P6,000.00, Philippine Currency, as attorney's fees; chanrobles virtual law library

(C) To pay the plaintiffs the interest at the legal rate of 6% per annum on moral and exemplary damages aforestated, from the date of this amended decision until said damages are fully paid; chanrobles virtual law library

(D) Defendants are further ordered to pay the costs of these suits. The counter-claim(s) of defendant in both cases are dismissed.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED 2 chanrobles virtual law library

On December 11, 1970, private respondents Adelina Bagadiong and Rosario Sto. Tomas, filed an action for damages against petitioner in the Court of First Instance of Camarines Sur, docketed therein as Civil Case No. 7047. On May 18, 1972, a similar action, Civil Case No. 7307, was filed in the same court by the other private respondent, Ladislao Santos. On February 9, 1973, considering that these two cases arose from the same incident and involved the same defendant and counsel for plaintiffs in both cases, a joint hearing of these cases was ordered and conducted by the lower court upon motion of both parties. 3 chanrobles virtual law library

Considering the significant role of evidentially-supported factual findings of the lower courts in the decisional processes of appellate courts, we find it necessary to reproduce the same, as reported in these cases by respondent court, together with the proceedings in the court a quo:

The amended complaint in Civil Case No. 7047 alleges, inter alia, that on November 16, 1970, plaintiffs Adelina Bagadiong and Rosario Sto. Tomas, now appellees, made reservations with, and bought two plane tickets from, defendant (Naga City branch station), now appellant, a common carrier engaged in the business of transporting passengers by air for compensation, for Naga-Manila flight on November 26, 1970; that on November 24, 1970, plaintiffs went back to defendant Naga City branch station and paid the fare for two round trip

40


ASSIGNMENT NO .3

tickets; that plaintiffs were not only issued their round trips tickets, but also their reservation in defendant's 3:40 o'clock afternoon Naga-Manila flight on November 26, 1970 were expressly confirmed by the Naga City branch station; that at three o'clock in the afternoon of November 26, 1970, or forty-five minutes before the scheduled departure time of the Naga-Manila flight, plaintiffs checked in at the Pili airport counter of defendant and there the latter's agent or employees got the tickets of the plaintiffs allegedly for the purpose of issuing to them a boarding pass; that few minutes before departure time, plaintiffs' luggage was loaded to (sic) the plane, but plaintiffs were not given back their tickets and were not allowed by defendant's agent or employees to board the plane; and that after the plane had taken off from the Pili airport with the luggage of plaintiffs, in spite of their complaint, all that defendant's agent or employees did at the Naga City branch station was to refined plaintiffs' fares.chanroblesvirtualawlibrary chanrobles virtual law library

Contending that defendant common carrier acted in bad faith in the breach of its contract with them, plaintiffs claimed for moral damages "in the amount of no less than P10,000.00 each," exemplary damages and actual damages. It is prayed that defendant be ordered to pay plaintiffs, among others, "the sum of P20,000.00 for moral damages" and P6,000.00 by way of expenses of litigation including attorney's fees.chanroblesvirtualawlibrary chanrobles virtual law library

In Civil Case No. 7307, the complaint alleges, among others, that on November 24, 1970, when plaintiff Ladislao Santos, now appellee, bought a plane ticket at the branch station of defendant in Naga City for Flight 296 from Naga to Manila scheduled on the afternoon of November 26, 1970, he was assured by the employees of defendant that his reservation for the flight was confirmed; that at two o'clock in the afternoon of November 29, 1970, one hour and forty minutes before the scheduled departure time of Fligth 296, plaintiff checked in at the Pili airport counter and then and there the employees of defendant asked for his ticket, allegedly for the purpose of issuing to him a boarding pass; that about three minutes before departure of Flight 296, the ticket was returned to plaintiff by defendants employee, informing him that there was no more seat available and he could not ride on that flight to Manila; that the employees of the defendant acted rudely and discourteously to his embarrassment in the presence of so many people who were at the airport at that time; that it was very important and urgent for plaintiff to be in Manila on the afternoon of November 26, 1970, because he had an appointment with an eye specialist for medical treatment of his eye and he and his brother were "to close a contract they entered into to supply shrimps to some restaurants and

market vendors in Manila; and that he and his brother failed to close the contract to supply shrimps, as it was on December 1, 1970, that he was finally able to reach Manila by train.chanroblesvirtualawlibrary chanrobles virtual law library

Likewise, claiming that defendant acted in bad faith in the breach of its contract with him, plaintiff Ladislao Santos has claimed for moral damages "in the amount of no less than P70,000.00," exemplary damages and actual damages in "the sum of P20,000.00 . . . which include(s) attorney's fees and expenses of litigation." chanrobles virtual law library

In its answer to the amended complaint, as well as to the complaint of other plaintiff-appellee, defendant-appellant common carrier interposed, among others, the following common special and affirmative defenses: that the aircraft used for Flight 296R/26 November 1970 (Virac-Naga-Manila) is a 44-seater; that due to the cancellation of its morning flight from Virac, some of its passengers for said flight took Flight 296R; that on the representations of Governor Alberto of Catanduanes, one of those manifested in the cancelled morning flight, its (defendant's) employees at its Virac station were constrained "to allow the Governor to take Flight 296R together with several companions" with the assurance of the Governor that two (2) of his companions would deplane in Naga; that on arrival in Naga, the two companions of the Governor refused to deplane despite repeated pleas and entreaties of its employees; that unable to persuade the two Virac passengers to deplane in Naga and "compelled by a reasonable and well-grounded fear that an untoward incident may ensue should the two (2) be forced to leave the aircraft," its employee "had to act in a manner dictated by the circumstances and by reasons of safety both of the passenger and the aircraft and crew;" that its failure to carry plaintiffs on board the plane "was necessitated by reason of safety and/or compliance with applicable lawsregulations, or orders, and the same are valid grounds for refusal to carry plaintiffs in accordance with its Domestic Passenger Tariff No. 2 (Section A, Rule 8[a]) which is incorporated by reference into the conditions of carriage as expressly provided for in plaintiffs" plane tickets; and that the error of its employees was an honest mistake or constitutes excusable negligence.chanroblesvirtualawlibrary chanrobles virtual law library

After trial on the merits, specifically on June 25, 1975, the lower court rendered a decision which, in part, is herein reproduced as follows: chanrobles virtual law library

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ASSIGNMENT NO .3

From the foregoing, the Court is of the opinion that: chanrobles virtual law library

(a) There was a contract of carriage to furnish plaintiffs passage from Naga (Pili airport) to Manila on Flight 296R on the afternoon of November 26, 1970.chanroblesvirtualawlibrary chanrobles virtual law library

(b) The said contract was breached when defendant failed to accommodate plaintiffs in Flight 296R.chanroblesvirtualawlibrary chanrobles virtual law library

(c) The breach of contract of carriage was in bad faith even granting the mistakes advanced by the defendant the same would still amount to negligence so gross and reckless as to amount to malice and/or bad faith.chanroblesvirtualawlibrary chanrobles virtual law library

(d) Due to the acts of the employees of the defendant in "bumping off the plaintiffs, the latter suffered embarrassment and humiliations, thereby causing them mental anguish, serious anxiety, wounded feeling and social humiliation, resulting in moral damages.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, judgment is hereby entered: chanrobles virtual law library

(a) Ordering the defendant in Civil Case No. 7047 to pay plaintiff Adelina Bagadiong the sum of P10,000.00, as moral damages; to pay plaintiff Rosario Sto. Tomas the sum of P10,000.00 as moral damages; to pay each plaintiff the sum of P10,000.00 by way of exemplary damages, and the sum of P6,000.00 as attorney's fees; chanrobles virtual law library

(b) Ordering the defendant in Civil Case No. 7307 to pay plaintiff Ladislao Santos the sum of P60,000.00 for moral damages; P20,000.00 by way of actual damages; the sum of P10,000.00 as exemplary damages and P6,000.00 for attorney's fees; chanrobles virtual law library

(c) Interest at the legal rate of 6% per annum on the moral and exemplary damages aforestated, from the date of this decision until said damages are fully paid; chanrobles virtual law library

(d) Ordering the defendant to pay the costs of these suits. Counterclaim of the defendant in both cases are hereby dismissed.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.chanroblesvirtualawlibrary chanrobles virtual law library

Under date of July 19, 1975, plaintiffs in Civil Case No. 7047 filed a Motion for Reconsideration of the decision, . . .

xxx xxx xxx chanrobles virtual law library

On July 30, 1975, the lower court granted the motion for reconsideration in its order which, in part states: chanrobles virtual law library

In the case of Ortigas vs. Lufthansa (Case Digest of the Bulletin issue of July 19, 1975), the Supreme Court, speaking thru Mr. Justice Antonio P. Barredo, increased the moral damages awarded to Ortigas by the CFI of Manila from P100,000.00 to P150,000.00 and the exemplary damages from P30,000.00 to P100,000.00. The ground of the Supreme Court in ordering the increase of the exemplary damages from P30,000.00 to P100,000.00, was that, "the airline should be made to pay an amount that can really serve as a deterrent against a seeming pattern of indifference and unconcern, and what is worse, of discrimination for racial reasons, discernible in the treatment of air passengers." chanrobles virtual law library

In the present case, this Court found clear evidence of discrimination by employees of the Philippine Airlines (PAL) when for unexplained and unwarranted reasons - evidently the desire to cater to the good graces of a "politico" - they unceremoniously "bumped off herein plaintiffs from the flight.

xxx xxx xxx chanrobles virtual law library

The dispositive part of the decision of this Court on these Civil Cases Nos. 7047 and 7304 dated July 1, 1975 is hereby amended and to read as follows, to wit:

Wherefore, judgment is hereby rendered:

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ASSIGNMENT NO .3

(A) Defendant Philippine Airlines, Inc., in Civil Case No. 7047, is ordered to pay the plaintiffs, Adelina Bagadiong and Rosario Sto. Tomas, the sum of P60,000.00, Philippine Currency, each as moral damages; the sum of P60,000.00, Philippine Currency, each, by way of exemplary damages, and the sum of P10,000.00, Philippine Currency, as attorney's fees; chanrobles virtual law library

(B) Defendant Philippine Airlines, Inc., in Civil Case No. 7307 is ordered to pay the plaintiff Ladislao Santos the sum of P60,000.00, Philippine Currency, as moral damages; the sum of P20,000.00, Philippine Currency, by way of actual damages; the sum of P60,000.00, Philippine Currency, as exemplary damages, and the sum of P10,000.00, Philippine Currency, as attorney's fees; chanrobles virtual law library

(C) To pay the plaintiffs the interest at the legal rate of 6% per annum on moral and exemplary damages aforestated, from the date of this amended decision until said damages are fully paid.chanroblesvirtualawlibrary chanrobles virtual law library

(D) Defendants are further ordered to pay the coasts of these suits. The counter-claims of defendant in both cases are dismissed.

SO ORDERED 4

As earlier stated, on appeal respondent court affirmed with modifications said decision of the lower court. Hence, this petition raising the following questions: chanrobles virtual law library

1. Is a passenger in a contract of air transportation entitled to moral damages when the failure of the carrier to accommodate the passenger resulted from unlawful acts of third parties against the carrie's personnel? chanrobles virtual law library

2. Are respondents entitled to exemplary damages when there is no sufficient evidence to show, and neither the appellate court nor the trial court found facts showing reckless, oppressive or malevolent conduct by the carrier? chanrobles virtual law library

3. Can a passenger in a contract of air transportation validly claim damages when she could have taken the flight had she not instead opted, of her own volition, to give her confirmed seat to another passenger who was accommodated by the carrier in her place? chanrobles virtual law library

4. May a trial court, in a motion for reconsideration, increase the damages it awarded in the original decision to an amount drastically over that it initially found to be warranted and significantly more than claimed by plaintiffs themselves? 5 chanrobles virtual law library

We have constantly ruled in a number of cases that moral damages are recoverable in a breach of contract of carriage where the air carrier through its agents acted fraudulently or in bad faith. 6 In the case at bar, the trial court and the Court of Appeals are in agreement that petitioner through its agents acted in bad faith in "bumping off" private respondents. As aptly found by the Court of Appeals, the failure of petitioner to accommodate private respondents was not the result of an honest mistake, because its employees knew and were aware that what they were doing was wrong. Hence, respondent court held that there was a "dishonest purpose" and "conscious doing of wrong" on the part of petitioner's employees in "bumping off" private respondents from the flight; and that the lower court did not err in holding that the failure of petitioner to accommodate private respondents on Flight 296R was attended by bad faith. 7 chanrobles virtual law library

The said pronouncement was based on the following findings in the decision of the trial court, which we are not inclined to disturb, the same having evidentiary foundation:

The employees of the defendant knew that there was a heavy booking of passengers on November 26, 1970 because of the coming of the Pope. Why did the Virac station overbooked (sic) two passengers, Gov. Alberto and Mayor Antonio, on Flight 296R, knowing all the time that these two passengers could not possibly obtain confirmed reservations in Naga? Knowing further the political stature of Gov. Alberto, Mr. Borjal, the branch supervisor of Virac, should had (sic) foreseen that should Gov. Alberto and Mayor Antonio refuse to deplane in Naga, should they failed to obtain confirmed reservations he, (Borjal) would create a situation wherein the defendant would be placed in a position to violate its contract of carriage with passengers with confirmed reservations who would not be accommodated because of Gov. Alberto and Mayor Antonio. This whole incident could have been avoided had Borjal not

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ASSIGNMENT NO .3

recklessly took (sic) a chance on the two overbooked passengers in getting confirmed reservation in Naga.chanroblesvirtualawlibrary chanrobles virtual law library

The situation was, however, aggravated by the employees of the defendant at Pili airport, particularly Mr. Azuela who seemed to be the one who was making decisions at the airport. Knowing already that Flight 296R was overbooked by two passengers and the allocations in Legaspi and Naga were also fully booked of passengers with confirmed reservations and plaintiffs were begging and pleading to be allowed to take Flight 296R as they had confirmed reservations and the luggage of Mrs. Bagadiong and Miss Sto. Tomas were already loaded in the plane, Mr. Azuela and his co- employees still allowed and gave preference to the two passengers (Fr. Laban and Miss Franca) to board and take Flight 296R notwithstanding the fact that Mr. Azuela and his co-employees at the airport knew and was (sic) aware at that time that the Sorsogon branch had no allocation in Flight 296R and that the flight of the Sorsogon passengers was already cancelled earlier. The employees of the defendant knowingly and deliberately disregarded the rights of the plaintiffs to board the plane and took (sic) Flight 296R by virtue of their being holders of tickets duly issued and paid for with confirmed reservations on Flight 296R. The employees of the defendant knew that by not allowing the plaintiffs to take Flight 296R they were violating the contract of carriage the defendant had with the plaintiffs. Even granting all the mistakes advanced by the defendant, still there would at least be negligence so gross and reckless that it amounts to malice or bad faith in its breach of contract with the plaintiffs (Lopez, et al. versus Pan American World Airways, No. L-22415, March 30, 1966, citing Fores vs. Miranda L-12163, March 4, 1959; Necesito vs. Paras, L-10605, June 30, 1958 16 SCRA 431).chanroblesvirtualawlibrary chanrobles virtual law library

The argument that the Sorsogon passengers arrived first and checked in earlier than the plaintiffs at the airport ticket counter of the defendant is not a valid reason to give them preference over the plaintiffs considering that the latter had confirmed reservations and they arrived on time at the airport and checked in at the defendant's ticket counter. If issuance of tickets duly paid for and with confirmed reservations is no guarantee that the passengers to whom it is (sic) issued would be accommodated, then air passengers would be placed in the hollow of the hands of the airlines and its employees. What security then can a passenger have? . . . 8 chanrobles virtual law library

In the case of Korean Airlines, Co., Ltd. vs. Hon. Court of Appeals, et al., 9 with a similar factual setting, we held:

We are satisfied from the findings of the respondent court (and of the trial court) that the private respondent was, in the language of the airline industry, "bumped off". She had a confirmed ticket. She arrived at the airport on time. However, she was not allowed to board because her seat had already been given to another passenger. As a result, she suffered damages for which the petitioner should be held liable.

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 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. Neglect or malfeasance of the carrier's employees naturally could give ground for an action for damages. 10 chanrobles virtual law library

The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of the passengers. In case of breach in bad faith of a contract of carriage, award of damages is in order. We have ruled that bad faith which would justify an award of moral and exemplary damages for breach of contract of carriage means a breach of a known duty through some motive of interest or illwill. 11 That pronouncement is applicable to these cases.chanroblesvirtualawlibrary chanrobles virtual law library

The contention of petitioner that its failure to accommodate private respondents was due to the unlawful acts of third persons and, constitutes caso fortuito, is untenable. To constitute a caso fortuito that would exempt a person from responsibility, it is essential that (a) the event must be independent of the will of the obligor; (b) it must be either unforseeable or inevitable; (c) its occurrence renders it impossible for the obligor to fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation in the aggravation of the injury resulting to the obligee or creditor. 12 chanrobles virtual law library

One essential characteristic of a fortuitous event is that it was independent of the will of the obligor or of his employees, which fact is lacking in this case. The alleged fortuitous event,

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ASSIGNMENT NO .3

supposedly consisting of the unlawful acts of Governor Alberto and Mayor Antonio, is not independent of the will of herein petitioner as the obligor but was caused by the very act of its agents in allowing the governor and the mayor to board Flight 296R in excess of the number of passengers allotted to them and with full knowledge that the said flight for Manila was fully booked. The impossibility of their being accommodated was necessarily forseeable. The claim of petitioner that there was a prior arrangement between its agent in Virac and the governor and the mayor that the latter would be accommodated only up to Naga is belied by the passengers' manifest wherein it is stated that the place of destination of both the governor and the mayor was Manila . 13 chanrobles virtual law library

Again, we quote respondent Court of Appeals:

The fear spoken of by witness Azuela is speculative, fanciful and remote. The statement attributed to Governor Alberto and/or the mayors, that "if we cannot board the plane there will be something that will happen," is vague. The threat, if ever it was, was not of such a serious character and imminence as to create in the mind of defendant-appellant's employees fear of greater injury if they would not allow Governor Alberto and the mayors to remain in the plane which was then scheduled to fly to Manila. It is difficult to believe that Governor Alberto and the mayors would make any threat or intimidation to keep their seats in the plane. They were provincial and municipal executives with a common duty to maintain peace and order and to prevent the commission of crimes. The cited cases involving Hukbalahaps and robbers are misplaced, because they are known to be ruthless killers, whose intimidation or the violence they employed is sufficient to produce in the mind of their victims real, imminent or reasonable fear. As correctly observed by the lower court from the evidence of record, defendant-appellant's employees "bumped off plaintiffs from the flight in their desire" "to cater to the good graces of a politico" (Governor Alberto). 14 chanrobles virtual law library

Petitioner's agents, by giving permission to board Flight 296R to persons who were not among those with valid confirmations and who consequently had no right to be given preference in taking said flight, deliberately created a situation that would place, as it did place, petitioner in arrant violation of its contract with private respondents who were "bumped off" by reason thereof. Petitioner, having unlawfully deprived private respondents of their seats, without any regard at all to their feelings and convenience just so it could accommodate other persons who had no better right thereto, cannot now relieve itself from liability by

invoking a fortuitous event, a defense as erroneous as it is contrived.chanroblesvirtualawlibrary chanrobles virtual law library

As we stressed in Ortigas, Jr. vs. Lufthansa German Airlines. 15

. . . Nobody, much less a common carrier who is under constant special obligation to give utmost consideration to the convenience of its customers, may be permitted to relieve itself from any difficult situation created by its own lack of diligence in the conduct of its affairs in a manner prejudicial to such customers. It is Our considered view that when it comes to contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passengers 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. . . .

We, therefore, find no error on the part of respondent Court of Appeals in awarding moral and exemplary damages as well as attorney's fees. The findings that petitioner had breached its contract of carriage in bad faith and in wanton disregard of private respondents' rights as passengers lay the basis and justification for such awards. The imposition of exemplary damages is necessary to deter petitioner or other airlines from committing similar breaches of contract in the future, although there are still reported instances thereof.chanroblesvirtualawlibrary chanrobles virtual law library

With respect to the third issue, we also find the same to be without merit for being based on specious and strained reasoning. The fact that respondent Bagadiong relinquished her seat in favor of her son is of no moment, considering that her son was also a confirmed passenger who had a right to demand accommodation from petitioner. As noted by respondent court, the act of respondent Bagadiong was motivated solely by her concern for her son who also risked being denied accommodation but who was then returning to school in Manila. Such sacrifice was not voluntary on her part, and her inability to take the fligth was the consequence of the wrongful act of petitioner's employees for which it has to answer. 16 chanrobles virtual law library

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ASSIGNMENT NO .3

On the last issue regarding the propriety of the lower court's increasing the award of damages it awarded in the original decision, petitioner's allegation that respondent court passed upon the matter sub silentio is not correct.chanroblesvirtualawlibrary chanrobles virtual law library

Respondent court precisely resolved said issue by modifying the decision of the lower court, awarding each respondent instead an aggregate amount of P30,000.00 as moral and exemplary damages, plus P6,000.00 as attorney's fees. The award of moral and exemplary damages in an aggregate amount may not be the usual way of awarding said damages. However, there can be no question that the entitlement to moral damages having been established, exemplary damages may be awarded; and exemplary damages may be awarded even though not so expressly pleaded in the complaint nor proved . 17 chanrobles virtual law library

Nor can petitioner accurately claim that the award made by respondent court exceeded the amounts prayed for by respondents Bagadiong and Sto. Tomas in their complaint. A reading of said complaint shows that only their claims for moral damages and attorney's fees were limited to P20,000.00 and P6,000.00, respectively; the award of exemplary damages was left to the discretion of the lower court. 18 chanrobles virtual law library

The amount of exemplary damages need not be pleaded in the complaint because the same cannot be predetermined. 19 One can merely ask that it be determined by the court as the evidence may warrant and be awarded at its discretion. This is exactly what private respondents did. Awards for moral and exemplary damages, as well as attorney's fees are left to the sound discretion of the court. 20 Such discretion, if wen exercised, will not be disturbed on appeal. 21 chanrobles virtual law library

Parenthetically, in a special appearance "only for the purpose of the filing of this notice of death of party' received by the Court on May 22, 1990, 22 Atty. Romeo M. Gumba submitted a certified true copy of the death certificate of private respondent Rosario Sto. Tomas, attesting to her death on January 20, 1988, with said counsel informing the Court that decedent's surviving heirs are Salvacion Sto. Tomas Gerona and Cecilia Sto. Tomas Pardo, both with addresses at Monterey Subdivision, Naga City. This matter should be taken into account in the executory processes consequent to this decision.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, the assailed decision of respondent Court of Appeals is hereby AFFIRMED in toto, with costs against petitioner.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

Melencio-Herrera (Chairman), Paras and Padilla, JJ., concur.chanroblesvirtualawlibrary chanrobles virtual law library

Sarmiento, J., is on leave.

chanrobles virtual law library

[G.R. No. 125138. March 2, 1999]

NICHOLAS Y. CERVANTES, Petitioner, vs. COURT OF APPEALS AND THE PHILIPPINE AIR LINES, INC., respondent.

D E C I S I O N

PURISIMA, J.:

This Petition for Review on certiorari assails the 25 July 1995 decision of the Court of Appeals[1 in CA GR CV No. 41407, entitled Nicholas Y. Cervantes vs. Philippine Air Lines Inc., affirming in toto the judgment of the trial court dismissing petitioners complaint for damages.

On March 27, 1989, the private respondent, Philippines Air Lines, Inc. (PAL), issued to the herein petitioner, Nicholas Cervantes (Cervantes), a round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of one year from issuance, i.e., until March 27, 1990. The issuance of the said plane ticket was in compliance with a Compromise Agreement entered into between the contending parties in two previous suits, docketed as Civil Case Nos. 3392 and 3451 before the Regional Trial Court in Surigao City.i[2

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ASSIGNMENT NO .3

On March 23, 1990, four days before the expiry date of subject ticket, the petitioner used it. Upon his arrival in Los Angeles on the same day, he immediately booked his Los Angeles-Manila return ticket with the PAL office, and it was confirmed for the April 2, 1990 flight.

Upon learning that the same PAL plane would make a stop-over in San Francisco, and considering that he would be there on April 2, 1990, petitioner made arrangements with PAL for him to board the flight in San Francisco instead of boarding in Los Angeles.

On April 2, 1990, when the petitioner checked in at the PAL counter in San Francisco, he was not allowed to board. The PAL personnel concerned marked the following notation on his ticket: TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY.

Aggrieved, petitioner Cervantes filed a Complaint for Damages, for breach of contract of carriage docketed as Civil Case No. 3807 before Branch 32 of the Regional Trial Court of Surigao del Norte in Surigao City. But the said complaint was dismissed for lack of merit.ii[3

On September 20, 1993, petitioner interposed an appeal to the Court of Appeals, which came out with a Decision, on July 25, 1995, upholding the dismissal of the case.

On May 22, 1996, petitioner came to this Court via the Petition for Review under consideration.

The issues raised for resolution are: (1) Whether or not the act of the PAL agents in confirming subject ticket extended the period of validity of petitioners ticket; (2) Whether or not the defense of lack of authority was correctly ruled upon; and (3) Whether or not the denial of the award for damages was proper.

To rule on the first issue, there is a need to quote the findings below. As a rule, conclusions and findings of fact arrived at by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons.iii[4

The facts of the case as found by the lower courtiv[5 are, as follows:

The plane ticket itself (Exhibit A for plaintiff; Exhibit 1 for defendant) provides that it is not valid after March 27, 1990. (Exhibit 1-F). It is also stipulated in paragraph 8 of the Conditions of Contract (Exhibit 1, page 2) as follows:

"8. This ticket is good for carriage for one year from date of issue, except as otherwise provided in this ticket, in carriers tariffs, conditions of carriage, or related regulations. The fare for carriage hereunder is subject to change prior to commencement of carriage. Carrier may refuse transportation if the applicable fare has not been paid.v[6

The question on the validity of subject ticket can be resolved in light of the ruling in the case of Lufthansa vs. Court of Appealsvi[7. In the said case, the Tolentinos were issued first class tickets on April 3, 1982, which will be valid until April 10,1983. On June 10, 1982, they changed their accommodations to economy class but the replacement tickets still contained the same restriction. On May 7, 1983, Tolentino requested that subject tickets be extended, which request was refused by the petitioner on the ground that the said tickets had already expired. The non-extension of their tickets prompted the Tolentinos to bring a complaint for breach of contract of carriage against the petitioner. In ruling against the award of damages, the Court held that the ticket constitute the contract between the parties. It is axiomatic that when the terms are clear and leave no doubt as to the intention of the contracting parties, contracts are to be interpreted according to their literal meaning.

In his effort to evade this inevitable conclusion, petitioner theorized that the confirmation by the PALs agents in Los Angeles and San Francisco changed the compromise agreement between the parties.

As aptly ruled by the appellate court:

xxx on March 23, 1990, he was aware of the risk that his ticket could expire, as it did, before he returned to the Philippines. (pp. 320-321, Original Records)vii[8

The question is: Did these two (2) employees, in effect , extend the validity or lifetime of the ticket in question? The answer is in the negative. Both had no authority to do so. Appellant knew this from the very start when he called up the Legal Department of appellee in the Philippines before he left for the United States of America. He had first hand knowledge that

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ASSIGNMENT NO .3

the ticket in question would expire on March 27,1990 and that to secure an extension, he would have to file a written request for extension at the PALs office in the Philippines (TSN, Testimony of Nicholas Cervantes, August 2, 1991, pp 20-23). Despite this knowledge, appellant persisted to use the ticket in question.[9

From the aforestated facts, it can be gleaned that the petitioner was fully aware that there was a need to send a letter to the legal counsel of PAL for the extension of the period of validity of his ticket.

Since the PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal counsel of PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents, according to the Court of Appeals,viii[10 acted without authority when they confirmed the flights of the petitioner.

Under Article 1898[11 of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein petitioner) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principals ratification.[12

Anent the second issue, petitioners stance that the defense of lack of authority on the part of the PAL employees was deemed waived under Rule 9, Section 2 of the Revised Rules of Court, is unsustainable. Thereunder, failure of a party to put up defenses in their answer or in a motion to dismiss is a waiver thereof.

Petitioner stresses that the alleged lack of authority of the PAL employees was neither raised in the answer nor in the motion to dismiss. But records show that the question of whether there was authority on the part of the PAL employees was acted upon by the trial court when Nicholas Cervantes was presented as a witness and the depositions of the PAL employees, Georgina M. Reyes and Ruth Villanueva, were presented.

The admission by Cervantes that he was told by PALs legal counsel that he had to submit a letter requesting for an extension of the validity of subject tickets was tantamount to knowledge on his part that the PAL employees had no authority to extend the validity of subject tickets and only PALs legal counsel was authorized to do so.

However, notwithstanding PALs failure to raise the defense of lack of authority of the said PAL agents in its answer or in a motion to dismiss, the omission was cured since the said issue was litigated upon, as shown by the testimony of the petitioner in the course of trial. Rule 10, Section 5 of the 1997 Rules of Civil Procedure provides:

Sec. 5. Amendment to conform or authorize presentation of evidence. - When issues not raised by the pleadings are tried with express or implied consent of the parties, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. xxx

Thus, when evidence is presented by one party, with the express or implied consent of the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards the said issue, which shall be treated as if they have been raised in the pleadings. There is implied consent to the evidence thus presented when the adverse party fails to object thereto.[13

Re: the third issue, an award of damages is improper because petitioner failed to show that PAL acted in bad faith in refusing to allow him to board its plane in San Francisco.

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.ix

[14 Petitioner knew there was a strong possibility that he could not use the subject ticket, so much so that he bought a back-up ticket to ensure his departure. Should there be a finding of bad faith, we are of the opinion that it should be on the petitioner. What the employees of PAL did was one of simple negligence. No injury resulted on the part of petitioner because he had a back-up ticket should PAL refuse to accommodate him with the use of subject ticket.

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ASSIGNMENT NO .3

Neither can the claim for exemplary damages be upheld. Such kind of damages is imposed by way of example or correction for the public good, and the existence of bad faith is established. The wrongful act must be accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent manner.x

[15 Here, there is no showing that PAL acted in such a manner. An award for attorneys fees is also improper.

WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals dated July 25, 1995 AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.

Romero, (Chairman), and Gonzaga-Reyes, JJ., concur.

Vitug, J., abroad on official business.

Panganiban, J., on leave.

B. AIR TRANSPORTAION( WARSAW CONVENTION)

EN BANC

G.R. No. 101538 June 23, 1992

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

CRUZ, J.:

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

Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination.

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

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

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ASSIGNMENT NO .3

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

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

1. the court of the domicile of the carrier;

2. the court of its principal place of business;

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

4. the court of the place of destination.

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

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

The petitioner then came to this Court, raising substantially the same issues it submitted in the Court of Appeals.

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

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

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

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

I

THE ISSUE OF CONSTITUTIONALITY

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

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

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

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

It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a judicial inquiry into such a question are first satisfied.

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ASSIGNMENT NO .3

Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible of judicial determination; the constitutional question must have been opportunely raised by the proper party; and the resolution of the question is unavoidably necessary to the decision of the case itself. 6

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

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

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

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

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

The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an attempt to formulate a legal principle which would justify non-performance of a treaty obligation if the conditions with relation to which the parties contracted have changed so materially and so unexpectedly as to create a situation in which

the exaction of performance would be unreasonable." 7 The key element of this doctrine is the vital change in the condition of the contracting parties that they could not have foreseen at the time the treaty was concluded.

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

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

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

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

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

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

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

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

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

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

The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a constructive denial of his right to access to our courts for the protection of his rights. He would consequently be deprived of this vital guaranty as embodied in the Bill of Rights.

Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It does not mean that a person can go to any court for redress of his grievances regardless of the nature or value of his claim. If the petitioner is barred from filing his complaint before our courts, it is because they are not vested with the appropriate jurisdiction under the Warsaw Convention, which is part of the law of our land.

II

THE ISSUE OF JURISDICTION.

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

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

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

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

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

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

Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the petitioner cites several cases holding that Article

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28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional. 10

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

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

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

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

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the international sense must be established in accordance with

Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the court to which the case is submitted.

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

Article 32 provides:

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

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

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

Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is that NOA averred in its MOTION TO DISMISS that the ground thereof is "the Court has no subject matter jurisdiction to

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entertain the Complaint" which SANTOS considers as equivalent to "lack of jurisdiction over the subject matter . . ." However, the gist of NOA's argument in its motion is that the Philippines is not the proper place where SANTOS could file the action — meaning that the venue of the action is improperly laid. Even assuming then that the specified ground of the motion is erroneous, the fact is the proper ground of the motion — improper venue — has been discussed therein.

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

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

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

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

The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal. The date and time of departure were specified but not of the return flight. The plane crashed while on route from Montreal to Los Angeles, killing Mrs.

Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S. District Court of California. The defendant moved to dismiss for lack of jurisdiction but the motion was denied thus:

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

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

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

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

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

. . . Although the authorities which addressed this precise issue are not extensive, both the cases and the commentators are almost unanimous in

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concluding that the "place of destination" referred to in the Warsaw Convention "in a trip consisting of several parts . . . is the ultimate destination that is accorded treaty jurisdiction." . . .

But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad; whether the return portion of the ticket is characterized as an option or a contract, the carrier was legally bound to transport the passenger back to the place of origin within the prescribed time and. the passenger for her part agreed to pay the fare and, in fact, did

pay the fare. Thus there was mutuality of obligation and a binding contract of carriage, The fact that the passenger could forego her rights under the contract does not make it any less a binding contract. Certainly, if the parties did not contemplate the return leg of the journey, the passenger would not have paid for it and the carrier would not have issued a round trip ticket.

We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract of carriage or, specifically in this case,

[

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the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should therefore be considered merely an agreed stopping place and not the destination.

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

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

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

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

The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its provisions, American courts have taken the broad view that the French legal

[

meaning must govern. 18 In French, he says, the "domicile" of the carrier means every place where it has a branch office.

The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held:

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

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basis of jurisdiction is in effect a request to create a new jurisdictional standard for the Convention.

Furthermore, it was argued in another case 20 that:

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

We agree with these rulings.

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

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

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

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

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

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

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

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

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

III

THE ISSUE OF PROTECTION TO MINORS

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

Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.

Application of this article to the present case is misplaced. The above provision assumes that the court is vested with jurisdiction to rule in favor of the disadvantaged minor, As already explained, such jurisdiction is absent in the case at bar.

CONCLUSION

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

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

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

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

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

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

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Narvasa, C.J., Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur.

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

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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.

D E C I S I O N

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.

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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

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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.

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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

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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.

G.R. No. 119641 May 17, 1996

PHILIPPINE AIRLINES, INC., Petitioner, vs. COURT OF APPEALS, DR. JOSEFINO MIRANDA and LUISA MIRANDA, Respondents.

REGALADO, J.:

In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) assails the decision of respondent Court of Appeals in CA-G.R. CV No. 29147 1

which affirmed the judgment of the trial court finding herein petitioner liable as follows:

Wherefore, premises considered, judgment is hereby rendered ordering the defendant, Philippine Airlines or PAL, to pay to the plaintiffs, Dr. Josefino Miranda and Luisa Miranda, the sum of P100,000.00 as moral damages; P30,000.00 as exemplary or corrective damages; P10,000.00 as attorney's fees; and the costs. 2

The factual antecedents of the present petition reveal that sometime in May, 1988, Dr. Josefino Miranda and his wife, Luisa, who were residents of Surigao City, went to the United States of America on a regular flight of Philippine Airlines, Inc. (PAL). On June 19, 1988, after a stay of over a month there, they obtained confirmed bookings from PAL's San Francisco Office for PAL Flight PR 101 from San Francisco to Manila via Honolulu on June 21, 1988; PAL flight PR 851 from Manila to Cebu on June 24, 1988; and PAL Flight PR 905 from Cebu to Surigao also on June 24, 1988.

Accordingly, on June 21, 1988, private respondents boarded PAL Flight PR 101 in San Francisco with five (5) pieces of baggage. After a stopover at Honolulu, and upon arrival in Manila on June 23, 1988, they were told by the PAL personnel that their baggage consisting of two balikbayan boxes, two pieces of luggage and one fishing rod case were off-loaded at Honolulu, Hawaii due to weight limitations. Consequently, private respondents missed their connecting flight from Manila to Cebu City, as originally scheduled, since they had to wait for their baggage which arrived the following day, June 24, 1988, after their pre-scheduled connecting flight had left. They consequently also missed their other scheduled connecting flight from Cebu City to Surigao City.

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On June 25, 1988, they departed for Cebu City and therefrom private respondents had to transfer to PAL Flight 471 for Surigao City. On the way to Surigao City, the pilot announced that they had to return to Mactan Airport due to some mechanical problem. While at Mactan Airport, the passengers were provided by PAL with lunch and were booked for the afternoon flight to Surigao City. However, said flight was also canceled.

Since there were no more lights for Surigao City that day, private respondents asked to be billeted at the Cebu Plaza Hotel where they usually stay whenever they happen to be in Cebu City. They were, however, told by the PAL employees that they could not be accommodated at said hotel supposedly because it was fully booked. Contrarily, when Dr. Miranda called the hotel, he was informed that he and his wife could be accommodated there. Although reluctant at first, PAL eventually agreed to private respondents' overnight stay at said hotel. Oscar Jereza, PAL duty manager, approved the corresponding hotel authority with standard meals. It was only after private respondents' insistence that their meals be ordered a la carte that they were allowed to do so by PAL provided that they sign for their orders.

Inasmuch as the shuttle bus had already left by the time private respondents were ready to go to the hotel, PAL offered them P150.00 to include the fare for the return trip to the airport. Dr. Miranda asked for P150.00 more as he and his wife, along with all of their baggage, could not be accommodated in just one taxi, aside from the need for tipping money for hotel boys. Upon refusal of this simple request, Dr. Miranda then declared that he would forego the amenities offered by PAL. Thus, the voucher for P150.00 and the authority for the hotel accommodations prepared by PAL were voided due to private respondents' decision not to avail themselves thereof.

To aggravate the muddled situation, when private respondents tried to retrieve their baggage, they were told this time that the same were loaded on another earlier PAL flight to Surigao City. Thus, private respondents proceeded to the hotel sans their baggage and of which they were deprived for the remainder of their trip. Private respondents were finally able to leave on board the first PAL flight to Surigao City only on June 26, 1988. Thereafter, they instituted an action for damages which, after trial as well as on appeal, was decided in their favor.

Petitioner PAL has come to us via the instant petition for review on certiorari, wherein it challenges the affirmatory decision of respondent Court of Appeals 3 (1) for applying Articles 2220, 2232 and 2208 of the Civil Code when it sustained the award of the court a quo for moral and exemplary damages and attorney's fees despite absence of bad faith on its part; and (2) for not applying the express provisions of the contract of carriage and pertinent provisions of the Warsaw Convention limiting its liability to US$20.00 per kilo of baggage.

I. Anent the first issue, petitioner argues that there was no bad faith on its part for while there was admittedly a delay in fulfilling its obligation under the contract of carriage with respect to the transport of passengers and the delivery of their baggage, such delay was justified by the paramount consideration of ensuring the safety of its passengers. It likewise maintains that its employees treated private respondents fairly and with courtesy to the extent of acceding to most of their demands in order to mitigate the inconvenience occasioned by the measures undertaken by the airline to ensure passenger safety. 4

It reiterated its position that the off-loading of private respondents' baggage was due to "weight limitations," as lengthily explained by petitioner from an

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aeronautically technical viewpoint, 5 taking into consideration such variable factors as flight distance, weather, air resistance, runway condition and fuel requirement. Given the variable weather conditions, it claimed that the weight limitation for each flight can only be ascertained shortly before take-off. While admittedly there would be a resulting inconvenience in the accommodations of the passengers and the handling of their cargo, the same is outweighed by the paramount concern for the safety of the flight.

Petitioner moreover impugns the Court of Appeal's allegedly improper reliance on the inaccurate interpretation of the testimony of PAL's baggage service representative, Edgar Mondejar, * that private respondents' baggage were off-loaded to give preference to baggage and/or cargo originating from Honolulu. PAL argues that Mondejar's knowledge of what transpired in Honolulu was merely based on the telex report forwarded to PAL's Manila station stating that the off-loading was due to weight limitations. 6

Petitioner enumerates the following incidents as indicative of its good faith in dealing with private respondents: (1) The cancellation of the flight to Surigao City due to mechanical/engine trouble was to ensure the safety of passengers and cargo; (2) PAL offered to shoulder private respondents' preferred accommodations, meals and transportation while in Cebu City with more than the usual amenities given in cases of flight disruption, and gave them priority in the following day's flight to Surigao City; (3) PAL employees did not act rudely towards private respondents and its managerial personnel even gave them special attention; (4) It was reasonable for PAL to limit the transportation expense to P150.00, considering that the fare between the airport and the hotel was only P75.00, and they would be picked up by the shuttle bus from the hotel to the airport, while the request for money for tips could not be justified; and (5) The inadvertent loading of private respondents'

baggage on the replacement flight to Surigao City was at most simple and excusable negligence due to the numerous flight disruptions and large number of baggage on that day.

Petitioner strenuously, and understandably, insists that its employees did not lie to private respondents regarding the want of accommodations at the latter's hotel of preference. The only reason why Cebu Plaza Hotel was not initially offered to them by PAL was because of the earlier advice of the hotel personnel that not all the stranded PAL passengers could be accommodated therein. It claimed that it was in accordance with the airline's policy of housing all affected passengers in one location for easy communication and transportation, which accommodations in this instance could be provided by Magellan Hotel. However, upon insistence of the Mirandas on their preference for Cebu Plaza Hotel, Jeremias Tumulak, PAL's passenger relations officer, told them that they could use the office phone and that if they could arrange for such accommodation PAL would shoulder the expenses. This concession, so petitioner avers, negates any malicious intent on its part.

Crucial to the determination of the propriety of the award of damages in this case is the lower court's findings on the matter of bad faith, which deserves to be quoted at length:

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

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claimed to have suffered social humiliation, wounded feelings, frustration and mental anguish.

xxx xxx xxx

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

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

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

Q Before a plane departs, your office will see to it the plane loads the exact weight limitation insofar as the cargoes (sic) and passengers are concerned, is that correct?

A Yes.

Q And so with the PR 101 flight starting mainland USA, it complied with the weight limitation, passengers and baggages (sic) limitation, is that correct?

A Yes.

Q In other words the trip from the mainland USA started in Hawaii to off-load cargoes (sic), you complied with the weight limitation and so on?

A Yes.

Q But you are saying upon arriving in Honolulu certain containers were off-loaded?

A Yes.

Q That would be therefore some containers were off-loaded to give way to some other containers starting from Honolulu towards Manila?

A Yes.

Q In other words Mr. Mondejar, preference was given to cargoes (sic) newly loaded at Honolulu instead of the cargoes (sic) already from mainland USA, is that correct?

A Yes.

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

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

The Court of Appeals affirmed these findings of the trial court by stating that

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

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

reason was revealed by Edgar Montejar, baggage service representative of the appellant. . . . 9

xxx xxx xxx

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

The Court has time and again ruled, and it cannot be over-emphasized, that a contract of air carriage generates a relation attended with a public duty and any discourteous conduct on the part of a carrier's employee toward a passenger gives the latter an action for damages and, more so, where there is bad faith. 11

It is settled that bad faith must be duly proved and not merely presumed. The existence of bad faith, being a factual question, and the Supreme Court not being a trier of facts, the findings thereon of the trial court as well as of the Court of Appeals shall not be disturbed on appeal and are entitled to great weight and respect. 12 Said findings are final and conclusive upon the Supreme Court except, inter alia, where the findings of the Court of Appeals and the trial court are contrary to each other. 13

It is evident that the issues raised in this petition are the correctness of the factual findings of the Court of Appeals of bad faith on the part of petitioner

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and the award of damages against it. This Court has consistently held that the findings of the Court of Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions created by case law. As nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed. 14

It is now firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith. 15 Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit. 16 Such unprofessional and proscribed conduct is attributable to petitioner airline in the case at bar and the adverse doctrinal rule is accordingly applicable to it.

In Cathay Pacific Airways, Ltd. v. Court of Appeals, et al., 17 a case which is virtually on all fours with the present controversy, we stated:

In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it failed to deliver the luggage of petitioner at the appointed place and time. We agree. . . . 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, We are persuaded that the employees of CATHAY acted in bad faith, . . .

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

It must, of course, be borne in mind that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered. 18 in a contractual or quasi-contractual relationship, exemplary damages, on the other hand, may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 19 Attorney's fees in the concept of damages may be awarded where there is a finding of bad faith. 20 The evidence on record amply sustains, and we correspondingly find, that the awards assessed against petitioner on the aforestated items of damages are justified and reasonable.

At this juncture, it may also be pointed out that it is PAL's duty to provide assistance to private respondents and, for that matter, any other passenger similarly inconvenienced due to delay in the completion of the transport and the receipt of their baggage. Therefore, its unilateral and voluntary act of providing cash assistance is deemed part of its obligation as an air carrier, and is hardly anything to rave about. Likewise, arrangements for and verification of requested hotel accommodations for private respondents could and should have been done by PAL employees themselves, and not by Dr. Miranda. It was rather patronizing of PAL to make much of the fact that they allowed Dr. Miranda to use its office telephone in order to get a hotel room.

While it may be true that there was no direct evidence on record of blatant rudeness on the part of PAL employees towards the Mirandas, the fact that private respondents were practically compelled to haggle for accommodations, a situation unbefitting persons of their stature, is rather demeaning and it partakes of discourtesy magnified by PAL's condescending

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attitude. Moreover, it cannot be denied that the PAL employees herein concerned were definitely less than candid, to put it mildly, when they withheld information from private respondents that they could actually be accommodated in a hotel of their choice.

Indeed, the flamboyant testimony of Oscar Jereza, * as PAL's duty manager, merely pays lip-service to, without putting into reality, the avowed company policy of invariably making available and always granting the requests for the kind and standard of accommodations demanded by and appropriate for its passengers. 21 Certainly, a more efficient service, and not a lackadaisical and disorganized system, is expected of the nation's flag carrier, especially on an international flight.

For, on the picayune matter of transportation expenses, PAL was obviously and unduly scrimping even on the small amount to be given to the Mirandas. PAL failed to consider that they were making arrangements for two paying round-trip passengers, not penny-ante freeloaders, who had been inconvenienced by the numerous delays in flight services and careless handling of their belongings by PAL. The niggardly attitude of its personnel in this unfortunate incident, as well as their hair-splitting attempts at justification, is a disservice to the image which our national airline seeks to project in its costly advertisements.

We agree with the findings of the lower court that the request of private respondents for monetary assistance of P300.00 for taxi fare was indeed justified, considering that there were two of them and they had several pieces of luggage which had to be ferried between the airport and the hotel. Also, the request for a small additional sum for tips is equally reasonable since tipping, especially in a first-rate hotel, is an accepted practice, of which the Court can

take judicial notice. This is aside from the fact that private respondents, having just arrived from an extended trip abroad, had already run out of Philippine currency, which predicament was exacerbated by their additional stay in Manila due to the off-loading of their baggage. All these inconveniences should have warranted a commonsensical and more understanding treatment from PAL, considering that private respondents found themselves in. this unpleasant situation through no fault of theirs.

2. On its second issue, petitioner avers that the express provisions on private respondents' tickets stipulating that liability for delay in delivery of baggage shall be limited to US$20.00 per kilo of baggage delayed, unless the passenger declares a higher valuation, constitutes the contract of carriage between PAL and private respondents.

It further contends that these express provisions are in compliance with the provisions of the Warsaw Convention for the Unification of Rules Relating to International Carrier by Air, to which the Philippines is a signatory. Thereunder, it is asserted that PAL flight PR 101 from San Francisco, U.S.A., to Manila, Philippines is an "international transportation" well within the coverage of the Warsaw Convention.

Petitioner obstinately insists on the applicability of the provisions of the Warsaw Convention regarding the carrier's limited liability since the off-loading was supposedly justified and not attended by bad faith. Neither was there any claim for loss of baggage as in fact private respondents' baggage were, albeit delayed, received by them in good condition. 22

The court a quo debunked petitioner's arguments by this holding:

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

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

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

The congruent finding of both the trial court and respondent court that there was discriminatory off-loading being a factual question is, as stated earlier, binding upon and can no longer be passed upon by this Court, especially in view of and in deference to the affirmance of the same by respondent appellate court.

There was no error on the part of the Court of Appeals when it refused to apply the provisions of the Warsaw Convention, for in the words of this Court in the aforequoted Cathay Pacific case:

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

ACCORDINGLY, finding no reversible error, the challenged judgment of respondent Court of Appeals is hereby AFFIRMED in toto.

SO ORDERED.

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

G.R. No. 122308 July 8, 1997

PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA, petitioners, vs.

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ASSIGNMENT NO .3

COURT OF APPEALS and TRANS-WORLD AIRLINES INC., respondents.

DAVIDE, JR., J.:

The main issue in this petition for review under Rule 45 of the Rules of Court is the applicability of Article 28(1) of the Warsaw Convention, 1 which provides as follows:

Art. 28. (1) An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination.

We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court of Appeals in CA-G.R. CV No. 39896 2 affirming the 24 July 1992 Order of the Regional Trial Court of Quezon City, Branch 102, which dismissed Civil Case No. Q-91-9620 3 on the ground of lack of jurisdiction in view of the aforementioned Article 28(1) of the Warsaw Convention.

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

Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society. Mr. Mapa is an established businessman and currently the Regional General Manager of Akerlund and Rausing, a multinational packaging material manufacturer based in Manila. He was previously the

Senior Vice President of Phimco Industries, an affiliate company of Swedish Match Company. Mrs. Mapa is a successful businesswoman engaged in the commercial transactions of high value antique and oriental arts decor items originating from Asian countries. Carmina S. Mapa is the daughter of plaintiffs Purita and Cornelio and is a graduate of the International School in Bangkok, Thailand, now presently enrolled at the Boston University where she is majoring in communication.

Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidence by TWA ticket Nos. 015:9475:153:304 and 015:9475:153:305, purchased in Bangkok, Thailand. Said TWA tickets are for Los Angeles-New York-Boston-St. Louis-Chicago. . . .

Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is Kansas City, Missouri, USA. TWA's place of business through which the contracts were made is Bangkok, Thailand. The place of destination is Chicago, USA.

On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104 for Los Angeles. Carmina was to commence schooling and thus was accompanied by Purita to assist her in settling down at the University.

They arrived Los Angeles on the same date and stayed there until August 14, 1990 when they left for New York City.

On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F. Kennedy (JFK) Airport, New York, on TWA Flight No. 904.

On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a connecting flight on TWA's carrier, TW 0901, from JFK Airport, New York, to Boston's Logan Airport, checking in seven (7) pieces of luggage at the TWA counter in the JFK Airport. The seven baggages were

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received by a porter who issued seven TWA baggage receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor.

From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded to TWA's ticket counter and presented their confirmed TWA tickets numbered 015:9475:153:304 and 015:9475:153:305 with a 3:00 p.m. departure time. They were issued their boarding passes and were instructed to proceed to gate 35 for boarding. At about 2:40 p.m., plaintiffs noticed that there was still no instruction to board the aircraft so they made inquiries. The TWA ground stewardess informed plaintiffs that they were at the wrong gate because their flight was boarding at gate 1. Upon hearing this, plaintiffs rushed to gate 1 which was in another building terminal. At gate 1, they were told by a TWA ground stewardess that flight 901 had just departed. However, they were consoled that another TWA flight was leaving for Boston after 30 minutes and plaintiffs could use the same boarding pass for the next flight. At around 3:15 p.m., plaintiffs Purita and Carmina were able to board the next flight. However, the plane was not immediately cleared for take off on account of a thunderstorm. The passengers were instructed to stay inside the aircraft until 6:00 p.m. when the plane finally left for Boston.

Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim their baggages and found only three out of the seven they checked in, to wit: one Samsonite on the carousel, another Samsonite lying on the floor near the carousel and a third baggage, an American Tourister, inside the unclaimed baggage office. Plaintiffs immediately reported the loss of their four baggages to the TWA Baggage Office at Logan Airport. TWA's representative confidently assured them that their baggages would be located within 24 hours and not more than 48 hours.

On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler, Customer Relations-Baggage Service, apologizing for TWA's failure to locate the missing luggage and requesting plaintiffs to accomplish a passenger property questionnaire to facilitate a further intensive and computerized search for the lost luggage. Plaintiffs duly accomplished the passenger property questionnaire, taking pains to write down in detail the

contents of each missing baggage. The total value of the lost items amounted to $11,283.79.

On September 20, 1990, plaintiff's counsel wrote TWA thru its General Sales Manager in the Philippines, Daniel Tuason, with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue corner Paseo de Roxas, Makati, Metro Manila demanding indemnification for the grave damage and injury suffered by the plaintiffs.

TWA again assured plaintiffs that intensive search was being conducted.

On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffs-appellants two options: (a) transportation credit for future TWA travel or (b) cash settlement. Five months lapsed without any result on TWA's intensive search.

On January 3, 1991, plaintiffs-appellant opted for transportation credit for future TWA travel.

On January 11, 1991, TWA disregarded plaintiffs' option and unilaterally declared the payment of $2,560.00 as constituting full satisfaction of the plaintiffs' claim.

On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the actual cost of their lost baggages and their contents.

Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and redress plaintiffs for the grave injury and damages they have suffered. 4

Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then filed with the trial court on 1 August 1991 a complaint 5

for damages, 6 which was docketed as Civil Case No. Q-91-9620.

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Before a responsive pleading was filed, the petitioners filed an Amended Complaint. 7 They prayed that after due trial private respondent Trans-World Airlines, Inc. (hereafter, TWA), be ordered to pay them the following amounts: (1) US$8,723.79, or its equivalent in Philippine currency, representing the cost of the lost luggage and its contents; (2) US$2,949.50, or its equivalent in Philippine currency, representing the cost of hotel, board and lodging, and communication expenses; (3) P1 million, by way of moral damages; (4) P1 million, by way of exemplary damages, with legal interest on said amounts from the date of extrajudicial demand thereof; and (5) P500,000.00 as attorney's fees, costs of the suit, and other expenses of litigation. 8

On 26 February 1992, TWA filed its Answer to the Amended Complaint raising, as special and affirmative defense, lack of jurisdiction of Philippine courts over the action for damages in the pursuant to Article 28(1) of the Warsaw Convention, the action could only be brought either in Bangkok where the contract was entered into, or in Boston which was the place of destination, or in Kansas City which is the carrier's domicile and principal place of business.

TWA further alleged that pursuant to the Warsaw Convention and the Notice of Baggage Limitations at the back of the tickets, its liability to the petitioners is limited to US$9.07 per pound, or US$20.00 per kilo, which is in lieu of actual and compensatory damages. Even assuming that petitioners' bag weighed the maximum acceptable weight of 70 pounds, TWA's maximum liability is $640.00 per bag or $2,560.00 for the four pieces of baggage, which the petitioners have been offered and have accepted. TWA also submitted that it could not be liable for moral and exemplary damages and attorney's fees because it did not

act in a wanton, fraudulent, reckless, oppressive, or malevolent manner. 9

On 7 February 1992, the petitioners filed their second Amended Complaint 10 to include a claim of US$2,500, or its equivalent in Philippine Currency, representing the additional replacement cost of the items and personal effects contained in their lost luggage; and US$4,500 representing the travel expenses, hotel, lodging, food and other expenses of petitioner Cornelio Mapa, who was constrained to join his family in Boston to extend the necessary assistance in connection with the lost luggage.

After the filing of TWA's Answer to the second Amended Complaint, 11 and petitioners' Reply thereto, the trial court gave TWA ten days within which to submit a memorandum in support of its affirmative defenses; after which the incident would be deemed submitted for resolution. 12 However, after TWA filed its Memorandum, 13 the trial court gave the petitioners five days within which to file a reply memorandum; and TWA, two days from receipt of the latter to file its comment thereon. 14 The petitioners then filed their Opposition (by way of Reply Memorandum) 15 to which TWA filed a Reply. 16 Thereafter, the petitioners submitted a Rejoinder 17; TWA, a Surrejoinder. 18

On 24 July 1992, the trial court issued an Order 19 dismissing the case for lack of jurisdiction in light of Article 28(1) of the Warsaw Convention. Thus:

It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case because plaintiffs' contract of transportation does not constitute "international transportation" as defined in said convention. This however is

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belied by the Passenger Property Questionnaire which is Annex C of plaintiffs' amended complaint. Page two of said questionnaire accomplished by plaintiffs under the heading "Your Complete Itinerary" shows that the TWA tickets issued to the plaintiffs form part of the contract of transportation to be performed from Manila to the United States. Since the Philippines and the United States are parties to the convention, plaintiffs' contracts of transportation come within the meaning of International Transportation.

xxx xxx xxx

On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to the case at bar, even if the basis of plaintiffs' present action is breach of contract of carriage under the New Civil Code.

The next question to be resolved is whether or not the Court has jurisdiction to try the present case in the light of the provision of Art. 28(1) above-quoted.

Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted only in any of the following places/courts:

(1) The court of the domicile of the carrier;

(2) The court of its principal place of business;

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

(4) The court of the place of destination.

In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in the same case of Augusto Benedicto Santos vs. Northwest Airlines held:

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

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

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

xxx xxx xxx75


ASSIGNMENT NO .3

It has been shown by the defendant that the domicile of the defendant Trans World Airlines, Inc. is Kansas City, Missouri, its principal place of business is also in Kansas City, Missouri, the carrier's place of business through which the contracts were made is Bangkok (Annexes A and A-1, Amended Complaint), and the place of destination was Boston.

The Philippines not being one of the places specified in Art. 28(1) abovequoted where the complaint may be instituted, this Court therefore, does not have jurisdiction over the present case.

Evidently discontented with the trial court's order, the petitioners appealed to the Court of Appeals, contending that the lower court erred in not holding that (1) it has jurisdiction over the instant case and (2) the Warsaw Convention is inapplicable in the instant case because the subject matter of the case is not included within the coverage of the said convention. 20 They claimed that their cause of action could be based on breach of contract of air carriage founded on Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code governing common carriers or Article 2176 of the same Code governing tort or quasi-delict.

The appellate court disagreed with the petitioners and affirmed the order of the trial court. It held that the Warsaw Convention is the law which governs the dispute between the petitioners and TWA because what is involved is international transportation defined by said Convention in Article I(2). This holding is founded on its determination that the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago purchased in Bangkok, Thailand, were issued in conjunction with, and therefore formed part of, the contract of transportation performed from Manila, Philippines, to the United States.

The respondent court further held that the cause of action of the petitioners arose from the loss of the four checked pieces of baggage, which then falls under Article 18(1), Chapter III (Liability of the Carrier) of the Warsaw Conventions. 21 Pursuant to Article 24(1) of the Convention, all actions for damages, whether based on tort, code law or common law, arising from loss of baggage under Article 18 of the Warsaw Convention, can only be brought subject to the conditions and limits set forth in the Warsaw Convention. Article 28(1) thereof sets forth conditions and limits in that the action for damages may be instituted only in the territory of one of the High Contracting Parties, before the court of (1) the domicile of the carrier, (2) the carrier's principal place of business, (3) the place of business through which the contract has been made, or (4) the place of destination. Since the Philippines is not one of these places, a Philippine Court, like the RTC, has no jurisdiction over the complaint for damages.

Respondent Court of Appeals likewise held that the petitioners could not claim application of Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code on common carriers without taking into consideration Article 1753 of the same Code, which provides that the law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction, or deterioration. Since the country of ultimate destination is Chicago, the law of Chicago shall govern the liability of TWA for the loss of the four pieces of baggage. Neither is Article 2176 of the New Civil Code on torts or quasi-delicts applicable in view of the private international law principle of lex loci delicti commissi. 22 In addition, comformably with Santos III v. Northwest Orient Airlines, 23 mere allegation of willful

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misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention.

Failing in their bid to reconsider the decision, the petitioners filed this petition. They aver that respondent Court of Appeals gravely erred (1) in holding that the Warsaw Convention is applicable to this case and (2) in applying Article 1753 of the Civil Code and the principle of lex loci delicti commissi. 24

We resolved to give due course to the petitioner after the filing by TWA of its Comment on the petition and noted without action for the reasons stated in the resolution of 25 September 1996 petitioners' Reply and Rejoinder. We then required the parties to submit their respective memoranda. They did in due time.

The petitioners insist that the Warsaw Convention is not applicable to their case because the contracts they had with TWA did not involve an international transportation. Whether the contracts were of international transportation is to be solely determined from the TWA tickets issued to them in Bangkok, Thailand, which showed that their itinerary was Los Angeles-New York-Boston-St. Louis-Chicago. Accordingly, since the place of departure (Los Angeles) and the place of destination (Chicago) are both within the territory of one High Contracting Party, with no agreed stopping place in a territory subject to the sovereignty, mandate, suzerainty or authority of another Power, the contracts did not constitute 'international transportation' as defined by the convention. They also claim to be without legal basis the contention of TWA that their transportation contracts were of international character because of the handwritten notations in the tickets re "INT'S TKT #079-

4402956821-2" and "INT'L TKT #079-4402956819." Notwithstanding such notations, the TWA tickets, viz., (a) No. 015.9475:153:304 and (b) No. 015:9475:153:305 did not cease to be for the itinerary therein designated. Besides, it is a fact that petitioners Purita and Carmina Mapa traveled from Manila to Los Angeles via Philippine Airlines (PAL) by virtue of PAL tickets issued independently of the TWA tickets.

The pitch issue to be resolved under the petitioner's first assigned error is whether the contracts of transportation between Purita and Carmina Mapa, on the one hand, and TWA, on the other, were contracts of "international transportation" under the Warsaw Convention. If they were, then we should sustain the trial court and the Court of Appeals in light of our ruling in Santos v. Northwest Orient Airlines. 25 It appears clear to us that TWA itself, the trial court, and the Court of Appeals impliedly admit that if the sole basis were the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago, the contracts cannot be brought within the term "international transportation," as defined in Article I(2) of the Warsaw Convention. As provided therein, a contract is one of international transportation only if

according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the transportation or a transshipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though that power is not a party to this convention.

There are then two categories of international transportation, viz., (1) that where the place of departure and the place of destination are situated within the territories of two High Contracting Parties regardless

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of whether or not there be a break in the transportation or a transshipment; and (2) that where the place of departure and the place of destination are within the territory of a single High Contracting Party if there is an agreed stopping place within a territory subject to the sovereignty, mandate, or authority of another power, even though the power is not a party of the Convention.

The High Contracting Parties referred to in the Convention are the signatories thereto and those which subsequently adhered to it. In the case of the Philippines, the Convention was concurred in by the Senate, through Resolution No. 19, on 16 May 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on 13 October 1950 and was deposited with the Polish Government on 9 November 1950. The Convention became applicable to the Philippines on 9 February 1951. Then, on 23 September 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring the Philippines' formal adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof. 26

The contracts of transportation in this case are evidenced by the two TWA tickets, No. 015:9475:153:304 and No. 015:9475:153:305, both purchased and issued in Bangkok, Thailand. On the basis alone of the provisions therein, it is obvious that the place of departure and the place of destination are all in the territory of the United States, or of a single High Contracting Party. The contracts, therefore, cannot come within the purview of the first category of international transportation. Neither can it be under the second category since there was NO

agreed stopping place within a territory subject to the sovereignty, mandate, or authority of another power.

The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and TWA, on the other, within the first category of "international transportation" is to link them with, or to make them an integral part of, the Manila-Los Angeles travel of Purita and Carmina through PAL aircraft. The "linkages" which have been pointed out by the TWA, the trial court, and the Court of Appeals are (1) the handwritten notations, viz., INT'L TKT # 079-4402956821-2 and INT'L TKT # 079-4402956819, on the two TWA tickets; and (2) the entries made by petitioners Purita and Carmina Mapa in column YOUR COMPLETE ITINERARY in TWA's Passenger Property Questionnaire, wherein they mentioned their travel from Manila to Los Angeles in flight PR 102.

The alleged "international tickets" mentioned in the notations in conjunction with which the two TWA tickets were issued were not presented. Clearly then, there is at all no factual basis of the finding that the TWA tickets were issued in conjunction with the international tickets, which are even, at least as of now, non-existent.

As regards the petitioner's entry in YOUR COMPLETE ITINERARY column of the Passenger Property Questionnaire wherein they included the Manila-Los Angeles travel, it must be pointed out that this was made on 4 September 1990 27 by petitioners Purita and Carmina Mapa, and only in connection with their claim for their lost pieces of baggage. The loss occurred much earlier, or on 27 August 1990. The entry can by no means be considered as a part of, or supplement to,

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their contracts of transportation evidenced by the TWA tickets which covered transportation within the United States only.

It must be underscored that the first category of international transportation under the Warsaw Convention is based on "the contract made by the parties." TWA does not claim that the Manila-Los Angeles contracts of transportation which brought Purita and Carmina to Los Angeles were also its contracts. It does not deny the assertion of the petitioners that those contracts were independent of the TWA tickets issued in Bangkok, Thailand. No evidence was offered that TWA and PAL had an agreement concerning transportation of passengers from points of departures not served with aircrafts of one or the other. There could have been no difficulty for such agreement, since TWA admitted without qualification in paragraph 1 of its Answer 28 to the second Amended Complaint the allegation in paragraph 1.1 of the latter 29 that TWA "is a foreign corporation licensed to do business in the Philippines with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue, corner Paseo de Roxas, Makati, Metro Manila."

TWA relies on Article I(3) of the Convention, which provides as follows:

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

It also points to Article 15 of the IATA Recommend Practice 1724, which provides: Carriage to be performed by a several successive carriers under one ticket, or under a ticket and any conjunction ticket issued in connection therewith, is regarded as a single operation." 30

The flaw of respondent's position is the presumption that the parties have "regarded" as an "undivided carriage" or as a "single operation" the carriage from Manila to Los Angeles through PAL then to New York-Boston-St. Louis-Chicago through TWA. The dismissal then of the second Amended Complaint by the trial court and the Court of Appeals' affirmance of the dismissal were not based on indubitable facts or grounds, but no inferences without established factual basis.

TWA should have offered evidence for its affirmative defenses at the preliminary hearing therefor. Section 5 of Rule 16 of the Rules of Court expressly provides:

Sec. 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal provided for in this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed.

Without any further evidence as earlier discussed, the trial court should have denied the affirmative defense of lack of jurisdiction because it did not appear to be indubitable. Section 3 of Rule 16 of the Rules of Court provides:

Sec. 3. Hearing and order. — After hearing the court may deny or grant the motion or allow amendment of pleading, or may defer the hearing and determination of the motion until the trial if the ground alleged therein does not appear to be indubitable.

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WHEREFORE, the instant petition is GRANTED and the challenged decision of 31 May 1995 of respondent Court of Appeals in CA-G.R. CV No. 39896, as well as the Order of 24 July 1992 of the Regional Trial Court of Quezon City, Branch 102, in Civil Case No. Q-91-9620, is REVERSED and SET ASIDE.

The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to proceed with the pre-trial, if it has not been terminated, and with the trial on the merits of the case and then to render judgment thereon, taking into account the foregoing observations on the issue of jurisdiction.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

G.R. No. 104685 March 14, 1996

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

VITUG, J.:p

The appeal before the Court involves the issue of an airline's liability for lost luggage. The petition for review assails the decision of the Court of Appeals, 1 dated 27 February 1992,

affirming an award of damages made by the trial court in a complaint filed by private respondent against petitioner.

The factual background of the case, narrated by the trial court and reproduced at length by the appellate court, is hereunder quoted:

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

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

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

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

On September 30, 1987, on the occasion of plaintiffs following up of her luggage claim, she was furnished copies of defendant's telexes with an information that the Burssel's Office of defendant found the luggage and that they have broken the locks for identification (Exhibit "B"). Plaintiff was assured by the defendant that it has notified its Manila Office that the luggage will be shipped to Manila on October 27, 1987. But unfortunately

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plaintiff was informed that the luggage was lost for the second time (Exhibits "C" and "C-1").

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

Plaintiff demanded from the defendant the money value of the luggage and its contents amounting to $4,265.00 or its exchange value, but defendant refused to settle the claim.

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

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

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

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

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

(d) . . . P10,000.00 as attorney's fees; and

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

Sabena appealed the decision of the Regional Trial Court to the Court of Appeals. The appellate court, in its decision of 27 February 1992, affirmed in toto the trial court's judgment.

Petitioner airline company, in contending that the alleged negligence of private respondent should be considered the primary cause for the loss of her luggage, avers that, despite her awareness that the flight ticket had been confirmed only for Casablanca and Brussels, and that her flight from Brussels to Manila had yet to be confirmed, she did not retrieve the luggage upon arrival in Brussels. Petitioner insists that private respondent, being a seasoned international traveler, must have likewise been familiar with the standard provisions contained in her flight ticket that items of value are required to be hand-carried by the passenger and that the liability of the airline for loss, delay or damage to baggage would be limited, in any event, to only US $20.00 per kilo unless a higher value is declared in advance and corresponding additional charges are paid thereon. At the Casablanca International Airport, private respondent, in checking in her luggage, evidently did not declare its contents or value. Petitioner cites Section 5(c), Article IX, of the General Conditions of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the Hague Protocol of 1955, generally observed by International carriers, stating, among other things, that:

Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked baggage, fragile or perishable articles, money, jewelry, precious metals, negotiable papers, securities or other valuable. 4

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Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation and corresponds with the circumstances of the person, of the time, and of the place. When the source of an obligation is derived from a contract, the mere breach or non-fulfillment of the prestation gives rise to the presumption of fault on the part of the obligor. This rule is no different in the case of common carriers in the carriage of goods which, indeed, are bound to observe not just the due diligence of a good father of a family but that of "extraordinary" care in the vigilance over the goods. The appellate court has aptly observed:

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

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

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

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

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

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

(5) Order or act of competent public authority.

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

The above rules remain basically unchanged even when the contract is breached by tort 6 although noncontradictory principles on quasi-delict may then be assimilated as also forming part of the governing law. Petitioner is not thus entirely off track when it has likewise raised in its defense the tort doctrine of proximate cause. Unfortunately for petitioner, however, the doctrine cannot, in this particular instance, support its case. Proximate cause is that which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have occurred. The exemplification by the Court in one case 7 is simple and explicit; viz:

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

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

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said the appellate court, "underscores the wanton negligence and lack of care" on the part of the carrier.

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

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

The Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the Convention, as this Court has now, and at an earlier time, pointed out. Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad

faith, recklessness, or otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The Convention's provisions, in short, do not regulate or exclude liability for other breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of damage. Otherwise, an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd. Nor may it for a moment be supposed that if a member of the aircraft complement should inflict some physical injury on a passenger, or maliciously destroy or damage the latter's property, the Convention might successfully be pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set by said Convention. It is in this sense that the Convention has been applied, or ignored, depending on the peculiar facts presented by each case.

The Court thus sees no error in the preponderant application to the instant case by the appellate court, as well as by the trial court, of the usual rules on the extent of recoverable damages beyond the Warsaw limitations. Under domestic law and jurisprudence (the Philippines being the country of destination), the attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier liable for all damages which can be reasonably attributed, although unforeseen, to the non-performance of the obligation, 9 including moral and exemplary damages. 10

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

SO ORDERED.

Padilla, Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.

83


ASSIGNMENT NO .3

G.R. No. 119706 March 14, 1996

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

REGALADO, J.:p

This is definitely not a case of first impression. The incident which eventuated in the present controversy is a drama of common contentious occurrence between passengers and carriers whenever loss is sustained by the former. Withal, the exposition of the factual ambience and the legal precepts in this adjudication may hopefully channel the assertiveness of passengers and the intransigence of

carriers into the realization that at times a bad extrajudicial compromise could be better than a good judicial victory.

Assailed in this petition for review is the decision of respondent Court of Appeals in CA-G.R. CV No. 42744 1 which affirmed the decision of the lower court 2 finding petitioner Philippine Air Lines, Inc. (PAL) liable as follows:

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

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

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

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

(4) P10,000.00 as attorney's fee;

all in addition to the costs of the suit.

Defendant's counterclaim is hereby dismissed for lack of merit. 3

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

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

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value of the damaged microwave oven, and transportation charges paid by plaintiff to defendant company. But these demands fell on deaf ears.

On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against defendant in the lower court.

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

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

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

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

When Concepcion C. Diño claimed the baggag(e) (Exh. "B") with defendant, then with the Bureau of Customs, the front glass of the microwave oven was already broken and cannot be repaired

because of the danger of radiation. They demanded from defendant thru Atty. Paco P30,000.00 for the damages although a brand new one costs P40,000.00, but defendant refused to pay.

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

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

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

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

As stated at the outset, respondent Court of Appeals similarly ruled in favor of private respondent by affirming in full the trial court's judgment in Civil Case No. 6210, with costs against petitioner. 6 Consequently, petitioner now impugns respondent appellate court's ruling insofar as it agrees with (1) the conclusions of the trial court that since the air

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ASSIGNMENT NO .3

waybill is a contract of adhesion, its provisions should be strictly construed against herein petitioner; (2) the finding of the trial court that herein petitioner's liability is not limited by the provisions of the air waybill; and (3) the award by the trial court to private respondent of moral and exemplary damages, attorney's fees and litigation expenses.

The trial court relied on the ruling in the case of Fieldmen's Insurance Co., Inc. vs. Vda. De Songco, et al. 7 in finding that the provisions of the air waybill should be strictly construed against petitioner. More particularly, the court below stated its findings thus:

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

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

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

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

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

Counsel for private respondent refutes these arguments by saying that due to her eagerness to ship the microwave oven to Manila, private respondent assented to the terms and conditions of the contract

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ASSIGNMENT NO .3

without any opportunity to question or change its terms which are practically on a "take-it-or-leave-it" basis, her only participation therein being the affixation of her signature. Further, reliance on the Fieldmen's Insurance case is misplaced since it is not the ambiguity or obscurity of the stipulation that renders necessary the strict interpretation of a contract of adhesion against the drafter, but the peculiarity of the transaction wherein one party, normally a corporation, drafts all the provisions of the contract without any participation whatsoever on the part of the other party other than affixment of signature. 11

A review of jurisprudence on the matter reveals the consistent holding of the Court that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof. 12 As explained in Ong Yiu vs. Court of Appeals, et al., supra:

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

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

. . . , it should be borne in mind that a contract of adhesion may be struck down as void and unenforceable, for being subversive of

public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. . . . .

but subject to the caveat that —

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

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

We find nothing objectionable about the lower court's reliance upon the Fieldmen's Insurance case, the principles wherein squarely apply to the present petition. The parallelism between the aforementioned case and this one is readily apparent for, just as in the instant case, it is the binding effect of the provisions in a contract of adhesion (an insurance policy in Fieldmen's Insurance) that is put to test.

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ASSIGNMENT NO .3

A judicious reading of the case reveals that what was pivotal in the judgment of liability against petitioner insurance company therein, and necessarily interpreting the provisions of the insurance policy as ineffective, was the finding that the representations made by the agent of the insurance company rendered it impossible to comply with the conditions of the contract in question, rather than the mere ambiguity of its terms. The extended pronouncements regarding strict construction of ambiguous provisions in an adhesion contract against its drafter, which although made by the Court as an aside but has perforce evolved into a judicial tenet over time, was actually an incidental statement intended to emphasize the duty of the court to protect the weaker, as against the more dominant, party to a contract, as well as to prevent the iniquitous situation wherein the will of one party is imposed upon the other in the course of negotiation.

Thus, there can be no further question as to the validity of the terms of the air waybill, even if the same constitutes a contract of adhesion. Whether or not the provisions thereof particularly on the limited liability of the carrier are binding on private respondent in this instance must be determined from the facts and circumstances involved vis-a-vis the nature of the provisions sought to be enforced, taking care that equity and fair play should characterize the transaction under review.

On petitioner's insistence that its liability for the damage to private respondent's microwave oven, if any, should be limited by the provisions of the air waybill, the lower court had this to say:

By and large, defendant's evidence is anchored principally on plaintiff's alleged failure to comply with paragraph 12, a(1) (Exh. "1-C-2") of the Air waybill (Exh. "A," also Exh. "1"), by filing a formal

claim immediately after discovery of the damage. Plaintiff filed her formal claim only on August 13, 1990 (Exh. "6", also Exh. "E"). And, failed to present positive proof on the value of the damaged microwave oven. Hence, the denial of her claim.

This Court has misgivings about these pretensions of defendant.

xxx xxx xxx

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

The appellate court declared correct the non-application by the trial court of the limited liability of therein defendant-appellant under the "Conditions of the Contract" contained in the air waybill, based on the ruling in Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., 15 which substantially enunciates the rule that while the Warsaw Convention has the force and effect of law in the Philippines, being a treaty commitment by the government and as a signatory thereto, the same does not operate as an exclusive enumeration of the instances when a carrier shall be liable for breach of contract or as an absolute limit of the extent of liability, nor does it preclude the operation of the Civil Code or other pertinent laws.

Petitioner insists that both respondent court and the trial court erred in finding that petitioner's liability, if any, is not limited by the provisions of the air waybill, for, as evidence of the contract of carriage between petitioner and private respondent, it substantially states that the shipper certifies to the correctness of the entries contained therein and

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ASSIGNMENT NO .3

accepts that the carrier's liability is limited to US $20 per kilogram of goods lost, damaged or destroyed unless a value is declared and a supplementary charge paid. Inasmuch as no such declaration was made by private respondent, as she admitted during cross-examination, the liability of petitioner, if any, should be limited to 28 kilograms multiplied by US $20, or $560. Moreover, the validity of these conditions has been upheld in the leading case of Ong Yiu vs. Court of Appeals, et al., supra, and subsequent cases, for being a mere reiteration of the limitation of liability under the Warsaw Convention, which treaty has the force and effect of law. 16

It is additionally averred that since private respondent was merely advised, not ordered, that she need not declare a higher value for her cargo, the final decision of refraining from making such a declaration fell on private respondent and should not put the petitioner in estoppel from invoking its limited liability. 17

In refutation, private respondent explains that the reason for the absence of a declaration of a higher value was precisely because petitioner's personnel in San Francisco, U.S.A. advised her not to declare the value of her cargo, which testimony has not at all been rebutted by petitioner. This being so, petitioner is estopped from faulting private respondent for her failure to declare the value of the microwave oven. 18

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

. . . . The stipulation in the bill of lading limiting the common carrier's liability to the value of goods appearing in the bill, unless the shipper

or owner declares a greater value, is valid and binding. The limitation of the carrier's liability is sanctioned by the freedom of the contracting parties to establish such stipulations, clauses, terms, or conditions as they may deem convenient, provided they are not contrary to law, morals, good customs and public policy. . . . . 19

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

In the case at bar, it will be noted that private respondent signified an intention to declare the value of the microwave oven prior to shipment, but was explicitly advised against doing so by PAL's personnel in San Francisco, U.S.A., as borne out by her testimony in court:

xxx xxx xxx

Q Did you declare the value of the shipment?

A No. I was advised not to.

Q Who advised you?

A At the PAL Air Cargo. 21

It cannot be denied that the attention of PAL through its personnel in San Francisco was sufficiently called to the fact that private respondent's cargo was highly susceptible to breakage as would necessitate the declaration of its actual value. Petitioner had all the opportunity to check the condition and manner of packing prior to acceptance for shipment, 22 as well as during the preparation of the air

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waybill by PAL's Acceptance Personnel based on information supplied by the shipper, 23 and to reject the cargo if the contents or the packing did not meet the company's required specifications. Certainly, PAL could not have been otherwise prevailed upon to merely accept the cargo.

While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of incident, posited that there may have been inadequate and improper packing of the cargo, 24 which by itself could be a ground for refusing carriage of the goods presented for shipment, he nonetheless admitted on cross-examination that private respondent's cargo was accepted by PAL in its San Francisco office:

ATTY. VINCO

So that, be that as it may, my particular concern is that, it is the PAL personnel that accepts the baggage?

WITNESS

Yes, sir.

ATTY. VINCO

Also, if he comes from abroad like in this particular case, it is the PAL personnel who accepts the baggage?

WITNESS

Yes, sir.

ATTY. VINCO

And the PAL personnel may or may not accept the baggage?

WITNESS

Yes, sir.

ATTY. VINCO

According to what is stated as in the acceptance of the cargo, it is to the best interest of the airlines, that is, he want(s) also that the airlines would be free from any liability. Could that be one of the grounds for not admitting a baggage?

WITNESS

Safety is number one (1)

xxx xxx xxx

ATTY. VINCO

So, this baggage was accepted and admitted in San Francisco?

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ASSIGNMENT NO .3

WITNESS

Yes, sir.

ATTY. VINCO

And you could not show any document to the Court that would suggest that this baggage was denied admittance by your office at San Francisco?

WITNESS

No, I cannot show.

ATTY. VINCO

Now, can you show any document that would suggest that there was insufficient pac(k)aging on this particular baggage from abroad?

WITNESS

No, sir. 25

In response to the trial court's questions during the trial, he also stated that while the passenger's declaration regarding the general or fragile character of the cargo is to a certain extent determinative of its classification, PAL nevertheless has and exercises discretion as to the manner of handling required by the nature of the cargo it accepts for

carriage. He further opined that the microwave oven was only a general, not a fragile, cargo which did not require any special handling. 26

There is no absolute obligation on the part of a carrier to accept a cargo. Where a common carrier accepts a cargo for shipment for valuable consideration, it takes the risk of delivering it in good condition as when it was loaded. And if the fact of improper packing is known to the carrier or its personnel, or apparent upon observation but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom. 27

The acceptance in due course by PAL of private respondent's cargo as packed and its advice against the need for declaration of its actual value operated as an assurance to private respondent that in fact there was no need for such a declaration. Petitioner can hardly be faulted for relying on the representations of PAL's own personnel.

In other words, private respondent Mejia could and would have complied with the conditions stated in the air waybill, i.e., declaration of a higher value and payment of supplemental transportation charges, entitling her to recovery of damages beyond the stipulated limit of US $20 per kilogram of cargo in the event of loss or damage, had she not been effectively prevented from doing so upon the advice of PAL's personnel for reasons best known to themselves.

As pointed out by private respondent, the aforestated facts were not denied by PAL in any of its pleadings nor rebutted by way of evidence presented in the course of the trial, and thus in effect it judicially admitted that such an advice was given by its personnel in San

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Francisco, U.S.A. Petitioner, therefore, is estopped from blaming private respondent for not declaring the value of the cargo shipped and which would have otherwise entitled her to recover a higher amount of damages. The Court's bidding in the Fieldmen's Insurance case once again rings true:

. . . As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice.

We likewise uphold the lower court's finding that private respondent complied with the requirement for the immediate filing of a formal claim for damages as required in the air waybill or, at least, we find that there was substantial compliance therewith.

Private respondent testified that she authorized her sister, Concepcion Diño, to claim her cargo consisting of a microwave oven since the former had to take a connecting flight to Bacolod City on the very same afternoon of the day of her arrival. 28 As instructed, Concepcion Diño promptly proceeded to PAL's Import Section the next day to claim the oven. Upon discovering that the glass door was broken, she immediately filed a claim by way of the baggage freight claim 29 on which was duly annotated the damage sustained by the oven. 30

Her testimony relates what took place thereafter:

ATTY. VINCO

So, after that inspection, what did you do?

WITNESS

After that annotation placed by Mr. Villaruz, I went home and I followed it up the next day with the Clerk of PAL cargo office.

ATTY. VINCO

What did the clerk tell you?

WITNESS

She told me that the claim was being processed and I made several phone calls after that. I started my follow-ups February up to June 1990.

ATTY. VINCO

And what results did those follow-ups produce?

WITNESS

All they said (was) that the document was being processed, that they were waiting for Atty. Paco to report to the office and they could refer the matter to Atty. Paco.

ATTY. VINCO

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ASSIGNMENT NO .3

Who is this Atty. Paco?

WITNESS

He was the one in-charge of approving our claim.

ATTY. VINCO

Were you able to see Atty. Paco?

WITNESS

Yes, sir. I personally visited Atty. Paco together with my auntie who was a former PAL employee.

xxx xxx xxx

ATTY. VINCO

So, what did you do, did you make a report or did you tell Atty. Paco of your scouting around for a possible replacement?

WITNESS

I did call him back at his office. I made a telephone call.

ATTY. VINCO

And what answer did Atty. Paco make after you have reported back to him?

WITNESS

They told me that they were going to process the claim based on the price that I gave them but there was no definite result.

ATTY. VINCO

How many times did you go and see Atty. Paco regarding the claim of your sister?

WITNESS

I made one personal visit and several follow-up calls. With Atty. Paco, I made one phone call but I made several phone calls with his secretary or the clerk at PAL cargo office and I was trying to locate him but unfortunately, he was always out of his office. 31

PAL claims processor, Rodolfo Pandes, * confirmed having received the baggage freight claim on January 30, 1990 32 and the referral to and extended pendency of the private respondent's claim with the office of Atty. Paco, to wit:

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ASSIGNMENT NO .3

ATTY. VINCO:

Q And you did instruct the claimant to see the Claim Officer of the company, right?

WITNESS:

A Yes, sir.

ATTY. VINCO:

Q And the Claim Officer happened to be Atty. Paco?

WITNESS:

A Yes, sir.

ATTY. VINCO:

Q And you know that the plaintiff thru her authorized representative Concepcion Diño, who is her sister had many times gone to Atty. Paco, in connection with this claim of her sister?

WITNESS:

A Yes, sir.

ATTY. VINCO:

Q As a matter of fact even when the complaint was already filed here in Court the claimant had

continued to call about the settlement of her claim with Atty. Paco, is that correct?

xxx xxx xxx

WITNESS:

A Yes, sir.

ATTY. VINCO:

Q You know this fact because a personnel saw you in one of the pre-trial here when this case was heard before the sala of Judge Moscardon, is that correct?

WITNESS:

A Yes.

ATTY. VINCO:

Q In other words, the plaintiff rather had never stop(ped) in her desire for your company to settle this claim, right?

WITNESS:

A Yes, sir. 33

Considering the abovementioned incidents and private respondent Mejia's own zealous efforts in following up the claim, 34 it was clearly not her fault that the letter of demand for damages could only be filed,

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after months of exasperating follow-up of the claim, on August 13, 1990. 35 If there was any failure at all to file the formal claim within the prescriptive period contemplated in the air waybill, this was largely because of PAL's own doing, the consequences of which cannot, in all fairness, be attributed to private respondent.

Even if the claim for damages was conditioned on the timely filing of a formal claim, under Article 1186 of the Civil Code that condition was deemed fulfilled, considering that the collective action of PAL's personnel in tossing around the claim and leaving it unresolved for an indefinite period of time was tantamount to "voluntarily preventing its fulfillment." On grounds of equity, the filing of the baggage freight claim, which sufficiently informed PAL of the damage sustained by private respondent's cargo, constituted substantial compliance with the requirement in the contract for the filing of a formal claim.

All told, therefore, respondent appellate court did not err in ruling that the provision on limited liability is not applicable in this case. We, however, note in passing that while the facts and circumstances of this case do not call for the direct application of the provisions of the Warsaw Convention, it should be stressed that, indeed, recognition of the Warsaw Convention does not preclude the operation of the Civil Code and other pertinent laws in the determination of the extent of liability of the common carrier. 36

The Warsaw Convention, being a treaty to which the Philippines is a signatory, is as much a part of Philippine law as the Civil Code, Code of Commerce and other municipal special laws. 37 The provisions

therein contained, specifically on the limitation of carrier's liability, are operative in the Philippines but only in appropriate situations.

Petitioner ascribes ultimate error in the award of moral and exemplary damages and attorney's fees in favor of private respondent in that other than the statement of the trial court that petitioner acted in bad faith in denying private respondent's claim, which was affirmed by the Court of Appeals, there is no evidence on record that the same is true. The denial of private respondent's claim was supposedly in the honest belief that the same had prescribed, there being no timely formal claim filed; and despite having been given an opportunity to submit positive proof of the value of the damaged microwave oven, no such proof was submitted. Petitioner insists that its failure to deliver the oven in the condition in which it was shipped could hardly be considered as amounting to bad faith. 38

Private respondent counters that petitioner's failure to deliver the microwave oven in the condition in which it was received can be described as gross negligence amounting to bad faith, on the further consideration that it failed to prove that it exercised the extraordinary diligence required by law, and that no explanation whatsoever was given as to why the front glass of the oven was broken. 39

The trial court justified its award of actual, moral and exemplary damages, and attorney's fees in favor of private respondent in this wise:

Since the plaintiff's baggage destination was the Philippines, Philippine law governs the liability of the defendant for damages for the microwave oven.

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The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735 and 1753 . . . .

xxx xxx xxx

In this case, defendant failed to overcome, not only the presumption but more importantly, plaintiff's evidence that defendant's negligence was the proximate cause of the damages of the microwave oven. Further plaintiff has established that defendant acted in bad faith when it denied the former's claim on the ground that the formal claim was filed beyond the period as provided in paragraph 12 (a-1) (Exh. "1-C-2") of the Air Waybill (Exh. "1", also Exh. "A"), when actually, Concepcion Diño, sister of plaintiff has immediately filed the formal claim upon discovery of the damage. 40

Respondent appellate court was in full agreement with the trial court's finding of bad faith on the part of petitioner as a basis for the award of the aforestated damages, declaring that:

As to the last assigned error, a perusal of the facts and law of the case reveals that the lower court's award of moral and exemplary damages, attorney's fees and costs of suit to plaintiff-appellee is in accordance with current laws and jurisprudence on the matter. Indeed, aside from the fact that defendant-appellant acted in bad faith in breaching the contract and in denying plaintiff's valid claim for damages, plaintiff-appellee underwent profound distress, sleepless nights, and anxiety upon knowledge of her damaged microwave oven in possession of defendant-appellant, entitling her to the award of moral and exemplary damages (Cathay Pacific Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221, New Civil Code), and certainly plaintiff-appellant's unjust refusal to comply with her valid demand for payment, thereby also entitling her to reasonable attorney's fees [Art. 2208 (2) and (11), id.]. 41

It will be noted that petitioner never denied that the damage to the microwave oven was sustained while the same was in its custody. The possibility that said damage was due to causes beyond the control of PAL has effectively been ruled out since the entire process in handling of the cargo — from the unloading thereof from the plane, the towing and transfer to the PAL warehouse, the transfer to the Customs examination area, and its release thereafter to the shipper — was done almost exclusively by, and with the intervention or, at the very least, under the direct supervision of a responsible PAL personnel. 42

The very admissions of PAL, through Vicente Villaruz of its Import Section, as follows:

ATTY. VINCO

So that, you now claim, Mr. Witness, that from the time the cargo was unloaded from the plane until the time it reaches the Customs counter where it was inspected, all the way, it was the PAL personnel who did all these things?

WITNESS

Yes, however, there is also what we call the Customs storekeeper and the Customs guard along with the cargo.

ATTY. VINCO

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You made mention about a locator?

WITNESS

Yes, sir.

ATTY. VINCO

This locator, is he an employee of the PAL or the Customs?

WITNESS

He is a PAL employee. 43

lead to the inevitable conclusion that whatever damage may have been sustained by the cargo is due to causes attributable to PAL's personnel or, at all events, under their responsibility.

Moreover, the trial court underscored the fact that petitioner was not able to overcome the statutory presumption of negligence in Article 1735 which, as a common carrier, it was laboring under in case of loss, destruction or deterioration of goods, through proper showing of the exercise of extraordinary diligence. Neither did it prove that the damage to the microwave oven was because of any of the excepting causes under Article 1734, all of the same Code. Inasmuch as the subject item was received in apparent good condition, no contrary notation or exception having been made on the air waybill upon its acceptance for shipment, the fact that it was delivered with a broken glass door raises the presumption that PAL's personnel were negligent in the carriage and handling of the cargo. 44

Furthermore, there was glaringly no attempt whatsoever on the part of petitioner to explain the cause of the damage to the oven. The unexplained cause of damage to private respondent's cargo constitutes gross carelessness or negligence which by itself justifies the present award of damages. 45 The equally unexplained and inordinate delay in acting on the claim upon referral thereof to the claims officer, Atty. Paco, and the noncommittal responses to private respondent's entreaties for settlement of her claim for damages belies petitioner's pretension that there was no bad faith on its part. This unprofessional indifference of PAL's personnel despite full and actual knowledge of the damage to private respondent's cargo, just to be exculpated from liability on pure technicality and bureaucratic subterfuge, smacks of willful misconduct and insensitivity to a passenger's plight tantamount to bad faith 46 and renders unquestionable petitioner's liability for damages. In sum, there is no reason to disturb the findings of the trial court in this case, especially with its full affirmance by respondent Court of Appeals.

On this note, the case at bar goes into the annals of our jurisprudence after six years and recedes into the memories of our legal experience as just another inexplicable inevitability. We will never know exactly how many man-hours went into the preparation, litigation and adjudication of this simple dispute over an oven, which the parties will no doubt insist they contested as a matter of principle. One thing, however, is certain. As long as the first letter in "principle" is somehow outplaced by the peso sign, the courts will always have to resolve similar controversies although mutual goodwill could have dispensed with judicial recourse.

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IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent Court of Appeals is AFFIRMED in toto.

SO ORDERED.

Romero, Puno and Mendoza, JJ., concur.

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

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

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

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

CASTRO, J.:

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

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

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

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

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

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

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

On March 17, 1966 the respondents, referring to KLM as the principal of Aer Lingus, filed a complaint for damages with the Court of First Instance of Manila arising from breach of contract of carriage and for

the humiliating treatment received by them at the hands of the Aer Lingus manager in Barcelona. After due hearing, the trial court awarded damages to the respondents as follows: $43.35 or its peso equivalent as actual damages, P10,000 as moral damages, P5,000 as exemplary damages, and P5,000 as attorney's fees, and expenses of litigation.

Both parties appealed to the Court of Appeals. The KLM sought complete exoneration; the respondents prayed for an increase in the award of damages. In its decision of August 14, 1969 the Court of Appeals decreed as follows: "Appellant KLM is condemned to pay unto the plaintiffs the sum of $43.35 as actual damages; P50,000 as moral damages; and P6,000 as attorney's fees and costs."

Hence, the present recourse by the KLM.

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

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

ART. 30. (1) In the case of transportation to be performed by various successive carriers and failing within the definition set out in the third paragraph of Article I, each carrier who accepts passengers, baggage, or goods shall be subject to the rules set out in the

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convention, and shall be deemed to be one of the contracting parties to the contract of transportation insofar as the contract deals with that part of transportation which is performed under his supervision. 2

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

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

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

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

The respondents rebut the foregoing arguments, thus:

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

ART. 25. (1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the damage is caused by his willful misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to willful misconduct. 3

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

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

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

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

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

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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

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embarrassment suffered by the respondents at the hands of a supercilious boor of the Aer Lingus.

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

Makalintal, C.J., Makasiar, Esguerra and Muñoz Palma, JJ., concur.

G.R. No. 150843 March 14, 2003

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

DAVIDE, JR., C.J.:

Is an involuntary upgrading of an airline passenger’s accommodation from one class to a more superior class at no extra cost a breach of contract of carriage that would entitle the passenger to an award of damages? This is a novel question that has to be resolved in this case.

The facts in this case, as found by the Court of Appeals and adopted by petitioner Cathay Pacific Airways, Ltd., (hereinafter Cathay) are as follows:

Cathay is a common carrier engaged in the business of transporting passengers and goods by air. Among the many routes it services is the Manila-

Hongkong-Manila course. As part of its marketing strategy, Cathay accords its frequent flyers membership in its Marco Polo Club. The members enjoy several privileges, such as priority for upgrading of booking without any extra charge whenever an opportunity arises. Thus, a frequent flyer booked in the Business Class has priority for upgrading to First Class if the Business Class Section is fully booked.

Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are frequent flyers of Cathay and are Gold Card members of its Marco Polo Club. On 24 September 1996, the Vazquezes, together with their maid and two friends Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for pleasure and business.

For their return flight to Manila on 28 September 1996, they were booked on Cathay’s Flight CX-905, with departure time at 9:20 p.m. Two hours before their time of departure, the Vazquezes and their companions checked in their luggage at Cathay’s check-in counter at Kai Tak Airport and were given their respective boarding passes, to wit, Business Class boarding passes for the Vazquezes and their two friends, and Economy Class for their maid. They then proceeded to the Business Class passenger lounge.

When boarding time was announced, the Vazquezes and their two friends went to Departure Gate No. 28, which was designated for Business Class passengers. Dr. Vazquez presented his boarding pass to the ground stewardess, who in turn inserted it into an electronic machine reader or computer at the gate. The ground stewardess was assisted by a ground attendant by the name of Clara Lai Han Chiu. When Ms. Chiu glanced at the computer monitor, she saw a message that there was a "seat change" from Business Class to First Class for the Vazquezes.

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Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’ accommodations were upgraded to First Class. Dr. Vazquez refused the upgrade, reasoning that it would not look nice for them as hosts to travel in First Class and their guests, in the Business Class; and moreover, they were going to discuss business matters during the flight. He also told Ms. Chiu that she could have other passengers instead transferred to the First Class Section. Taken aback by the refusal for upgrading, Ms. Chiu consulted her supervisor, who told her to handle the situation and convince the Vazquezes to accept the upgrading. Ms. Chiu informed the latter that the Business Class was fully booked, and that since they were Marco Polo Club members they had the priority to be upgraded to the First Class. Dr. Vazquez continued to refuse, so Ms. Chiu told them that if they would not avail themselves of the privilege, they would not be allowed to take the flight. Eventually, after talking to his two friends, Dr. Vazquez gave in. He and Mrs. Vazquez then proceeded to the First Class Cabin.

Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to Cathay’s Country Manager, demanded that they be indemnified in the amount of P1million for the "humiliation and embarrassment" caused by its employees. They also demanded "a written apology from the management of Cathay, preferably a responsible person with a rank of no less than the Country Manager, as well as the apology from Ms. Chiu" within fifteen days from receipt of the letter.

In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s Country Manager Argus Guy Robson, informed the Vazquezes that Cathay would investigate the incident and get back to them within a week’s time.

On 8 November 1996, after Cathay’s failure to give them any feedback within its self-imposed deadline, the Vazquezes instituted before the Regional Trial Court of Makati City an action for damages against Cathay, praying for the payment to each of them the amounts of P250,000 as temperate damages; P500,000 as moral damages; P500,000 as exemplary or corrective damages; and P250,000 as attorney’s fees.

In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that they preferred to stay in Business Class, Ms. Chiu "obstinately, uncompromisingly and in a loud, discourteous and harsh voice threatened" that they could not board and leave with the flight unless they go to First Class, since the Business Class was overbooked. Ms. Chiu’s loud and stringent shouting annoyed, embarrassed, and humiliated them because the incident was witnessed by all the other passengers waiting for boarding. They also claimed that they were unjustifiably delayed to board the plane, and when they were finally permitted to get into the aircraft, the forward storage compartment was already full. A flight stewardess instructed Dr. Vazquez to put his roll-on luggage in the overhead storage compartment. Because he was not assisted by any of the crew in putting up his luggage, his bilateral carpal tunnel syndrome was aggravated, causing him extreme pain on his arm and wrist. The Vazquezes also averred that they "belong to the uppermost and absolutely top elite of both Philippine Society and the Philippine financial community, [and that] they were among the wealthiest persons in the Philippine[s]."

In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade passengers to the next better class of accommodation, whenever an opportunity arises, such as when a certain section is fully booked. Priority in upgrading is given to its frequent flyers, who are considered favored

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passengers like the Vazquezes. Thus, when the Business Class Section of Flight CX-905 was fully booked, Cathay’s computer sorted out the names of favored passengers for involuntary upgrading to First Class. When Ms. Chiu informed the Vazquezes that they were upgraded to First Class, Dr. Vazquez refused. He then stood at the entrance of the boarding apron, blocking the queue of passengers from boarding the plane, which inconvenienced other passengers. He shouted that it was impossible for him and his wife to be upgraded without his two friends who were traveling with them. Because of Dr. Vazquez’s outburst, Ms. Chiu thought of upgrading the traveling companions of the Vazquezes. But when she checked the computer, she learned that the Vazquezes’ companions did not have priority for upgrading. She then tried to book the Vazquezes again to their original seats. However, since the Business Class Section was already fully booked, she politely informed Dr. Vazquez of such fact and explained that the upgrading was in recognition of their status as Cathay’s valued passengers. Finally, after talking to their guests, the Vazquezes eventually decided to take the First Class accommodation.

Cathay also asserted that its employees at the Hong Kong airport acted in good faith in dealing with the Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of disrespect against them (the Vazquezes). Assuming that there was indeed a breach of contractual obligation, Cathay acted in good faith, which negates any basis for their claim for temperate, moral, and exemplary damages and attorney’s fees. Hence, it prayed for the dismissal of the complaint and for payment of P100,000 for exemplary damages and P300,000 as attorney’s fees and litigation expenses.

During the trial, Dr. Vazquez testified to support the allegations in the complaint. His testimony was corroborated by his two friends who were with

him at the time of the incident, namely, Pacita G. Cruz and Josefina Vergel de Dios.

For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen; Ms. Chiu; Norma Barrientos, Comptroller of its retained counsel; and Mr. Robson. Yuen and Robson testified on Cathay’s policy of upgrading the seat accommodation of its Marco Polo Club members when an opportunity arises. The upgrading of the Vazquezes to First Class was done in good faith; in fact, the First Class Section is definitely much better than the Business Class in terms of comfort, quality of food, and service from the cabin crew. They also testified that overbooking is a widely accepted practice in the airline industry and is in accordance with the International Air Transport Association (IATA) regulations. Airlines overbook because a lot of passengers do not show up for their flight. With respect to Flight CX-905, there was no overall overbooking to a degree that a passenger was bumped off or downgraded. Yuen and Robson also stated that the demand letter of the Vazquezes was immediately acted upon. Reports were gathered from their office in Hong Kong and immediately forwarded to their counsel Atty. Remollo for legal advice. However, Atty. Remollo begged off because his services were likewise retained by the Vazquezes; nonetheless, he undertook to solve the problem in behalf of Cathay. But nothing happened until Cathay received a copy of the complaint in this case. For her part, Ms. Chiu denied that she shouted or used foul or impolite language against the Vazquezes. Ms. Barrientos testified on the amount of attorney’s fees and other litigation expenses, such as those for the taking of the depositions of Yuen and Chiu.

In its decision1 of 19 October 1998, the trial court found for the Vazquezes and decreed as follows:

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

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

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

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

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

e) Costs of suit.

SO ORDERED.

According to the trial court, Cathay offers various classes of seats from which passengers are allowed to choose regardless of their reasons or motives, whether it be due to budgetary constraints or whim. The choice imposes a clear obligation on Cathay to transport the passengers in the class chosen by them. The carrier cannot, without exposing itself to liability, force a passenger to involuntarily change his choice. The upgrading of the Vazquezes’ accommodation over and above their vehement objections was due to the overbooking of the Business Class. It was a pretext to pack as many

passengers as possible into the plane to maximize Cathay’s revenues. Cathay’s actuations in this case displayed deceit, gross negligence, and bad faith, which entitled the Vazquezes to awards for damages.

On appeal by the petitioners, the Court of Appeals, in its decision of 24 July 2001,2 deleted the award for exemplary damages; and it reduced the awards for moral and nominal damages for each of the Vazquezes to P250,000 and P50,000, respectively, and the attorney’s fees and litigation expenses to P50,000 for both of them.

The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class, Cathay novated the contract of carriage without the former’s consent. There was a breach of contract not because Cathay overbooked the Business Class Section of Flight CX-905 but because the latter pushed through with the upgrading despite the objections of the Vazquezes.

However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or meant to be discourteous to, Dr. Vazquez, although it might seemed that way to the latter, who was a member of the elite in Philippine society and was not therefore used to being harangued by anybody. Ms. Chiu was a Hong Kong Chinese whose fractured Chinese was difficult to understand and whose manner of speaking might sound harsh or shrill to Filipinos because of cultural differences. But the Court of Appeals did not find her to have acted with deliberate malice, deceit, gross negligence, or bad faith. If at all, she was negligent in not offering the First Class accommodations to other passengers. Neither can the flight stewardess in the First Class Cabin be said to have been in bad faith when she failed to assist Dr. Vazquez in lifting his baggage into the overhead storage bin. There is no proof that he asked for help and was refused even after saying that he was suffering from "bilateral carpal tunnel

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syndrome." Anent the delay of Yuen in responding to the demand letter of the Vazquezes, the Court of Appeals found it to have been sufficiently explained.

The Vazquezes and Cathay separately filed motions for a reconsideration of the decision, both of which were denied by the Court of Appeals.

Cathay seasonably filed with us this petition in this case. Cathay maintains that the award for moral damages has no basis, since the Court of Appeals found that there was no "wanton, fraudulent, reckless and oppressive" display of manners on the part of its personnel; and that the breach of contract was not attended by fraud, malice, or bad faith. If any damage had been suffered by the Vazquezes, it was damnum absque injuria, which is damage without injury, damage or injury inflicted without injustice, loss or damage without violation of a legal right, or a wrong done to a man for which the law provides no remedy. Cathay also invokes our decision in United Airlines, Inc. v. Court of Appeals3 where we recognized that, in accordance with the Civil Aeronautics Board’s Economic Regulation No. 7, as amended, an overbooking that does not exceed ten percent cannot be considered deliberate and done in bad faith. We thus deleted in that case the awards for moral and exemplary damages, as well as attorney’s fees, for lack of proof of overbooking exceeding ten percent or of bad faith on the part of the airline carrier.

On the other hand, the Vazquezes assert that the Court of Appeals was correct in granting awards for moral and nominal damages and attorney’s fees in view of the breach of contract committed by Cathay for transferring them from the Business Class to First Class Section without prior notice or consent and over their vigorous objection. They likewise argue that the issuance of passenger

tickets more than the seating capacity of each section of the plane is in itself fraudulent, malicious and tainted with bad faith.

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

We resolve the first issue in the affirmative.

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

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

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

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In previous cases, the breach of contract of carriage consisted in either the bumping off of a passenger with confirmed reservation or the downgrading of a passenger’s seat accommodation from one class to a lower class. In this case, what happened was the reverse. The contract between the parties was for Cathay to transport the Vazquezes to Manila on a Business Class accommodation in Flight CX-905. After checking-in their luggage at the Kai Tak Airport in Hong Kong, the Vazquezes were given boarding cards indicating their seat assignments in the Business Class Section. However, during the boarding time, when the Vazquezes presented their boarding passes, they were informed that they had a seat change from Business Class to First Class. It turned out that the Business Class was overbooked in that there were more passengers than the number of seats. Thus, the seat assignments of the Vazquezes were given to waitlisted passengers, and the Vazquezes, being members of the Marco Polo Club, were upgraded from Business Class to First Class.

We note that in all their pleadings, the Vazquezes never denied that they were members of Cathay’s Marco Polo Club. They knew that as members of the Club, they had priority for upgrading of their seat accommodation at no extra cost when an opportunity arises. But, just like other privileges, such priority could be waived. The Vazquezes should have been consulted first whether they wanted to avail themselves of the privilege or would consent to a change of seat accommodation before their seat assignments were given to other passengers. Normally, one would appreciate and accept an upgrading, for it would mean a better accommodation. But, whatever their reason was and however odd it might be, the Vazquezes had every right to decline the upgrade and insist on the Business Class accommodation they had booked for and which was designated in their boarding passes. They clearly waived their priority or preference when they asked that other passengers be given the

upgrade. It should not have been imposed on them over their vehement objection. By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes.

We are not, however, convinced that the upgrading or the breach of contract was attended by fraud or bad faith. Thus, we resolve the second issue in the negative.

Bad faith and fraud are allegations of fact that demand clear and convincing proof. They are serious accusations that can be so conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans or mudslinging unless convincingly substantiated by whoever is alleging them.

Fraud has been defined to include an inducement through insidious machination. Insidious machination refers to a deceitful scheme or plot with an evil or devious purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state material facts and, by reason of such omission or concealment, the other party was induced to give consent that would not otherwise have been given.7

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.8

We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were not induced to agree to the upgrading through insidious words or deceitful machination or through willful concealment of material facts. Upon

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boarding, Ms. Chiu told the Vazquezes that their accommodations were upgraded to First Class in view of their being Gold Card members of Cathay’s Marco Polo Club. She was honest in telling them that their seats were already given to other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to consider the remedy of offering the First Class seats to other passengers. But, we find no bad faith in her failure to do so, even if that amounted to an exercise of poor judgment.

Neither was the transfer of the Vazquezes effected for some evil or devious purpose. As testified to by Mr. Robson, the First Class Section is better than the Business Class Section in terms of comfort, quality of food, and service from the cabin crew; thus, the difference in fare between the First Class and Business Class at that time was $250.9 Needless to state, an upgrading is for the better condition and, definitely, for the benefit of the passenger.

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

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

exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful act of non-accommodation.

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

Now we come to the third issue on damages.

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

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

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Although incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant’s wrongful act or omission.11 Thus, case law establishes the following requisites for the award of moral damages: (1) there must be an injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate

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cause of the injury sustained by the claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219 of the Civil Code.12

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

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

The deletion of the award for exemplary damages by the Court of Appeals is correct. It is a requisite in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent or malevolent manner.15 Such requisite is absent in this case. Moreover, to be entitled thereto the claimant must first establish his right to moral, temperate, or compensatory damages.16 Since the Vazquezes are not entitled to any of these damages, the award for exemplary damages has no legal basis. And where the awards for moral and exemplary damages are eliminated, so must the award for attorney’s fees.17

The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of contract is an award for nominal damages under Article 2221 of the Civil Code, which reads as follows:

Article 2221 of the Civil Code provides:

Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

Worth noting is the fact that in Cathay’s Memorandum filed with this Court, it prayed only for the deletion of the award for moral damages. It deferred to the Court of Appeals’ discretion in awarding nominal damages; thus:

As far as the award of nominal damages is concerned, petitioner respectfully defers to the Honorable Court of Appeals’ discretion. Aware as it is that somehow, due to the resistance of respondents-spouses to the normally-appreciated gesture of petitioner to upgrade their accommodations, petitioner may have disturbed the respondents-spouses’ wish to be with their companions (who traveled to Hong Kong with them) at the Business Class on their flight to Manila. Petitioner regrets that in its desire to provide the respondents-spouses with additional amenities for the one and one-half (1 1/2) hour flight to Manila, unintended tension ensued.18

Nonetheless, considering that the breach was intended to give more benefit and advantage to the Vazquezes by upgrading their Business Class

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accommodation to First Class because of their valued status as Marco Polo members, we reduce the award for nominal damages to P5,000.

Before writing finis to this decision, we find it well-worth to quote the apt observation of the Court of Appeals regarding the awards adjudged by the trial court:

We are not amused but alarmed at the lower court’s unbelievable alacrity, bordering on the scandalous, to award excessive amounts as damages. In their complaint, appellees asked for P1 million as moral damages but the lower court awarded P4 million; they asked for P500,000.00 as exemplary damages but the lower court cavalierly awarded a whooping P10 million; they asked for P250,000.00 as attorney’s fees but were awarded P2 million; they did not ask for nominal damages but were awarded P200,000.00. It is as if the lower court went on a rampage, and why it acted that way is beyond all tests of reason. In fact the excessiveness of the total award invites the suspicion that it was the result of "prejudice or corruption on the part of the trial court."

The presiding judge of the lower court is enjoined to hearken to the Supreme Court’s admonition in Singson vs. CA (282 SCRA 149 [1997]), where it said:

The well-entrenched principle is that the grant of moral damages depends upon the discretion of the court based on the circumstances of each case. This discretion is limited by the principle that the amount awarded should not be palpably and scandalously excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court….

and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held:

Nonetheless, we agree with the injunction expressed by the Court of Appeals that passengers must not prey on international airlines for damage awards, like "trophies in a safari." After all neither the social standing nor prestige of the passenger should determine the extent to which he would suffer because of a wrong done, since the dignity affronted in the individual is a quality inherent in him and not conferred by these social indicators. 19

We adopt as our own this observation of the Court of Appeals.

WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the Court of Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED, and as modified, the awards for moral damages and attorney’s fees are set aside and deleted, and the award for nominal damages is reduced to P5,000.

No pronouncement on costs.

SO ORDERED.

Vitug, Carpio, and Azcuna, JJ., concur.Ynares-Santiago, J., on leave.

EN BANC

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G.R. No. L-22425 August 31, 1965

NORTHWEST AIRLINES, INC., Petitioner, vs. NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH DIVISION), Respondents.

CONCEPCION, J.: chanrobles virtual law library

This is an action for damages for alleged breach of contract. After appropriate proceedings the Court of First Instance of Manila, in which the case was originally filed, rendered judgment sentencing defendant Northwest Airlines, Inc. - hereinafter referred to as petitioner - to pay to plaintiff Cuenca - hereinafter referred to as respondent - the sum of P20,000 as moral damages, together with the sum of P5,000 as exemplary damages, with legal interest thereon from the date of the filing of complaint," December 12, 1959, "until fully paid, plus the further sum of P2,000 as attorney's fees and expenses of litigation." On appeal taken by petitioner, said decision was affirmed by the Court of Appeals, except as to the P5,000.00 exemplary damages, which was eliminated, and the P20,000.00 award for moral damages, which was converted into nominal damages. The case is now before us on petition for review by certiorari filed by petitioner, upon the ground that the lower court has erred: (1) in holding that the Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines; (2) in not holding that respondent has no cause of action; and (3) in awarding P20,000 as nominal damages.chanroblesvirtualawlibrary chanrobles virtual law library

We deem it unnecessary to pass upon the first assignment of error because the same is the basis of the second assignment of error, and the latter is devoid of merit, even if we assumed the former to be well-taken. Indeed the second

assignment of error is predicated upon Articles 17, 18 and 19 of said Convention, reading:

ART. 17. The carrier shall be liable for damages sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.chanroblesvirtualawlibrary chanrobles virtual law library

ART. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction or loss of, or of damage to, any checked baggage, or any goods, if the occurrence which caused the damage so sustained took place during the transportation by air.chanroblesvirtualawlibrary chanrobles virtual law library

(2) The transportation by air within the meaning of the preceding paragraph shall comprise the period during which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft, or, in the case of a landing outside an airport, in any place whatsoever. chanroblesvirtualawlibrary chanrobles virtual law library

(3) The period of the transportation by air shall not extend to any transportation by land, by sea, or by river performed outside an airport. If, however, such transportation takes place in the performance of a contract for transportation by air, for the purpose of loading, delivery, or transhipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the transportation by air. chanroblesvirtualawlibrary chanrobles virtual law library

ART. 19. The carrier shall be liable for damage occasioned by delay in the transportation by air of passengers, baggage, or goods.

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Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of a passenger or injury suffered by him, or of destruction or loss of, or damage to any checked baggage or any goods, or of delay in the transportation by air of passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The same merely declare the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier. Under petitioner's theory, an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd. chanroblesvirtualawlibrary chanrobles virtual law library

The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz. 4606), and Quijano vs. Philippine Air Lines (CA-G.R. No. 21804-R). Neither case is, however, in point, aside from the fact that the latter is not controlling upon us. In the first case, this Court eliminated a P10,000 award for nominal damages, because the aggrieved party had already been awarded P6,000 as compensatory damages, P30,000 as moral damages and P10,000 as exemplary damages, and "nominal damages cannot co-exist with compensatory damages." In the case at bar, the Court of Appeals has adjudicated no such compensatory, moral and exemplary damages to respondent herein.chanroblesvirtualawlibrary chanrobles virtual law library

Moreover, there are special reasons why the P20,000.00 award in favor of respondent herein is justified, even if said award were characterized as nominal damages. When his contract of carriage was violated by the petitioner, respondent held the office of Commissioner of Public Highways of the Republic of the Philippines. Having boarded petitioner's plane in Manila with a first class ticket to Tokyo, he was, upon arrival at Okinawa, transferred

to the tourist class compartment. Although he revealed that he was traveling in his official capacity as official delegate of the Republic to a conference in Tokyo, an agent of petitioner rudely compelled him in the presence of other passengers to move, over his objection, to the tourist class, under threat of otherwise leaving him in Okinawa. In order to reach the conference on time, respondent had no choice but to obey.chanroblesvirtualawlibrary chanrobles virtual law library

It is true that said ticket was marked "W/L," but respondent's attention was not called thereto. Much less was he advised that "W/L" meant "wait listed." Upon the other hand, having paid the first class fare in full and having been given first class accommodation as he took petitioner's plane in Manila, respondent was entitled to believe that this was a confirmation of his first class reservation and that he would keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not tried to explain or even alleged that the person to whom respondent's first class seat was given had a better right thereto. In other words, since the offense had been committed with full knowledge of the fact that respondent was an official representative of the Republic of the Philippines, the sum of P20,000 awarded as damages may well be considered as merely nominal. At any rate, considering that petitioner's agent had acted in a wanton, reckless and oppressive manner, said award may also be considered as one for exemplary damages. chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the petitioner. It is so ordered.

Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Dizon, Regala, Makalintal and Zaldivar, JJ., concur.Bengzon, J.P., took no part.Barrera, J., is on leave.

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Documents

3rd Assignment a. Common Provisions( Art 17464 to 1766 of Ncc