Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-11037 December 29, 1960

convalescence, having spent in this connection the total sum of P775.30 in addition to the amount already referred to. On April 24, 1953 the present action was filed to recover for Edgardo Cariaga, from the LTB and the MRR Co., and total sum of P312,000.00 as actual, compensatory, moral and exemplary damages, and for his parents, the sum of P18,00.00 in the same concepts. The LTB disclaimed liability claiming that the accident was due to the negligence of its co-defendant, the Manila Railroad Company, for not providing a crossing bar at the point where the national highway crossed the railway track, and for this reason filed the corresponding cross-claim against the latter company to recover the total sum of P18,194.75 representing the expenses paid to Edgardo Cariaga. The Manila Railroad Company, in turn, denied liability upon the complaint and crossclaim alleging that it was the reckless negligence of the bus driver that caused the accident. The lower court held that it was the negligence of the bus driver that caused the accident and, as a result, rendered judgment sentencing the LTB to pay Edgardo Cariaga the sum of P10,490.00 as compensatory damages, with interest at the legal rate from the filing of the complaint, and dismissing the cross-claim against the Manila Railroad Company. From this decision the Cariagas and the LTB appealed. The Cariagas claim that the trial court erred: in awarding only P10,490.00 as compensatory damages to Edgardo; in not awarding them actual and moral damages, and in not sentencing appellant LTB to pay attorney's fees. On the other hand, the LTB's principal contention in this appeal is that the trial court should have held that the collision was due to the fault of both the locomotive driver and the bus driver and erred, as a consequence, in not holding the Manila Railroad Company liable upon the cross-claim filed against it. We shall first dispose of the appeal of the bus company. Its first contention is that the driver of the train locomotive, like the bus driver, violated the law, first, in sounding the whistle only when the collision was about to take place instead of at a distance at least 300 meters from the crossing, and second, in not ringing the locomotive bell at all. Both contentions are without merits. After considering the evidence presented by both parties the lower court expressly found: . . . While the train was approximately 300 meters from the crossing, the engineer sounded two long and two short whistles and upon reaching a point about 100 meters from the highway, he sounded a long whistle which lasted up to the time the train was about to cross it. The bus proceeded on its way without slackening its speed and it

EDGARDO CARIAGA, ET AL., plaintiffs-appellants, vs. LAGUNA TAYABAS BUS COMPANY, defendant-appellant. MANILA RAILROAD COMPANY, defendant-appellee. Ozaeta, Lichauco and Picazo for defendant and appellant. E.A. Fernandez and L.H. Fernandez for plaintiffs and appellants. Gov't. Corp. Counsel A. Padilla and Atty. F.A. Umali for appellee. DIZON, J.: At about 1:00 p.m. on June 18, 1952, Bus No. 133 of the Laguna Tayabas Bus Co. hereinafter referred to as the LTB driven by Alfredo Moncada, left its station at Azcarraga St., Manila, for Lilio, Laguna, with Edgardo Cariaga, a fourthyear medical student of the University of Santo Tomas, as one of its passengers. At about 3:00 p.m., as the bus reached that part of the poblacion of Bay, Laguna, where the national highway crossed a railroad track, it bumped against the engine of a train then passing by with such terrific force that the first six wheels of the latter were derailed, the engine and the front part of the body of the bus was wrecked, the driver of the bus died instantly, while many of its passengers, Edgardo among them, were severely injured. Edgardo was first confined at the San Pablo City Hospital from 5:00 p.m., June 18, 1952, to 8:25 a.m., June 20 of the same year when he was taken to the De los Santos Clinic, Quezon City. He left that clinic on October 14 to be transferred to the University of Santo Tomas Hospital where he stayed up to November 15. On this last date he was taken back to the De los Santos Clinic where he stayed until January 15, 1953. He was unconscious during the first 35 days after the accident; at the De los Santos Clinic Dr. Gustilo removed the fractured bones which lacerated the right frontal lobe of his brain and at the University of Santo Tomas Hospital Dr. Gustilo performed another operation to cover a big hole on the right frontal part of the head with a tantalum plate. The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous expenses incurred from June 18, 1952 to April, 1953. From January 15, 1953 up to April of the same year Edgardo stayed in a private house in Quezon, City, the LTB having agreed to give him a subsistence allowance of P10.00 daily during his

bumped against the train engine, causing the first six wheels of the latter to be derailed.

. . . that the train whistle had been sounded several times before it reached the crossing. All witnesses for the plaintiffs and the defendants are uniform in stating that they heard the train whistle sometime before the impact and considering that some of them were in the bus at the time, the driver thereof must have heard it because he was seated on the left front part of the bus and it was his duty and concern to observe such fact in connection with the safe operation of the vehicle. The other L.T.B. bus which arrived ahead at the crossing, heeded the warning by stopping and allowing the train to pass and so nothing happened to said vehicle. On the other hand, the driver of the bus No. 133 totally ignored the whistle and noise produced by the approaching train and instead he tried to make the bus pass the crossing before the train by not stopping a few meters from the railway track and in proceeding ahead. The above findings of the lower court are predicated mainly upon the testimony of Gregorio Ilusondo, a witness for the Manila Railroad Company. Notwithstanding the efforts exerted by the LTB to assail his credibility, we do not find in the record any fact or circumstance sufficient to discredit his testimony. We have, therefore, no other alternative but to accept the findings of the trial court to the effect, firstly, that the whistle of locomotive was sounded four times two long and two short "as the train was approximately 300 meters from the crossing"; secondly, that another LTB bus which arrived at the crossing ahead of the one where Edgardo Cariaga was a passenger, paid heed to the warning and stopped before the "crossing", while as the LTB itself now admits (Brief p. 5) the driver of the bus in question totally disregarded the warning. But to charge the MRR Co. with contributory negligence, the LTB claims that the engineer of the locomotive failed to ring the bell altogether, in violation of the section 91 of Article 1459, incorporated in the charter of the said MRR Co. This contention as is obvious is the very foundation of the cross-claim interposed by the LTB against its co-defendant. The former, therefore, had the burden of proving it affirmatively because a violation of law is never presumed. The record discloses that this burden has not been satisfactorily discharged. The Cariagas, as appellants, claim that the award of P10,000.00 compensatory damages to Eduardo is inadequate considering the nature and the after effects of the physical injuries suffered by him. After a careful consideration of the evidence on this point we find their contentions to be well-founded.

From the deposition of Dr. Romeo Gustilo, a neurosurgeon, it appears that, as a result of the injuries suffered by Edgardo, his right forehead was fractured necessitating the removal of practically all of the right frontal lobe of his brain. From the testimony of Dr. Jose A. Fernandez, a psychiatrist, it may be gathered that, because of the physical injuries suffered by Edgardo, his mentality has been so reduced that he can no longer finish his studies as a medical student; that he has become completely misfit for any kind of work; that he can hardly walk around without someone helping him, and has to use a brace on his left leg and feet. Upon the whole evidence on the matter, the lower court found that the removal of the right frontal lobe of the brain of Edgardo reduced his intelligence by about 50%; that due to the replacement of the right frontal bone of his head with a tantalum plate Edgardo has to lead a quite and retired life because "if the tantalum plate is pressed in or dented it would cause his death." The impression one gathers from this evidence is that, as a result of the physical injuries suffered by Edgardo Cariaga, he is now in a helpless condition, virtually an invalid, both physically and mentally. Appellant LTB admits that under Art. 2201 of the Civil Code the damages for which the obligor, guilty of a breach of contract but who acted in good faith, is liable shall be those that are the natural and probable consequences of the breach and which the parties had forseen or could have reasonably forseen at the time the obligation was constituted, provided such damages, according to Art. 2199 of the same Code, have been duly proved. Upon this premise it claims that only the actual damages suffered by Edgardo Cariaga consisting of medical, hospital and other expenses in the total sum of P17,719.75 are within this category. We are of the opinion, however, that the income which Edgardo Cariaga could earn if he should finish the medical course and pass the corresponding board examinations must be deemed to be within the same category because they could have reasonably been foreseen by the parties at the time he boarded the bus No. 133 owned and operated by the LTB. At that time he was already a fourth-year student in medicine in a reputable university. While his scholastic may not be first rate (Exhibits 4, 4-A to 4-C), it is, nevertheless, sufficient to justify the assumption that he could have passed the board test in due time. As regards the income that he could possibly earn as a medical practitioner, it appears that, according to Dr. Amado Doria, a witness for the LTB, the amount of P300.00 could easily be expected as the minimum monthly income of Edgardo had he finished his studies. Upon consideration of all the facts mentioned heretofore this Court is of the opinion, and so holds, that the compensatory damages awarded to Edgardo Cariaga should be increased to P25,000.00.

Edgardo Cariaga's claim for moral damages and attorney's fees was denied by the trial court, the pertinent portion of its decision reading as follows: Plaintiffs' claim for moral damages cannot also be granted. Article 2219 of the Civil Code enumerates the instances when moral damages may be covered and the case under consideration does not fall under any one of them. The present action cannot come under paragraph 2 of said article because it is not one of the quasi-delict and cannot be considered as such because of the pre-existing contractual relation between the Laguna Tayabas Bus Company and Edgardo Cariaga. Neither could defendant Laguna Tayabas Bus Company be held liable to pay moral damages to Edgardo Cariaga under Article 2220 of the Civil Code on account of breach of its contract of carriage because said defendant did not act fraudulently or in bad faith in connection therewith. Defendant Laguna Tayabas Bus Company had exercised due diligence in the selection and supervision of its employees like the drivers of its buses in connection with the discharge of their duties and so it must be considered an obligor in good faith. The plaintiff Edgardo Cariaga is also not entitled to recover for attorney's fees, because this case does not fall under any of the instances enumerated in Article 2208 of the Civil Code. We agree with the trial court and, to the reason given above, we add those given by this Court in Cachero vs. Manila Yellow Taxicab Co., Inc.(101 Phil., 523, 530, 533): A mere perusal of plaintiff's complaint will show that this action against the defendant is predicated on an alleged breach of contract of carriage, i.e., the failure of the defendants to bring him "safely and without mishaps" to his destination, and it is to be noted that the chauffeur of defendant's taxicab that plaintiff used when he received the injuries involved herein, Gregorio Mira, has not even made a party defendant to this case. Considering, therefore, the nature of plaintiff's action in this case, is he entitled to compensation for moral damages? Article 2219 of the Civil Code says the following: Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; (3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in Article 309; (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

Of course enumerated in the just quoted Article 2219 only the first two may have any bearing on the case at bar. We find, however, with regard to the first that the defendant herein has not committed in connection with this case any "criminal offense resulting in physical injuries". The one that committed the offense against the plaintiff is Gregorio Mira, and that is why he has been already prosecuted and punished therefor. Altho (a) owners and managers of an establishment and enterprise are responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions; (b) employers are likewise liable for damages caused by their employees and household helpers acting within the scope of their assigned task (Article 218 of the Civil Code); and (c) employers and corporations engaged in any kind of industry are subsidiary civilly liable for felonies committed by their employees in the discharge of their duties (Art. 103, Revised Penal Code), plaintiff herein does not maintain this action under the provisions of any of the articles of the codes just mentioned and against all the persons who might be liable for the damages caused, but as a result of an admitted breach of contract of carriage and against the defendant employer alone. We, therefore, hold that the case at bar does not come within the exception of paragraph 1, Article 2219 of the Civil Code. The present complaint is not based either on a "quasi-delict causing physical injuries" (Art. 2219, par. 2 of the Civil Code). From the report of the Code Commission on the new Civil Code. We copy the following: A question of nomenclature confronted the Commission. After a careful deliberation, it was agreed to use the term "quasi-delict" for those obligations which do not arise from law, contracts, quasi-contracts, or criminal offenses. They are known in Spanish legal treaties as "culpa aquiliana", "culpa-extra-contractual" or "cuasi-delitos". The phrase "culpa-extra-contractual" or its translation "extra-contractual-fault" was eliminated because it did not exclude quasi-contractual or penal obligations. "Aquilian fault" might have been selected, but it was thought inadvisable to refer to so ancient a

law as the "Lex Aquilia". So "quasi-delict" was chosen, which more nearly corresponds to the Roman Law classification of the obligations and is in harmony with the nature of this kind of liability. The Commission also thought of the possibility of adopting the word "tort" from Anglo-American law. But "tort" under that system is much broader than the SpanishPhilippine concept of obligations arising from non-contractual negligence. "Tort" in Anglo-American jurisprudence includes not only negligence, but also intentional criminal act, such as assault and battery, false imprisonment and deceit. In the general plan of the Philippine legal system, intentional and malicious acts are governed by the Penal Code, although certain exceptions are made in the Project. (Report of the Code Commission, pp. 161-162). In the case of Cangco, vs. Manila Railroad, 38 Phil. 768, We established the distinction between obligation derived from negligence and obligation as a result of a breach of contract. Thus, we said: It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due care in its performance. That is to say, its liability is direct and immediate, differing essentially in the legal viewpoint from the presumptive responsibility for the negligence of its servants, imposed by Article 1903 of the Civil Code (Art. 2180 of the new), which can be rebutted by proof of the exercise of due care in their selection of supervision. Article 1903 is not applicable to obligations arising EX CONTRACTU, but only to extra-contractual obligations or to use the technical form of expression, that article relates only to CULPA AQUILIANA' and not to CULPA CONTRACTUAL.lawphil.net The decisions in the cases of Castro vs. Acro Taxicab Co., (82 Phil., 359; 46 Off. Gaz., No. 5, p. 2023); Lilius, et al. vs. Manila Railroad, 59 Phil., 758) and others, wherein moral damages were awarded to the plaintiffs, are not applicable to the case at bar because said decision were rendered before the effectivity of the new Civil Code (August 30, 1950) and for the further reason that the complaints filed therein were based on different causes of action. In view of the foregoing the sum of P2,000 was awarded as moral damages by the trial court has to be eliminated, for under the law it is not a compensation awardable in a case like the one at bar. What has been said heretofore relative to the moral damages claimed by Edgardo Cariaga obviously applies with greater force to a similar claim (4th assignment of error) made by his parents.

The claim made by said spouses for actual and compensatory damages is likewise without merits. As held by the trial court, in so far as the LTB is concerned, the present action is based upon a breach of contract of carriage to which said spouses were not a party, and neither can they premise their claim upon the negligence or quasi-delict of the LTB for the simple reason that they were not themselves injured as a result of the collision between the LTB bus and train owned by the Manila Railroad Company. Wherefore, modified as above indicated, the appealed judgement is hereby affirmed in all other respects, with costs against appellant LTB. Paras, C.J., Bengzon, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Gutierrez David, and Paredes, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC

of Minalin who, in the meantime, had gone to the scene to investigate. Patrolman Bacani placed Policronio Quintos, Jr. and three other injured men who rode on the bullcart aboard the La Mallorca bus and brought them to the provincial hospital of Pampanga at San Fernando for medical assistance. Notwithstanding such assistance, Policronio Quintos, Jr. died at 3:15 p.m. on the same day, March 17, 1960, due to traumatic shock due to cerebral injuries. The private respondents, Trinidad, Prima and Julita, all surnamed Quintos, are the sisters and only surviving heirs of Policronio Quintos Jr., who died single, leaving no descendants nor ascendants. Said respondents herein brought this action against herein petitioner, Villa Rey Transit, Inc., as owner and operator of said passenger bus, bearing Plate No. TPU-14871-Bulacan, for breach of the contract of carriage between said petitioner and the deceased Policronio Quintos, Jr., to recover the aggregate sum of P63,750.00 as damages, including attorney's fees. Said petitioner defendant in the court of first instance contended that the mishap was due to a fortuitous event, but this pretense was rejected by the trial court and the Court of Appeals, both of which found that the accident and the death of Policronio had been due to the negligence of the bus driver, for whom petitioner was liable under its contract of carriage with the deceased. In the language of His Honor, the trial Judge: The mishap was not the result of any unforeseeable fortuitous event or emergency but was the direct result of the negligence of the driver of the defendant. The defendant must, therefore, respond for damages resulting from its breach of contract for carriage. As the complaint alleged a total damage of only P63,750.00 although as elsewhere shown in this decision the damages for wake and burial expenses, loss of income, death of the victim, and attorneys fee reach the aggregate of P79,615.95, this Court finds it just that said damages be assessed at total of only P63,750.00 as prayed for in plaintiffs' amended complaint. The despositive part of the decision of the trial Court reads: WHEREFORE, judgment is hereby rendered ordering the defendant to pay to the plaintiffs the amount of P63,750.00 as damages for breach of contract of carriage resulting from the death of Policronio Quintos, Jr. which, as above indicated, was affirmed by the Court of Appeals. Hence, the present petition for review on certiorari, filed by Villa Rey Transit, Inc. The only issue raised in this appeal is the amount of damages recoverable by private respondents herein. The determination of such amount depends, mainly upon two (2) factors, namely: (1) the number of years on the basis of which the damages shall be computed and (2) the rate at which the losses sustained by said respondents should be fixed.

G.R. No. L-25499 February 18, 1970 VILLA REY TRANSIT, INC., petitioner, vs. THE COURT OF APPEALS, TRINIDAD A. QUINTOS, PRIMA A. QUINTOS, AND JULITA A. QUINTOS,respondents. Laurea and Pison for petitioner. Bonifacio M. Abad, Jr. for respondents.

CONCEPCION, C.J.: Petitioner, Villa Rey Transit, Inc., seeks the review by certiorari of a decision of the Court of Appeals affirming that of the Court of First Instance of Pangasinan. The basic facts are set forth in said decision of the Court of Appeals, from which We quote: At about 1:30 in the morning of March 17, 1960, an Izuzu First Class passenger bus owned and operated by the defendant, bearing Plate No. TPU-14871-Bulacan and driven by Laureano Casim, left Lingayen, Pangasinan, for Manila. Among its paying passengers was the deceased, Policronio Quintos, Jr. who sat on the first seat, second row, right side of the bus. At about 4:55 o'clock a.m. when the vehicle was nearing the northern approach of the Sadsaran Bridge on the national highway in barrio Sto. Domingo, municipality of Minalin, Pampanga, it frontally hit the rear side of a bullcart filled with hay. As a result the end of a bamboo pole placed on top of the hayload and tied to the cart to hold it in place, hit the right side of the windshield of the bus. The protruding end of the bamboo pole, about 8 feet long from the rear of the bullcart, penetrated through the glass windshield and landed on the face of Policronio Quintos, Jr. who, because of the impact, fell from his seat and was sprawled on the floor. The pole landed on his left eye and the bone of the left side of his face was fractured. He suffered other multiple wounds and was rendered unconscious due, among other causes to severe cerebral concussion. A La Mallorca passenger bus going in the opposite direction towards San Fernando, Pampanga, reached the scene of the mishap and it was stopped by Patrolman Felino Bacani of the municipal police force

The first factor was based by the trial court the view of which was concurred in by the Court of Appeals upon the life expectancy of Policronio Quintos, Jr., which was placed at 33-1/3 years he being over 29 years of age (or around 30 years for purposes of computation) at the time of his demise by applying the formula (2/3 x [80-301 = life expectancy) adopted in the American Expectancy Table of Mortality or the actuarial of Combined Experience Table of Mortality. Upon the other hand, petitioner maintains that the lower courts had erred in adopting said formula and in not acting in accordance with Alcantara v. Surro1 in which the damages were computed on a four (4) year basis, despite the fact that the victim therein was 39 years old, at the time of his death, and had a life expectancy of 28.90 years. The case cited is not, however, controlling in the one at bar. In the Alcantara case, none of the parties had questioned the propriety of the four-year basis adopted by the trial court in making its award of damages. Both parties appealed, but only as regards the amount thereof. The plaintiffs assailed the non-inclusion, in its computation, of the bonus that the corporation, which was the victim's employer, had awarded to deserving officers and employees, based upon the profits earned less than two (2) months before the accident that resulted in his death. The defendants, in turn, objected to the sum awarded for the fourth year, which was treble that of the previous years, based upon the increases given, in that fourth year, to other employees of the same corporation. Neither this objection nor said claim for inclusion of the bonus was sustained by this Court. Accordingly, the same had not thereby laid down any rule on the length of time to be used in the computation of damages. On the contrary, it declared: The determination of the indemnity to be awarded to the heirs of a deceased person has therefore no fixed basis. Much is left to the discretion of the court considering the moral and material damages involved, and so it has been said that "(t)here can be no exact or uniform rule for measuring the value of a human life and the measure of damages cannot be arrived at by precise mathematical calculation, but the amount recoverable depends on the particular facts and circumstances of each case. The life expectancy of the deceased or of the beneficiary, whichever is shorter, is an important factor.' (25 C.J.S. 1241.) Other factors that are usually considered are: (1) pecuniary loss to plaintiff or beneficiary (25 C.J.S. 1243-1250) ; (2) loss of support (25 C.J.S., 1250-1251); (3) loss of service (25 C.J.S. 1251-1254); (4) loss of society (25 C.J.S. 1254-1255); (5) mental suffering of beneficiaries (25 C.J.S., 1258-1259) ; and (6) medical and funeral expenses (26 C.J.S., 1254-1260)."2 Thus, life expectancy is, not only relevant, but, also, an important element in fixing the amount recoverable by private respondents herein. Although it is not the sole element determinative of said amount, no cogent reason has been given to warrant its disregard and the adoption, in the case at bar, of a purely arbitrary standard,

such as a four-year rule. In short, the Court of Appeals has not erred in basing the computation of petitioner's liability upon the life expectancy of Policronio Quintos, Jr. With respect to the rate at which the damages shall be computed, petitioner impugns the decision appealed from upon the ground that the damages awarded therein will have to be paid now, whereas most of those sought to be indemnified will be suffered years later. This argument is basically true, and this is, perhaps, one of the reasons why the Alcantara case points out the absence of a "fixed basis" for the ascertainment of the damages recoverable in litigations like the one at bar. Just the same, the force of the said argument of petitioner herein is offset by the fact that, although payment of the award in the case at bar will have to take place upon the finality of the decision therein, the liability of petitioner herein had been fixed at the rate only of P2,184.00 a year, which is the annual salary of Policronio Quintos, Jr. at the time of his death, as a young "training assistant" in the Bacnotan Cement Industries, Inc. In other words, unlike the Alcantara case, on which petitioner relies, the lower courts did not consider, in the present case, Policronio's potentiality and capacity to increase his future income. Indeed, upon the conclusion of his training period, he was supposed to have a better job and be promoted from time to time, and, hence, to earn more, if not considering the growing importance of trade, commerce and industry and the concomitant rise in the income level of officers and employees therein much more. At this juncture, it should be noted, also, that We are mainly concerned with the determination of the losses or damages sustained by the private respondents, as dependents and intestate heirs of the deceased, and that said damages consist, not of the full amount of his earnings, but of the support, they received or would have received from him had he not died in consequence of the negligence of petitioner's agent. In fixing the amount of that support, We must reckon with the "necessary expenses of his own living", which should be deducted from his earnings. Thus, it has been consistently held that earning capacity, as an element of damages to one's estate for his death by wrongful act is necessarily his net earning capacity or his capacity to acquire money, "less the necessary expense for his own living.3 Stated otherwise, the amount recoverable is not loss of the entire earning, but rather the loss of that portion of the earnings which the beneficiary would have received.4 In other words, only net earnings, not gross earning, are to be considered 5 that is, the total of the earnings less expenses necessary in the creation of such earnings or income6and less living and other incidental expenses.7 All things considered, We are of the opinion that it is fair and reasonable to fix the deductible living and other expenses of the deceased at the sum of P1,184.00 a year, or about P100.00 a month, and that, consequently, the loss sustained by his sisters

may be roughly estimated at P1,000.00 a year or P33,333.33 for the 33-1/3 years of his life expectancy. To this sum of P33,333.33, the following should be added: (a) P12,000.00, pursuant to Arts. 104 and 107 of the Revised Penal Code, in relation to Article 2206 of our Civil Code, as construed and applied by this Court; 8 (b) P1,727.95, actually spent by private respondents for medical and burial expenses; and (c) attorney's fee, which was fixed by the trial court, at P500.00, but which, in view of the appeal taken by petitioner herein, first to the Court of Appeals and later to this Supreme Court, should be increased to P2,500.00. In other words, the amount adjudged in the decision appealed from should be reduced to the aggregate sum of P49,561.28, with interest thereon, at the legal rate, from December 29, 1961, date of the promulgation of the decision of the trial court. Thus modified, said decision and that of the Court of Appeals are hereby affirmed, in all other respects, with costs against petitioner, Villa Rey Transit, Inc. It is so ordered. Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Teehankee, Barredo and Villamor, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-49188 January 30, 1990 PHILIPPINE AIRLINES, INC., petitioner, vs. HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance, Manila, and AMELIA TAN, respondents.

1. On the first cause of action, to pay to the plaintiff the amount of P75,000.00 as actual damages, with legal interest thereon from plaintiffs extra-judicial demand made by the letter of July 20, 1967; 2. On the third cause of action, to pay to the plaintiff the amount of P18,200.00, representing the unrealized profit of 10% included in the contract price of P200,000.00 plus legal interest thereon from July 20,1967; 3. On the fourth cause of action, to pay to the plaintiff the amount of P20,000.00 as and for moral damages, with legal interest thereon from July 20, 1 967; 4. On the sixth cause of action, to pay to the plaintiff the amount of P5,000.00 damages as and for attorney's fee. Plaintiffs second and fifth causes of action, and defendant's counterclaim, are dismissed.

GUTIERREZ, JR., J.: With costs against the defendant. (CA Rollo, p. 18) Behind the simple issue of validity of an alias writ of execution in this case is a more fundamental question. Should the Court allow a too literal interpretation of the Rules with an open invitation to knavery to prevail over a more discerning and just approach? Should we not apply the ancient rule of statutory construction that laws are to be interpreted by the spirit which vivifies and not by the letter which killeth? This is a petition to review on certiorari the decision of the Court of Appeals in CAG.R. No. 07695 entitled "Philippine Airlines, Inc. v. Hon. Judge Ricardo D. Galano, et al.", dismissing the petition for certiorari against the order of the Court of First Instance of Manila which issued an alias writ of execution against the petitioner. The petition involving the alias writ of execution had its beginnings on November 8, 1967, when respondent Amelia Tan, under the name and style of Able Printing Press commenced a complaint for damages before the Court of First Instance of Manila. The case was docketed as Civil Case No. 71307, entitled Amelia Tan, et al. v. Philippine Airlines, Inc. After trial, the Court of First Instance of Manila, Branch 13, then presided over by the late Judge Jesus P. Morfe rendered judgment on June 29, 1972, in favor of private respondent Amelia Tan and against petitioner Philippine Airlines, Inc. (PAL) as follows: WHEREFORE, judgment is hereby rendered, ordering the defendant Philippine Air Lines: On July 28, 1972, the petitioner filed its appeal with the Court of Appeals. The case was docketed as CA-G.R. No. 51079-R. On February 3, 1977, the appellate court rendered its decision, the dispositive portion of which reads: IN VIEW WHEREOF, with the modification that PAL is condemned to pay plaintiff the sum of P25,000.00 as damages and P5,000.00 as attorney's fee, judgment is affirmed, with costs. (CA Rollo, p. 29) Notice of judgment was sent by the Court of Appeals to the trial court and on dates subsequent thereto, a motion for reconsideration was filed by respondent Amelia Tan, duly opposed by petitioner PAL. On May 23,1977, the Court of Appeals rendered its resolution denying the respondent's motion for reconsideration for lack of merit. No further appeal having been taken by the parties, the judgment became final and executory and on May 31, 1977, judgment was correspondingly entered in the case. The case was remanded to the trial court for execution and on September 2,1977, respondent Amelia Tan filed a motion praying for the issuance of a writ of execution of the judgment rendered by the Court of Appeals. On October 11, 1977, the trial court, presided over by Judge Galano, issued its order of execution with the corresponding writ in favor of the respondent. The writ was duly referred to Deputy

Sheriff Emilio Z. Reyes of Branch 13 of the Court of First Instance of Manila for enforcement. Four months later, on February 11, 1978, respondent Amelia Tan moved for the issuance of an alias writ of execution stating that the judgment rendered by the lower court, and affirmed with modification by the Court of Appeals, remained unsatisfied. On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of an alias writ of execution stating that it had already fully paid its obligation to plaintiff through the deputy sheriff of the respondent court, Emilio Z. Reyes, as evidenced by cash vouchers properly signed and receipted by said Emilio Z. Reyes. On March 3,1978, the Court of Appeals denied the issuance of the alias writ for being premature, ordering the executing sheriff Emilio Z. Reyes to appear with his return and explain the reason for his failure to surrender the amounts paid to him by petitioner PAL. However, the order could not be served upon Deputy Sheriff Reyes who had absconded or disappeared. On March 28, 1978, motion for the issuance of a partial alias writ of execution was filed by respondent Amelia Tan. On April 19, 1978, respondent Amelia Tan filed a motion to withdraw "Motion for Partial Alias Writ of Execution" with Substitute Motion for Alias Writ of Execution. On May 1, 1978, the respondent Judge issued an order which reads: As prayed for by counsel for the plaintiff, the Motion to Withdraw 'Motion for Partial Alias Writ of Execution with Substitute Motion for Alias Writ of Execution is hereby granted, and the motion for partial alias writ of execution is considered withdrawn. Let an Alias Writ of Execution issue against the defendant for the fall satisfaction of the judgment rendered. Deputy Sheriff Jaime K. del Rosario is hereby appointed Special Sheriff for the enforcement thereof. (CA Rollo, p. 34) On May 18, 1978, the petitioner received a copy of the first alias writ of execution issued on the same day directing Special Sheriff Jaime K. del Rosario to levy on execution in the sum of P25,000.00 with legal interest thereon from July 20,1967 when respondent Amelia Tan made an extra-judicial demand through a letter. Levy was also ordered for the further sum of P5,000.00 awarded as attorney's fees. On May 23, 1978, the petitioner filed an urgent motion to quash the alias writ of execution stating that no return of the writ had as yet been made by Deputy Sheriff Emilio Z. Reyes and that the judgment debt had already been fully satisfied by the petitioner as evidenced by the cash vouchers signed and receipted by the server of the writ of execution, Deputy Sheriff Emilio Z. Reyes.

On May 26,1978, the respondent Jaime K. del Rosario served a notice of garnishment on the depository bank of petitioner, Far East Bank and Trust Company, Rosario Branch, Binondo, Manila, through its manager and garnished the petitioner's deposit in the said bank in the total amount of P64,408.00 as of May 16, 1978. Hence, this petition for certiorari filed by the Philippine Airlines, Inc., on the grounds that: I AN ALIAS WRIT OF EXECUTION CANNOT BE ISSUED WITHOUT PRIOR RETURN OF THE ORIGINAL WRIT BY THE IMPLEMENTING OFFICER. II PAYMENT OF JUDGMENT TO THE IMPLEMENTING OFFICER AS DIRECTED IN THE WRIT OF EXECUTION CONSTITUTES SATISFACTION OF JUDGMENT. III INTEREST IS NOT PAYABLE WHEN THE DECISION IS SILENT AS TO THE PAYMENT THEREOF. IV SECTION 5, RULE 39, PARTICULARLY REFERS TO LEVY OF PROPERTY OF JUDGMENT DEBTOR AND DISPOSAL OR SALE THEREOF TO SATISFY JUDGMENT. Can an alias writ of execution be issued without a prior return of the original writ by the implementing officer? We rule in the affirmative and we quote the respondent court's decision with approval: The issuance of the questioned alias writ of execution under the circumstances here obtaining is justified because even with the absence of a Sheriffs return on the original writ, the unalterable fact remains that such a return is incapable of being obtained (sic) because the officer who is to make the said return has absconded and cannot be brought to the Court despite the earlier order of the court for him to appear for this purpose. (Order of Feb. 21, 1978, Annex C, Petition). Obviously, taking cognizance of this circumstance, the order of May 11, 1978 directing the issuance of an alias writ was therefore issued. (Annex D. Petition). The need for such a return as a condition precedent for the issuance of an alias writ was justifiably dispensed with by the court below and its action in this regard meets with our concurrence. A contrary view will produce an abhorent situation whereby the mischief of an erring officer of the court

could be utilized to impede indefinitely the undisputed and awarded rights which a prevailing party rightfully deserves to obtain and with dispatch. The final judgment in this case should not indeed be permitted to become illusory or incapable of execution for an indefinite and over extended period, as had already transpired. (Rollo, pp. 3536) Judicium non debet esse illusorium; suum effectum habere debet (A judgment ought not to be illusory it ought to have its proper effect). Indeed, technicality cannot be countenanced to defeat the execution of a judgment for execution is the fruit and end of the suit and is very aptly called the life of the law (Ipekdjian Merchandising Co. v. Court of Tax Appeals, 8 SCRA 59 [1963]; Commissioner of Internal Revenue v. Visayan Electric Co., 19 SCRA 697, 698 [1967]). A judgment cannot be rendered nugatory by the unreasonable application of a strict rule of procedure. Vested rights were never intended to rest on the requirement of a return, the office of which is merely to inform the court and the parties, of any and all actions taken under the writ of execution. Where such information can be established in some other manner, the absence of an executing officer's return will not preclude a judgment from being treated as discharged or being executed through an alias writ of execution as the case may be. More so, as in the case at bar. Where the return cannot be expected to be forthcoming, to require the same would be to compel the enforcement of rights under a judgment to rest on an impossibility, thereby allowing the total avoidance of judgment debts. So long as a judgment is not satisfied, a plaintiff is entitled to other writs of execution (Government of the Philippines v. Echaus and Gonzales, 71 Phil. 318). It is a well known legal maxim that he who cannot prosecute his judgment with effect, sues his case vainly. More important in the determination of the propriety of the trial court's issuance of an alias writ of execution is the issue of satisfaction of judgment. Under the peculiar circumstances surrounding this case, did the payment made to the absconding sheriff by check in his name operate to satisfy the judgment debt? The Court rules that the plaintiff who has won her case should not be adjudged as having sued in vain. To decide otherwise would not only give her an empty but a pyrrhic victory. It should be emphasized that under the initial judgment, Amelia Tan was found to have been wronged by PAL. She filed her complaint in 1967.

It is now 1990. Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the courts have solemnly declared as rightfully hers. Through absolutely no fault of her own, Ms. Tan has been deprived of what, technically, she should have been paid from the start, before 1967, without need of her going to court to enforce her rights. And all because PAL did not issue the checks intended for her, in her name. Under the peculiar circumstances of this case, the payment to the absconding sheriff by check in his name did not operate as a satisfaction of the judgment debt. In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person. Article 1240 of the Civil Code provides: Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. (Emphasis supplied) Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the particular payment (Ulen v. Knecttle 50 Wyo 94, 58 [2d] 446, 111 ALR 65). Payment made to one having apparent authority to receive the money will, as a rule, be treated as though actual authority had been given for its receipt. Likewise, if payment is made to one who by law is authorized to act for the creditor, it will work a discharge (Hendry v. Benlisa 37 Fla. 609, 20 SO 800,34 LRA 283). The receipt of money due on ajudgment by an officer authorized by law to accept it will, therefore, satisfy the debt (See 40 Am Jm 729, 25; Hendry v. Benlisa supra; Seattle v. Stirrat 55 Wash. 104 p. 834,24 LRA [NS] 1275). The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment debtor in the case at bar, to the sheriff should be valid payment to extinguish the judgment debt. There are circumstances in this case, however, which compel a different conclusion. The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The checks were not payable to Amelia Tan or Able Printing Press but to the absconding sheriff. Did such payments extinguish the judgment debt? Article 1249 of the Civil Code provides:

After ten (10) years of protracted litigation in the Court of First Instance and the Court of Appeals, Ms. Tan won her case.

The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. In the meantime, the action derived from the original obligation shall be held in abeyance. In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money (US v. Robertson, 5 Pet. [US] 641, 8 L. ed. 257) and unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of payment of his debt (Anderson v. Gill, 79 Md.. 312, 29 A 527, 25 LRA 200,47 Am. St. Rep. 402). Consequently, unless authorized to do so by law or by consent of the obligee a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. Strictly speaking, the acceptance by the sheriff of the petitioner's checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment (See. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager's check or ordinary cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3). If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's, there would have been no payment. After dishonor of the checks, Ms. Tan could have run after other properties of PAL. The theory is that she has received no value for what had been awarded her. Because the checks were drawn in the name of Emilio Z. Reyes, neither has she received anything. The same rule should apply. It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation. The reasoning is logical but is it valid and proper? Logic has its limits in decision making. We should not follow rulings to their logical extremes if in doing so we arrive at unjust or absurd results.

In the first place, PAL did not pay in cash. It paid in cheeks. And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being waylaid or running off with what he is carrying for another. Payment in checks is precisely intended to avoid the possibility of the money going to the wrong party. The situation is entirely different where a Sheriff seizes a car, a tractor, or a piece of land. Logic often has to give way to experience and to reality. Having paid with checks, PAL should have done so properly. Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the Court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge amounts of cash or legal tender to sheriffs and other executing officers. Payment in cash would result in damage or interminable litigations each time a sheriff with huge amounts of cash in his hands decides to abscond. As a protective measure, therefore, the courts encourage the practice of payments by cheek provided adequate controls are instituted to prevent wrongful payment and illegal withdrawal or disbursement of funds. If particularly big amounts are involved, escrow arrangements with a bank and carefully supervised by the court would be the safer procedure. Actual transfer of funds takes place within the safety of bank premises. These practices are perfectly legal. The object is always the safe and incorrupt execution of the judgment. It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name of another. Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue advantage by the sheriff, or any person into whose hands the checks may have fallen, whether wrongfully or in behalf of the creditor. The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn. As explained and held by the respondent court: ... [K]nowing as it does that the intended payment was for the private party respondent Amelia Tan, the petitioner corporation, utilizing the services of its personnel who are or should be knowledgeable about the accepted procedures and resulting consequences of the checks drawn, nevertheless, in this instance, without prudence, departed from what is generally observed and done, and placed as payee in the checks the name of the errant Sheriff and not the name of the rightful payee. Petitioner thereby created a situation which permitted the said Sheriff to personally encash said checks and misappropriate the proceeds thereof to his exclusive personal benefit. For

the prejudice that resulted, the petitioner himself must bear the fault. The judicial guideline which we take note of states as follows: As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss. (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61 Phil. 625) Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made possible the loss had but itself to blame. The attention of this Court has been called to the bad practice of a number of executing officers, of requiring checks in satisfaction of judgment debts to be made out in their own names. If a sheriff directs a judgment debtor to issue the checks in the sheriff's name, claiming he must get his commission or fees, the debtor must report the sheriff immediately to the court which ordered the execution or to the Supreme Court for appropriate disciplinary action. Fees, commissions, and salaries are paid through regular channels. This improper procedure also allows such officers, who have sixty (60) days within which to make a return, to treat the moneys as their personal finds and to deposit the same in their private accounts to earn sixty (60) days interest, before said finds are turned over to the court or judgment creditor (See Balgos v. Velasco, 108 SCRA 525 [1981]). Quite as easily, such officers could put up the defense that said checks had been issued to them in their private or personal capacity. Without a receipt evidencing payment of the judgment debt, the misappropriation of finds by such officers becomes clean and complete. The practice is ingenious but evil as it unjustly enriches court personnel at the expense of litigants and the proper administration of justice. The temptation could be far greater, as proved to be in this case of the absconding sheriff. The correct and prudent thing for the petitioner was to have issued the checks in the intended payee's name. The pernicious effects of issuing checks in the name of a person other than the intended payee, without the latter's agreement or consent, are as many as the ways that an artful mind could concoct to get around the safeguards provided by the law on negotiable instruments. An angry litigant who loses a case, as a rule, would not want the winning party to get what he won in the judgment. He would think of ways to delay the winning party's getting what has been adjudged in his favor. We cannot condone that practice especially in cases where the courts and their officers are involved. We rule against the petitioner. Anent the applicability of Section 15, Rule 39, as follows: Section 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment

debtor not exempt from execution, or on a sufficient amount of such property, if they be sufficient, and selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. ... the respondent court held: We are obliged to rule that the judgment debt cannot be considered satisfied and therefore the orders of the respondent judge granting the alias writ of execution may not be pronounced as a nullity. xxx xxx xxx It is clear and manifest that after levy or garnishment, for a judgment to be executed there is the requisite of payment by the officer to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment and none such payment had been concededly made yet by the absconding Sheriff to the private respondent Amelia Tan. The ultimate and essential step to complete the execution of the judgment not having been performed by the City Sheriff, the judgment debt legally and factually remains unsatisfied. Strictly speaking execution cannot be equated with satisfaction of a judgment. Under unusual circumstances as those obtaining in this petition, the distinction comes out clearly. Execution is the process which carries into effect a decree or judgment (Painter v. Berglund, 31 Cal. App. 2d. 63, 87 P 2d 360, 363; Miller v. London, 294 Mass 300, 1 NE 2d 198, 200; Black's Law Dictionary), whereas the satisfaction of a judgment is the payment of the amount of the writ, or a lawful tender thereof, or the conversion by sale of the debtor's property into an amount equal to that due, and, it may be done otherwise than upon an execution (Section 47, Rule 39). Levy and delivery by an execution officer are not prerequisites to the satisfaction of a judgment when the same has already been realized in fact (Section 47, Rule 39). Execution is for the sheriff to accomplish while satisfaction of the judgment is for the creditor to achieve. Section 15, Rule 39 merely provides the sheriff with his duties as executing officer including delivery of the proceeds of his levy on the debtor's property to satisfy the judgment debt. It is but to stress that the implementing officer's duty should not stop at his receipt of payments but must continue until payment is delivered to the obligor or creditor. Finally, we find no error in the respondent court's pronouncement on the inclusion of interests to be recovered under the alias writ of execution. This logically follows from our ruling that PAL is liable for both the lost checks and interest. The respondent court's decision in CA-G.R. No. 51079-R does not totally supersede the trial court's

judgment in Civil Case No. 71307. It merely modified the same as to the principal amount awarded as actual damages. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The judgment of the respondent Court of Appeals is AFFIRMED and the trial court's issuance of the alias writ of execution against the petitioner is upheld without prejudice to any action it should take against the errant sheriff Emilio Z. Reyes. The Court Administrator is ordered to follow up the actions taken against Emilio Z. Reyes. SO ORDERED. Fernan, C.J., Cruz, Paras, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC 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.

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 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

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.

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 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", "B1," "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) xxx xxx xxx

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. 24Implicit 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 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 xxx xxx xxx

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 xxx xxx xxx

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, 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 copassenger. 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: 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. 43And 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.1awphl.nt 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? 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.

Republic of the Philippines SUPREME COURT Manila

The driver was charged with serious physical injuries through reckless imprudence, and upon interposing a plea of guilty was sentenced accordingly. The contention that the evidence did not sufficiently establish the identity of the vehicle as the belonging to the petitioner was rejected by the appellate court which found, among other things, that is carried plate No. TPU-1163, SERIES OF 1952, Quezon City, registered in the name of Paz Fores, (appellant herein) and that the vehicle even had the name of "Doa Paz" painted below its wind shield. No evidence to the contrary was introduced by the petitioner, who relied on an attack upon the credibility of the two policemen who went to the scene of the incident jtBbQlcsD. A point to be further remarked is petitioner's contention that on March 21, 1953, or one day before the accident happened, she allegedly sold the passenger jeep that was involved therein to a certain Carmen Sackerman.

EN BANC

DECISION

March 4, 1959 G.R. No. L-12163 PAZ FORES, petitioner, vs. IRENEO MIRANDA, respondent. Alberto O. Villaraza for petitioner. Almazan and Ereneta for respondent. , J.: Defendant-petitioner Paz Fores brings this petition for review of the decision of the Court of Appeals (C.A. Case No. 1437-R) awarding to the plaintiff-respondent Ireneo Miranda the sums of P5,000 by way of actual damages and counsel fees, and P10,000 as moral damages, with costs. Respondent was one of the passengers on a jeepney driven by Eugenio Luga. While the vehicle was descending the Sta. Mesa bridge at an excessive rate of speed, the driver lost control thereof, causing it to swerve and to his the bridge wall. The accident occurred on the morning of March 22, 1953. Five of the passengers were injured, including the respondent who suffered a fracture of the upper right humerus. He was taken to the National Orthopedic Hospital for treatment, and later was subjected to a series of operations; the first on May 23, 1953, when wire loops were wound around the broken bones and screwed into place; a second, effected to insert a metal splint, and a third one to remove such splint. At the time of the trial, it appears that respondent had not yet recovered the use of his right arm. The initial problem raised by the petitioner in this appeal may be formulated thus "Is the approval of the Public Service Commission necessary for the sale of a public service vehicle even without conveying therewith the authority to operate the same?" Assuming the dubious sale to be a fact, the court of Appeals answered the query in the affirmative. The ruling should be upheld. Section 20 of the Public Service Act (Commonwealth Act No. 146) provides: Sec. 20. Subject to established limitations and exceptions and saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the previous approval and authority of the Commission previously had xxxxxxxxx (g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates, privileges, or rights, or any part thereof; or merge or consolidate its property, franchises, privileges or rights, or any part thereof, with those of any other public service. The approval herein required shall be given, after notice to the public and after hearing the persons interested at a public hearing, if it be shown that there are just and reasonable grounds for making the mortgage or encumbrance, for liabilities of more than one year maturity, or the sale, alienation, lease, merger, or consolidation to be approved and that the same are not detrimental to the public interest, and in case of a sale, the date on which the same is to be consummated shall be fixed in the order of approval: Provided, however, That nothing herein contained shall be construed to

prevent the transaction from being negotiated or completed before its approval or to prevent the sale, alienation, or lease by any public service of any of its property in the ordinary course of its business. Interpreting the effects of this particular provision of law, we have held in the recent cases of Montoya vs. Ignacio, * 50 O.G. No. 1, p. 108; Timbol vs. Osias, et al., G. R. No. L-7547, April 30, 1955, and Medina vs. Cresencia, 99 Phil. 506; 52 O.G. No. 10, p. 4606, that a transfer contemplated by the law, if made without the requisite approval of the Public Service Commission, is not effective and binding in so far as the responsibility of the grantee under the franchise in relation to the public is concerned. Petitioner assails, however, the applicability of these rulings to the instant case, contending that in those cases, the operator did not convey, by lease or by sale, the vehicle independently of his rights under the franchise. This line of reasoning does not find support in the law. The provisions of the statute are clear and prohibit the sale, alienation, lease, or encumbrance of the property, franchise, certificate, privileges or rights, or any part thereof of the owner or operator of the public service Commission. The law was designed primarily for the protection of the public interest; and until the approval of the public Service Commission is obtained the vehicle is, in contemplation of law, still under the service of the owner or operator standing in the records of the Commission which the public has a right to rely upon. The proviso contained in the aforequoted law, to the effect that nothing therein shall be construed "to prevent the transaction from being negotiated or complete before its approval", means only that the sale without the required approval is still valid and binding between the parties (Montoya vs. Ignacio, supra). The phrase "in the ordinary course of its business" found in the other proviso" or to prevent the sale, alienation, or lease by any public service of any of its property". As correctly observed by the lower court, could not have been intended to include the sale of the vehicle itself, but at most may refer only to such property that may be conceivably disposed or by the carrier in the ordinary course of its business, like junked equipment or spare parts. The case of Indalecio de Torres vs. Vicente Ona (63 Phil. 594, 597) is enlightening; and there, it was held: Under the law, the Public Service Commission has not only general supervision and regulation of, but also full jurisdiction and control over all public utilities including the property, equipment and facilities used, and the property rights and franchise enjoyed by every individual and company engaged i the performance of a public service in the sense this phrase is used in the Public Service Act or Act No. 3108). By virtue of the provisions of said Act, motor vehicles used in the performance of a service, as the transportation of freight from one point to another, have to this date

been considered and they cannot but be so considered-public service property; and, by reason of its own nature, a TH truck, which means that the operator thereof places it at the disposal of anybody who is willing to pay a rental of its use, when he desires to transfer or carry his effects, merchandise or any other cargo from one place to another, is necessarily a public service property. (Emphasis supplied) Of course, this court has held in the case of Bachrach Motor co. vs. Zamboanga Transportation Co., 52 Phil. 244, that there may be a nunc pro tunc authorization which has the effect of having the approval retroact to the date of the transfer; but such outcome cannot prejudice rights intervening in the meantime. It appears that no such approval was given by the Commission before the accident occurred 7DZQ8tD. The P10,000 actual damages awarded by the Court of First Instance of Manila were reduced by the Court of Appeals to only P2,000, on the ground that a review of the records failed to disclose a sufficient basis for the trial court's appraisal, since the only evidence presented on this point consisted of respondent's bare statement that his expenses and loss of income amounted to P20,000. On the other hand, "it cannot be denied," the lower court said, "that appellee (respondent) did incur expenses"' It is well to note further that respondent was a painter by profession and a professor of Fine Arts, so that the amount of P2,000 awarded cannot be said to be excessive (see Arts. 2224 and 2225, Civil Code of the Philippines). The attorney's fees in the sum of P3,000 also awarded to the respondent are assailed on the ground that the Court of First Instance did not provided for the same, and since no appeal was interposed by said respondent, it was allegedly error for the Court of Appeals to award them motu proprio. Petitioner fails to note that attorney's fees are included in the concept of actual damages under the Civil Code and may be awarded whenever the court deems it is just and equitable (Art. 2208, Civil Code of the Philippines). We see no reason to alter these awards JCD3KS. Anent the moral damages ordered to be paid to the respondent, the same must be discarded. We have repeatedly ruled (Cachero vs. Manila Yellow Taxicab Co. Inc., 101 Phil. 523; 54 O.G. [26], 6599; Necesito, et al vs. Paras, 104 Phil. 75; 56 O.G. [23] 4023, that moral damages are not recoverable in damage actions predicted on a breach of the contract of transportation, in view of Articles 2219 and 2220 of the new Civil Code, which provide as follows: Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries;

xxxxxxxxx Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under circumstances, such damages are justify due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. By contrasting the provisions of these two article it immediately becomes apparent that: (a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or deliberately injurious conduct, is essential to justify an award of moral damages; and (b) That a breach of contract can not be considered included in the descriptive term "analogous cases" used in Art. 2219; not only because Art. 2220 specifically provides for the damages that are caused by contractual breach, but because the definition of quasi-delict in Art. 2176 of the Code expressly excludes the cases where there is a "preexisting contractual relation between the parties." Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage dome. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the deceased passenger to "demand moral damages for mental anguish by reason of the death of the deceased" (Necesito vs. Paras, 104 Phil. 84, Resolution on motion to reconsider, September 11, 1958). But the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We think it is clear that the mere carelessness of the carrier's driver does not per se constitute of justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages by the Court of Appeals. To award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by Art. 220, would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation.

The Court of Appeals has invoked our rulings in Castro vs. Acro Taxicab Co., G.R. No. 49155, December 14, 1948 and Layda vs. Court of Appeals, 90 Phil. 724; but these doctrines were predicated upon our former law of damages, before judicial discretion in fixing them became limited by the express provisions of the new Civil Code (previously quoted). Hence, the aforesaid rulings are now inapplicable WNuQkH. Upon the other hand, the advantageous position of a party suing a carrier for breach of the contract of transportations explains, to some extent, the limitations imposed by the new Code on the amount of the recovery. The action for breach of contract imposes on the defendant carrier a presumption of liability upon mere proof of injury to the passenger; that latter is relieved from the duty to established the fault of the carrier, or of his employees, and the burden is placed on the carrier to prove that it was due to an unforseen event or to force majeure (Cangco vs. Manila Railroad Co., 38 Phil. 768, 777). Moreover, the carrier, unlike in suits for quasi-delict, may not escape liability by proving that it has exercised due diligence in the selection and supervision of its employees (Art. 1759, new civil code; Cangco vs. Manila Railroad Co., supra; Prado vs. Manila Electric Co., 51 Phil. 900). The difference in conditions, defenses and proof, as well as the codal concept of quasi-delict as essentially extra contractual negligence, compel us to differentiate between action ex contractu, and actions quasi ex delicto, and prevent us from viewing the action for breach of contract as simultaneously embodying an action on tort. Neither can this action be taken as one to enforce on employee's liability under Art. 103 of the Revised Penal Code, since the responsibility is not alleged to be subsidiary, nor is there on record any averment or proof that the driver of appellant was insolvent. In fact, he is not even made a party to the suit. It is also suggested that a carrier's violation of its engagement to safety transport the passenger involves a breach of the passenger's confidence, and therefore should be regarded as a breach of contract in bad faith, justifying recovery of moral damages under Art. 2220. This theory is untenable, for under it the carrier would always be deemed in bad faith, in every case its obligation to the passenger is infringed, and it would be never accountable for simple negligence; while under the law (Art. 1756). the presumption is that common carriers acted negligently (and not maliciously), and Art. 1762 speaks of negligence of the common carrier. ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in article 1733 and 1755.

ART. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced. The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as mere carelessness) is too fundamental in our law to be ignored (Arts. 1170-1172); their consequences being clearly differentiated by the Code. ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the lawmakers when in Art. 2220 they limited recovery of moral damages to breaches of contract in bad faith. It is true that negligence may be occasionally so gross as to amount to malice; but that fact must be shown in evidence, and a carrier's bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the carrier's employees. In view of the foregoing considerations, the decision of the Court of Appeals is modified by eliminating the award of P5,000.00 by way of moral damages. (Court of Appeals Resolution of May 5, 1957). In all other respects, the judgment is affirmed. No costs in this instance. So ordered. Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur. .

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-22415 March 30, 1966

accommodation for them in the first class, stating that they could not go in that flight unless they took the tourist class therein. Due to pressing engagements awaiting Senator Lopez and his wife, in the United States he had to attend a business conference in San Francisco the next day and she had to undergo a medical check-up in Mayo Clinic, Rochester, Minnesota, on May 28, 1960 and needed three days rest before that in San Francisco Senator Lopez and party were constrained to take PAN-AM's flight from Tokyo to San Francisco as tourist passengers. Senator Lopez however made it clear, as indicated in his letter to PAN-AM's Tokyo office on that date (Exh. A), that they did so "under protest" and without prejudice to further action against the airline.1wph1.t Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM on June 2, 1960 in the Court of First Instance of Rizal. Alleging breach of contracts in bad faith by defendant, plaintiffs asked for P500,000 actual and moral damages, P100,000 exemplary damages, P25,000 attorney's fees plus costs. PAN-AM filed its answer on June 22, 1960, asserting that its failure to provide first class accommodations to plaintiffs was due to honest error of its employees. It also interposed a counterclaim for attorney's fees of P25,000. Subsequently, further pleadings were filed, thus: plaintiffs' answer to the counterclaim, on July 25, 1960; plaintiffs' reply attached to motion for its admittance, on December 2, 1961; defendant's supplemental answer, on March 8, 1962; plaintiffs' reply to supplemental answer, on March 10, 1962; and defendant's amended supplemental answer, on July 10, 1962. After trial which took twenty-two (22) days ranging from November 25, 1960 to January 5, 1963 the Court of First Instance rendered its decision on November 13, 1963, the dispositive portion stating: In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant, which is accordingly ordered to pay the plaintiffs the following: (a) P100,000.00 as moral damages; (b) P20,000.00 as exemplary damages; (c) P25,000.00 as attorney's fees, and the costs of this action. So ordered. Plaintiffs, however, on November 21, 1963, moved for reconsideration of said judgment, asking that moral damages be increased to P400,000 and that six per cent (6%) interest per annum on the amount of the award be granted. And defendant opposed the same. Acting thereon the trial court issued an order on December 14, 1963, reconsidering the dispositive part of its decision to read as follows:

FERNANDO LOPEZ, ET AL., plaintiffs-appellants, vs. PAN AMERICAN WORLD AIRWAYS, defendant-appellant. Ross, Selph and Carrascoso for the defendant-appellant. Vicente J. Francisco for the plaintiffs-appellants. BENGZON, J.P., J.: Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal. Since the value in controversy exceeds P200,000 the appeals were taken directly to this Court upon all questions involved (Sec. 17, par. 3[5], Judiciary Act). Stated briefly the facts not in dispute are as follows: Reservations for first class accommodations in Flight No. 2 of Pan American World Airways hereinafter otherwise called PAN-AM from Tokyo to San Francisco on May 24, 1960 were made with PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for then Senator Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano, Jr., (Milagros Lopez Montelibano). PAN-AM's San Francisco head office confirmed the reservations on March 31, 1960. First class tickets for the abovementioned flight were subsequently issued by PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444 for all of them was fully paid before the tickets were issued. As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in Tokyo at 5:30 P.M. of that day. As soon as they arrived Senator Lopez requested Minister Busuego of the Philippine Embassy to contact PAN-AM's Tokyo office regarding their first class accommodations for that evening's flight. For the given reason that the first class seats therein were all booked up, however, PANAM's Tokyo office informed Minister Busuego that PAN-AM could not accommodate Senator Lopez and party in that trip as first class passengers. Senator Lopez thereupon gave their first class tickets to Minister Busuego for him to show the same to PAN-AM's Tokyo office, but the latter firmly reiterated that there was no

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant, which is accordingly ordered to pay the plaintiffs the following: (a) P150,000.00 as moral damages; (b) P25,000.00 as exemplary damages; with legal interest on both from the date of the filing of the complaint until paid; and (c) P25,000.00 as attorney's fees; and the costs of this action. So ordered. It is from said judgment, as thus reconsidered, that both parties have appealed. Defendant, as stated, has from the start admitted that it breached its contracts with plaintiffs to provide them with first class accommodations in its Tokyo-San Francisco flight of May 24, 1960. In its appeal, however, it takes issue with the finding of the court a quo that it acted in bad faith in the branch of said contracts. Plaintiffs, on the other hand, raise questions on the amount of damages awarded in their favor, seeking that the same be increased to a total of P650,000. Anent the issue of bad faith the records show the respective contentions of the parties as follows. According to plaintiffs, defendant acted in bad faith because it deliberately refused to comply with its contract to provide first class accommodations to plaintiffs, out of racial prejudice against Orientals. And in support of its contention that what was done to plaintiffs is an oftrepeated practice of defendant, evidence was adduced relating to two previous instances of alleged racial discrimination by defendant against Filipinos in favor of "white" passengers. Said previous occasions are what allegedly happened to (1) Benito Jalbuena and (2) Cenon S. Cervantes and his wife. And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first class ticket from PAN-AM on April 13, 1960; he confirmed it on April 15, 1960 as to the Tokyo-Hongkong flight of April 20, 1960; PAN-AM similarly confirmed it on April 20, 1960. At the airport he and another Oriental Mr. Tung were asked to step aside while other passengers - including "white" passengers boarded PANAM's plane. Then PAN-AM officials told them that one of them had to stay behind. Since Mr. Tung was going all the way to London, Jalbuena was chosen to be left behind. PAN-AM's officials could only explain by saying there was "some mistake". Jalbuena thereafter wrote PAN-AM to protest the incident (Exh. B). As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on September 29, 1958 from Bangkok to Hongkong, he and his wife had to take tourist class, although they had first class tickets, which they had previously confirmed, because their seats in first class were given to "passengers from London."

Against the foregoing, however, defendant's evidence would seek to establish its theory of honest mistake, thus: The first class reservations of Senator Lopez and party were made on March 29, 1960 together with those of four members of the Rufino family, for a total of eight (8) seats, as shown in their joint reservation card (Exh. 1). Subsequently on March 30, 1960, two other Rufinos secured reservations and were given a separate reservation card (Exh. 2). A new reservation card consisting of two pages (Exhs. 3 and 4) was then made for the original of eight passengers, namely, Senator Lopez and party and four members of the Rufino family, the first page (Exh. 3) referring to 2 Lopezes, 2 Montelibanos and 1 Rufino and the second page (Exh. 4) referring to 3 Rufinos. On April 18, 1960 "Your Travel Guide" agency cancelled the reservations of the Rufinos. A telex message was thereupon sent on that date to PAN-AM's head office at San Francisco by Mariano Herranz, PAN-AM's reservations employee at its office in Escolta, Manila. (Annex A-Acker's to Exh. 6.) In said message, however, Herranz mistakenly cancelled all the seats that had been reserved, that is, including those of Senator Lopez and party. The next day April 1960 Herranz discovered his mistake, upon seeing the reservation card newly prepared by his co-employee Pedro Asensi for Sen. Lopez and party to the exclusion of the Rufinos (Exh. 5). It was then that Herranz sent another telex wire to the San Francisco head office, stating his error and asking for the reinstatement of the four (4) first class seats reserved for Senator Lopez and party (Annex A-Velasco's to Exh. 6). San Francisco head office replied on April 22, 1960 that Senator Lopez and party are waitlisted and that said office is unable to reinstate them (Annex B-Velasco's to Exh. 6). Since the flight involved was still more than a month away and confident that reinstatement would be made, Herranz forgot the matter and told no one about it except his co-employee, either Armando Davila or Pedro Asensi or both of them (Tsn., 123-124, 127, Nov. 17, 1961). Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations employee working in the same Escolta office as Herranz, phoned PAN-AM's ticket sellers at its other office in the Manila Hotel, and confirmed the reservations of Senator Lopez and party. PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's mistake after "Your Travel Guide" phone on May 18, 1960 to state that Senator Lopez and party were going to depart as scheduled. Accordingly, Jose sent a telex wire on that date to PAN-AM's head office at San Francisco to report the error and asked said office to continue holding the reservations of Senator Lopez and party (Annex B-Acker's to Exh. 6). Said message was reiterated by Jose in his telex wire of May 19, 1960

(Annex C-Acker's to Exh. 6). San Francisco head office replied on May 19, 1960 that it regrets being unable to confirm Senator Lopez and party for the reason that the flight was solidly booked (Exh. 7). Jose sent a third telex wire on May 20, 1960 addressed to PAN-AM's offices at San Francisco, New York (Idlewild Airport), Tokyo and Hongkong, asking all-out assistance towards restoring the cancelled spaces and for report of cancellations at their end (Annex D-Acker's to Exh. 6). San Francisco head office reiterated on May 20, 1960 that it could not reinstate the spaces and referred Jose to the Tokyo and Hongkong offices (Exh. 8). Also on May 20, the Tokyo office of PAN-AM wired Jose stating it will do everything possible (Exh. 9). Expecting that some cancellations of bookings would be made before the flight time, Jose decided to withhold from Senator Lopez and party, or their agent, the information that their reservations had been cancelled. Armando Davila having previously confirmed Senator Lopez and party's first class reservations to PAN-AM's ticket sellers at its Manila Hotel office, the latter sold and issued in their favor the corresponding first class tickets on the 21st and 23rd of May, 1960. From the foregoing evidence of defendant it is in effect admitted that defendant through its agents first cancelled plaintiffs, reservations by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel agent the fact of said cancellation, letting them go on believing that their first class reservations stood valid and confirmed. In so misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed reservations for the same, when in fact they had none, defendant wilfully and knowingly placed itself into the position of having to breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation by other passengers before flight time, as it turned out in this case. Such actuation of defendant may indeed have been prompted by nothing more than the promotion of its self-interest in holding on to Senator Lopez and party as passengers in its flight and foreclosing on their chances to seek the services of other airlines that may have been able to afford them first class accommodations. All the time, in legal contemplation such conduct already amounts to action in bad faith. For bad faith means a breach of a known duty through some motive of interest or ill-will (Spiegel vs. Beacon Participations, 8 NE 2d 895, 907). As stated in Kamm v. Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: "Self-enrichment or fraternal interest, and not personal ill-will, may well have been the motive; but it is malice nevertheless." As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew that plaintiffs' reservations had been cancelled. As of May 20 he knew that the San Francisco head office stated with finality that it could not reinstate plaintiffs' cancelled reservations. And yet said reservations supervisor made the "decision" to use his

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

Q So it was not your duty to notify Sen. Lopez and parties that their reservations had been cancelled since May 18, 1960? A As I said before it was my duty. It was my duty but as I said again with respect to that duty I have the power to make a decision or use my discretion and judgment whether I should go ahead and tell the passenger about the cancellation. (Tsn., pp. 1719, 28-29, March 15, 1962.) At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that their reservation had not been cancelled. An additional indication of this is the fact that upon the face of the two tickets of record, namely, the ticket issued to Alfredo Montelibano, Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs. Alfredo Montelibano, Jr., on May 23, 1960 (Exh. 23), the reservation status is stated as "OK". Such willful-non-disclosure of the cancellation or pretense that the reservations for plaintiffs stood and not simply the erroneous cancellation itself is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in this respect defendant clearly acted in bad faith. As if to further emphasize its bad faith on the matter, defendant subsequently promoted the employee who cancelled plaintiffs' reservations and told them nothing about it. The record shows that said employee Mariano Herranz was not subjected to investigation and suspension by defendant but instead was given a reward

in the form of an increase of salary in June of the following year (Tsn., 86-88, Nov. 20, 1961). At any rate, granting all the mistakes advanced by the defendant, there would at least be negligence so gross and reckless as to amount to malice or bad faith (Fores vs. Miranda, L-12163, March 4, 1959; Necesito v. Paras, L-10605-06, June 30, 1958). Firstly, notwithstanding the entries in the reservation cards (Exhs. 1 & 3) that the reservations cancelled are those of the Rufinos only, Herranz made the mistake, after reading said entries, of sending a wire cancelling all the reservations, including those of Senator Lopez and party (Tsn., pp. 108-109, Nov. 17, 1961). Secondly, after sending a wire to San Francisco head office on April 19, 1960 stating his error and asking for reinstatement, Herranz simply forgot about the matter. Notwithstanding the reply of San Francisco head Office on April 22, 1960 that it cannot reinstate Senator Lopez and party (Annex B-Velasco's to Exh. 6), it was assumed and taken for granted that reinstatement would be made. Thirdly, Armando Davila confirmed plaintiff's reservations in a phone call on April 27, 1960 to defendant's ticket sellers, when at the time it appeared in plaintiffs' reservation card (Exh. 5) that they were only waitlisted passengers. Fourthly, defendant's ticket sellers issued plaintiffs' tickets on May 21 and 23, 1960, without first checking their reservations just before issuing said tickets. And, finally, no one among defendant's agents notified Senator Lopez and party that their reservations had been cancelled, a precaution that could have averted their entering with defendant into contracts that the latter had already placed beyond its power to perform. Accordingly, there being a clear admission in defendant's evidence of facts amounting to a bad faith on its part in regard to the breach of its contracts with plaintiffs, it becomes unnecessary to further discuss the evidence adduced by plaintiffs to establish defendant's bad faith. For what is admitted in the course of the trial does not need to be proved (Sec. 2, Rule 129, Rules of Court). Addressing ourselves now to the question of damages, it is well to state at the outset those rules and principles. First, moral damages are recoverable in breach of contracts where the defendant acted fraudulently or in bad faith (Art. 2220, New Civil Code). Second, in addition to moral damages, exemplary or corrective damages may be imposed by way of example or correction for the public good, in breach of contract where the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner (Articles 2229, 2232, New Civil Code). And, third, a written contract for an attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable (Sec. 24, Rule 138, Rules of Court). First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded

feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets issued by defendant and yet they were given only the tourist class. At stop-overs, they were expected to be among the first-class passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. Senator Lopez was then Senate President Pro Tempore. International carriers like defendant know the prestige of such an office. For the Senate is not only the Upper Chamber of the Philippine Congress, but the nation's treaty-ratifying body. It may also be mentioned that in his aforesaid office Senator Lopez was in a position to preside in impeachment cases should the Senate sit as Impeachment Tribunal. And he was former Vice-President of the Philippines. Senator Lopez was going to the United States to attend a private business conference of the Binalbagan-Isabela Sugar Company; but his aforesaid rank and position were by no means left behind, and in fact he had a second engagement awaiting him in the United States: a banquet tendered by Filipino friends in his honor as Senate President Pro Tempore (Tsn., pp. 14-15, Nov. 25, 1960). For the moral damages sustained by him, therefore, an award of P100,000.00 is appropriate. Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and therefore his humiliation. In addition she suffered physical discomfort during the 13-hour trip,(5 hours from Tokyo to Honolulu and 8 hours from Honolulu to San Francisco). Although Senator Lopez stated that "she was quite well" (Tsn., p. 22, Nov. 25, 1960) he obviously meant relatively well, since the rest of his statement is that two months before, she was attackedby severe flu and lost 10 pounds of weight and that she was advised by Dr. Sison to go to the United States as soon as possible for medical check-up and relaxation, (Ibid). In fact, Senator Lopez stated, as shown a few pages after in the transcript of his testimony, that Mrs. Lopez was sick when she left the Philippines: A. Well, my wife really felt very bad during the entire trip from Tokyo to San Francisco. In the first place, she was sick when we left the Philippines, and then with that discomfort which she [experienced] or suffered during that evening, it was her worst experience. I myself, who was not sick, could not sleep because of the discomfort. (Tsn., pp. 27-28, Nov. 25, 1960). It is not hard to see that in her condition then a physical discomfort sustained for thirteen hours may well be considered a physical suffering. And even without regard to the noise and trepidation inside the plane which defendant contends, upon the strengh of expert testimony, to be practically the same in first class and tourist

class the fact that the seating spaces in the tourist class are quite narrower than in first class, there beingsix seats to a row in the former as against four to a row in the latter, and that in tourist class there is very little space for reclining in view of the closer distance between rows (Tsn., p. 24, Nov. 25, 1960), will suffice to show that the aforesaid passenger indeed experienced physical suffering during the trip. Added to this, of course, was the painfull thought that she was deprived by defendant after having paid for and expected the same of the most suitable, place for her, the first class, where evidently the best of everything would have been given her, the best seat, service, food and treatment. Such difference in comfort between first class and tourist class is too obvious to be recounted, is in fact the reason for the former's existence, and is recognized by the airline in charging a higher fare for it and by the passengers in paying said higher rate Accordingly, considering the totality of her suffering and humiliation, an award to Mrs. Maria J. Lopez of P50,000.00 for moral damages will be reasonable. Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate members of the family of Senator Lopez. They formed part of the Senator's party as shown also by the reservation cards of PAN-AM. As such they likewise shared his prestige and humiliation. Although defendant contends that a few weeks before the flight they had asked their reservations to be charged from first class to tourist class which did not materialize due to alleged full booking in the tourist class the same does not mean they suffered no shared in having to take tourist class during the flight. For by that time they had already been made to pay for first class seats and therefore to expect first class accommodations. As stated, it is one thing to take the tourist class by free choice; a far different thing to be compelled to take it notwithstanding having paid for first class seats. Plaintiffs-appellants now ask P37,500.00 each for the two but we note that in their motion for reconsideration filed in the court a quo, they were satisfied with P25,000.00 each for said persons. (Record on Appeal, p. 102). For their social humiliation, therefore, the award to them of P25,000.00 each is reasonable. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages (Articles 2229, 2232, New Civil Code). In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts in the future by defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or corrective damages. Now, as to attorney's fees, the record shows a written contract of services executed on June 1, 1960 (Exh. F) whereunder plaintiffs-appellants engaged the services of their counsel Atty. Vicente J. Francisco and agreedto pay the sum of P25,000.00 as

attorney's fees upon the termination of the case in the Court of First Instance, and an additional sum of P25,000.00 in the event the case is appealed to the Supreme Court. As said earlier, a written contract for attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable. A consideration of the subject matter of the present controversy, of the professional standing of the attorney for plaintiffs-appellants, and of the extent of the service rendered by him, shows that said amount provided for in the written agreement is reasonable. Said lawyer whose prominence in the legal profession is well known studied the case, prepared and filed the complaint, conferred with witnesses, analyzed documentary evidence, personally appeared at the trial of the case in twentytwo days, during a period of three years, prepared four sets of cross-interrogatories for deposition taking, prepared several memoranda and the motion for reconsideration, filed a joint record on appeal with defendant, filed a brief for plaintiffs as appellants consisting of 45 printed pages and a brief for plaintiffs as appellees consisting of 265 printed pages. And we are further convinced of its reasonableness because defendant's counsel likewise valued at P50,000.00 the proper compensation for his services rendered to defendant in the trial court and on appeal. In concluding, let it be stressed that the amount of damages awarded in this appeal has been determined by adequately considering the official, political, social, and financial standing of the offended parties on one hand, and the business and financial position of the offender on the other (Domingding v. Ng, 55 O.G. 10). And further considering the present rate of exchange and the terms at which the amount of damages awarded would approximately be in U.S. dollars, this Court is all the more of the view that said award is proper and reasonable. Wherefore, the judgment appealed from is hereby modified so as to award in favor of plaintiffs and against defendant, the following: (1) P200,000.00 as moral damages, divided among plaintiffs, thus: P100,000.00 for Senate PresidentPro Tempore Fernando Lopez; P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his son-in-law Alfredo Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo Montelibano, Jr.; (2) P75,000.00 as exemplary or corrective damages; (3) interest at the legal rate of 6% per annum on the moral and exemplary damages aforestated, from December 14, 1963, the date of the amended decision of the court a quo, until said damages are fully paid; (4) P50,000.00 as attorney's fees; and (5) the costs. Counterclaim dismissed.So ordered. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala, Makalintal, Zaldivar and Sanchez, JJ., concur. Dizon, J., is on leave.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-28773 June 30, 1975 FRANCISCO ORTIGAS, JR., plaintiff-appellant-appellee, vs. LUFTHANSA GERMAN AIRLINES, defendant-appellant-appellee. Baizas, Alberto and Associates for appellant Lufthansa German Airlines. Pelaez, Jalandoni and Jamir for appellant Francisco Ortigas, Jr. BARREDO, J.: Direct appeals of both parties plaintiff, Francisco Ortigas, and defendant Lufthansa German Airlines, from the decision of the Court of First Instance of Manila, Branch X, "condemning the defendant to pay plaintiff the amount of P100,000 as moral damages, P30,000 as exemplary or corrective damages, with interest on both sums at the legal rate from the commencement of this suit until fully paid, P20,000 as attorney's fees and the costs" for the former's failure to "comply with its obligation to give first class accommodation to (the latter) a (Filipino) passenger holding a first class ticket," aggravated by the giving of the space instead to a Belgian and the improper conduct of its agents in dealing with him during the occasion of such discriminatory violation of its contract of carriage. Defendant buttresses its appeal on the following: ASSIGNMENT OF ERRORS I THE LOWER COURT ACTED WITH GRAVE ABUSE OF DISCRETION IN DENYING THE DEFENDANT'S URGENT MOTION FOR POSTPONEMENT DATED SEPTEMBER 24, 1966. II THE LOWER COURT CONSEQUENTLY ERRED IN ORDERING THE STRIKING FROM THE RECORDS THE TESTIMONY OF WITNESS IVO LAZZARI AND IN DEEMING THE CASE SUBMITTED FOR DECISION ON THE EVIDENCE OF THE PLAINTIFF ALONE.

III THE LOWER COURT ERRED IN CONDEMNING DEFENDANT TO PAY THE PLAINTIFF THE AMOUNT OF P100,000.00 AS MORAL DAMAGES, P30,000.00 AS EXEMPLARY OR CORRECTIVE DAMAGES, WITH INTEREST ON BOTH SUMS AT THE LEGAL RATE FROM THE COMMENCEMENT OF THIS SUIT UNTIL FULLY PAID, P20,000.00 AS ATTORNEY'S FEES, AND COSTS. (Pp. 1213, p. 118, Record.) On the other hand, plaintiff's sole ground for his appeal is that "the trial court erred in ordering Lufthansa to pay Ortigas only P100,000 as moral damages, P20,000 as exemplary or corrective damages, and P20,000 as attorney's fees." (PlaintiffAppellant's Brief, p. a.) Thus, apart from the contention of defendant that it has been denied its full day in court, the only issue raised by both appellants relate to the amount of the damages awarded by the trial court, plaintiff claiming it is less than he is entitled to and the defendant insisting on the opposite. Lufthansa maintains it has not had its full day in court because the trial court abruptly ended the trial by denying its last motion for postponement notwithstanding it was well founded and forthwith ordering the striking out of the testimony of its absent witness whose cross-examination had not been finished and then declaring the case submitted for decision. In this connection, the record reveals the following facts: Plaintiff's complaint was filed with the court below on December 24, 1963 and after issues were joined, a pre-trial was held, the parties submitted a partial stipulation of facts and thereafter went to trial, the last day of which was on September 28, 1966. As to what happened in between, a detailed account is made in the brief of Ortigas as plaintiff-appellee as follows: ... Thereafter the case was set for hearing twenty four (24) times, or on April 27, 1964, July 9, 1964, August 20, 1964, October 1, 1964, November 11, 1964, December 22, 1964, February 3, 1965, March 18, 1965, May 5, 1965, June 11, 1965, July 22, 1965, August 26, 1965 and September 8, 1965, September 22, 1965, November 3, 1965, November 24, 1965, December 17, 1965, December 29, 1965, January 14, 1966, February 2, 1966, April 19, 1966, April 20, 1966, July 5, 6 and 7, 1966, August 25, 1966 and September 28, 1966. One (1) hearing, or that of August 25, 1966, was cancelled because the trial judge, Hon. Jose L. Moya, was then sick. Other postponements were as follows: Postponements at instance of plaintiff

Three (3) settings were cancelled upon motion of plaintiff on grounds that defendant's counsel (Atty. Crispin Baizas) himself must have found sufficient, for he gave his conformity thereto. These were the hearings set for: July 9, 1964 postponed upon plaintiff's motion, dated June 27, 1964, or 12 days before the hearing, on the ground that he had to attend an important business matter in Mindanao, which was so urgent that "for plaintiff to even make a flying trip to Manila for the scheduled hearing might jeopardize and render to naught a project to which plaintiff has already expended considerable time, money and effort" (RA pp. 28-29. Note: All reference herein will be to plaintiff's Record on Appeal). August 26, 1965 postpone upon plaintiff's motion, dated August 23, 1965, for the reason that he was in London for business reasons and could not return to the Philippines on time for the hearing. This motion is not reproduced in any Record on Appeal but is admitted. July 5-7, 1966 18 days before the dates set for the hearing, counsel for plaintiff filed a motion, dated June 17, 1966, for Postponement on the ground that Atty. Rodegelio M. Jalandoni, who had been personally handling this case was then in Washington, D.C. on business and would not be back until the middle part of August, 1966. Considering that the trial of the case was far advanced, it would be difficult for another lawyer to substitute for Atty. Jalandoni. Defendant's counsel agreed to the motion (RA pp. 50-51). Postponement at instance of both parties Four (4) settings, or those of August 20, 1964, October 1, 1964, November 11, 1964 and December 22, 1964, were cancelled upon the joint motion of the parties on the ground that negotiations for the possible settlement of this case were pending (RA pp. 31-34). While both attorneys for plaintiff and defendant signed the joint motions for postponement, the initiative to have the hearings cancelled actually came from defendant's counsel who claimed that he needed time to consult with his client. Plaintiff welcomed the possibility of compromise and acceded to join the requests for postponement but became impatient at and suspicious of the attempt to delay so that in the motion to postpone the December 22, 1964 hearing, plaintiff insisted on the insertion of the phrase "be postponed for the last time" (RA p. 34).1wph1.t These took place after the pre-trial but before plaintiff had started presenting his evidence.

Postponement at instance of defendant Of the remaining 16 settings, at least TEN (10) were postponed or could not proceed except for a few minutes because either Atty. Crispin Baizas, counsel for defendant, was not available or needed time to prepare or had to attend a meeting somewhere else, or, as in the case of September 28, 1966, defendants witnesses wanted to avoid the inconvenience of coming to the Philippines. The situation became such that on two (2) occasions the court a quo warned the defendant and/or its counsel that it was postponing the trial "for the last time" and "definitely for the last time." Thus: February 3, 1965 On this date, although plaintiff was ready to present his evidence and the Court to hear the parties, Atty. Baizas asked for postponement for the reason that he had to be somewhere else. The undersigned graciously obliged by not objecting, albeit the motion was made without warning and in open court. March 18, 1965 Once again the hearing scheduled for this date was postponed on motion of Atty. Baizas in open court. The undersigned did not object because, as far as he can now recall, the excuse given was that opposite counsel had another appointment. June 11, 1965 The Court was free the whole morning of this day and plaintiff actually took the witness stand. After plaintiff was through with his direct testimony, Atty. Zaida R. Alberto, who appeared for the defendant, asked that the crossexamination be postponed for the next hearing, on the ground that Atty. Baizas knew more of the defense. The following appears of record: "ATTY. ALBERTO: If Your Honor please, may I request to allow the cross examination at the next hearing. COURT: You can handle the cross examination now. ATTY. ALBERTO: The defense are more in the knowledge of Atty. Baizas. COURT: If you postpone the cross-examination we will forget the testimony and will be spending much time referring to his testimony, so you better cross-examine him while his testimony is still fresh.

ATTY. ALBERTO: May I ask for a reconsideration, Your Honor, anyway it is past 11:00 o'clock I do not think there will be enough time. COURT: We still have one hour. ATTY. ALBERTO: I ask for a reconsideration, Your Honor. COURT: On motion of the defendant's counsel, the continuation of the trial is postponed to July 22, 1965, at 8:30 a.m. The parties were notified in open court of this new assignment." (t.s.n. pp. 43-44, June 11, 1965) Notwithstanding there was an hour left, which was precious considering the crowded calendar of the Court, and Judge Moya wanted to hear the cross-examination because plaintiff's testimony was fresh, the Court pleased counsel for the defendant and postponed the hearing to July 22, 1965. September 22, 1965 At this hearing the undersigned requested that Dr. Isidro Pertiera be permitted to take the witness stand. He is a heart specialist and it was difficult to bring him to court because of his many patients. His direct testimony did not take long, after which Atty. Baizas asked for postponement, for the reason that he did not expect Dr. Pertiera to testify and, since the subject of the testimony was important and technical, he needed time to be able to cross-examine. The undersigned, understanding the predicament of Atty. Baizas, did not offer any objection. November 3, 1965 This scheduled hearing was postponed upon motion dated October 7, 1965, of Atty. Baizas on the ground that he was leaving on a business trip abroad. The undersigned again did not object. November 24, 1965 It will be recalled that the hearing of September 22, 1965, supra, was postponed to enable Atty. Baizas to prepare for his crossexamination of Dr. Pertiera. On this date, November 24, 1965, Atty. Baizas crossexamined briefly the doctor, but announced: "ATTY. BAIZAS: May I announce, your Honor, that after I cross-examine the Doctor I will ask for a postponement of my cross examination of Atty. Ortigas because I will have to attend

a meeting of the PAL Board of Directors this morning. My cross examination will not be very long." (t.s.n., pp. 34, November 24, 1965) The PAL Board of Directors' meeting was certainly not more important than the occupation of the Court, and it was still early, but counsel was insistent. The Court was beginning to be perturbed by the dilatory motions; yet it granted counsel's requested postponement but "for the last time." Thus: "ATTY. BAIZAS: That is all. May I make that request, Your Honor, that it is simply that I have to be present at the meeting. I wish to finish my cross examination on Atty. Ortigas but it is merely that the meeting is held for today at 10:00 o'clock and I would like to ask for a postponement to continue the cross examination. COURT: I will grant this for the last time. On motion of Atty. Baizas, the continuation of the hearing is postponed for the last time to December 17, 1965, at 8:30 a.m., by agreement between him and Atty. Jalandoni." (t.s.n., p. 17, November 24, 1965) December 17, 1965 Although at the hearing of November 24, 1965 trial was postponed for the last time to December 17, 1965, the Court's warning did not seem to register because on December 7, 1965 defendant's counsel filed another motion for postponement alleging that he had received a telegram to the effect that the meeting of the Legal Committee of IATA that he was attending, originally scheduled for December 10-15, had been deferred and would begin on December 13 and as it was for 5 days, it would not be possible for him to return for the December 17 hearing; hence, he requested that said hearing be reset for December 27 and 29. In his undated motion filed on December 7,1965 counsel averred that: "There is no intention whatever to delay the case but because of the circumstances above-stated, undersigned counsel is constrained to ask, for the last time, for the cancellation of the hearing on December 17 and for its resetting on such dates as may be convenient to this Honorable Court, preferably December 27 and 29." (RA p. 41) The undersigned opposed said motion and alleged: "That this case has been pending since December 24, 1963, or almost two years now, and trial thereof has been repeatedly suspended and/or postponed; That at the hearing of November 24, 1965, this Honorable Court precisely postponed continuation of the trial thereof for the last time to December 17, a date which was fixed by agreement of the parties;

That when counsel for defendant left, as alleged, on December 6, 1965 he did so with full knowledge of the intransferable character of the trial set for December 17; That defendant can well be represented by Atty. Baizas' associate, Atty. Alberto, who, as a matter of fact, handled this case when trial started on June 11, 1965 and has been actively collaborating with Atty. Baizas since then; That when plaintiff testified on direct examination on June 11, 1965 said Atty. Alberto appeared for defendant and that plaintiff is now merely due for further crossexamination." (RA p. 43) In spite of said opposition, the Trial Court once more granted defendant's request but was more categorical this time with its admonition against further postponements and used the word "definitely" in its order which read: "ORDER For the reasons stated in the defendant's motion for postponement and in view of the fact that it seeks a deferment of the hearing for only a few days, the continuation of the trial is postponed definitely for the last time to December 29, 1965, at 8:30 a.m. "SO ORDERED. "Manila, Philippines, December 11, 1965. JOSE L. MOYA Judge" (RA p. 46) March 10, 1966 The hearing on this date lasted for only a few minutes, with the undersigned offering the documentary evidence for the plaintiff. Thereupon, defendant's counsel again asked for postponement so he could go over said evidence. Since he had no witnesses to present, the Court once more postponed the trial to April 19, 1966 without any objection on the part of the undersigned. April 19, 1966 The hearing for this day was cancelled upon motion of defendant's counsel (RA p. 49) on his representation that defendant's witness Ivo Lazzari had arrived from Italy at midnight of April 18, 1.966 and was not in a condition to take the witness stand. The Court again accommodatingly transferred the hearing to the following day, April 20, 1966, although it had other cases scheduled for that date and the case at bar was not among them, just so Lazzari's trip would not be useless. The undersigned likewise did not oppose the transfer of hearing. (Pp. 2-13 Brief, p. 132 Record.)

Defendant does not seriously deny these facts. Seemingly, the controversy between the parties revolves around defendant's motion for postponement of the hearing set for September 28, 1966 which was denied by the trial court. It is this denial that is the subject of the first above-quoted alleged errors assigned by Lufthansa in its brief as defendant-appellant. At the time this incident of postponement arose, plaintiff had already closed his evidence, and so it was the turn of the defendant to prove its defenses. The starting date for this was April 19, 1966, but, upon motion of defendant's counsel, it was deferred to the next day, April 20, 1966, on which date defendant's first witness, Ivo Lazzari, took the witness stand. His testimony, however, was not finished in the morning and afternoon of that day nor during the whole day of April 22, 1966. Atty. Rodegelio M. Jalandoni was still cross-examining him when the hearing was continued "to the first available date in the calendar". Eventually, the next continuation of the trial was set at first for July 5, 6 and 7, 1966, but upon motion of plaintiff's counsel, it was reset for August 25, 1966, on which date, in spite of the presence of Lazzari who came from Rome purposely for the trial together with another expected witness, Severino Caselli, and still another witness, C.H. Dehio, who came from Hongkong, no trial could be held because of the absence of the judge. Hence, another date, September 28, 1966 was fixed with notice to the parties received by them respectively the month previous. On September 24, 1966, defendant's counsel filed a motion for postponement thus: COMES NOW the defendant by undersigned counsel and to this Honorable Court respectfully states: 1 The above-entitled case is set for hearing on September 28, 1966 at 8:30 o'clock in the morning. 2 The witnesses who are scheduled to testify for the defendant at said hearing are to come from Rome, Italy; 3 Word has been received from the defendant that said witn will not be able to come for the hearing aforementioned. WHEREFORE, it is respectfully prayed that the hearing of this case scheduled for September 28 be postponed to some other date most convenient to this Honorable

Court, preferably on any of the following dates: October 21, 17; Novembers, 3, 8, 9 or 11, 1966. ... . (Page 53, Record on Appeal, p. 29, Rec.) On September 27, 1966, plaintiff's counsel filed the following opposition to the above motion: COMES NOW plaintiff, through undersigned counsel and, in opposition to defendant's urgent motion for postponement, dated September 24, 1966, to this Honorable Court respectfully states: That this case has been pending since December, 1963; That defendant's aforesaid motion does not give any valid reason for postponing the hearing, since it does not state why defendant's witnesses cannot come to Manila on the scheduled dates of continuation of trial; That the convenience and motive of defendant and its witnesses in not exerting every effort to testify are not the concern of the plaintiff, and more so of this Honorable Court, and that the speedy and proper administration of justice dictates that the hearing proceed irrespective of defendant's obvious disregard of the need thereofl; That defendant's attitude is aggravated by the fact that, being an airline company, it has all facilities to have its employees available as witnesses at any time it desires. WHEREFORE, it is respectfully prayed that defendant's aforesaid motion for postponement be denied. ... . (Pp. 55-56, id.) In view of this opposition, on the same day, His Honor issued an order of denial: No reason whatsoever having been alleged or shown why the defendant's witnesses will not be able to come from Rome to Manila on the day of the hearing, and this case having been pending since December, 1963, the motion for postponement is denied. (Pp. 56-57, id.) On the day set for the hearing, September 28, 1966, Atty. Zaida Ruby S. Alberto appeared for defendant and verbally moved for reconsideration of the foregoing order of denial. She argued that: Actually, it is not intended to delay the termination of this case. As a matter of fact, on August 15, 1966, the date set for the hearing of this case, we were ready with the presentation of our evidence as our two witnesses from Rome were here. But

unfortunately, Your Honor was indisposed, so the hearing was postponed to this date. I really do not know why our witness failed to come. However, I intend to make an inquiry about the matter so that I could file the corresponding explanation for their failure to appear in Court today. May I, therefore, reiterate my motion for reconsideration, with the reservation that I be allowed to file my explanation for the failure of these two witnesses coming from Rome to appear for today's hearing. (Page 2, t.s.n., Sept. 28/66.) But as counsel could not give the exact reason why defendant's witness scheduled to testify were absent, the trial court denied the motion; ruling that "no ground has been alleged in support thereof." (p. 6, t.s.n., September 28, 1966.) This order was immediately followed by a motion of plaintiff's counsel for the striking out of the entire testimony of the witness, Ivo Lazzari, upon the ground that counsel had not yet finished his cross-examination of him and his absence was unexplained. No objection appears to have been made to such motion, albeit counsel for defendant tried to point out that Atty. Jalandoni had already finished his cross-examination of the witness. After verifying from the records that such was not the case, His Honor issued the following order: The witness Ivo Lazzari not having appeared at the hearing set for today, for which reason his cross-examination cannot be continued, on motion of the plaintiff's counsel, his testimony is striken from the record, and this case is deemed submitted for decision on the evidence already presented. (Pp. 57-58, Rec. on Ap., id.) Thus the trial ended and parties were allowed to submit their respective memoranda. On October 19, 1966, however, defendant's counsel filed the following motion for reconsideration: MOTION FOR RECONSIDERATION . COMES NOW defendant by undersigned counsel this Honorable Court moving for a reconsideration of the orders dated September 27 and September 28, 1966, respectively, respectfully states: 1 On September 26, 1966 a motion for postponement of the hearing on September 28, 1966 was filed by undersigned counsel for the reason that word had just been received from the defendant that the witnesses who were scheduled to testify at the said hearing and who were to come from Rome, Italy, would not be able to come to the Philippines for said hearing. This motion was denied in the order of September 27, 1966;

2 No reason could be stated in the aforesaid motion for postponement because at the time it was prepared, counsel for defendant did not really know the specific reasons for the inability of said witnesses to come. A simple telex message had been sent by the Far East Manager of the defendant company to defendant's representatives in Manila advising the latter that the witnesses in question could not come. Copy of said telex message is attached to and made part of this motion for reconsideration as Annex "I"; 3 For this reason on September 28, 1966, when the case was called, counsel for the defendant reiterated the motion for postponement and requested this Honorable Court for time to submit an explanation on the failure of defendant's witnesses to come as a letter elaborating on the matter would surely follow the telex' message. This request was however denied by the Honorable Court and upon motion of plaintiff's counsel, another order was issued striking out from the record the testimony of defendant's only witness so far, Ivo Lazzari, whose cross-examination was to be continued that date, for the latter's failure to appear at the hearing, and deeming the case submitted for decision; 4 It is alleged by opposing counsel that the witnesses did not come for the hearing of September 28, 1966 because it was inconvenient for them and for defendant. This accusation is absolutely without basis and malicious; 5 If inconvenience were the only reason for the witnesses' failure to come, then they would not also have come previously because it was just as inconvenient for them then. It will be recalled that Ivo Lazzari had been here in April 1966 when he was presented on direct examination and partly on cross-examination. On August 25, 1966, the case was also scheduled for hearing. All of defendant's witnesses came here from Rome, Italy for said hearing. Even Mr. C. H. Dehio was also here to testify. Unfortunately, the Presiding (Judge) of this Honorable Court was indisposed on that particular morning and so the hearing on said date was cancelled. We mention this only to show that the failure of the witnesses to come for the hearing on September 28 was not caused by mere inconvenience; 6

Defendant had and had no intention to delay the proceedings whatsoever. The witnesses in question could not come because of certain circumstances that rendered their coming over virtually impossible. Both witnesses, Ivo Lazzari and Saverino Casilli are employees of defendant company at the Rome office. The air traffic in Rome has been particularly heavy this season. Some of the personnel of the Lufthansa Rome office were on leave and these two employees had to assume some of the duties of those employees who were on leave, aside from performing their own regular duties, If they were to leave their posts to come for the hearing on September 28, there would be grave disruption to the public service and for this reason they were not able to come. These facts are contained in a letter dated September 29, 1966 written to undersigned counsel by C. H. Dehio, IATA Agency Manager, Far East and Australasia, Lufthansa German Air Lines, copy of which is attached to and made part of this motion for reconsideration as Annex "2";. The envelope in which said letter contained is likewise attached to and made part of this motion as Annex "2-A"; 7 Witness Ivo Lazzari had first shed his testimony on direct examination and on September 28, 1966, opposing counsel was to continue cross-examination of said witness. The other witness Saverino Casilli was to be presented after Ivo Lazzari would have finished testifying. Both witnesses are material for the defense and no other person could testify on the facts that are the subject of their testimony. The inability of said witnesses to come for the hearing on September 28 was not due to any fault or neglect on the part of defendant who in fact had exerted every effort to have them come, but because of the supervening circumstances above-described, their coming over could not have been possible without seriously disrupting public service; 8 There is no question that the granting or denial of a motion for postponement rests upon the sound discretion of the court. We submit however that under the circumstances, the ends of justice would have been better served by granting the motion on question. The reason for defendant's motion for postponement is valid and meritorious, and the grant of a postponement based on such ground would not have adversely affected the substantial rights of plaintiffs. "Continuances and postponements of trial are part and parcel of our judicial system of justice, and where no substantial rights are affected and the intention to delay is not manifest, it is sound judicial discretion to allow them. (Rexwell vs. Canlas, No. L16746, Dec. 30, 1961)

"There is even authority for the view that the right to a speedy trial is not violated by granting a continuance on the ground of absence of material witness. (People vs. Romero, G.R. No. L-4517-20, May 25, 1953) The lower court erred in denying a motion for postponement filed by defense to await arrival of a material witness." (People vs. Narsolis, et al. G.R. No. L-2764, March 24, 1950) "A miscarriage of justice may result from the accidental or excusable absence of a material witness, where presence can be secured by the grant of a reasonable continuance." (Luna vs. Arcenas, 34 Phil. 80, 98-99) 8 Defendant has a valid and meritorious defense, and if given opportunity to present its side of the case, it would certainly diminish, if not altogether disprove plaintiffs claim. ... court litigations are primarily for the search of truth. ... A trial by which both parties are given the chance to adduce truth is the best way to find out such truth. A denial of this chance would be too technical. The dispensation of justice and the vindication of grievances should not be barred by technicalities." (Ronquillo vs. Marasigan, L-11621, May 21, 1962; Santiago vs. Joaquin, L-15237, May 31, 1963, emphasis ours.) "Judicial experience dictates that it is better that cases are tried on the merits even with a little delay than that substantial rights of a party litigant be sacrificed on the altar of technicality." (Uy vs. Demetillo, CA-G.R. No. 32665-R, Jan. 14, 1964.) 9 An affidavit of merit by Clarita C. de la Riva, Manager, Rocha & Cua., Inc., General Sales Agents, Lufthansa German Airlines is likewise attached to and made an integral part of this motion for reconsideration as Annex "3"; 10 The order dated September 27, denying defendant's motion for postponement and the order of September 28, 1966 striking off from the records the testimony on direct examination of the witness Ivo Lazzari and holding the case submitted for decision on the evidence presented would unduly prejudice defendant's stand, and would amount to a denial of due process to defendant. "The paramount interests of justice demand such reasonable allowances as would prevent, without doing an injustice to the opposing party, the loss by a litigant of his chance to duly present his side of the case before the court. With a view of avoiding a

possible miscarriage of justice, the exercise of the court's discretion ought to lean, in a reasonable degree toward bringing about a presentation of evidence on both sides. ..." (Gerona vs. Calada, CA-G.R. No. 23955-R March 30, 1963, Tormes vs. Balzado, CAG.R. No. 32019-R, April 17, 1964.) WHEREFORE, it is respectfully prayed that the orders of the Honorable Court dated September 27, and September 28, 1966, respectively, be reconsidered and set aside; that the testimony of defendant's witness Ivo Lazzari be allowed to remain on record and that a date be set for the continuation of defendant's evidence. Manila, Philippines, October 19, 1966. CRISPIN D. BAIZAS & ASSOCIATES By: s/t/ Crispin D. Baizas Counsel for the defendant Suite 305 Shurdut Building Intramuros, Manila VERIFICATION I, CRISPIN D. BAIZAS, after having been sworn according to law, depose and say: I am the counsel for the defendant in the above-entitled case; I have prepared the foregoing motion for reconsideration and all the allegations contained therein are true and correct of my own knowledge and to the best of my information and belief. s/t/ CRISPIN D. BAIZAS SUBSCRIBED AND SWORN TO BEFORE ME this 19th day of October. 1966 in the City of Manila, affiant exhibiting to me his Res. Cert. No. A- 5892423 issued on January 28, 1966 at Makati, Rizal. s/ (Illigible) NOTARY PUBLIC Until December 31, 1967 Doc. No. 1377 Page No. 77 Book No. III Series of 1966. (Pages 58-67, Record on Appeal, id.)

to which, plaintiff's counsel filed the following opposition: COMES NOW plaintiff, through undersigned counsel, and, in opposition to defendant's motion for reconsideration, dated October 19, 1966, to this Honorable Court respectfully states that: 1. This is in effect the second motion for reconsideration that defendant has filed against the order of September 27, 1966 denying its motion for postponement of the hearing of September 28. The first motion for reconsideration was made in open court by Atty. Zaida S. Alberto and denied on the same date. 2. Defendant now claims that it did not intend to delay the trial of this case and seeks to justify the failure of its witnesses, Ivo Lazzari and Saverino Casilli, to appear on September 28 on the ground that: "... The air traffic in Rome has been particularly heavy this season. Some of the personnel of the Lufthansa Rome office were on leave and these two employees had to assume some of the duties of these employees who were on leave, aside from performing their own regular duties. If they were to leave their posts to come for the hearing on September 28, there would be grave disruption to the public service and for this reason they were not able to come. ..." (p. 3, Defendant's Motion for Reconsideration.) 3. Note that the above alleged facts are contained in a mere letter that was written by a certain Mr. C.H. Dehio, an employee of defendant in Hongkong, to its counsel on September 29, 1966, or one day after the hearing of September 28, when presumably defendant's aforesaid employee had already been informed that this Honorable Court had denied the postponement and considered this case as submitted for decision. Defendant is an airline company and has all the telex facilities to communicate in a matter of minutes with its various agencies. The ground for failure to appear, to wit, supposed pressure of work of said employees, is as easy to conceive and gratuitously state as to flick one's fingers. We wish to call attention to the significant fact that the statement of Mr. Dehio in his letter is not under oath. Incorporating said statement in the body of the motion for reconsideration that is sworn to by counsel merely `to the best of his information and belief, or in an affidavit of Mrs. Clarita C. de la Riva (Annex 3) who was only referring to hearsay information derived from Mr. Dehio's aforesaid letter, is insufficient verification of the motion for reconsideration under Section 6, Rule 7 of the Rules of Court. Even Mr. Dehio had he executed the affidavit himself, would have been disqualified to swear to the facts because he is stationed in Hongkong. So that, when defendant's counsel and Mrs. de la Riva verified the motion on "information and belief" derived from Mr. Dehio's letter, their statements were hearsay thrice removed.

4. But assuming said facts to be true, did this justify the failure of defendant's witnesses to appear at the scheduled hearing or constitute a valid excuse for defendant's inability to present evidence. We respectfully submit that they do not. The September 28 hearing was set as early as August 25, 1966, or more than one (1) month previous, to suit the schedules not only of this Honorable Court but of the parties as well. Surely, it was incumbent on defendant, if it has deference to this Honorable Court and our administration of justice to see to it that its witnesses, particularly Ivo Lazzari who was on the witness stand and due for cross-examination, would be available, rather than granting leave to its other employees and burdening the two needed witnesses with additional work. Defendant is not a neophyte in the airline business. Assuming arguendo that it is true that the volume of air traffic in Europe was high in "September and early October", it should have foreseen the situation and taken appropriate measures to assure compliance with its obligation to this Honorable Court. The witnesses are defendant's employees and subject to its exclusive control. Instead, defendant allegedly rendered itself short handed by granting leave to its other employees, and now comes to court with a lame excuse requesting that it be extricated from a predicament that it has deliberatedly brought upon itself. For the execuse that with the workload for Mr. Lazzari and Mr. Casilli becoming heavier than usual "it would seriously disrupt our service to the travelling public if, during this time, they were to leave their jobs for several days" (Please see Mr. Dehio's letter, Annex "2") is lame, by any standard. The local newspapers are constantly carrying news articles of how large and expanded is the Lufthansa as an airline outfit. Surely, of its hundred (if not thousands) of available employees, two like Lazzari and Casilli could have been dispensed from their work temporarily to defend the company against the just grievance asserted by an injured passenger before a court of justice. At the most, defendant was after the promotion of its own interest in holding the two employees to their jobs, and is not avoiding "grave disruption to the public service" as counsel exaggerates Mr. Dehio's expression "seriously disrupt our service to the travelling public" two distinct ideas, the latter signifying self-interest as distinguished from public necessity. This Honorable Court can take judicial notice that there are many other airlines-operating in the same areas as doe, Lufthansa and competing with it. 5. As we explained at the September 28 hearing, the truth of the matter is that, contrary to the unverified representations of defendant, the reason for the nonattendance of defendant's witnesses was to avoid the inconvenience of coming to the Philippines to testify. In other words, after Ivo Lazzari and Saverino Casilli were unable to testify last August 25, 1966, defendant thought of avoiding having said witnesses come again to Manila. We say this because sometime on September 20, 1966, Atty. Leonardo P. Valmonte (an assistant attorney of plaintiff who is helping in this case) had a telephone conversation with defendant's counsel, Atty. Zaida S. Alberto in connection with the former's request for a copy of a certain exhibit, and in

the course of their conversation Atty. Alberto informed Atty. Valmonte that the trial scheduled for September 28, 1966 would not proceed because they were intending "to secure the permission of the court to take the testimonies of their witnesses by way of deposition". In short, even before the receipt of the alleged telex (Annex "1" of Motion) by defendant's counsel on September 22, 1966, said counsel announcing that the trial could not proceed because they were going to resort to depositions of their witnesses in Rome, rather than have said witnesses come to Manila. The decision to take depositions having been made on or before September 20, it was an easy matter to have Lufthansa's Hongkong office send the telex of September 22 stating that they would be unable to provide witnesses on September 28. No reason was given why witnesses could not be provided 6 or 7 days thence. If in truth there was unexpected increase in air traffic, surely 6 or 7 days were more than sufficient to make the necessary arrangements so that the work of Lazzari and Casilli could be taken over temporarily just so these witnesses could appear before this Honorable Court at the appointed date. Attached hereto as Annex "A" is the affidavit of Atty. Leonardo P. Valmonte on his aforesaid conversation with Atty. Alberto. 6. At the hearing on September 28, when we made reference to the above-referred to conversation between Attys. Valmonte and Alberto, the latter did not deny that she had in truth spoken to Atty. Valmonte in the tenor above related. As a matter of fact, she admitted that defendant was intending to take the depositions of its witnesses in Rome. 7. When this honorable Court denied the motion for postponement on September 28, 1966, it did so in the exercise of its sound judicial discretion, for no valid reason was given why the witnesses could not appear, whereas this case had been pending for about three (3) years and had been postponed several times with repeated warnings on defendant that said postponements were for the last time. And now, in its motion for reconsideration, defendant has failed to effectively allege the ground for the failure of said witnesses to come, and even if said ground be admitted as true for argument's sake, it merely showed "inofficiousness, lack of resourcefulness and diligence, if not total indifference" on the part of defendant to protect in court its interests and to prevent needless delays in the discharge of judicial business. "Postponement not based on valid reasons. Where a party seeks postponement of the hearing of this case for reasons caused by his own inofficiousness, lack of resourcefulness and diligence if not total indifference to his own interests or to the interests of those he represents, thereby resulting in his failure to present his own evidence, the court would not extend to him its mantle of protection. If it was he who created the situation that brought about the resulting adverse consequences, he cannot plead for his day in court nor claim that he was so denied of it." (De Leon vs. People's Homesite and Housing Corporation, CA-G.R. No. 31169-R, Aug. 31,1963.)

8. In the case of Hap Hong Hardware Co. vs. Philippine Company, GR. No. L-16773 (May 23, 1961), the Supreme Court, in sustaining the trial court's denial of a motion for postponement and on the ground that the defendant's witnesses, officers of the company, had not come because it was the beginning of the milling season in the municipality of San Jose, Mindoro Occidental and their presence in the Central was very, necessary, held that the trial court was perfectly justified in denying said motion for postponement because the reason adduced was "not unavoidable and one that could not have been foreseen." Said the Supreme Court: "The reason adduced in support of the motion for postponement is not unavoidable and one that could not have been foreseen. Defendant ought to have known long before the date of trial that the milling season would start when the trial of the case would be held. The motion should have been presented long in advance of the hearing, so that the court could have taken steps to postpone the trial without inconvenience to the adverse party. As it is, however, the motion was presented on the day of the trial. Knowing as it should have known that postponements lie in the court's discretion and there being no apparent reason why the defendant could not have presented the motion earlier, thus avoiding inconvenience to the adverse party, the appellant cannot claim that the trial court erred in denying postponement. Under all the circumstances we hold that the Court was perfectly justified in denying the motion for postponement." In the case at bar, the same unjustified excuse is adduced that the witnesses, who are employees (not even officers) of defendant, had work to do, albeit date of trial was set one month previous. 9. The cases cited by defendant are not in point, the facts involved therein being very different from those attending the case at bar. For example, in the cited case of Lino Luna vs. Arcenas, 34 Phil. 93, the trial judge declined to grant a continuance of a few hours to give counsel an opportunity to secure the presence of the defendant. The Supreme Court held that considering that it did not appear that defendant was indulging in dilatory tactics, the denial of the motion for short Postponement was improper. Again, in the case of People vs. Romero, G.R. No. L-4517, May 25, 1953, the prosecution witnesses, although subpoenaed, failed to appear; whereupon the fiscal asked that they be ordered arrested and that in the meantime the trial be postponed. The Supreme Court likewise held that the denial of the postponement was improper. These fact situations, however, as can immediately be seen are completely different from that of Lufthansa whose non-presentation of its employees-witnesses was motivated by the desire to avoid inconvenience to them, hence its frustrated plan to have their depositions taken in Rome.

10. Complaints regarding delays in the disposition of court cases are prevalent and have recently found expression not only in executive pronouncements but in judicial admonitions. The unclogging of court dockets remains a pressing problem to the despair of litigants. As the Court of Appeals put it: "The records reveals that the trial of the case was postponed five times at the instance of appellants themselves, and for this reason the trial was delayed for more than one year and three months. In granting these several postponements, the trial judge was over liberal already, and to have allowed another postponement would have been to jeopardize plaintiff's interest. Obviously courts cannot unduly protect the interests of one party to the detriment of the other. Already, there are complaints regarding delays in the disposition of court cases. The unclogging of our court dockets still remains a pressing problem in the despair of many a litigant. However to eliminate, at least minimize, these delays is as much our concern and any act of trial courts conducive towards this purposeful end will be encouraged by appellate court's." (Rosario vs. De Leon, CA-G.R. No. 6495-R, April 25, 1941; 40 O.G. 752.) 11. Prejudice will be occasioned plaintiff if defendant's belated motion for reconsideration is granted. Notwithstanding defendant's counsel's receipt of Mr. Dehio's letter, dated September 25, 1966, a few days after said date, defendant delayed the filing of its motion for reconsideration until after about three (3) weeks later. In the meantime, it knew as of September 28 that this Honorable Court had striken out the testimony of Ivo Lazzari, considered the case submitted for decision on the evidence on record, and given plaintiff's counsel 7 days to present his memorandum. Plaintiff and his counsel exerted all efforts and worked overtime just so to be able to submit his memorandum within the short period allowed. Said memorandum was finished on time, and has been served on defendant's counsel and submitted to Court. In other words, defendant purposely waited until the submission of plaintiffs memorandum before presenting its motion for reconsideration based on alleged information received three (3) weeks previous. To grant defendant's instant motion for reconsideration would place plaintiff at a great disadvantage, because defendant is now fully aware of every facet of plaintiff's cause and can simply tailor its defenses and evidence in refutation thereof. 12. Defendant claims that plaintiff is taking undue advantage of a technicality and it should not be deprived of its day in court on this ground. Suffice it to state that it is never technical to invoke one's rights, and that while the Rules of Court should be liberally construed, their strict observance has been considered indispensable to the prevention of needless delays and the orderly and speedy discharge of judicial business. Thus:

"Although the Rules of Court should be liberally construed, however their strict observance which have been considered indispensable to the prevention of needless delays and to the orderly and speedy discharge of judicial business, is as imperative necessity. Thus, the rules prescribing the time within which certain act must be done, or certain proceedings taken, are considered absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of judicial business, is as imperative necessity. Thus, the rules prescribing the time within which certain act must be done, or certain proceedings taken, are considered absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of judicial business and therefore must be strictly complied with." (Alvero vs. De la Rosa, 76 Phil. 428, cited in Francisco on Civil Procedure, Vol. 1, P. 89) "Rules of Courts, promulgated by authority of law, have the force and effect of law; and rules of court prescribing the time within which certain acts must be done, or certain proceedings taken are considered absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of judicial business. "Conlu vs. Court of Appeals, et al.,G.R. No. L-14027, January 29, 1960, citing Shioji vs. Harvey, 43 Phil. 333; Alvero vs. De la Rosa, et al., 42 Off. Gaz., p. 316, (Supra.) WHEREFORE, it is respectfully prayed that defendant's motion for reconsideration, dated October 19, 1966, be denied. Manila, October 31, 1966. (Pages 74-88, Record on Appeal, id.) By way of reply to the above opposition, defendant's counsel alleged: Defendant could have from the beginning taken depositions in Rome, but so as to avoid any inconvenience to plaintiff and that the court may see and hear the witnesses testify to better determine the credibility of their testimony defendant had been bringing the witnesses here. As a matter of fact, defendant even without leave of court may take the depositions of its witness by merely giving the Court notice of its intention to do so. "After answer has been filed no leave at court is required as a prerequisite to taking depositions ... (Marzo vs. Moore McCormick Line, Inc. 8 Feb. Rules of Service, p. 560; cited in Moran Comments on Rules of Court Vol. II, p. 18) "After issue is joined, depositions may be taken without leave of court. (Lyons vs. Bronx Towing Line, Inc., 1 Fed. Service p. 341) "After answer is served, depositions may be taken as of course and application should not be made to the court for leave. (Schultz vs. State Mutual Life Assurance Company, 1 Fed. Rules of Service, p. 340, US Dist. Ct. Dist. of Oregon, Oct. 14, 1938)

"The statements made by Atty. Valmonte are false and malicious. An affidavit executed by Atty. Zaida Ruby Alberto is attached to and made part of this Reply as Annex "1". (Pages 92-93, Record on Appeal,id.) On October 24, 1966, the trial court resolved the incident in a brief order holding that "(f)or the reasons stated in the plaintiff's opposition to the motion for reconsideration, it is denied." In its appeal, defendant reiterates insistently its position that the denial of its motion for postponement as well as the order striking out the testimony of Ivo Lazzari were issued in grave abuse of discretion and should be set aside. Before going any further, however, it may be mentioned that since defendant has not assigned as error, although it discusses in its brief, the denial of its last motion for reconsideration, plaintiff contends that such failure constitutes a bar to any further consideration of the merits of the arguments of defendant relative to the main denial-of-postponement and striking-out orders. To be sure, there is technical plausibility in such pose of plaintiff, but considering the importance of the other matters involved in this case, it would serve the interests of justice more if We passed on the merits of the substantial issues in this controversy. After all, "this Court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that their consideration is necessary in arriving at a just decision of the case." (Saura Import & Export Co., Inc. vs. Philippine International Surety Co., Inc., L-15184, May 31, 1963, 8 SCRA 143.) And considering the inter-relation between the omitted assignment of error and those actually assigned and discussed by defendant's counsel, We can apply here the ruling in Hernandez vs. Andal, 78 Phil. 196, to the effect that "an unassigned error closely related to an error properly assigned or upon which the determination of the question raised by the error properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as an error." (at pp. 209210.) Now, with respect to defendant's first assignment of error, We feel that the rather extended recital We have made above of the incidents and proceedings related to the trial court's order denying defendant's motion for postponement of the hearing set for September 28, 1966 is self-revealing. It argues against the charge that His Honor's order of denial was improper and unjustified. The case had been pending for about three years and had actually suffered during that period even more than the usually permissible number of continuances, quite often to suit the convenience of defendant's counsel. Notice of the September 28, 1966 schedule had been served on counsel the month previous. It must be assumed that due preparations and arrangements were to be made since the receipt of that notice to insure the presence in Manila for the expected witnesses on the date set. Under the

circumstances, the excuse given by defendant that the witnesses could not leave their respective stations and places of work to attend the trial is plainly unacceptable. There was enough time and opportunity for defendant to have made the corresponding adjustments in the assignments of its personnel so as to enable its witnesses to be in court. The trouble is that defendant relied on the assumption that the court could be made to wait until the volume and other conditions of its business would permit it to comply with the schedule of the court. For an airline company engaged in international transportation and presumably having all the facilities to have any of its employees available practically anywhere in the world at a moment's notice, if it only took due care to do this, defendant's attitude cannot be countenanced. What is more, the motion of September 24, 1966 gave no reason at all why defendant's witnesses supposed to come from Rome would be unable to be at the trial. Even as late as the day of the hearing, September 28, 1966, the court could not be told the reason for such inability. All that counsel could say was that she "intend(ed) to inquire and file the explanation" later. This was not as it should have been, for the telex advising the Manila office that the witnesses would not be available was received on September 22nd yet, and certainly there was enough time to investigate and find out the reason for such unavailability. And as no justifiable reason could be advanced in support of the verbal motion for reconsideration. We cannot say that His Honor acted improperly when he denied the same. We reiterate, the case had been pending for more than three years, with so many postponements, and the least that defendant should have done to merit favorable action on the part of the trial judge was to be ready with an explanation of its inability to proceed with the trial, giving the detailed and good reasons therefor. As it is, there was actually no basis at all for the exercise of discretion on the part of the trial judge in a manner favorable to it. Trials may be postponed because of the absence of evidence only when such absence is justified. Mere absence is not a justification in itself. Section 4 of Rule 22 is sufficiently clear on this point. It provides that "A motion to postpone a trial on the ground of absence of evidence can be granted only upon affidavit showing the materiality of evidence expected to be obtained, and that due diligence has been used to procure it." This means that it must be shown to the court that due diligence had been exercised in either securing the presence of the evidence (witnesses) or preventing the absence thereof. There is, of course, defendant's motion for reconsideration of October 19, 1966 praying for the setting aside of the court's order of denial as well as the other order striking out the testimony of witness Lazzari. But, as already noted, the only excuse given in said motion is that:

... The witnesses in question could not come because of certain circumstances that rendered their coming over virtually impossible. Both witnesses, Ivo Lazzari and Saverino Casilli are employees of defendant company at the Rome office. The air traffic in Rome has been particularly heavy this season. Some of the personnel of the Lufthansa Rome office were on leave and these two employees had to assume some of the duties of those employees who were on leave aside from performing their own regular duties. If they were to leave their posts to come for the hearing on September 28, there would be grave disruption to the public service and for this reason they were not able to come. ... (Page 47, Rec. on Ap., p. 32, Record.) Indeed, even if such reason were given earlier on September 24, 1966 the court would have been as well justified in denying the requested postponement. We cannot see any reason why, despite its having knowledge of the date of the hearing about a month before, defendant did not see to it that its expected witnesses were not assigned to do duty on the day they were supposed to appear in court. We cannot believe Lufthansa could be so undermanned that such a simple adjustment of its personnel had to be "impossible." Moreover, the Rome based witnesses were not the only possible witnesses of defendant. To begin with, Mr. C.H. Dehio, the IATA Agency Manager, Far East and Australasia, Lufthansa German Air Lines, who, according to the record, had already attended previous hearings as a prospective witness could have been made to go to court. There is nothing in the record to show that he was also rendered incapable of doing so. Then there could still be local witnesses, it is no excuse that presenting other witnesses would have disrupted the presentation of defendant's case, for parties may be allowed to maintain their own way of presenting their evidence only where this can be done without injury to the expeditious disposition of the case and the best interests of the administration of justice. Coming now to the second assigned error regarding the striking out of the unfinished testimony of Lazarri, the Court is also of the opinion and so holds that the trial court's action cannot be categorized as arbitrary or oppressive or as amounting to a grave abuse of discretion. To be sure, this second order was but a logical consequence of the previous order denying defendant's motion for postponement. With such denial, the next thing in order was to declare the presentation of evidence of the defendant terminated. Accordingly, it was necessary to determine what evidence could be considered to be for the defendant. And so when counsel for plaintiff asked the court to strike out the testimony so far given by Lazarri, there was practically no alternative for the court but to grant the same. Indeed, defendant's counsel could not and did not offer any objection thereto.

Oral testimony may be taken into account only when it is complete, that is, if the witness has been wholly cross-examined by the adverse party or the right to crossexamine is lost wholly or in part thru the fault of such adverse party. But when crossexamination is not and cannot be done or completed due to causes attributable to the party offering the witness, the uncompleted testimony is thereby rendered incompetent. The right of a party to cross-examine the witnesses of his adversary is invaluable as it is inviolable in civil cases, no less than the right of the accused in criminal cases. The express recognition of such right of the accused in the Constitution does not render the right thereto of parties in civil cases less constitutionally based, for it is an indispensable part of the due process guaranteed by the fundamental law. Subject to appropriate supervision by the judge in order to avoid unnecessary delays on account of its being unduly protracted and to needed injunctions protective of the right of the witness against self-incrimination and oppressive and unwarranted harrassment and embarrassment, a party is absolutely entitled to a full cross-examination as prescribed in Section 8 of Rule 132 thus: "Upon the termination of the direct examination, the witness may be cross-examined by the adverse party as to any matters stated in the direct examination, or connected therewith, with sufficient fullness and freedom to test his accuracy and truthfulness and freedom from interest or bias, or the reverse, and to elicit all important facts bearing upon the issue." Until such cross-examination has been finished, the testimony of the witness cannot be considered as complete and may not, therefore, be allowed to form part of the evidence to be considered by the court in deciding the case. In the case at bar, however, We have opted not to rely exclusively on the foregoing considerations. In order to satisfy Ourselves as to whether or not defendant stands to be irreparably prejudiced by the impugned action of the trial court relative to the testimony of Lazzari, We have just the same gone over the transcript thereof. After considering the same, however, We are of the impression that even his direct testimony, without taking into account anymore his answers to the cross-examination questions of counsel for plaintiff, cannot be of much weight in establishing the defenses in defendant's answer. But it would seem more appropriate to elaborate on this point when We come to the discussion of the mutual accusation of the parties that the trial court erred in the portion of its discretion awarding damages to plaintiff. The last issue submitted for Our resolution relates to the award of damages made by the trial court in favor of Ortigas against Lufthansa in the amounts aforestated, as to which, as already noted at the outset, both parties have appealed taking opposite positions. In this respect, the appealed decision made the following findings and discussion of the material facts:

In October, 1963, the Sharp Travel Service, the travel department of C. F. Sharp, Inc., the majority interest-in-which is held by Rocha y Cia., Inc., General Agents of the defendant, Lufthansa German Airlines issued to the plaintiff First Class Pan American Ticket No. 026492147076 to 81 which would take him from Manila, the place of departure, to Hongkong, various cities in the United States, Europe, Asia, the Far East, and then back to Manila, the place of destination. Ortigas' ticket for all these different legs of his journey was first class. He left Manila October 12, 1963, as scheduled. In New York, he decided to leave out some cities, included in his original itinerary, to be in Hongkong on the 19th day of November, 1963, for several appointments he had there. He went to the Trans World Airlines and had his Pan American ticket changed with First Class TWA Ticket No. 115-460-451- 878 to 881. His TWA ticket was also first class for the entire trip from New York to several European cities, including Rome, and thence to the Far East, with Manila also as the place of destination. Ortigas arrived in due course in Rome. To be sure he could fly first class to Hongkong on November 18, 1963, for his appointments there the next day, Ortigas repaired to the office of the Alitalia on Saturday, November 16, 1963, to book passage. The man at the counter of the Alitalia office told him it had no flight on Monday but the Lufthansa had. The man thereupon called up the office of the Lufthansa and, after talking to an employee thereof, told Ortigas that the Lufthansa had no first class, but only economy, seats available on its Monday flight. Ortigas answered that he was not willing to take an economy seat and requested the employee to call up other airlines. Then the phone rang. The employee answered and afterwards informed Ortigas that the Lufthansa had a first class seat available for its Monday flight. Ortigas immediately asked him to get the seat and to see to it that his ticket be confirmed and validated for the flight and a first class seat. The man thereafter asked for Ortigas' passport and other travel papers and attached a validating sticker (Exhibit "D-1") on flight coupon No. 4 (Exhibit "B") which corresponded to the Rome-Hongkong leg of his TWA Ticket No. 115-460-461-878 The sticker recites: Flight Res. Carrier No. Date Time Status LH 646 18 Nov. 12:35 P.M. O.K. Wishing to be doubly sure, Ortigas again requested the Alitalia employee to call back the Lufthansa office to recheck whether his ticket was really confirmed and validated. The man did so, after which he told Ortigas that his ticket had been checked, validated, and confirmed as shown by the word "O.K." on the sticker. The same employee later

wrote on the cover of the plaintiff's ticket "10.15 Terminal-36, via Gioliti" (Exhibits "C" and "C-1") and told him to be in the air terminal on Monday, November 18, at 10:00 A.M. The following Monday, Ortigas checked out of his hotel and took a taxi to the terminal, arriving there about 9:30 A.M. He unloaded his baggage and proceeded to the counter in charge of the Lufthansa passengers. The lady at the counter told him the Lufthansa had no space for him that day. Ortigas requested her to check with her main office, which she did by calling it up. After calling, she apologized and said the plaintiff's ticket was in order and would be confirmed and validated. On her request, Ortigas had his luggage weighed and was given the free luggage allowance of a first class passenger. He was furthermore asked to pay 800 liras for bus fare and 700 liras as embarkation tax. Then Ortigas, along with other passengers, one of whom was Amado Castro of the Development Bank of the Philippines, boarded a bus for the airport. At the airport, the plaintiff handed over his ticket to the man behind the Lufthansa counter, who told him everything was all right. At that juncture, the plaintiff heard his name called. He inquired if he was being called from an employee of the Lufthansa and, on receiving an affirmative answer, said he was Ortigas. The employee asked for his passport and other papers and, after examining his passport, where his Filipino nationality appears, said he could not board the plane that day because his seat would be given to a Belgian. Ortigas asked the man why he was doing that to him when his ticket was confirmed and validated first class. The Lufthansa employee replied he was sorry but Ortigas could not leave. Fearing he would have a recurrence of his heart ailment, Ortigas took a nitroglycerin pill which his doctor advised him to take on occasions of stress. The plaintiff then told the Lufthansa man to bring the Belgian over so that his papers may be examined to determine whether he had a preferred right to Ortigas' seat but the Lufthansa employee turned down the request, raised his voice, and said if the plaintiff desired, he could take an economy seat and he would be allowed a refund. Ortigas retorted he was not interested in a refund and what he wanted was to travel first class in accordance with his ticket. This argument occurred in the presence of the other passengers, one of whom was Amado Castro, and the plaintiff felt embarrassed and humiliated because the Lufthansa employee was shouting at him and treating him the way he did. Ortigas made another request, namely, that the employee call other airlines to inquire if they had flights to Hongkong that day but he once more turned down the plea and insisted that Ortigas travel economy, with the promise that he will be transferred to first class in Cairo and onward to Hongkong.

After promising to, the man went inside a room and, after a while, came out and assured the plaintiff he would travel first class from Cairo to Hongkong because he sent a communication that it should be done. He then jotted down some letters on Ortigas' ticket. The plaintiff replied he was not satisfied with the arrangement but was constrained to agree to it because he had to be in Hongkong the next day, his luggage was in all probability already inside the plane, he was not certain he could still secure a hotel reservation, the manager of the hotel where he stayed having told him it would be hard for him to get another reservation once he checks out, and he was assured he would be given first class passage from Cairo onward. Upon arrival in Cairo, the plaintiff requested the Lufthansa agent to transfer him to first class but the agent said he could not and that he did not receive any communication from Rome to that effect. Ortigas also requested the man to find out if there were other airlines having planes leaving that day but his request was likewise denied. The man, however, promised that at Dharham, Ortigas will be transferred to first class. Ortigas had no alternative but to continue traveling as before but he did so again under protest. At Dharham, the plaintiff once more requested a transfer to first class but was also told by the Lufthansa agent that he had not received any communication about the change and the request could not be granted. The plaintiff had to travel perforce economy from Dharham. In Calcutta, Ortigas once again requested a transfer or that he be assisted in booking passage on other planes but was also refused. It was only in Bangkok when the chief steward asked him if he wanted to move over to first class but having been already embarrassed and humiliated and the trip to Hongkong being only three hours, he said he would not as a sign of protest. In Hongkong, Ortigas protested against the treatment given him but was told by the Lufthansa office he had to file his protest in Manila, it being the point of destination. He did so by means of a letter, dated November 25, 1963 (Exhibit "F"), followed by another letter, dated December 20, 1963 (Exhibit "C"), and not having received any definite answer, he brought this suit. Although Ortigas' ticket for the flight from Rome to Hongkong was validated and confirmed by the Alitalia, its act bound and obligated the Lufthansa. The Alitalia and Lufthansa are members of the International Air Transport Association (IATA). It is admitted that as such member, the Alitalia can issue tickets for other members of the association like the Lufthansa, Pan American World Airways, and others. Par. 10, Order of April 29, 1964, and Exhibit "H", certification of the manager of the Alitalia. Aside from being members of the IATA, the Alitalia and Lufthansa are pool partners and conduct a joint service with interchangeable flights for the European-Far East-and Australia sectors. Par. 11, Order of April 29, 1964. Under the pool agreement (Exhibit

"DD") they undertake to adhere to the appropriate IATA regulations and to take measures to provide district sales offices with every possibility for close cooperation in the promotion of the pool services covered by the agreement, including "reservation and booking". They furthermore, in effect confirm in the agreement that tickets of one, other than free and reduced tickets, may be validated by the other. Finally, Manuel Otayza, general manager of Filital, Inc., which is the general agent of the Alitalia in the Philippines, testified that space reservation through telephone calls between airlines is permitted by IATA's, "Manual of Traffic Conference Resolutions" and that telephone calls for reservation by one airline to another is in fact accepted procedure in accordance with the official airline guide of the Air Traffic Conference and International Air Transport Association (Exhibit "W"). The placing by the Alitalia of a sticker on the plaintiff's ticket obligated the Lufthansa to give him a first class seat on its flight from Rome to Hongkong on November 18, 1963. The same witness, Manuel Otayza, testified that the placing of a validating sticker on a ticket is standard airline procedure; that a sticker changes are status of a reservation; that consequently while Ortigas' ticket was "open", that is, it had no reservation for a particular flight between Rome and Hongkong, the moment a validating sticker was placed thereon, stating the flight number of the airline, the day and hour of departure, with the letters "O-K", his ticket was changed from an "open" to a "confirmed" or "validated" ticket; and that the sticker on Ortigas' ticket meant that first class space was confirmed for him on Lufthansa flight 646 to Hongkong on November 18, 1963, at 12:35 P.M. Aside from Otayza's testimony, it is admitted that in the stipulation of facts that "the letters "O.K." (Exhibit D-2) appearing on the "Res. Status" box of the sticker (Exhibit D-1) attached to Flight Coupon No. 4 of TWA Ticket No. 015-410:451-880 (Exhibit "D") means space confirmed, per IATA Resolution 275, page 4, Issue 2, a photostatic copy of which is attached hereto as Exhibit "O"; that validate means to stamp or write on the passenger ticket an indication that the passenger ticket has been officially issued by the carrier; that "the placing of a sticker on a flight coupon is a revalidation thereof for the flight mentioned in said sticker and is an alteration effected on said coupon, in accordance with the procedure laid down in IATA Resolution 275d, Page 1, Issue 1, a photostatic copy of which is attached thereto as Exhibit "S";. and that "prior endorsement was not necessary for Alitalia to revalidate TWA Ticket No. 115-410880 Exhibit "D" because Alitalia is the carrier originally designated in the "Via carrier" box of said ticket, in accordance with IATA Resolution No. 279, photostatic copy of which is attached hereto as Exhibit 'T'." There was, therefore, a valid and binding contract between Lufthansa and the plaintiff to transport him as a first class passenger from Rome to Hongkong on November 18,

1963, and this agreement the defendant violated by compelling the plaintiff to travel as an economy passenger. It cannot be said the breach was the result of an honest mistake or excusable negligence. There is evidence the defendant acted with `bad faith and in wilful disregard of the plaintiffs rights. Ortigas' ticket was confirmed on the early morning of November 16, 1963, more than 48 hours before his departure on the afternoon of November 18. There was, therefore, ample time to send a telex message from Rome to the defendant's main office in Frankfurt, which is only about 2-1/2 flying hours away, to reserve a first class seat for the plaintiff. At the terminal on Via Gioliti, he was again told that he had a first class seat, his luggage was checked in divesting him of control thereof, and transported to the airport some 37 kilometers distant. He was in this manner deprived of the opportunity of availing himself of the facilities of other airlines and compelled to take the Lufthansa flight even against his will. In the airport, although he, was found entitled to fly first class, he was told after his Filipino passport was seen, that his seat would be given to a Belgian, without any reason or explanation whatsoever. His simple request that the Belgian's ticket be produced and examined to see who had a better right to a first class seat was turned down. So was his equally simple request that other airlines be called to find out if any of them could accept him as a first class passenger to Hongkong that day. He was deceived into boarding the Lufthansa plane at Rome by falsely assuring him he will be transferred to first class at Cairo, the next stop in the flight. The same false and deceptive promise was given him at Dharham and Calcutta. Indubitable proof of the defendant's bad faith is found in the fact that while its employee was assuring the plaintiff he would be transferred to first class in Cairo, he was at the same time writing on his ticket the following notation: "TRVLDY/c ROME HEG ROME ST", which means "Travelled economy class Rome to Hongkong St", thereby barring Ortigas from asserting any right to demand first class accommodation. The defendant's employee, therefore, knew all along the plaintiff would not travel first class, and yet he deliberately made him believe he would be transferred to first class from Cairo to Hongkong. From the circumstances, it is clear that the defendant not only breached its duty to the plaintiff but also did not want to release him as a passenger and wished to hold on to him even if it would cause him inconvenience and embarrassment. (Pages 97-109, Record on Appeal.) . Disputing the foregoing conclusions, Lufthansa claims firstly that the Alitalia employee who validated and confirmed Ortigas' reservation must have made a

mistake because actually, he was informed by the Lufthansa Rome office that Ortigas could only be waitlisted. Assuming, however, there was such an error, it has been indisputably proven that under the so-called pool arrangement among different airline companies pursuant to the International Air Transport Association (IATA) agreement of which Alitalia and Lufthansa are signatories, both companies are constituted thereby as agents of each other in the issuing of tickets and other matters pertaining to their relations with those who would need their services, and since there can be no question that on its face, the annotations made by Alitalia on the ticket here in dispute cannot have any (other meaning than that the reservation of Ortigas for the Rome Hongkong flight was validated and confirmed, Lufthansa's disclaimer is unavailing. Besides, it appears that when Ortigas checked in at the airport, the Lufthansa lady employee thereat told him, after making the proper verification, that the reservation was correct. What is more, in the unconcluded testimony of Ivo Lazzari, the striking out of which is questioned by Lufthansa, he admitted that it was a fact that the said reservation of plaintiff for first class was confirmed, albeit he qualified that this was done already in the morning of November 18th, the day of the flight, almost at the last hour. What seems to have happened was that somehow the first class accommodations for that flight were overboard and Lufthansa tried to solve the problem by downgrading Ortigas to the economy class in favor of a Belgian, as Ortigas was told by the Lufthansa employee who paged him over the public address system for the purpose just as he was about to go to the departure area, with his luggage already checked and his overweight fees duly paid, so much so that they were already loaded in the plane. Verily, such treatment given to plaintiff was completely wrong and absolutely unjustifiable. 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 difficulty 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 passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passenger to the award of moral damages in accordance with Article 2220 of the Civil Code. But in the instant case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over plaintiff was done willfully and in wanton disregard of plaintiff's rights and his dignity as a human being and as a Filipino, who may not be discriminated against with impunity. Lufthansa contends, however, that there could not have been any possible discrimination by reason of race against Ortigas because from his appearance, said plaintiff can easily be taken for a European or white more than his own witness Amado Castro and besides, there were other orientals in the same flight on that occasion. It is argued that any such policy would be self-defeating, since it would certainly be damaging to its own business. Again, this ratiocination cannot carry the

day for Lufthansa, for what appears from the evidence in this case is not really a case of a general policy of discriminating against orientals or non-whites, but a specific act of Lufthansa employee at the airport of giving preference to a Belgian after examining Ortigas passport wherein his Filipino nationality is noted. Indeed, the fact that despite plaintiffs protestations and demand that he be shown how it could happen that somebody else, particularly that Belgian, should be given his place when his reservation was validated and confirmed and actually, he had already checked in and his baggage was already in the plane, nothing was done to satisfy him, merely infused bad faith into the breach of contract already committed of depriving plaintiff of his reserved accommodation. In other words, from the legal standpoint, such preference given to a European surely aggravated the damage or injury suffered by plaintiff, but the very act alone of deliberately downgrading him despite his confirmed reservation for first class accommodation is sufficient ground for relief. And considering that there are already recorded cases in this Court wherein Filipinos have been similarly discriminated against by foreign airline company employees in the treatment of passengers this new instance can easily be believed and correspondingly dealt with in fixing and assessing the liability of herein defendant. As found by the court below what worsened the situation of Ortigas was that Lufthansa succeeded in keeping him as its passenger by assuring him that he would be given first class accommodation at Cairo, the next station, the proper arrangements therefor having been made already, when in truth such was not the case. Thus, instead of complying with the request of Ortigas that other airlines be contacted to find out it they had first class space for him, the Lufthansa employee who had indifferently told him about his downgrading paid very little attention if ever to said request. And to keep him from giving the business to another company, he was made to believe that he would be given first class accommodation at Cairo. Although molested and embarrassed to the point that he had to take nitroglycerine pills to ward off a possible heart attack, Ortigas hardly had any choice, since his luggage was already in the plane. To his disappointment, when the plane reached Cairo, he was told by the Lufthansa office there that no word at all had been received from Rome and they had no space for him in first class. Worse, similar false representations were made to him at Dharham and Calcutta. It was only at Bangkok where for the first time, Ortigas was at last informed that he could have a first class seat in that leg of the flight, from Bangkok to Hongkong. This Ortigas rejected, if only to make patent his displeasure and indignation at being so inconsiderately treated in the earlier part of his journey. Lufthansa insists in its brief that it could have proven that there was no such "entrapment of a captive passenger" had it been allowed the postponement it sought of the September 28, 1966 hearing. It is argued that there could have been no way by which its Rome office could have assured Ortigas about what he would be given in Cairo, the flight being fully booked as it was without any assurance of any first class

seat being vacated by then. We are not impressed. In view of the insistence of plaintiff that he be given the first class accommodation he had contracted and paid for, the least that the, Rome office should have done was to communicate with Cairo and strongly urge that all possible effort be made to comply with his well grounded request. As it happened, however, the Cairo office informed Ortigas when he arrived there that they had not received any word at all from Rome. On the contrary, as pointed out by the trial court, contrary to the verbal assurance given Ortigas, the Lufthansa employee made annotations on his ticket that he was travelling economy class from Rome to Hongkong. If, as contended by Lufthansa, Ortigas was duly advised to make arrangements for transfer to first class as soon as he arrived at each station on the way, why was such notation made that he was travelling up to Hongkong in economy class? All these only go to show that any evidence of defendant tending to disprove the testimony of Ortigas would in any event have been inconclusive or unreliable. Likewise, Lufthansa maintains that it could have proven that Ortigas did not take offense at being downgraded, as in fact, according to Lufthansa, he was in jovial mood throughout the trip enjoying his conversation and exchange of amenities with his seatmate, who by strange coincidence happened to be the Manager of Lufthansa German Airlines for the district of Australia and New Zealand holding said position since 1962. 1 Moreover, it is argued, the economy class accommodations are not much different from first class and Ortigas was not delayed in his trip. We cannot see the point. A passenger contracts for first class accommodations for many reasons peculiar to himself and pays a higher price therefor, and it is certainly not for the airplane to say later, after it deprives him of his space in order to favor another passenger, that economy class is anyway just as good as first class. That Ortigas was rightfully indignant is not difficult to imagine. No person in his normal senses and possessed of human dignity would have been unperturbed and unruffled by the treatment he had received. More, he was under express admonition of his doctor taking care of his ailing coronary condition to travel only in first class. Indeed, that he complained and made himself emphatically clear while still in Rome is sufficiently substantiated in the record, as it was more or less admitted by defendant's witness Lazzari when he testified that he heard about plaintiff's complaint that same day, November 18, 1963. In the light of all the foregoing, there can be no doubt as to the right of Ortigas to damages, both moral and exemplary. Precedents We have consistently adhered to so dictate. Beginning with Cuenca, 2 wherein the Court rejected the theory that an air carrier is liable only in the event of death or injury suffered by a passenger, because, according to the Court, to so hold would be tantamount to declaring the carrier "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", We have uniformly upheld the right of a passenger to damages in all cases wherein, after having contracted and

paid for first class accommodations duly confirmed and validated, he is transferred over his objection to economy, class, which he has to take in order to be able to arrive at his destination on his scheduled time. In the case of Nicolas L. Cuenca, then Commissioner of Public Highways of the Philippines, he boarded a Northwest plane in Manila with a first class ticket to Tokyo, but upon arrival at Okinawa, an agent of the company rudely compelled him, over his protest, to move over to the tourist class, which he had to do, so he could reach the international conference he was attending on time. Under these facts, the Court held that the P20,000 awarded by the lower court to Cuenca "may well be considered as nominal and also as exemplary, the Court of Appeals having modified the trial court's designation thereof as moral, saying it should have been nominal. In Lopez 3, Honorable Fernando Lopez, then an incumbent senator and former Vice President of the Philippines, together with his wife and his daughter and son-in-law, made first class reservations with the Pan American World Airways in its Tokyo-San Francisco flight. The reservation having been confirmed, first class tickets were subsequently issued in their favor. Mistakenly, however, defendant's agent cancelled said reservation, but expecting some cancellations before the flight scheduled about a month later, the reservations supervisor decided to withhold the information from them, with the result that upon arrival in Tokyo, the Lopezes discovered they had no first class accommodations and were thus compelled to take the tourist class, just so the senator could be on time for his pressing engagements in the United States. In the light of these facts, the Court held there was a breach of the contract of carriage and viewed as the element of bad faith entitling the plaintiffs to moral damages for such contractual breach, the failure of the agents of the defendant to inform the plaintiffs on time that their reservation for first class had long before been cancelled by mistake. According to the Court, such omission placed plaintiffs in a predicament that enabled the company to keep the plaintiffs as their passengers in the tourist class, thereby retaining the business and promoting the company's self-interest at the expense of, embarrassment, discomfort and humiliation on the part of the plaintiffs. In Air France vs. Carrascoso 4 plaintiff Mr. Rafael Carrascoso, a civil engineer who was going to Lourdes, France, as a member of a religious group of pilgrims was issued by the Philippine Air Lines, as agent of the defendant Air France, a ticket for first class round trip from Manila to Rome. From Manila, Carrascoso travelled first class, as per said ticket, but at Bangkok, the Manager of the defendant airline forced him to vacate the first class seat because there was a white man who allegedly had a better right thereto, without, however, showing him the basis for such preference. Upon these factual premises, the Court held:

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 ill will or for ulterior purpose." (Words & Phrases, Perm. Ed., Vol. 5, p. 13, citing Warfield Natural Gas Co. vs. Allen, 59 S.W. (2d) 534, 538.) 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: "The evidence shows that 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." (R.A., p. 74; emphasis supplied.) (at pp. 166-167.) These precedents, as may be seen, apply four-square to herein plaintiffs case. Defendant's liability for willful and wanton breach of its contract of carriage with plaintiff is, therefore, indubitable. Coming now to the amount that should be awarded by way of damages to the plaintiff, it is also the teaching of the cases aforecited that defendant is liable not only for moral but also for exemplary damages. As earlier stated, the court below fixed the compensation for moral damages at P100,000 and the exemplary at P30,000. The Court believes that these amounts are not enough. According to the lower court: Although the plaintiff has not held any elective public office, he has however, a distinguished record as a private citizen, a lawyer, businessman, a civic and religious leader, a member of numerous government boards and organizations as well as of local and international bodies, and is the recipient of awards and citations for outstanding services and achievements.

He was, and still is, moreover suffering from a heart ailment and has been advised by his physician to travel first class because it is more relaxing and comfortable. His position as chairman of the boards of directors of the corporation he represented also required that he travel in that manner. He was, furthermore, carrying a special passport issued by the Philippine Government to represent it and business corporations abroad. His sickness and the need for him to travel in the most comfortable manner possible were made known to the defendant's employee, but he paid no heed to them. Instead, he engaged Ortigas in a heated discussion, summarily brushed off his protests and pleas, humiliated him, and tricked him into boarding his employer's plane, endangering thereby his health and obliging him to take medicine to forestall an attack. There is, finally, evidence that he was discriminated against because of his nationality for he was told to yield his first class seat to a Belgian only after his passport was examined and his Filipino citizenship must have been noted. . Under the circumstances and measured by the criterion, jurisprudence has followed, the compensation the plaintiff should be entitled to receive must be fixed at P100,000.00 as moral damages, P30,000.00 as exemplary damages or corrective damages, and P20,000.00 as attorney's fees. (Pp. 111-113, Record on Appeal.) We have reviewed the evidence and We are convinced there is more than ample basis for these findings. But under the circumstances revealed in the record, it is Our considered opinion that the award of moral damages should be increased to P150,000. We cannot go along with defendant's pose that in Cuenca the amount awarded was only P20,000, for the very obvious reason that in that case what was involved was only one leg of the flight contracted for, namely, that from Okinawa to Tokyo, whereas in the case not at bar, the offense was repeated four times, at Rome, Cairo, Dharham and Calcutta, with apparent cold indifference of defendant's agents to plaintiff's plight. Besides, it appears that Cuenca did not appeal from the trial court's decision fixing said amount, hence there was no occasion for the Supreme Court to award more. This was also what happened in the Carrascoso case, where the plaintiff did not complain against the award of only P25,000-moral-and P10,000-exemplary damages made by the trial court. It was Air France who claimed that these were even excessive. Verily, however, such, discriminatory acts of the defendants in those cases which were not only violative of their contractual obligations but also offensive to human dignity and national or racial pride constitute about the most justifiable ground for the award of moral damages, for the resulting injury therefrom cannot but cause immense mental anguish, besmirched reputation, wounded feelings, moral shock and social humiliation. (See Article 2217 of the Civil Code.) We reiterate, they are to be

considered as infecting with bad faith the breach of contract committed, under Article 2220 of the same Code. (Lopez vs. Pan Am., supra.) Lufthansa suggests that compared to the P100,000 awarded to Vice President Lopez in the case aforementioned, the P100,000 given by the trial court to Ortigas are "grossly excessive". It does not appear to Us to be so. As pointed out by His Honor, "although plaintiff has not held any elective public office, he has, however, a distinguished record as a private citizen, a lawyer, businessman, a civic and religious leader, a member of numerous boards and organizations as well as local and international bodies, and is the recipient of awards and citations for outstanding services and achievements." Indeed, under the proven facts in the record, We cannot regard plaintiff in any inferior position vis-a-vis Vice President Lopez in the highest circles of Philippine society and in the business and religious world, not to speak of his standing in government officialdom. Beside there is again the disparity between then Lopez case and this one that here the offense, which, as in Cuenca, is aggravated by the Lufthansa employee at Rome having falsely noted on the ticket that Ortigas was travelling in economy from Rome to Hongkong, 5 was repeated four times in the same trip, namely in Rome, Cairo, Dharham and Calcutta. More importantly, unlike in the case of Lopez, Ortigas was suffering from a weak heart and under doctor's advice to travel only in first class, hence, his being compelled to stay in economy or tourist class during the major part of his trip, must have given him added apprehensive feelings about his safety. And, moreover, it is to benoted that in the Lopez case, which was decided in 1966, aside from taking into account the personal circumstances of the plaintiff, the Court considered "the present rate of exchange and the terms at which amount of damages awarded would approximately be in U.S. dollars", hence, We may not justifiably do differently here.. Furthermore, it may not be amiss to mention here that in Zulueta vs. Pan American Airways Inc., 43 SCRA 397, the Court awarded the plaintiffs: Zulueta, the husband, his wife and a minor daughter, a total of P775,000 as damages consisting of P500,000 as moral, P200,000 as exemplary and P75,000 as attorney's fees, apart from actual damages. In that case, the Zulueta's were coming home to Manila from Honolulu in a Pan-American plane. At Wake, however, where the plane arrived at 4:00 o'clock in the morning, Zulueta could not be found at flight time because, without letting anyone know, not even his wife or daughter, he had relieved himself, according to him, at the beach behind the terminal. When at last, he was found, the Pan-Am employee who first met him while walking back from the beach remonstrated him thus: "What in the hell do you think you are! Get on that plane." This angered Zulueta who engaged the said employee in an exchange of angry words. In the meanwhile, the pilot who had been tipped by a "man from the State Department", also a passenger in that flight, that

there might be a bomb in the plane and expressed apprehension for the safety of the flight unless Zulueta could be found, ordered the unloading of the bags of the Zuluetas, and when three of the four of them had already been unloaded, he ordered Zulueta to open them, but the latter refused. Another exchange of angry words followed, in the course of which, according to Zulueta's evidence, the pilot went to the extent of referring to him and his family as "those monkeys". Ultimately, the plane left without Zulueta, albeit his wife and daughter were on board, because the captain refused to allow Zulueta to board until after his bags were opened and inspected, which Zulueta refused entirely to do. Although, said decision is not yet final, because of the pendency of a second motion for reconsideration the Court has not yet resolved, the Court has already allowed the partial execution of the judgment, thus enabling Zuluetas to collect already one-half of the amount or over P335,000, which amount, according to the concurring and dissenting opinion there of the writer of the instant decision could be the least that should anyway be allowed. Of course, the Court did not itemize the award but granted the same to the family as a whole, but it is evident that in the final distribution, Zulueta would get for himself from at least P150,000 to not more than P200,00. 6 We hold that the foregoing considerations justify the increase of the award of moral damages from P100,000 to P150,000. Finally, We have the dispute regarding the amount of exemplary damages awarded. In this respect, it is Our considered opinion that defendant should Pay P100,000 instead of the P30,000 awarded by the trial court. The record of this case taken together with what are revealed in the other similar cases decided by this Court, those aforediscussed, convinces Us that defendant, as an 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. This is not the first case, and unless the proper sanctions are applied, it does not appear it is going to be the last yet, of instances wherein Filipino passengers having validated and confirmed tickets for first class would be shoved to the economy class, over their valid objections and without any regard at all to their feelings and convenience, only to favor other passengers presumed by the airlines to be of superior race, hence, deserving preference. It is high time everyone concerned were made to realize that the laws of the Philippines do not permit any act of discrimination against its citizens, specially when this accompanies a clear breach of contractual obligations of common carriers whose business is affected with public interest and must be directed to serve the convenience and comfort of the passengers. When any disregard of such laws is committed, the Supreme Court, as the interpreter of such laws, must exact the commensurate liability which they contemplate.

"Exemplary damages are required by public policy, for wanton acts must be repressed. They are an antidote so that the poison of wickedness may not run through the body politic." (Report of Code Commission, pp. 75-76) by authority of the decided cases aforediscussed, 7 acts of similar nature as those herein involved fall within the category of those justifying the imposition of exemplary damages pursuant to the codal concept just stated. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. ... In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts by defendant or other airlines." (Lopez v. Pan-American World Airways, supra; see also Rotea vs. Halili, 109 Phil. 495; People vs. Medroso, Jr., G.R. No. L-37633, Jan. 31, 1975, 62 SCRA 245; Cotabato Timberland Co. Inc. vs. Plaridel Lumber Co., Inc., 13 SCRA 235) Thus, all relevant matters considered, P100,000 of exemplary damages, which practically amounts only to not more than $15,000 U.S. under the present rate of exchange, would serve the ends for which the liability has been conceived. WHEREFORE, the judgment appealed from is modified by raising the award of moral and exemplary damages to plaintiff Ortigas to P150,000.00 and P100,000.00, respectively. In all other respects, including as to the payment of interests on the said amounts, the same is affirmed. Fernando (Chairman), Antonio, Aquino and Concepcion, Jr., JJ., concur.

FIRST DIVISION [G.R. No. 150843. March 14, 2003] CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL VAZQUEZ, respondents. DECISION DAVIDE, JR., C.J.: Is an involuntary upgrading of an airline passengers accommodation from one class to a more superior class at no extra cost a breach of contract of carriage that would entitle the passenger to an award of damages? This is a novel question that has to be resolved in this case. The facts in this case, as found by the Court of Appeals and adopted by petitioner Cathay Pacific Airways, Ltd., (hereinafter Cathay) are as follows: Cathay is a common carrier engaged in the business of transporting passengers and goods by air. Among the many routes it services is the Manila-Hongkong-Manila course. As part of its marketing strategy, Cathay accords its frequent flyers membership in its Marco Polo Club. The members enjoy several privileges, such as priority for upgrading of booking without any extra charge whenever an opportunity arises. Thus, a frequent flyer booked in the Business Class has priority for upgrading to First Class if the Business Class Section is fully booked. Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are frequent flyers of Cathay and are Gold Card members of its Marco Polo Club. On 24 September 1996, the Vazquezes, together with their maid and two friends Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for pleasure and business. For their return flight to Manila on 28 September 1996, they were booked on Cathays Flight CX-905, with departure time at 9:20 p.m. Two hours before their time of departure, the Vazquezes and their companions checked in their luggage at Cathays check-in counter at Kai Tak Airport and were given their respective boarding passes, to wit, Business Class boarding passes for the Vazquezes and their two friends, and Economy Class for their maid. They then proceeded to the Business Class passenger lounge. When boarding time was announced, the Vazquezes and their two friends went to Departure Gate No. 28, which was designated for Business Class passengers. Dr. Vazquez presented his boarding pass to the ground stewardess, who in turn inserted it

into an electronic machine reader or computer at the gate. The ground stewardess was assisted by a ground attendant by the name of Clara Lai Han Chiu. When Ms. Chiu glanced at the computer monitor, she saw a message that there was a seat change from Business Class to First Class for the Vazquezes. Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes accommodations were upgraded to First Class. Dr. Vazquez refused the upgrade, reasoning that it would not look nice for them as hosts to travel in First Class and their guests, in the Business Class; and moreover, they were going to discuss business matters during the flight. He also told Ms. Chiu that she could have other passengers instead transferred to the First Class Section. Taken aback by the refusal for upgrading, Ms. Chiu consulted her supervisor, who told her to handle the situation and convince the Vazquezes to accept the upgrading. Ms. Chiu informed the latter that the Business Class was fully booked, and that since they were Marco Polo Club members they had the priority to be upgraded to the First Class. Dr. Vazquez continued to refuse, so Ms. Chiu told them that if they would not avail themselves of the privilege, they would not be allowed to take the flight. Eventually, after talking to his two friends, Dr. Vazquez gave in. He and Mrs. Vazquez then proceeded to the First Class Cabin. Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to Cathays Country Manager, demanded that they be indemnified in the amount of P1million for the humiliation and embarrassment caused by its employees. They also demanded a written apology from the management of Cathay, preferably a responsible person with a rank of no less than the Country Manager, as well as the apology from Ms. Chiu within fifteen days from receipt of the letter. In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathays Country Manager Argus Guy Robson, informed the Vazquezes that Cathay would investigate the incident and get back to them within a weeks time. On 8 November 1996, after Cathays failure to give them any feedback within its self imposed deadline, the Vazquezes instituted before the Regional Trial Court of Makati City an action for damages against Cathay, praying for the payment to each of them the amounts of P250,000 as temperate damages; P500,000 as moral damages; P500,000 as exemplary or corrective damages; and P250,000 as attorneys fees. In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that they preferred to stay in Business Class, Ms. Chiu obstinately, uncompromisingly and in a loud, discourteous and harsh voice threatened that they could not board and leave with the flight unless they go to First Class, since the Business Class was overbooked. Ms. Chius loud and stringent shouting annoyed, embarrassed, and humiliated them because the incident was witnessed by all the other passengers

waiting for boarding. They also claimed that they were unjustifiably delayed to board the plane, and when they were finally permitted to get into the aircraft, the forward storage compartment was already full. A flight stewardess instructed Dr. Vazquez to put his roll-on luggage in the overhead storage compartment. Because he was not assisted by any of the crew in putting up his luggage, his bilateral carpal tunnel syndrome was aggravated, causing him extreme pain on his arm and wrist. The Vazquezes also averred that they belong to the uppermost and absolutely top elite of both Philippine Society and the Philippine financial community, [and that] they were among the wealthiest persons in the Philippine[s]. In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade passengers to the next better class of accommodation, whenever an opportunity arises, such as when a certain section is fully booked. Priority in upgrading is given to its frequent flyers, who are considered favored passengers like the Vazquezes. Thus, when the Business Class Section of Flight CX-905 was fully booked, Cathays computer sorted out the names of favored passengers for involuntary upgrading to First Class. When Ms. Chiu informed the Vazquezes that they were upgraded to First Class, Dr. Vazquez refused. He then stood at the entrance of the boarding apron, blocking the queue of passengers from boarding the plane, which inconvenienced other passengers. He shouted that it was impossible for him and his wife to be upgraded without his two friends who were traveling with them. Because of Dr. Vazquezs outburst, Ms. Chiu thought of upgrading the traveling companions of the Vazquezes. But when she checked the computer, she learned that the Vazquezes companions did not have priority for upgrading. She then tried to book the Vazquezes again to their original seats. However, since the Business Class Section was already fully booked, she politely informed Dr. Vazquez of such fact and explained that the upgrading was in recognition of their status as Cathays valued passengers. Finally, after talking to their guests, the Vazquezes eventually decided to take the First Class accommodation. Cathay also asserted that its employees at the Hong Kong airport acted in good faith in dealing with the Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of disrespect against them (the Vazquezes). Assuming that there was indeed a breach of contractual obligation, Cathay acted in good faith, which negates any basis for their claim for temperate, moral, and exemplary damages and attorneys fees. Hence, it prayed for the dismissal of the complaint and for payment of P100,000 for exemplary damages and P300,000 as attorneys fees and litigation expenses. During the trial, Dr. Vazquez testified to support the allegations in the complaint. His testimony was corroborated by his two friends who were with him at the time of the incident, namely, Pacita G. Cruz and Josefina Vergel de Dios.

For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen; Ms. Chiu; Norma Barrientos, Comptroller of its retained counsel; and Mr. Robson. Yuen and Robson testified on Cathays policy of upgrading the seat accommodation of its Marco Polo Club members when an opportunity arises. The upgrading of the Vazquezes to First Class was done in good faith; in fact, the First Class Section is definitely much better than the Business Class in terms of comfort, quality of food, and service from the cabin crew. They also testified that overbooking is a widely accepted practice in the airline industry and is in accordance with the International Air Transport Association (IATA) regulations. Airlines overbook because a lot of passengers do not show up for their flight. With respect to Flight CX905, there was no overall overbooking to a degree that a passenger was bumped off or downgraded. Yuen and Robson also stated that the demand letter of the Vazquezes was immediately acted upon. Reports were gathered from their office in Hong Kong and immediately forwarded to their counsel Atty. Remollo for legal advice. However, Atty. Remollo begged off because his services were likewise retained by the Vazquezes; nonetheless, he undertook to solve the problem in behalf of Cathay. But nothing happened until Cathay received a copy of the complaint in this case. For her part, Ms. Chiu denied that she shouted or used foul or impolite language against the Vazquezes. Ms. Barrientos testified on the amount of attorneys fees and other litigation expenses, such as those for the taking of the depositions of Yuen and Chiu. In its decision[1] of 19 October 1998, the trial court found for the Vazquezes and decreed as follows: WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby rendered in favor of plaintiffs Vazquez spouses and against defendant Cathay Pacific Airways, Ltd., ordering the latter to pay each plaintiff the following: a) b) c) Nominal damages in the amount of P100,000.00 for each plaintiff; Moral damages in the amount of P2,000,000.00 for each plaintiff; Exemplary damages in the amount of P5,000,000.00 for each plaintiff;

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

SO ORDERED. According to the trial court, Cathay offers various classes of seats from which passengers are allowed to choose regardless of their reasons or motives, whether it be

due to budgetary constraints or whim. The choice imposes a clear obligation on Cathay to transport the passengers in the class chosen by them. The carrier cannot, without exposing itself to liability, force a passenger to involuntarily change his choice. The upgrading of the Vazquezes accommodation over and above their vehement objections was due to the overbooking of the Business Class. It was a pretext to pack as many passengers as possible into the plane to maximize Cathays revenues. Cathays actuations in this case displayed deceit, gross negligence, and bad faith, which entitled the Vazquezes to awards for damages. On appeal by the petitioners, the Court of Appeals, in its decision of 24 July 2001,[2] deleted the award for exemplary damages; and it reduced the awards for moral and nominal damages for each of the Vazquezes to P250,000 and P50,000, respectively, and the attorneys fees and litigation expenses to P50,000 for both of them. The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class, Cathay novated the contract of carriage without the formers consent. There was a breach of contract not because Cathay overbooked the Business Class Section of Flight CX-905 but because the latter pushed through with the upgrading despite the objections of the Vazquezes. However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or meant to be discourteous to, Dr. Vazquez, although it might seemed that way to the latter, who was a member of the elite in Philippine society and was not therefore used to being harangued by anybody. Ms. Chiu was a Hong Kong Chinese whose fractured Chinese was difficult to understand and whose manner of speaking might sound harsh or shrill to Filipinos because of cultural differences. But the Court of Appeals did not find her to have acted with deliberate malice, deceit, gross negligence, or bad faith. If at all, she was negligent in not offering the First Class accommodations to other passengers. Neither can the flight stewardess in the First Class Cabin be said to have been in bad faith when she failed to assist Dr. Vazquez in lifting his baggage into the overhead storage bin. There is no proof that he asked for help and was refused even after saying that he was suffering from bilateral carpal tunnel syndrome. Anent the delay of Yuen in responding to the demand letter of the Vazquezes, the Court of Appeals found it to have been sufficiently explained. The Vazquezes and Cathay separately filed motions for a reconsideration of the decision, both of which were denied by the Court of Appeals. Cathay seasonably filed with us this petition in this case. Cathay maintains that the award for moral damages has no basis, since the Court of Appeals found that there was no wanton, fraudulent, reckless and oppressive display of manners on the part of its personnel; and that the breach of contract was not attended by fraud, malice, or

bad faith. If any damage had been suffered by the Vazquezes, it was damnum absque injuria, which is damage without injury, damage or injury inflicted without injustice, loss or damage without violation of a legal right, or a wrong done to a man for which the law provides no remedy. Cathay also invokes our decision in United Airlines, Inc. v. Court of Appeals[3] where we recognized that, in accordance with the Civil Aeronautics Boards Economic Regulation No. 7, as amended, an overbooking that does not exceed ten percent cannot be considered deliberate and done in bad faith. We thus deleted in that case the awards for moral and exemplary damages, as well as attorneys fees, for lack of proof of overbooking exceeding ten percent or of bad faith on the part of the airline carrier. On the other hand, the Vazquezes assert that the Court of Appeals was correct in granting awards for moral and nominal damages and attorneys fees in view of the breach of contract committed by Cathay for transferring them from the Business Class to First Class Section without prior notice or consent and over their vigorous objection. They likewise argue that the issuance of passenger tickets more than the seating capacity of each section of the plane is in itself fraudulent, malicious and tainted with bad faith. The key issues for our consideration are whether (1) by upgrading the seat accommodation of the Vazquezes from Business Class to First Class Cathay breached its contract of carriage with the Vazquezes; (2) the upgrading was tainted with fraud or bad faith; and (3) the Vazquezes are entitled to damages. We resolve the first issue in the affirmative. A contract is a meeting of minds between two persons whereby one agrees to give something or render some service to another for a consideration. There is no contract unless the following requisites concur: (1) consent of the contracting parties; (2) an object certain which is the subject of the contract; and (3) the cause of the obligation which is established.[4] Undoubtedly, a contract of carriage existed between Cathay and the Vazquezes. They voluntarily and freely gave their consent to an agreement whose object was the transportation of the Vazquezes from Manila to Hong Kong and back to Manila, with seats in the Business Class Section of the aircraft, and whose cause or consideration was the fare paid by the Vazquezes to Cathay. The only problem is the legal effect of the upgrading of the seat accommodation of the Vazquezes. Did it constitute a breach of contract? Breach of contract is defined as the failure without legal reason to comply with the terms of a contract.[5] It is also defined as the [f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract. [6]

In previous cases, the breach of contract of carriage consisted in either the bumping off of a passenger with confirmed reservation or the downgrading of a passengers seat accommodation from one class to a lower class. In this case, what happened was the reverse. The contract between the parties was for Cathay to transport the Vazquezes to Manila on a Business Class accommodation in Flight CX-905. After checking-in their luggage at the Kai Tak Airport in Hong Kong, the Vazquezes were given boarding cards indicating their seat assignments in the Business Class Section. However, during the boarding time, when the Vazquezes presented their boarding passes, they were informed that they had a seat change from Business Class to First Class. It turned out that the Business Class was overbooked in that there were more passengers than the number of seats. Thus, the seat assignments of the Vazquezes were given to waitlisted passengers, and the Vazquezes, being members of the Marco Polo Club, were upgraded from Business Class to First Class. We note that in all their pleadings, the Vazquezes never denied that they were members of Cathays Marco Polo Club. They knew that as members of the Club, they had priority for upgrading of their seat accommodation at no extra cost when an opportunity arises. But, just like other privileges, such priority could be waived. The Vazquezes should have been consulted first whether they wanted to avail themselves of the privilege or would consent to a change of seat accommodation before their seat assignments were given to other passengers. Normally, one would appreciate and accept an upgrading, for it would mean a better accommodation. But, whatever their reason was and however odd it might be, the Vazquezes had every right to decline the upgrade and insist on the Business Class accommodation they had booked for and which was designated in their boarding passes. They clearly waived their priority or preference when they asked that other passengers be given the upgrade. It should not have been imposed on them over their vehement objection. By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes. We are not, however, convinced that the upgrading or the breach of contract was attended by fraud or bad faith. Thus, we resolve the second issue in the negative. Bad faith and fraud are allegations of fact that demand clear and convincing proof. They are serious accusations that can be so conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans or mudslinging unless convincingly substantiated by whoever is alleging them. Fraud has been defined to include an inducement through insidious machination. Insidious machination refers to a deceitful scheme or plot with an evil or devious purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state material facts and, by reason of such omission or concealment, the other party was induced to give consent that would not otherwise have been given. [7]

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.[8] We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were not induced to agree to the upgrading through insidious words or deceitful machination or through willful concealment of material facts. Upon boarding, Ms. Chiu told the Vazquezes that their accommodations were upgraded to First Class in view of their being Gold Card members of Cathays Marco Polo Club. She was honest in telling them that their seats were already given to other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to consider the remedy of offering the First Class seats to other passengers. But, we find no bad faith in her failure to do so, even if that amounted to an exercise of poor judgment. Neither was the transfer of the Vazquezes effected for some evil or devious purpose. As testified to by Mr. Robson, the First Class Section is better than the Business Class Section in terms of comfort, quality of food, and service from the cabin crew; thus, the difference in fare between the First Class and Business Class at that time was $250.[9]Needless to state, an upgrading is for the better condition and, definitely, for the benefit of the passenger. We are not persuaded by the Vazquezes argument that the overbooking of the Business Class Section constituted bad faith on the part of Cathay. Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board, as amended, provides: Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of flights or portions of flights originating from or terminating at, or serving a point within the territory of the Republic of the Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines, for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only honest mistakes on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful act of non-accommodation. It is clear from this section that an overbooking that does not exceed ten percent is not considered deliberate and therefore does not amount to bad faith. [10] Here, while there was admittedly an overbooking of the Business Class, there was no evidence of overbooking of the plane beyond ten percent, and no passenger was ever bumped off or was refused to board the aircraft. Now we come to the third issue on damages.

The Court of Appeals awarded each of the Vazquezes moral damages in the amount of P250,000. Article 2220 of the Civil Code provides: Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Although incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendants wrongful act or omission.[11] Thus, case law establishes the following requisites for the award of moral damages: (1) there must be an injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219 of the Civil Code. [12] Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the carrier is guilty of fraud or bad faith or where the mishap resulted in the death of a passenger.[13] Where in breaching the contract of carriage the airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of the obligation which the parties had foreseen or could have reasonably foreseen. In such a case the liability does not include moral and exemplary damages. [14] In this case, we have ruled that the breach of contract of carriage, which consisted in the involuntary upgrading of the Vazquezes seat accommodation, was not attended by fraud or bad faith. The Court of Appeals award of moral damages has, therefore, no leg to stand on. The deletion of the award for exemplary damages by the Court of Appeals is correct. It is a requisite in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent or malevolent manner.[15] Such requisite is absent in this case. Moreover, to be entitled thereto the claimant must first establish his right to moral, temperate, or compensatory damages.[16] Since the Vazquezes are not entitled to any of these damages, the award for exemplary damages has no legal basis. And where the awards for moral and exemplary damages are eliminated, so must the award for attorneys fees. [17]

The most that can be adjudged in favor of the Vazquezes fo r Cathays breach of contract is an award for nominal damages under Article 2221 of the Civil Code, which reads as follows: Article 2221 of the Civil Code provides: Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. Worth noting is the fact that in Cathays Memorandum filed with this Court, it prayed only for the deletion of the award for moral damages. It deferred to the Court of Appeals discretion in awarding nominal damages; thus: As far as the award of nominal damages is concerned, petitioner respectfully defers to the Honorable Court of Appeals discretion. Aware as it is that somehow, due to the resistance of respondents-spouses to the normally-appreciated gesture of petitioner to upgrade their accommodations, petitioner may have disturbed the respondentsspouses wish to be with their companions (who traveled to Hong Kong with them) at the Business Class on their flight to Manila. Petitioner regrets that in its desire to provide the respondents-spouses with additional amenities for the one and one-half (1 1/2) hour flight to Manila, unintended tension ensued.[18] Nonetheless, considering that the breach was intended to give more benefit and advantage to the Vazquezes by upgrading their Business Class accommodation to First Class because of their valued status as Marco Polo members, we reduce the award for nominal damages to P5,000. Before writing finis to this decision, we find it well-worth to quote the apt observation of the Court of Appeals regarding the awards adjudged by the trial court: We are not amused but alarmed at the lower courts unbelievable alacrity, bordering on the scandalous, to award excessive amounts as damages. In their complaint, appellees asked for P1 million as moral damages but the lower court awarded P4 million; they asked for P500,000.00 as exemplary damages but the lower court cavalierly awarded a whooping P10 million; they asked for P250,000.00 as attorneys fees but were awarded P2 million; they did not ask for nominal damages but were awarded P200,000.00. It is as if the lower court went on a rampage, and why it acted that way is beyond all tests of reason. In fact the excessiveness of the total award invites the suspicion that it was the result of prejudice or corruption on the part of the trial court.

The presiding judge of the lower court is enjoined to hearken to the Supreme Courts admonition in Singson vs. CA (282 SCRA 149 [1997]), where it said: The well-entrenched principle is that the grant of moral damages depends upon the discretion of the court based on the circumstances of each case. This discretion is limited by the principle that the amount awarded should not be palpably and scandalously excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court. and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held: Nonetheless, we agree with the injunction expressed by the Court of Appeals that passengers must not prey on international airlines for damage awards, like trophies in a safari. After all neither the social standing nor prestige of the passenger should determine the extent to which he would suffer because of a wrong done, since the dignity affronted in the individual is a quality inherent in him and not conferred by these social indicators. [19] We adopt as our own this observation of the Court of Appeals. WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the Court of Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED, and as modified, the awards for moral damages and 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.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 106664 March 8, 1995 PHILIPPINE AIR LINES, petitioner, vs. FLORANTE A. MIANO, respondent. PUNO, J.: The petitioner questions the Decision of the Regional Trial Court of Makati, Branch 148, dated July 29, 1992, 1awarding private respondent moral and exemplary damages and attorney's fees for want of legal justification. We grant the petition. The facts are uncontroverted. On August 31, 1988, private respondent took petitioner's flight PR 722, Mabuhay Class, bound for Frankfurt, Germany. He had an immediate onward connecting flight via Lufthansa flight LH 1452 to Vienna, Austria. At the Ninoy Aquino International Airport, he checked-in one brown suitcase weighing twenty (20) kilograms 2 but did not declare a higher valuation. He claimed that his suitcase contained money, documents, one Nikkon camera with zoom lens, suits, sweaters, shirts, pants, shoes, and other accessories. 3 Upon private respondent's arrival at Vienna via Lufthansa flight LH 1452, his checked-in baggage was missing. He reported the matter to the Lufthansa authorities. After three (3) hours of waiting in vain, he proceeded to Piestany, Czechoslovakia. Eleven (11) days after or on September 11, 1988, his suitcase was delivered to him in his hotel in Piestany, Czechoslovakia. He claimed that because of the delay in the delivery of his suitcase, he was forced to borrow money to buy some clothes, to pay $200.00 for the transportation of his baggage from Vienna to Piestany, and lost his Nikkon camera. 4 In November 1988, private respondent wrote to petitioner a letter demanding: (1) P10,000.00 cost of allegedly lost Nikkon camera; (2) $200.00 for alleged cost of transporting luggage from Vienna to Piestany; and (3) P100,000.00 as damages. In its reply, petitioner informed private respondent that his letter was forwarded to its legal department for investigation.

Private respondent felt his demand letter was left unheeded. He instituted an action for Damages docketed as Civil Case No. 89-3496 before the Regional Trial Court of Makati. Petitioner contested the complaint. It disclaimed any liability on the ground that there was neither a report of mishandled baggage on flight PR 722 nor a tracer telex received from its Vienna Station. It, however, contended that if at all liable its obligation is limited by the Warsaw Convention rate. Petitioner filed a Third-Party Complaint against Lufthansa German Airlines imputing the mishandling of private respondent's baggage, but was dismissed for its failure to prosecute. In its decision, the trial court observed that petitioner's actuation was not attended by bad faith. Nevertheless, it awarded private respondent damages and attorney's fees, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff (private respondent) and against the defendant (petitioner), thereby ordering the latter to pay the following: (a) U.S. $200.00 as cost of transporting the suitcase from Vienna to Czechoslovakia; (b) P40,000.00 as moral damages; (c) P20,000.00 as exemplary damages; and (d) P15,000.00 as attorney's fees. SO ORDERED. 5 Hence, this petition for review. In breach of contract of carriage by air, moral damages are awarded only if the defendant acted fraudulently or in bad faith. 6 Bad faith means a breach of a known duty through same motive of interest or ill will. 7 The trial court erred in awarding moral damages to private respondent. The established facts evince that petitioner's late delivery of the baggage for eleven (11) days was not motivated by ill will or bad faith. In fact, it immediately coordinated with its Central Baggage Services to trace private respondent's suitcase and succeeded in finding it. At the hearing, petitioner's Manager for Administration of Airport Services Department Miguel Ebio testified that their records disclosed that Manila, the originating station, did not receive any tracer telex. 8 A tracer telex, an airline

lingo, is an action of any station that the airlines operate from whom a passenger may complain or have not received his baggage upon his arrival. 9 It was reasonable to presume that the handling of the baggage was normal and regular. Upon inquiry from their Frankfurt Station, it was however discovered that the interline tag of private respondent's baggage was accidentally taken off. According to Mr. Ebio, it was customary for destination stations to hold a tagless baggage until properly identified. The tracer telex, which contained information on the baggage, is matched with the tagless luggage for identification. Without the tracer telex, the color and the type of baggage are used as basis for the matching. Thus, the delay. Worthy to stress, the trial court made an unequivocal conclusion that petitioner did not act in bad faith or with malice,viz.: xxx xxx xxx Absent a finding as to the bad intention of defendant (petitioner) PAL , this court finds it appropriate to apply the Warsaw Convention with respect to the liability of Air Carriers. 10 xxx xxx xxx The mere fact that defendant (petitioner) exerted effort to assist plaintiff (private respondent) in his predicament as shown in defendant's (petitioner's) letter to plaintiff (private respondent) (Exh. "E") and likewise the letter from Mr. Miguel Ebio, Manager-Airport Services Administration of defendant (petitioner) PAL to its Senior Counsel-Litigation, Atty. Marceliano Calica (Exh. "3") which reveals the fact that an investigation was conducted as to mishandled baggage, coupled with the fact that said information were then relayed to plaintiff (private respondent) as evidenced by a letter of defendant (petitioner) to plaintiff (private respondent) (Exh. "4") does not warrant a showing of malice on the part of defendant ( petitioner). 11 xxx xxx xxx Under the circumstances obtaining, considering that defendant's (petitioner's) actuation was not attendant with bad faith, the award of moral damages in the amount of P40,000.00 is but just and fair. 12 Bad faith must be substantiated by evidence. In LBC vs. Court of Appeals, 13 we ruled: Bad faith under the law cannot be presumed; it must be established by clear and convincing evidence. Again, the unbroken jurisprudence is that in breach of contract cases where the defendant 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 reasonably have foreseen. The damages, however, will not include liability far moral damages. (Citations omitted) We can neither sustain the award of exemplary damages. The prerequisite for the award of exemplary damages in cases of contract or quasi-contract 14 is that the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. 15 The undisputed facts do not so warrant the characterization of the action of petitioner. The award of attorney's fees must also be disallowed for lack of legal leg to stand on. The fact that private respondent was compelled to litigate and incur expenses to protect and enforce his claim did not justify the award of attorney's fees. The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. 16 Petitioner is willing to pay the just claim of $200.00 as a result of the delay in the transportation of the luggage in accord with the Warsaw Convention. Needless to say, the award of attorney's fees must be deleted where the award of moral and exemplary damages are eliminated. IN VIEW WHEREOF, the assailed Decision of July 29, 1992 is MODIFIED deleting the award of moral and exemplary damages and attorney's fees. No costs. SO ORDERED. Narvasa, C.J., Bidin, Regalado and Mendoza, JJ., concur.

FIRST DIVISION NORTHWEST AIRLINES, INC., Petitioner, Present: - versus PUNO, C.J., Chairperson, CARPIO MORALES, NACHURA,* SPOUSES EDWARD J. HESHAN AND NELIA L. HESHAN AND DARA GANESSA L. HESHAN, REPRESENTED BY HER PARENTS EDWARD AND NELIA HESHAN, Respondents. LEONARDO-DE CASTRO, and VILLARAMA, JR., JJ. G.R. No. 179117

(Carns) to get the boarding passes, he was asked to step aside and wait to be called again.[3]

After all the other departing passengers were given their boarding passes, the Heshans were told to board the plane without any boarding pass given to them and to just occupy open seats therein. Inside the plane, the Heshans noticed that only one vacant passenger seat was available, which was offered to Dara, while Edward and Nelia were directed to occupy two folding seats located at the rear portion of the plane. To respondents, the two folding seats were crew seats intended for the stewardesses.[4] Upset that there were not enough passenger seats for them, the Heshans complained to the cabin crew about the matter but were told that if they did not like to occupy the seats, they were free to disembark from the plane. And disembark they did, complaining thereafter to Carns about their situation. Petitioners plane then departed for Memphis without respondents onboard.[5] The Heshans were later endorsed to and carried by Trans World Airways to Los Angeles. Respondents arrived in Los Angeles at 10:30 p.m. of the same day but had to wait for three hours at the airport to retrieve their luggage from petitioners Flight No. 972M.[6] Respondents stayed for five days more in the U.S. before going back home to Manila.[7] On September 24, 1998, respondents sent a letter to petitioner to demand indemnification for the breach of contract of carriage. [8] Via letter of December 4, 1998, petitioner replied that respondents were prohibited to board Flight No. 972M for verbally abus[ing] [the] flight crew.[9] As their demand remained unheeded, respondents filed a complaint for breach of contract with damages at the Regional Trial Court (RTC) of Quezon City.[10] From the depositions of petitioners employees Carns, Mylan Brown (Brown) and Melissa Seipel (Seipel), the following version is gathered: The Heshans did not have reservations for particular seats on the flight. When they requested that they be seated together, Carns denied the request and explained that other passengers had pre-selected seats and that the computerized seating system did not reflect that the request could be accommodated at the time. Carns nonetheless assured the Heshans that they would be able to board the plane and be seated accordingly, as he in fact instructed them ten minutes before the planes departure, to board the plane even without boarding passes and to occupy open seats therein. [11]

Promulgated: February 3, 2010

x--------------------------------------------------x DECISION CARPIO MORALES, J.: In July 1998, Edward Heshan (Edward) purchased three (3) roundtrip tickets from Northwest Airlines, Inc. (petitioner) for him, his wife Nelia Heshan (Nelia) and daughter Dara Ganessa Heshan (Dara) for their trip from Manila to St. Louis, Missouri, USA and back to attend an ice skating competition where then seven yearold Dara was to participate.[1] When Daras participation in the ice skating event ended on August 7, 1998, the Heshans proceeded to the airport to take the connecting flight from St. Louis toMemphis on their way to Los Angeles. At the airport, the Heshans first checked-in their luggage at the airports curbside check-in near the entrance.[2] Since theyarrived three hours early for their 6:05 p.m. flight (Flight No. 972M), the Heshans whiled away the time at a nearby coffee shop. At 5:15 p.m. when the check-in counter opened, Edward took to the line where he was second in the queue. When his turn came and presented the tickets to petitioners customer service agent Ken Carns

By Seipels claim, as the Heshans were upset upon learning that they were not seated together on the plane, she told them that she would request other passengers to switch places to accommodate their demand; that she never had a chance to try to carry out their demand, however, as she first had to find space for their bags in the overhead compartment; and that the Heshans cursed her which compelled her to seek assistance from Brown in dealing with them.[12] Brown averred that she went to the back portion of the plane to help out but she was brushed aside by Nelia who was cursing them as she stormed out of the plane followed by Edward and Dara.[13] Petitioner denied that the Heshans (hereafter respondents) were told to occupy folding seats or crew seats since [Federal Aviation Authority] regulations say no passengers are to sit there.[14] As for respondents not having been given boarding passes, petitioner asserted that that does not in itself mean that the flight was overbooked, for [t]his is done on last minute boarding when flights are full and in order to get passengers on their way and to get the plane out on time. This is acceptable procedure.[15] Branch 96 of the RTC, by Decision[16] of August 20, 2002, rendered judgment in favor of respondents, disposing as follows: WHEREFORE, judgment is rendered ordering [petitioner] Northwest Airlines, Inc. to pay [respondents] Edward J. Heshan, Nelia L. Heshan and Dara Ganessa L. Heshan the following: 1. 2. 3. 4. P3,000,000.00, as moral damages; P500,000.00, as exemplary damages; A sum equivalent of 20% of the foregoing amounts, as attorneys fees; and, Costs of suit.

make sure of their seating together, and, in fact, Edward was second in the queue for boarding passes. Yet, Edward was unceremoniously sidelined and curtly told to wait without any explanations why. His concerned seeking for explanations was repeatedly rebuffed by the airline employees. When, at last, they were told to board the aircraft although they had not yet been issued boarding passes, which they thought to be highly unusual, they soon discovered, to their dismay, that the plane was fully booked, with only one seat left for the 3 of them. Edward and Nelia rejected the offer [to take] the crew seats. [Respondents] were thus forced to disembark. (italics in the original; emphasis and underscoring supplied) On appeal, the Court of Appeals, by Decision[18] of June 22, 2007, sustained the trial courts findings but reduced the award of moral and exemplary damages to P2 million and P300,000, respectively.[19] In affirming the findings of the trial court, the appellate court held: [I]t is clear that the only instances [sic] when the [petitioner] and its agents allow its passengers to board the plane without any boarding pass is when the flights are full and the plane is running late. Taking into account the fact that the [respondents] arrived at the airport early, checked-in their baggage before hand and were in fact at the gates of the boarding area on time, thus, it could not be said that they can fall under the exceptional circumstance [sic]. It bears stressing at this juncture that it becomes a highly irregular situation that despite the fact that the [respondents] showed up on time at the boarding area[,] they were made to go in last and sans any boarding passes. Thus, We hold that it can be logically inferred that the reason why no boarding passes were immediately issued to the [respondents] is because Flight 972 from St. Louis to Memphis is full and the [respondents] were bumped off from their flight. (emphasis, italics and underscoring supplied) Reconsideration having been denied by the appellate court,[20] petitioner filed the present petition for review upon the issues of whether the appellate court I . . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO MORAL DAMAGES II

SO ORDERED.[17] In finding for respondents, the trial court noted: [T]hat the [respondents] held confirmed reservations for the St Louis-Memphis leg of their return trip to the Philippines is not disputed. As such, they were entitled as of right under their contract to be accommodated in the flight, regardless of whether they had selected their seats in advance or not. They had arrived at the airport early to

. . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO EXEMPLARY DAMAGES III

. . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO ATTORNEYS FEES IV . . .ASSUMING ARGUENDO THAT RESPONDENTS WERE ENTITLED TO AN AWARD OF DAMAGES, [ERRED IN AWARDING EXCESSIVE DAMAGES TO RESPONDENTS] . V . . . ERRED IN NOT FINDING FOR [IT] ON ITS COUNTERCLAIM.[21] To petitioner, the present petition offers compelling reasons to again review the congruent factual findings of the lower courts which, to it, are contrary to the evidence on record; that the lower courts disregarded vital testimonies of its witnesses; that the appellate court premised its decision on a misapprehension of facts and failed to consider certain relevant facts which, if properly taken into account, will justify a different conclusion; that the appellate court made several inferences which were manifestly mistaken and absurd; and that the appellate court exercised grave abuse of discretion in the appreciation of facts.[22] Petitioner maintains that it did not violate the contract of carriage since respondents were eventually transported from Memphis to Los Angeles, albeit via another airline, and that respondents made no claim of having sustained injury during the carriage.[23] Petitioner goes on to posit that if indeed crew seats were offered to respondents, its crew would have had nowhere to sit and the plane would not have been able to depart,[24] and that in reality, respondents voluntarily disembarked from the aircraft because they were not willing to wait to be seated together.[25] At all events, petitioner finds the amount of damages imposed by the appellate court excessive and unprecedented and needing substantial reduction.[26] In their Comment, respondents counter that since the petition is predicated on questions of facts and the appellate court affirmed the trial courts factual findings, these are entitled to great weight and respect.[27] Respondents thus maintain that petitioner was guilty of breach of contract. They cite Singapore Airlines v. Fernandez,[28] which ruled: [W]hen an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger then has every right

to expect that he be transported on that flight and on that date. If he does not, then the carrier opens itself to a suit for a breach of contract of carriage. The petition fails. As has repeatedly been underscored, in petitions for review on certiorari, the general rule is that only questions of law may be raised by the parties and passed upon by the Court.[29] Factual findings of the appellate court are generally binding on the Court, especially when in complete accord with the findings of the trial court, as in the present case, save for some recognized exceptions.[30] The issues raised by petitioner are predicated on the appreciation of factual issues. In weighing the evidence of the parties, the trial court found respondents more credible. An examination of the evidence presented by petitioner shows that it consisted only of depositions of its witnesses. It had in its possession and disposition pertinent documents such as the flight manifest and the planes actual seating capacity and layout which could have clearly refuted respondents claims that there were not enough passenger seats available for them. It inexplicably failed to offer even a single piece of documentary evidence. The Court thus believes that if at least the cited documentary evidence had been produced, it would have been adverse to petitioners case.[31] More. Petitioner failed to satisfactorily explain why it did not issue boarding passes to respondents who were confirmed passengers, even after they had checked-in their luggage three hours earlier. That respondents did not reserve seats prior to checkingin did not excuse the non-issuance of boarding passes. From Carns following testimony, viz: Q. Now you mentioned open seats, Mr. Carns, can you tell us what the phrase or term open seats mean? A. Well, about 10 minutes before boarding time when we cancel those who do not take reserve seats, we know how many passengers are on the plane and we just tell the other passengers to take whatever seat is available at that time, it is gathered that respondents were made to wait for last-minute cancellations before they were accommodated onto the plane. This, coupled with petitioners failure to issue respondents their boarding passes and the eleventh-hour directive for them to embark, reinforces the impression that the flight was overbooked. Petitioners assertion that respondents disembarked from the plane when their request to be seated together was ignored does not impress. The observation of the appellate court, viz:

x x x x [T]he fact that the Appellees still boarded the plane ten (10) minutes prior to the departure time, despite knowing that they would be seated apart, is a clear manifestation of the Appellees willingness to abandon their request and just board the plane in order to catch their flight. But as it turns out, there were not enough seats for the three of them as aptly found by the Court a quo, to which We subscribed [ sic]. x x x x,[33] merits the Courts concurrence. Nonetheless, the petition is in part meritorious. There is a need to substantially reduce the moral damages awarded by the appellate court. While courts are given discretion to determine the amount of damages to be awarded, it is limited by the principle that the amount awarded should not be palpably and scandalously excessive.[34] Moral damages are neither intended to impose a penalty to the wrongdoer, nor to enrich the claimant. Taking into consideration the facts and circumstances attendant to the case, an award to respondents of P500,000, instead of P2,000,000, as moral damages is to the Court reasonable.[35] WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with MODIFICATION. The award of moral damages is reduced to P500,000. In all other respects, the Decision is AFFIRMED. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 88052 December 14, 1989 JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P. MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P. MECENAS; and OFELIA M. JAVIER, petitioners, vs. HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and NEGROS NAVIGATION CO., INC., respondents. Benito P. Favie and Jose Dario Magno for petitioners. Hernandez, Velicaria, Vibar & Santiago for private respondents.

respondents Negros Navigation and Capt. Roger Santisteban, the captain of the "Don Juan" without, however, impleading either PNOC or PNOC Shipping. In their complaint, petitioners alleged that they were the seven (7) surviving legitimate children of Perfecto Mecenas and Sofia Mecenas and that the latter spouses perished in the collision which had resulted from the negligence of Negros Navigation and Capt. Santisteban. Petitioners prayed for actual damages of not less than P100,000.00 as well as moral and exemplary damages in such amount as the Court may deem reasonable to award to them. Another complaint, docketed as Civil Case No. Q-33932, was filed in the same court by Lilia Ciocon claiming damages against Negros Navigation, PNOC and PNOC Shipping for the death of her husband Manuel Ciocon, another of the luckless passengers of the "Don Juan." Manuel Ciocon's body, too, was never found. The two (2) cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, Branch 82. On 17 July 1986, after trial, the trial court rendered a decision, the dispositive of which read as follows: WHEREFORE, the Court hereby renders judgment ordering:

FELICIANO, J.: At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a bargetype oil tanker of Philippine registry, with a gross tonnage of 1,241,68 tons, owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and headed towards Bataan. At about 1:00 o'clock in the afternoon of that same day, the M/V "Don Juan," an interisland vessel, also of Philippine registry, of 2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc. (Negros Navigation) left Manila bound for Bacolod with seven hundred fifty (750) passengers listed in its manifest, and a complete set of officers and crew members. On the evening of that same day, 22 April 1980, at about 10:30 o'clock, the "Tacloban City" and the "Don Juan" collided at the Talbas Strait near Maestra de Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred, the sea was calm, the weather fair and visibility good. As a result of this collision, the M/V "Don Juan" sank and hundreds of its passengers perished. Among the ill-fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by petitioners. On 29 December 1980, petitioners filed a complaint in the then Court- of First Instance of Quezon City, docketed as Civil Case No. Q-31525, against private

a) The defendant Negros Navigation Co., Inc. and Capt. Roger Santisteban jointly and severally liable to pay plaintiffs in Civil Case No Q-31525, the sum of P400,000.00 for the death of plaintiffs' parents, Perfecto A. Mecenas and Sofia P. Mecenas; to pay said plaintiff's the sum of P15.000,00 as and for attorney's fees; plus costs of the suit. b) Each of the defendants Negros Navigation Co Inc. and Philippine National Oil Company/PNOC Shipping and Transportation Company, to pay the plaintiff in Civil Case No. Q-33932, the sum of P100,000.00 for the death of Manuel Ciocon, to pay said plaintiff jointly and severally, the sum of P1 5,000.00 as and for attorney's fees, plus costs of the suit. 1 Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial court's decision to the Court of Appeals. Later, PNOC and PNOC Shipping withdrew their appeal citing a compromise agreement reached by them with Negros Navigation; the Court of Appeals granted the motion by a resolution dated 5 September 1988, subject to the reservation made by Lilia Ciocon that she could not be bound by the compromise agreement and would enforce the award granted her by the trial court. In time, the Court of Appeals rendered a decision dated 26 January 1989 which decreed the following: WHEREFORE, in view of the foregoing, the decision of the court a quo is hereby affirmed as modified with respect to Civil Case No. 31525, wherein defendant

appellant Negros Navigation Co. Inc. and Capt. Roger Santisteban are held jointly and severally liable to pay the plaintiffs the amount of P100,000. 00 as actual and compensatory damages and P15,000.00 as attorney's fees and the cost of the suit. 2 The issue to be resolved in this Petition for Review is whether or not the Court of Appeals had erred in reducing the amount of the damages awarded by the trial court to the petitioners from P400,000.00 to P100,000.00. We note that the trial court had granted petitioners the sum of P400,000,00 " for the death of [their parents] " plus P15,000.00 as attorney's fees, while the Court of Appeals awarded them P100,000.00 " as actual and compensatory damages" and P15,000.00 as attorney's fees. To determine whether such reduction of the damages awarded was proper, we must first determine whether petitioners were entitled to an award of damages other than actual or compensatory damages, that is, whether they were entitled to award of moral and exemplary damages. We begin by noting that both the trial court and the Court of Appeals considered the action (Civil Case No. Q-31525) brought by the sons and daughters of the deceased Mecenas spouses against Negros Navigation as based on quasi-delict. We believed that action is more appropriately regarded as grounded on contract, the contract of carriage between the Mecenas spouses as regular passengers who paid for their boat tickets and Negros Navigation; the surviving children while not themselves passengers are in effect suing the carrier in representation of their deceased parents. 3 Thus, the suit (Civil Case No. Q-33932) filed by the widow Lilia Ciocon was correctly treated by the trial and appellate courts as based on contract (vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC and PNOC Shipping). In an action based upon a breach of the contract of carriage, the carrier under our civil law is liable for the death of passengers arising from the negligence or willful act of the carrier's employees although such employees may have acted beyond the scope of their authority or even in violation of the instructions of the carrier, 4which liability may include liability for moral damages. 5 It follows that petitioners would be entitled to moral damages so long as the collision with the "Tacloban City" and the sinking of the "Don Juan" were caused or attended by negligence on the part of private respondents. In respect of the petitioners' claim for exemplary damages, it is only necessary to refer to Article 2232 of the Civil Code: Article 2332. In contracts and quasi-contracts, the court may exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 6

Thus, whether petitioners are entitled to exemplary damages as claimed must depend upon whether or not private respondents acted recklessly, that is, with gross negligence. We turn, therefore, to a consideration of whether or not Negros Navigation and Capt. Santisteban were grossly negligent during the events which culminated in the collision with "Tacloban City" and the sinking of the "Don Juan" and the resulting heavy loss of lives. The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 March 1981, held that the "Tacloban City" was "primarily and solely [sic] at fault and responsible for the collision." 7 Initially, the Minister of National Defense upheld the decision of Commodore Ochoco. 8 On Motion for Reconsideration, however, the Minister of National Defense reversed himself and held that both vessels had been at fault: It is therefore evident from a close and thorough review of the evidence that fault is imputable to both vessels for the collision. Accordingly, the decision dated March 12, 1982, subject of the Motion for Reconsideration filed by counsel of M/T Tacloban City, is hereby reversed. However, the administrative penalties imposed oil both vessels and their respective crew concerned are hereby affirmed. 9 The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion that the Minister of National Defense had reached that both the "Tacloban City" and the "Don Juan" were at fault in the collision. The trial court summarized the testimony and evidence of PNOC and PNOC Shipping as well as of Negros Navigation in the following terms: Defendant PNOC's version of the incident: M/V Don Juan was first sighted at about 5 or 6 miles from Tacloban City (TSN, January 21, 1985, p. 13); it was on the starboard (right) side of Tacloban City. This was a visual contact; not picked up by radar (p. 15, Ibid). Tacloban City was travelling 310 degrees with a speed of 6 knots, estimated speed of Don Juan of 16 knots (TSN, May 9, pp. 5-6). As Don Juan approached, Tacloban City gave a leeway of 1 0 degrees to the left. 'The purpose was to enable Tacloban to see the direction of Don Juan (p. 19, Ibid). Don Juan switched to green light, signifying that it will pass Tacloban City's right side; it will be a starboard to starboard passing (p. 21, Ibid) Tacloban City's purpose in giving a leeway of 10 degrees at this point, is to give Don Juan more space for her passage (p. 22, Ibid). This was increased by Tacloban City to an additional 15 degrees towards the left (p. 22, Ibid). The way was clear and Don Juan has not changed its course (TSN, May 9,1985, p. 39).

When Tacloban City altered its course the second time, from 300 degrees to 285 degrees, Don Juan was about 4.5 miles away (TSN, May 9,1985, p. 7). Despite executing a hardport maneuver, the collision nonetheless occurred. Don Juan rammed the Tacloban City near the starboard bow (p. 7, Ibid)." NENACO's [Negros Navigation] version. Don Juan first sighted Tacloban City 4 miles away, as shown by radar (p. 13, May 24, 1983). Tacloban City showed its red and green lights twice; it proceeded to, and will cross, the path of Don Juan. Tacloban was on the left side of Don Juan (TSN, April 20,1983, p. 4). Upon seeing Tacloban's red and green lights, Don Juan executed hard starboard (TSN, p. 4, Ibid.) This maneuver is in conformity with the rule that 'when both vessels are head on or nearly head on, each vessel must turn to the right in order to avoid each other. (p. 5, Ibid). Nonetheless, Tacloban appeared to be heading towards Don Juan (p. 6, Ibid), When Don Juan executed hard starboard, Tacloban was about 1,500 feet away (TSN, May 24,1983, p. 6). Don Juan, after execution of hard starboard, will move forward 200 meters before the vessel will respond to such maneuver (p. 7, Ibid). The speed of Don Juan at that time was 17 knits; Tacloban City 6.3 knots. t "Between 9 to 15 seconds from execution of hard starboard, collision occurred (p. 8, Ibid). (pp. 3-4 Decision). 10 The trial court concluded: M/ V Don Juan and Tacloban City became aware of each other's presence in the area by visual contact at a distance of something like 6 miles from each other. They were fully aware that if they continued on their course, they will meet head on . Don Juan steered to the right; Tacloban City continued its course to the left. There can be no excuse for them not to realize that, with such maneuvers, they will collide. They executed maneuvers inadequate, and too late, to avoid collision. The Court is of the considered view that the defendants are equally negligent and are liable for damages. (p. 4, decision). 11 The Court of Appeals, for its part, reached the same conclusion. 12 There is, therefore, no question that the "Don Juan" was at least as negligent as the M/T "Tacloban City" in the events leading up to the collision and the sinking of the "Don Juan." The remaining question is whether the negligence on the part of the "Don Juan" reached that level of recklessness or gross negligence that our Civil Code

requires for the imposition of exemplary damages. Our own review of the record in the case at bar requires us to answer this in the affirmative. In the first place, the report of the Philippine Coast Guard Commandant (Exhibit "l 0"), while holding the "Tacloban City" as "primarily and solely [sic] at fault and responsible for the collision," did itself set out that there had been fault or negligence on the part of Capt. Santisteban and his officers and crew before the collision and immediately after contact of the two (2) vessels. The decision of Commodore Ochoco said: xxxxxxxxx M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing mahjong before and up to the time of collision. Moreover, after the collision, he failed to institute appropriate measures to delay the sinking MS Don Juan and to supervise properly the execution of his order of abandonship. As regards the officer on watch, Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform Capt. Santisteban of the imminent danger of collision and of the actual collision itself Also, he failed to assist his master to prevent the fast sinking of the ship. The record also indicates that Auxiliary Chief Mate Antonio Labordo displayed laxity in maintaining order among the passengers after the collision. x x x x x x x x x. 13 We believe that the behaviour of the captain of the "Don Juan" in tills instanceplaying mahjong "before and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence[t]he duty to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. 14 The record does not show that was the first or only time that Capt. Santisteban had entertained himself during a voyage by playing mahjong with his officers and passengers; Negros Navigation in permitting, or in failing to discover and correct such behaviour, must be deemed grossly negligent.

Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, "to institute appropriate measures to delay the sinking of M/V Don Juan." This appears to us to be a euphemism for failure to maintain the sea-worthiness or the water-tight integrity of the "Don Juan." The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with the "Tacloban City. 15 While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself " There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. The Certificate of Inspection 16 dated 27 August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the Don Juan's home port, states: Passengers allowed : 810 Total Persons Allowed : 864 The report of the Philippine Coast Guard (Exhibit "10") stated that the "Don Juan" had been "officially cleared with 878 passengers on board when she sailed from the port of Manila on April 22, 1980 at about 1:00 p.m." This head-count of the passengers "did not include the 126 crew members, children below three (3) years old and two (2) half-paying passengers" which had been counted as one adult passenger. 17 Thus, the total number of persons on board the "Don Juan" on that illstarred night of 22 April 1 980 was 1,004, or 140 persons more than the maximum lumber that could be safely carried by the "Don Juan," per its own Certificate of Inspection. 18 We note in addition, that only 750 passengers had been listed in its manifest for its final voyage; in other words, at least 128 passengers on board had not even been entered into the "Don Juan's" manifest. The "Don Juan's" Certificate of Inspection showed that she carried life boat and life raft accommodations for only 864 persons, the maximum number of persons she was permitted to carry; in other words, she did not carry enough boats and life rafts for all the persons actually on board that tragic night of 22 April 1980. We hold that under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew) and of its ship-owner arises; this presumption was never rebutted by Negros Navigation.

The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the context of the following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that of the "Tacloban City" was 6.3. knots. 19 Secondly, the "Don Juan" carried the full complement of officers and crew members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which was functioning that night. Fourthly, the "Don Juan's" officer on-watch had sighted the "Tacloban City" on his radar screen while the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don Juan" while the "Tacloban City" was still 2.7 miles away. 20In the total set of circumstances which existed in the instant case, the "Don Juan," had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban City," Indeed, the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely. It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power- driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. 21 The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 150 to port side while the "Don Juan" veered hard to starboard. This circumstance, while it may have made the collision immediately inevitable, cannot, however, be viewed in isolation from the rest of the factual circumstances obtaining before and up to the collision. In any case, Rule 18 like all other International Rules of the Road, are not to be obeyed and construed without regard to all the circumstances surrounding a particular encounter between two (2) vessels. 22 In ordinary circumstances, a vessel discharges her duty to another by a faithful and literal observance of the Rules of Navigation, 23 and she cannot be held at fault for so doing even though a different course would have prevented the collision. This rule, however, is not to be applied where it is apparent, as in the instant case, that her captain was guilty of negligence or of a want of seamanship in not perceiving the necessity for, or in so acting as to create such necessity for, a departure from the rule and acting accordingly. 24 In other words, "route observance" of the International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules. 25 In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing to take early preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could choose its own distance. 26, It is noteworthy that the "Tacloban City," upon turning hard to port

shortly before the moment of collision, signalled its intention to do so by giving two (2) short blasts with horn. 26A The "Don Juan " gave no answering horn blast to signal its own intention and proceeded to turn hatd to starboard. 26B We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of passengers. We find no necessity for passing upon the degree of negligence or culpability properly attributable to PNOC and PNOC Shipping or the master of the "Tacloban City," since they were never impleaded here. It will be recalled that the trial court had rendered a lump sum of P400,000.00 to petitioners for the death of their parents in the "Don Juan" tragedy. Clearly, the trial court should have included a breakdown of the lump sum award into its component parts: compensatory damages, moral damages and exemplary damages. On appeal, the Court of Appeals could have and should have itself broken down the lump sum award of the trial court into its constituent parts; perhaps, it did, in its own mind. In any case, the Court of Appeals apparently relying upon Manchester Development Corporation V. Court of Appeals 27 reduced the P400,000.00 lump sum award into a P100,000.00 for actual and compensatory damages only. We believe that the Court of Appeals erred in doing so, It is true that the petitioners' complaint before the trial court had in the body indicated that the petitioner-plaintiffs believed that moral damages in the amount of at least P1,400,000.00 were properly due to them (not P12,000,000.00 as the Court of Appeals erroneously stated) as well as exemplary damages in the sum of P100,000.00 and that in the prayer of their complaint, they did not specify the amount of moral and exemplary damages sought from the trial court. We do not believe, however, that the Manchester doctrine, which has been modified and clarified in subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. 28 can be applied in the instant case so as to work a striking out of that portion of the trial court's award which could be deemed nationally to constitute an award of moral and exemplary damages. Manchester was promulgated by the Court on 7 May 1987. Circular No. 7 of this Court, which embodied the doctrine in Manchester, is dated 24 March 1988. Upon the other hand, the complaint in the case at bar was filed on 29 December 1980, that is, long before either Manchester or Circular No. 7 of 24 March 1988 emerged. The decision of the trial court was itself promulgated on 17 July 1986, again, before Manchester and Circular No. 7 were promulgated. We do not believe that Manchester should have been applied retroactively to this case where a decision on the merits had already been rendered by the trial court, even though such decision was then under appeal and had not yet reached finality. There is no indication at all that petitioners here sought simply to evade payment of the court's filing fees or to mislead the court in the

assessment of the filing fees. In any event, we apply Manchester as clarified and amplified by Sun Insurance Office Ltd. (SIOL), by holding that the petitioners shall pay the additional filing fee that is properly payable given the award specified below, and that such additional filing fee shall constitute a lien upon the judgment. We consider, finally, the amount of damages-compensatory, moral and exemplaryproperly imposable upon private respondents in this case. The original award of the trial court of P400,000.00 could well have been disaggregated by the trial court and the Court of Appeals in the following manner: 1. actual or compensatory damages proved in the course of trial consisting of actual expenses

incurred by petitioners in their search for their parents' bodies- -P126,000.00 2. actual or compensatory

damages in case of wrongful death (P30,000.00 x 2) -P60,000.00 29 (3) moral damages -P107,000.00 (4) exemplary damages -P107,000.00 Total -P400,000.00 Considering that petitioners, legitimate children of the deceased spouses Mecenas, are seven (7) in number and that they lost both father and mothe in one fell blow of fate, and considering the pain and anxiety they doubtless experienced while searching for their parents among the survivors and the corpses recovered from the sea or washed ashore, we believe that an additional amount of P200,000.00 for moral damages, making a total of P307,000.00 for moral damages, making a total of P307,000.00 as moral damages, would be quite reasonable. Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard which is in fact that of the highest possible degree of diligence, from

common carriers and in creating a presumption of negligence against them, the law seels to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court will take judicial notive of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. Considering the foregoing, we believe that an additional award in the amount of P200,000.00 as exmplary damages, is quite modest. The Court is aware that petitioners here merely asked for the restoration of the P 400.000.00 award of the trial court. We underscore once more, however, the firmly settled doctrine that this Court may consider and resolved all issues which must be decided in order to render substantial justice to the parties, including issues not explicity raised by the party affected. In the case at bar, as in Kapalaran Bus Line v. Coronado, et al., 30 both the demands of sustantial justice and the imperious requirements of public policy compel us to the conclusion that the trial court's implicit award of moral and exemplary damages was erronoeusly deledted and must be restored and augmented and brought more nearely to the level required by public policy and substantial justice. WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the Decision of the Court of Appeals insofar as it redurce the amount of damages awarded to petitioners to P100,000.00 is hereby REVERSED and SET ASIDE. The award granted by the trial court is hereby RESTORED and AUGMENTED as follows: (a) P 126,000.00 for actual damages; (b) P 60,000.00 as compensatory damages for wrongful death; (c) P 307,000.00 as moral damages; (d) P 307,000.00 as exemplary damages making a total of P 800,000.00; and (e) P 15,000.00 as attorney's fees. Petitioners shall pay the additional filing fees properly due and payable in view of the award here made, which fees shall be computed by the Clerks of Court of the trial

court, and shall constitute a lien upon the judgment here awarded. Cost against private respondents. SO ORDERED. Fernan,C.J., Gutierrez, Jr., Bibin and Cortes, JJ., concur.

FIRST DIVISION [G.R. No. 71929 : December 4, 1990.] 192 SCRA 9 ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E. PABLO, Respondents.

Once back in Manila she demanded that ALITALIA make reparation for the damages thus suffered by her. ALITALIA offered her "free airline tickets to compensate her for any alleged damages. . . ." She rejected the offer, and forthwith commenced the action 6 which has given rise to the present appellate proceedings. As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra, 7 Italy, but only on the day after her scheduled appearance and participation at the U.N. meeting there. 8 Of course Dr. Pablo was no longer there to accept delivery; she was already on her way home to Manila. And for some reason or other, the suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven (11) months later, and four (4) months after institution of her action. 9 After appropriate proceedings and trial, the Court of First Instance rendered judgment in Dr. Pablo's favor: 10

DECISION

NARVASA, J.: "(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY THOUSAND PESOS (P20,000.00), Philippine Currency, by way of nominal damages; Dr. Felipa Pablo an associate professor in the University of the Philippines, 1 and a research grantee of the Philippine Atomic Energy Agency was invited to take part at a meeting of the Department of Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in Food and Agriculture of the United Nations in Ispra, Italy. 2 She was invited in view of her specialized knowledge in "foreign substances in food and the agriculture environment." She accepted the invitation, and was then scheduled by the organizers, to read a paper on "The Fate of Radioactive Fusion Products Contaminating Vegetable Crops." 3 The program announced that she would be the second speaker on the first day of the meeting. 4 To fulfill this engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA. She arrived in Milan on the day before the meeting in accordance with the itinerary and time table set for her by ALITALIA. She was however told by the ALITALIA personnel there at Milan that her luggage was "delayed inasmuch as the same . . . (was) in one of the succeeding flights from Rome to Milan." 5 Her luggage consisted of two (2) suitcases: one contained her clothing and other personal items; the other, her scientific papers, slides and other research material. But the other flights arriving from Rome did not have her baggage on board. By then feeling desperate, she went to Rome to try to locate her bags herself. There, she inquired about her suitcases in the domestic and international airports, and filled out the forms prescribed by ALITALIA for people in her predicament. However, her baggage could not be found. Completely distraught and discouraged, she returned to Manila without attending the meeting in Ispra, Italy. : nad (2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND PESOS (P5,000.00), Philippine Currency, as and for attorney's fees; (and) (3) Ordering the defendant to pay the costs of the suit." ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal of the judgment. 11 Indeed, the Appellate Court not only affirmed the Trial Court's decision but also increased the award of nominal damages payable by ALITALIA to P40,000.00. 12 That increase it justified as follows: 13 "Considering the circumstances, as found by the Trial Court and the negligence committed by defendant, the amount of P20,000.00 under present inflationary conditions as awarded . . . to the plaintiff as nominal damages, is too little to make up for the plaintiff's frustration and disappointment in not being able to appear at said conference; and for the embarrassment and humiliation she suffered from the academic community for failure to carry out an official mission for which she was singled out by the faculty to represent her institution and the country. After weighing carefully all the considerations, the amount awarded to the plaintiff for nominal damages and attorney's fees should be increased to the cost of her round trip air fare or at the present rate of peso to the dollar at P40,000,00." ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make basically the same points it tried to make before the Trial Court and the Intermediate Appellate Court, i.e.:

1) that the Warsaw Convention should have been applied to limit ALITALIA'S liability; and 2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal damages and attorney's fees. 14 In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court to have refused to pass on all the assigned errors and in not stating the facts and the law on which its decision is based. 15 Under the Warsaw Convention, 16 an air carrier is made liable for damages for: 1) the death, wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft or in the course of its operations of embarking or disembarking; 17 2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took place during the carriage by air;" 18 and 3) delay in the transportation by air of passengers, luggage or goods. 19 In these cases, it is provided in the Convention that the "action for damages, however, founded, can only be brought subject to conditions and limits set out" therein. 20 The Convention also purports to limit the liability of the carriers in the following manner: 21 1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of 250,000 francs . . . Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability.: nad 2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of 250 francs per kilogramme, unless the passenger or consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that sum is greater than the actual value to the consignor at delivery. b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects the

value of other packages covered by the same baggage check or the same air way bill, the total weight of such package or packages shall also be taken into consideration in determining the limit of liability. 3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to 5000 francs per passenger. 4. The limits prescribed . . shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or part of the court costs and of the other expenses of litigation incurred by the plaintiff. The foregoing provision shall not apply if the amount of the damages awarded, excluding court costs and other expenses of the litigation, does not exceed the sum which the carrier has offered in writing to the plaintiff within a period of six months from the date of the occurrence causing the damage, or before the commencement of the action, if that is later. 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." 22 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, 23 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. 24 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. 25 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" 26 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." 27 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.:-cralaw In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw Convention was applied as regards the limitation on the carrier's liability, there being a simple loss of baggage without any otherwise improper conduct on the part of the officials or employees of the airline or other special injury sustained by the passenger. On the other hand, the Warsaw Convention has invariably been held inapplicable, or as not restrictive of the carrier's liability, where there was satisfactory evidence of malice or bad faith attributable to its officers and employees. 29 Thus, an air carrier was sentenced to pay not only compensatory but also moral and exemplary damages, and attorney's fees, for instance, where its employees rudely put a passenger holding a first-class ticket in the tourist or economy section, 30 or ousted a brown Asiatic from the plane to give his seat to a white man, 31 or gave the seat of a passenger with a confirmed reservation to another, 32 or subjected a passenger to extremely rude, even barbaric treatment, as by calling him a "monkey." 33 In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless, that some special species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the time appointed a breach of its contract of carriage, to be sure with the result that she was unable to read the paper and make the scientific presentation (consisting of slides, autoradiograms or films, tables and tabulations) that she had painstakingly labored over, at the prestigious international conference, to attend which she had traveled hundreds of miles, to her chagrin and embarrassment and the disappointment and annoyance of the organizers. She felt, not unreasonably, that the invitation for her to participate at the conference, extended by the Joint FAO/IAEA Division of Atomic Energy in Food and Agriculture of the United Nations, was a singular honor not only to herself, but to the University of the Philippines and the country as well, an opportunity to make some sort of impression among her colleagues in that field of scientific activity. The opportunity to claim this honor or distinction was irretrievably lost to her because of Alitalia's breach of its contract.

Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety, which gradually turned to panic and finally despair, from the time she learned that her suitcases were missing up to the time when, having gone to Rome, she finally realized that she would no longer be able to take part in the conference. As she herself put it, she "was really shocked and distraught and confused." Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage. She is not, of course, entitled to be compensated for loss or damage to her luggage. As already mentioned, her baggage was ultimately delivered to her in Manila, tardily but safely. She is however entitled to nominal damages which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered and this Court agrees that the respondent Court of Appeals correctly set the amount thereof at P40,000.00. As to the purely technical argument that the award to her of such nominal damages is precluded by her omission to include a specific claim therefor in her complaint, it suffices to draw attention to her general prayer, following her plea for moral and exemplary damages and attorney's fees, "for such other and further just and equitable relief in the premises," which certainly is broad enough to comprehend an application as well for nominal damages. Besides, petitioner should have realized that the explicit assertion, and proof, that Dr. Pablo's right had been violated or invaded by it absent any claim for actual or compensatory damages, the prayer thereof having been voluntarily deleted by Dr. Pablo upon the return to her of her baggage necessarily raised the issue of nominal damages.: rd This Court also agrees that respondent Court of Appeals correctly awarded attorney's fees to Dr. Pablo, and the amount of P5,000.00 set by it is reasonable in the premises. The law authorizes recovery of attorney's fees inter alia where, as here, "the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest," 34 or "where the court deems it just and equitable." 35 WHEREFORE, no error being perceived in the challenged decision of the Court of Appeals, it appearing on the contrary to be entirely in accord with the facts and the law, said decision is hereby AFFIRMED, with costs against the petitioner. SO ORDERED. Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 121404 May 3, 2006

SO ORDERED.11 We held therein that private respondent Bellosillo has not established a prima facie case to hold petitioner administratively liable as her dealings with the latter, such as the alleged cash borrowings and unwarranted solicitations, were ordinary business transactions arising from their personal dealings, and not from an attorney-client relationship. They represent purely personal interests and not professional misconduct. In view of the foregoing, the present petition has been rendered moot as petitioners prayer has become inconsequential with the dismissal of the administrative complaint filed against him. Thus, the trial of Civil Case No. 88-2181 must now proceed immediately. Section 18, Rule 139-B of the Rules of Court states that "proceedings against attorneys shall be private and confidential. However, the final order of the Supreme Court shall be published like its decisions in other cases." The purpose of the rule is not only to enable this Court to make its investigations free from any extraneous influence or interference, but also to protect the personal and professional reputation of attorneys and judges from the baseless charges of disgruntled, vindictive, and irresponsible clients and litigants; it is also to deter the press from publishing administrative cases or portions thereto without authority. We have ruled that malicious and unauthorized publication or verbatim reproduction of administrative complaints against lawyers in newspapers by editors and/or reporters may be actionable.12 Such premature publication constitutes a contempt of court, punishable by either a fine or imprisonment or both at the discretion of the Court. The lawyer as an aggrieved party may recover damages in a civil suit filed for the purpose; 13 or may choose to waive the confidentiality of proceedings in the disbarment case against him/her.14 Enabling the court to keep administrative investigations free of extraneous influence or interference essentially calls for independence and impartiality of the investigating court, commissioners, or officers. It does not, however, exclude the possibility of simultaneously commencing a judicial case against a lawyer who is being administratively investigated. The settled rule is that criminal and civil cases are different from administrative matters, such that the disposition in the first two will not inevitably govern the third and vice versa.15 In Berbano v. Barcelona,16 it was held that: Disciplinary proceedings against lawyers are sui generis. Neither purely civil nor purely criminal, they do not involve a trial of an action or a suit, but are rather investigations by the Court into the conduct of one of its officers. Not being intended to inflict punishment, [they are] in no sense a criminal prosecution. Accordingly, there

ANICETO G. SALUDO, JR., Petitioner, vs. COURT OF APPEALS, HON. FERNANDO V. GOROSPE, JR., in his capacity as Presiding Judge, Regional Trial Court of Makati, Branch 61, and SALLY V. BELLOSILLO, Respondents. DECISION YNARES-SANTIAGO, J.: This Petition1 seeks to annul and set aside the August 8, 1995 Resolution2 of the Court of Appeals in CA-G.R. SP No. 36670, which dismissed the Petition3 for certiorari to annul and set aside the November 10, 19944 and February 20, 1995 Orders5 issued by the Regional Trial Court of Makati City, Branch 61, in Civil Case No. 88-2181. The said Orders denied petitioner Aniceto G. Saludo, Jr.s Motion to S uspend Proceedings in Civil Case No. 88-21816 as well as his Motion for Reconsideration.71avvphil.net Petitioner prayed for the suspension of proceedings in the said civil case on the ground that to proceed with the trial would make public the administrative case entitled Bellosillo v. The Board of Governors of the Integrated Bar of the Philippines and Aniceto G. Saludo, Jr.8 for Gross Professional Misconduct/Malpractice filed by herein private respondent Sally V. Bellosillo against him and thereby violate the confidentiality rule as stated in Section 18, Rule 139-B of the Rules of Court.9 On September 4, 1995, we issued a Temporary Restraining Order (TRO)10 to enjoin the Regional Trial Court of Makati City, Branch 61, from proceeding with the pretrial and trial of Civil Case No. 88-2181, effective immediately and during the entire period that the case is pending or until further orders. It appears, however, that on March 31, 2006, the Court rendered judgment on the administrative case disposing as follows: WHEREFORE, the petition is DENIED and the assailed Resolution of the IBP Board of Governors, dated March 30, 1996, dismissing the complaint against respondent [Aniceto G. Saludo. Jr.] in Adm. Case No. 3297 is AFFIRMED.

is neither a plaintiff nor a prosecutor therein. [They] may be initiated by the Court motu propio. Public interest is [their] primary objective, and the real question for determination is whether or not the attorney is still a fit person to be allowed the privileges as such. Hence, in the exercise of its disciplinary powers, the Court merely calls upon a member of the Bar to account for his actuations as an officer of the Court with the end in view of preserving the purity of the legal profession and the proper and honest administration of justice by purging the profession of members who by their misconduct have prove[n] themselves no longer worthy to be entrusted with the duties and responsibilities pertaining to the office of an attorney. We also emphasized in Gatchalian Promotions Talents Pool, Inc. v. Naldoza 17 that: [A] finding of guilt in the criminal case will not necessarily result in a finding of liability in the administrative case. Conversely, respondents acquittal does not necessarily exculpate him administratively. In the same vein, the trial courts finding of civil liability against the respondent will not inexorably lead to a similar finding in the administrative action before this Court. Neither will a favorable disposition in the civil action absolve the administrative liability of the lawyer. x x x. Thus, the proceedings in Civil Case No. 88-2181 could continue notwithstanding the pendency of the administrative case. In fact, we have actually ruled on administrative cases with pending judicial proceedings related thereto.18 The fact that the charges and some pieces of evidence to be used in both cases are similar does not necessarily amount to prejudice or deprivation of due process to any of the parties in either case. Petitioner also contended that the non-suspension of Civil Case No. 88-2181 while the administrative case is being heard would unduly expose him to the public eye and ear, and consequently cause irreparable injury to his personal and professional integrity. Petitioners contention lacks basis. As correctly pointed out by the Court of Appeal s in CA-G.R. SP No. 36670, petitioner can ably protect himself by timely objections to any action of the other parties in Civil Case No. 88-2181, which refers to the administrative case against him. Besides, to forestall the civil case from proceeding due to the pendency of the administrative case would be unfair to the party instituting the civil case and would also unduly delay the administration of justice. Indeed, the success of a lawyer in his profession depends almost entirely on his reputation. Anything which will harm his good name is to be deplored 19 as a lawyers reputation is "a plant of tender growth, and its bloom, once lost, is not easily restored."20 The eventual dismissal however of the administrative case, as in this case, should more than redeem and maintain petitioners good name. Finally, the Court of Appeals correctly held that:

Under Section 1, Rule 21 of the Revised Rules of Court, [now Section 8, Rule 30 of the Rules of Court21], an action may be suspended only on the ground of a possibility of a compromise. The rule of confidentiality under Section 18 of Rule 139-B cannot be a ground for suspending the proceedings in a civil case, unless it is patent, which is not the case here, that the civil case was filed purposely to circumvent the said rule. As a matter of fact, the complaint in this case was not initiated by the private respondent but by a person whom she claims to be an agent of the petitioner. The confidentiality of administrative proceeding is not intended to place lawyers in a privileged position with regard to civil or criminal actions against them. 22 WHEREFORE, theinstant petition is DISMISSED for being moot and academic. The Temporary Restraining Order issued on September 4, 1995 is ordered LIFTED. The Presiding Judge of the Regional Trial Court of Makati City, Branch 61 is ORDERED to proceed hearing Civil Case No. 88-2181. SO ORDERED.

THIRD DIVISION [G.R. No. 151783. July 8, 2003] VICTORINO SAVELLANO, VIRGINIA B. SAVELLANO and DEOGRACIAS B. SAVELLANO, petitioners, vs. NORTHWEST AIRLINES,respondent. DECISION

All such sums shall bear legal interest, i.e., 6% per annum pursuant to Article 2209 of the Civil Code (Reformina vs. Tomol, 139 SCRA 260) from the date of the filing of the complaint until fully paid. Costs against the x x x Northwest Airlines, Inc. [Respondents] counterclaim is ordered dismissed, for lack of merit. [5] The Facts The facts of the case are summarized by the CA as follows:

PANGANIBAN, J.: When, as a result of engine malfunction, a commercial airline is unable to ferry its passengers on the original contracted route, it nonetheless has the duty of fulfilling its responsibility of carrying them to their contracted destination on the most convenient route possible. Failing in this, it cannot just unilaterally shuttle them, without their consent, to other routes or stopping places outside of the contracted sectors. However, moral damages cannot be awarded without proof of the carriers bad faith, ill will, malice or wanton conduct. Neither will actual damages be granted in the absence of convincing and timely proof of loss. But nominal damages may be allowed under the circumstances in the case herein. The Case Before the Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set aside the June 29, 2001 Decision[1] of the Court of Appeals[2] (CA) in CA-GR CV No. 47165. The dispositive part of the Decision reads: WHEREFORE, the judgment of July 29, 1994 is hereby REVERSED and SET ASIDE and another rendered DISMISSING [petitioners] Complaint. No pronouncement as to costs. [3] On the other hand, the dispositive portion of the Regional Trial Court (RTC) Decision[4] that was reversed by the CA disposed thus: WHEREFORE, premises considered, decision is hereby rendered in favor of the plaintiffs and against the defendant, sentencing the latter to pay to the former, the following amounts: 1. 2. 3. 4. P500,000.00 as actual damages; P3,000,000.00 as moral damages; P500,000.00 as exemplary damages; and P500,000.00 as attorneys fees; [Petitioner] Victorino Savellano (Savellano) was a Cabugao, Ilocos Sur mayor for many terms, former Chairman of the Commission on Elections and Regional Trial Court (RTC) judge. His wife, [Petitioner] Virginia is a businesswoman and operates several rural banks in Ilocos Sur. The couples x x x son [Petitioner] Deogracias was, at the time [of] the incident subject of the case, the Vice-Governor of Ilocos Sur. On October 27, 1991, at around 1:45 p.m., [petitioners] departed from San Francisco, USA on board Northwest Airlines (NW) Flight 27, Business Class, bound for Manila, Philippines using the NW round-trip tickets which were issued at [respondents] Manila ticketing office. [Petitioners] were expected to arrive at the Ninoy Aquino International Airport (NAIA), Manila on October 29, 1991 (Manila time) or after twelve (12) hours of travel. After being airborne for approximately two and one-half (2) hours or at about 4:15 p.m. of the same day, October 27, 1991 (Seattle, USA time), NW Flight 27s pilot made an emergency landing in Seattle after announcing that a fire had started in one of the planes engines. [Petitioners] and the other passengers proceeded to Gate 8 of the Seattle Airport where they were instructed to go home to Manila the next day, using the same boarding passes with the same seating arrangements [Respondents] shuttle bus thereafter brought all passengers to t he Seattle Red Lion Hotel where they were billeted by, and at the expense of [respondent]. [Petitioners] who were traveling as a family were assigned one room at the hotel. At around 12:00 midnight, they were awakened by a phone call from [respondents] personnel who advised them to be at the Seattle Airport by 7:00 a.m. (Seattle time) the following day, October 28, 1991, for departure. To reach the airport on time, the NW shuttle bus fetched them early, making them skip the 6:30 a.m. hotel breakfast.

Prior to leaving the hotel, however, [petitioners] met at the lobby Col. Roberto Delfin, a Filipino co-passenger who was also traveling Business Class, who informed them that he and some passengers were leaving the next day, October 29, 1991, on board the same plane with the same itinerary. On account of the engine failure of the plane, [petitioner] Virginia developed nervousness. On getting wind of information that they were bumped off, she took valium to calm her nerves and cough syrup for the fe ver and colds she had developed during the trip. When [petitioners] reached the Seattle Airport, [respondents] ground stewardess belatedly advised them that instead of flying to Manila they would have to board NW Flight 94, a DC-10 plane, bound for a 3-hour flight to Los Angeles for a connecting flight to Manila. When [Petitioner] Savellano insisted theirs was a direct flight to Manila, the female ground stewardess just told them to hurry up as they were the last passengers to board. In Los Angeles, [petitioners] and the other passengers became confused for while there was a sort of a board which announced a Seoul -Bangkok flight, none was posted for a Manila flight. It was only after they complained to the NW personnel that the latter finally changed the board to include Manila. Before boarding NW Flight 23 for Manila via Seoul, [petitioners] encountered another problem. Their three small handcarried items which were not padlocked as they were merely closed by zippers were not allowed to be place d inside the passengers baggage compartments of the plane by an arrogant NW ground stewardess. On [petitioners] arrival at the NAIA, Manila where they saw Col. Delfin and his wife as well as the other passengers of the distressed flight who unlike them [petitioners] who left Seattle on October 28, 1991, left Seattle on October 29, 1991, they were teased for taking the longer and tiresome route to the Philippines. When [petitioners] claimed their luggage at the baggage carousel, they discovered that the would-have-been handcarried items which were not allowed to be placed inside the passengers baggage compartment had been ransacked and the contents thereof stolen. Virginia was later to claim having lost her diamond earrings costing P300,000.00, two (2) Perry Gan shoes worth US$ 250.00, four (4) watches costing US$ 40.00 each, two (2) pieces of Tag Heuer watch and three (3) boxes of Elizabeth Arden [perfumes]. Deogracias, on the other hand, claimed to have lost two (2) pairs of Cole Haan shoes which he bought for his wife, and the clothes, camera, personal computer, and jeans he bought for his children.

By letter of November 22, 1991, [petitioners] through counsel demanded from [respondent] the amount of P3,000,000.00 as damages for what they claimed to be the humiliation and inconvenience they suffered in the hands of its personnel. [Respondent] did not accede to the demand, however, impelling [petitioners] to file a case for damages at the RTC of Cabugao, Ilocos Sur subject of the present appeal. [Petitioners] concede that they were not downgraded in any of the flights on their way home to Manila. Their only complaint is that they suffered inconvenience, embarrassment, and humiliation for taking a longer route. During the trial, the [RTC], on motio n of [petitioners], issued on October 29, 1993 a subpoena duces tecum directing [respondent] to submit the passengers manifest of the distressed flight from San Francisco to Tokyo on October 27, 1991, the passengers manifest of the same distressed plane from Seattle to Tokyo which took off on October 29, 1991, and the passenger manifest of the substitute plane from Seattle to Los Angeles and Los Angeles to Seoul enroute to Manila which took off on October 28, 1991. The subpoena duces tecum was served on December 1, 1993 but was not complied with, however, by [respondent], it proffering that its Minneapolis head office retains documents only for one year after which they are destroyed. x x x Branch 24 of the RTC of Cabugao, Ilocos Sur rendered judgment in favor of [petitioners] x x x. In granting moral and actual damages to [petitioners], the [RTC] credited [petitioners] claim that they were excluded form the Seattle -Tokyo-Manila flight to accommodate several Japanese passengers bound for Japan. And as basis of its award of actual damages arising from the allegedly lost articles contained in the would-havebeen handcarried [luggage], the [RTC], passing on the lack of receipts covering the same, took judicial notice of the Filipinos practice of often bri nging home pasalubong for friends and relatives.[6] Ruling of the Court of Appeals The CA ruled that petitioners had failed to show respondents bad faith, negligence or malice in transporting them via the Seattle-Los Angeles-Seoul-Manila route. Hence, it held that there was no basis for the RTCs award of moral and exemplary damages. Neither did it find any reason to grant attorneys fees. It further ruled:

[Petitioners] testimonial claim of losses is unsupported by any other evidence at all. It is odd and even contrary to human experience for [petitioner] Virginia not to have taken out a P300,000.00 pair of diamond earrings from an unlocked small luggage after such luggage was not allowed to be placed inside the passengers baggage compartment, given the ease with which it could have been done as the small luggage was merely closed by zipper. Just as it is odd why no receipts for alleged purchases for valuable pasalubongs including Tag Huer watches, camera and personal computer were presented. x x x.[7] Thus, even the trial courts award of actual damages was reversed by the appellate court. Hence this Petition.[8] Issues In their appeal, petitioners ask this Court to rule on these issues: x x x [W]hether or not petitioners discriminatory bump -off from NW Flight No. 0027 on 28 October 1991 (not the diversion of the distressed plane to Seattle the day before, i.e. NW Flight 27 on 27 October 1991) constitutes breach by respondent airline of its air-carriage contract? And if so, whether or not petitioners are entitled to actual, moral and exemplary damages -- including attorneys fees -- as a consequence?[9] The Courts Ruling The Petition is partly meritorious. First Issue: Breach of Contract Petitioners contract of carriage with Northwest was for the San Francisco Tokyo(Narita)-Manila flights scheduled for October 27, 1991. This itinerary was not followed when the aircraft used for the first segment of the journey developed engine trouble. Petitioners stress that they are questioning, not the cancellation of the original itinerary, but its substitution, which they allegedly had not contracted for or agreed to. They insist that, like the other passengers of the distressed flight, they had the right to be placed on Flight 27, which had a connecting flight from Japan to Manila. They add that in being treated differently and shabbily, they were being discriminated against.

A contract is the law between the parties.[10] Thus, in determining whether petitioners rights were violated, we must look into its provisions, which are printed on the airline ticket. Condition 9 in the agreement states that a x x x [c]arrier may without notice substitute alternate carriers or aircraft, and may alter or omit stopping places shown on the ticket in case of necessity. x x x.[11] The basis of the Complaint was the way respondent allegedly treated petitioners like puppets that could be shuttled to Manila via Los Angeles and Seoul without their consent.[12] Undeniably, it did not take the time to explain how it would be meeting its contractual obligation to transport them to their final destination. Its employees merely hustled the confused petitioners into boarding one plane after another without giving the latter a choice from other courses of action that were available. It unilaterally decided on the most expedient way for them to reach their final destination. Passengers Consent After an examination of the conditions printed on the airline ticket, we find nothing there authorizing Northwest to decide unilaterally, after the distressed flight landed in Seattle, what other stopping places petitioners should take and when they should fly. True, Condition 9 on the ticket allowed respondent to substitute alternate carriers or aircraft without notice. However, nothing there permits shuttling passengers -without so much as a by your-leave -- to stopping places that they have not been previously notified of, much less agreed to or been prepared for. Substituting aircrafts or carriers without notice is entirely different from changing stopping places or connecting cities without notice. The ambiguities in the contract, being one of adhesion, should be construed against the party that caused its preparation -- in this case, respondent.[13] Since the conditions enumerated on the ticket do not specifically allow it to change stopping places or to fly the passengers to alternate connecting cities without consulting them, then it must be construed to mean that such unilateral change was not permitted. Proof of Necessity of Alteration Furthermore, the change in petitioners flight itinerary does not fall under the situation covered by the phrase may alter or omit stopping places shown on the ticket in case of necessity.[14] A case of necessity must first be proven. The burden of proving it necessarily fell on respondent. This responsibility it failed to discharge. Petitioners do not question the stop in Seattle, so we will not delve into this matter. The airplane engine trouble that developed during the flight bound for Tokyo from San Francisco definitely merited the necessity of landing the plane at some

place for repair -- in this case, Seattle -- but not that of shuttling petitioners to other connecting points thereafter without their consent. Northwest failed to show a case of necessity for changing the stopping place from Tokyo to Los Angeles and Seoul. It is a fact that some of the passengers on the distressed flight continued on to the Tokyo (Narita) connecting place. No explanation whatsoever was given to petitioners as to why they were not similarly allowed to do so. It may be that the Northwest connecting flight from Seattle to Tokyo to Manila could no longer accommodate them. Yet it may also be that there were other carriers that could have accommodated them for these sectors of their journey, and whose route they might have preferred to the more circuitous one unilaterally chosen for them by respondent. In the absence of evidence as to the actual situation, the Court is hard pressed to determine if there was a case of necessity sanctioning the alteration of the Tokyo stopping place in the case of petitioners. Thus, we hold that in the absence of a demonstrated necessity thereof and their rerouting to Los Angeles and Seoul as stopping places without their consent, respondent committed a breach of the contract of carriage. Second Issue:

different factual findings.[16] In this case, the trial court found the presence of bad faith and hence awarded moral and exemplary damages; while the CA found none and hence deleted the award of damages. Thus, the Court is now behooved to review the basis for sustaining the award or deletion of damages. Petitioners impute oppression, discrimination, recklessness and malevolence to respondent. We are not convinced. There is no persuasive evidence that they were maliciously singled out to fly the Seattle-Los Angeles-Seoul-Manila route. It appears that the passengers of the distressed flight were randomly divided into two groups. One group was made to take the Tokyo-Manila flight; and the other, the Los Angeles-Seoul-Manila flight. The selection of who was to take which flight was handled via the computer reservation system, which took into account only the passengers final destination.[17] The records show that respondent was impelled by sincere motives to get petitioners to their final destination by whatever was the most expeditious course -- in its judgment, if not in theirs. Though they claim that they were not accommodated on Flight 27 from Seattle to Tokyo because respondent had taken on Japanese passengers, petitioners failed to present convincing evidence to back this allegation. In the absence of convincing evidence, we cannot find respondent guilty of bad faith. Lopez, Zulueta and Ortigas

Damages Rulings Not Applicable Being guilty of a breach of their contract, respondent may be held liable for damages suffered by petitioners in accordance with Articles 1170 and 2201 of the Civil Code, which state: Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof are liable for damages. (Emphasis supplied) Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor s hall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. As a general rule, the factual findings of the CA when supported by substantial evidence on record are final and conclusive and may not be reviewed on appeal.[15] An exception to this rule is when the lower court and the CA arrive at Petitioners cite the cases of Lopez v. Pan American World Airways,[18] Zulueta v. Pan American World Airways, Inc.[19] and Ortigas Jr. v. Lufthansa German Airlines[20] to support their claim for moral and exemplary damages. In Lopez, Honorable Fernando Lopez, then an incumbent senator and former Vice President of the Philippines -- together with his wife, his daughter and his son-in-law - made first-class reservations with the Pan American World Airways on its TokyoSan Francisco flight. The reservation having been confirmed, first-class tickets were subsequently issued in their favor. Mistakenly, however, defendants agent cancelled the reservation. But expecting other cancellations before the flight scheduled a month later, the reservations supervisor decided to withhold the information from them, with the result that upon arrival in Tokyo, the Lopezes discovered they had no first-class accommodations. Thus, they were compelled to take the tourist class, just so the senator could be on time for his pressing engagements in the United States. In the light of these facts, the Court held there was a breach of the contract of carriage. The failure of the defendant to inform the plaintiffs on time that their reservations for the first class had long been cancelled was considered as the element of bad faith

entitling them to moral damages for the contractual breach. According to the Court, such omission had placed them in a predicament that enabled the company to keep them as their passengers in the tourist class. Thus, the defendant was able to retain the business and to promote its self-interest at the expense of embarrassment, discomfort and humiliation on their part. In Zulueta, the passenger was coming home to Manila from Honolulu via a PanAmerican flight. The plane had a stopover at Wake Island, where Rafael Zulueta went down to relieve himself. At flight time, he could not be located immediately. Upon being found, an altercation ensued between him and the Pan-Am employees. One of them remonstrated: What in the hell do you think you are? Get on that plane. An exchange of angry words followed, and the pilot went to the extent of referring to the Zuluetas as those monkeys. Subsequently, for his belligerent attitude, Rafael Zulueta was intentionally off-loaded and left at Wake Island with the prospect of being stranded there for a week, with malice aforethought. The Court awarded to the Zuluetas P500,000.00 as moral damages, P200,000.00 as exemplary damages and P75,000.00 as attorneys fees, apart from the actual damages of P5,502.85. In Ortigas, Francisco Ortigas Jr. had a confirmed and validated first-class ticket for Lufthansas Flight No. 646. His reserved first-class seat was, however, given to a Belgian. As a result, he was forced to take economy class on the same flight. Lufthansa succeeded in keeping him as a passenger by assuring him that he would be given first-class accommodation at the next stop. The proper arrangements therefor had supposedly been made already, when in truth such was not the case. In justifying the award of moral and exemplary damages, the Court explained: x x x [W]hen it comes to contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passenger to the award of moral damages in accordance with Article 2220 of the Civil Code. But in the instant case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over plaintiff was done willfully and in wanton disregard of plaintiffs rights and his dignity as a human being and as a Filipino, who may not be discriminated against with impunity. To summarize, in Lopez, despite sufficient time -- one month -- to inform the passengers of what had happened to their booking, the airline agent intentionally withheld that information from them. In Zulueta, the passenger was deliberately offloaded after being gravely insulted during an altercation. And in Ortigas, the passenger was intentionally downgraded in favor of a European.

These cases are different from and inapplicable to the present case. Here, there is no showing that the breach of contract was done with the same entrepreneurial motive or self-interest as in Lopez or with ill will as in Zulueta and Ortigas. Petitioners have failed to show convincingly that they were rerouted by respondent to Los Angeles and Seoul because of malice, profit motive or self-interest. Good faith is presumed, while bad faith is a matter of fact that needs to be proved [21] by the party alleging it. In the absence of bad faith, ill will, malice or wanton conduct, respondent cannot be held liable for moral damages. Article 2219 of the Civil Code[22] enumerates the instances in which moral damages may be awarded. In a breach of contract, such damages are not awarded if the defendant is not shown to have acted fraudulently or with malice or bad faith.[23]Insufficient to warrant the award of moral damages is the fact that complainants suffered economic hardship, or that they worried and experienced mental anxiety.[24] Neither are exemplary damages proper in the present case. The Civil Code provides that [i]n contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.[25] Respondent has not been proven to have acted in that manner. At most, it can only be found guilty of having acted without first considering and weighing all other possible courses of actions it could have taken, and without consulting petitioners and securing their consent to the new stopping places. The unexpected and sudden requirement of having to arrange the connecting flights of every single person in the distressed plane in just a few hours, in addition to the Northwest employees normal workload, was difficult to satisfy perfectly. We cannot find respondent liable for exemplary damages for its imperfection of neglecting to consult with the passengers beforehand. Nevertheless, herein petitioners will not be totally deprived of compensation. Nominal damages may be awarded as provided by the Civil Code, from which we quote: Art. 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. Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any property right has been invaded.

Nominal damages are recoverable if no actual, substantial or specific damages were shown to have resulted from the breach.[26] The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.[27] In the present case, we must consider that petitioners suffered the inconveniences of having to wake up early after a bad night and having to miss breakfast; as well as the fact that they were business class passengers. They paid more for better service; thus, rushing them and making them miss their small comforts was not a trivial thing. We also consider their social and official status. Victorino Savellano was a former mayor, regional trial court judge and chairman of the Commission on Elections. Virginia B. Savellano was the president of five rural banks, and Deogracias Savellano was then the incumbent vice governor of Ilocos Sur. Hence, it will be proper to grant one hundred fifty thousand pesos (P150,000) as nominal damages [28] to each of them, in order to vindicate and recognize their right[29] to be notified and consulted before their contracted stopping place was changed. A claim for the alleged lost items from the baggage of petitioners cannot prosper, because they failed to give timely notice of the loss to respondent. The Conditions printed on the airline ticket plainly read: 2. Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not International carriage as defined by that Convention. xxx x xx xxx

the date of receipt in the case of luggage and seven days from date of receipt in the case of goods. In the case of delay the complaint must be made at the latest within fourteen days from the date on which the luggage or goods have been placed at his disposal. 3. Every complaint must be made in writing upon the document of carriage or by separate notice in writing dispatched within the times aforesaid. 4. Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part. After allegedly finding that their luggage had been ransacked, petitioners never lodged a complaint with any Northwest airport personnel. Neither did they mention the alleged loss of their valuables in their November 22, 1991 demand letter.[31] Hence, in accordance with the parties contract of carriage, no claim can be heard or admitted against respondent with respect to alleged damage to or loss of petitioners baggage. WHEREFORE, the Petition is hereby PARTIALLY GRANTED, and the assailed Decision MODIFIED. Respondent is ORDERED to pay one hundred fifty thousand pesos (P150,000) to each of the three petitioners as nominal damages. No pronouncement as to costs. SO ORDERED. Puno, (Chairman), Sandoval-Gutierrez, and Corona, JJ., concur. Carpio-Morales, J., no part.

7. Checked baggage will be delivered to bearer of the baggage check. In case of damage to baggage moving in international transportation complaint must be made in writing to carrier forthwith after discovery of damage, and at the latest, within 7 days from receipt; in case of delay, complaint must be made within 21 days from date the baggage was delivered. x x x.[30] The pertinent provisions of the Rules Relating to International Carriage by Air (Warsaw Convention) state: Article 26 1. Receipt by the person entitled to delivery of luggage or goods without complaint is prima facie evidence that the same have been delivered in good condition and in accordance with the document of carriage. 2. In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within three days from