was further held that Phoenix and McGee had no cause of action against Mindanao Terminal because the
latter, whose services were contracted by Del Monte, a distinct corporation from Del Monte Produce, had no
G.R. No. 162467
MINDANAO TERMINAL AND
BROKERAGE SERVICE, INC.
Petitioner,
- versus -
PHOENIX ASSURANCE VELASCO, JR.,
COMPANY OF NEW YORK/ LEONARDO DE CASTRO,** and
MCGEE & CO., INC., BRION, JJ.
Respondent.
Promulgated:
May 8, 2009
x------------------------------------------------------------------------------------x
DECISION
TINGA, J.:
Before us is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure of the 29
October 2003[2] Decision of the Court of Appeals and the 26 February 2004 Resolution[3] of the same court
denying petitioners motion for reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal and Brokerage Service, Inc.
(Mindanao Terminal), a stevedoring company, to load and stow a shipment of 146,288 cartons of fresh green
Philippine bananas and 15,202 cartons of fresh pineapples belonging to Del Monte Fresh Produce
International, Inc. (Del Monte Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was docked
at the port of Davao City and the goods were to be transported by it to the port of Inchon, Korea in favor of
consignee Taegu Industries, Inc. Del Monte Produce insured the shipment under an open cargo policy with
private respondent Phoenix Assurance Company of New York (Phoenix), a non-life insurance company, and
private respondent McGee & Co. Inc. (McGee), the underwriting manager/agent of Phoenix.[4]
Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel set sail from the port
of Davao City and arrived at the port of Inchon, Korea. It was then discovered upon discharge that some of
the cargo was in bad condition. The Marine Cargo Damage Surveyor of Incok Loss and Average Adjuster of
Korea, through its representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of the
shipment. In a survey report, it was stated that 16,069 cartons of the banana shipment and 2,185 cartons of
the pineapple shipment were so damaged that they no longer had commercial value.[5]
Del Monte Produce filed a claim under the open cargo policy for the damages to its shipment. McGees Marine
Claims Insurance Adjuster evaluated the claim and recommended that payment in the amount of $210,266.43
be made. A check for the recommended amount was sent to Del Monte Produce; the latter then issued a
subrogation receipt[6] to Phoenix and McGee.
Phoenix and McGee instituted an action for damages[7] against Mindanao Terminal in the Regional Trial
Court (RTC) of Davao City, Branch 12. After trial, the RTC,[8] in a decision dated 20 October 1999, held that
the only participation of Mindanao Terminal was to load the cargoes on board the M/V Mistrau under the
direction and supervision of the ships officers, who would not have accepted the cargoes on board the vessel
and signed the foremans report unless they were properly arranged and tightly secured to withstand voyage
across the open seas. Accordingly, Mindanao Terminal cannot be held liable for whatever happened to the
cargoes after it had loaded and stowed them. Moreover, citing the survey report, it was found by the RTC that
the cargoes were damaged on account of a typhoon which M/V Mistrau had encountered during the voyage. It
contract with the assured Del Monte Produce. The RTC dismissed the complaint and awarded the
counterclaim of Mindanao Terminal in the amount of P83,945.80 as actual damages and P100,000.00 as
attorneys fees.[9] The actual damages were awarded as reimbursement for the expenses incurred by
Mindanao Terminals lawyer in attending the hearings in the case wherein he had to travel all the way from
Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and set aside[10] the
decision of the RTC in its 29 October 2003 decision. The same court ordered Mindanao Terminal to pay
Phoenix and McGee the total amount of $210,265.45 plus legal interest from the filing of the complaint until
fully paid and attorneys fees of 20% of the claim.[11] It sustained Phoenixs and McGees argument that the
damage in the cargoes was the result of improper stowage by Mindanao Terminal. It imposed on Mindanao
Terminal, as the stevedore of the cargo, the duty to exercise extraordinary diligence in loading and stowing
the cargoes. It further held that even with the absence of a contractual relationship between Mindanao
Terminal and Del Monte Produce, the cause of action of Phoenix and McGee could be based on quasi-delict
under Article 2176 of the Civil Code.[12]
Mindanao Terminal filed a motion for reconsideration,[13] which the Court of Appeals denied in its 26 February
2004[14] resolution. Hence, the present petition for review.
Mindanao Terminal raises two issues in the case at bar, namely: whether it was careless and negligent in the
loading and stowage of the cargoes onboard M/V Mistrau making it liable for damages; and, whether Phoenix
and McGee has a cause of action against Mindanao Terminal under Article 2176 of the Civil Code on quasi-
delict. To resolve the petition, three questions have to be answered: first, whether Phoenix and McGee have a
cause of action against Mindanao Terminal; second, whether Mindanao Terminal, as a stevedoring company,
is under obligation to observe the same extraordinary degree of diligence in the conduct of its business as
required by law for common carriers[15] and warehousemen;[16] and third, whether Mindanao Terminal
observed the degree of diligence required by law of a stevedoring company.
We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against Mindanao
Terminal, from which the present case has arisen, states a cause of action. The present action is based on
quasi-delict, arising from the negligent and careless loading and stowing of the cargoes belonging to Del
Monte Produce. Even assuming that both Phoenix and McGee have only been subrogated in the rights of Del
Monte Produce, who is not a party to the contract of service between Mindanao Terminal and Del Monte, still
the insurance carriers may have a cause of action in light of the Courts consistent ruling that the act that
breaks the contract may be also a tort.[17] In fine, a liability for tort may arise even under a contract, where
tort is that which breaches the contract[18]. In the present case, Phoenix and McGee are not suing for
damages for injuries arising from the breach of the contract of service but from the alleged negligent manner
by which Mindanao Terminal handled the cargoes belonging to Del Monte Produce. Despite the absence of
contractual relationship between Del Monte Produce and Mindanao Terminal, the allegation of negligence on
the part of the defendant should be sufficient to establish a cause of action arising from quasi-delict.[19]
The resolution of the two remaining issues is determinative of the ultimate result of this case.
Article 1173 of the Civil Code is very clear that if the law or contract does not state the degree of diligence
which is to be observed in the performance of an obligation then that which is expected of a good father of a
family or ordinary diligence shall be required. Mindanao Terminal, a stevedoring company which was charged
with the loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau, had acted merely as a
labor provider in the case at bar. There is no specific provision of law that imposes a higher degree of
diligence than ordinary diligence for a stevedoring company or one who is charged only with the loading and
stowing of cargoes. It was neither alleged nor proven by Phoenix and McGee that Mindanao Terminal was
bound by contractual stipulation to observe a higher degree of diligence than that required of a good father of
a family. We therefore conclude that following Article 1173, Mindanao Terminal was required to observe
ordinary diligence only in loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau.
The Court of Appeals erred when it cited the case of Summa Insurance Corporation v. CA and Port Service
Inc.[20] in imposing a higher degree of diligence,[21] on Mindanao Terminal in loading and stowing the
cargoes. The case of Summa Insurance Corporation v. CA, which involved the issue of whether an arrastre
operator is legally liable for the loss of a shipment in its custody and the extent of its liability, is inapplicable to
the factual circumstances of the case at bar. Therein, a vessel owned by the National Galleon Shipping
Corporation (NGSC) arrived at Pier 3, South Harbor, Manila, carrying a shipment consigned to the order of
Caterpillar Far East Ltd. with Semirara Coal Corporation (Semirara) as "notify party." The shipment, including
a bundle of PC 8 U blades, was discharged from the vessel to the custody of the private respondent, the
exclusive arrastre operator at the South Harbor. Accordingly, three good-order cargo receipts were issued by
NGSC, duly signed by the ship's checker and a representative of private respondent. When Semirara
inspected the shipment at house, it discovered that the bundle of PC8U blades was missing. From those
facts, the Court observed:
x x x The relationship therefore between the consignee and the arrastre operator must be examined. This
relationship is much akin to that existing between the consignee or owner of shipped goods and the common
carrier, or that between a depositor and a warehouseman[[22]]. In the performance of its obligations, an
arrastre operator should observe the same degree of diligence as that required of a common carrier and a
warehouseman as enunciated under Article 1733 of the Civil Code and Section 3(b) of the Warehouse
Receipts Law, respectively. Being the custodian of the goods discharged from a vessel, an arrastre operator's
duty is to take good care of the goods and to turn them over to the party entitled to their possession.
(Emphasis supplied)[23]
Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn[34] and on the survey report[35] of
the damage to the cargoes. Byeong, whose testimony was refreshed by the survey report,[36] found that the
cause of the damage was improper stowage[37] due to the manner the cargoes were arranged such that
there were no spaces between cartons, the use of cardboards as support system, and the use of small rope
to tie the cartons together but not by the negligent conduct of Mindanao Terminal in loading and stowing the
cargoes. As admitted by Phoenix and McGee in their Comment[38] before us, the latter is merely a
stevedoring company which was tasked by Del Monte to load and stow the shipments of fresh banana and
pineapple of Del Monte Produce aboard the M/V Mistrau. How and where it should load and stow a shipment
in a vessel is wholly dependent on the shipper and the officers of the vessel. In other words, the work of the
stevedore was under the supervision of the shipper and officers of the vessel. Even the materials used for
stowage, such as ropes, pallets, and cardboards, are provided for by the vessel. Even the survey report found
that it was because of the boisterous stormy weather due to the typhoon Seth, as encountered by M/V Mistrau
during its voyage, which caused the shipments in the cargo hold to collapse, shift and bruise in extensive
extent.[39] Even the deposition of Byeong was not supported by the conclusion in the survey report that:
CAUSE OF DAMAGE

There is a distinction between an arrastre and a stevedore.[24] Arrastre, a Spanish word which refers to xxx
hauling of cargo, comprehends the handling of cargo on the wharf or between the establishment of the
consignee or shipper and the ship's tackle. The responsibility of the arrastre operator lasts until the delivery of
From the above facts and our survey results, we are of the opinion that damage occurred aboard the carrying
the cargo to the consignee. The service is usually performed by longshoremen. On the other hand,
vessel during sea transit, being caused by ships heavy rolling and pitching under boisterous weather while
stevedoring refers to the handling of the cargo in the holds of the vessel or between the ship's tackle and the
proceeding from 1600 hrs on 7th October to 0700 hrs on 12th October, 1994 as described in the sea protest.
holds of the vessel. The responsibility of the stevedore ends upon the loading and stowing of the cargo in the
[40]
vessel.

As it is clear that Mindanao Terminal had duly exercised the required degree of diligence in loading and
It is not disputed that Mindanao Terminal was performing purely stevedoring function while the private
stowing the cargoes, which is the ordinary diligence of a good father of a family, the grant of the petition is in
respondent in the Summa case was performing arrastre function. In the present case, Mindanao Terminal, as
order.
a stevedore, was only charged with the loading and stowing of the cargoes from the pier to the ships cargo
hold; it was never the custodian of the shipment of Del Monte Produce. A stevedore is not a common carrier
However, the Court finds no basis for the award of attorneys fees in favor of petitioner. None of the
for it does not transport goods or passengers; it is not akin to a warehouseman for it does not store goods for
circumstances enumerated in Article 2208 of the Civil Code exists. The present case is clearly not an
profit. The loading and stowing of cargoes would not have a far reaching public ramification as that of a
unfounded civil action against the plaintiff as there is no showing that it was instituted for the mere purpose of
common carrier and a warehouseman; the public is adequately protected by our laws on contract and on
vexation or injury. It is not sound public policy to set a premium to the right to litigate where such right is
quasi-delict. The public policy considerations in legally imposing upon a common carrier or a warehouseman
exercised in good faith, even if erroneously.[41] Likewise, the RTC erred in awarding P83,945.80 actual
a higher degree of diligence is not present in a stevedoring outfit which mainly provides labor in loading and
damages to Mindanao Terminal. Although actual expenses were incurred by Mindanao Terminal in relation to
stowing of cargoes for its clients.
the trial of this case in Davao City, the lawyer of Mindanao Terminal incurred expenses for plane fare, hotel
accommodations and food, as well as other miscellaneous expenses, as he attended the trials coming all the
In the third issue, Phoenix and McGee failed to prove by preponderance of evidence[25] that Mindanao way from Manila. But there is no showing that Phoenix and McGee made a false claim against Mindanao
Terminal had acted negligently. Where the evidence on an issue of fact is in equipoise or there is any doubt Terminal resulting in the protracted trial of the case necessitating the incurrence of expenditures.[42]
on which side the evidence preponderates the party having the burden of proof fails upon that issue. That is to
say, if the evidence touching a disputed fact is equally balanced, or if it does not produce a just, rational belief WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 66121 is
of its existence, or if it leaves the mind in a state of perplexity, the party holding the affirmative as to such fact SET ASIDE and the decision of the Regional Trial Court of Davao City, Branch 12 in Civil Case No. 25,311.97
must fail.[26] is hereby REINSTATED MINUS the awards of P100,000.00 as attorneys fees and P83,945.80 as actual
We adopt the findings[27] of the RTC,[28] which are not disputed by Phoenix and McGee. The Court of damages.
Appeals did not make any new findings of fact when it reversed the decision of the trial court. The only
participation of Mindanao Terminal was to load the cargoes on board M/V Mistrau.[29] It was not disputed by SO ORDERED.
Phoenix and McGee that the materials, such as ropes, pallets, and cardboards, used in lashing and rigging
the cargoes were all provided by M/V Mistrau and these materials meets industry standard.[30]
It was further established that Mindanao Terminal loaded and stowed the cargoes of Del Monte Produce
aboard the M/V Mistrau in accordance with the stowage plan, a guide for the area assignments of the goods
in the vessels hold, prepared by Del Monte Produce and the officers of M/V Mistrau.[31] The loading and
stowing was done under the direction and supervision of the ship officers. The vessels officer would order the
closing of the hatches only if the loading was done correctly after a final inspection.[32] The said ship officers
would not have accepted the cargoes on board the vessel if they were not properly arranged and tightly
secured to withstand the voyage in open seas. They would order the stevedore to rectify any error in its
loading and stowing. A foremans report, as proof of work done on board the vessel, was prepared by the
checkers of Mindanao Terminal and concurred in by the Chief Officer of M/V Mistrau after they were satisfied
that the cargoes were properly loaded.[33]

BRITISH AIRWAYS, petitioner,
vs.
COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.
DECISION
ROMERO, J.:
In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of respondent Court
of Appeals[1] promulgated on September 7, 1995, which affirmed the award of damages and attorneys fees
made by the Regional Trial Court of Cebu, 7th Judicial Region, Branch 17, in favor of private respondent GOP
Mahtani as well as the dismissal of its third-party complaint against Philippine Airlines (PAL).[2]
The material and relevant facts are as follows:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he
obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket
from BA where the following itinerary was indicated:[3]
CARRIER FLIGHT DATE TIME STATUS
MANILA MNL PR 310Y 16 APR 1730 OK
HONGKONG HKG BA 20 M 16 APR 2100 OK
BOMBAY BOM BA 19 M 23 APR 0840 OK
MANILA MNL"
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and
upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing
his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to
the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon
inquiry from the BA representatives, he was told that the same might have been diverted to London. After
patiently waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing the
Property Irregularity Report.[4]
Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages and attorneys
fees[5] against BA and Mr. Gumar before the trial court, docketed as Civil Case No. CEB-9076.
On September 4, 1990, BA filed its answer with counter claim[6] to the complaint raising, as special and
affirmative defenses, that Mahtani did not have a cause of action against it. Likewise, on November 9, 1990,
BA filed a third-party complaint[7] against PAL alleging that the reason for the non-transfer of the luggage was
due to the latters late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtanis
luggage to the BA aircraft bound for Bombay.
On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any liability,
arguing that there was, in fact, adequate time to transfer the luggage to BA facilities in Hongkong.
Furthermore, the transfer of the luggage to Hongkong authorities should be considered as transfer to BA.[8]
After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of
Mahtani,[9] the dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendant for
which defendant is ordered to pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the value of the
two (2) suit cases; Four Hundred U.S. ($400.00) Dollars representing the value of the contents of plaintiffs
luggage; Fifty Thousand (P50,000.00) Pesos for moral and actual damages and twenty percent (20%) of the
total amount imposed against the defendant for attorneys fees and costs of this action.
The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED for lack of cause of
action.
SO ORDERED.
Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial courts findings. Thus:
WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed from to be in
accordance with law and evidence, the same is hereby AFFIRMED in toto, with costs against defendant-
appellant.
SO ORDERED.[10]
BA is now before us seeking the reversal of the Court of Appeals decision.
In essence, BA assails the award of compensatory damages and attorneys fees, as well as the dismissal of its
third-party complaint against PAL.[11]
Regarding the first assigned issue, BA asserts that the award of compensatory damages in the separate sum
of P7,000.00 for the loss of Mahtanis two pieces of luggage was without basis since Mahtani in his
complaint[12] stated the following as the value of his personal belongings:
8. On said travel, plaintiff took with him the following items and its corresponding value, to wit:
1. personal belonging - - - - - - - - - - - - - - P10,000.00
2. gifts for his parents and relatives - - - - - $5,000.00
Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided for in the
ticket, which reads:[13]
Liability for loss, delay, or damage to baggage is limited unless a higher value is declared in advance and
additional charges are paid:
1. For most international travel (including domestic corporations of international journeys) the liability limit is
approximately U.S. $9.07 per pound (U.S. $20.00) per kilo for checked baggage and U.S. $400 per
passenger for unchecked baggage.
Before we resolve the issues raised by BA, it is needful to state that the nature of an airlines contract of
carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a
contract to transport passengers to their destination. A business intended to serve the travelling public
primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting
standard.[14] Neglect or malfeasance by the carriers employees could predictably furnish bases for an action
for damages.[15]
In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is
indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of cases[16] we have
assessed the airlines culpability in the form of damages for breach of contract involving misplaced luggage.
In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant
satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection
to defendants acts.[17]
In this regard, the trial court granted the following award as compensatory damages:
Since plaintiff did not declare the value of the contents in his luggage and even failed to show receipts of the
alleged gifts for the members of his family in Bombay, the most that can be expected for compensation of his
lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or a combined value of Four Hundred
($400.00) U.S. Dollars for Twenty kilos representing the contents plus Seven Thousand (P7,000.00) Pesos
representing the purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA that there should have been no separate award for the
luggage and the contents thereof since Mahtani failed to declare a separate higher valuation for the luggage,
[18] and therefore, its liability is limited, at most, only to the amount stated in the ticket.
Considering the facts of the case, we cannot assent to such specious argument.
Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to recover
a greater amount. Article 22(1) of the Warsaw Convention,[19] provides as follows:
xxxxxxxxx
(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of
250 francs per kilogram, unless the consignor has made, at the time the package was handed over to the
carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so
requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves
that the sum is greater than the actual value to the consignor at delivery.
American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess
of the limits specified in the tariff which was filed with the proper authorities, such tariff being binding on the
passenger regardless of the passengers lack of knowledge thereof or assent thereto.[20] This doctrine is
recognized in this jurisdiction.[21]
Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts
where the facts and circumstances justify that they should be disregarded.[22]
In addition, we have held that benefits of limited liability are subject to waiver such as when the air carrier
failed to raise timely objections during the trial when questions and answers regarding the actual claims and
damages sustained by the passenger were asked.[23]
Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of limited
liability when it allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his
luggage, without any objection. In this regard, we quote the pertinent transcript of stenographic notes of
Mahtanis direct testimony:[24]
Q - How much are you going to ask from this court?
A - P100,000.00.
Q - What else?
A - Exemplary damages.
Q - How much?
A - P100,000.00.
Q - What else?
A - The things I lost, $5,000.00 for the gifts I lost and my
personal belongings, P10,000.00.
Q - What about the filing of this case?
A - The court expenses and attorneys fees is 30%.
Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the
adverse party to be inadmissible for any reason, the latter has the right to object. However, such right is a
mere privilege which can be waived. Necessarily, the objection must be made at the earliest opportunity, lest
silence when there is opportunity to speak may operate as a waiver of objections.[25] BA has precisely failed
in this regard.
To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even conducted
his own cross-examination as well.[26] In the early case of Abrenica v. Gonda,[27] we ruled that:
x x x (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the admission
of any evidence must be made at the proper time, and that if not so made it will be understood to have been
waived. The proper time to make a protest or objection is when, from the question addressed to the witness,
or from the answer thereto, or from the presentation of proof, the inadmissibility of evidence is, or may be
inferred.
Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great
respect.[28] Since the actual value of the luggage involved appreciation of evidence, a task within the
competence of the Court of Appeals, its ruling regarding the amount is assuredly a question of fact, thus, a
finding not reviewable by this Court.[29]
As to the issue of the dismissal of BAs third-party complaint against PAL, the Court of Appeals justified its
ruling in this wise, and we quote:[30]
Lastly, we sustain the trial courts ruling dismissing appellants third-party complaint against PAL.
The contract of air transportation in this case pursuant to the ticket issued by appellant to plaintiff-appellee
was exclusively between the plaintiff Mahtani and defendant-appellant BA. When plaintiff boarded the PAL
plane from Manila to Hongkong, PAL was merely acting as a subcontractor or agent of BA. This is shown by
the fact that in the ticket issued by appellant to plaintiff-appellee, it is specifically provided on the Conditions of
Contract, paragraph 4 thereof that:
4. x x x carriage to be performed hereunder by several successive carriers is regarded as a single operation.
The rule that carriage by plane although performed by successive carriers is regarded as a single operation
and that the carrier issuing the passengers ticket is considered the principal party and the other carrier merely
subcontractors or agent, is a settled issue.
We cannot agree with the dismissal of the third-complaint.
In Firestone Tire and Rubber Company of the Philippines v. Tempengko,[31] we expounded on the nature of a
third-party complaint thus:
The third-party complaint is, therefore, a procedural device whereby a third party who is neither a party nor
privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the
defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for
contribution, indemnity, subrogation or any other relief, in respect of the plaintiffs claim. The third-party
complaint is actually independent of and separate and distinct from the plaintiffs complaint. Were it not for this
provision of the Rules of Court, it would have to be filed independently and separately from the original
complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party
defendant or so to speak, to litigate his separate cause of action in respect of plaintiffs claim against a third-
party in the original and principal case with the object of avoiding circuitry of action and unnecessary
proliferation of law suits and of disposing expeditiously in one litigation the entire subject matter arising from
one particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of
carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally
denies. In other words, BA and PAL are blaming each other for the incident.

In resolving this issue, it is worth observing that the contract of air transportation was exclusively between
Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the formers journey to PAL, as its
subcontractor or agent. In fact, the fourth paragraph of the Conditions of Contracts of the ticket[32] issued by
BA to Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay.

4. x x x carriage to be performed hereunder by several successive carriers is regarded as a single operation.

Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to
Hongkong acted as the agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also
responsible for any negligence in the performance of its function[33] and is liable for damages which the
principal may suffer by reason of its negligent act.[34] Hence, the Court of Appeals erred when it opined that
BA, being the principal, had no cause of action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association
(IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other
matters pertaining to their relationship.[35] Therefore, in the instant case, the contractual relationship between
BA and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed
ticket, and the latter the agent.

Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German Airlines v. Court
of Appeals.[36] In that case, Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip
aboard different airlines. Unfortunately, Air Kenya, one of the airlines which was to carry Antiporda to a
specific destination bumped him off.

An action for damages was filed against Lufthansa which, however, denied any liability, contending that its
responsibility towards its passenger is limited to the occurrence of a mishap on its own line. Consequently,
when Antiporda transferred to Air Kenya, its obligation as a principal in the contract of carriage ceased; from
there on, it merely acted as a ticketing agent for Air Kenya.

In rejecting Lufthansas argument, we ruled:

In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda
and remains to be so, regardless of those instances when actual carriage was to be performed by various
carriers. The issuance of confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip
aboard successive carriers concretely attest to this.

Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and
not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from
any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals,[37] while not exactly in
point, the case, however, illustrates the principle which governs this particular situation. In that case, we
recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or
omission in the performance of its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of
ultimately determining who was primarily at fault as between them, is without legal basis. After all, such
proceeding is in accord with the doctrine against multiplicity of cases which would entail receiving the same or
similar evidence for both cases and enforcing separate judgments therefor. It must be borne in mind that the
purpose of a third-party complaint is precisely to avoid delay and circuity of action and to enable the
controversy to be disposed of in one suit.[38] It is but logical, fair and equitable to allow BA to sue PAL for
indemnification, if it is proven that the latters negligence was the proximate cause of Mahtanis unfortunate
experience, instead of totally absolving PAL from any liability.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 43309 dated
September 7, 1995 is hereby MODIFIED, reinstating the third-party complaint filed by British Airways dated
November 9, 1990 against Philippine Airlines. No costs.

SO ORDERED.

[G.R. No. 116044-45. March 9, 2000]
AMERICAN AIRLINES, petitioner,
vs.
COURT OF APPEALS, HON. BERNARDO LL. SALAS and DEMOCRITO MENDOZA, respondents.
Oldmis o
DECISION
GONZAGA_REYES, J.:
Before us is a petition for review of the decision dated December 24, 1993 rendered by the Court of Appeals
in the consolidated cases docketed as CA-G.R. SP nos. 30946 and 31452 entitled American Airlines vs. The
Presiding Judge Branch 8 of the Regional Trial Court of Cebu and Democrito Mendoza, petitions for certiorari
and prohibition. In SP no. 30946, the petitioner assails the trial courts order denying the petitioners motion to
dismiss the action for damages filed by the private respondent for lack of jurisdiction under section 28 (1) of
the Warsaw Convention; and in SP No. 31452 the petitioner challenges the validity of the trial courts order
striking off the record the deposition of the petitioners security officer taken in Geneva, Switzerland for failure
of the said security officer to answer the cross interrogatories propounded by the private respondent. Ncm
The sole issue raised in SP No. 30946 is the questioned jurisdiction of the Regional Trial Court of Cebu to
take cognizance of the action for damages filed by the private respondent against herein petitioner in view of
Art 28 (1) of the Warsaw Convention.[1] It is undisputed that the private respondent purchased from
Singapore Airlines in Manila conjunction tickets for Manila - Singapore - Athens - Larnaca - Rome - Turin -
Zurich - Geneva - Copenhagen - New York. The petitioner was not a participating airline in any of the
segments in the itinerary under the said conjunction tickets. In Geneva the petitioner decided to forego his trip
to Copenhagen and to go straight to New York and in the absence of a direct flight under his conjunction
tickets from Geneva to New York, the private respondent on June 7, 1989 exchanged the unused portion of
the conjunction ticket for a one-way ticket from Geneva to New York from the petitioner airline. Petitioner
issued its own ticket to the private respondent in Geneva and claimed the value of the unused portion of the
conjunction ticket from the IATA[2] clearing house in Geneva. Ncmmis
In September 1989, private respondent filed an action for damages before the regional trial court of Cebu for
the alleged embarassment and mental anguish he suffered at the Geneva Airport when the petitioners
security officers prevented him from boarding the plane, detained him for about an hour and allowed him to
board the plane only after all the other passengers have boarded. The petitioner filed a motion to dismiss for
lack of jurisdiction of Philippine courts to entertain the said proceedings under Art. 28 (1) of the Warsaw
Convention. The trial court denied the motion. The order of denial was elevated to the Court of Appeals which
affirmed the ruling of the trial court. Both the trial and that appellate courts held that the suit may be brought in
the Philippines under the pool partnership agreement among the IATA members, which include Singapore
Airlines and American Airlines, wherein the members act as agents of each other in the issuance of tickets to
those who may need their services. The contract of carriage perfected in Manila between the private
respondent and Singapore Airlines binds the petitioner as an agent of Singapore Airlines and considering that
the petitioner has a place of business in Manila, the third option of the plaintiff under the Warsaw Convention
i.e. the action may be brought in the place where the contract was perfected and where the airline has a place
of business, is applicable. Hence this petition assailing the order upholding the jurisdiction of Philippine courts
over the instant action. Scnc m
Both parties filed simultaneous memoranda pursuant to the resolution of this Court giving due course to the
petition.
The petitioners theory is as follows: Under Art 28 (1) of the Warsaw convention an action for damages must
be brought at the option of the plaintiff either before the court of the 1) domicile of the carrier; 2) the carriers
principal place of business; 3) the place where the carrier has a place of business through which the contract
was made; 4) the place of destination. The petitioner asserts that the Philippines is neither the domicile nor
the principal place of business of the defendant airline; nor is it the place of destination. As regards the third
option of the plaintiff, the petitioner contends that since the Philippines is not the place where the contract of
carriage was made between the parties herein, Philippine courts do not have jurisdiction over this action for
damages. The issuance of petitioners own ticket in Geneva in exchange for the conjunction ticket issued by
Singapore Airlines for the final leg of the private respondents trip gave rise to a separate and distinct contract
of carriage from that entered into by the private respondent with Singapore Airlines in Manila. Petitioner lays
stress on the fact that the plane ticket for a direct flight from Geneva to New York was purchased by the
private respondent from the petitioner by "exchange and cash" which signifies that the contract of carriage
with Singapore Airlines was terminated and a second contract was perfected. Moreover, the second contract
of carriage cannot be deemed to have been an extension of the first as the petitioner airline is not a
participating airline in any of the destinations under the first contract. The petitioner claims that the private
respondents argument that the petitioner is bound under the IATA Rules as agent of the principal airline is
irrelevant and the alleged bad faith of the airline does not remove the case from the applicability of the
Warsaw Convention. Further, the IATA Rule cited by the private respondent which is admittedly printed on the
ticket issued by the petitioner to him which states, "An air carrier issuing a ticket for carriage over the lines of
another carrier does so only as its agent" does not apply herein, as neither Singapore Airlines nor the
petitioner issued a ticket to the private respondent covering the route of the other. Since the conjunction
tickets issued by Singapore Airlines do not include the route covered by the ticket issued by the petitioner, the
petitioner airline submits that it did not act as an agent of Singapore Airlines. Sdaa miso
Private respondent controverts the applicability of the Warsaw Convention in this case. He posits that under
Article 17 of the Warsaw Convention[3] a carrier may be held liable for damages if the "accident" occurred on
board the airline or in the course of "embarking or disembarking" from the carrier and that under Article 25 (1)
[4] thereof the provisions of the convention will not apply if the damage is caused by the "willful misconduct" of
the carrier. He argues that his cause of action is based on the incident at the pre-departure area of the
Geneva airport and not during the process of embarking nor disembarking from the carrier and that security
officers of the petitioner airline acted in bad faith. Accordingly, this case is released from the terms of the
Convention. Private respondent argues that assuming that the convention applies, his trip to nine cities in
different countries performed by different carriers under the conjunction tickets issued in Manila by Singapore
Airlines is regarded as a single transaction; as such the final leg of his trip from Geneva to New York with the
petitioner airline is part and parcel of the original contract of carriage perfected in Manila. Thus, the third
option of the plaintiff under Art. 28 (1) e.g., where the carrier has a place of business through which the
contract of carriage was made, applies herein and the case was properly filed in the Philippines. The private
respondent seeks affirmance of the ruling of the lower courts that the petitioner acted as an agent of
Singapore Airlines under the IATA Rules and as an agent of the principal carrier the petitioner may be held
liable under the contract of carriage perfected in Manila, citing the judicial admission made by the petitioner
that it claimed the value of the unused portion of the private respondents conjunction tickets from the IATA
Clearing House in Geneva where the accounts of both airlines are respectively credited and debited.
Accordingly, the petitioner cannot now deny the contract of agency with Singapore Airlines after it honored the
conjunction tickets issued by the latter. Sdaad
The petition is without merit.
The Warsaw Convention to which the Republic of the Philippines is a party and which has the force and effect
of law in this country applies to all international transportation of persons, baggage or goods performed by an
aircraft gratuitously or for hire.[5] As enumerated in the Preamble of the Convention, one of the objectives is
"to regulate in a uniform manner the conditions of international transportation by air".[6] The contract of
carriage entered into by the private respondent with Singapore Airlines, and subsequently with the petitioner,
to transport him to nine cities in different countries with New York as the final destination is a contract of
international transportation and the provisions of the Convention automatically apply and exclusively govern
the rights and liabilities of the airline and its passengers.[7] This includes section 28 (1) which enumerates the
four places where an action for damages may be brought. Scs daad
The threshold issue of jurisdiction of Philippine courts under Art 28 (1) must first be resolved before any
pronouncements may be made on the liability of the carrier thereunder.[8] The objections raised by the private
respondent that this case is released from the terms of the Convention because the incident on which this
action is predicated did not occur in the process of embarking and disembarking from the carrier under Art
17[9] and that the employees of the petitioner airline acted with malice and bad faith under Art 25 (1)[10]
pertain to the merits of the case which may be examined only if the action has first been properly commenced
under the rules on jurisdiction set forth in Art. 28 (1).
Art (28) (1) of the Warsaw Convention states: Sup rema
The quoted provisions of the Warsaw Convention Art. 1(3) clearly states that a contract of air transportation is
taken as a single operation whether it is founded on a single contract or a series of contracts. The number of
tickets issued does not detract from the oneness of the contract of carriage as long as the parties regard the
contract as a single operation. The evident purpose underlying this Article is to promote international air travel
by facilitating the procurement of a series of contracts for air transportation through a single principal and
obligating different airlines to be bound by one contract of transportation. Petitioners acquiescence to take the
place of the original designated carrier binds it under the contract of carriage entered into by the private
respondent and Singapore Airlines in Manila. Juris sc
The third option of the plaintiff under Art 28 (1) of the Warsaw Convention e.g., to sue in the place of business
of the carrier wherein the contract was made, is therefore, Manila, and Philippine courts are clothed with
jurisdiction over this case. We note that while this case was filed in Cebu and not in Manila the issue of venue
is no longer an issue as the petitioner is deemed to have waived it when it presented evidence before the trial
court.

Art 28 (1) An action for damages must be brought at the option of the plaintiff, in the territory of one of the
High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of
business or where he has a place of business through which the contract has been made, or before the court
at the place of destination.
There is no dispute that petitioner issued the ticket in Geneva which was neither the domicile nor the principal
place of business of petitioner nor the respondents place of destination.
The question is whether the contract of transportation between the petitioner and the private respondent
would be considered as a single operation and part of the contract of transportation entered into by the latter
with Singapore Airlines in Manila.
Petitioner disputes the ruling of the lower court that it is. Petitioners main argument is that the issuance of a
new ticket in Geneva created a contract of carriage separate and distinct from that entered by the private
respondent in Manila.
The issue raised in SP No. 31452 which is whether or not the trial court committed grave abuse of discretion
in ordering the deposition of the petitioners security officer taken in Geneva to be stricken off the record for
failure of the said security officer to appear before the Philippine consul in Geneva to answer the cross-
interrogatories filed by the private respondent does not have to be resolved. The subsequent appearance of
the said security officer before the Philippine consul in Geneva on September 19, 1994 and the answer to the
cross-interrogatories propounded by the private respondent was transmitted to the trial court by the Philippine
consul in Geneva on September 23, 1994[15] should be deemed as full compliance with the requisites of the
right of the private respondent to cross-examine the petitioners witness. The deposition filed by the petitioner
should be reinstated as part of the evidence and considered together with the answer to the cross-
interrogatories.
WHEREFORE, the judgment of the appellate court in CA-G.R. SP No. 30946 is affirmed. The case is ordered
remanded to the court of origin for further proceedings. The decision of the appellate court in CA-G.R. SP. No.
31452 is set aside. The deposition of the petitioners security officer is reinstated as part of the evidence. Misj
uris

We find the petitioners argument without merit. Juris SO ORDERED.

Art 1(3) of the Warsaw Convention which states:

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

The contract of carriage between the private respondent and Singapore Airlines although performed by
different carriers under a series of airline tickets, including that issued by petitioner, constitutes a single
operation. Members of the IATA are under a general pool partnership agreement wherein they act as agent of
each other in the issuance of tickets[11] to contracted passengers to boost ticket sales worldwide and at the
same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the
world. Booking and reservation among airline members are allowed even by telephone and it has become an
accepted practice among them.[12] A member airline which enters into a contract of carriage consisting of a
series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and
through the required process of interline settlement of accounts by way of the IATA clearing house an airline is
duly compensated for the segment of the trip serviced.[13] Thus, when the petitioner accepted the unused
portion of the conjunction tickets, entered it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the conjunction tickets, i.e., Geneva to New York,
the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as agent of the
principal contracting airline, Singapore Airlines, as to the segment of the trip the petitioner agreed to
undertake. As such, the petitioner thereby assumed the obligation to take the place of the carrier originally
designated in the original conjunction ticket. The petitioners argument that it is not a designated carrier in the
original conjunction tickets and that it issued its own ticket is not decisive of its liability. The new ticket was
simply a replacement for the unused portion of the conjunction ticket, both tickets being for the same amount
of US$ 2,760 and having the same points of departure and destination.[14] By constituting itself as an agent
of the principal carrier the petitioners undertaking should be taken as part of a single operation under the
contract of carriage executed by the private respondent and Singapore Airlines in Manila.

CHINA AIRLINES, petitioner,
vs.
DANIEL CHIOK, respondent.
DECISION
PANGANIBAN, J.:
A common carrier has a peculiar relationship with and an exacting responsibility to its passengers. For
reasons of public interest and policy, the ticket-issuing airline acts as principal in a contract of carriage and is
thus liable for the acts and the omissions of any errant carrier to which it may have endorsed any sector of the
entire, continuous trip.
The Case
Before the Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, seeking to
reverse the August 7, 2001 Decision[2] and the February 7, 2002 Resolution[3] of the Court of Appeals (CA) in
CA-GR CV No. 45832. The challenged Decision disposed as follows:
WHEREFORE, premises considered, the assailed Decision dated July 5, 1991 of Branch 31, Regional Trial
Court, National Capital Judicial Region, Manila, in Civil Case No. 82-13690, is hereby MODIFIED by deleting
that portion regarding defendants-appellants liabilities for the payment of the actual damages amounting to
HK$14,128.80 and US$2,000.00 while all other respects are AFFIRMED. Costs against defendants-
appellants.[4]
The assailed Resolution denied Petitioners Motion for Partial Reconsideration.
The Facts
The facts are narrated by the CA[5] as follows:
On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok) purchased from China Airlines, Ltd.
(CAL for brevity) airline passenger ticket number 297:4402:004:278:5 for air transportation covering Manila-
Taipei-Hongkong-Manila. Said ticket was exclusively endorseable to Philippine Airlines, Ltd. (PAL for brevity).
Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei using [the] CAL ticket. Before
he left for said trip, the trips covered by the ticket were pre-scheduled and confirmed by the former. When he
arrived in Taipei, he went to the CAL office and confirmed his Hongkong to Manila trip on board PAL Flight No.
PR 311. The CAL office attached a yellow sticker appropriately indicating that his flight status was OK.
When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight back to Manila.
The PAL office confirmed his return trip on board Flight No. PR 311 and attached its own sticker. On
November 24, 1981, Chiok proceeded to Hongkong International Airport for his return trip to Manila. However,
upon reaching the PAL counter, Chiok saw a poster stating that PAL Flight No. PR 311 was cancelled because
of a typhoon in Manila. He was then informed that all the confirmed ticket holders of PAL Flight No. PR 311
were automatically booked for its next flight, which was to leave the next day. He then informed PAL
personnel that, being the founding director of the Philippine Polysterene Paper Corporation, he ha[d] to reach
Manila on November 25, 1981 because of a business option which he ha[d] to execute on said date.
On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok Chan (hereafter referred to
as Lok) ha[d] taken and received Chioks plane ticket and his luggage. Lok called the attention of Carmen
Chan (hereafter referred to as Carmen), PALs terminal supervisor, and informed the latter that Chioks name
was not in the computer list of passengers. Subsequently, Carmen informed Chiok that his name did not
appear in PALs computer list of passengers and therefore could not be permitted to board PAL Flight No. PR
307.
Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he was not allowed to take his
flight. The latter then wrote the following, to wit: PAL STAFF CARMEN CHAN CHKD WITH R/C KENNY AT
1005H NO SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25 NOV. The latter sought to recover
his luggage but found only 2 which were placed at the end of the passengers line. Realizing that his new
Samsonite luggage was missing, which contained cosmetics worth HK$14,128.80, he complained to Carmen.
Thereafter, Chiok proceeded to PALs Hongkong office and confronted PALs reservation officer, Carie Chao
(hereafter referred to as Chao), who previously confirmed his flight back to Manila. Chao told Chiok that his
name was on the list and pointed to the latter his computer number listed on the PAL confirmation sticker
attached to his plane ticket, which number was R/MN62.
Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5 and asked Chao if this ticket could
be used to book him for the said flight. The latter, once again, booked and confirmed the formers trip, this time
on board PAL Flight No. PR 311 scheduled to depart that evening. Later, Chiok went to the PAL check-in
counter and it was Carmen who attended to him. As this juncture, Chiok had already placed his travel
documents, including his clutch bag, on top of the PAL check-in counter.
Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion, Chiok lost his
clutch bag containing the following, to wit: (a) $2,000.00; (b) HK$2,000.00; (c) Taipei $8,000.00; (d)
P2,000.00; (e) a three-piece set of gold (18 carats) cross pens valued at P3,500; (f) a Cartier watch worth
about P7,500.00; (g) a tie clip with a garnet birthstone and diamond worth P1,800.00; and (h) a [pair of]
Christian Dior reading glasses. Subsequently, he was placed on stand-by and at around 7:30 p.m., PAL
personnel informed him that he could now check-in.
Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for damages, against PAL and CAL,
as defendants, docketed as Civil Case No. 82-13690, with Branch 31, Regional Trial Court, National Capital
Judicial Region, Manila.
He alleged therein that despite several confirmations of his flight, defendant PAL refused to accommodate him
in Flight No. 307, for which reason he lost the business option aforementioned. He also alleged that PALs
personnel, specifically Carmen, ridiculed and humiliated him in the presence of so many people. Further, he
alleged that defendants are solidarily liable for the damages he suffered, since one is the agent of the other.[6]
The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to respondent. It did
not, however, rule on their respective cross-claims. It disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendants to jointly and
severally pay:
1. Actual damages in the amount of HK$14,128.80 or its equivalent in Philippine Currency at the time of the
loss of the luggage consisting of cosmetic products;
2. US$2,000.00 or its equivalent at the time of the loss of the clutch bag containing the money;
3. P200,000.00 by way of moral damages;
4. P50,000.00 by way of exemplary damages or corrective damages;
5. Attorney[]s fees equivalent to 10% of the amounts due and demandable and awarded in favor of the
plaintiff; and
6. The costs of this proceedings.[7]

The two carriers appealed the RTC Decision to the CA.
Ruling of the Court of Appeals
Affirming the RTC, the Court of Appeals debunked petitioners claim that it had merely acted as an issuing
agent for the ticket covering the Hong Kong-Manila leg of respondents journey. In support of its Decision, the
CA quoted a purported ruling of this Court in KLM Royal Dutch Airlines v. Court of Appeals[8] as follows:
Article 30 of the Warsaw providing that in case of transportation to be performed by various successive
carriers, the passenger can take action only against the carrier who performed the transportation during which
the accident or the delay occurred presupposes the occurrence of either an accident or delay in the course of
the air trip, and does not apply if the damage is caused by the willful misconduct on the part of the carriers
employee or agent acting within the scope of his employment.
It would be unfair and inequitable to charge a passenger with automatic knowledge or notice of a condition
which purportedly would excuse the carrier from liability, where the notice is written at the back of the ticket in
letters so small that one has to use a magnifying glass to read the words. To preclude any doubt that the
contract was fairly and freely agreed upon when the passenger accepted the passage ticket, the carrier who
issued the ticket must inform the passenger of the conditions prescribed in the ticket or, in the very least,
ascertain that the passenger read them before he accepted the passage ticket. Absent any showing that the
carriers officials or employees discharged this responsibility to the passenger, the latter cannot be bound by
the conditions by which the carrier assumed the role of a mere ticket-issuing agent for other airlines and
limited its liability only to untoward occurrences in its own lines.
Where the passage tickets provide that the carriage to be performed thereunder by several successive
carriers is to be regarded as a single operation, the carrier which issued the tickets for the entire trip in effect
guaranteed to the passenger that the latter shall have sure space in the various carriers which would ferry him
through the various segments of the trip, and the ticket-issuing carrier assumes full responsibility for the entire
trip and shall be held accountable for the breach of that guaranty whether the breach occurred in its own lines
or in those of the other carriers.[9]
On PALs appeal, the appellate court held that the carrier had reneged on its obligation to transport respondent
when, in spite of the confirmations he had secured for Flight PR 311, his name did not appear in the
computerized list of passengers. Ruling that the airlines negligence was the proximate cause of his
excoriating experience, the appellate court sustained the award of moral and exemplary damages.
The CA, however, deleted the RTCs award of actual damages amounting to HK$14,128.80 and US$2,000.00,
because the lost piece of luggage and clutch bag had not actually been checked in or delivered to PAL for
transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial Reconsideration, contending that the appellate court
had erroneously relied on a mere syllabus of KLM v. CA, not on the actual ruling therein. Moreover, it argued
that respondent was fully aware that the booking for the PAL sector had been made only upon his request;
and that only PAL, not CAL, was liable for the actual carriage of that segment. Petitioner likewise prayed for a
ruling on its cross-claim against PAL, inasmuch as the latters employees had acted negligently, as found by
the trial court.
Denying the Motion, the appellate court ruled that petitioner had failed to raise any new matter or issue that
would warrant a modification or a reversal of the Decision. As to the alleged misquotation, the CA held that
while the portion it had cited appeared to be different from the wording of the actual ruling, the variance was
more apparent than real since the difference [was] only in form and not in substance.[10]
CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3, 2001 Resolution, this Court
denied PALs appeal, docketed as GR No. 149544, for failure to serve the CA a copy of the Petition as
required by Section 3, Rule 45, in relation to Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No.
1-88 of this Court. PALs Motion for Reconsideration was denied with finality on January 21, 2002.
Only the appeal of CAL[11] remains in this Court.
Issues
In its Memorandum, petitioner raises the following issues for the Courts consideration:
1. The Court of Appeals committed judicial misconduct in finding liability against the petitioner on the basis of
a misquotation from KLM Royal Dutch Airlines vs. Court of Appeals, et al., 65 SCRA 237 and in magnifying its
misconduct by denying the petitioners Motion for Reconsideration on a mere syllabus, unofficial at that.
2. The Court of Appeals committed an error of law when it did not apply applicable precedents on the case
before it.
3. The Court of Appeals committed a non sequitur when it did not rule on the cross-claim of the petitioner.[12]
The Courts Ruling
The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for quoting from and basing its ruling against the two
airlines on an unofficial syllabus of this Courts ruling in KLM v. CA. Moreover, such misconduct was allegedly
aggravated when the CA, in an attempt to justify its action, held that the difference between the actual ruling
and the syllabus was more apparent than real.[13]
We agree with petitioner that the CA committed a lapse when it relied merely on the unofficial syllabus of our
ruling in KLM v. CA. Indeed, lawyers and litigants are mandated to quote decisions of this Court accurately.
[14] By the same token, judges should do no less by strictly abiding by this rule when they quote cases that
support their judgments and decisions. Canon 3 of the Code of Judicial Conduct enjoins them to perform
official duties diligently by being faithful to the law and maintaining their professional competence.
However, since this case is not administrative in nature, we cannot rule on the CA justices administrative
liability, if any, for this lapse. First, due process requires that in administrative proceedings, the respondents
must first be given an opportunity to be heard before sanctions can be imposed. Second, the present action is
an appeal from the CAs Decision, not an administrative case against the magistrates concerned. These two
suits are independent of and separate from each other and cannot be mixed in the same proceedings.
By merely including the lapse as an assigned error here without any adequate and proper administrative case
therefor, petitioner cannot expect the imposition of an administrative sanction.
In the case at bar, we can only determine whether the error in quotation would be sufficient to reverse or
modify the CA Decision.
Applicability of KLM v. CA
In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for their world tour. The tour
included a Barcelona-Lourdes route, which was serviced by the Irish airline Aer Lingus. At the KLM office in
Frankfurt, Germany, they obtained a confirmation from Aer Lingus of their seat reservations on its Flight 861.
On the day of their departure, however, the airline rudely off-loaded them.
When sued for breach of contract, KLM sought to be excused for the wrongful conduct of Aer Lingus by
arguing that its liability for damages was limited only to occurrences on its own sectors. To support its
argument, it cited Article 30 of the Warsaw Convention, stating that when transportation was to be performed
by various successive carriers, the passenger could take action only against the carrier that had performed
the transportation when the accident or delay occurred.
In holding KLM liable for damages, we ruled as follows:
1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be sustained.
That article presupposes the occurrence of either an accident or a delay, neither of which took place at the
Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to
transport the respondents to their planned and contracted destination.
2. The argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus because
of the provision printed on the respondents' tickets expressly limiting the KLM's liability for damages only to
occurrences on its own lines is unacceptable. As noted by the Court of Appeals that condition was printed in
letters so small that one would have to use a magnifying glass to read the words. Under the circumstances, it
would be unfair and inequitable to charge the respondents with automatic knowledge or notice of the said
condition so as to preclude any doubt that it was fairly and freely agreed upon by the respondents when they
accepted the passage tickets issued to them by the KLM. As the airline which issued those tickets with the
knowledge that the respondents would be flown on the various legs of their journey by different air carriers,
the KLM was chargeable with the duty and responsibility of specifically informing the respondents of
conditions prescribed in their tickets or, in the very least, to ascertain that the respondents read them before
they accepted their passage tickets. A thorough search of the record, however, inexplicably fails to show that
any effort was exerted by the KLM officials or employees to discharge in a proper manner this responsibility to
the respondents. Consequently, we hold that the respondents cannot be bound by the provision in question by
which KLM unilaterally assumed the role of a mere ticket-issuing agent for other airlines and limited its liability
only to untoward occurrences on its own lines.
3. Moreover, as maintained by the respondents and the Court of Appeals, the passage tickets of the
respondents provide that the carriage to be performed thereunder by several successive carriers is to be
regarded as a single operation, which is diametrically incompatible with the theory of the KLM that the
respondents entered into a series of independent contracts with the carriers which took them on the various
segments of their trip. This position of KLM we reject. The respondents dealt exclusively with the KLM which
issued them tickets for their entire trip and which in effect guaranteed to them that they would have sure
space in Aer Lingus flight 861. The respondents, under that assurance of the internationally prestigious KLM,
naturally had the right to expect that their tickets would be honored by Aer Lingus to which, in the legal sense,
the KLM had indorsed and in effect guaranteed the performance of its principal engagement to carry out the
respondents' scheduled itinerary previously and mutually agreed upon between the parties.
4. The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of an official
of the Aer Lingus which the KLM had engaged to transport the respondents on the Barcelona-Lourdes
segment of their itinerary. It is but just and in full accord with the policy expressly embodied in our civil law
which enjoins courts to be more vigilant for the protection of a contracting party who occupies an inferior
position with respect to the other contracting party, that the KLM should be held responsible for the abuse,
injury and embarrassment suffered by the respondents at the hands of a supercilious boor of the Aer Lingus.
[15]
In the instant case, the CA ruled that under the contract of transportation, petitioner -- as the ticket-issuing
carrier (like KLM) -- was liable regardless of the fact that PAL was to perform or had performed the actual
carriage. It elucidated on this point as follows:
By the very nature of their contract, defendant-appellant CAL is clearly liable under the contract of carriage
with [respondent] and remains to be so, regardless of those instances when actual carriage was to be
performed by another carrier. The issuance of a confirmed CAL ticket in favor of [respondent] covering his
entire trip abroad concretely attests to this. This also serves as proof that defendant-appellant CAL, in effect
guaranteed that the carrier, such as defendant-appellant PAL would honor his ticket, assure him of a space
therein and transport him on a particular segment of his trip.[16]
Notwithstanding the errant quotation, we have found after careful deliberation that the assailed Decision is
supported in substance by KLM v. CA. The misquotation by the CA cannot serve as basis for the reversal of
its ruling.
Nonetheless, to avert similar incidents in the future, this Court hereby exhorts members of the bar and the
bench to refer to and quote from the official repository of our decisions, the Philippine Reports, whenever
practicable.[17] In the absence of this primary source, which is still being updated, they may resort to
unofficial sources like the SCRA.[18] We remind them that the Courts ponencia, when used to support a
judgment or ruling, should be quoted accurately.[19]
Second Issue:
Liability of the Ticket-Issuing Airline
We now come to the main issue of whether CAL is liable for damages. Petitioner posits that the CA Decision
must be annulled, not only because it was rooted on an erroneous quotation, but also because it disregarded
jurisprudence, notably China Airlines v. Intermediate Appellate Court[20] and China Airlines v. Court of
Appeals.[21]
Jurisprudence Supports
CA Decision
It is significant to note that the contract of air transportation was between petitioner and respondent, with the
former endorsing to PAL the Hong Kong-to-Manila segment of the journey. Such contract of carriage has
always been treated in this jurisdiction as a single operation. This jurisprudential rule is supported by the
Warsaw Convention,[22] to which the Philippines is a party, and by the existing practices of the International
Air Transport Association (IATA).
Article 1, Section 3 of the Warsaw Convention states:
Transportation to be performed by several successive air carriers shall be deemed, for the purposes of this
Convention, to be one undivided transportation, if it has been regarded by the parties as a single operation,
whether it has been agreed upon under the form of a single contract or of a series of contracts, and it shall not
lose its international character merely because one contract or a series of contracts is to be performed entirely
within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting
Party.[23]
Article 15 of IATA-Recommended Practice similarly provides:
Carriage to be performed by several successive carriers under one ticket, or under a ticket and any
conjunction ticket issued therewith, is regarded as a single operation.
In American Airlines v. Court of Appeals,[24] we have noted that under a general pool partnership agreement,
the ticket-issuing airline is the principal in a contract of carriage, while the endorsee-airline is the agent.
x x x Members of the IATA are under a general pool partnership agreement wherein they act as agent of each
other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time
provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world.
Booking and reservation among airline members are allowed even by telephone and it has become an
accepted practice among them. A member airline which enters into a contract of carriage consisting of a
series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and
through the required process of interline settlement of accounts by way of the IATA clearing house an airline is
duly compensated for the segment of the trip serviced. Thus, when the petitioner accepted the unused portion
of the conjunction tickets, entered it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the conjunction tickets, i.e., Geneva to New York,
the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as agent of the
principal contracting airline, Singapore Airlines, as to the segment of the trip the petitioner agreed to
undertake. As such, the petitioner thereby assumed the obligation to take the place of the carrier originally
designated in the original conjunction ticket. The petitioners argument that it is not a designated carrier in the
original conjunction tickets and that it issued its own ticket is not decisive of its liability. The new ticket was
simply a replacement for the unused portion of the conjunction ticket, both tickets being for the same amount
of US$ 2,760 and having the same points of departure and destination. By constituting itself as an agent of
the principal carrier the petitioners undertaking should be taken as part of a single operation under the
contract of carriage executed by the private respondent and Singapore Airlines in Manila.[25]
Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court of Appeals[26]
was held liable, even when the breach of contract had occurred, not on its own flight, but on that of another
airline. The Decision followed our ruling in Lufthansa German Airlines v. Court of Appeals,[27] in which we had
held that the obligation of the ticket-issuing airline remained and did not cease, regardless of the fact that
another airline had undertaken to carry the passengers to one of their destinations.
In the instant case, following the jurisprudence cited above, PAL acted as the carrying agent of CAL. In the
same way that we ruled against British Airways and Lufthansa in the aforementioned cases, we also rule that
CAL cannot evade liability to respondent, even though it may have been only a ticket issuer for the Hong
Kong-Manila sector.
Moral and Exemplary Damages
Both the trial and the appellate courts found that respondent had satisfactorily proven the existence of the
factual basis for the damages adjudged against petitioner and PAL. As a rule, the findings of fact of the CA
affirming those of the RTC will not be disturbed by this Court.[28] Indeed, the Supreme Court is not a trier of
facts. As a rule also, only questions of law -- as in the present recourse -- may be raised in petitions for review
under Rule 45.
Moral damages cannot be awarded in breaches of carriage contracts, except in the two instances
contemplated in Articles 1764 and 2220 of the Civil Code, which we quote:
Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of
this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the
breach of contract by a common carrier.
xxxxxxxxx
Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should
find that, under the circumstances, such damages are justly due. The same rule applies to breaches of
contract where the defendant acted fraudulently or in bad faith. (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We must therefore determine if CAL or its agent (PAL)
is guilty of bad faith that would entitle respondent to moral damages.
In Lopez v. Pan American World Airways,[29] we defined bad faith as a breach of a known duty through some
motive of interest or ill will.
In the case at bar, the known duty of PAL was to transport herein respondent from Hong Kong to Manila. That
duty arose when its agent confirmed his reservation for Flight PR 311,[30] and it became demandable when
he presented himself for the trip on November 24, 1981.
It is true that due to a typhoon, PAL was unable to transport respondent on Flight PR 311 on November 24,
1981. This fact, however, did not terminate the carriers responsibility to its passengers. PAL voluntarily
obligated itself to automatically transfer all confirmed passengers of PR 311 to the next available flight, PR
307, on the following day.[31] That responsibility was subsisting when respondent, holding a confirmed ticket
for the former flight, presented himself for the latter.
The records amply establish that he secured repeated confirmations of his PR 311 flight on November 24,
1981. Hence, he had every reason to expect that he would be put on the replacement flight as a confirmed
passenger. Instead, he was harangued and prevented from boarding the original and the replacement flights.
Thus, PAL breached its duty to transport him. After he had been directed to pay the terminal fee, his pieces of
luggage were removed from the weighing-in counter despite his protestations.[32]
It is relevant to point out that the employees of PAL were utterly insensitive to his need to be in Manila on
November 25, 1981, and to the likelihood that his business affairs in the city would be jeopardized because of
a mistake on their part. It was that mistake that had caused the omission of his name from the passenger list
despite his confirmed flight ticket. By merely looking at his ticket and validation sticker, it is evident that the
glitch was the airlines fault. However, no serious attempt was made by PAL to secure the all-important
transportation of respondent to Manila on the following day. To make matters worse, PAL allowed a group of
non-revenue passengers, who had no confirmed tickets or reservations, to board Flight PR 307.[33]
Time and time again, this Court has stressed that the business of common carriers is imbued with public
interest and duty; therefore, the law governing them imposes an exacting standard.[34] In Singson v. Court of
Appeals,[35] we said:
x x x [T]he carrier's utter lack of care and sensitivity to the needs of its passengers, clearly constitutive of
gross negligence, recklessness and wanton disregard of the rights of the latter, [are] acts evidently
indistinguishable or no different from fraud, malice and bad faith. As the rule now stands, where in breaching
the contract of carriage the defendant airline is shown to have acted fraudulently, with malice or in bad faith,
the award of moral and exemplary damages, in addition to actual damages, is proper.[36] (Italics supplied)
In Saludo v. Court of Appeals,[37] the Court reminded airline companies that due to the nature of their
business, they must not merely give cursory instructions to their personnel to be more accommodating
towards customers, passengers and the general public; they must require them to be so.
The acts of PALs employees, particularly Chan, clearly fell short of the extraordinary standard of care that the
law requires of common carriers.[38] As narrated in Chans oral deposition,[39] the manner in which the airline
discharged its responsibility to respondent and its other passengers manifested a lack of the requisite
diligence and due regard for their welfare. The pertinent portions of the Oral Deposition are reproduced as
follows:
Q Now you said that flight PR 311 on 24th November was cancelled due to [a] typhoon and naturally the
passengers on said flight had to be accommodated on the first flight the following day or the first flight
subsequently. [W]ill you tell the Honorable Deposition Officer the procedure followed by Philippine Airlines in
the handling of passengers of cancelled flight[s] like that of PR 311 which was cancelled due to [a] typhoon?
A The procedure will be: all the confirmed passengers from [PR] 311 24th November [are] automatically
transfer[red] to [PR] 307, 25th November[,] as a protection for all disconfirmed passengers.
Q Aside from this procedure[,] what do you do with the passengers on the cancelled flight who are expected
to check-in on the flights if this flight is cancelled or not operating due to typhoon or other reasons[?] In other
words, are they not notified of the cancellation?
A I think all these passengers were not notified because of a typhoon and Philippine Airlines Reservation were
[sic] not able to call every passenger by phone.
Atty. Fruto:
Q Did you say were not notified?
A I believe they were not, but believe me, I was on day-off.
Atty. Calica:
Q Per procedure, what should have been done by Reservations Office when a flight is cancelled for one
reason or another?
A If there is enough time, of course, Reservations Office x x x call[s] up all the passengers and tell[s] them the
reason. But if there [is] no time[,] then the Reservations Office will not be able to do that.[40]
xxxxxxxxx
Q I see. Miss Chan, I [will] show you a ticket which has been marked as Exh. A and A-1. Will you please go
over this ticket and tell the court whether this is the ticket that was used precisely by Mr. Chiok when he
checked-in at [F]light 307, 25 November 81?
A [Are you] now asking me whether he used this ticket with this sticker?
Q No, no, no. That was the ticket he used.
A Yes, [are you] asking me whether I saw this ticket?
Atty. Fruto: Yes.
A I believe I saw it.
Q You saw it, O.K. Now of course you will agree with me Miss Chan that this yellow stub here which has been
marked as Exh. A-1-A, show[s] that the status on flight 311, 24th November, is O.K., correct?
A Yes.
Q You agree with me. And you will also agree with me that in this ticket of flight 311, on this, another sticker
Exh. A-1-B for 24 November is O.K.?
A May I x x x look at them. Yes, it says O.K. x x x, but [there is] no validation.
Q O.K. Miss Chan what do you understand by these entries here R bar M N 6 V?[41]
A This is what we call a computer reference.
Q I see. This is a computer reference showing that the name of Mr. Chiok has been entered in Philippine
Airlines computer, and this is his computer number.
A Yes.
Q Now you stated in your answer to the procedure taken, that all confirmed passengers on flight 311, 24
November[,] were automatically transferred to 307 as a protection for the passengers, correct?
A Correct.

Q So that since following the O.K. status of Mr. Chioks reservation [on] flight 311, [he] was also automatically
transferred to flight 307 the following day?
A Should be.
Q Should be. O.K. Now do you remember how many passengers x x x were transferred from flight 311, 24
November to flight 307, 25 November 81?
A I can only give you a very brief idea because that was supposed to be air bus so it should be able to
accommodate 246 people; but how many [exactly], I dont know.[42]
xxxxxxxxx
Q So, between six and eight oclock in the evening of 25 November 81, Mr. Chiok already told you that he just
[came] from the Swire Building where Philippine Airlines had [its] offices and that he told you that his space for
311 25 November 81 was confirmed?
A Yes.
Q That is what he told you. He insisted on that flight?
A Yes.
Q And did you not try to call up Swire Building-- Philippine Airlines and verify indeed if Mr. Chiok was there?
A Swire House building is not directly under Philippine Airlines. it is just an agency for selling Philippine
Airlines ticket. And besides around six o clock theyre close[d] in Central.
Q So this Swire Building is an agency authorized by Philippine Airlines to issue tickets for and on behalf of
Philippine Airlines and also...
A Yes.
Q And also to confirm spaces for and on behalf of Philippine Airlines.
A Yes.[43]
Under the foregoing circumstances, we cannot apply our 1989 ruling in China Airlines v. Intermediate
Appellate Court,[44] which petitioner urges us to adopt. In that case, the breach of contract and the
negligence of the carrier in effecting the immediate flight connection for therein private respondent was
incurred in good faith.[45] Having found no gross negligence or recklessness, we thereby deleted the award
of moral and exemplary damages against it.[46]
This Courts 1992 ruling in China Airlines v. Court of Appeals[47] is likewise inapplicable. In that case, we
found no bad faith or malice in the airlines breach of its contractual obligation.[48] We held that, as shown by
the flow of telexes from one of the airlines offices to the others, petitioner therein had exercised diligent efforts
in assisting the private respondent change his flight schedule. In the instant case, petitioner failed to exhibit
the same care and sensitivity to respondents needs.
In Singson v. Court of Appeals,[49] we said:
x x x Although the rule is that moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the mishap results in the death of a passenger, or where the carrier is guilty of
fraud or bad faith, there are situations where the negligence of the carrier is so gross and reckless as to
virtually amount to bad faith, in which case, the passenger likewise becomes entitled to recover moral
damages.
In the present case, we stress that respondent had repeatedly secured confirmations of his PR 311 flight on
November 24, 1981 -- initially from CAL and subsequently from the PAL office in Hong Kong. The status of
this flight was marked OK on a validating sticker placed on his ticket. That sticker also contained the entry
RMN6V. Ms Chan explicitly acknowledged that such entry was a computer reference that meant that
respondents name had been entered in PALs computer.
Since the status of respondent on Flight PR 311 was OK, as a matter of right testified to by PALs witness, he
should have been automatically transferred to and allowed to board Flight 307 the following day. Clearly
resulting from negligence on the part of PAL was its claim that his name was not included in its list of
passengers for the November 24, 1981 PR 311 flight and, consequently, in the list of the replacement flight
PR 307. Since he had secured confirmation of his flight -- not only once, but twice -- by personally going to the
carriers offices where he was consistently assured of a seat thereon -- PALs negligence was so gross and
reckless that it amounted to bad faith.
In view of the foregoing, we rule that moral and exemplary[50] damages were properly awarded by the lower
courts.[51]
Third Issue:
Propriety of the Cross-Claim
We now look into the propriety of the ruling on CALs cross-claim against PAL. Petitioner submits that the CA
should have ruled on the cross-claim, considering that the RTC had found that it was PALs employees who
had acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:
Sec. 8. Cross-claim. - A cross claim is any claim by one party against a co-party arising out of the transaction
or occurrence that is the subject matter either of the original action or of a counterclaim therein. Such cross-
claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant
for all or part of a claim asserted in the action against the cross-claimant.
For purposes of a ruling on the cross-claim, PAL is an indispensable party. In BA Finance Corporation v. CA,
[52] the Court stated:
x x x. An indispensable party is one whose interest will be affected by the courts action in the litigation, and
without whom no final determination of the case can be had. The partys interest in the subject matter of the
suit and in the relief sought are so inextricably intertwined with the other parties that his legal presence as a
party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of
the parties before the court which is effective, complete, or equitable.
xxxxxxxxx
Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real
finality.
PALs interest may be affected by any ruling of this Court on CALs cross-claim. Hence, it is imperative and in
accordance with due process and fair play that PAL should have been impleaded as a party in the present
proceedings, before this Court can make a final ruling on this matter.
Although PAL was petitioners co-party in the case before the RTC and the CA, petitioner failed to include the
airline in the present recourse. Hence, the Court has no jurisdiction over it. Consequently, to make any ruling
on the cross-claim in the present Petition would not be legally feasible because PAL, not being a party in the
present case, cannot be bound thereby.[53]
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.

CATHAY PACIFIC AIRWAYS, LTD., petitioner,
vs.
SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL VAZQUEZ, respondents.
DECISION
DAVIDE, JR., C.J.:
Is an involuntary upgrading of an airline passengers accommodation from one class to a more superior class
at no extra cost a breach of contract of carriage that would entitle the passenger to an award of damages?
This is a novel question that has to be resolved in this case.
The facts in this case, as found by the Court of Appeals and adopted by petitioner Cathay Pacific Airways,
Ltd., (hereinafter Cathay) are as follows:
Cathay is a common carrier engaged in the business of transporting passengers and goods by air. Among the
many routes it services is the Manila-Hongkong-Manila course. As part of its marketing strategy, Cathay
accords its frequent flyers membership in its Marco Polo Club. The members enjoy several privileges, such as
priority for upgrading of booking without any extra charge whenever an opportunity arises. Thus, a frequent
flyer booked in the Business Class has priority for upgrading to First Class if the Business Class Section is
fully booked.
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are frequent flyers of
Cathay and are Gold Card members of its Marco Polo Club. On 24 September 1996, the Vazquezes, together
with their maid and two friends Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for pleasure and
business.
For their return flight to Manila on 28 September 1996, they were booked on Cathays Flight CX-905, with
departure time at 9:20 p.m. Two hours before their time of departure, the Vazquezes and their companions
checked in their luggage at Cathays check-in counter at Kai Tak Airport and were given their respective
boarding passes, to wit, Business Class boarding passes for the Vazquezes and their two friends, and
Economy Class for their maid. They then proceeded to the Business Class passenger lounge.
When boarding time was announced, the Vazquezes and their two friends went to Departure Gate No. 28,
which was designated for Business Class passengers. Dr. Vazquez presented his boarding pass to the
ground stewardess, who in turn inserted it into an electronic machine reader or computer at the gate. The
ground stewardess was assisted by a ground attendant by the name of Clara Lai Han Chiu. When Ms. Chiu
glanced at the computer monitor, she saw a message that there was a seat change from Business Class to
First Class for the Vazquezes.
Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes accommodations were upgraded to First
Class. Dr. Vazquez refused the upgrade, reasoning that it would not look nice for them as hosts to travel in
First Class and their guests, in the Business Class; and moreover, they were going to discuss business
matters during the flight. He also told Ms. Chiu that she could have other passengers instead transferred to
the First Class Section. Taken aback by the refusal for upgrading, Ms. Chiu consulted her supervisor, who told
her to handle the situation and convince the Vazquezes to accept the upgrading. Ms. Chiu informed the latter
that the Business Class was fully booked, and that since they were Marco Polo Club members they had the
priority to be upgraded to the First Class. Dr. Vazquez continued to refuse, so Ms. Chiu told them that if they
would not avail themselves of the privilege, they would not be allowed to take the flight. Eventually, after
talking to his two friends, Dr. Vazquez gave in. He and Mrs. Vazquez then proceeded to the First Class Cabin.
Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to Cathays Country
Manager, demanded that they be indemnified in the amount of P1million for the humiliation and
embarrassment caused by its employees. They also demanded a written apology from the management of
Cathay, preferably a responsible person with a rank of no less than the Country Manager, as well as the
apology from Ms. Chiu within fifteen days from receipt of the letter.
In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathays Country Manager Argus Guy
Robson, informed the Vazquezes that Cathay would investigate the incident and get back to them within a
weeks time.
On 8 November 1996, after Cathays failure to give them any feedback within its self-imposed deadline, the
Vazquezes instituted before the Regional Trial Court of Makati City an action for damages against Cathay,
praying for the payment to each of them the amounts of P250,000 as temperate damages; P500,000 as moral
damages; P500,000 as exemplary or corrective damages; and P250,000 as attorneys fees.
In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that they preferred to stay in
Business Class, Ms. Chiu obstinately, uncompromisingly and in a loud, discourteous and harsh voice
threatened that they could not board and leave with the flight unless they go to First Class, since the Business
Class was overbooked. Ms. Chius loud and stringent shouting annoyed, embarrassed, and humiliated them
because the incident was witnessed by all the other passengers waiting for boarding. They also claimed that
they were unjustifiably delayed to board the plane, and when they were finally permitted to get into the
aircraft, the forward storage compartment was already full. A flight stewardess instructed Dr. Vazquez to put
his roll-on luggage in the overhead storage compartment. Because he was not assisted by any of the crew in
putting up his luggage, his bilateral carpal tunnel syndrome was aggravated, causing him extreme pain on his
arm and wrist. The Vazquezes also averred that they belong to the uppermost and absolutely top elite of both
Philippine Society and the Philippine financial community, [and that] they were among the wealthiest persons
in the Philippine[s].
In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade passengers to the
next better class of accommodation, whenever an opportunity arises, such as when a certain section is fully
booked. Priority in upgrading is given to its frequent flyers, who are considered favored passengers like the
Vazquezes. Thus, when the Business Class Section of Flight CX-905 was fully booked, Cathays computer
sorted out the names of favored passengers for involuntary upgrading to First Class. When Ms. Chiu informed
the Vazquezes that they were upgraded to First Class, Dr. Vazquez refused. He then stood at the entrance of
the boarding apron, blocking the queue of passengers from boarding the plane, which inconvenienced other
passengers. He shouted that it was impossible for him and his wife to be upgraded without his two friends
who were traveling with them. Because of Dr. Vazquezs outburst, Ms. Chiu thought of upgrading the traveling
companions of the Vazquezes. But when she checked the computer, she learned that the Vazquezes
companions did not have priority for upgrading. She then tried to book the Vazquezes again to their original
seats. However, since the Business Class Section was already fully booked, she politely informed Dr.
Vazquez of such fact and explained that the upgrading was in recognition of their status as Cathays valued
passengers. Finally, after talking to their guests, the Vazquezes eventually decided to take the First Class
accommodation.
Cathay also asserted that its employees at the Hong Kong airport acted in good faith in dealing with the
Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of disrespect against them
(the Vazquezes). Assuming that there was indeed a breach of contractual obligation, Cathay acted in good
faith, which negates any basis for their claim for temperate, moral, and exemplary damages and attorneys
fees. Hence, it prayed for the dismissal of the complaint and for payment of P100,000 for exemplary damages
and P300,000 as attorneys fees and litigation expenses.
During the trial, Dr. Vazquez testified to support the allegations in the complaint. His testimony was
corroborated by his two friends who were with him at the time of the incident, namely, Pacita G. Cruz and
Josefina Vergel de Dios.
For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen; Ms. Chiu; Norma
Barrientos, Comptroller of its retained counsel; and Mr. Robson. Yuen and Robson testified on Cathays policy
of upgrading the seat accommodation of its Marco Polo Club members when an opportunity arises. The
upgrading of the Vazquezes to First Class was done in good faith; in fact, the First Class Section is definitely
much better than the Business Class in terms of comfort, quality of food, and service from the cabin crew.
They also testified that overbooking is a widely accepted practice in the airline industry and is in accordance
with the International Air Transport Association (IATA) regulations. Airlines overbook because a lot of
passengers do not show up for their flight. With respect to Flight CX-905, there was no overall overbooking to
a degree that a passenger was bumped off or downgraded. Yuen and Robson also stated that the demand
letter of the Vazquezes was immediately acted upon. Reports were gathered from their office in Hong Kong
and immediately forwarded to their counsel Atty. Remollo for legal advice. However, Atty. Remollo begged off
because his services were likewise retained by the Vazquezes; nonetheless, he undertook to solve the
problem in behalf of Cathay. But nothing happened until Cathay received a copy of the complaint in this case.
For her part, Ms. Chiu denied that she shouted or used foul or impolite language against the Vazquezes. Ms.
Barrientos testified on the amount of attorneys fees and other litigation expenses, such as those for the taking
of the depositions of Yuen and Chiu.
In its decision[1] of 19 October 1998, the trial court found for the Vazquezes and decreed as follows:
WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby
rendered in favor of plaintiffs Vazquez spouses and against defendant Cathay Pacific Airways, Ltd., ordering
the latter to pay each plaintiff the following:
a) Nominal damages in the amount of P100,000.00 for each plaintiff;
b) Moral damages in the amount of P2,000,000.00 for each plaintiff;
c) Exemplary damages in the amount of P5,000,000.00 for each plaintiff;
d) Attorneys fees and expenses of litigation in the amount of P1,000,000.00 for each plaintiff; and
e) Costs of suit.
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 for Cathays breach of contract is an award for
nominal damages under Article 2221 of the Civil Code, which reads as follows:
Article 2221 of the Civil Code provides:
Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
Worth noting is the fact that in Cathays Memorandum filed with this Court, it prayed only for the deletion of the
award for moral damages. It deferred to the Court of Appeals discretion in awarding nominal damages; thus:
As far as the award of nominal damages is concerned, petitioner respectfully defers to the Honorable Court of
Appeals discretion. Aware as it is that somehow, due to the resistance of respondents-spouses to the
normally-appreciated gesture of petitioner to upgrade their accommodations, petitioner may have disturbed
the respondents-spouses wish to be with their companions (who traveled to Hong Kong with them) at the
Business Class on their flight to Manila. Petitioner regrets that in its desire to provide the respondents-
spouses with additional amenities for the one and one-half (1 1/2) hour flight to Manila, unintended tension
ensued.[18]
Nonetheless, considering that the breach was intended to give more benefit and advantage to the Vazquezes
by upgrading their Business Class accommodation to First Class because of their valued status as Marco
Polo members, we reduce the award for nominal damages to P5,000.
Before writing finis to this decision, we find it well-worth to quote the apt observation of the Court of Appeals
regarding the awards adjudged by the trial court:
We are not amused but alarmed at the lower courts unbelievable alacrity, bordering on the scandalous, to
award excessive amounts as damages. In their complaint, appellees asked for P1 million as moral damages
but the lower court awarded P4 million; they asked for P500,000.00 as exemplary damages but the lower
court cavalierly awarded a whooping P10 million; they asked for P250,000.00 as attorneys fees but were
awarded P2 million; they did not ask for nominal damages but were awarded P200,000.00. It is as if the lower
court went on a rampage, and why it acted that way is beyond all tests of reason. In fact the excessiveness of
the total award invites the suspicion that it was the result of prejudice or corruption on the part of the trial
court.
The presiding judge of the lower court is enjoined to hearken to the Supreme Courts admonition in Singson
vs. CA (282 SCRA 149 [1997]), where it said:
The well-entrenched principle is that the grant of moral damages depends upon the discretion of the court
based on the circumstances of each case. This discretion is limited by the principle that the amount awarded
should not be palpably and scandalously excessive as to indicate that it was the result of prejudice or
corruption on the part of the trial court.
and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held:
Nonetheless, we agree with the injunction expressed by the Court of Appeals that passengers must not prey
on international airlines for damage awards, like trophies in a safari. After all neither the social standing nor
prestige of the passenger should determine the extent to which he would suffer because of a wrong done,
since the dignity affronted in the individual is a quality inherent in him and not conferred by these social
indicators. [19]
We adopt as our own this observation of the Court of Appeals.
WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the Court of Appeals of 24
July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED, and as modified, the awards for moral damages
and attorneys fees are set aside and deleted, and the award for nominal damages is reduced to P5,000.
No pronouncement on costs.
SO ORDERED.
G.R. No. L-22415 March 30, 1966
FERNANDO LOPEZ, ET AL., plaintiffs-appellants,
vs.
PAN AMERICAN WORLD AIRWAYS, defendant-appellant.
Ross, Selph and Carrascoso for the defendant-appellant.
Vicente J. Francisco for the plaintiffs-appellants.
BENGZON, J.P., J.:
Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal. Since the value in
controversy exceeds P200,000 the appeals were taken directly to this Court upon all questions involved (Sec.
17, par. 3[5], Judiciary Act).
Stated briefly the facts not in dispute are as follows: Reservations for first class accommodations in Flight No.
2 of Pan American World Airways hereinafter otherwise called PAN-AM from Tokyo to San Francisco on
May 24, 1960 were made with
PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for then Senator
Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs.
Alfredo Montelibano, Jr., (Milagros Lopez Montelibano). PAN-AM's San Francisco head office confirmed the
reservations on March 31, 1960.
First class tickets for the abovementioned flight were subsequently issued by
PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444 for all of
them was fully paid before the tickets were issued.
As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in Tokyo at
5:30 P.M. of that day. As soon as they arrived Senator Lopez requested Minister Busuego of the Philippine
Embassy to contact PAN-AM's Tokyo office regarding their first class accommodations for that evening's flight.
For the given reason that the first class seats therein were all booked up, however, PAN-AM's Tokyo office
informed Minister Busuego that PAN-AM could not accommodate Senator Lopez and party in that trip as first
class passengers. Senator Lopez thereupon gave their first class tickets to Minister Busuego for him to show
the same to PAN-AM's Tokyo office, but the latter firmly reiterated that there was no accommodation for them
in the first class, stating that they could not go in that flight unless they took the tourist class therein.
Due to pressing engagements awaiting Senator Lopez and his wife, in the United States he had to attend a
business conference in San Francisco the next day and she had to undergo a medical check-up in Mayo
Clinic, Rochester, Minnesota, on May 28, 1960 and needed three days rest before that in San Francisco
Senator Lopez and party were constrained to take PAN-AM's flight from Tokyo to San Francisco as tourist
passengers. Senator Lopez however made it clear, as indicated in his letter to PAN-AM's Tokyo office on that
date (Exh. A), that they did so "under protest" and without prejudice to further action against the
airline.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:
In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the
defendant, which is accordingly ordered to pay the plaintiffs the following: (a) P150,000.00 as moral damages;
(b) P25,000.00 as exemplary damages; with legal interest on both from the date of the filing of the complaint
until paid; and (c) P25,000.00 as attorney's fees; and the costs of this action.
So ordered.
It is from said judgment, as thus reconsidered, that both parties have appealed.
Defendant, as stated, has from the start admitted that it breached its contracts with plaintiffs to provide them
with first class accommodations in its Tokyo-San Francisco flight of May 24, 1960. In its appeal, however, it
takes issue with the finding of the court a quo that it acted in bad faith in the branch of said contracts.
Plaintiffs, on the other hand, raise questions on the amount of damages awarded in their favor, seeking that
the same be increased to a total of P650,000.
Anent the issue of bad faith the records show the respective contentions of the parties as follows.
According to plaintiffs, defendant acted in bad faith because it deliberately refused to comply with its contract
to provide first class accommodations to plaintiffs, out of racial prejudice against Orientals. And in support of
its contention that what was done to plaintiffs is an oftrepeated practice of defendant, evidence was adduced
relating to two previous instances of alleged racial discrimination by defendant against Filipinos in favor of
"white" passengers. Said previous occasions are what allegedly happened to (1) Benito Jalbuena and (2)
Cenon S. Cervantes and his wife.
And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first class ticket from PAN-
AM on April 13, 1960; he confirmed it on April 15, 1960 as to the Tokyo-Hongkong flight of April 20, 1960;
PAN-AM similarly confirmed it on April 20, 1960. At the airport he and another Oriental Mr. Tung were
asked to step aside while other passengers - including "white" passengers boarded PAN-AM's plane. Then
PAN-AM officials told them that one of them had to stay behind. Since Mr. Tung was going all the way to
London, Jalbuena was chosen to be left behind. PAN-AM's officials could only explain by saying there was
"some mistake". Jalbuena thereafter wrote PAN-AM to protest the incident (Exh. B).
As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on September 29, 1958 from
Bangkok to Hongkong, he and his wife had to take tourist class, although they had first class tickets, which
they had previously confirmed, because their seats in first class were given to "passengers from London."
Against the foregoing, however, defendant's evidence would seek to establish its theory of honest mistake,
thus:
The first class reservations of Senator Lopez and party were made on March 29, 1960 together with those of
four members of the Rufino family, for a total of eight (8) seats, as shown in their joint reservation card (Exh.
1). Subsequently on March 30, 1960, two other Rufinos secured reservations and were given a separate
reservation card (Exh. 2). A new reservation card consisting of two pages (Exhs. 3 and 4) was then made for
the original of eight passengers, namely, Senator Lopez and party and four members of the Rufino family, the
first page (Exh. 3) referring to 2 Lopezes, 2 Montelibanos and 1 Rufino and the second page (Exh. 4) referring
to 3 Rufinos. On April 18, 1960 "Your Travel Guide" agency cancelled the reservations of the Rufinos. A telex
message was thereupon sent on that date to PAN-AM's head office at San Francisco by Mariano Herranz,
PAN-AM's reservations employee at its office in Escolta, Manila. (Annex A-Acker's to Exh. 6.) In said
message, however, Herranz mistakenly cancelled all the seats that had been reserved, that is, including those
of Senator Lopez and party.
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. 17-19, 28-29, March 15, 1962.)
At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs
believe that their reservation had not been cancelled. An additional indication of this is the fact that upon the
face of the two tickets of record, namely, the ticket issued to Alfredo Montelibano, Jr. on May 21, 1960 (Exh.
22) and that issued to Mrs. Alfredo Montelibano, Jr., on May 23, 1960 (Exh. 23), the reservation status is
stated as "OK". Such willful-non-disclosure of the cancellation or pretense that the reservations for plaintiffs
stood and not simply the erroneous cancellation itself is the factor to which is attributable the breach of
the resulting contracts. And, as above-stated, in this respect defendant clearly acted in bad faith.
As if to further emphasize its bad faith on the matter, defendant subsequently promoted the employee who
cancelled plaintiffs' reservations and told them nothing about it. The record shows that said employee
Mariano Herranz was not subjected to investigation and suspension by defendant but instead was given a
reward in the form of an increase of salary in June of the following year (Tsn., 86-88, Nov. 20, 1961).
At any rate, granting all the mistakes advanced by the defendant, there would at least be negligence so gross
and reckless as to amount to malice or bad faith (Fores vs. Miranda, L-12163, March 4, 1959; Necesito v.
Paras, L-10605-06, June 30, 1958). Firstly, notwithstanding the entries in the reservation cards (Exhs. 1 & 3)
that the reservations cancelled are those of the Rufinos only, Herranz made the mistake, after reading said
entries, of sending a wire cancelling all the reservations, including those of Senator Lopez and party (Tsn., pp.
108-109, Nov. 17, 1961). Secondly, after sending a wire to San Francisco head office on April 19, 1960 stating
his error and asking for reinstatement, Herranz simply forgot about the matter. Notwithstanding the reply of
San Francisco head Office on April 22, 1960 that it cannot reinstate Senator Lopez and party (Annex B-
Velasco's to Exh. 6), it was assumed and taken for granted that reinstatement would be made. Thirdly,
Armando Davila confirmed plaintiff's reservations in a phone call on April 27, 1960 to defendant's ticket
sellers, when at the time it appeared in plaintiffs' reservation card (Exh. 5) that they were only waitlisted
passengers. Fourthly, defendant's ticket sellers issued plaintiffs' tickets on May 21 and 23, 1960, without first
checking their reservations just before issuing said tickets. And, finally, no one among defendant's 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 twenty-two days, during a period of three years, prepared four sets of cross-interrogatories for
deposition taking, prepared several memoranda and the motion for reconsideration, filed a joint record on
appeal with defendant, filed a brief for plaintiffs as appellants consisting of 45 printed pages and a brief for
plaintiffs as appellees consisting of 265 printed pages. And we are further convinced of its reasonableness
because defendant's counsel likewise valued at P50,000.00 the proper compensation for his services
rendered to defendant in the trial court and on appeal.
In concluding, let it be stressed that the amount of damages awarded in this appeal has been determined by
adequately considering the official, political, social, and financial standing of the offended parties on one hand,
and the business and financial position of the offender on the other (Domingding v. Ng, 55 O.G. 10). And
further considering the present rate of exchange and the terms at which the amount of damages awarded
would approximately be in U.S. dollars, this Court is all the more of the view that said award is proper and
reasonable.
Wherefore, the judgment appealed from is hereby modified so as to award in favor of plaintiffs and against
defendant, the following: (1) P200,000.00 as moral damages, divided among plaintiffs, thus: P100,000.00 for
Senate President Pro Tempore Fernando Lopez; P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his
son-in-law Alfredo Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo Montelibano, Jr.; (2)
P75,000.00 as exemplary or corrective damages; (3) interest at the legal rate of 6% per annum on the moral
and exemplary damages aforestated, from December 14, 1963, the date of the amended decision of the court
a quo, until said damages are fully paid; (4) P50,000.00 as attorney's fees; and (5) the costs. Counterclaim
dismissed.
So ordered.

[G.R. No. 123560. March 27, 2000]
SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners,
vs.
PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA CANILAO and
CLAUDIA TAGUNICAR, respondents.
DECISION
PUNO, J.:
This petition for review seeks a reversal of the 31 August 1995 Decision[1] and 11 January 1998 Resolution[2]
of the Court of Appeals holding private respondent Claudia Tagunicar solely liable for moral and exemplary
damages and attorneys fees, and deleting the trial courts award for actual damages.
The facts as found by the trial court are as follows: Kycalr
"Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In connection with [this]
business, he travels from time to time to Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs bought
plane tickets (Exhs. A & B) from defendant Claudia Tagunicar who represented herself to be an agent of
defendant Tourist World Services, Inc. (TWSI). The destination[s] are Hongkong, Tokyo, San Francisco,
U.S.A., for the amount of P25,000.00 per computation of said defendant Claudia Tagunicar (Exhs. C & C-1).
The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy two (2) lines of infrared heating system
processing textured plastic article (Exh. K).
"On said date, only the passage from Manila to Hongkong, then to Tokyo, were confirmed. [PAA] Flight 002
from Tokyo to San Francisco was on "RQ" status, meaning "on request". Per instruction of defendant Claudia
Tagunicar, plaintiffs returned after a few days for the confirmation of the Tokyo-San Francisco segment of the
trip. After calling up Canilao of TWSI, defendant Tagunicar told plaintiffs that their flight is now confirmed all
the way. Thereafter, she attached the confirmation stickers on the plane tickets (Exhs. A & B).
"A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am office to verify the
status of the flight. According to said Adrian Yu, a personnel of defendant Pan Am told him over the phone that
plaintiffs booking[s] are confirmed.
"On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They left Hongkong for Tokyo
on July 28, 1978. Upon their arrival in Tokyo, they called up Pan-Am office for reconfirmation of their flight to
San Francisco. Said office, however, informed them that their names are not in the manifest. Since plaintiffs
were supposed to leave on the 29th of July, 1978, and could not remain in Japan for more than 72 hours, they
were constrained to agree to accept airline tickets for Taipei instead, per advise of JAL officials. This is the
only option left to them because Northwest Airlines was then on strike, hence, there was no chance for the
plaintiffs to obtain airline seats to the United States within 72 hours. Plaintiffs paid for these tickets.
"Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they were forced to return back to
Manila on August 3, 1978, instead of proceeding to the United States. [Japan] Air Lines (JAL) refunded the
plaintiffs the difference of the price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I & J) in the total
amount of P2,602.00.
"In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc. cancelled Yu Eng Chos
option to buy the two lines of infra-red heating system (Exh. K). The agreement was for him to inspect the
equipment and make final arrangement[s] with the said company not later than August 7, 1978. From this
business transaction, plaintiff Yu Eng Cho expected to realize a profit of P300,000.00 to P400,000.00."
"[A] scrutiny of defendants respective evidence reveals the following:
"Plaintiffs, who were intending to go to the United States, were referred to defendant Claudia Tagunicar, an
independent travel solicitor, for the purchase of their plane tickets. As such travel solicitor, she helps in the
processing of travel papers like passport, plane tickets, booking of passengers and some assistance at the
airport. She is known to defendants Pan-Am, TWSI/Julieta Canilao, because she has been dealing with them
in the past years. Defendant Tagunicar advised plaintiffs to take Pan-Am because Northwest Airlines was then
on strike and plaintiffs are passing Hongkong, Tokyo, then San Francisco and Pan-Am has a flight from Tokyo
to San Francisco. After verifying from defendant TWSI, thru Julieta Canilao, she informed plaintiffs that the
fare would be P25,093.93 giving them a discount of P738.95 (Exhs. C, C-1). Plaintiffs, however, gave her a
check in the amount of P25,000.00 only for the two round trip tickets. Out of this transaction, Tagunicar
received a 7% commission and 1% commission for defendant TWSI.
Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets from defendant Julieta Canilao
with the following schedules:
Origin Destination Airline Date Time/Travel
Manila Hongkong CX900 7-23-78 1135/1325hrs
Hongkong Tokyo CS500 7-28-78 1615/2115hrs
Tokyo San Francisco PA002 7-29-78 1930/1640hrs
The use of another airline, like in this case it is Cathay Pacific out of Manila, is allowed, although the tickets
issued are Pan-Am tickets, as long as it is in connection with a Pan-Am flight. When the two (2) tickets (Exhs.
A & B) were issued to plaintiffs, the letter "RQ" appears below the printed word "status" for the flights from
Tokyo to San Francisco which means "under request," (Exh. 3-A, 4-A Pan-Am). Before the date of the
scheduled departure, defendant Tagunicar received several calls from the plaintiffs inquiring about the status
of their bookings. Tagunicar in turn called up TWSI/Canilao to verify; and if Canilao would answer that the
bookings are not yet confirmed, she would relate that to the plaintiffs. Calrky
"Defendant Tagunicar claims that on July 13, 1978, a few days before the scheduled flight, plaintiff Yu Eng
Cho personally went to her office, pressing her about their flight. She called up defendant Julieta Canilao, and
the latter told her "o sige Claudia, confirm na." She even noted this in her index card (Exh. L), that it was
Julieta who confirmed the booking (Exh. L-1). It was then that she allegedly attached the confirmation stickers
(Exhs. 2, 2-B TWSI) to the tickets. These stickers came from TWSI.
Defendant Tagunicar alleges that it was only in the first week of August, 1978 that she learned from Adrian Yu,
son of plaintiffs, that the latter were not able to take the flight from Tokyo to San Francisco, U.S.A. After a few
days, said Adrian Yu came over with a gentleman and a lady, who turned out to be a lawyer and his secretary.
Defendant Tagunicar claims that plaintiffs were asking for her help so that they could file an action against
Pan-Am. Because of plaintiffs promise she will not be involved, she agreed to sign the affidavit (Exh. M)
prepared by the lawyer. Mesm
Defendants TWSI/Canilao denied having confirmed the Tokyo-San Francisco segment of plaintiffs flight
because flights then were really tight because of the on-going strike at Northwest Airlines. Defendant Claudia
Tagunicar is very much aware that [said] particular segment was not confirmed, because on the very day of
plaintiffs departure, Tagunicar called up TWSI from the airport; defendant Canilao asked her why she attached
stickers on the tickets when in fact that portion of the flight was not yet confirmed. Neither TWSI nor Pan-Am
confirmed the flight and never authorized defendant Tagunicar to attach the confirmation stickers. In fact, the
confirmation stickers used by defendant Tagunicar are stickers exclusively for use of Pan-Am only.
Furthermore, if it is the travel agency that confirms the booking, the IATA number of said agency should
appear on the validation or confirmation stickers. The IATA number that appears on the stickers attached to
plaintiffs tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when in fact TWSIs IATA number is 2-83-
0770 (Exhs. 5, 5-A TWSI)."[3]
A complaint for damages was filed by petitioners against private respondents Pan American World Airways,
Inc.(Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar
(Tagunicar) for expenses allegedly incurred such as costs of tickets and hotel accommodations when
petitioners were compelled to stay in Hongkong and then in Tokyo by reason of the non-confirmation of their
booking with Pan-Am. In a Decision dated November 14, 1991, the Regional Trial Court of Manila, Branch 3,
held the defendants jointly and severally liable, except defendant Julieta Canilao, thus: Scslx
"WHEREFORE, judgment is hereby rendered for the plaintiffs and ordering defendants Pan American World
Airways, Inc., Tourist World Services, Inc. and Claudia Tagunicar, jointly and severally, to pay plaintiffs the
sum of P200,000.00 as actual damages, minus P2,602.00 already refunded to the plaintiffs; P200,000.00 as
moral damages; P100,000.00 as exemplary damages; an amount equivalent to 20% of the award for and as
attorneys fees, plus the sum of P30,000.00 as litigation expenses.
Defendants counterclaims are hereby dismissed for lack of merit.
SO ORDERED."
Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995, the appellate
court rendered judgment modifying the amount of damages awarded, holding private respondent Tagunicar
solely liable therefor, and absolving respondents Pan Am and TWSI from any and all liability, thus: Slxs c
"PREMISES CONSIDERED, the decision of the Regional Trial Court is hereby SET ASIDE and a new one
entered declaring appellant Tagunicar solely liable for:
1) Moral damages in the amount of P50,000.00;
2) Exemplary damages in the amount of P25,000.00; and
3) Attorneys fees in the amount of P10,000.00 plus costs of suit.
The award of actual damages is hereby DELETED.
SO ORDERED."
In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not a duly
authorized agent or representative of either Pan Am or TWSI. It held that their business transactions are not
sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as its agent and sub-agent,
respectively. It further held that Tagunicar was not authorized to confirm the bookings of, nor issue validation
stickers to, herein petitioners and hence, Pan Am and TWSI cannot be held responsible for her actions.
Finally, it deleted the award for actual damages for lack of proof.
Hence this petition based on the following assignment of errors: slx mis
1. the Court of Appeals, in reversing the decision of the trial court, misapplied the ruling in Nicos Industrial
Corporation vs. Court of Appeals, et. al. [206 SCRA 127]; and
2. the findings of the Court of Appeals that petitioners ticket reservations in question were not confirmed and
that there is no agency relationship among PAN-AM, TWSI and Tagunicar are contrary to the judicial
admissions of PAN-AM, TWSI and Tagunicar and likewise contrary to the findings of fact of the trial court.
We affirm.
I. The first issue deserves scant consideration. Petitioners contend that contrary to the ruling of the Court of
Appeals, the decision of the trial court conforms to the standards of an ideal decision set in Nicos Industrial
Corporation, et. al. vs. Court of Appeals, et. al.,[4] as "that which, with welcome economy of words, arrives at
the factual findings, reaches the legal conclusions, renders its ruling and, having done so, ends." It is averred
that the trial courts decision contains a detailed statement of the relevant facts and evidence adduced by the
parties which thereafter became the bases for the courts conclusions.
A careful scrutiny of the decision rendered by the trial court will show that after narrating the evidence of the
parties, it proceeded to dispose of the case with a one-paragraph generalization, to wit: Missdaa
"On the basis of the foregoing facts, the Court is constrained to conclude that defendant Pan-Am is the
principal, and defendants TWSI and Tagunicar, its authorized agent and sub-agent, respectively.
Consequently, defendants Pan-Am, TWSI and Claudia Tagunicar should be held jointly and severally liable to
plaintiffs for damages. Defendant Julieta Canilao, who acted in her official capacity as Office Manager of
defendant TWSI should not be held personally liable."[5]
The trial courts finding of facts is but a summary of the testimonies of the witnesses and the documentary
evidence presented by the parties. It did not distinctly and clearly set forth, nor substantiate, the factual and
legal bases for holding respondents TWSI, Pan Am and Tagunicar jointly and severally liable. In Del Mundo
vs. CA, et al.[6] where the trial court, after summarizing the conflicting asseverations of the parties, disposed
of the kernel issue in just two (2) paragraphs, we held: Sda adsc
"It is understandable that courts, with their heavy dockets and time constraints, often find themselves with little
to spare in the preparation of decisions to the extent most desirable. We have thus pointed out that judges
might learn to synthesize and to simplify their pronouncements. Nevertheless, concisely written such as they
may be, decisions must still distinctly and clearly express, at least in minimum essence, its factual and legal
bases."
For failing to explain clearly and well the factual and legal bases of its award of moral damages, we set it
aside in said case. Once more, we stress that nothing less than Section 14 of Article VIII of the Constitution
requires that "no decision shall be rendered by any court without expressing therein clearly and distinctly the
facts and the law on which it is based." This is demanded by the due process clause of the Constitution. In the
case at bar, the decision of the trial court leaves much to be desired both in form and substance. Even while
said decision infringes the Constitution, we will not belabor this infirmity and rather examine the sufficiency of
the evidence submitted by the petitioners. Rtc spped
II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized ticketing agent of
Pan Am. Proceeding from this premise, they contend that TWSI and Pan Am should be held liable as
principals for the acts of Tagunicar. Petitioners stubbornly insist that the existence of the agency relationship
has been established by the judicial admissions allegedly made by respondents herein, to wit: (1) the
admission made by Pan Am in its Answer that TWSI is its authorized ticket agent; (2) the affidavit executed by
Tagunicar where she admitted that she is a duly authorized agent of TWSI; and (3) the admission made by
Canilao that TWSI received commissions from ticket sales made by Tagunicar. Korte
We do not agree. By the contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.[7] The elements
of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority.[8] It is a settled rule that persons dealing with an
assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of
agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is
upon them to establish it.[9]
In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated that she is an
authorized agent of TWSI. This affidavit, however, has weak probative value in light of respondent Tagunicars
testimony in court to the contrary. Affidavits, being taken ex parte, are almost always incomplete and often
inaccurate, sometimes from partial suggestion, or for want of suggestion and inquiries. Their infirmity as a
species of evidence is a matter of judicial experience and are thus considered inferior to the testimony given
in court.[10] Further, affidavits are not complete reproductions of what the declarant has in mind because they
are generally prepared by the administering officer and the affiant simply signs them after the same have
been read to her.[11] Respondent Tagunicar testified that her affidavit was prepared and typewritten by the
secretary of petitioners lawyer, Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the
latter went to see her at her office. This was confirmed by Adrian Yu who testified that Atty. Acebedo brought
his notarial seal and notarized the affidavit of the same day.[12] The circumstances under which said affidavit
was prepared put in doubt petitioners claim that it was executed voluntarily by respondent Tagunicar. It
appears that the affidavit was prepared and was based on the answers which respondent Tagunicar gave to
the questions propounded to her by Atty. Acebedo.[13] They never told her that the affidavit would be used in
a case to be filed against her.[14] They even assured her that she would not be included as defendant if she
agreed to execute the affidavit.[15] Respondent Tagunicar was prevailed upon by petitioners son and their
lawyer to sign the affidavit despite her objection to the statement therein that she was an agent of TWSI. They
assured her that "it is immaterial"[16] and that "if we file a suit against you we cannot get anything from
you."[17] This purported admission of respondent Tagunicar cannot be used by petitioners to prove their
agency relationship. At any rate, even if such affidavit is to be given any probative value, the existence of the
agency relationship cannot be established on its sole basis. The declarations of the agent alone are generally
insufficient to establish the fact or extent of his authority.[18] In addition, as between the negative allegation of
respondents Canilao and Tagunicar that neither is an agent nor principal of the other, and the affirmative
allegation of petitioners that an agency relationship exists, it is the latter who have the burden of evidence to
prove their allegation,[19] failing in which, their claim must necessarily fail. Sclaw
We stress that respondent Tagunicar categorically denied in open court that she is a duly authorized agent of
TWSI, and declared that she is an independent travel agent.[20] We have consistently ruled that in case of
conflict between statements in the affidavit and testimonial declarations, the latter command greater weight.
[21]
As further proofs of agency, petitioners call our attention to TWSIs Exhibits "7", "7-A", and "8" which show that
Tagunicar and TWSI received sales commissions from Pan Am. Exhibit "7"[22] is the Ticket Sales Report
submitted by TWSI to Pan Am reflecting the commissions received by TWSI as an agent of Pan Am. Exhibit
"7-A"[23] is a listing of the routes taken by passengers who were audited to TWSIs sales report. Exhibit
"8"[24] is a receipt issued by TWSI covering the payment made by Tagunicar for the tickets she bought from
TWSI. These documents cannot justify the deduction that Tagunicar was paid a commission either by TWSI or
Pan Am. On the contrary, Tagunicar testified that when she pays TWSI, she already deducts in advance her
commission and merely gives the net amount to TWSI.[25] From all sides of the legal prism, the transaction is
simply a contract of sale wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to
her clients. Sc lex
III. Petitioners included respondent Pan Am in the complaint on the supposition that since TWSI is its duly
authorized agent, and respondent Tagunicar is an agent of TWSI, then Pan Am should also be held
responsible for the acts of respondent Tagunicar. Our disquisitions above show that this contention lacks
factual and legal bases. Indeed, there is nothing in the records to show that respondent Tagunicar has been
employed by Pan Am as its agent, except the bare allegation of petitioners. The real motive of petitioners in
suing Pan Am appears in its Amended Complaint that "[d]efendants TWSI, Canilao and Tagunicar may not be
financially capable of paying plaintiffs the amounts herein sought to be recovered, and in such event,
defendant Pan Am, being their ultimate principal, is primarily and/or subsidiarily liable to pay said amounts to
plaintiffs."[26] This lends credence to respondent Tagunicars testimony that she was persuaded to execute an
affidavit implicating respondents because petitioners knew they would not be able to get anything of value
from her. In the past, we have warned that this Court will not tolerate an abuse of the judicial process by
passengers in order to pry on international airlines for damage awards, like "trophies in a safari."[27]
This meritless suit against Pan Am becomes more glaring with petitioners inaction after they were bumped off
in Tokyo. If petitioners were of the honest belief that Pan Am was responsible for the misfortune which beset
them, there is no evidence to show that they lodged a protest with Pan Ams Tokyo office immediately after
they were refused passage for the flight to San Francisco, or even upon their arrival in Manila. The testimony
of petitioner Yu Eng Cho in this regard is of little value, viz.:
"Atty. Jalandoni: x x x
q Upon arrival at the Tokyo airport, what did you do if any in connection with your schedule[d] trip?
a I went to the Hotel, Holiday Inn and from there I immediately called up Pan Am office in Tokyo to reconfirm
my flight, but they told me that our names were not listed in the manifest, so next morning, very early in the
morning I went to the airport, Pan Am office in the airport to verify and they told me the same and we were not
allowed to leave.
q You were scheduled to be in Tokyo for how long Mr. Yu?
a We have to leave the next day 29th.
q In other words, what was your status as a passenger?
a Transient passengers. We cannot stay there for more than 72 hours.
xxxxxxxxx
q As a consequence of the fact that you claimed that the Pan Am office in Tokyo told you that your names
were not in the manifest, what did you do, if any?
a I ask[ed] them if I can go anywhere in the States? They told me I can go to LA via Japan Airlines and I
accepted it.
q Do you have the tickets with you that they issued for Los Angeles?
a It was taken by the Japanese Airlines instead they issue[d] me a ticket to Taipei.
xxxxxxxxx
q Were you able to take the trip to Los Angeles via Pan Am tickets that was issued to you in lieu of the tickets
to San Francisco?
a No, sir.
q Why not?
a The Japanese Airlines said that there were no more available seats.
q And as a consequence of that, what did you do, if any?
a I am so much scared and worried, so the Japanese Airlines advised us to go to Taipei and I accepted it.
xxxxxxxxx
q Why did you accept the Japan Airlines offer for you to go to Taipei?
a Because there is no chance for us to go to the United States within 72 hours because during that time
Northwest Airlines [was] on strike so the seats are very scarce. So they advised me better left (sic) before the
72 hours otherwise you will have trouble with the Japanese immigration.
q As a consequence of that you were force[d] to take the trip to Taipei?
a Yes, sir."[28] (emphasis supplied)
It grinds against the grain of human experience that petitioners did not insist that they be allowed to board,
considering that it was then doubly difficult to get seats because of the ongoing Northwest Airlines strike. It is
also perplexing that petitioners readily accepted whatever the Tokyo office had to offer as an alternative.
Inexplicably too, no demand letter was sent to respondents TWSI and Canilao.[29] Nor was a demand letter
sent to respondent Pan Am. To say the least, the motive of petitioners in suing Pan Am is suspect. x law
We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to board to justify
petitioners claim for damages. Mere refusal to accede to the passengers wishes does not necessarily
translate into damages in the absence of bad faith.[30] The settled rule is that the law presumes good faith
such that any person who seeks to be awarded damages due to acts of another has the burden of proving
that the latter acted in bad faith or with ill motive.[31] In the case at bar, we find the evidence presented by
petitioners insufficient to overcome the presumption of good faith. They have failed to show any wanton,
malevolent or reckless misconduct imputable to respondent Pan Am in its refusal to accommodate petitioners
in its Tokyo-San Francisco flight. Pan Am could not have acted in bad faith because petitioners did not have
confirmed tickets and more importantly, they were not in the passenger manifest. Sc
In not a few cases, this Court did not hesitable to hold an airline liable for damages for having acted in bad
faith in refusing to accommodate a passenger who had a confirmed ticket and whose name appeared in the
passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines Inc.[32] we ruled that there was a valid and
binding contract between the airline and its passenger after finding that validating sticker on the passengers
ticket had the letters "O.K." appearing in the Res. Status box which means "space confirmed" and that the
ticket is confirmed or validated. In Pan American World Airways Inc. v. IAC, et al.[33] where a would-be-
passenger had the necessary ticket, baggage claim and clearance from immigration all clearly showing that
she was a confirmed passenger and included in the passenger manifest and yet was denied accommodation
in said flight, we awarded damages. In Armovit, et al. v. CA, et al.,[34] we upheld the award of damages made
against an airline for gross negligence committed in the issuance of tickets with erroneous entries as to the
time of flight. In Alitalia Airways v. CA, et al.,[35] we held that when airline issues a ticket to a passenger
confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every
right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a
suit for breach of contract of carriage. And finally, an award of damages was held proper in the case of
Zalamea, et al. v. CA, et al.,[36] where a confirmed passenger included in the manifest was denied
accommodation in such flight. Scmis

On the other hand, the respondent airline in Sarreal, Sr. v. Japan Airlines Co., Ltd.,[37] was held not liable for
damages where the passenger was not allowed to board the plane because his ticket had not been
confirmed. We ruled that "[t]he stub that the lady employee put on the petitioners ticket showed among other
coded items, under the column "status" the letters "RQ" which was understood to mean "Request." Clearly,
this does not mean a confirmation but only a request. JAL Traffic Supervisor explained that it would have been
different if what was written on the stub were the letter "ok" in which case the petitioner would have been
assured of a seat on said flight. But in this case, the petitioner was more of a wait-listed passenger than a
regularly booked passenger." Mis sc

In the case at bar, petitioners ticket were on "RQ" status. They were not confirmed passengers and their
names were not listed in the passenger manifest. In other words, this is not a case where Pan Am bound itself
to transport petitioners and thereafter reneged on its obligation. Hence, respondent airline cannot be held
liable for damages. Mis spped

IV. We hold that respondent Court of Appeals correctly ruled that the tickets were never confirmed for good
reasons: (1) The persistent calls made by respondent Tagunicar to Canilao, and those made by petitioners at
the Manila, Hongkong and Tokyo offices of Pan Am, are eloquent indications that petitioners knew that their
tickets have not been confirmed. For, as correctly observed by Pan Am, why would one continually try to have
ones ticket confirmed if it had already been confirmed? (2) The validation stickers which respondent Tagunicar
attached to petitioners tickets were those intended for the exclusive use of airline companies. She had no
authority to use them. Hence, said validation stickers, wherein the word "OK" appears in the status box, are
not valid and binding. (3) The names of petitioners do not appear in the passenger manifest. (4) Respondent
Tagunicars "Exhibit 1"[38] shows that the status of the San Francisco-New York segment was "Ok", meaning it
was confirmed, but that the status of the Tokyo-San Francisco segment was still "on request". (5) Respondent
Canilao testified that on the day that petitioners were to depart for Hongkong, respondent Tagunicar called her
from the airport asking for confirmation of the Tokyo-San Francisco flight, and that when she told respondent
Tagunicar that she should not have allowed petitioners to leave because their tickets have not been
confirmed, respondent Tagunicar merely said "Bahala na."[39] This was never controverted nor refuted by
respondent Tagunicar. (6) To prove that it really did not confirm the bookings of petitioners, respondent
Canilao pointed out that the validation stickers which respondent Tagunicar attached to the tickets of
petitioners had IATA No. 2-82-0770 stamped on it, whereas the IATA number of TWSI is 28-30770.[40]

Undoubtedly, respondent Tagunicar should be liable for having acted in bad faith in misrepresenting to
petitioners that their tickets have been confirmed. Her culpability, however, was properly mitigated. Petitioner
Yu Eng Cho testified that he repeatedly tried to follow up on the confirmation of their tickets with Pan Am
because he doubted the confirmation made by respondent Tagunicar.[41] This is clear proof that petitioners
knew that they might be bumped off at Tokyo when they decided to proceed with the trip. Aware of this risk,
petitioners exerted efforts to confirm their tickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly,
we find the modification as to the amount of damages awarded just and equitable under the circumstances.
Spped

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

SO ORDERED.

HERMINIO MARIANO, JR., Petitioner,
vs.
ILDEFONSO C. CALLEJAS and EDGAR DE BORJA, Respondents.
DECISION
PUNO, C.J.:
On appeal are the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV No. 66891, dated May
21, 2004 and January 7, 2005 respectively, which reversed the Decision3 of the Regional Trial Court (RTC) of
Quezon City, dated September 13, 1999, which found respondents jointly and severally liable to pay petitioner
damages for the death of his wife.
First, the facts:
Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr. Frelinda Mariano who was a passenger of a
Celyrosa Express bus bound for Tagaytay when she met her death. Respondent Ildefonso C. Callejas is the
registered owner of Celyrosa Express, while respondent Edgar de Borja was the driver of the bus on which
the deceased was a passenger.
At around 6:30 p.m. on November 12, 1991, along Aguinaldo Highway, San Agustin, Dasmarias, Cavite, the
Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided with an Isuzu truck with trailer bearing
plate numbers PJH 906 and TRH 531. The passenger bus was bound for Tagaytay while the trailer truck
came from the opposite direction, bound for Manila. The trailer truck bumped the passenger bus on its left
middle portion. Due to the impact, the passenger bus fell on its right side on the right shoulder of the highway
and caused the death of Dr. Mariano and physical injuries to four other passengers. Dr. Mariano was 36 years
old at the time of her death. She left behind three minor children, aged four, three and two years.
Petitioner filed a complaint for breach of contract of carriage and damages against respondents for their
failure to transport his wife and mother of his three minor children safely to her destination. Respondents
denied liability for the death of Dr. Mariano. They claimed that the proximate cause of the accident was the
recklessness of the driver of the trailer truck which bumped their bus while allegedly at a halt on the shoulder
of the road in its rightful lane. Thus, respondent Callejas filed a third-party complaint against Liong Chio
Chang, doing business under the name and style of La Perla Sugar Supply, the owner of the trailer truck, for
indemnity in the event that he would be held liable for damages to petitioner.lavvph!l
Other cases were filed. Callejas filed a complaint,4 docketed as Civil Case No. NC-397 before the RTC of
Naic, Cavite, against La Perla Sugar Supply and Arcadio Arcilla, the truck driver, for damages he incurred due
to the vehicular accident. On September 24, 1992, the said court dismissed the complaint against La Perla
Sugar Supply for lack of evidence. It, however, found Arcilla liable to pay Callejas the cost of the repairs of his
passenger bus, his lost earnings, exemplary damages and attorneys fees.5
A criminal case, Criminal Case No. 2223-92, was also filed against truck driver Arcilla in the RTC of Imus,
Cavite. On May 3, 1994, the said court convicted truck driver Arcadio Arcilla of the crime of reckless
imprudence resulting to homicide, multiple slight physical injuries and damage to property.6
In the case at bar, the trial court, in its Decision dated September 13, 1999, found respondents Ildefonso
Callejas and Edgar de Borja, together with Liong Chio Chang, jointly and severally liable to pay petitioner
damages and costs of suit. The dispositive portion of the Decision reads:
ACCORDINGLY, the defendants are ordered to pay as follows:
1. The sum of P50,000.00 as civil indemnity for the loss of life;
2. The sum of P40,000.00 as actual and compensatory damages;
3. The sum of P1,829,200.00 as foregone income;
4. The sum of P30,000.00 as moral damages;
5. The sum of P20,000.00 as exemplary damages;
6. The costs of suit.
SO ORDERED.7
Respondents Callejas and De Borja appealed to the Court of Appeals, contending that the trial court erred in
holding them guilty of breach of contract of carriage.
On May 21, 2004, the Court of Appeals reversed the decision of the trial court. It reasoned:
. . . the presumption of fault or negligence against the carrier is only a disputable presumption. It gives in
where contrary facts are established proving either that the carrier had exercised the degree of diligence
required by law or the injury suffered by the passenger was due to a fortuitous event. Where, as in the instant
case, the injury sustained by the petitioner was in no way due to any defect in the means of transport or in the
method of transporting or to the negligent or wilful acts of private respondent's employees, and therefore
involving no issue of negligence in its duty to provide safe and suitable cars as well as competent employees,
with the injury arising wholly from causes created by strangers over which the carrier had no control or even
knowledge or could not have prevented, the presumption is rebutted and the carrier is not and ought not to be
held liable. To rule otherwise would make the common carrier the insurer of the absolute safety of its
passengers which is not the intention of the lawmakers.8
The dispositive portion of the Decision reads:
WHEREFORE, the decision appealed from, insofar as it found defendants-appellants Ildefonso Callejas and
Edgar de Borja liable for damages to plaintiff-appellee Herminio E. Mariano, Jr., is REVERSED and SET
ASIDE and another one entered absolving them from any liability for the death of Dr. Frelinda Cargo
Mariano.9
The appellate court also denied the motion for reconsideration filed by petitioner.
Hence, this appeal, relying on the following ground:
THE DECISION OF THE HONORABLE COURT OF APPEALS, SPECIAL FOURTEENTH DIVISION IS NOT
IN ACCORD WITH THE FACTUAL BASIS OF THE CASE.10
The following are the provisions of the Civil Code pertinent to the case at bar:
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in q Why did you say that the truck has no brakes?
articles 1733 and 1755.
a I tested it.
In accord with the above provisions, Celyrosa Express, a common carrier, through its driver, respondent De
Borja, and its registered owner, respondent Callejas, has the express obligation "to carry the passengers q And you found no brakes?
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,"11 and to observe extraordinary diligence in the discharge of its a Yes, sir.
duty. The death of the wife of the petitioner in the course of transporting her to her destination gave rise to the
presumption of negligence of the carrier. To overcome the presumption, respondents have to show that they xxx
observed extraordinary diligence in the discharge of their duty, or that the accident was caused by a fortuitous
event. q When you went to the scene of accident, what was the position of Celyrosa bus?

This Court interpreted the above quoted provisions in Pilapil v. Court of Appeals.12 We elucidated: a It was lying on its side.

While the law requires the highest degree of diligence from common carriers in the safe transport of their COURT:
passengers and creates a presumption of negligence against them, it does not, however, make the carrier an
insurer of the absolute safety of its passengers. q Right side or left side?

Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the carriage a Right side.
of passengers by common carriers to only such as human care and foresight can provide. What constitutes
compliance with said duty is adjudged with due regard to all the circumstances. ATTY. ESTELYDIZ:

Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the common q On what part of the road was it lying?
carrier when its passenger is injured, merely relieves the latter, for the time being, from introducing evidence
to fasten the negligence on the former, because the presumption stands in the place of evidence. Being a a On the shoulder of the road.
mere presumption, however, the same is rebuttable by proof that the common carrier had exercised
extraordinary diligence as required by law in the performance of its contractual obligation, or that the injury COURT:
suffered by the passenger was solely due to a fortuitous event.
q How many meters from the point of impact?
In fine, we can only infer from the law the intention of the Code Commission and Congress to curb the
recklessness of drivers and operators of common carriers in the conduct of their business. a Near, about 5 meters.14

Thus, it is clear that neither the law nor the nature of the business of a transportation company makes it an
insurer of the passenger's safety, but that its liability for personal injuries sustained by its passenger rests
upon its negligence, its failure to exercise the degree of diligence that the law requires.
In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome the
presumption of negligence against them. The totality of evidence shows that the death of petitioners spouse
was caused by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped
the Celyrosa Express bus, owned and operated by respondents.
First, we advert to the sketch prepared by PO3 Magno S. de Villa, who investigated the accident. The
sketch13 shows the passenger bus facing the direction of Tagaytay City and lying on its right side on the
shoulder of the road, about five meters away from the point of impact. On the other hand, the trailer truck was
on the opposite direction, about 500 meters away from the point of impact. PO3 De Villa stated that he
interviewed De Borja, respondent driver of the passenger bus, who said that he was about to unload some
passengers when his bus was bumped by the driver of the trailer truck that lost its brakes. PO3 De Villa
checked out the trailer truck and found that its brakes really failed. He testified before the trial court, as
follows:
His police report bolsters his testimony and states:
Said vehicle 1 [passenger bus] was running from Manila toward south direction when, in the course of its
travel, it was hit and bumped by vehicle 2 [truck with trailer] then running fast from opposite direction, causing
said vehicle 1 to fall on its side on the road shoulder, causing the death of one and injuries of some
passengers thereof, and its damage, after collission (sic), vehicle 2 continiously (sic) ran and stopped at
approximately 500 meters away from the piont (sic) of impact.15
In fine, the evidence shows that before the collision, the passenger bus was cruising on its rightful lane along
the Aguinaldo Highway when the trailer truck coming from the opposite direction, on full speed, suddenly
swerved and encroached on its lane, and bumped the passenger bus on its left middle portion. Respondent
driver De Borja had every right to expect that the trailer truck coming from the opposite direction would stay
on its proper lane. He was not expected to know that the trailer truck had lost its brakes. The swerving of the
trailer truck was abrupt and it was running on a fast speed as it was found 500 meters away from the point of
collision. Secondly, any doubt as to the culpability of the driver of the trailer truck ought to vanish when he
pleaded guilty to the charge of reckless imprudence resulting to multiple slight physical injuries and damage to
property in Criminal Case No. 2223-92, involving the same incident.1avvph!1

ATTY. ESTELYDIZ: IN VIEW WHEREOF, the petition is DENIED. The Decision dated May 21, 2004 and the Resolution dated
January 7, 2005 of the Court of Appeals in CA-G.R. CV No. 66891 are AFFIRMED.
q You pointed to the Isuzu truck beyond the point of impact. Did you investigate why did (sic) the Isuzu truck is
beyond the point of impact? SO ORDERED.

a Because the truck has no brakes.

COURT:

q What is the distance between that circle which is marked as Exh. 1-c to the place where you found the
same?

a More or less 500 meters.


[G.R. No. 140698. June 20, 2003]
ROGELIO ENGADA, petitioner,
vs.
HON. COURT OF APPEALS, Former Fourteenth Division, Manila, and PEOPLE OF THE PHILIPPINES,
respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision[1] dated May 31, 1999 of the Court of Appeals in
CA-G.R. CR No. 18358, which affirmed with modification the judgment[2] dated August 25, 1994, of the
Regional Trial Court of Iloilo City, Branch 29, in Criminal Case No. 36223. The RTC found petitioner guilty
beyond reasonable doubt of simple imprudence resulting in physical injuries and damage to property, and
sentenced him to (a) suffer imprisonment for one month and one day of arresto mayor, (b) pay private
complainant, Mrs. Sheila Seyan, the amount of fifty one thousand pesos (P51,000) for the total destruction of
the Toyota Tamaraw jeepney, and one hundred ten thousand pesos (P110,000) for her hospital and medical
expenses, and (c) pay the costs of suit. The CA increased the prison term imposed on petitioner to four
months of arresto mayor.
The facts culled from the records are as follows:
On November 29, 1989, at about 1:30 in the afternoon, Edwin Iran was driving a blue Toyota Tamaraw
jeepney bound for Iloilo City. On board was Sheila Seyan, the registered owner of the Tamaraw. While
traversing the road along Barangay Acquit, Barotac Nuevo, the Tamaraw passengers allegedly saw from the
opposite direction a speeding Isuzu pick-up, driven by petitioner Rogelio Engada. The pick-up had just
negotiated a hilly gradient on the highway. When it was just a few meters away from the Tamaraw, the Isuzu
pick-ups right signal light flashed, at the same time, it swerved to its left, encroaching upon the lane of the
Tamaraw and headed towards a head-on collision course with it. Seyan shouted at Iran to avoid the pick-up.
Iran swerved to his left but the pick-up also swerved to its right. Thus, the pick-up collided with the Tamaraw,
hitting the latter at its right front passenger side. The impact caused the head and chassis of the Tamaraw to
separate from its body. Seyan was thrown out of the Tamaraw and landed on a ricefield. The pick-up stopped
diagonally astride the center of the road.
Seyan and Iran were brought to Barotac Nuevo Medicare Hospital.[3] Seyan was profusely bleeding from her
nose and was in a state of shock with her eyes closed. In the afternoon of the same day, November 29, 1989,
she was transferred to St. Pauls Hospital in Iloilo City where she was confined. Her medical certificate
revealed that she suffered a fracture on the right femur, lacerated wound on the right foot, multiple contusions,
abrasions, blunt abdominal injury, and lacerations of the upper-lower pole of the right kidney.[4] She was
discharged from the hospital only on January 15, 1990.
Seyan incurred P130,000 in medical expenses. The Toyota Tamaraw jeepney ended up in the junk heap. Its
total loss was computed at P80,000.
A criminal complaint for damage to property through reckless imprudence with serious physical injuries was
filed with the Municipal Trial Court of Barotac Nuevo against petitioner Rogelio Engada and Edwin Iran.[5]
Probable cause was found against petitioner, while the complaint against Iran was dismissed.[6]
Consequently, an Information was filed against petitioner charging him with serious physical injuries and
damage to property through reckless imprudence, thus:
That on or about November 29, 1989, in the Municipality of Barotac Nuevo, Province of Iloilo, Philippines, and
within the jurisdiction of this Honorable Court, the above-named accused Rogelio Engada driving an Isuzu
Pick-up with Plate No. SAR 117 owned by the Land Bank of the Philippines, did then and there wilfully,
unlawfully and with reckless imprudence drive said pick-up in a careless, reckless and imprudent manner with
disregard of traffic laws and regulations, and as a result of such negligent and reckless driving the Isuzu Pick-
up driven by the accused bumped a Toyota Tamaraw jeep with Plate No. FBF 601 owned by Joelito and
Sheila Seyan and driven by Edwin Iran thereby causing damage to the Toyota Tamaraw in the amount of
P80,000.00 and serious physical injuries to Mrs. Sheila Seyan who was riding said vehicle, the injuries barring
complications will heal in more than 30 days.
CONTRARY TO LAW.[7]
After trial, the court rendered on August 25, 1994 a decision, disposing as follows:
WHEREFORE, the Court, finding the accused guilty beyond reasonable doubt of Simple Imprudence resulting
[in] physical injuries and damage to property defined and penalized in Article 263, paragraph 4 and in relation
with Article 365, paragraph 2 of the Revised Penal Code, hereby sentences the accused Rogelio Engada to
suffer imprisonment of ONE (1) MONTH and ONE (1) DAY of arresto mayor.
Accused is further ordered to pay complainant Mrs. Sheila Seyan the amount of P51,000.00 for the total
destruction of the Toyota Tamaraw Jeepney and P110,000.00 for indemnification of hospital and medical
expenses, and to pay the cost of the suit.
SO ORDERED.[8]
Petitioner appealed to the Court of Appeals. On May 31, 1999, the CA dismissed the appeal and affirmed with
modification the trial courts decision, thus:
WHEREFORE, the instant appeal is hereby DISMISSED. Accordingly, the appealed decision is hereby
AFFIRMED with modification as to the penalty imposed upon the accused who is hereby sentenced to suffer
imprisonment of FOUR (4) MONTHS of arresto mayor.
SO ORDERED.[9]
Petitioner filed a motion for reconsideration, but it was denied. Hence, the instant petition, wherein petitioner
raises the issue of:
WHETHER OR NOT THE FINDINGS OF RESPONDENT COURT OF APPEALS ARE SUPPORTED BY THE
EVIDENCE OR BASED ON A MISAPPREHENSION OF FACTS RESULTING IN A MANIFESTLY MISTAKEN
INFERENCE SPECIFICALLY ON WHAT WAS THE PROXIMATE CAUSE OF THE ACCIDENT AND WHOSE
ACT WAS IT.[10]
Petitioner claims innocence and seeks acquittal. He contends that in this case we should relax the rule that
only legal questions can be raised in a petition for review under Rule 45 of the Rules of Court. According to
him, the Court of Appeals misapprehended the facts, and erred in its conclusion as to the proximate cause of
the collision. He insists that the Court of Appeals erred when it found him negligent for occupying the lane of
the Tamaraw jeepney, and then failing to return to his original lane at the safest and earliest opportunity.
Petitioner further contends that the CA failed to consider that he already relayed his intention to go back to his
lane by flashing the pick-ups right signal light. He submits that at that moment Iran, the driver of the Tamaraw,
had no more reason to swerve to his left. Had Iran not swerved to the left, according to petitioner, the collision
would have been avoided. It was Iran who was clearly negligent, says petitioner. Citing our ruling in McKee v.
Intermediate Appellate Court,[11] petitioner avers that although his act of occupying the Tamaraws lane was
the initial act in the chain of events, Irans swerving to the left after petitioner flashed his right turn signal,
constituted a sufficient intervening event, which proximately caused the eventual injuries and damages to
private complainant.
 [O]r if, after attempting to pass, the driver of the overtaking vehicle finds that he cannot make the passage in
Petitioner also claims that the Court of Appeals erred when it found that the pick-up approached the Tamaraw safety, the latter must slacken his speed so as to avoid the danger of a collision, even bringing his car to a
at a fast speed. He maintains that this was not borne by the evidence on record. stop if necessary.

The Office of the Solicitor General, as counsel for the state, counters that the Court of Appeals did not err in
convicting the accused, now petitioner herein. Petitioners negligence was the proximate cause of the
accident, according to the OSG, for the following reasons: First, petitioner for no justifiable reason occupied
the opposite lane. Second, while on the wrong lane, petitioner was driving the Isuzu pick-up fast, and he
returned to his own lane only at the last minute. This left Iran, the driver of the Tamaraw, with no opportunity to
reflect on the safest way to avoid the accident. Irans swerving to the left was his reaction to petitioners
wrongful act, which appropriately calls for the application of the emergency rule. The rationale of this rule is
that a person who is confronted with a sudden emergency might have no time for thought, and he must make
a prompt decision based largely upon impulse or instinct. Thus, he cannot be held to the same standard of
conduct as one who had an opportunity to reflect, even though it later appears that he made the wrong
decision. Clearly, under the emergency rule petitioner cannot shift the blame to Iran, concludes the OSG.
As to petitioners claim that there was no evidence showing that the pick-up was running very fast, the OSG
avers that this is rebutted by the testimony of Seyan and Iran who both testified that petitioner drove the pick-
up at a fast speed when it encroached on their lane immediately before the collision.
Did the Court of Appeals err in finding that the action of petitioner, Rogelio Engada, was the proximate cause
of the collision? This is the crux of the present petition.
In our view, petitioners attempt to pin the blame on Edwin Iran, the driver of the Tamaraw, for the vehicular
collision is unfounded. Iran swerved to the left only to avoid petitioners pick-up, which was already on a head
to head position going against Irans Tamaraw jeepney immediately before the vehicles collided. This fact has
been established by the evidence on record. No convincing proof was adduced by petitioner that the driver of
the Tamaraw, Iran, could have avoided a head-on collision.
We note that petitioner admitted his Isuzu pick-up intruded into the lane of the Tamaraw jeepney. Prosecution
witness Nelson Alobin, one of those who went to the scene of the incident immediately, testified that when he
arrived at the place where the collision took place, he saw the pick-up positioned diagonally at the center of
the road.[12] Its head was towards the direction of Barotac Nuevo and the rear tires were just a few inches
beyond the center of the lane.[13] Moving backwards facing Barotac Nuevo, at two arms length away from the
pick-up, Alobin also saw a tire mark, 12 inches long and located at the left side of the center line going to the
right side.[14]
For failing to observe the duty of diligence and care imposed on drivers of vehicles abandoning their lane,
petitioner must be held liable.
Iran could not be faulted when in his attempt to avoid the pick-up, he swerved to his left. Petitioners acts had
put Iran in an emergency situation which forced him to act quickly. An individual who suddenly finds himself in
a situation of danger and is required to act without much time to consider the best means that may be
adopted to avoid the impending danger, is not guilty of negligence if he fails to undertake what subsequently
and upon reflection may appear to be a better solution, unless the emergency was brought by his own
negligence.[18]
Petitioner tries to extricate himself from liability by invoking the doctrine of last clear chance. He avers that
between him and Iran, the latter had the last clear chance to avoid the collision, hence Iran must be held
liable.
The doctrine of last clear chance states that a person who has the last clear chance or opportunity of avoiding
an accident, notwithstanding the negligent acts of his opponent, is considered in law solely responsible for the
consequences of the accident.[19] But as already stated on this point, no convincing evidence was adduced
by petitioner to support his invocation of the abovecited doctrine. Instead, what has been shown is the
presence of an emergency and the proper application of the emergency rule. Petitioners act of swerving to the
Tamaraws lane at a distance of 30 meters from it and driving the Isuzu pick-up at a fast speed as it
approached the Tamaraw, denied Iran time and opportunity to ponder the situation at all. There was no clear
chance to speak of. Accordingly, the Court of Appeals did not err in holding petitioner responsible for the
vehicular collision and the resulting damages, including the injuries suffered by Mrs. Sheila Seyan and the
total loss of the Tamaraw jeepney. It also did not err in imposing on petitioner the sentence of four (4) months
of arresto mayor.[20]
WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of the Court of Appeals
in CA-G.R. CR No. 18358 is AFFIRMED. Costs against petitioner.
SO ORDERED.

The above circumstance corroborates the testimony of both Seyan and Iran that, immediately before the
collision, the pick-up was not on its proper lane but on the other lane (the left lane rather than the right)
directly on collision course with the Tamaraw jeepney. The tire mark reveals the short distance between the
two vehicles when the Isuzu pick-up attempted to return to its proper lane.

It is a settled rule that a driver abandoning his proper lane for the purpose of overtaking another vehicle in an
ordinary situation has the duty to see to it that the road is clear and he should not proceed if he cannot do so
in safety.[15] This rule is consistent with Section 41, paragraph (a) of R.A. 4136 as amended, otherwise
known as The Land Transportation and Traffic Code, which provides:

Sec. 41. Restrictions on overtaking and passing. (a) The driver of a vehicle shall not drive to the left side of
the center line of a highway in overtaking or passing another vehicle proceeding in the same direction, unless
such left side is clearly visible and is free of oncoming traffic for a sufficient distance ahead to permit such
overtaking or passing to be made in safety.

In the present case, there was only a distance of 30 meters from the Tamaraw jeepney when the Isuzu pick-
up abandoned its lane and swerved to the left of the center line.[16] In addition, petitioner was running at a
fast clip while traversing this lane. This was testified to by Seyan and Iran, unrebutted by petitioner. The
resulting damage to the Tamaraw jeepney, at the point where the head and chassis were separated from the
body, bolsters this conclusion that petitioner was speeding. In our view, petitioner was negligent in several
ways, and his negligence was the proximate cause of the collision. In abandoning his lane, he did not see to it
first that the opposite lane was free of oncoming traffic and was available for a safe passage. Further, after
seeing the Tamaraw jeepney ahead, petitioner did not slow down, contrary to the rule set in Batangas Laguna
Tayabas Bus Co. v. IAC,[17] thus:
 Respondent filed an action for Quasi-Delict, Damages, and Attorneys Fees against LADECO, its
administrative officer Henry Berenguel[4] (Berenguel) and Deocampo. Respondent alleged that his pick-up
was slowing down to about five to ten kilometers per hour (kph) and was making a left turn preparatory to
turning south when it was bumped from behind by the crewcab which was running at around 60 to 70 kph.
The crewcab stopped 21 meters from the point of impact. Respondent alleged that he heard a screeching
sound before the impact. Respondent was seated beside the driver and was looking at the speedometer
when the accident took place. Respondent testified that Borres made a signal because he noticed a blinking
light while looking at the speedometer.[5]

Respondent sent a demand letter to LADECO for the payment of the damages he incurred because of the
accident but he did not receive any reply. Thus, respondent filed the case against LADECO, Berenguel, and
Deocampo.

Deocampo alleged that the pick-up and the crewcab he was driving were both running at about 40 kph. The
pick-up was running along the outer lane. The pick-up was about 10 meters away when it made a U-turn
towards the left. Deocampo testified that he did not see any signal from the pick-up.[6] Deocampo alleged that
he tried to avoid the pick-up but he was unable to avoid the collision. Deocampo stated that he did not apply
the brakes because he knew the collision was unavoidable. Deocampo admitted that he stepped on the
G.R. No. 153076
brakes only after the collision.

LAPANDAY AGRICULTURAL and

DEVELOPMENT CORPORATION
(LADECO), HENRY BERENGUEL, Present: The Ruling of the Trial Court
and APOLONIO R. DEOCAMPO,
Petitioners,
- versus In its 3 March 1995 Decision,[7] the Regional Trial Court of Davao City, Branch 15 (trial court) ruled:

WHEREFORE, judgment is hereby rendered ordering the defendants LADECO and Apolonio Deocampo to
MICHAEL RAYMOND ANGALA, solidarily pay the plaintiffs the following sums:
Promulgation
Respondent. June 21, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 1. Twenty three thousand two hundred (P23,200.00) pesos as actual damages.

2. Ten thousand (P10,000.00) pesos as moral damages.

DECISION
3. Ten thousand (P10,000.00) pesos as attorneys fees.

4. Costs of suit.
CARPIO, J.:

The Case
Before the Court is a petition for review[1] assailing the 25 July 2001 Decision[2] and 11 March 2002
Resolution[3] of the Court of Appeals in CA-G.R. CV No. 51134.
SO ORDERED.[8]
The trial court found that the crewcab was running very fast while following the pick-up and that the crewcabs
speed was the proximate cause of the accident. The trial court observed that the crewcab stopped 21 meters
away from the point of impact despite Deocampos claim that he stepped on the brakes moments after the
collision. The trial court ruled that Deocampo had the last opportunity to avoid the accident.
The trial court found that Berenguel was not liable because he was not the owner of the crewcab.

The Antecedent Facts

LADECO and Deocampo (petitioners)[9] filed a motion for reconsideration. The trial court denied petitioners
motion in its 13 June 1995 Order.[10]
On 4 May 1993, at about 2:45 p.m., a Datsun crewcab with plate no. PEC-903 driven by Apolonio Deocampo
(Deocampo) bumped into a 1958 Chevy pick-up with plate no. MAM-475 owned by Michael Raymond Angala
(respondent) and driven by Bernulfo Borres (Borres). Lapanday Agricultural and Development Corporation Petitioners filed an appeal before the Court of Appeals.
(LADECO) owned the crewcab which was assigned to its manager Manuel Mendez (Mendez). Deocampo
was the driver and bodyguard of Mendez. Both vehicles were running along Rafael Castillo St., Agdao, Davao
City heading north towards Lanang, Davao City. The left door, front left fender, and part of the front bumper of
the pick-up were damaged. The Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the trial courts decision.
The Court of Appeals sustained the finding of the trial court that Deocampo was negligent. The Court of
Appeals applied the doctrine of last clear chance and ruled that Deocampo had the responsibility of avoiding
the pick-up.
The Court of Appeals also sustained the solidary liability of LADECO and Deocampo. The Court of Appeals
ruled that under Article 2180 of the Civil Code, the negligence of the driver is presumed to be the negligence
of the owner of the vehicle.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, premises considered, the appeal is DISMISSED for lack of merit, and the assailed Decision of
the Court a quo in Civil Case No. 22067-93 is AFFIRMED in toto. Costs against defendants-appellants.
SO ORDERED.[11]
Petitioners filed a motion for reconsideration. In its 11 March 2002 Resolution, the Court of Appeals denied the
motion for lack of merit.
Hence, the petition before this Court.
The Issues
The issues before the Court are the following:
1. Whether the provisions of Section 45(b) of Republic Act No. 4136[12] (RA 4136) and Article 2185 of the
Civil Code apply to this case; and
2. Whether respondent is entitled to the damages awarded.
The Ruling of this Court
The petition is partly meritorious.
Both Drivers are Negligent
Both the trial court and the Court of Appeals found that Deocampo was at fault because he was driving very
fast prior to the collision. The Court of Appeals sustained the trial courts finding that Deocampo was running
more than the normal cruising speed. Both the trial court and the Court of Appeals noted that the crewcab
stopped 21 meters away from the point of impact. Deocampo admitted that he stepped on the brakes only
after the collision.
Petitioners allege that Borres did not take the proper lane before executing the U-turn. Petitioners allege that
Borres violated Section 45(b) of RA 4136 and it was his recklessness that was the proximate cause of the
accident.
Section 45(b) of RA 4136 states:
Sec. 45. Turning at intersections. x x x
(b) The driver of a vehicle intending to turn to the left shall approach such intersection in the lane for traffic to
the right of and nearest to the center line of the highway, and, in turning, shall pass to the left of the center of
the intersection, except that, upon highways laned for traffic and upon one-way highways, a left turn shall be
made from the left lane of traffic in the direction in which the vehicle is proceeding.
Petitioners further allege that since Borres was violating a traffic rule at the time of the accident, respondent
and Borres were the parties at fault. Petitioners cite Article 2185 of the Civil Code, thus:
Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any traffic regulation.
We rule that both parties were negligent in this case. Borres was at the outer lane when he executed a U-turn.
Following Section 45(b) of RA 4136, Borres should have stayed at the inner lane which is the lane nearest to
the center of the highway. However, Deocampo was equally negligent. Borres slowed down the pick-up
preparatory to executing the U-turn. Deocampo should have also slowed down when the pick-up slowed
down. Deocampo admitted that he noticed the pick-up when it was still about 20 meters away from him.[13]
Vehicular traffic was light at the time of the incident. The pick-up and the crewcab were the only vehicles on
the road.[14] Deocampo could have avoided the crewcab if he was not driving very fast before the collision,
as found by both the trial court and the Court of Appeals. We sustain this finding since factual findings of the
Court of Appeals affirming those of the trial court are conclusive and binding on this Court.[15] Further, the
crewcab stopped 21 meters from the point of impact. It would not have happened if Deocampo was not
driving very fast.
Doctrine of Last Clear Chance Applies
Since both parties are at fault in this case, the doctrine of last clear chance applies.
The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is
appreciably later than that of the other, or where it is impossible to determine whose fault or negligence
caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so is chargeable
with the loss.[16] In this case, Deocampo had the last clear chance to avoid the collision. Since Deocampo
was driving the rear vehicle, he had full control of the situation since he was in a position to observe the
vehicle in front of him.[17] Deocampo had the responsibility of avoiding bumping the vehicle in front of him.
[18] A U-turn is done at a much slower speed to avoid skidding and overturning, compared to running straight
ahead.[19] Deocampo could have avoided the vehicle if he was not driving very fast while following the pick-
up. Deocampo was not only driving fast, he also admitted that he did not step on the brakes even upon seeing
the pick-up. He only stepped on the brakes after the collision.
Petitioners are Solidarily Liable
LADECO alleges that it should not be held jointly and severally liable with Deocampo because it exercised
due diligence in the supervision and selection of its employees. Aside from this statement, LADECO did not
proffer any proof to show how it exercised due diligence in the supervision and selection of its employees.
LADECO did not show its policy in hiring its drivers, or the manner in which it supervised its drivers. LADECO
failed to substantiate its allegation that it exercised due diligence in the supervision and selection of its
employees.
Hence, we hold LADECO solidarily liable with Deocampo.
Respondent is Entitled to Moral Damages
We sustain the award of moral damages. Moral damages are awarded to allow a plaintiff to obtain means,
diversion, or amusement that will serve to alleviate the moral suffering he has undergone due to the
defendants culpable action.[20] The trial court found that respondent, who was on board the pick-up when the
collision took place, suffered shock, serious anxiety, and fright when the crewcab bumped his pick-up. We
sustain the trial court and the Court of Appeals in ruling that respondent sufficiently showed that he suffered
shock, serious anxiety, and fright which entitle him to moral damages.
Both the trial court and the Court of Appeals failed to give any justification for the award of attorneys fees.
Awards of attorneys fees must be based on findings of fact and of law and stated in the decision of the trial
court.[21] Further, no premium should be placed on the right to litigate.[22] Hence, we delete the award of
attorneys fees.
WHEREFORE, we AFFIRM the 25 July 2001 Decision and 11 March 2002 Resolution of the Court of Appeals
in CA-G.R. CV No. 51134 with MODIFICATION by deleting the award of attorneys fees.
SO ORDERED.
G.R. No. 144723 February 27, 2006
LARRY ESTACION, Petitioner,
vs.
NOE BERNARDO, thru and his guardian ad litem ARLIE BERNARDO, CECILIA BANDOQUILLO and
GEMINIANO QUINQUILLERA, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari filed by Larry Estacion (petitioner) seeking to annul the Decision
dated April 17, 20001 of the Court of Appeals (CA) in CA-GR CV No. 41447 which affirmed in toto the
decision of the Regional Trial Court (RTC) of Dumaguete City, Branch 41, Negros Oriental, holding petitioner
and his driver Bienvenido Gerosano (Gerosano) liable for damages for the injury sustained by Noe Bernardo
(respondent Noe). Also assailed is the appellate courts Resolution dated August 16, 20002 denying
petitioners motion for reconsideration.
In the afternoon of October 16, 1982, respondent Noe was going home to Dumaguete from Cebu, via Bato
and Tampi. At Tampi, he boarded a Ford Fiera passenger jeepney with plate no. NLD 720 driven by
respondent Geminiano Quinquillera (Quinquillera), owned by respondent Cecilia Bandoquillo (Bandoquillo),
and was seated on the extension seat placed at the center of the Fiera. From San Jose, an old woman
wanted to ride, so respondent Noe offered his seat. Since the Fiera was already full, respondent Noe hung or
stood on the left rear carrier of the vehicle. Somewhere along Barangay Sto. Nio, San Jose, Negros Oriental,
between kilometers 13 and 14, the Fiera began to slow down and then stopped by the right shoulder of the
road to pick up passengers. Suddenly, an Isuzu cargo truck, owned by petitioner and driven by Gerosano,
which was traveling in the same direction, hit the rear end portion of the Fiera where respondent Noe was
standing. Due to the tremendous force, the cargo truck smashed respondent Noe against the Fiera crushing
his legs and feet which made him fall to the ground. A passing vehicle brought him to the Silliman University
Medical Center where his lower left leg was amputated.
Police investigation reports showed that respondent Noe was one of the 11 passengers of the Fiera who
suffered injuries; that when the Fiera stopped to pick up a passenger, the cargo truck bumped the rear left
portion of the Fiera; that only one tire mark from the front right wheel of the cargo truck was seen on the road.
A sketch of the accident was drawn by investigator Mateo Rubia showing the relative positions of the two
vehicles, their distances from the shoulder of the road and the skid marks of the right front wheel of the truck
measuring about 48 feet.
On February 18, 1993, respondent Noe, through his guardian ad litem Arlie Bernardo, filed with the RTC of
Dumaguete City a complaint3 for damages arising from quasi delict against petitioner as the registered owner
of the cargo truck and his driver Gerosano. He alleged that the proximate cause of his injuries and suffering
was the reckless imprudence of Gerosano and petitioners negligence in the selection of a reckless driver and
for operating a vehicle that was not roadworthy. He prayed for actual damages, loss of income, moral and
exemplary damages, attorneys fees, litigation expenses and costs of suit.
Petitioner and his driver Gerosano filed their Answer4 denying the material allegations in the complaint. They,
in turn, filed a third party complaint5 against respondents Bandoquillo and Quinquillera, as owner and driver
respectively of the Fiera. They alleged that it was the reckless imprudence of respondent driver Quinquillera
and his clear violation of the traffic rules and regulations which was the proximate cause of the accident and
asked for indemnification for whatever damages they would be sentenced to pay. Respondents Bandoquillo
and Quinquillera filed their Answer to the third party complaint asking for the dismissal of the third party
complaint and for payment of attorneys fees.
Driver Gerosano was charged criminally for reckless imprudence resulting to multiple physical injuries with
damage to property before the Municipal Circuit Trial Court (MCTC) of Pamplona-Amlan and San Jose,
Negros Oriental. On November 16, 1987, the MCTC rendered its decision6 finding him guilty of the crime
charged and was sentenced to four months and one day to two years and four months and to pay the costs.
On February 18, 1993, the RTC rendered its judgment in the civil case,7 the dispositive portion of which
reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants Gerosano and
Estacion, to pay plaintiff, jointly or solidarily, the following:
1. P129,584.20 for actual damages in the form of medical and hospitalization expenses;
2. P50,000.00 for moral damages, consisting of mental anguish, moral shock, serious anxiety and wounded
feelings;
3. P10,000.00 for attorneys fees; and
4. P5,000.00 for litigation expenses.
SO ORDERED.8
The trial court ruled that the negligence of Gerosano, petitioners driver, is the direct and proximate cause of
the incident and of the injuries suffered by respondent Noe; that Gerosanos gross negligence and reckless
imprudence had been confirmed by the Judgment in Criminal Case No. 463; that based on the findings of the
police investigator, the faulty brakes caused the cargo truck to bump the Fiera; that the Traffic Accident Report
showed that the tire mark of the cargo truck measuring 48 feet is visibly imprinted on the road where the
incident took place indicating that the said vehicle was speeding fast; that the existence of one tire mark of the
cargo truck proved that the said vehicle had a faulty brake, otherwise, it would have produced two tire marks
on the road; and that the photographs taken right after the incident also showed who the guilty party was.
The trial court did not give credence to the argument of petitioner and his driver that the truck was properly
checked by a mechanic before it was dispatched for a trip. It found that petitioner is negligent in maintaining
his vehicle in good condition to prevent any accident to happen; that petitioner is liable under Article 2180 of
the Civil Code as employer of driver Gerosano for being negligent in the selection and supervision of his
driver as well as for maintaining and operating a vehicle that was not roadworthy; and that petitioner and his
driver are solidarily liable for all the natural and probable consequences of their negligent acts or omissions.
The trial court dismissed the third party complaint filed by petitioner and his driver against respondents
Bandoquillo and Quinquillera.
Dissatisfied, only petitioner appealed to the CA. On April 17, 2000, the CA rendered the assailed decision
which affirmed in toto the decision of the trial court. Petitioners motion for reconsideration was denied in a
Resolution dated August 16, 2000.
Hence, the herein petition for review.
Petitioner submits the following issues for resolution:9
WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER LARRY ESTACION
EXERCISED THE DUE DILIGENCE OF A GOOD FATHER OF A FAMILY TO PREVENT DAMAGE DESPITE
ABUNDANCE OF EVIDENCE TO THAT EFFECT;
WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER LARRY ESTACION
EXERCISED DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF HIS EMPLOYEE AND IN
MAINTAINING HIS CARGO TRUCK ROADWORTHY AND IN GOOD OPERATING CONDITION;
WHETHER THE COURT OF APPEALS ERRED IN EXONERATING RESPONDENTS CECILIA
BANDOQUILLO AND GEMINIANO QUINQUILLERA.
In his Memorandum, petitioner contends that he was able to establish that he observed the diligence of a
good father of a family not only in the selection of his employees but also in maintaining his truck roadworthy
and in good operating condition; that the CA erred in exonerating respondents Bandoquillo and Quinquillera,
owner and driver, respectively of the Fiera from liability when their negligence was the proximate cause of
respondent Noes injuries; that respondent Noes act of standing in the rear carrier of the Fiera is in itself
negligence on his part which was aggravated by the fact that respondent Quinquillera overtook the cargo
truck driven by Gerosano on the curve and suddenly cut into the latters lane; that due to the overloading of
passengers, Gerosano was not able to see the brake lights of the Fiera when it suddenly stopped to pick up
passengers; that overloading is in violation of the applicable traffic rules and regulations and Article 2185 is
explicit when it provides that "unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation"; that since the
Fiera driver was negligent, there arises a presumption that respondent Bandoquillo, as owner of the Fiera, is
negligent in the selection and supervision of her employee; that assuming petitioner Estacion and his driver
are not entirely blameless, the negligence of Quinquillera is sufficient basis why the respective liabilities
should be delineated vis--vis their degree of negligence consistent with Article 217910 of the Civil Code.
Respondent Noe filed his Memorandum alleging that the first and second issues raised are factual in nature
which are beyond the ambit of a petition for review; that petitioner failed to overcome the presumption of
negligence thus he is liable for the negligence of his driver Gerosano; and that the third issue is best
addressed to respondents Bandoquillo and Quinquillera.
Respondents Bandoquillo and Quinquillera failed to file their memorandum despite receipt of our Resolution
requiring them to submit the same.
We find it apropos to resolve first the third issue considering that the extent of the liability of petitioner and his
driver is dependent on whether respondents Bandoquillo and Quinquillera are the ones negligent in the
vehicular mishap that happened in the afternoon of October 16, 1982 where respondent Noe was injured,
resulting in the amputation of his left leg.
At the outset, the issue raised is factual in nature. Whether a person is negligent or not is a question of fact
which we cannot pass upon in a petition for review on certiorari, as our jurisdiction is limited to reviewing
errors of law.11 As a rule, factual findings of the trial court, affirmed by the CA, are final and conclusive and
may not be reviewed on appeal. The established exceptions are: (1) when the inference made is manifestly
mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) when the findings are
grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the CA is based on
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA, in making its findings,
went beyond the issues of the case and the same is contrary to the admissions of both appellant and
appellee; (7) when the findings of fact are conclusions without citation of specific evidence on which they are
based; (8) when the CA manifestly overlooked certain relevant facts not disputed by the parties and which, if
properly considered, would justify a different conclusion; and (9) when the findings of fact of the CA are
premised on the absence of evidence and are contradicted by the evidence on record.12
On the basis of the records of this case, we find that there is cogent reason for us to review the factual
findings of the lower courts to conform to the evidence on record and consider this case as an exception to
the general rule.
The trial court and the appellate court had made a finding of fact that the proximate cause of the injury
sustained by respondent Noe was the negligent and careless driving of petitioners driver, Gerosano, who was
driving at a fast speed with a faulty brake when the accident happened. We see no cogent reason to disturb
the trial courts finding in giving more credence to the testimony of respondent Noe than the testimony of
Gerosano, petitioners truck driver.
The correctness of such finding is borne by the records. In his testimony, Gerosano said that he was driving
the truck at a speed of about 40 kilometers per hour;13 that the Fiera was behind him but upon reaching the
curve, i.e., after passing San Jose going to Dumaguete, the Fiera overtook him and blocked his way;14 that
he was 10 meters from the Fiera prior to the impact15 when he applied the brakes16 and tried to evade the
Fiera but he still hit it.17
We agree with the trial court and the appellate court when they found that the truck was running at a fast
speed because if Gerosano was really driving at a speed of 40 kilometers per hour and considering that the
distance between the truck and the Fiera in front was about 10 meters, he had more than enough time to
slacken his speed and apply his break to avoid hitting the Fiera. However, from the way the truck reacted to
the application of the brakes, it showed that Gerosano was driving at a fast speed because the brakes
skidded a lengthy 48 feet as shown in the sketch of police investigator Rubia of the tire marks visibly printed
on the road.
Moreover, the photographs taken after the incident and the testimony of Gerosano as to the extent of damage
to the truck, i.e. the trucks windshield was broken and its hood was damaged after the impact,18 further
support the finding of both courts that Gerosano was driving at a fast pace.
The accident was further caused by the faulty brakes of the truck. Based on the sketch report, there was only
one tire mark of the right tire of the cargo truck during the incident which, as testified to by police investigator
Rubia, meant that the brakes of the truck were not aligned otherwise there would be two tire marks
impressions on the road.19 Although petitioner contends that there are other factors to explain why only one
skid mark was found at the place of the incident, such as the angle and edges of the road as well as the
balance of the weight of the cargo laden in the truck, he failed to show that indeed those factors were present
to prove his defense. Such claim cannot be given credence considering that investigator Rubia testified that
the body of the truck was very much on the road, i.e., not over the shoulder of the road,20 and the road was
straight.21 Indeed, it is the negligent act of petitioners driver of driving the cargo truck at a fast speed coupled
with faulty brakes which was the proximate cause of respondent Noes injury.
Petitioners claim that right after overtaking the cargo truck, the Fiera driver suddenly stopped to pick up three
passengers from the side of the road; that the overloading of passengers prevented his truck driver from
determining that the Fiera had pulled over to pick up passengers as the latters brakelights were obstructed by
the passengers standing on the rear portion of the Fiera were not substantiated at all. Respondent
Quinquillera, the driver of the Fiera, testified that the distance from the curve of the road when he stopped and
picked up passengers was estimated to be about 80 to 90 feet.22 In fact, from the sketch drawn by
investigator Rubia, it showed a distance of 145 feet from the curve of the road to the speed tire mark (which
measured about 48 feet) visibly printed on the road to the Fiera. This means that the Fiera driver did not stop
immediately after the curve as what petitioner claims. Moreover, Gerosano admitted that his truck was at a
distance of 10 meters prior to the impact. The distance between the two vehicles was such that it would be
impossible for Gerosano not to have seen that the Fiera had pulled over to pick up passengers.
However, we agree with petitioner that respondent Noes act of standing on the rear carrier of the Fiera
exposing himself to bodily injury is in itself negligence on his part. We find that the trial court and the CA erred
when they failed to consider that respondent Noe was also guilty of contributory negligence. Contributory
negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has
suffered, which falls below the standard to which he is required to conform for his own protection. 23
It has been established by the testimony of respondent Noe that he was with four or five other persons
standing on the rear carrier of the Fiera since it was already full. Respondent Noes act of standing on the left
rear carrier portion of the Fiera showed his lack of ordinary care and foresight that such act could cause him
harm or put his life in danger. It has been held that "to hold a person as having contributed to his injuries, it
must be shown that he performed an act that brought about his injuries in disregard of warning or signs of an
impending danger to health and body.24 Respondent Noes act of hanging on the Fiera is definitely
dangerous to his life and limb.
We likewise find merit in petitioners contention that respondent Quinquillera, the Fiera driver, was also
negligent. There is merit to petitioners claim that there was overloading which is in violation of traffic rules and
regulations. Respondent Noe himself had testified that he was standing at the rear portion of the Fiera
because the Fiera was already full. Respondent Quinquillera should not have taken more passengers than
what the Fiera can accommodate. If the Fiera was not overloaded, respondent Noe would not have been
standing on the rear carrier and sustained such extent of injury.
Furthermore, we find that respondent Quinquillera was negligent in allowing respondent Noe to stand on the
Fieras rear portion. Section 32(c) of Article III of Republic Act No. 4136, otherwise known as "The Land
Transportation and Traffic Code" provides:
(c) Riding on running boards No driver shall allow any person to ride on running board, step board or
mudguard of his motor vehicle for any purpose while the vehicle is in motion.
Respondent Quinquilleras act of permitting respondent Noe to hang on the rear portion of the Fiera in such a
dangerous position creates undue risk of harm to respondent Noe. Quinquillera failed to observe that degree
of care, precaution and vigilance that the circumstances justly demand. Thus, respondent Noe suffered
injury.25 Since respondent Quinquillera is negligent, there arises a presumption of negligence on the part of
his employer, respondent Bandoquillo, in supervising her employees properly. Such presumption was not
rebutted at all by Bandoquillo. Thus, the CA erred in affirming the dismissal of the third party complaint filed by
petitioner against respondents Quinquillera and Bandoquillo.
Petitioner contends that he was able to establish that he exercised the due diligence of a good father of a
family in the selection of his employees as well as in the maintenance of his cargo truck in good operating
condition. He claims that in addition to looking at Gerosanos drivers license, he accompanied the latter in his
first two trips, during which he ascertained Gerosanos competence as a driver, petitioner being a driver
himself; that the truck driven by Gerosano has never figured in any accident prior to the incident involved; that
upon his acquisition of the cargo truck on March 16, 1982, only 7 months prior to the incident, the same was
thoroughly checked up and reconditioned; and that he had in his employ a mechanic who conducted periodic
check-ups of the engine and brake system of the cargo truck.
We are not persuaded.
Article 2180 of the Civil Code provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.
xxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.
xxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage.
As the employer of Gerosano, petitioner is primarily and solidarily liable for the quasi-delict committed by the
former. Petitioner is presumed to be negligent in the selection and supervision of his employee by operation of
law and may be relieved of responsibility for the negligent acts of his driver, who at the time was acting within
the scope of his assigned task, only if he can show that he observed all the diligence of a good father of a
family to prevent damage.26
In Yambao v. Zuniga,27 we have clarified the meaning of the diligence of a good father of a family, thus:
The "diligence of a good father" referred to in the last paragraph of the aforecited statute means diligence in
the selection and supervision of employees. Thus, when an employee, while performing his duties, causes
damage to persons or property due to his own negligence, there arises the juris tantum presumption that the
employer is negligent, either in the selection of the employee or in the supervision over him after the selection.
For the employer to avoid the solidary liability for a tort committed by his employee, an employer must rebut
the presumption by presenting adequate and convincing proof that in the selection and supervision of his
employee, he or she exercises the care and diligence of a good father of a family. x x x
Petitioners claim that she exercised due diligence in the selection and supervision of her driver, Venturina,
deserves but scant consideration. Her allegation that before she hired Venturina she required him to submit
his drivers license and clearances is worthless, in view of her failure to offer in evidence certified true copies
of said license and clearances. Bare allegations, unsubstantiated by evidence, are not equivalent to proof
under the rules of evidence. x x x
In any case, assuming arguendo that Venturina did submit his license and clearances when he applied with
petitioner in January 1992, the latter still fails the test of due diligence in the selection of her bus driver. Case
law teaches that for an employer to have exercised the diligence of a good father of a family, he should not be
satisfied with the applicants mere possession of a professional drivers license; he must also carefully
examine the applicant for employment as to his qualifications, his experience and record of service. Petitioner
failed to present convincing proof that she went to this extent of verifying Venturinas qualifications, safety
record, and driving history. The presumption juris tantum that there was negligence in the selection of her bus
driver, thus, remains unrebutted.
Nor did petitioner show that she exercised due supervision over Venturina after his selection. For as pointed
out by the Court of Appeals, petitioner did not present any proof that she drafted and implemented training
programs and guidelines on road safety for her employees. In fact, the record is bare of any showing that
petitioner required Venturina to attend periodic seminars on road safety and traffic efficiency. Hence, petitioner
cannot claim exemption from any liability arising from the recklessness or negligence of Venturina.
In sum, petitioners liability to private respondents for the negligent and imprudent acts of her driver,
Venturina, under Article 2180 of the Civil Code is both manifest and clear. Petitioner, having failed to rebut the
legal presumption of negligence in the selection and supervision of her driver, is responsible for damages, the
basis of the liability being the relationship of pater familias or on the employers own negligence. x x x28
(Emphasis supplied)
Petitioner failed to show that he examined driver Gerosano as to his qualifications, experience and service
records. In fact, the testimony of driver Gerosano in his cross-examination showed the non-observance of
these requirements. Gerosano testified that petitioner was his first employer in Dumaguete and that he was
accepted by petitioner on the very day he applied for the job;29 that his drivers license was issued in
Mindanao where he came from30 and that while petitioner asked him about his driving record in Mindanao, he
did not present any document of his driving record.31 Such admission clearly established that petitioner did
not exercise due diligence in the selection of his driver Gerosano.
Moreover, the fact that petitioners driver Gerosano was driving in an efficient manner when petitioner was
with him in his first two trips would not conclusively establish that Gerosano was not at all reckless. It could
not be considered as due diligence in the supervision of his driver to exempt petitioner from liability. In the
supervision of his driver, petitioner must show that he had formulated training programs and guidelines on
road safety for his driver which the records failed to show. We find that petitioner failed to rebut the
presumption of negligence in the selection and supervision of his employees.
Moreover, there was also no proof that he exercised diligence in maintaining his cargo truck roadworthy and
in good operating condition. While petitioners mechanic driver testified that he made a routine check up on
October 15, 1982, one day before the mishap happened, and found the truck operational, there was no record
of such inspection.
Turning now to the award of damages, since there was contributory negligence on the part of respondent
Noe, petitioners liability should be mitigated in accordance with Article 2179 of the Civil Code which provides:
and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the operator of the
other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the
latters heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals, thus:
"Nor should it make difference that the liability of petitioner [bus owner] springs from contract while that of
respondents [owner and driver of other vehicle] arises from quasi delict. As early as 1913, we already ruled in
Gutierrez v. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of
the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view
that under the circumstances they are liable on quasi delict."36
WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision of the Court of Appeals
dated April 17, 2000 as well as its Resolution dated August 16, 2000 are AFFIRMED with MODIFICATION to
the effect that the dispositive portion of the Decision dated February 18, 1993 of the Regional Trial Court of
Dumaguete City in Civil Case No. 8122, should read as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants Gerosano and
Estacion, as well as third party defendants Bandoquillo and Quinquillera, to pay plaintiff, jointly and solidarily,
the following:
1. P103,667.36 for actual damages in the form of medical and hospitalization expenses;
2. P40,000.00 for moral damages, consisting of mental anguish, moral shock, serious anxiety and wounded
feelings;
3. P10,000.00 for attorneys fees; and
4. P5,000.00 for litigation expenses.1avvphil.net

When the plaintiffs own negligence was the immediate and proximate cause of his injury, he cannot recover SO ORDERED."
damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being
the defendants lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages No pronouncement as to costs.
to be awarded.
SO ORDERED.
The underlying precept of the above article on contributory negligence is that a plaintiff who is partly
responsible for his own injury should not be entitled to recover damages in full but must bear the
consequences of his own negligence. The defendant must thus be held liable only for the damages actually
caused by his negligence.32

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

In the present case, taking into account the contributing negligence of respondent Noe, we likewise rule that
the demands of substantial justice are satisfied by distributing the damages also on a 20-80 ratio excluding
attorneys fees and litigation expenses.34 Consequently, 20% should be deducted from the actual and moral
damages awarded by the trial court in favor of respondent Noe, that is: 20% of P129,584.20 for actual
damages is P25,916.84 and 20% of P50,000.00 for moral damages is P10,000.00. Thus, after deducting the
same, the award for actual damages should be P103,667.36 and P40,000.00 for moral damages or 80% of
the damages so awarded.

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

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

The same rule of liability was applied in situations where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus
causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court,
G.R. No. 119756 March 18, 1999

FORTUNE EXPRESS, INC., petitioner,

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

MENDOZA, J.:

This is an appeal by petition for review on certiorari of the decision, dated July 29, 1994, of the Court of
Appeals, which reversed the decision of the Regional Trial Court, Branch VI, Iligan City. The aforesaid
decision of the trial court dismissed the complaint of public respondents against petitioner for damages for
breach of contract of carriage filed on the ground that petitioner had not exercised the required degree of
diligence in the operation of one of its buses. Atty. Talib Caorong, whose heirs are private respondents herein,
was a passenger of the bus and was killed in the ambush involving said bus.

The facts of the instant case are as follows:

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

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

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

However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of
the armed men was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained
consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as he was innocent of
any wrong doing and was only trying to make a living. The armed men were, however, adamant as they
repeated the warning that they were going to burn the bus along with its driver. During this exchange between
Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus and crawled to the canal
on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able
to pull Atty. Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but
he died while undergoing operation. 3
The private respondents brought this suit for breach of contract of carriage in the Regional Trial Court, Branch
VI, Iligan City. In its decision, dated December 28, 1990, the trial court dismissed the complaint, holding as
follows:
The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the "rumors" that the
Moslems intended to take revenge by burning five buses of defendant is established since the latter also
utilized Crisanto Generalao as a witness. Yet despite this information, the plaintiffs charge, defendant did not
take proper precautions. . . . Consequently, plaintiffs now fault the defendant for ignoring the report. Their
position is that the defendant should have provided its buses with security guards. Does the law require
common carriers to install security guards in its buses for the protection and safety of its passengers? Is the
failure to post guards on omission of the duty to "exercise the diligence of a good father of the family" which
could have prevented the killing of Atty. Caorong? To our mind, the diligence demanded by law does not
include the posting of security guard in buses. It is an obligation that properly belongs to the State. Besides,
will the presence of one or two security guards suffice to deter a determined assault of the lawless and thus
prevent the injury complained of? Maybe so, but again, perhaps not. In other words, the presence of a
security guard is not a guarantee that the killing of Atty. Caorong would have been definitely avoided.
xxx xxx xxx
Accordingly, the failure of defendant to accord faith and credit to the report of Mr. Generalao and the fact that
it did not provide security to its buses cannot, in the light of the circumstances, be characterized as
negligence.
Finally, the evidence clearly shows that the assalants did not have the least intention of the harming any of the
passengers. They ordered all the passengers to alight and set fire on the bus only after all the passengers
were out of danger. The death of Atty. Caorong was an unexpected and unforseen occurrense over which
defendant had no control. Atty. Caorong performed an act of charity and heroism in coming to the succor of
the driver even in the face of danger. He deserves the undying gratitude of the driver whose life he saved. No
one should blame him for an act of extraordinary charity and altruism which cost his life. But neither should
any blame be laid on the doorstep of defendant. His death was solely due to the willfull acts of the lawless
which defendant could neither prevent nor to stop.
WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of merit, the counter-
claim is likewise dismissed. No costs. 4
On appeal, however, the Court of Appeals reversed. It held:
In the case at bench, how did defendant-appellee react to the tip or information that certain Maranao
hotheads were planning to burn five of its buses out of revenge for the deaths of two Maranaos in an earlier
collision involving appellee's bus? Except for the remarks of appellee's operations manager that "we will have
our action . . . . and I'll be the one to settle it personally," nothing concrete whatsoever was taken by appellee
or its employees to prevent the execution of the threat. Defendant-appellee never adopted even a single
safety measure for the protection of its paying passengers. Were there available safeguards? Of course, there
were: one was frisking passengers particularly those en route to the area where the threats were likely to be
carried out such as where the earlier accident occurred or the place of influence of the victims or their locality.
If frisking was resorted to, even temporarily, . . . . appellee might be legally excused from liabilty. Frisking of
passengers picked up along the route could have been implemented by the bus conductor; for those boarding
at the bus terminal, frisking could have been conducted by him and perhaps by additional personnel of
defendant-appellee. On hindsight, the handguns and especially the gallon of gasoline used by the felons all of
which were brought inside the bus would have been discovered, thus preventing the burning of the bus and
the fatal shooting of the victim.
Appellee's argument that there is no law requiring it to provide guards on its buses and that the safety of
citizens is the duty of the government, is not well taken. To be sure, appellee is not expected to assign
security guards on all its buses; if at all, it has the duty to post guards only on its buses plying predominantly
Maranaos areas. As discussed in the next preceding paragraph, least appellee could have done in response
to the report was to adopt a system of verification such as the frisking of passengers boarding at its buses.
Nothing, and no repeat, nothing at all, was done by defendant-appellee to protect its innocent passengers
from the danger arising from the "Maranao threats." It must be observed that frisking is not a novelty as a
safety measure in our society. Sensitive places in fact, nearly all important places have applied this
method of security enhancement. Gadgets and devices are avilable in the market for this purpose. It would
not have weighed much against the budget of the bus company if such items were made available to its
personnel to cope up with situations such as the "Maranaos threats."
In view of the constitutional right to personal privacy, our pronouncement in this decision should not be
construed as an advocacy of mandatory frisking in all public conveyances. What we are saying is that given
the circumstances obtaining in the case at bench that: (a) two Maranaos died because of a vehicular collision
involving one of appellee's vehicles; (b) appellee received a written report from a member of the Regional
Security Unit, Constabulary Security Group, that the tribal/ethnic group of the two deceased were planning to
burn five buses of appellee out of revenge; and (c) appelle did nothing absolutely nothing for the safety
of its passengers travelling in the area of influence of the victims, appellee has failed to exercise the degree of
dilegence required of common carriers. Hence, appellee must be adjudge liable.
xxx xxx xxx
WHEREFORE the decision appealed from is hereby REVERSED and another rendered ordering defendant-
appellee to pay plaintiffs-appellants the following:
1) P3,399,649.20 as death indemnity;
2) P50,000.00 and P500.00 per appearance as attorney's fee and
Costs against defendant-appellee. 5
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL
TRIAL COURT DATED DECEMBER 28, 1990 DISMISSING THE COMPLAINT AS WELL AS THE
COUNTERCLAIM, AND FINDING FOR PRIVATE RESPONDENTS BY ORDERING PETITIONER TO PAY
THE GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES,
AS WELL AS DENYING PETITIONERS MOTION FRO RECONSIDERATION AND THE SUPPLEMENT TO
SAID MOTION, WHILE HOLDING, AMONG OTHERS, THAT THE PETITIONER BREACHED THE
CONTRACT OF THE CARRIAGE BY ITS FAILURE TO EXCERCISE THE REQUIRED DEGREE OF
DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTABLE, VIOLENT,
AND FORCEFULL, AS TO BE REGARDED AS CASO FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT
PETITIONER COULD HAVE PROVIDED ADEQUATE SECURITY IN PREDOMINANTLY MUSLIM AREAS AS
PART OF ITS DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A COMMON CARRIER.
The instant has no merit.
First. Petitioner's Breach of the Contract of Carriage.
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger
on account of wilfull acts of other passengers, if the employees of the common carrier could have prevented
the act through the exercise of the diligence of a good father of a family. In the present case, it is clear that
because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was
made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take
revenge on the petitioner by burning some of its buses and the assurance of petitioner's operation manager,
Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to protect the safety of
its passengers.
Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a
large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the
safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-
intrusive gadgets such as metal detectors, before allowing them on board could have been employed without
violating the passenger's constitutional rights. As this Court amended in Gacal v. Philippine Air Lines, Inc., 6 a
common carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their
baggages.

From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's
buses because they did not exercise the diligence of a good father of a family. Hence, petitioner should be
held liable for the death of Atty. Caorong.
Second. Seizure of Petitioner's Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it
could not be held liable.
Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is
inevitable. In Yobido v. Court of Appeals, 7 we held that to considered as force majeure, it is necessary that
(1) the cause of the breach of the obligation must be independent of the human will; (2) the event must be
either unforeseeable or unavoidable; (3) the occurence must be render it impossible for the debtor to fulfill the
obligation in a normal manner; and (4) the obligor must be free of participation in, or aggravation of, the injury
to the creditor. The absence of any of the requisites mentioned above would prevent the obligor from being
excused from liability.
Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable for its failure to take the
necessary precautions against an approaching typhoon, of which it was warned, resulting in the loss of the
lives of several passengers. The event was forseeable, and, thus, the second requisite mentioned above was
not fulfilled. This ruling applies by analogy to the present case. Despite the report of PC agent Generalao that
the Maranaos were going to attack its buses, petitioner took no steps to safeguard the lives and properties of
its passengers. The seizure of the bus of the petitioner was foreseeable and, therefore, was not a fortuitous
event which would exempt petitioner from liabilty.
Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court of Appeals, 10 in support
of its contention that the seizure of its bus by the assailants constitutes force majeure. In Pilapil v. Court of
Appeals, 11 it was held that a common carrier is not liable for failing to install window grills on its buses to
protect the passengers from injuries cause by rocks hurled at the bus by lawless elements. On the other
hand, in De Guzman v. Court of Appeals, 12 it was ruled that a common carriers is not responsible for goods
lost as a result of a robbery which is attended by grave or irresistable threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil
Code provides that "a common carrier is bound to carry the passengers as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances."
Thus, we held in Pilapil and De Guzman that the respondents therein were not negligent in failing to take
special precautions against threats to the safety of passengers which could not be foreseen, such as tortious
or criminal acts of third persons. In the present case, this factor of unforeseeability (the second requisite for an
event to be considered force majeure) is lacking. As already stated, despite the report of PC agent Generalao
that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's
operation manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done
by petitioner to protect the safety of passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to
retrieve something. But Atty. Caorong did not act recklessly. It should be pointed out that the intended targets
of the violence were petitioners and its employees, not its passengers. The assailant's motive was to retaliate
for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in
which the two Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus,
ordered the passengers to get off the bus as they intended to burn it and its driver. The armed men actually
allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt to
help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this
act cannot considered an act of negligence, let alone recklessness.
Fourth. Petitioner Liable to Private Respaondents for Damages
We now consider the question of damages that the heirs of Atty. Caorong, private respondents herein, are
entitled to recover from the petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides for the payment of
indemnity for the death of passengers caused by the breach of contract of carriage by a common carrier.
Initially fixed in Art. 2206 at P3,000.00, the amount of the said indemnity for death has through the years been
gradually increased in view of the declining value of the peso. It is presently fixed at P50,000.00. 13 Private
respondents are entitled to this amount.
Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to
an adequate compensation only for such pecuniary loss suffered by him as has duly proved." The trial court
found that the private respondents spent P30,000.00 for the wake and burial of Atty. Caorong. 14 Since
petitioner does not question this finding of the trial court, it is liable to private respondent in the said amount as
actual damages.
Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants
of the deceased may demand moral damages for mental anguish by reason of the death of the deceased."
The trial court found that private respondent Paulie Caorong suffered pain from the death of her husband and
worry on how to provide support for their minor children, private respondents Yasser King, Rose Heinni, and
Prince Alexander. 15 The petitioner likewise does not question this finding of the trial court. Thus, in
accordance with recent decisions of this Court, 16 we hold that the petitioner is liable to the private
respondents in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the court may award
exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent
reckless manner." In the present case, the petitioner acted in a wanton and reckless manner. Despite warning
that the Maranaos were planning to take revenge against the petitioner by burning some of its buses, and
contary to the assurance made by its operations manager that the necessary precautions would be take, the
petitioner and its employees did nothing to protect the safety of passengers. Under the circumtances, we
deem it reasonable to award private respondents exemplary damages in the amount of P100,000.00. 17
Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case,
exemplary damages are awarded. In the recent case of Sulpicio Lines, Inc. v. Court of Appeals, 18 we held an
award of P50,000.00 as attorney's fees to be reasonable. Hence, the private respondents are entitled to
attorney's fees in that amount.
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof,
provides that in addition to the indemnity for death arising from the breach of contrtact of carriage by a
common carrier, the "defendant shall be liable for the loss of the earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter." The formula established in decided cases for computing net
earning capacity is as follows: 19
Gross Necessary
Net Earning = Life x Annual Living
Capacity Expectancy Income Expenses
Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the
deceased. 20 Since Atty. Caorong was 37 years old at that time of his death, 21 he had a life expectancy of
28 2/3 more years. 22 His projected gross annual income, computed based on his monthly salary of
P11,385.00. 23 as a lawyer in the Department of Agrarian Reform at the time of his death, was P148,005.00.
24 Allowing for necessary living expenses of fifty percent (50%) 25 of his projected gross annual income, his
total earning capacity amounts to P2,121,404.90. 26 Hence, the petitioner is liable to the private respondents
in the said amount as a compensation for loss of earning capacity.
WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby AFFIRMED with the
MODIFICATION that petitioner Fortune Express, Inc. is ordered to pay the following amounts to private
respondents Paulie, Yasser King, Rose Heinni, and Prince Alexander Caorong:
1. death indemnity in the amount of fifty thousand pesos (P50,000.00);
2. actual damages in the amount of thirty thousand pesos (P30,000.00);
3. moral damages in the amount of one hundred thousand pesos (P100,000.00);
4. exemplary damages in the amount of one hundred thousand pesos (P100,000.00);
5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);
6. compensation for loss of earning capacity in the amount of two million one hundred twenty-one SO ORDERED.
thousand four hundred four pesos and ninety centavos (P2,121,404.90); and

7. cost of suits.