1

G.R. No. 101089. April 7, 1993.

ESTRELLITA M. BASCOS, petitioners,

vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

Modesto S. Bascos for petitioner.

Pelaez, Adriano & Gregorio for private respondent.

SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. — Article 1732 of the Civil Code defines a
common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given
undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the
quantity or extent of the business transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals is instructive. In referring to
Article 1732 of the Civil Code, it held thus: "The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its
services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions."

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. — Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently
if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption . . . The presumption of negligence was raised against petitioner. It was petitioner's
burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own
failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. — In De Guzman
vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of
Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with
Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy . . . (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or
irresistible threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme Court also held that: "Under Article 1745
(6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility — even for acts of
strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We
believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are
lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner herself has made the admission that she
was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to
prove the same.

5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. — While the affidavit of Juanito
Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses.

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. — Granting that the said evidence were not
self-serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law
defines it to be and not what it is called by the contracting parties.

DECISION

CAMPOS, JR., J p:
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This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO, doing business under the name
CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:

"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto. Costs against appellant." 1

The facts, as gathered by this Court, are as follows:

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2 with Jibfair Shipping
Agency Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila
to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano,
subcontracted with Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila
Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a consequence of that failure,
Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract which stated that:

"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or damages to the cargo during
transport at market value, . . ." 3

Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and
damages with writ of preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ of Preliminary Attachment was
supported by an affidavit 5 which contained the following allegations:

"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of preliminary attachment may
lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;"

5. That there is no sufficient security for the claim sought to be enforced by the present action;

6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"

The trial court granted the writ of preliminary attachment on February 17, 1987.

In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE leased her cargo truck to
load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the cargo; that
the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was immediately
reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked properties; that after preliminary investigation,
an information for robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated
petitioner from any liability to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay the former:

1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual damages with
legal interest of 12% per cent per annum to be counted from December 4, 1986 until fully paid;

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and

3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED for being moot and academic.

SO ORDERED." 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.

Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:

"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.
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II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN
FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY,
HIJACKING.

III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT PETITIONER'S MOTION TO
DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE
MERITS OF THE CASE." 7

The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the hijacking referred to a force
majeure?

The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that she did business under the
name A.M. Bascos Trucking and that said admission dispensed with the presentation by private respondent, Rodolfo Cipriano, of proofs that
petitioner was a common carrier. The respondent Court also adopted in toto the trial court's decision that petitioner was a common carrier,
Moreover, both courts appreciated the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck
driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by
Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was
placed in petitioner's care.

In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in this petition that the contract
between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to
the contract as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos
confirmed in his testimony his statement that the contract was a lease contract. 10 She also stated that: she was not catering to the general
public. Thus, in her answer to the amended complaint, she said that she does business under the same style of A.M. Bascos Trucking, offering
her trucks for lease to those who have cargo to move, not to the general public but to a few customers only in view of the fact that it is only a
small business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.

Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business transacted." 12 In this case, petitioner herself has made the admission that
she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their services only to a select group of people and because the
private respondents, plaintiffs in the lower court, did not object to the presentation of affidavits by petitioner where the transaction was referred to
as a lease contract.

Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to Article 1732 of the
Civil Code, it held thus:

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

Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed them as self-serving and
petitioner contests the conclusion. We are bound by the appellate court's factual conclusions. Yet, granting that the said evidence were not self-
serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it
to be and not what it is called by the contracting parties. 15 Furthermore, petitioner presented no other proof of the existence of the contract of
lease. He who alleges a fact has the burden of proving it. 16

Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. 17 Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 18 There are very few instances
when the presumption of negligence does not attach and these instances are enumerated in Article 1734. 19 In those cases where the
presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.
 4

In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of the cargo. In De
Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability
arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:

"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy;

xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or
force, is dispensed with or diminished;"

In the same case, 21 the Supreme Court also held that:

"Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility —
even for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted with grave or irresistible threat, violence or
force. We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24
"Salaysay". However, both the trial court and the Court of Appeals have concluded that these affidavits were not enough to overcome the
presumption. Petitioner's affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account.
While it had been admitted in court for lack of objection on the part of private respondent, the respondent Court had discretion in assigning
weight to such evidence. We are bound by the conclusion of the appellate court. In a petition for review on certiorari, We are not to determine
the probative value of evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took
place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants are available as
witnesses. 25 The subsequent filing of the information for carnapping and robbery against the accused named in said affidavits did not
necessarily mean that the contents of the affidavits were true because they were yet to be determined in the trial of the criminal cases.

The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made
the presumption conclusive against her.

Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to disturb the conclusion that the
motion to lift/dissolve the writ of preliminary attachment has been rendered moot and academic by the decision on the merits.

In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The petition is DISMISSED and the
decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract with Jibfair
Shipping Agency Corp whereby the former bound itself to haul the latter’s 2,000 m/tons of soya bean meal to the warehouse in Calamba,
Laguna. To carry out its obligation, CIPTRADE, through Cipriano, subcontracted with Bascos to transport and to deliver 400 sacks of soya bean
meal from the Manila Port Area to Calamba, Laguna. Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid
Jibfair Shipping Agency the amount of the lost goods in accordance with their contract.
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and
damages with writ of preliminary attachment for breach of a contract of carriage. The trial court granted the writ of preliminary attachment.

In her answer, petitioner interposed the defense that there was no contract of carriage since CIPTRADE leased her cargo truck to load the cargo
from Manila Port Area to Laguna and that the truck carrying the cargo was hijacked and being a force majeure, exculpated petitioner from any
liability

After trial, the trial court rendered a decision in favor of Cipriano and against Bascos ordering the latter to pay the former for actual damages for
attorney’s fees and cost of suit.

The “Urgent Motion To Dissolve/Lift preliminary Attachment” Bascos is DENIED for being moot and academic.

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court’s judgment.
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Hence this petition for review on certiorari

ISSUE:
(1) WON petitioner a common carrier
(2) WON the hijacking referred to a force majeure

HELD: The petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
1. YES

In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in this petition that the contract
between her and Cipriano was lease of the truck. She also stated that: she was not catering to the general public. Thus, in her answer to the
amended complaint, she said that she does business under the same style of A.M. Bascos Trucking, offering her trucks for lease to those who
have cargo to move, not to the general public but to a few customers only in view of the fact that it is only a small business.

We agree with the respondent Court in its finding that petitioner is a common carrier.

Article 1732 of the Civil Code defines a common carrier as “(a) person, corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public.” The test to determine a
common carrier is “whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business transacted.” 12 In this case, petitioner herself has made the admission that
she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their services only to a select group of people. Regarding the
first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it held
thus:

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

2. NO

Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when
the presumption of negligence does not attach and these instances are enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of the cargo. In De
Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from liability
arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:

“Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy; xx

(6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or
force, is dispensed with or diminished;” xx

NOTES:
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1. She cited as evidence certain affidavits which referred to the contract as “lease”. These affidavits were made by Jesus Bascos and by
petitioner herself and Cipriano and CIPTRADE did not object to the presentation of affidavits by petitioner where the transaction was referred to
as a lease contract. Both the trial and appellate courts have dismissed them as self-serving and petitioner contests the conclusion. We are
bound by the appellate court’s factual conclusions. Yet, granting that the said evidence were not self-serving, the same were not sufficient to
prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what it is called by the
contracting parties. Furthermore, petitioner presented no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it.

2. Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to disturb the conclusion that the
motion to lift/dissolve the writ of preliminary attachment has been rendered moot and academic by the decision on the merits.

G.R. No. 157917 August 29, 2012

SPOUSES TEODORO 1 and NANETTE PEREÑA, Petitioners,
vs.
SPOUSES NICOLAS and TERESITA L. ZARATE, PHILIPPINE NATIONAL RAILWAYS, and the COURT OF APPEALS, Respondents.
DECISION
BERSAMIN, J.:
The operator of a school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary diligence in the conduct of
his business. He is presumed to be negligent when death occurs to a passenger. His liability may include indemnity for loss of earning capacity
even if the deceased passenger may only be an unemployed high school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Pereña (Pereñas) appeal the adverse decision promulgated on November 13,
2002, by which the Court of Appeals (CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial Court
(RTC), Branch 260, in Parañaque City that had decreed them jointly and severally liable with Philippine National Railways (PNR), their co-
defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high
school student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereñas were engaged in the business of transporting students from their respective residences in Parañaque City to Don Bosco in Pasong
Tamo, Makati City, and back. In their business, the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to
transport 14 students at a time, two of whom would be seated in the front beside the driver, and the others in the rear, with six students on either
side. They employed Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, as on previous school days,
the van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his place on the left side of the van near the rear door. The
van, with its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student riders on their way to Don Bosco.
Considering that the students were due at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular
traffic on the South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath the
Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the narrow path was
marked by piles of construction materials and parked passenger jeepneys, and the railroad crossing in the narrow path had no railroad warning
signs, or watchmen, or other responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing
open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the
vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked because he overtook the passenger bus on its
left side. The train blew its horn to warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the
van, Alano applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was imminent. The
passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact
threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the train, which dragged his body and
severed his head, instantaneously killing him. Alano fled the scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against Alfaro, the Pereñas, PNR and
Alano. The Pereñas and PNR filed their respective answers, with cross-claims against each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation carriage of the former spouses’ son from
their residence in Parañaque to his school at the Don Bosco Technical Institute in Makati City;
 7

(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son of spouses Zarate died in
connection with a vehicular/train collision which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses Pereña, then
driven and operated by the latter’s employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of
August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad crossing used by motorists for
crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and safety warning signs and railings at the site commonly
used for railroad crossing;
(6) At the material time, countless number of Makati bound public utility and private vehicles used on a daily basis the site of the collision as an
alternative route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident on board the commuter train involved without waiting for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator for railroad crossing at the time
of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the former and its project contractor;
and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence constituting the proximate cause of
the vehicular collision, which resulted in the death of plaintiff spouses’ son;
(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for any negligence which may be attributed
to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable for negligence in failing to provide
adequate safety warning signs and railings in the area commonly used by motorists for railroad crossings, constituting the proximate cause of
the vehicular collision which resulted in the death of the plaintiff spouses’ son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with plaintiff-spouses in failing to provide adequate
and safe transportation for the latter’s son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and attorney’s fees;
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the accident, in allowing or tolerating the
motoring public to cross, and its failure to install safety devices or equipment at the site of the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever amount the latter may be held
answerable or which they may be ordered to pay in favor of plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the latter in their Complaint by reason of its
gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary damages and attorney’s fees. 2
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was
based on quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and
supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had not been involved in any vehicular accident prior to
the collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips
transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first
stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision, 3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly
and severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
 8

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration, 4 reiterating that the cooperative gross negligence of the Pereñas
and PNR had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based
on the established circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with defendant-appellants spouses
Teodorico and Nanette Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming documentary evidence on record,
supporting the case of defendants-appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary damages and attorney’s fees
with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine National Railways and in not holding the latter
and its train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the absence of sufficient basis for such an
award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral damages to P 2,500,000.00;
and deleted the attorney’s fees because the RTC did not state the factual and legal bases, to wit: 6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Parañaque City is AFFIRMED with
the modification that the award of Actual Damages is reduced to P59,502.76; Moral Damages is reduced to P 2,500,000.00; and the
award for Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company
and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum representing the loss of the deceased’s earning capacity
despite Cariaga being only a medical student at the time of the fatal incident. Applying the formula adopted in the American Expectancy Table of
Mortality:–
2/3 x (80 – age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21 (the age when he would
have graduated from college and started working for his own livelihood) instead of 15 years (his age when he died). Considering that the nature
of his work and his salary at the time of Aaron’s death were unknown, it used the prevailing minimum wage of P 280.00/day to compute Aaron’s
gross annual salary to beP 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3
years, his gross income would aggregate to P 4,351,164.30, from which his estimated expenses in the sum ofP 2,189,664.30 was deducted to
finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be higher than the amount claimed by the
Zarates, only P 2,109,071.00, the amount expressly prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration. 8
Issues
In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and severally liable to pay damages with Philippine
National Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning capacity of a minor who was only a high
school student at the time of his death in the absence of sufficient basis for such an award.
 9

III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing their claim against the Pereñas on
breach of contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in the selection and supervision of Alfaro,
the van driver, by seeing to it that Alfaro had a driver’s license and that he had not been involved in any vehicular accident prior to the fatal
collision with the train; that they even had their own son travel to and from school on a daily basis; and that Teodoro Pereña himself sometimes
accompanied Alfaro in transporting the passengers to and from school. The RTC gave scant consideration to such defense by regarding such
defense as inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as a common carrier; and that their
standard of care was extraordinary diligence, not the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually regarded as a private carrier, 9primarily because he only caters
to some specific or privileged individuals, and his operation is neither open to the indefinite public nor for public use, the exact nature of the
operation of a school bus service has not been finally settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another, gratuitously or for hire.
The carrier is classified either as a private/special carrier or as a common/public carrier.10 A private carrier is one who, without making the
activity a vocation, or without holding himself or itself out to the public as ready to act for all who may desire his or its services, undertakes, by
special agreement in a particular instance only, to transport goods or persons from one place to another either gratuitously or for hire. 11The
provisions on ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required of a private carrier is only
ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm or association engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering such services to the
public.12Contracts of common carriage are governed by the provisions on common carriers of the Civil Code, the Public Service Act, 13 and other
special laws relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to have
acted negligently in case of the loss of the effects of passengers, or the death or injuries to passengers. 14
In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco,15viz:
“Public use” is the same as “use by the public”. The essential feature of the public use is not confined to privileged individuals, but is open to the
indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look
not only to the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or
the public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There
must be, in general, a right which the law compels the owner to give to the general public. It is not enough that the general prosperity of the
public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge the character of the use is whether the
public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction between a person or an
enterprise offering transportation on a regular or an isolated basis; and has not distinguished a carrier offering his services to the general public,
that is, the general community or population, from one offering his services only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the notion of public service under
the Public Service Act, which supplements the law on common carriers found in the Civil Code. Public service, according to Section 13,
paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or
limited clientèle, whether permanent or occasional, and done for the general business purposes , any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x x. 17
Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common carriers pipeline
operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually transacted, or the number
and character of the conveyances used in the activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has
held out to the general public as his business or occupation. If the undertaking is a single transaction, not a part of the general business or
occupation engaged in, as advertised and held out to the general public, the individual or the entity rendering such service is a private, not a
 10

common, carrier. The question must be determined by the character of the business actually carried on by the carrier, not by any secret intention
or mental reservation it may entertain or assert when charged with the duties and obligations that the law imposes. 21
Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a school bus service were: (a)
engaged in transporting passengers generally as a business, not just as a casual occupation; (b) undertaking to carry passengers over
established roads by the method by which the business was conducted; and (c) transporting students for a fee. Despite catering to a limited
clientèle, the Pereñas operated as a common carrier because they held themselves out as a ready transportation indiscriminately to the
students of a particular school living within or near where they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law. Given the nature of the business and
for reasons of public policy, the common carrier is 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.” 22 Article 1755 of the Civil Code specifies that the
common carrier should “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.” To successfully fend off liability in an action upon the death or injury to a passenger, the
common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal presumption that he or it was at fault or
acted negligently would stand.23 No device, whether by stipulation, posting of notices, statements on tickets, or otherwise, may dispense with or
lessen the responsibility of the common carrier as defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court might now reverse the CA’s findings on
their liability. On the contrary, an examination of the records shows that the evidence fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the accident because death
had occurred to their passenger.25 The presumption of negligence, being a presumption of law, laid the burden of evidence on their shoulders to
establish that they had not been negligent.26 It was the law no less that required them to prove their observance of extraordinary diligence in
seeing to the safe and secure carriage of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally
responsible for the death of Aaron and thus to be held liable for all the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their negligence by credible evidence. Their defense of having
observed the diligence of a good father of a family in the selection and supervision of their driver was not legally sufficient. According to Article
1759 of the Civil Code, their liability as a common carrier did not cease upon proof that they exercised all the diligence of a good father of a
family in the selection and supervision of their employee. This was the reason why the RTC treated this defense of the Pereñas as inappropriate
in this action for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope of his authority or even in
violation of the orders of the common carrier.27 In this connection, the records showed their driver’s actual negligence. There was a showing, to
begin with, that their driver traversed the railroad tracks at a point at which the PNR did not permit motorists going into the Makati area to cross
the railroad tracks. Although that point had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver
into taking that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his passengers but he
still disregarded the risks. Compounding his lack of care was that loud music was playing inside the air-conditioned van at the time of the
accident. The loudness most probably reduced his ability to hear the warning horns of the oncoming train to allow him to correctly appreciate the
lurking dangers on the railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles traversed the railroad
tracks. In so doing, he lost his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate
his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided a collision with the train but the van got
slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the railroad tracks despite knowing
that his slackening of speed and going to a full stop were in observance of the right of way at railroad tracks as defined by the traffic laws and
regulations.28 He thereby violated a specific traffic regulation on right of way, by virtue of which he was immediately presumed to be negligent. 29
The omissions of care on the part of the van driver constituted negligence, 30 which, according to Layugan v. Intermediate Appellate Court,31 is
“the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man would not do, 32 or as Judge Cooley defines it, ‘(t)he failure to observe
for the protection of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury.’”33
The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading case of Picart v.
Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of course be always determined
in the light of human experience and in view of the facts involved in the particular case . Abstract speculation cannot here be of much
value but this much can be profitably said: Reasonable men govern their conduct by the circumstances which are before them or
known to them. They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to take care only
when there is something before them to suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm
as a result of the course actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable
foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is this: Conduct is said to
 11

be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was
sufficiently probable to warrant his foregoing the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he traversed the railroad tracks at a point not
allowed for a motorist’s crossing despite being fully aware of the grave harm to be thereby caused to his passengers; and when he disregarded
the foresight of harm to his passengers by overtaking the bus on the left side as to leave himself blind to the approach of the oncoming train that
he knew was on the opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court held the PNR solely liable for the
damages caused to a passenger bus and its passengers when its train hit the rear end of the bus that was then traversing the railroad crossing.
But the circumstances of that case and this one share no similarities. In Philippine National Railways v. Intermediate Appellate Court , no
evidence of contributory negligence was adduced against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of
extraordinary diligence by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the Pereñas
and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate Appellate Court was traversing the
dedicated railroad crossing when it was hit by the train, but the Pereñas’ school van traversed the railroad tracks at a point not intended for that
purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR “jointly and severally” liable for damages arising from the death of
Aaron. They had been impleaded in the same complaint as defendants against whom the Zarates had the right to relief, whether jointly,
severally, or in the alternative, in respect to or arising out of the accident, and questions of fact and of law were common as to the
Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct from the
basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR
also guilty of negligence despite the school van of the Pereñas traversing the railroad tracks at a point not dedicated by the PNR as a railroad
crossing for pedestrians and motorists, because the PNR did not ensure the safety of others through the placing of crossbars, signal lights,
warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that
a crossing guard had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others
as well as the need to control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the liability, the CA modified the amount.
Both lower courts took into consideration that Aaron, while only a high school student, had been enrolled in one of the reputable schools in the
Philippines and that he had been a normal and able-bodied child prior to his death. The basis for the computation of Aaron’s earning capacity
was not what he would have become or what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the
time of his death. Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at the time of his
death, but on 21 years, his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and unfounded. They cited People v. Teehankee,
Jr.,37 where the Court deleted the indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative due to his having
graduated from high school at the International School in Manila only two years before the shooting, and was at the time of the shooting only
enrolled in the first semester at the Manila Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court,
that he was for all intents and purposes only a high school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to that of Aaron here. The CA
and the RTC were not speculating that Aaron would be some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or
a lawyer). Instead, the computation of Aaron’s earning capacity was premised on him being a lowly minimum wage earner despite his being then
enrolled at a prestigious high school like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at
work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and in favor of the defendants
whose negligence not only cost Aaron his life and his right to work and earn money, but also deprived his parents of their right to his presence
and his services as well. Our law itself states that the loss of the earning capacity of the deceased shall be the liability of the guilty party in favor
of the heirs of the deceased, and shall in every case be assessed and awarded by the court “unless the deceased on account of permanent
physical disability not caused by the defendant, had no earning capacity at the time of his death.” 38 Accordingly, we emphatically hold in favor of
the indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because compensation of this nature is awarded
not for loss of time or earnings but for loss of the deceased’s power or ability to earn money.39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and Manila Railroad
Company,40 fourth-year medical student Edgardo Carriaga’s earning capacity, although he survived the accident but his injuries rendered him
permanently incapacitated, was computed to be that of the physician that he dreamed to become. The Court considered his scholastic record
sufficient to justify the assumption that he could have finished the medical course and would have passed the medical board examinations in
due time, and that he could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that
murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs had they graduated in due
time, and that their jobs would probably pay them high monthly salaries from P 10,000.00 to P 15,000.00 upon their graduation. Their earning
 12

capacities were computed at rates higher than the minimum wage at the time of their deaths due to their being already senior agriculture
students of the University of the Philippines in Los Baños, the country’s leading educational institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective amounts of P 2,500,000.00
and P 1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of P 2,500,000.00 were really just and reasonable under the established circumstances of this case because they were
intended by the law to assuage the Zarates’ deep mental anguish over their son’s unexpected and violent death, and their moral shock over the
senseless accident. That amount would not be too much, considering that it would help the Zarates obtain the means, diversions or
amusements that would alleviate their suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an
injustice, given the passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.
Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective the desired example for
the public good. As a common carrier, the Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to
prevent a similarly senseless accident from happening again. Only by an award of exemplary damages in that amount would suffice to instill in
them and others similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with
public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13, 2002; and ORDER the
petitioners to pay the costs of suit.
SO ORDERED.
Civil Law – Common Carrier – Private School Transport are Common Carriers
Torts and Damages – Heirs of a high school student may be awarded damages for loss income
In June 1996, Nicolas and Teresita Zarate contracted Teodoro and Nanette Pereña to transport their (Zarate’s) son, Aaron Zarate, to and from
school. The Pereñas were owners of a van being used for private school transport.
At about 6:45am of August 22, 1996, the driver of the said private van, Clemente Alfaro, while the children were on board including Aaron,
decided to take a short cut in order to avoid traffic. The usual short cut was a railroad crossing of the Philippine National Railway (PNR).
Alfaro saw that the barandilla (the pole used to block vehicles crossing the railway) was up which means it was okay to cross. He then tried to
overtake a bus. However, there was in fact an oncoming train but Alfaro no longer saw the train as his view was already blocked by the bus he
was trying to overtake. The bus was able to cross unscathed but the van’s rear end was hit. During the collision, Aaron, was thrown off the van.
His body hit the railroad tracks and his head was severed. He was only 15 years old.
It turns out that Alfaro was not able to hear the train honking from 50 meters away before the collision because the van’s stereo was playing
loudly.
The Zarates sued PNR and the Pereñas (Alfaro became at-large). Their cause of action against PNR was based on quasi-delict. Their cause of
action against the Pereñas was based on breach of contract of common carriage.
In their defense, the Pereñas invoked that as private carriers they were not negligent in selecting Alfaro as their driver as they made sure that he
had a driver’s license and that he was not involved in any accident prior to his being hired. In short, they observed the diligence of a good father
in selecting their employee.
PNR also disclaimed liability as they insist that the railroad crossing they placed there was not meant for railroad crossing (really, that’s their
defense!).
The RTC ruled in favor of the Zarates. The Court of Appeals affirmed the RTC. In the decision of the RTC and the CA, they awarded damages in
favor of the Zarates for the loss of earning capacity of their dead son.
The Pereñas appealed. They argued that the award was improper as Aaron was merely a high school student, hence, the award of such
damages was merely speculative. They cited the case of People vs Teehankee where the Supreme Court did not award damages for the loss of
earning capacity despite the fact that the victim there was enrolled in a pilot school.
ISSUES: Whether or not the defense of due diligence of a good father by the Pereñas is untenable. Whether or not the award of damages for
loss of income is proper.
HELD: Yes, in both issues.
Defense of Due Diligence of a Good Father
This defense is not tenable in this case. The Pereñas are common carriers. They are not merely private carriers. (Prior to this case, the status of
private transport for school services or school buses is not well settled as to whether or not they are private or common carriers – but they were
generally regarded as private carriers). Private transport for schools are common carriers. The Pereñas, as the operators of a school bus
service were: (a) engaged in transporting passengers generally as a business, not just as a casual occupation; (b) undertaking to carry
passengers over established roads by the method by which the business was conducted; and (c) transporting students for a fee. Despite
catering to a limited clientèle, the Pereñas operated as a common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where they operated the service and for a fee.
 13

Being a common carrier, what is required of the Pereñas is not mere diligence of a good father. What is specifically required from them by law is
extraordinary diligence – a fact which they failed to prove in court. Verily, their obligation as common carriers did not cease upon their exercise
of diligently choosing Alfaro as their employee.
(It is recommended that you read the full text, the Supreme Court made an elaborate and extensive definition of common and private carriers
as well as their distinctions.)
Award of Damages for Aaron’s loss of earning capacity despite he being a high school student at the time of his death
The award is proper. Aaron was enrolled in a reputable school (Don Bosco). He was of normal health and was an able-bodied person. Further,
the basis of the computation of his earning capacity was not on what he would have become. It was based on the current minimum wage. The
minimum wage was validly used because with his circumstances at the time of his death, it is most certain that had he lived, he would at least
be a minimum wage earner by the time he starts working. This is not being speculative at all.
The Teehankee case was different because in that case, the reason why no damages were awarded for loss of earning capacity was that the
defendants there were already assuming that the victim would indeed become a pilot – hence, that made the assumption speculative. But in the
case of Aaron, there was no speculation as to what he might be – but whatever he’ll become, it is certain that he will at the least be earning
minimum wage.

G.R. No. L-19495 February 2, 1924

HONORIO LASAM, ET AL., plaintiffs-appellants,

vs.
FRANK SMITH, JR., defendant-appellant.

Palma and Leuterio for plaintiffs-appellants.

Mariano Alisangco for defendant-appellant.

OSTRAND, J.:

The plaintiff are husband and wife and this action is brought to recover damages in the sum of P20,000 for physical injuries sustained by them in
an automobile accident. The trial court rendered a judgment in their favor for the sum of P1,254.10, with legal interest from the date of the
judgment. Both the plaintiffs and the defendant appeal, the former maintaining that the damages awarded are insufficient while the latter denies
all liability for any damages whatever.

It appears from the evidence that on February 27, 1918, the defendant was the owner of a public garage in the town of San Fernando, La Union,
and engaged in the business of carrying passengers for hire from the one point to another in the Province of La Union and the surrounding
provinces. On the date mentioned, he undertook to convey the plaintiffs from San Fernando to Currimao, Ilocos Norte, in a Ford automobile. On
leaving San Fernando, the automobile was operated by a licensed chauffeur, but after having reached the town of San Juan, the chauffeur
allowed his assistant, Remigio Bueno, to drive the car. Bueno held no driver's license, but had some experience in driving, and with the
exception of some slight engine trouble while passing through the town of Luna, the car functioned well until after the crossing of the Abra River
in Tagudin, when, according to the testimony of the witnesses for the plaintiffs, defects developed in the steering gear so as to make accurate
steering impossible, and after zigzagging for a distance of about half a kilometer, the car left the road and went down a steep embankment.

The defendant, in his testimony, maintains that there was no defect in the steering gear, neither before nor after the accident, and expresses the
opinion that the swaying or zigzagging of the car must have been due to its having been driven at an excessive rate of speed. This may possibly
be true, but it is, from our point of view, immaterial whether the accident was caused by negligence on the part of the defendant's employees, or
whether it was due to defects in the automobile; the result would be practically the same in either event.

In going over the bank of the road, the automobile was overturned and the plaintiffs pinned down under it. Mr. Lasam escaped with a few
contusions and a "dislocated" rib , but his wife, Joaquina Sanchez, received serious injuries, among which was a compound fracture of one of
the bones in her left wrist. She also appears to have suffered a nervous breakdown from which she had not fully recovered at the time of the
trial.

The complaint in the case was filed about a year and a half after the occurrence above related. It alleges, among other things, that the accident
was due to defects in the automobile as well as to the incompetence and negligence of the chauffeur, and the case appears to have been tried
largely upon the theory that it sounds in tort and that the liability of the defendant is governed by article 1903 of the Civil Code. The trial court
held, however, that the cause of action rests on the defendant's breach of the contract of carriage and that, consequently, articles 1101-1107 of
the Civil Code, and not article 1903, are applicable. The court further found that the breach of the contract was not due to fortuitous events and
that, therefore, the defendant was liable in damages.

In our opinion, the conclusions of the court below are entirely correct. That upon the facts stated the defendant's liability, if any, is contractual, is
well settled by previous decisions of the court, beginning with the case of Rakes vs. Atlantic, Gulf & Pacific Co. (7 Phil., 359), and the distinction
between extra-contractual liability and contractual liability has been so ably and exhaustively discussed in various other cases, that nothing
further need here be said upon that subject. (See Cangco vs. Manila Railroad Co., 38 Phil., 768; Manila Railroad Co. vs. Compania
Trasatlantica and Atlantic, Gulf & Pacific Co., 38 Phil., 875; De Guia vs. Manila Electric Railroad & Light Co., 40 Phil., 706.) It is sufficient to
 14

reiterate that the source of the defendant's legal liability is the contract of carriage; that by entering into that contract he bound himself to carry
the plaintiffs safely and securely to their destination; and that having failed to do so he is liable in damages unless he shows that the failure to
fulfill his obligation was due to causes mentioned in article 1105 of the Civil Code, which reads as follows:

No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the
cases in which the law expressly provides otherwise and those in which the obligation itself imposes such liability.

This brings us to the principal question in the case:

What is meant by "events which cannot be foreseen and which, having been foreseen, are inevitable?" The Spanish authorities regard the
language employed as an effort to define the term caso fortuito and hold that the two expressions are synonymous. (Manresa, Comentarios al
Codigo Civil Español, vol. 8, pp. 88 et seq.; Scævola, Codigo Civil, vol. 19, pp. 526 et seq.)

The antecedent to article 1105 is found in Law 11, Title 33, Partida 7, which defines caso fortuito as "occasion que a case por aventura de que
non se puede ante ver. E son estos, derrivamientos de casas e fuego que se enciende a so ora, e quebrantamiento de navio, fuerca de
ladrones. . . . (An event that takes place by accident and could not have been foreseen. Examples of this are destruction of houses, unexpected
fire, shipwreck, violence of robbers. . . .)"

Escriche defines caso fortuito as "an unexpected event or act of God which could either be foreseen nor resisted, such as floods, torrents,
shipwrecks, conflagrations, lightning, compulsion, insurrections, destructions, destruction of buildings by unforseen accidents and other
occurrences of a similar nature."

In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Española says: "In a legal sense and, consequently, also in relation
to contracts, a caso fortuito presents the following essential characteristics: (1) The cause of the unforeseen and unexpected occurrence, or of
the failure of the debtor to comply with his obligation, must be independent of the human will. (2) It must be impossible to foresee the event
which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid. (3) The occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner. And (4) the obligor (debtor) must be free from any participation in the
aggravation of the injury resulting to the creditor." (5 Enciclopedia Juridica Española, 309.)

As will be seen, these authorities agree that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an
essential element of a caso fortuito. Turning to the present case, it is at once apparent that this element is lacking. It is not suggested that the
accident in question was due to an act of God or to adverse road conditions which could not have been foreseen. As far as the records shows,
the accident was caused either by defects in the automobile or else through the negligence of its driver. That is not a caso fortuito.

We agree with counsel that neither under the American nor Spanish law is a carrier of passengers an absolute insurer against the risks of travel
from which the passenger may protect himself by exercising ordinary care and diligence. The case of Alba vs. Sociedad Anonima de
Tranvias, Jurisprudencia Civil, vol. 102, p. 928, cited by the defendant in support of his contentions, affords a good illustration of the application
of this principle. In that case Alba, a passenger on a street car, was standing on the platform of the car while it was in motion. The car rounded a
curve causing Alba to lose his balance and fall off the platform, sustaining severe injuries. In an action brought by him to recover damages, the
supreme court of Spain held that inasmuch as the car at the time of the accident was travelling at a moderate rate of speed and there was no
infraction of the regulations, and the plaintiff was exposed to no greater danger than that inherent in that particular mode of travel, the plaintiff
could not recover, especially so since he should have been on his guard against a contingency as natural as that of losing his balance to a
greater or less extent when the car rounded the curve .

But such is not the present case; here the passengers had no means of avoiding the danger or escaping the injury.

The plaintiffs maintain that the evidence clearly establishes that they are entitled to damages in the sum of P7,832.80 instead of P1,254.10 as
found by the trial court, and their assignments of error relate to this point only.

There can be no doubt that the expenses incurred by the plaintiffs as a result of the accident greatly exceeded the amount of the damages
awarded. But bearing in mind that in determining the extent of the liability for losses or damages resulting from negligence in the fulfillment of a
contractual obligation, the courts have "a discretionary power to moderate the liability according to the circumstances" (De Guia vs. Manila
Electric Railroad & Light Co., 40 Phil., 706; art. 1103, Civil Code), we do not think that the evidence is such as to justify us in interfering with the
discretion of the court below in this respect. As pointed out by that court in its well-reasoned and well-considered decision, by far the greater part
of the damages claimed by the plaintiffs resulted from the fracture of a bone in the left wrist of Joaquina Sanchez and from her objections to
having a decaying splinter of the bone removed by a surgical operation. As a consequence of her refusal to submit such an operation, a series
of infections ensued and which required constant and expensive medical treatment for several years. We agree with the court below that the
defendant should not be charged with these expenses.

G.R. No. L-8034 November 18, 1955

 15

CORNELIA A. DE GILLACO, ET AL., plaintiffs-appellees,

vs.
MANILA RAILROAD COMPANY, defendant-appellant.

First Assistant Corporate Counsel Federico C. Alikpala and Attorney Higino R. Francisco for appellant.
Restituto Luna for appellees.

REYES, J.B.L., J.:

The Manila Railroad Company has appealed from a judgment of the Court of First Instance of Laguna sentencing it to pay P4,000 damages to
the appellees herein, the widow and children of the late Tomas Gillaco, shot by an employee of the Company in April, 1946.

The judgment was rendered upon the following stipulation of facts:

That at about 7:30 a.m., on the morning of April 1, 1946, Lieut. Tomas Gillaco, husband of the plaintiff, was a passenger in the early
morning train of the Manila Railroad Company from Calamba, Laguna to Manila;

That when the train reached the Paco Railroad station, Emilio Devesa, a train guard of the Manila Railroad Company assigned in the
Manila-San Fernando, La Union Line, happened to be in said station waiting for the same train which would take him to Tutuban
Station, where he was going to report for duty;

That Emilio Devesa had a long standing personal grudge against Tomas Gillaco, same dating back during the Japanese occupation;

That because of this personal grudge, Devesa shot Gillaco with the carbine furnished to him by the Manila Railroad Company for his
use as such train guard, upon seeing him inside the train coach;

That Tomas Gillaco died as a result of the would which he sustained from the shot fired by Devesa.

It is also undisputed that Devesa was convicted with homicide by final judgment of the Court of Appeals.

Appellant's contention is that, on the foregoing facts, no liability attaches to it as employer of the killer, Emilio Devesa; that it is not responsible
subsidiary ex delicto, under Art. 103 of the Revised Penal Code, because the crime was not committed while the slayer was in the actual
performance of his ordinary duties and service; nor is it responsible ex contractu, since the complaint did not aver sufficient facts to establish
such liability, and no negligence on appellant's party was shown. The Court below held the Railroad company responsible on the ground that a
contract of transportation implies protection of the passengers against acts of personal violence by the agents or employees of the carrier.

There can be no quarrel with the principle that a passenger is entitled to protection from personal violence by the carrier or its agents or
employees, since the contract of transportation obligates the carrier to transport a passenger safely to his destination. But under the law of the
case, this responsibility extends only to those that the carrier could foresee or avoid through the exercise of the degree of car and diligence
required of it.

Discussing the basis of a carrier's liability under the old Civil Code of 1889 (which was in force in 1946, when Gillaco was shot) this Court said in
Lasam vs. Smith (45 Phil., 657):

In our opinion, the conclusions of the court below are entirely correct. That upon the facts stated the defendant's liability, if any, is
contractual, is well settled by previous decisions of the court, beginning with the case of Rakes vs. Atlantic, Gulf & Pacific Co. (7 Phil.,
359), and the distinction between extra-contractual liability and contractual liability has been so ably and exhaustively discussed in
various other cases that nothing further need here be said upon that subject. (See Cangco vs. Manila Railroad Co., 38 Phil., 768;
Manila Railroad vs. Compañia Transatlantica and Atlantic, Gulf & Pacific Co., 38 Phil., 875; De Guia vs. Manila Electric Railroad &
Light Co., 40 Phil., 706). It is sufficient to reiterate that the source of the defendant's legal liability is the contract of carriage; that by
entering into that contract he bound himself to carry the plaintiff safely and securely to their destination; and that having failed to do so
he is liable in damages unless he shows that the failure to fulfill his obligation was due to causes mentioned in article 1105 of the Civil
Code, which reads as follows:

"No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the
cases in which the law expressly provides otherwise and those in which the obligation itself imposes such liability."

The act of guard Devesa in shooting passenger Gillaco (because of a personal grudge nurtured against the latter since the Japanese
occupation) was entirely unforeseeable by the Manila Railroad Co. The latter had no means to ascertain or anticipate that the two would meet,
nor could it reasonably foresee every personal rancor that might exist between each one of its many employees and any one of the thousands
of eventual passengers riding in its trains. The shooting in question was therefore "caso fortuito" within the definition of article 105 of the old Civil
Code, being both unforeseeable and inevitable under the given circumstances; and pursuant to established doctrine, the resulting breach of
appellant's contract of safe carriage with the late Tomas Gillaco was excused thereby.
 16

No doubt that a common carrier is held to a very high degree of care and diligence in the protection of its passengers; but, considering the vast
and complex activities of modern rail transportation, to require of appellant that it should guard against all possible misunderstanding between
each and every one of its employees and every passenger that might chance to ride in its conveyances at any time, strikes us as demanding
diligence beyond what human care and foresight can provide.

The lower Court and the appellees both relied on the American authorities that particularly hold carriers to be insurers of the safety of their
passengers against willful assault and intentional ill treatment on the part of their servants, it being immaterial that the act should be one of
private retribution on the part of the servant, impelled by personal malice toward the passenger (10 Am. Jur. 108; Ed. Note to
Gassenheimer vs. Wester R. Co. 40 LRA (NS), p. 999, et seq.) But as can be inferred from the previous jurisprudence of this Court , the Civil
Code of 1889 did not impose such absolute liability (Lasam vs. Smith, supra). The liability of a carrier as an insurer was not recognized in this
jurisdiction (Government vs. Inchausti & Co., 40 Phil., 219; Oriental Comm. Co. vs. Naviera Filipina, 38 Off. Gaz., 1020).

Another very important consideration that must be borne in mind is that, when the crime took place, the guard Devesa had no duties to
discharge in connection with the transportation of the deceased from Calamba to Manila. The stipulation of facts is clear that when Devesa shot
and killed Gillaco, Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting
transportation to Tutuban, the starting point of the train that he was engaged to guard. In fact, his tour of duty was to start at 9:00 a.m., two
hours after the commission of the crime. Devesa was therefore under no obligation to safeguard the passenger of the Calamba-Manila train,
where the deceased was riding; and the killing of Gillaco was not done in line of duty. The position of Devesa at the time was that of another
would be passenger, a stranger also awaiting transportation, and not that of an employee assigned to discharge any of the duties that the
Railroad had assumed by its contract with the deceased. As a result, Devesa's assault cannot be deemed in law a breach of Gillaco's contract of
transportation by a servant or employee of the carrier. We agree with the position taken by the Supreme Court of Texas in a similar case, where
it held:

The only good reason for making the carrier responsible for the misconduct of the servant perpetrated in his own interest, and not in
that of his employer, or otherwise within the scope of his employment, is that the servant is clothed with the delegated authority, and
charge with the duty by the carrier, to execute his undertaking with the passenger. And it cannot be said, we think, that there is any
such delegation to the employees at a station with reference to passenger embarking at another or traveling on the train. Of course,
we are speaking only of the principle which holds a carrier responsible for wrong done to passenger by servants acting in their own
interest, and not in that of the employer. That principle is not the ordinary rule, respondent superior, by which the employer is held
responsible only for act or omissions of the employee in the scope of his employment; but the only reason in our opinion for a broader
liability arises from the fact that the servant, in mistreating the passenger wholly for some private purpose of his own, in the very act,
violates the contractual obligation of the employer for the performance of which he has put the employee in his place. The reason
does not exist where the employee who committed the assault was never in a position in which it became his duty to his employer to
represent him in discharging any duty of the latter toward the passenger. The proposition that the carrier clothes every employee
engaged in the transportation business with the comprehensive duty of protecting every passenger with whom he may in any way
come in contact, and hereby makes himself liable for every assault commited by such servant, without regard to the inquiry whether or
not the passenger has come within the sphere of duty of that servant as indicated by the employment, is regarded as not only not
sustained by the authorities, but as being unsound and oppressive both to the employer and the employee. (Houston & T. C. R. Co.
vs. Bush, 32 LRA (NS), p. 1205.)

G.R. No. L-22272 June 26, 1967

ANTONIA MARANAN, plaintiff-appellant,

vs.
PASCUAL PEREZ, ET AL., defendants.
PASCUAL PEREZ, defendant appellant.

Pedro Panganiban for plaintiff-appellant.

Magno T. Bueser for defendant-appellant.

BENGZON, J.P., J.:

Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by Pascual Perez when he was stabbed and killed
by the driver, Simeon Valenzuela.

Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas. Found guilty, he was sentenced to suffer imprisonment and
to indemnify the heirs of the deceased in the sum of P6,000. Appeal from said conviction was taken to the Court of Appeals. 1äwphï1.ñët

On December 6 1961, while appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an action in the Court of First
Instance of Batangas to recover damages from Perez and Valenzuela for the death of her son. Defendants asserted that the deceased was
killed in self-defense, since he first assaulted the driver by stabbing him from behind. Defendant Perez further claimed that the death was
a caso fortuito for which the carrier was not liable.
 17

The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant
Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court, the former asking for more damages and
the latter insisting on non-liability. Subsequently, the Court of Appeals affirmed the judgment of conviction earlier mentioned, during the
pendency of the herein appeal, and on May 19, 1964, final judgment was entered therein. ( Rollo, p. 33).

Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884, that the carrier is under no absolute
liability for assaults of its employees upon the passengers. The attendant facts and controlling law of that case and the one at bar are very
different however. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee. As this Court
there found:

x x x when the crime took place, the guard Devesa had no duties to discharge in connection with the transportation of the deceased
from Calamba to Manila. The stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was assigned to guard the
Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting transportation to Tutuban, the starting point of the train
that he was engaged to guard. In fact, his tour of duty was to start at 9:00 two hours after the commission of the crime. Devesa was
therefore under no obligation to safeguard the passengers of the Calamba-Manila train, where the deceased was riding; and the
killing of Gillaco was not done in line of duty. The position of Devesa at the time was that of another would be passenger, a stranger
also awaiting transportation, and not that of an employee assigned to discharge any of the duties that the Railroad had assumed by its
contract with the deceased. As a result, Devesa's assault can not be deemed in law a breach of Gillaco's contract of transportation by
a servant or employee of the carrier. . . . (Emphasis supplied)

Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had entrusted the duty
of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in the course of duty of
the guilty employee and when the employee was acting within the scope of his duties.

Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose
upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts committed by their employees. The
death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of the old
Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly
remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure. And herein
significantly lies the statutory difference between the old and present Civil Codes, in the backdrop of the factual situation before Us, which
further accounts for a different result in the Gillaco case. Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the
common carrier liable for intentional assaults committed by its employees upon its passengers, by the wording of Art. 1759 which categorically
states that

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

The Civil Code provisions on the subject of Common Carriers 1 are new and were taken from Anglo-American Law.2There, the basis of the
carrier's liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the principle
that it is the carrier's implied duty to transport the passenger safely.3

Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is
not sufficient that the act be within the course of employment only.4

Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the
employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. 5 The
carrier's liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. 6

As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second view. At least three very
cogent reasons underlie this rule. As explained in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390, and Haver v. Central
Railroad Co., 43 LRA 84, 85: (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection
afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other
passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier for the
servant's violation of duty to passengers, is the result of the formers confiding in the servant's hands the performance of his contract to safely
transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between
the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since
it, and not the passengers, has power to select and remove them.

Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence
and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude.

Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the defendant carrier liable pursuant to Art. 1759
of the Civil Code. The dismissal of the claim against the defendant driver was also correct. Plaintiff's action was predicated on breach of contract
 18

of carriage7 and the cab driver was not a party thereto. His civil liability is covered in the criminal case wherein he was convicted by final
judgment.

In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This is the minimum compensatory
damages amount recoverable under Art. 1764 in connection with Art. 2206 of the Civil Code when a breach of contract results in the
passenger's death. As has been the policy followed by this Court, this minimal award should be increased to P6,000. As to other alleged actual
damages, the lower court's finding that plaintiff's evidence thereon was not convincing, 8 should not be disturbed. Still, Arts. 2206 and 1764
award moral damages in addition to compensatory damages, to the parents of the passenger killed to compensate for the mental anguish they
suffered. A claim therefor, having been properly made, it becomes the court's duty to award moral damages. 9 Plaintiff demands P5,000 as moral
damages; however, in the circumstances, We consider P3,000 moral damages, in addition to the P6,000 damages afore-stated, as sufficient.
Interest upon such damages are also due to plaintiff-appellant. 10

Wherefore, with the modification increasing the award of actual damages in plaintiff's favor to P6,000, plus P3,000.00 moral damages, with legal
interest on both from the filing of the complaint on December 6, 1961 until the whole amount is paid, the judgment appealed from is affirmed in
all other respects. No costs. So ordered.

GR No L-22272 Maranan vs Perez Case

Page historylast edited by Aaron Cymor Nemeno 6 years, 9 months ago
Title: G.R. No. L-22272 Maranan v. Perez Case

Link: http://www.lawphil.net/judjuris/juri1967/jun1967/gr_l-22272_1967.html

Facts of the Case:

The carrier was charged for damages due to the case where his former employee executed homicide.

According the Civil code of the Philippines, made a point that the common carrier is "liable for the damages done by his employees to their
passengers" by the wording of Art. 1759 which states that:

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

Antonia Maranan, the mother of the victim filed an action in the court of First Instance of Batangas to recover damages from Perez who is the
carrier and Valenzuela, who is the suspect found guilty of homicide for the death of Rogelio Corachea, her son. In defense of Perez claimed
that deceased was killed in self-defense because he was the first who assaulted the driver. In addition to that, the defendant claimed that the
death was caso foruito which means Perez, the carrier is not liable for the damages done. In the end, the lower court adjudged the defendant
carrier liable pursuant to Article 1759 of the Civil Code

Issues:

 Whether the carrier did not partake on the crime scene, is responsible for the protection of the passengers?
 Whether the carrier is not involve in that event, is responsible for the action of his employees?
 Whether it is not the fault of the carrier committing the crime, is liable due to the fact that he hired the employee who
failed transporting the passenger to safety?
 Whether it's the employee's fault, the carrier will bear the risk of wrongful acts or negligence of the carrier's employees against
passengers?
 19

Decisions:

The court's decision is yes, the carrier is liable for the damages due to Art. 1759 of the Civil Code proves his guilt.
The three very least reasons to which the remaining issues are also 'yesy', explained in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W.
388, 389-390, and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the special undertaking of the carrier requires that it furnish its passenger
that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at
the hands of strangers and other passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2)
said liability of the carrier for the servant's violation of duty to passengers, is the result of the formers confiding in the servant's hands the
performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care
prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's
employees against passengers, since it, and not the passengers, has power to select and remove them.

G.R. No. L-20761 July 27, 1966

LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents.

G. E. Yabut, R. Monterey and M.C. Lagman for petitioner.

Ahmed Garcia for respondents.

BARRERA, J.:

La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No. 23267-R, holding it liable for quasi-delict and ordering it to
pay to respondents Mariano Beltran, et al., P6,000.00 for the death of his minor daughter Raquel Beltran, plus P400.00 as actual damages.

The facts of the case as found by the Court of Appeals, briefly are:

On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with their minor daughters, namely, Milagros, 13
years old, Raquel, about 4½ years old, and Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate TPU No. 757
(1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga, bound for Anao, Mexico, Pampanga. At the
time, they were carrying with them four pieces of baggages containing their personal belonging. The conductor of the bus, who
happened to be a half-brother of plaintiff Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full fares of the plaintiff
and their eldest child, Milagros. No fare was charged on Raquel and Fe, since both were below the height at which fare is charged in
accordance with the appellant's rules and regulations.

After about an hour's trip, the bus reached Anao whereat it stopped to allow the passengers bound therefor, among whom were the
plaintiffs and their children to get off. With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of their baggages,
was the first to get down the bus, followed by his wife and his children. Mariano led his companions to a shaded spot on the left
pedestrians side of the road about four or five meters away from the vehicle. Afterwards, he returned to the bus in controversy to get
his other bayong, which he had left behind, but in so doing, his daughter Raquel followed him, unnoticed by her father. While said
Mariano Beltran was on the running board of the bus waiting for the conductor to hand him his bayong which he left under one of its
seats near the door, the bus, whose motor was not shut off while unloading, suddenly started moving forward, evidently to resume its
trip, notwithstanding the fact that the conductor has not given the driver the customary signal to start, since said conductor was still
attending to the baggage left behind by Mariano Beltran. Incidentally, when the bus was again placed into a complete stop, it had
travelled about ten meters from the point where the plaintiffs had gotten off.

Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board without getting
his bayong from the conductor. He landed on the side of the road almost in front of the shaded place where he left his wife and
children. At that precise time, he saw people beginning to gather around the body of a child lying prostrate on the ground, her skull
crushed, and without life. The child was none other than his daughter Raquel, who was run over by the bus in which she rode earlier
together with her parents.
 20

For the death of their said child, the plaintiffs commenced the present suit against the defendant seeking to recover from the latter an
aggregate amount of P16,000 to cover moral damages and actual damages sustained as a result thereof and attorney's fees. After
trial on the merits, the court below rendered the judgment in question.

On the basis of these facts, the trial court found defendant liable for breach of contract of carriage and sentenced it to pay P3,000.00 for the
death of the child and P400.00 as compensatory damages representing burial expenses and costs.

On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract in the case, for the reason that when the
child met her death, she was no longer a passenger of the bus involved in the incident and, therefore, the contract of carriage had already
terminated. Although the Court of Appeals sustained this theory, it nevertheless found the defendant-appellant guilty of quasi-delict and held the
latter liable for damages, for the negligence of its driver, in accordance with Article 2180 of the Civil Code. And, the Court of Appeals did not only
find the petitioner liable, but increased the damages awarded the plaintiffs-appellees to P6,000.00, instead of P3,000.00 granted by the trial
court.

In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable for quasi-delict, considering that respondents
complaint was one for breach of contract, and (2) in raising the award of damages from P3,000.00 to P6,000.00 although respondents did not
appeal from the decision of the lower court.

Under the facts as found by the Court of Appeals, we have to sustain the judgement holding petitioner liable for damages for the death of the
child, Raquel Beltran. It may be pointed out that although it is true that respondent Mariano Beltran, his wife, and their children (including the
deceased child) had alighted from the bus at a place designated for disembarking or unloading of passengers, it was also established that the
father had to return to the vehicle (which was still at a stop) to get one of his bags or bayong that was left under one of the seats of the bus.
There can be no controversy that as far as the father is concerned, when he returned to the bus for his bayongwhich was not unloaded, the
relation of passenger and carrier between him and the petitioner remained subsisting. For, the relation of carrier and passenger does not
necessarily cease where the latter, after alighting from the car, aids the carrier's servant or employee in removing his baggage from the car. 1 The
issue to be determined here is whether as to the child, who was already led by the father to a place about 5 meters away from the bus, the
liability of the carrier for her safety under the contract of carriage also persisted.

It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's
vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a
reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined
from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger. 2 So
also, where a passenger has alighted at his destination and is proceeding by the usual way to leave the company's premises, but before actually
doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the
difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such
to the protection of the railroad and company and its agents. 3

In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Raquel,
the child that she was, must have followed the father. However, although the father was still on the running board of the bus awaiting for the
conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was
at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's
agent had exercised the "utmost diligence" of a "very cautions person" required by Article 1755 of the Civil Code to be observed by a common
carrier in the discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping the bus, nevertheless
did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go and while the latter was
still unloading part of the baggages of the passengers Mariano Beltran and family. The presence of said passengers near the bus was not
unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of
carriage.

But even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for the negligence of its
driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the complaint, which reads —

That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and
want of exercise of the utmost diligence of a very cautious person on the part of the defendants and their agent, necessary to
transport plaintiffs and their daughter safely as far as human care and foresight can provide in the operation of their vehicle.

is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while incompatible with the other claim under the contract
of carriage, is permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes of action in the
alternative, be they compatible with each other or not, to the end that the real matter in controversy may be resolved and determined. 4

The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated when it was alleged in the complaint that "the
death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want of exercise of the utmost diligence of a very cautious
person on the part of the defendants and their agent." This allegation was also proved when it was established during the trial that the driver,
even before receiving the proper signal from the conductor, and while there were still persons on the running board of the bus and near it,
started to run off the vehicle. The presentation of proof of the negligence of its employee gave rise to the presumption that the defendant
 21

employer did not exercise the diligence of a good father of the family in the selection and supervision of its employees. And this presumption, as
the Court of Appeals found, petitioner had failed to overcome. Consequently, petitioner must be adjudged peculiarily liable for the death of the
child Raquel Beltran.

The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals, however, cannot be sustained. Generally, the
appellate court can only pass upon and consider questions or issues raised and argued in appellant's brief. Plaintiffs did not appeal from that
portion of the judgment of the trial court awarding them on P3,000.00 damages for the death of their daughter. Neither does it appear that, as
appellees in the Court of Appeals, plaintiffs have pointed out in their brief the inadequacy of the award, or that the inclusion of the figure
P3,000.00 was merely a clerical error, in order that the matter may be treated as an exception to the general rule. 5Herein petitioner's contention,
therefore, that the Court of Appeals committed error in raising the amount of the award for damages is, evidently, meritorious. 1äwphï1.ñët

Wherefore, the decision of the Court of Appeals is hereby modified by sentencing, the petitioner to pay to the respondents Mariano Beltran, et
al., the sum of P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00 as actual damages. No costs in this instance. So
ordered.

[G.R. No. 150843. March 14, 2003]

CATHAY PACIFIC AIRWAYS, LTD., petitioner , vs . SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL
VAZQUEZ, respondents .

DECISION
DAVIDE, JR., C.J .:

Is an involuntary upgrading of an airline passengers accommodation from one class to a more superior class at no extra cost a breach of
contract of carriage that would entitle the passenger to an award of damages? This is a novel question that has to be resolved in this case.
The facts in this case, as found by the Court of Appeals and adopted by petitioner Cathay Pacific Airways, Ltd., (hereinafter Cathay) are as
follows:
Cathay is a common carrier engaged in the business of transporting passengers and goods by air. Among the many routes it services is
the Manila-Hongkong-Manila course. As part of its marketing strategy, Cathay accords its frequent flyers membership in its Marco Polo
Club. The members enjoy several privileges, such as priority for upgrading of booking without any extra charge whenever an opportunity
arises. Thus, a frequent flyer booked in the Business Class has priority for upgrading to First Class if the Business Class Section is fully booked.
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are frequent flyers of Cathay and are Gold Card
members of its Marco Polo Club. On 24 September 1996, the Vazquezes, together with their maid and two friends Pacita Cruz and Josefina
Vergel de Dios, went to Hongkong for pleasure and business.
For their return flight to Manila on 28 September 1996, they were booked on Cathays Flight CX-905, with departure time at 9:20 p.m. Two
hours before their time of departure, the Vazquezes and their companions checked in their luggage at Cathays check-in counter at Kai Tak
Airport and were given their respective boarding passes, to wit, Business Class boarding passes for the Vazquezes and their two friends, and
Economy Class for their maid. They then proceeded to the Business Class passenger lounge.
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.
 22

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.
 23

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
 24

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]
 25

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. 150843. March 14, 2003]

 26

FACTS:
In respondents’ return flight to Manila from Hongkong, they were deprived of their original seats in Business Class with their companions
because of overbooking. Since respondents were privileged members, their seats were upgraded to First Class. Respondents refused but
eventually persuaded to accept it. Upon return to Manila, they demanded that they be indemnified in the amount of P1million for the “humiliation
and embarrassment” caused by its employees. Petitioner’s Country Manager failed to respond. Respondents instituted action for damages. The
RTC ruled in favor of respondents. The Court of Appeals affirmed the RTC decision with modification in the award of damages.

ISSUE:
Whether or not the petitioners (1) breached the contract of carriage, (2) acted with fraud and (3) were liable for damages.

RULING:
(1) YES. Although respondents have the priority of upgrading their seats, such priority may be waived, as what respondents did. It should have
not been imposed on them over their vehement objection.

(2) NO. There was no evident bad faith or fraud in upgrade of seat neither on overbooking of flight as it is within 10% tolerance.

(3) YES. Nominal damages (Art. 2221, NCC) were awarded in the amount of P5,000.00. Moral damages (Art.2220, NCC) and attorney’s fees
were set aside and deleted from the Court of Appeals’ ruling.

G.R. No. 203902

SPOUSES DIONISIO ESTRADA and JOVITA R. ESTRADA, Petitioner

vs.
PHILIPPINE RABBIT BUS LINES, INC. and EDUARDO R. SA YLAN, Respondents

DECISION

DEL CASTILLO, J.:

The Court restates in this petition two principles on the grant of damages. First, moral damages, as a general rule, are not recoverable in an
action for damages predicated on breach of contract. 1 Second, temperate damages in lieu of actual damages for loss of earning capacity may
be awarded where earning capacity is plainly established but no evidence was presented to support the allegation of the injured party's actual
income.2

This Petition for Review on Certiorari assails the May 16, 2012 Decision3 and October 1, 2012 Resolution4 of the Court of Appeals (CA) in CA-
G.R. CV No. 95520, which partially granted the appeal filed therewith by respondent Philippine Rabbit Bus Lines, Inc. (Philippine Rabbit) and
denied petitioners spouses Dionisio C. Estrada (Dionisio) and Jovita R. Estrada's motion for reconsideration thereto.

Factual Antecedents

On April 13, 2004, petitioners filed with the Regional Trial Court (RTC) of Urdaneta City, Pangasinan, a Complaint 5for Damages against
Philippine Rabbit and respondent Eduardo R. Saylan (Eduardo).

The facts as succinctly summarized by the RTC are as follows:

[A] mishap occurred on April 9, 2002 along the national highway in Barangay Alipangpang, Pozorrubio, Pangasinan, between the passenger bus
with plate number CVK-964 and body number 3101, driven by [respondent] Eduardo Saylan and owned by [respondent] Philippine Rabbit Bus,
Lines, Inc., and the Isuzu truck with plate number UPB-974 driven by Willy U. Urez and registered in the nan1e of Rogelio Cuyton, Jr.. At the
time of the incident, the Philippine Rabbit Bus was going towards the north direction, while the Isuzu truck was travelling towards the south
direction. The collision happened at the left lane or the lane properly belonging to the Isuzu truck. The right front portion of the Isuzu Truck
appears to have collided with the right side portion of the body of the Philippine Rabbit bus. x x x Before the collision, the bus was following
closely a jeepney. When the jeepney stopped, the bus suddenly swerved to the left encroaching upon the rightful lane of the Isuzu truck, which
resulted in the collision of the two (2) vehicles. x x x The [petitioner] Dionisio Estrada, who was an1ong the passengers of the Philippine Rabbit
bus, as evidenced by the ticket issued to him, was injured on the [right] arm as a consequence of the accident. His injured right arm was
amputated at the Villaflor Medical Doctor's Hospital in Dagupan City x x x. For the treatment of his injury, he incurred expenses as evidenced by
x x x various receipts.6
 27

Dionisio argued that pursuant to the contract of carriage between him and Philippine Rabbit, respondents were duty-bound to carry him safely
as far as human care and foresight can provide, with utmost diligence of a very cautious person, and with due regard for all the circumstances
from the point of his origin in Urdaneta City to his destination in Pugo, La Union. However, through the fault and negligence of Philippine
Rabbit's driver, Eduardo, and without human care, foresight, and due regard for all circumstances, respondents failed to transport him safely by
reason of the aforementioned collision which resulted in the amputation of Dionisio's right arm. And since demands for Philippine Rabbit 7 to pay
him damages for the injury he sustained remained unheeded, Dionisio filed the said complaint wherein he prayed for the following awards:
moral damages of ₱500,000.00 actual damages of ₱60,000.00, and attorney's fees of ₱25,000.00.

Petitioners' claim for moral damages, in particular, was based on the following allegations:

9. [The] amount of ₱500,000.00 as moral damages for the amputation of [Dionisio's] right arm for life including his moral sufferings for such
[loss] of right arm is reasonable. Said amount is computed and derived using the formula (2/3 x [80- age of the complainant when the injury is
sustained] = life expectancy) adopted in the American Expectancy Table of Mortality or the actuarial of Combined Experience Table of Mortality.
From such formula, [Dionisio] is expected to live for 18 years, which is equivalent [to] about 6570 days. For each day, [Dionisio] is claiming
₱80.00 as he is expected to work for 8 hours a day with his amputated arm or to enjoy the same for at least 8 hours a day (or is claiming ₱l0.00
for each hour) for 18 years (6570 days). The amount that can be computed thereof would be ₱525,600.00 (6570 days x ₱80.00). [Dionisio] then
[rounded] it off to ₱500,000.00, the moral damages consisted [of] his moral sufferings due to the [loss] of his right arm for life; 8

Denying any liability, Philippine Rabbit in its Answer9 averred that it carried Dionisio safely as far as human care and foresight could provide with
the utmost diligence of a very cautious person and with due regard for all the circumstances prevailing. While it did not contest that its bus
figured in an accident, Philippine Rabbit nevertheless argued that the cause thereof was an extraordinary circumstance independent of its
driver's action or a fortuitous event. Hence, it claimed to be exempt from any liability arising therefrom. In any case, Philippine Rabbit averred
that it was the Isuzu truck coming from the opposite direction which had the last clear chance to avoid the mishap. Instead of slowing down upon
seeing the bus, the said truck continued its speed such that it bumped into the right side of the bus. The proximate cause of the accident,
therefore, was the wrongful and negligent manner in which the Isuzu truck was operated by its driver. In view of this, Philippine Rabbit believed
that Dionisio has no cause of action against it.

With respect to Eduardo, he was declared in default after he failed to file an Answer despite due notice. 10

Ruling of the Regional Trial Court

Treating petitioners' Complaint for damages as one predicated on breach of contract of carriage, the RTC rendered its Decision 11 on December
1, 2009.

In concluding that Eduardo was negligent in driving the Philippine Rabbit bus, the said court ratiocinated, viz.:

Evidently, prior to the accident, [Eduardo] was tailgating the jeepney ahead of him. When the jeepney stopped, [Eduardo] suddenly swerved the
bus to the left, encroaching in the process the rightful lane of the oncoming Isuzu truck, thereby resulting in the collision. The fact that [Eduardo]
did not apply the brakes, but instead swerved to the other lane, fairly suggests that he was not only unnecessarily close to the jeepney, but that
he was operating the bus at a speed greater than what was reasonably necessary for him to be able to bring his vehicle to a full stop to avoid
hitting the vehicle he was then following. Clearly, immediately before the collision, [Eduardo] was actually violating Section 35 of the Land
Transportation and Traffic Code, Republic Act No. 4136, as amended:

Sec. 35. Restriction as to speed. - (a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not
greater nor less than [what] is reasonable and proper, having due regard for the traffic, the width of the highway, and or any other condition then
and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of
any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the clear distance ahead.

Too, when [Eduardo] swerved to the left and encroached on the rightful lane of the Isuzu truck, he was violating Section 41 of the same Traffic
Code:

Sec. 41. Restriction 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.

The fact that the collision occurred immediately after the bus swerved on the left lane clearly [indicates] that the other lane was not clear and
free of oncoming vehicle at the time x x x [Eduardo] tried to overtake the jeepney to avoid hitting it.

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, unless
there is proof to the contrary (Article 2185 of the CivilCode). [Eduardo] failed to rebut this legal presumption as he chose not to answer the
complaint and to testify in court. [Philippine Rabbit was also] unsuccessful in overthrowing the said legal presumption. x x x
 28

[Eduardo's] failure to observe the proper and safe distance from the vehicle ahead of him and in running the bus at a speed greater than what
was reasonably necessary to control and stop the vehicle when warranted by the circumstances, clearly were reflective of his lack of precaution,
vigilance, and foresight in operating his vehicle. As an experienced driver, he should have known about the danger posed by tailgating another
vehicle and driving his vehicle at an unreasonable speed called for by the circumstances. For, the sudden stopping of a motor vehicle, for
whatever [reason], is not an uncommon and [unforeseeable] occurrence in the highway. If only he had exercised diligence, vigilance and
foresight, he would have refrained from tailgating another vehicle at a dangerously close range. What he should have done instead was to
maintain a reasonable distance from the jeepney and drove his vehicle at a speed not greater than will permit him to bring the vehicle to a stop
within the assured clear distance ahead. This he failed to do. As a consequence, when the jeepney stopped, he was unable to control and stop
the bus. Instead, he was forced to swerve the bus to the left lane blocking the path of the oncoming Isuzu truck. While he averted smashing the
jeepney, he however collided with the Isuzu truck. No doubt, it was [Eduardo's] lack of precaution, vigilance and foresight that led to the
accident. Otherwise stated, it was his recklessness or negligence that was the proximate cause of the mishap.

[Philippine Rabbit's] imputation of fault to the driver of the Isuzu truck, claiming that it was the latter [which] had the last clear chance to avoid the
accident, deserves scant consideration. As the evidence would show, the impact occurred immediately after the bus swerved and while in the
process of encroaching on the left lane. This is evidenced by the fact that the front portion of the Isuzu truck collided with the right side portion of
the bus. The driver of the Isuzu truck, before the accident, was cruising on the lane properly belonging to him. He had every right to expect that
all the vehicles, including the bus coming from the opposite direction would stay on their proper lane. He certainly was not expected to know
what prompted the bus driver to suddenly swerve his vehicle to the left. The abruptness by which the bus swerved without a warning could not
have given him the luxury of time to reflect and anticipate the bus' encroachment of his lane for him to be able to avoid it. Needless to point out,
there was no last clear chance to speak of on the part of the driver of the Isuzu truck to avoid the accident. Besides, the 'last clear chance'
principle is not applicable in this case since the instant suit is between the passenger and the common carrier. x x x 12

The RTC then proceeded to determine whether Philippine Rabbit, as it claimed, exercised the diligence of a good father of a family in the
selection and supervision of its drivers as to negate any liability for damages. The said court, however, was unconvinced after it found that (1)
Philippine Rabbit failed to show that it had taken all the necessary and actual steps to thoroughly examine the qualifications of Eduardo as a
driver worthy of employment; and (2) no proof relative to the existence of company rules and regulations, instructions, and policies affecting its
drivers, as well as to their actual implementation and observance, were presented. Hence, Philippine Rabbit was held jointly and severally liable
with Eduardo for the awards made in favor of Dionisio as follows:

The emotional anguish and suffering of x x x Dionisio Estrada as a consequence of the injury and amputation of his right arm due to the reckless
driving of x x x Eduardo, which resulted in the accident, cannot be overemphasized. The loss of the use of his right arm and the humiliation of
being tagged in the public [eye] as a person with only one arn1 would certainly be borne by him for the rest of his life. The amount of moral
damages he is praying appears to be reasonable under the circumstances.

Too, the award of attorney's fees is proper considering that x xx [Dionisio] was forced to litigate after x x x [Philippine Rabbit] refused to heed his
demand for the payment of damages as a consequence of the accident.

WHEREFORE, judgment is hereby rendered ordering x x x Philippine Rabbit Bus Lines, Inc. and Eduardo Saylan to pay jointly and severally x
xx Dionisio Estrada the following amounts:

1. Five Hundred Thousand Pesos (₱500,000.00) as moral damages;

2. Fifty Seven Thousand Seven Hundred Sixty Six Pesos and Twenty Five Centavos (₱57,766.25), as actual damages; and

3. Twenty Five Thousand Pesos (₱25,000.00), as attorney's fees; and the costs of suit.

SO ORDERED.13

Philippine Rabbit filed a Motion for Reconsideration 14 but the same was denied for lack of merit in an Order 15 dated May 31, 2010.

Ruling of the Court of Appeals

On appeal, Philippine Rabbit imputed error upon the RTC in not finding that it exercised the diligence of a good father of a family in the selection
and supervision of its drivers. In any case, it argued that moral damages are not recoverable in an action for damages predicated on breach of
contract except when death results or when the carrier is guilty of fraud or bad faith. Since none of the two aforementioned circumstances are
present in this case, Philippine Rabbit contended that it is Eduardo alone who should be held civilly liable.

In a Decision16 dated May 16, 2012, the CA partially granted the appeal on the following ratiocination:

Based from [sic] the aforecited allegations in the complaint, it was rightly regarded by the trial court as an action to recover damages arising
from breach of contract of carriage. There was in fact, an admission that [Dionisio] was a passenger of a bus owned by [Philippine Rabbit]. In an
action for breach of contract of carriage, all that is required is to prove the existence of such contract and its non-performance by the carrier
 29

through the latter's failure to carry the passenger safely to his destination. In the present case, it was duly established that there was a collision
and as a result of which, [Dionisio] sustained an injury.

[Philippine Rabbit] was therefore properly found liable for breach of contract of carriage. A common carrier is bound to carry its passengers
safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard to all the
circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is
injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common
carrier. This presumption may only be overcome by evidence that the carrier exercised extraordinary diligence, and this presumption remained
unrebutted in this case. The trial court found that the accident which led to the amputation of [Dionisio's] arm was due to the reckless driving and
negligence of [Philippine Rabbit's] driver and stated that:

No doubt, it was x x x [Eduardo's] lack of precaution, vigilance and foresight that led to the accident. Otherwise stated, it was his recklessness or
negligence that was the proximate cause of the mishap.

Such negligence and recklessness is binding against [Philippine Rabbit] pursuant to Article 1759 of the Civil Code which provides:

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

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

Thus, [Philippine Rabbit's] defense that it acted with the diligence of a good father of a family in its selection of its driver, Eduardo R. Saylan, is
unavailing. [Philippine Rabbit] however is correct in its contention that moral damages are not recoverable in actions for damages predicated on
a breach of contract, unless death of a passenger results, or it is proved that the carrier was guilty of fraud or bad faith, even if death does not
result.

There was no evidence on record indicative of fraud or bad faith on [Philippine Rabbit's] part. Bad faith should be established by clear and
convincing evidence. The settled rule is that the law always presumes good faith such that any person who seeks to be awarded damages due
to the acts of another has the burden of proving that the latter acted in bad faith or with ill motive. The award for attorney's fees must likewise be
deleted considering that moral damages cannot be granted and none of the instances enumerated in Article 2208 of the Civil Code is present in
the instant case. However, the actual damages awarded by the trial court are adequately substantiated by official receipts. Therefore, the same
shall be sustained.

The driver on the other hand, may not be held liable under the contract of carriage, not being a party to the same. The basis of a cause of action
of a passenger against the driver is either culpa criminal or culpa aquiliana. A passenger may file a criminal case based on culpa criminal
punishable under the Revised Penal Code or a civil case based on culpa aquiliana under Articles 2176 and 2177 of the Civil Code.

A cause of action based on culpa contractual is also separate and distinct from a cause of action based on culpa aquiliana. x x x

xxxx

The trial court therefore erred in ruling that [Philippine Rabbit] bus company and [respondent] driver are jointly and severally liable. The driver
cannot be held jointly and severally liable with the carrier in case of breach of the contract of carriage. The contract of carriage is between the
carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible [therefor] to the passenger, even if such
breach be due to the negligence of his driver. The carrier can neither shift his liability on the contract to his driver nor share it with him for his
driver's negligence is his.17

Accordingly, the CA modified the RTC Decision in that it declared Philippine Rabbit as solely and exclusively liable to Dionisio for actual
damages in the amount of ₱57,766.25 and deleted the award of moral damages and attorney's fees.

Petitioners filed a Motion for Reconsideration18 but the same was denied by the CA for lack of merit in a Resolution 19dated October 1, 2012.

Hence, this Petition for Review on Certiorari raising the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THERE WAS NO EVIDENCE ON RECORD
INDICATIVE OF FRAUD OR BAD FAITH ON [PHILIPPINE RABBIT'S] PART.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT [CONSIDERING] X X X THE [COST OF THE]
REPLACEMENT OF PETITIONER [DIONISIO'S AMPUTATED RIGHT ARM] WITH [AN] ARTIFICIAL ONE AS ACTUAL DAMAGES. 20

The Parties' Arguments

 30

Petitioners dispute the findings of lack of fraud or bad faith on the part of Philippine Rabbit as to make it liable for moral damages. According to
them, the assertions of Philippine Rabbit in its Answer, i.e., that it carried Dionisio safely; that it was not an insurer of all risks; that the accident
was caused by a fortuitous event; that in any event, it was the negligent manner by which the Isuzu truck was operated which was the proximate
cause of the accident; and that Dionisio has no cause of action against Philippine Rabbit, were made with the intention to evade liability.
Petitioners claim that the said assertions are clear indication of fraud or bad faith.

In justifying their claim for moral damages, petitioners aver that in their Complaint, they did not seek for moral damages in terms of physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury per se, but for moral damages based purely on the fact that Dionisio lost his right arm. They argue that while in a strict sense, Dionisio
incurred actual damages through the amputation of his right arm, such loss may rightly be considered as falling under moral damages. This is
because a right arm is beyond the commerce of man and loss thereof necessarily brings physical suffering, mental anguish, besmirched
reputation, social humiliation and similar injury to a person. At any rate, should this Court award the amount of ₱500,000.00 as actual damages
due to the loss of Dionisio's right arm, petitioners also find the same proper and appropriate under the circumstances.

Now jointly represented by one counsel, respondents, on the other hand, reiterate the rule that moral damages are not recoverable in an action
for damages predicated on a breach of contract, as in this case, since breach of contract is not one of the items enumerated in Article 2219 of
the Civil Code. Only as an exception, moral damages may be recovered in an action for breach of contract of carriage when the mishap results
in death or if the carrier acted fraudulently or in bad faith. Since Dionisio did not die in the mishap nor was Philippine Rabbit found guilty of fraud
or bad faith, respondents argue that an award for moral damages is improper for having no basis in fact and in law.

Our Ruling

The Court modifies the CA ruling.

Moral damages; Instances when

moral damages can be awarded in an
action for breach of contract.

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of
the defendant's wrongful act or omission.21

Under Article 2219 of the Civil Code, moral damages are recoverable in the following and analogous cases: (1) a criminal offense resulting in
physical injuries; (2) quasi-delicts causing physical injuries; (3) seduction, abduction, rape or other lascivious acts; (4) adultery or concubinage;
(5) illegal or arbitrary detention or arrest; (6) illegal search; (7) libel, slander, or any other form of defamation; (8) malicious prosecution; (9) acts
mentioned in Article 309;22 and (1) acts and actions referred to in Articles 21,23 26,24 27 ,25 28,26 29,27 30,28 32,29 34,30 and 35.31

x x x [C]ase 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.32

Since breach of contract is not one of the items enumerated under Article 2219, moral damages, as a general rule, are not recoverable in
actions for damages predicated on breach of contract. 33

x x x As an exception, such damages are recoverable [in an action for breach of contract:] (1) in cases in which the mishap results in the death
of a passenger, as provided in Article 1764,34 in relation to Article 2206(3)35 of the Civil Code; and (2) in x x x cases in which the carrier is guilty
of fraud or bad faith, as provided in Article 222036.37

Moral damages are not recoverable

in this case.

It is obvious that this case does not come under the first of the abovementioned exceptions since Dionisio did not die in the mishap but merely
suffered an injury. Nevertheless, petitioners contend that it falls under the second category since they aver that Philippine Rabbit is guilty of
fraud or bad faith.

It has been held, however, that "allegations of bad faith and fraud must be proved by clear and convincing evidence." 38 They are never
presumed considering that they are serious accusations that can be so conveniently and casually invoked. 39 And unless convincingly
substantiated by whoever is alleging them, they amount to mere slogans or mudslinging. 40

In this case, the fraud or bad faith that must be convincingly proved by petitioners should be one which was committed by Philippine Rabbit in
breaching its contract of carriage with Dionisio. Unfortunately for petitioners, the Court finds no persuasive proof of such fraud or bad faith.
 31

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. 41

Bad faith, on the other hand, "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." 42

There is no showing here that Philippine Rabbit induced Dionisio to enter into a contract of carriage with the former through insidious
machination. Neither is there any indication or even an allegation of deceit or concealment or omission of material facts by reason of which
Dionisio boarded the bus owned by Philippine Rabbit. Likewise, it was not shown that Philippine Rabbit's breach of its known duty, which was to
transport Dionisio from Urdaneta to La Union,43 was attended by some motive, interest, or ill will. From these, no fraud or bad faith can be
attributed to Philippine Rabbit.

Still, petitioners insist that since the defenses it pleaded in its Answer were designed to evade liability, Philippine Rabbit is guilty of fraud or bad
faith. Suffice it to state, however, that the allegations which made up Philippine Rabbit's defenses are hardly the kind of fraud or bad faith
contemplated by law. Again, it bears to mention that the fraud or bad faith must be one which attended the contractual breach or one which
induced Dionisio to enter into contract in the first place.

Clearly, moral damages are not recoverable in this case. The CA, therefore, did not err in deleting the award for moral damages.

Actual damages for loss/impairment

of earning capacity are also not
recoverable. In lieu thereof, the
Court awards temperate damages.

In an attempt to recover the ₱500,000.00 awarded by the RTC as moral damages but deleted by the CA, petitioners would instead want this
Court to grant them the same amount as just and proper compensation for the loss of Dionisio's right arm.

It can be recalled that in the Complaint, petitioners justified their claim for moral damages as follows:

9. [The] amount of ₱500,000.00 as moral damages for the amputation of [Dionisio's] right arm for life including his moral sufferings for such
[loss] of right arm is reasonable.

Said amount is computed and derived using the formula (2/3 x [80- age of the complainant when the injury is sustained] = life expectancy)
adopted in the American Expectancy Table of Mortality or the actuarial of Combined Experience Table of Mortality. From such formula, [Dionisio]
is expected to live for 18 years, which is equivalent [to] about 6570 days. For each day, [Dionisio] is claiming ₱80.00 as he is expected to work
for 8 hours a day with his amputated arm or to enjoy the same for at least 8 hours a day (or is claiming ₱l0.00 for each hour) for 18 years (6570
days). The amount that can be computed thereof would be ₱525,600.00 (6570 days x ₱80.00). [Dionisio] then [rounded] it off to ₱500,000.00,
the moral damages consisted [of] his moral sufferings due to the [loss] of his right arm for life; 44

It thus appears that while petitioners denominated their claim for ₱500,000.00 as moral damages, their computation was actually based on the
supposed loss/impairment of Dionisio's earning capacity.

Loss or impairment of ean1ing capacity finds support under Article 2205 (1) of the Civil Code, to wit:

Art. 2205. Damages may be recovered:

(1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury;

xxxx

It is, however, settled that "damages for loss [or impairment] of earning capacity is in the nature of actual damages x x x." 45

Actual or compensatory damages are those awarded in order to compensate a party for an injury or loss he suffered. They arise out of a sense
of natural justice, aimed at repairing the wrong done. To be recoverable, they must be duly proved with a reasonable degree of certainty. A court
cannot rely on speculation, conjecture, or guesswork as to the fact and amount of damages, but must depend upon competent proof that they
have suffered, and on evidence of the actual amount thereof. 46

Thus, as a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of
exception, damages for loss [or impairment] of earning capacity may be awarded despite the absence of documentary evidence when (1) the
deceased [or the injured] was self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice
 32

may be taken of the fact that in the deceased's line of work no documentary evidence is available; or (2) the deceased was employed as a daily
worker earning less than the minimum wage under current labor laws. 47

Here, it is unlikely that petitioners presented evidence to prove a claim for actual damages based on loss/impairment of earning capacity since
what they were claiming at the outset was an award for moral damages. The Court has nonetheless gone over the records to find out if they
have sufficiently shown during trial that they are entitled to such compensatory damages that they are now claiming. Unfortunately, no
documentary evidence supporting Dionisio's actual income is extant on the records. What it bears is the mere testimony of Dionisio on the
matter, viz.:

COURT:

Q: By the way, why did you submit the original copy of your exhibits to the GSIS?

A: I am claiming my GSIS compensation because I am a government Employee.

ATTY. SEVILLEJA:

Q: What particular government [agency do] you belong?

A: DECS.

Q: You are a teacher?

A: Yes sir.

Q: You are still continuing your profession as a teacher until now?

A: Yes sir.

Q: By the way Mr. witness, you are claiming x x x moral damages of ₱500,000.00? How did you compute that ₱500,000.00?

A: I based that from [sic] my income which is about ₱80.00 a day or ₱l0.00 per hour.

Q: Is that x x x gross or not?

A: Net sir.

Q: What are your other sideline?

A: I know [how] to drive a tricycle.

Q: Because of [the] amputation of your right arm, you mean to say you [cannot] drive anymore a tricycle?

A: Yes sir.

Q: By the way Mr. witness, how old are you when you met [the] accident?

A: More than 53 years old sir, less than 54.

Q: If you are claiming for x x x moral damages of P80.00 a day, how come you are asking for ₱500,000.00?

A: If you compute that it is ₱2,400.00 monthly. If I still [live by] about 20-30 years [more], I can still [earn] that amount. 48

It must be emphasized, though, that documentary proof of Dionisio's actual income cannot be dispensed with since based on the above
testimony, Dionisio does not fall under any of the two exceptions aforementioned. Thus, as it stands, there is no competent proof substantiating
his actual income and because of this, an award for actual damages for loss/ impairment of earning capacity cannot be made.

Nonetheless, since it was established that Dionisio lost his right arm, temperate damages in lieu of actual damages for loss/impairment of
earning capacity may be awarded in his favor. Under Article 2224, "[t]emperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from
the nature of the case, be proved with certainty."
 33

The case of Tan v. OMC Carriers, Inc.49 enumerates several instances wherein the Court awarded temperate damages in lieu of actual damages
for loss of earning capacity, viz.:

In the past, we awarded temperate damages in lieu of actual damages for loss of earning capacity where earning capacity is plainly established
but no evidence was presented to support the allegation of the injured party's actual income.

In Pleno v. Court of Appeals, we sustained the award of temperate damages in the amount of ₱200,000.00 instead of actual damages for loss of
earning capacity because the plaintiffs income was not sufficiently proven.

We did the same in People v. Singh, and People v. Almedilla, granting temperate damages in place of actual damages for the failure of the
prosecution to present sufficient evidence of the deceased's income.

Similarly, in Victory Liner, Inc. v. Gammad, we deleted the award of damages for loss of earning capacity for lack of evidentiary basis of the
actual extent of the loss. Nevertheless, because the income-earning capacity lost was clearly established, we awarded the heirs ₱500,000.00
as temperate damages.50

Accordingly, the Court in Tan awarded to the heirs of the therein deceased victim, who was working as a tailor at the time of his death,
temperate damages in the amount of ₱300,000.00 in lieu of compensatory damages.51

In the subsequent case of Orix Metro Leasing and Finance Corporation v. Mangalinao, 52 the Court likewise awarded temperate damages as
follows:

While the net income had not been sufficiently established, the Court recognizes the fact that the Mangalinao heirs had suffered loss deserving
of compensation.1âwphi1 What the CA awarded is in actuality a form of temperate damages. Such form of damages under Article 2224 of the
Civil Code is given in the absence of competent proof on the actual damages suffered. In the past, we awarded temperate damages in lieu of
actual damages for loss of earning capacity where earning capacity is plainly established but no evidence was presented to support the
allegation of the injured party's actual income. In this case, Roberto Mangalinao, the breadwinner of the family, was a businessman engaged in
buying and selling palay and agricultural supplies that required high capital in its operations and was only 37 at the time of his death. Moreover,
the Pathfinder which the Mangalinaos own, became a total wreck. Under the circumstances, we find the award of ₱500,000.00 as temperate
damages as reasonable.53

And in the more recent case of People v. Salahuddin,54 the lower courts' award of ₱4,398,000.00 as compensation for loss of earning capacity
of a murdered lawyer was disallowed due to insufficiency of evidence. Again in lieu thereof, temperate damages of ₱l,000,000.00 was
awarded.55

In view of the above rulings and under the circumstances of this case, the Court finds reasonable to award Dionisio temperate damages of
₱500,000.00 in lieu of actual damages for the loss/impairment of his earning capacity.

Actual damages by way of medical

expenses must be supported by
official receipts.

Anent petitioners' assertion that actual damages should be awarded to them for the cost of replacement of Dionisio's amputated right arm,
suffice it to state that petitioners failed to show during trial that the said amputated right arm was actually replaced by an artificial one. All that
petitioners submitted was a quotation of ₱l60,000.00 for a unit of elbow prosthesis 56 and nothing more. It has been held that actual proof of
expenses incurred for medicines and other medical supplies necessary for treatment and rehabilitation must be presented by the claimant, in
the form of official receipts, to show the exact cost of his medication and to prove that he indeed went through medication and rehabilitation. In
the absence of the same, such claim must be negated. 57

At any rate, the RTC already granted petitioners actual damages by way of medical expenses based on the official hospital receipts
submitted.58 There is, however, a need to correct the amount, that is, the should be ₱57,658.25 as borne by the receipts and not ₱57,766.25 .

Legal interest is imposed on the

amounts awarded.

In addition, the amounts of damages awarded are declared subject to legal interest of 6% per annum from the finality of this Decision until full
satisfaction.59

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed May 16, 2012 Decision and October 1, 2012 Resolution of the
Court of Appeals in CA-G.R. CV No. 95520 are AFFIRMED with MODIFICATIONS as follows: (1) petitioners are declared entitled to
temperate damages of ₱500,000.00; (2) the award of actual damages is set at the amount of ₱57,658.25; and (3) all damages awarded are
subject to legal interest of 6% per annum from the finality of this Decision until full satisfaction.
 34

SO ORDERED.

G.R. No. 212038

SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Petitioners

vs.
NORTHWEST AIRLINES, INC., Respondent

x-----------------------x

G.R. No. 212043

NORTHWEST AIRLINES, INC., Petitioner,

vs.
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Respondents.

DECISION

PERALTA, J.:

Before us are consolidated petitions for review on certiorari under Rule 45 of the Rules of Court assailing the Decision 1 dated August 30, 2013,
and Resolution2 dated March 31, 2014 of the Court of Appeals (CA) in CA-G.R. CV No. 93496 which affirmed the Decision 3 dated September 9,
2008 of the Regional Trial Court (RTC), Branch 97, Quezon City in Civil Case No. Q-N-02-46727 finding Northwest Airlines,
Inc. (Northwest) liable for breach of contract of carriage.

The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest Airlines, Inc. and are holders of Elite Platinum
World Perks Card, the highest category given to frequent flyers of the carrier.4 They are known in the musical instruments and sports
equipments industry in the Philippines being the owners of JB Music and JB Sports with outlets all over the country. They likewise own the five
(5) star Hotel Elizabeth in Baguio City and Cebu City, and the chain of Fersal Hotels and Apartelles in the country. 5

The Fernandos initiated the filing of the instant case which arose from two (2) separate incidents: first, when Jesus Fernando arrived at Los
Angeles (LA) Airport on December 20, 2001; second, when the Fernandos were to depart from the LA Airport on January 29, 2002. The factual
antecedents are as follows:

Version of Spouses Jesus and Elizabeth S. Fernando:

a.) The arrival at Los Angeles Airport on December 20, 2001

Sometime on December 20, 2001, Jesus Fernando arrived at the LA Airport via Northwest Airlines Flight No. NW02 to join his family who flew
earlier to the said place for a reunion for the Christmas holidays. 6

When Jesus Fernando presented his documents at the immigration counter, he was asked by the Immigration Officer to have his return ticket
verified and validated since the date reflected thereon is August 2001. So he approached a Northwest personnel who was later identified as
Linda Puntawongdaycha, but the latter merely glanced at his ticket without checking its status with the computer and peremptorily said that the
ticket has been used and could not be considered as valid. He then explained to the personnel that he was about to use the said ticket on
August 20 or 21, 2001 on his way back to Manila from LA but he could not book any seat because of some ticket restrictions so he, instead,
purchased new business class ticket on the said date.7 Hence, the ticket remains unused and perfectly valid.

To avoid further arguments, Jesus Fernando gave the personnel the number of his Elite Platinum World Perks Card for the latter to access the
ticket control record with the airline's computer and for her to see that the ticket is still valid. But Linda Puntawongdaycha refused to check the
validity of the ticket in the computer but, instead, looked at Jesus Fernando with contempt, then informed the Immigration Officer that the ticket
is not valid because it had been used.8

The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration and Naturalization Services (INS) where he was
asked humiliating questions for more than two (2) hours. When he was finally cleared by the Immigration Officer, he was granted only a twelve
(12)-day stay in the United States (US), instead of the usual six (6) months.9

When Jesus Fernando was finally able to get out of the airport, to the relief of his family, Elizabeth Fernando proceeded to a Northwest Ticket
counter to verify the status of the ticket. The personnel manning the counter courteously assisted her and confirmed that the ticket remained
unused and perfectly valid. To avoid any future problems that may be encountered on the validity of the ticket, a new ticket was issued to Jesus
Fernando.10
 35

Since Jesus Fernando was granted only a twelve (12)-day stay in the US, his scheduled plans with his family as well as his business
commitments were disrupted. He was supposed to stay with his family for the entire duration of the Christmas season because his son and
daughter were then studying at Pepperton University in California. But he was forced to fly back to Manila before the twelve (12)-day stay
expired and flew back to the US on January 15, 2002. The Fernandos were, likewise, scheduled to attend the Musical Instrument Trade Show in
LA on January 1 7, 2002 and the Sports Equipment Trade Show in Las Vegas on January 21 to 23, 2002 which were both previously scheduled.
Hence, Jesus Fernando had to spend additional expenses for plane fares and other related expenses, and missed the chance to be with his
family for the whole duration of the Christmas holidays. 11

b.) The departure from the Los Angeles Airport on January 29, 2002.

On January 29, 2002, the Fernandos were on their way back to the Philippines. They have confirmed bookings on Northwest Airlines NW Flight
No. 001 for Narita, Japan and NW 029 for Manila. They checked in with their luggage at the LA Airport and were given their respective boarding
passes for business class seats and claim stubs for six (6) pieces of luggage. With boarding passes, tickets and other proper travel documents,
they were allowed entry to the departure area and joined their business associates from Japan and the Philippines who attended the Musical
Instrument Trade Show in LA on January 17, 2002 and the Sports Equipment Trade Show in Las Vegas on January 21 to 23, 2002. When it was
announced that the plane was ready for boarding, the Fernandos joined the long queue of business class passengers along with their business
associates.12

When the Fernandos reached the gate area where boarding passes need to be presented, Northwest supervisor Linda Tang stopped them and
demanded for the presentation of their paper tickets (coupon type). They failed to present the same since, according to them, Northwest issued
electronic tickets (attached to the boarding passes) which they showed to the supervisor. 13 In the presence of the other passengers, Linda Tang
rudely pulled them out of the queue. Elizabeth Fernando explained to Linda Tang that the matter could be sorted out by simply verifying their
electronic tickets in her computer and all she had to do was click and punch in their Elite Platinum World Perks Card number. But Linda Tang
arrogantly told them that if they wanted to board the plane, they should produce their credit cards and pay for their new tickets, otherwise
Northwest would order their luggage off-loaded from the plane. Exasperated and pressed for time, the Fernandos rushed to the Northwest
Airline Ticket counter to clarify the matter. They were assisted by Northwest personnel Jeanne Meyer who retrieved their control number from
her computer and was able to ascertain that the Fernandos' electronic tickets were valid and they were confirmed passengers on both NW Flight
No. 001 for Narita Japan and NW 029 for Manila on that day. To ensure that the Fernandos would no longer encounter any problem with Linda
Tang, Jeanne Meyer printed coupon tickets for them who were then advised to rush back to the boarding gates since the plane was about to
depart. But when the Fernandos reached the boarding gate, the plane had already departed. They were able to depart, instead, the day after, or
on January 30, 2002, and arrived in the Philippines on January 31,2002. 14

Version of Northwest Airlines, Inc.:

a.) The arrival at the Los Angeles Airport on December 20, 2001.

Northwest claimed that Jesus Fernando travelled from Manila to LA on Northwest Airlines on December 20, 2001. At the LA Airport, it was
revealed that Jesus Fernando's return ticket was dated August 20 or 21, 2001 so he encountered a problem in the Immigration Service. About
an hour after the aircraft had arrived, Linda Puntawongdaycha, Northwest Customer Service Agent, was called by a US Immigration Officer
named "Nicholas" to help verify the ticket of Jesus Fernando. Linda Puntawongdaycha then asked Jesus Fernando to "show" her "all the
papers." Jesus Fernando only showed her the passenger receipt of his ticket without any ticket coupon attached to it. The passenger receipt
which was labelled "Passenger Receipt" or "Customer Receipt" was dated August 2001. Linda Puntawongdaycha asked Jesus Fernando
several times whether he had any other ticket, but Jesus Fernando insisted that the "receipt" was "all he has", and the passenger receipt was
his ticket. He failed to show her any other document, and was not able to give any other relevant information about his return ticket. Linda
Puntawongdaycha then proceeded to the Interline Department and checked Jesus Fernando's Passenger Name Record (PNR) and his itinerary.
The itinerary only showed his coming from Manila to Tokyo and Los Angeles; nothing would indicate about his flight back to Manila. She then
looked into his record and checked whether he might have had an electronic ticket but she could not find any. For failure to find any other
relevant information regarding Fernando's return ticket, she then printed out Jesus Fernando's PNR and gave the document to the US
Immigration Officer. Linda Puntawongdaycha insisted that she did her best to help Jesus Fernando get through the US Immigration. 15

b.) The departure from the Los Angeles Airport on January 29, 2002.

On January 29, 2002, the Fernandos took Northwest for their flight back to Manila. In the trip, the Fernandos used electronic tickets but the
tickets were dated January 26, 2002 and August 21, 2001. They reached the boarding gate few minutes before departure. Northwest personnel
Linda Tang was then the one assigned at the departure area. As a standard procedure, Linda Tang scanned the boarding passes and collected
tickets while the passengers went through the gate. When the Fernandos presented their boarding passes, Linda Tang asked for their tickets
because there were no tickets stapled on their boarding passes. She explained that even though the Fernandos had electronic tickets, they had
made "several changes on their ticket over and over". And when they made the booking/reservation at Northwest, they never had any ticket
number or information on the reservation.16

When the Fernandos failed to show their tickets, Linda Tang called Yong who was a supervisor at the ticket counter to verify whether the
Fernandos had checked in, and whether there were any tickets found at the ticket counter. Upon verification, no ticket was found at the ticket
counter, so apparently when the Fernandos checked in, there were no tickets presented. Linda Tang also checked with the computer the
reservation of the Fernandos, but again, she failed to see any electronic ticket number of any kind, and/or any ticket record. So as the
 36

Fernandos would be able to get on with the flight considering the amount of time left, she told them that they could purchase tickets with their
credit cards and deal with the refund later when they are able to locate the tickets and when they reach Manila. Linda Tang believed that she did
the best she could under the circumstances.17

However, the Fernandos did not agree with the solution offered by Linda Tang. Instead, they went back to the Northwest ticket counter and were
attended to by Jeanne Meyer who was "courteous" and "was very kind enough" to assist them. Jeanne Meyer verified their bookings and
"printed paper tickets" for them. Unfortunately, when they went back to the boarding gate, the plane had departed. Northwest offered alternative
arrangements for them to be transported to Manila on the same day on another airline, either through Philippine Airlines or Cathay Pacific
Airways, but they refused. Northwest also offered them free hotel accommodations but they, again, rejected the offer 18 Northwest then made
arrangements for the transportation of the Fernandos from the airport to their house in LA, and booked the Fernandos on a Northwest flight that
would leave the next day, January 30, 2002. On January 30, 2002, the Fernandos flew to Manila on business class seats. 19

On April 30, 2002, a complaint for damages20 was instituted by the Fernandos against Northwest before the RTC, Branch 97, Quezon City.
During the trial of the case, the Fernandos testified to prove their claim. On the part of Northwest, Linda Tang-Mochizuki and Linda
Puntawongdaycha testified through oral depositions taken at the Office of the Consulate General, Los Angeles City. The Northwest Manager for
HR-Legal Atty. Cesar Veneracion was also presented and testified on the investigation conducted by Northwest as a result of the letters sent by
Elizabeth Fernando and her counsel prior to the filing of the complaint before the RTC. 21

On September 9, 2008, the RTC issued a Decision, the dispositive portion of which states, thus:

WHEREFORE, in view of the foregoing, this Court rendered judgment in favor of the plaintiffs and against defendant ordering defendant to pay
the plaintiffs, the following:

1. Moral damages in the amount of Two Hundred Thousand Pesos (₱200,000.00);

2. Actual or compensatory damages in the amount of Two Thousand US Dollars ($2,000.00) or its corresponding Peso equivalent at
the time the airline ticket was purchased;

3. Attorney's fees in the amount of Fifty Thousand pesos (₱50,000.00); and,

4. Cost of suit.

SO ORDERED.22

Both parties filed their respective appeals which were dismissed by the CA in a Decision dated August 30, 2013, and affirmed the RTC Decision.

The Fernandos and Northwest separately filed motions for a reconsideration of the Decision, both of which were denied by the CA on March 31,
2014.

The Fernandos filed a petition for review on certiorari23before this court docketed as G.R. No. 212038. Northwest followed suit and its
petition24 was docketed as G.R. No. 212043. Considering that both petitions involved similar parties, emanated from the same Civil Case No. Q-
N-02-46727 and assailed the same CA judgment, they were ordered consolidated in a Resolution 25 dated June 18, 2014.

In G.R. No. 212038, the Fernandos raised the following issues:

WHETHER OR NOT THE ACTS OF THE PERSONNEL AND THAT OF DEFENDANT NORTHWEST ARE WANTON, MALICIOUS, RECKLESS,
DELIBERATE AND OPPRESSIVE IN CHARACTER, AMOUNTING TO FRAUD AND BAD FAITH;

WHETHER OR NOT PETITIONER SPOUSES ARE ENTITLED TO MORAL DAMAGES IN AN AMOUNT MORE THAN THAT AWARDED BY
THE TRIAL COURT;

WHETHER OR NOT DEFENDANT NORTHWEST IS LIABLE TO PETITIONER SPOUSES FOR EXEMPLARY DAMAGES; [AND]

WHETHER OR NOT THE PETITIONER SPOUSES ARE ENTITLED TO ATTORNEY'S FEES IN AN AMOUNT MORE THAN THAT AWARDED
BY THE TRIAL COURT.26

In G.R. No. 212043, Northwest anchored its petition on the following assigned errors:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST COMMITTED A BREACH OF CONTRACT
OF CARRIAGE;
 37

II

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS LIABLE FOR DAMAGES AND THE
AWARDS FOR MORAL DAMAGES AND ATTORNEY'S FEES ARE APPROPRIATE;

III

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS NOT ENTITLED TO RECOVER ON ITS
COUNTERCLAIMS.27

The Issues

The arguments proffered by the parties can be summed up into the following issues: (1) whether or not there was breach of contract of carriage
and whether it was done in a wanton, malevolent or reckless manner amounting to bad faith; (2) whether or not Northwest is liable for the
payment of moral damages and attorney's fees and whether it is liable to pay more than that awarded by the RTC; (3) whether or not Northwest
is liable for the payment of exemplary damages; and (4) whether or not Northwest Airlines is entitled to recover on its counterclaim.

In their petition, the Fernandos contended that it was the personal misconduct, gross negligence and the rude and abusive attitude of Northwest
employees Linda Puntawongdaycha and Linda Tang which subjected them to indignities, humiliation and embarrassment. The attitude of the
aforesaid employees was wanton and malevolent allegedly amounting to fraud and bad faith. According to the Fernandos, if only Linda
Puntawongdaycha had taken the time to verify the validity of the ticket in the computer, she would have not given the wrong information to the
Immigration Officer because the August 2001 return ticket remained unused and valid for a period of one (1) year, or until August 2002. The
wrong information given by Linda Puntawongdaycha aroused doubts and suspicions on Jesus Fernando's travel plans. The latter was then
subjected to two (2) hours of questioning which allegedly humiliated him. He was even suspected of being an "illegal alien". The negligence of
Linda Puntawongdaycha was allegedly so gross and reckless amounting to malice or bad faith.

As to the second incident, the Fernandos belied the accusation of Northwest that they did not present any tickets. They presented their
electronic tickets which were attached to their boarding passes. If they had no tickets, the personnel at the check-in counter would have not
issued them their boarding passes and baggage claim stubs. That's why they could not understand why the coupon-type ticket was still
demanded by Northwest.

On the award of moral damages, the Fernandos referred to the testimony of Elizabeth Fernando that she could not sleep and had a fever the
night after the second incident. Thus, the Fernandos demanded that they should be given more than the "token amount" granted by the RTC
which was affirmed by the CA. They stated that their status in the society and in the business circle should also be considered as a factor in
awarding moral damages. They averred that they are well-known in the musical instruments and sports equipment industry in the country being
the owners of JB Music and JB Sports with outlets all over the country. They own hotels, a chain of apartelles and a parking garage building in
Indiana, USA. And since the breach of contract allegedly amounted to fraud and bad faith, they likewise demanded for the payment of
exemplary damages and attorney's fees more than the amount awarded by the RTC.

On the other hand, Northwest stated in its petition that Linda Puntawongdaycha tried her best to help Jesus Fernando get through the US
Immigration. Notwithstanding that Linda Puntawongdaycha was not able to find any relevant information on Jesus Fernando's return ticket, she
still went an extra mile by printing the PNR of Jesus Fernando and handling the same personally to the Immigration Officer. It pointed out that
the Immigration Officer "noticed in the ticket that it was dated sometime August 20 or 21, 2001, although it was already December 2001."

As to the incident with Linda Tang, Northwest explained that she was only following Northwest standard boarding procedures when she asked
the Fernandos for their tickets even if they had boarding passes. Thus, the conduct cannot be construed as bad faith. The dates indicated on the
tickets did not match the booking. Elizabeth Fernando was using an electronic ticket dated August 21, 2001, while the electronic ticket of Jesus
Fernando was dated January 26, 2002. According to Northwest, even if the Fernandos had electronic tickets, the same did not discount the fact
that, on the face of the tickets, they were for travel on past dates. Also, the electronic tickets did not contain the ticket number or any information
regarding the reservation. Hence, the alleged negligence of the Fernandos resulted in the confusion in the procedure in boarding the plane and
the eventual failure to take their flight.

Northwest averred that the award of moral damages and attorney's fees were exorbitant because such must be proportionate to the suffering
inflicted. It argued that it is not obliged to give any "special treatment" to the Fernandos just because they are good clients of Northwest,
because the supposed obligation does not appear in the contract of carriage. It further averred that it is entitled to its counterclaim in the amount
of ₱500,000.00 because the Fernandos allegedly acted in bad faith in prosecuting the case which it believed are baseless and unfounded.

In the Comment28 of Northwest, it insisted that assuming a mistake was committed by Linda Tang and Linda Puntawongdaycha, such mistake
alone, without malice or ill will, is not equivalent to fraud or bad faith that would entitle the Fernandos to the payment of moral damages.

In the Reply29 of the Fernandos, they asserted that it was a lie on the part of Linda Puntawongdaycha to claim that she checked the passenger
name or PNR of Jesus Fernando from the computer and, as a result, she was not allegedly able to find any return ticket for him. According to
Jesus Fernando, Linda Puntawongdaycha merely looked at his ticket and declared the same to be invalid. The Fernandos reiterated that after
 38

Jesus Fernando was released by the US Immigration Service, Elizabeth Fernando proceeded to a Northwest Ticket counter to verify the status
of the ticket. The personnel manning the counter courteously assisted her and confirmed that the ticket remained unused and perfectly valid.
The personnel merely punched the Elite Platinum World Perks Card number of Jesus Fernando and was able to verify the status of the ticket.
The Fernandos further argued that if there was a discrepancy with the tickets or reservations, they would not have been allowed to check in, and
since they were allowed to check in then they were properly booked and were confirmed passengers of Northwest.

Our Ruling

We find merit in the petition of the Spouses Jesus and Elizabeth Fernando. The Fernandos' cause of action against Northwest stemmed from a
breach of contract of carriage. 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. 30

A contract of carriage is defined as one whereby a certain person or association of persons obligate themselves to transport persons, things, or
goods from one place to another for a fixed price. Under Article 1732 of the Civil Code, this "persons, corporations, firms, or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services
to the public" is called a common carrier.31 Undoubtedly, a contract of carriage existed between Northwest and the Fernandos. They voluntarily
and freely gave their consent to an agreement whose object was the transportation of the Fernandos from LA to Manila, and whose cause or
consideration was the fare paid by the Fernandos to Northwest. 32

In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a ticket to a passenger confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger then has every right to expect that he 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. 34

When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the Fernandos on their flight on 29 January 2002.

We note that the witness35 of Northwest admitted on cross-examination that based on the documents submitted by the Fernandos, they were
confirmed

passengers on the January 29, 2002 flight.36

In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was
negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier. 37 As the aggrieved party, the
Fernandos only had to prove the existence of the contract and the fact of its non-performance by Northwest, as carrier, in order to be awarded
compensatory and actual damages.38

Therefore, having proven the existence of a contract of carriage between Northwest and the Fernandos, and the fact of non-performance by
Northwest of its obligation as a common carrier, it is clear that Northwest breached its contract of carriage with the Fernandos. Thus, Northwest
opened itself to claims for compensatory, actual, moral and exemplary damages, attorney's fees and costs of suit. 39

Moreover, Article 1733 of the New Civil Code provides that 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. Also, Article 1755 of the same Code states that a common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all
the circumstances.

We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of contract "in failing to provide the spouses with the
proper assistance to avoid any inconvenience" and that the actuations of Northwest in both subject incidents "fall short of the utmost diligence of
a very cautious person expected of it". Both ruled that considering that the Fernandos are not just ordinary passengers but, in fact, frequent
flyers of Northwest, the latter should have been more courteous and accommodating to their needs so that the delay and inconveniences they
suffered could have been avoided. Northwest was remiss in its duty to provide the proper and adequate assistance to them.

Nonetheless, We are not in accord with the common finding of the CA and the RTC when both ruled out bad faith on the part of Northwest.
While We agree that the discrepancy between the date of actual travel and the date appearing on the tickets of the Fernandos called for some
verification, however, the Northwest personnel failed to exercise the utmost diligence in assisting the Fernandos. The actuations of Northwest
personnel in both subject incidents are constitutive of bad faith.

On the first incident, Jesus Fernando even gave the Northwest personnel the number of his Elite Platinum World Perks Card for the latter to
access the ticket control record with the airline's computer for her to see that the ticket is still valid. But Linda Puntawongdaycha refused to
check the validity of the ticket in the computer. As a result, the Immigration Officer brought Jesus Fernando to the interrogation room of the INS
where he was interrogated for more than two (2) hours. When he was finally cleared by the Immigration Officer, he was granted only a twelve
(12)-day stay in the United States (US), instead of the usual six (6) months. 40
 39

As in fact, the RTC awarded actual or compensatory damages because of the testimony of Jesus Fernando that he had to go back to Manila
and then return again to LA, USA, two (2) days after requiring him to purchase another round trip ticket from Northwest in the amount of
$2,000.00 which was not disputed by Northwest.41 In ignoring Jesus Fernando's pleas to check the validity of the tickets in the computer, the
Northwest personnel exhibited an indifferent attitude without due regard for the inconvenience and anxiety Jesus Fernando might have
experienced.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect,
courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from
such employees. So it is, that any rule or discourteous conduct on the part of employees towards a passenger gives the latter an action for
damages against the carrier.42

In requiring compliance with the standard of extraordinary diligence, a standard which is, in fact, that of the highest possible degree of diligence,
from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to
tame their reckless instincts and to force them to take adequate care of human beings and their property. 43

Notably, after the incident, the Fernandos proceeded to a Northwest Ticket counter to verify the status of the ticket and they were assured that
the ticked remained unused and perfectly valid. And, to avoid any future problems that may be encountered on the validity of the ticket, a new
ticket was issued to Jesus Fernando. The failure to promptly verify the validity of the ticket connotes bad faith on the part of Northwest.

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. It means breach of a known duty through some motive, interest or ill will that partakes of the nature of fraud. A finding of bad faith entitles
the offended party to moral damages.44

As to the second incident, there was likewise fraud or bad faith on the part of Northwest when it did not allow the Fernandos to board their flight
for Manila on January 29, 2002, in spite of confirmed tickets. We need to stress that they have confirmed bookings on Northwest Airlines NW
Flight No. 001 for Narita, Japan and NW 029 for Manila. They checked in with their luggage at LA Airport and were given their respective
boarding passes for business class seats and claim stubs for six (6) pieces of luggage. With boarding passes and electronic tickets, apparently,
they were allowed entry to the departure area; and, they eventually joined the long queue of business class passengers along with their
business associates.

However, in the presence of the other passengers, Northwest personnel Linda Tang pulled the Fernandos out of the queue and asked for paper
tickets (coupon type). Elizabeth Fernando explained to Linda Tang that the matter could be sorted out by simply verifying their electronic tickets
in her computer and all she had to do was click and punch in their Elite Platinum World Perks Card number. Again, the Northwest personnel
refused to do so; she, instead, told them to pay for new tickets so they could board the plane. Hence, the Fernandos rushed to the Northwest
Airline Ticket counter to clarify the matter. They were assisted by Northwest personnel Jeanne Meyer who retrieved their control number from
her computer and was able to ascertain that the Fernandos' electronic tickets were valid, and they were confirmed passengers on both NW
Flight No. 001 for Narita Japan and NW 029 for Manila on that day.

In Ortigas, Jr. v. Lufthansa German Airlines,45 this Court declared that "(i)n contracts of common carriage, in attention and lack of care on the
part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which
entitles the passengers to the award of moral damages in accordance with Article 2220 of the Civil Code."

In Pan American World Airways, Inc. v. Intermediate Appellate Court,46 where a would-be passenger had the necessary ticket, baggage claim
and clearance from immigration, all clearly and unmistakably showing that she was, in fact, included in the passenger manifest of said flight,
and yet was denied accommodation in said flight, this Court did not hesitate to affirm the lower court's finding awarding her damages on the
ground that the breach of contract of carriage amounted to bad faith. 47 For the indignity and inconvenience of being refused a confirmed seat on
the last minute, said passenger is entitled to an award of moral damages. 48

In this case, We need to stress that the personnel who assisted the Fernandos even printed coupon tickets for them and advised them to rush
back to the boarding gates since the plane was about to depart. But when the Fernandos reached the boarding gate, the plane had already
departed. They were able to depart, instead, the day after, or on January 30, 2002.

In Japan Airlines v. Jesus Simangan,49 this Court held that the acts committed by Japan Airlines against Jesus Simangan amounted to bad faith,
thus:

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

Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left behind. The latter was
unceremoniously bumped off despite his protestations and valid travel documents and notwithstanding his contract of carriage with
JAL. Damage had already been done when respondent was offered to fly the next day on July 30, 1992. Said offer did not cure
JAL's default.50
 40

Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals,51 where private respondent was not allowed to board the plane because her seat had
already been given to another passenger even before the allowable period for passengers to check in had lapsed despite the fact that she
had a confirmed ticket and she had arrived on time, this Court held that petitioner airline acted in bad faith in violating private respondent's
rights under their contract of carriage and is, therefore, liable for the injuries she has sustained as a result. 52

Under Article 222053 of the Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in order upon a showing that
the defendant acted fraudulently or in bad faith. 54 Clearly, in this case, the Fernandos are entitled to an award of moral damages. The purpose of
awarding moral damages is to enable the injured party to obtain means, diversion or amusement that will serve to alleviate the moral suffering
he has undergone by reason of defendant's culpable action. 55

We note that even if both the CA and the RTC ruled out bad faith on the part of Northwest, the award of "some moral damages" was recognized.
Both courts believed that considering that the Fernandos are good clients of Northwest for almost ten (10) years being Elite Platinum World
Perks Card holders, and are known in their business circle, they should have been given by Northwest the corresponding special
treatment.56 They own hotels and a chain of apartelles in the country, and a parking garage building in Indiana, USA. From this perspective, We
adopt the said view. We, thus, increase the award of moral damages to the Fernandos in the amount of ₱3,000,000.00.

As held in Kierulf v. Court of Appeals,57 the social and financial standing of a claimant may be considered if he or she was subjected to
contemptuous conduct despite the offender's knowledge of his or her social and financial standing.

In Trans World Airlines v. Court of Appeals,58 this Court considered the social standing of the aggrieved passenger:

At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law firm in Manila. He
was a director of several companies and was active in civic and social organizations in the Philippines . Considering the
circumstances of this case and the social standing of private respondent in the community , he is entitled to the award of moral and
exemplary damages. x x x This award should be reasonably sufficient to indemnify private respondent for the humiliation and
embarrassment that he suffered and to serve as an example to discourage the repetition of similar oppressive and discriminatory
acts. 59

Exemplary damages, which are awarded by way of example or correction for the public good, may be recovered in contractual obligations, if
defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.60 They are designed by our civil law to permit the courts to
reshape behavior that is socially deleterious in its consequence by creating negative incentives or deterrents against such behavior. 61 Hence,
given the facts and circumstances of this case, We hold Northwest liable for the payment of exemplary damages in the amount of
₱2,000,000.00.

In the case of Northwest Airlines, Inc. v. Chiong,62 Chiong was given the run-around at the Northwest check-in counter, instructed to deal with a
man in barong to obtain a boarding pass, and eventually barred from boarding a Northwest flight to accommodate an American passenger
whose name was merely inserted in the Flight Manifest, and did not even personally check-in at the counter. Under the foregoing
circumstances, the award of moral and exemplary damages was given by this Court.

Time and again, We have declared that a contract of carriage, in this case, air transport, is primarily intended to serve the traveling public and
thus, imbued with public interest. The law governing common carriers consequently imposes an exacting standard of conduct. 63 A contract to
transport passengers is quite different in kind and degree from any other contractual relation because of the relation which an air-carrier sustains
with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of
air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give
ground for an action or damages.64

As to the payment of attorney's fees, We sustain the award thereof on the ground that the Fernandos were ultimately compelled to litigate and
incurred expenses to protect their rights and interests, and because the Fernandos are entitled to an award for exemplary damages. Pursuant to
Article 2208 of the Civil Code, attorney's fees may be awarded when exemplary damages are awarded, or a party is compelled to litigate or
incur expenses to protect his interest, or where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly
valid, just and demandable claim.

Records show that the Fernandos demanded payment for damages from Northwest even before the filing of this case in court. 1âwphi1 Clearly,
the Fernandos were forced to obtain the services of counsel to enforce a just claim, for which they should be awarded attorney's fees. 65 We
deem it just and equitable to grant an award of attorney's fees equivalent to 10% of the damages awarded.

Lastly, the counterclaim of Northwest in its Answer66 is a compulsory counterclaim for damages and attorney's fees arising from the filing of the
complaint. This compulsory counterclaim of Northwest arising from the filing of the complaint may not be granted inasmuch as the complaint
against it is obviously not malicious or unfounded. It was filed by the Fernandos precisely to claim their right to damages against Northwest.
Well-settled is the rule that the commencement of an action does not per se make the action wrongful and subject the action to damages, for the
law could not have meant to impose a penalty on the right to litigate. 67
 41

WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated March 31, 2014 of the Court of Appeals, in CA-G.R. CV No.
93496 are hereby AFFIRMED WITH MODIFICATION. The award of moral damages and attorney's fees are hereby increased to
₱3,000,000.00 and ten percent (10%) of the damages awarded, respectively. Exemplary damages in the amount of ₱2,000,000.00 is also
awarded. Costs against Northwest Airlines.

The total amount adjudged shall earn legal interest at the rate of twelve percent (12%) per annum computed from judicial demand or from April
30, 2002 to June 30 2013, and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

SO ORDERED.

FIRST DIVISION

G. R. No. 188283, July 20, 2016

CATHAY PACIFIC AIRWAYS, LTD., Petitioner, v. SPOUSES ARNULFO AND EVELYN FUENTEBELLA, Respondents.

DECISION

SERENO, C.J. :

This is a Petition for Review on Certiorari filed by Cathay Pacific Airways Ltd. from the Court of Appeals (CA) Decision 1 and Resolution2 in CA-
G.R. CV No. 87698. The CA affirmed with modification the Decision 3 issued by the Regional Trial Court (RTC) Branch 30 in San Jose,
Camarines Sur, in Civil Case No. T-635.

The Case

The case originated from a Complaint4 for damages filed by respondents Arnulfo and Evelyn Fuentebella against petitioner Cathay Pacific
Airways Ltd., a foreign corporation licensed to do business in the Philippines. Respondents prayed for a total of PI3 million in damages for the
alleged besmirched reputation and honor, as well as the public embarrassment they had suffered as a result of a series of involuntary
downgrades of their trip from Manila to Sydney via Hong Kong on 25 October 1993 and from Hong Kong to Manila on 2 November 1993. 5 In its
Answer,6 petitioner maintained that respondents had flown on the sections and sectors they had booked and confirmed.

The RTC ruled in favor of respondents and awarded P5 million as moral damages, PI million as exemplary damages, and P500,000 as
attorney's fees. Upon review, the CA upheld the disposition and the awards, with the modification that the attorney's fees be reduced to
P100,000.

Petitioner prays that the Complaint be dismissed, or in the alternative, that the damages be substantially and equitably reduced. 7chanrobleslaw

Facts

In 1993, the Speaker of the House authorized Congressmen Arnulfo Fuentebella (respondent Fuentebella), Alberto Lopez (Cong. Lopez) and
Leonardo Fugoso (Cong. Fugoso) to travel on official business to Sydney, Australia, to confer with their counterparts in the Australian Parliament
from 25 October to 6 November 1993.8chanrobleslaw

On 22 October 1993, respondents bought Business Class tickets for Manila to Sydney via Hong Kong and back. 9 They changed their minds,
however, and decided to upgrade to First Class.10 From this point, the parties presented divergent versions of facts. The overarching
disagreement was on whether respondents should have been given First Class seat accommodations for all the segments of their itinerary.

According to respondents, their travel arrangements, including the request for the upgrade of their seats from Business Class to First Class,
were made through Cong. Lopez. 11 The congressman corroborated this allegation. 12 On the other hand, petitioner claimed that a certain Carol
Dalag had transacted on behalf of the congressmen and their spouses for the purchase of airline tickets for Manila-Hong Kong-Sydney-Hong
Kong- Manila. 13 According to petitioner, on 23 October 1993, one of the passengers called to request that the booking be divided into two: one
for the Spouses Lopez and Spouses Fugoso, and a separate booking for respondents. 14 Cong. Lopez denied knowing a Carol Dalag. 15 He was
not questioned regarding the request for two separate bookings. 16 However, in his testimony, he gave the impression that the travel
arrangements had been made for them as one group. 17 He admitted that he had called up petitioner, but only to request an upgrade of their
tickets from Business Class to First Class. 18 He testified that upon assurance that their group would be able to travel on First Class upon cash
payment of the fare difference, he sent a member of his staff that same afternoon to pay.19chanrobleslaw

Petitioner admits that First Class tickets were issued to respondents, but clarifies that the tickets were open-dated (waitlisted). 20 There was no
showing whether the First Class tickets issued to Sps. Lopez and Sps. Fugoso were open-dated or otherwise, but it appears that they were able
to fly First Class on all the segments of the trip, while respondents were not. 21chanrobleslaw

On 25 October 1993, respondents queued in front of the First Class counter in the airport. 22 They were issued boarding passes for Business
Class seats on board CX 902 bound for Hong Kong from Manila and Economy Class seats on board CX 101 bound for Sydney from Hong
 42

Kong.23 They only discovered that they had not been given First Class seats when they were denied entry into the First Class
lounge.24Respondent Fuentebella went back to the check-in counter to demand that they be given First Class seats or at the very least, access
to the First Class Lounge. He recalled that he was treated by the ground staff in a discourteous, arrogant and rude manner. 25cralawred He was
allegedly told that the plane would leave with or without them. 26 Both the trial court and the CA gave credence to the testimony of respondent
Fuentebella.

During trial, petitioner offered the transcript of the deposition of its senior reservation supervisor, Nenita Montillana (Montillana). 27 She said that
based on the record locator, respondents had confirmed reservations for Business Class seats for the Manila-Hong Kong, Sydney-Hong Kong,
and Hong Kong-Manila flights; but the booking for Business Class seats for the Hong Kong-Sydney leg was "under request;" and due to the
flight being full, petitioner was not able to approve the request. 28chanrobleslaw

Montillana admitted that First Class tickets had been issued to respondents, but qualified that those tickets were open-dated. 29 She referred to
the plane tickets, which bore the annotations "OPEN F OPEN" for all sectors of the flight. 30 Petitioner explained that while respondents
expressed their desire to travel First Class, they could not be accommodated because they had failed to confirm and the sections were full on
the date and time of their scheduled and booked flights. 31 Petitioner also denied that its personnel exhibited arrogance in dealing with
respondents; on the contrary, it was allegedly respondent Fuentebella who was hostile in dealing with the ground staff. 32chanrobleslaw

Respondents alleged that during transit through the Hong Kong airport on 25 October 1993, they were treated with far less respect and courtesy
by the ground staff.33 In fact, the first employee they approached completely ignored them and turned her back on them. 34 The second one did
not even give them any opportunity to explain why they should be given First Class seats, but instead brushed aside their complaints and told
them to just fall in line in Economy Class.35 The third employee they approached shoved them to the line for Economy Class passengers in front
of many people. 36chanrobleslaw

Petitioner used the deposition of Manuel Benipayo (Benipayo), airport service officer, and Raquel Galvez-Leonio (Galvez-Leonio), airport
services supervisor, to contradict the claims of respondents. Benipayo identified himself as the ground staff who had dealt with respondents'
complaint. 37 He testified that around five o'clock on 25 October 1993, respondent Fuentebella loudly insisted that he be accommodated on First
Class. But upon checking their records, he found out that respondents were only booked on Business Class. 38 Benipayo tried to explain this to
respondents in a very polite manner, 39 and he exerted his best effort to secure First Class seats for them, but the plane was already full. 40 He
presented a telex sent to their Hong Kong office, in which he requested assistance to accommodate respondents in First Class for the Hong
Kong-Sydney flight. 41 He claimed that he was intimidated by respondent Fuentebella into making the notations "Involuntary Downgrading" and
"fare difference to be refunded" on the tickets.42chanrobleslaw

For her part, Galvez-Leonio testified that it was company policy not to engage passengers in debates or drawn-out discussions, but to address
their concerns in the best and proper way.43 She admitted, however, that she had no personal knowledge of compliance in airports other than
NAIA.44chanrobleslaw

Respondents narrated that for their trip from Hong Kong to Sydney, they were squeezed into very narrow seats for eight and a half hours and,
as a result, they felt groggy and miserable upon landing. 45chanrobleslaw

Respondents were able to travel First Class for their trip from Sydney to Hong Kong on 30 October 1993. 46 However, on the last segment of the
itinerary from Hong Kong to Manila on 2 November 1993, they were issued boarding passes for Business Class. 47chanrobleslaw

Upon arrival in the Philippines, respondents demanded a formal apology and payment of damages from petitioner. 48 The latter conducted an
investigation, after which it maintained that no undue harm had been done to them. 49 Ruling of the Regional Trial Court

In resolving the case, the trial court first identified the ticket as a contract of adhesion whose terms, as such, should be construed against
petitioner.50 It found that respondents had entered into the contract because of the assurance that they would be given First Class
seats.51chanrobleslaw

The RTC gave full faith and credence to the testimonies of respondents and Cong. Fugoso, who testified in open court:

chanRoblesvirtualLawlibrary
[T]he court was able to keenly observe [the] demeanor [of respondents' witnesses] on the witness stand and they appear to be frank,
spontaneous, positive and forthright neither destroyed nor rebutted in the course of the entire trial...The court cannot state the same observation
in regard to those witnesses who testified by way of deposition [namely, Cong. Lopez all the witnesses of petitioner], except those appearing in
the transcript of records. And on record, it appears [that] witness Nenita Montillana was reading a note. 52chanrobleslaw

xxxx

[Montillana's] credibility, therefore, is affected and taking together [her] whole testimony based on the so-called locator record of the plaintiffs
spouses from the defendant Cathay Pacific Airways, the same has become less credible, if not, doubtful, to say the least. 53

The trial court ordered petitioner to pay P5 million as moral damages, P1 million as exemplary damages, and P500,000 as attorney's fees. In
setting the award for moral damages, the RTC considered the prestigious position held by respondent Fuentebella, as well as the bad faith
exhibited by petitioner.54According to the trial court, the contract was flagrantly violated in four instances: first, when respondents were denied
entry to the First Class lounge; second, at the check-in counter when the airport services officer failed to adequately address their concern; third,
 43

at the Hong Kong airport when they were ignored; and fourth, when respondents became the butt of jokes upon their arrival in
Sydney.55chanrobleslaw

RULING OF THE COURT OF APPEALS

The CA affirmed the RTC Decision with the modification that the attorney's fees be reduced to P100,000. The appellate court reviewed the
records and found that respondents were entitled to First Class accommodation throughout their trip. 56 It gave weight to the testimony of Cong.
Lopez that they had paid the fare difference to upgrade their Business Class tickets to First Class. 57 It also considered the handwritten notation
on the First Class tickets stating "fare difference to be refunded" as proof that respondents had been downgraded. 58chanrobleslaw

With regard to the question of whether respondents had confirmed their booking, the CA considered petitioner's acceptance of the fare
difference and the issuance of the First Class tickets as proof that the request for upgrade had been approved. 59 It noted that the tickets bore the
annotation that reconfirmation of flights is no longer necessary, further strengthening the fact of confirmation. 60chanrobleslaw

The C A found that there were no conditions stated on the face of the tickets; hence, respondents could not be expected to know that the tickets
they were holding were open-dated and were subject to the availability of seats. 61 It applied the rule on contracts of adhesion, and construed the
terms against petitioner.

Finding that there was a breach of contract when petitioner assigned Business Class and Economy Class seats to First Class ticket holders, the
CA proceeded to determine whether respondents were entitled to moral damages. It said that bad faith can be inferred from the inattentiveness
and lack of concern shown by petitioner's personnel to the predicament of respondents. 62 The court also considered as a badge of bad faith the
fact that respondents had been downgraded due to overbooking. 63chanrobleslaw

As regards the amount of moral damages awarded by the RTC, the CA found no prejudice or corruption that might be imputed to the trial court
in light of the circumstances.64 The appellate court pointed out that the trial court only awarded half of what had been prayed for. 65chanrobleslaw

The award of exemplary damages was sustained to deter a similar shabby treatment of passengers and a wanton and reckless refusal to honor
First Class tickets. 66 The award for attorney's fees was likewise sustained pursuant to Article 2208(2) of the Civil Code which allows recovery
thereof when an act or omission of the defendant compelled the plaintiff to litigate or incur expense to protect the latter's interest. 67chanrobleslaw

RULING OF THE COURT

There was a breach of contract.

In Air France v. Gillego68 this Court ruled that in an action based on a breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent; all that he has to prove is the existence of the contract and the fact of its nonperformance
by the carrier. In this case, both the trial and appellate courts found that respondents were entitled to First Class accommodations under the
contract of carriage, and that petitioner failed to perform its obligation. We shall not delve into this issue more deeply than is necessary because
We have decided to accord respect to the factual findings of the trial and appellate courts. We must, however, point out a crucial fact We have
uncovered from the records that further debunks petitioner's suggestion 69 that two sets of tickets were issued to respondents - one for Business
Class and another for open-dated First Class tickets with the following entries: 70chanrobleslaw

Business Class Tickets Date of Issue: 23 First Class Tickets Date of Issue: 5 Actual Class
Segment October 1993 October 1993 Boarded
Flight Class Status Flight Class Status
Manila-Hong Kong CX902 C OK OPEN F - Business
Hong Kong- CX 101 C RQ OPEN F - Economy
Sydney
Sydney-Hong Kong CX 100 C OK OPEN F - First
Hong Kong-Manila CX901 C OK OPEN F - Business

The First Class tickets issued on 25 October 1993 indicate that they were "issued in exchange for Ticket Nos. 160-401123987 and 160-
4474920334/5."71 The latter set of tickets numbered 160-4474920334/5 correspond to the Business Class tickets issued on 23 October 1993,
which in turn originated from Ticket No. 160-4011239858 issued on 22 October 1993. 72chanrobleslaw

With this information, We can conclude that petitioner may have been telling the truth that the passengers made many changes in their booking.
However, their claim that respondents held both Business Class tickets and the open-dated First Class tickets is untrue. We can also conclude
that on the same day of the flight, petitioner still issued First Class tickets to respondents. The incontrovertible fact, therefore, is that
respondents were holding First Class tickets on 25 October 1993.
 44

In FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation,73 We recognized the interests of the injured party in breach of contract
cases:

chanRoblesvirtualLawlibrary
xxx. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of
the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for
recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promissee that may include his
" expectation Interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had
the contract been performed, or his " reliance interest." which is his interest in being reimbursed for loss caused by reliance on the contract by
being put in as good a position as he would have been in had the contract not been made; or his "restitution interest." which is his interest in
having restored to him any benefit that he has conferred on the other party.

According to Montillana, a reservation is deemed confirmed when there is a seat available on the plane. 74When asked how a passenger was
informed of the confirmation, Montillana replied that computer records were consulted upon inquiry. 75 By its issuance of First Class tickets on the
same day of the flight in place of Business Class tickets that indicated the preferred and confirmed flight, petitioner led respondents to believe
that their request for an upgrade had been approved.

Petitioner tries to downplay the factual finding that no explanation was given to respondents with regard to the types of ticket that were issued to
them. It ventured that respondents were seasoned travelers and therefore familiar with the concept of open-dated tickets. 76 Petitioner attempts
to draw a parallel with Sarreal, Jr. v. JAL,77 in which this Court ruled that the airline could not be faulted for the negligence of the passenger,
because the latter was aware of the restrictions carried by his ticket and the usual procedure for travel. In that case, though, records showed
that the plaintiff was a well- travelled person who averaged two trips to Europe and two trips to Bangkok every month for 34 years. In the present
case, no evidence was presented to show that respondents were indeed familiar with the concept of open-dated ticket. In fact, the tickets do not
even contain the term "open-dated."

There is basis for the award of moral and exemplary

damages; however, the amounts were excessive.

Moral and exemplary damages are not ordinarily awarded in breach of contract cases. This Court has held that damages may be awarded only
when the breach is wanton and deliberately injurious, or the one responsible had acted fraudulently or with malice or bad faith. 78 Bad faith is a
question of fact that must be proven by clear and convincing evidence. 79 Both the trial and the appellate courts found that petitioner had acted
in bad faith. After review of the records, We find no reason to deviate from their finding.

Petitioner argues that the testimonial evidence of the treatment accorded by its employees to respondents is self-serving and, hence, should not
have been the basis for the finding of bad faith. 80 We do not agree. The Rules of Court do not require that the testimony of the injured party be
corroborated by independent evidence. In fact, in criminal cases in which the standard of proof is higher, this Court has ruled that the testimony
of even one witness may suffice to support a conviction. What more in the present case, in which petitioner has had adequate opportunity to
controvert the testimonies of respondents.

In Singapore Airlines Limited v. Fernandez,81 bad faith was imputed by the trial court when it found that the ground staff had not accorded the
attention and treatment warranted under the circumstances. This Court found no reason to disturb the finding of the trial court that the
inattentiveness and rudeness of the ground staff were gross enough to amount to bad faith. The bad faith in the present case is even more
pronounced because petitioner's ground staff physically manhandled the passengers by shoving them to the line, after another staff had insulted
them by turning her back on them.

However, the award of P5 million as moral damages is excessive, considering that the highest amount ever awarded by this Court for moral
damages in cases involving airlines is P500,000.82 As We said in Air France v. Gillego,83 the mere fact that respondent was a Congressman
should not result in an automatic increase in the moral and exemplary damages."

We find that upon the facts established, the amount of P500,000 as moral damages is reasonable to obviate the moral suffering that
respondents have undergone. With regard to exemplary damages, jurisprudence shows that P50,000 is sufficient to deter similar acts of bad
faith attributable to airline representatives.

WHEREFORE, the Petition is PARTIALLY GRANTED. The Court of Appeals Decision dated 31 March 2009 in CA-G.R. CV No. 87698 is
hereby AFFIRMED with MODIFICATION in that moral and exemplary damages are hereby reduced to P500,000 and P50,000, respectively.
These amounts shall earn legal interest of 6% per annum from the finality of this Decision until full payment.

SO ORDERED.