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Republic of the Philippines



G.R. No. L-11037 December 29, 1960

EDGARDO CARIAGA, ET AL., plaintiffs-appellants,

LAGUNA TAYABAS BUS COMPANY, defendant-appellant.
MANILA RAILROAD COMPANY, defendant-appellee.

Ozaeta, Lichauco and Picazo for defendant and appellant.

E.A. Fernandez and L.H. Fernandez for plaintiffs and appellants.
Gov't. Corp. Counsel A. Padilla and Atty. F.A. Umali for appellee.


At about 1:00 p.m. on June 18, 1952, Bus No. 133 of the Laguna Tayabas Bus
Co. — hereinafter referred to as the LTB — driven by Alfredo Moncada, left its station at
Azcarraga St., Manila, for Lilio, Laguna, with Edgardo Cariaga, a fourth-year medical
student of the University of Santo Tomas, as one of its passengers. At about 3:00 p.m., as
the bus reached that part of the poblacion of Bay, Laguna, where the national highway
crossed a railroad track, it bumped against the engine of a train then passing by with such
terrific force that the first six wheels of the latter were derailed, the engine and the front part
of the body of the bus was wrecked, the driver of the bus died instantly, while many of its
passengers, Edgardo among them, were severely injured. Edgardo was first confined at the
San Pablo City Hospital from 5:00 p.m., June 18, 1952, to 8:25 a.m., June 20 of the same
year when he was taken to the De los Santos Clinic, Quezon City. He left that clinic on
October 14 to be transferred to the University of Santo Tomas Hospital where he stayed up
to November 15. On this last date he was taken back to the De los Santos Clinic where he
stayed until January 15, 1953. He was unconscious during the first 35 days after the
accident; at the De los Santos Clinic Dr. Gustilo removed the fractured bones which
lacerated the right frontal lobe of his brain and at the University of Santo Tomas Hospital Dr.
Gustilo performed another operation to cover a big hole on the right frontal part of the head
with a tantalum plate.

The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous
expenses incurred from June 18, 1952 to April, 1953. From January 15, 1953 up to April of
the same year Edgardo stayed in a private house in Quezon, City, the LTB having agreed to
give him a subsistence allowance of P10.00 daily during his convalescence, having spent in
this connection the total sum of P775.30 in addition to the amount already referred to.
On April 24, 1953 the present action was filed to recover for Edgardo Cariaga, from the LTB
and the MRR Co., and total sum of P312,000.00 as actual, compensatory, moral and
exemplary damages, and for his parents, the sum of P18,00.00 in the same concepts. The
LTB disclaimed liability claiming that the accident was due to the negligence of its co-
defendant, the Manila Railroad Company, for not providing a crossing bar at the point where
the national highway crossed the railway track, and for this reason filed the corresponding
cross-claim against the latter company to recover the total sum of P18,194.75 representing
the expenses paid to Edgardo Cariaga. The Manila Railroad Company, in turn, denied
liability upon the complaint and cross-claim alleging that it was the reckless negligence of
the bus driver that caused the accident.

The lower court held that it was the negligence of the bus driver that caused the accident
and, as a result, rendered judgment sentencing the LTB to pay Edgardo Cariaga the sum of
P10,490.00 as compensatory damages, with interest at the legal rate from the filing of the
complaint, and dismissing the cross-claim against the Manila Railroad Company. From this
decision the Cariagas and the LTB appealed.

The Cariagas claim that the trial court erred: in awarding only P10,490.00 as compensatory
damages to Edgardo; in not awarding them actual and moral damages, and in not
sentencing appellant LTB to pay attorney's fees.

On the other hand, the LTB's principal contention in this appeal is that the trial court should
have held that the collision was due to the fault of both the locomotive driver and the bus
driver and erred, as a consequence, in not holding the Manila Railroad Company liable
upon the cross-claim filed against it.

We shall first dispose of the appeal of the bus company. Its first contention is that the driver
of the train locomotive, like the bus driver, violated the law, first, in sounding the whistle only
when the collision was about to take place instead of at a distance at least 300 meters from
the crossing, and second, in not ringing the locomotive bell at all. Both contentions are
without merits.

After considering the evidence presented by both parties the lower court expressly found:

. . . While the train was approximately 300 meters from the crossing, the engineer
sounded two long and two short whistles and upon reaching a point about 100
meters from the highway, he sounded a long whistle which lasted up to the time the
train was about to cross it. The bus proceeded on its way without slackening its
speed and it bumped against the train engine, causing the first six wheels of the
latter to be derailed.

xxx xxx xxx

. . . that the train whistle had been sounded several times before it reached the
crossing. All witnesses for the plaintiffs and the defendants are uniform in stating that
they heard the train whistle sometime before the impact and considering that some
of them were in the bus at the time, the driver thereof must have heard it because he
was seated on the left front part of the bus and it was his duty and concern to
observe such fact in connection with the safe operation of the vehicle. The other
L.T.B. bus which arrived ahead at the crossing, heeded the warning by stopping and
allowing the train to pass and so nothing happened to said vehicle. On the other
hand, the driver of the bus No. 133 totally ignored the whistle and noise produced by
the approaching train and instead he tried to make the bus pass the crossing before
the train by not stopping a few meters from the railway track and in proceeding

The above findings of the lower court are predicated mainly upon the testimony of Gregorio
Ilusondo, a witness for the Manila Railroad Company. Notwithstanding the efforts exerted
by the LTB to assail his credibility, we do not find in the record any fact or circumstance
sufficient to discredit his testimony. We have, therefore, no other alternative but to accept
the findings of the trial court to the effect, firstly, that the whistle of locomotive was sounded
four times — two long and two short — "as the train was approximately 300 meters from the
crossing"; secondly, that another LTB bus which arrived at the crossing ahead of the one
where Edgardo Cariaga was a passenger, paid heed to the warning and stopped before the
"crossing", while — as the LTB itself now admits (Brief p. 5) — the driver of the bus in
question totally disregarded the warning.

But to charge the MRR Co. with contributory negligence, the LTB claims that the engineer
of the locomotive failed to ring the bell altogether, in violation of the section 91 of Article
1459, incorporated in the charter of the said MRR Co. This contention — as is obvious — is
the very foundation of the cross-claim interposed by the LTB against its
co-defendant. The former, therefore, had the burden of proving it affirmatively because a
violation of law is never presumed. The record discloses that this burden has not been
satisfactorily discharged.

The Cariagas, as appellants, claim that the award of P10,000.00 compensatory damages to
Eduardo is inadequate considering the nature and the after effects of the physical injuries
suffered by him. After a careful consideration of the evidence on this point we find their
contentions to be well-founded.

From the deposition of Dr. Romeo Gustilo, a neurosurgeon, it appears that, as a result of
the injuries suffered by Edgardo, his right forehead was fractured necessitating the removal
of practically all of the right frontal lobe of his brain. From the testimony of Dr. Jose A.
Fernandez, a psychiatrist, it may be gathered that, because of the physical injuries suffered
by Edgardo, his mentality has been so reduced that he can no longer finish his studies as a
medical student; that he has become completely misfit for any kind of work; that he can
hardly walk around without someone helping him, and has to use a brace on his left leg and

Upon the whole evidence on the matter, the lower court found that the removal of the right
frontal lobe of the brain of Edgardo reduced his intelligence by about 50%; that due to the
replacement of the right frontal bone of his head with a tantalum plate Edgardo has to lead
a quite and retired life because "if the tantalum plate is pressed in or dented it would cause
his death."
The impression one gathers from this evidence is that, as a result of the physical injuries
suffered by Edgardo Cariaga, he is now in a helpless condition, virtually an invalid, both
physically and mentally.

Appellant LTB admits that under Art. 2201 of the Civil Code the damages for which the
obligor, guilty of a breach of contract but who acted in good faith, is liable shall be those that
are the natural and probable consequences of the breach and which the parties had forseen
or could have reasonably forseen at the time the obligation was constituted, provided such
damages, according to Art. 2199 of the same Code, have been duly proved. Upon this
premise it claims that only the actual damages suffered by Edgardo Cariaga consisting of
medical, hospital and other expenses in the total sum of P17,719.75 are within this
category. We are of the opinion, however, that the income which Edgardo Cariaga could
earn if he should finish the medical course and pass the corresponding board examinations
must be deemed to be within the same category because they could have reasonably been
foreseen by the parties at the time he boarded the bus No. 133 owned and operated by the
LTB. At that time he was already a fourth-year student in medicine in a reputable university.
While his scholastic may not be first rate (Exhibits 4, 4-A to 4-C), it is, nevertheless,
sufficient to justify the assumption that he could have passed the board test in due time. As
regards the income that he could possibly earn as a medical practitioner, it appears that,
according to Dr. Amado Doria, a witness for the LTB, the amount of P300.00 could easily be
expected as the minimum monthly income of Edgardo had he finished his studies.

Upon consideration of all the facts mentioned heretofore this Court is of the opinion, and so
holds, that the compensatory damages awarded to Edgardo Cariaga should be increased to

Edgardo Cariaga's claim for moral damages and attorney's fees was denied by the trial
court, the pertinent portion of its decision reading as follows:

Plaintiffs' claim for moral damages cannot also be granted. Article 2219 of the Civil
Code enumerates the instances when moral damages may be covered and the case
under consideration does not fall under any one of them. The present action cannot
come under paragraph 2 of said article because it is not one of the quasi-delict and
cannot be considered as such because of the pre-existing contractual relation
between the Laguna Tayabas Bus Company and Edgardo Cariaga. Neither could
defendant Laguna Tayabas Bus Company be held liable to pay moral damages to
Edgardo Cariaga under Article 2220 of the Civil Code on account of breach of its
contract of carriage because said defendant did not act fraudulently or in bad faith in
connection therewith. Defendant Laguna Tayabas Bus Company had exercised due
diligence in the selection and supervision of its employees like the drivers of its
buses in connection with the discharge of their duties and so it must be considered
an obligor in good faith.

The plaintiff Edgardo Cariaga is also not entitled to recover for attorney's fees,
because this case does not fall under any of the instances enumerated in Article
2208 of the Civil Code.
We agree with the trial court and, to the reason given above, we add those given by this
Court in Cachero vs. Manila Yellow Taxicab Co., Inc.(101 Phil., 523, 530, 533):

A mere perusal of plaintiff's complaint will show that this action against the defendant
is predicated on an alleged breach of contract of carriage, i.e., the failure of the
defendants to bring him "safely and without mishaps" to his destination, and it is to
be noted that the chauffeur of defendant's taxicab that plaintiff used when he
received the injuries involved herein, Gregorio Mira, has not even made a party
defendant to this case.

Considering, therefore, the nature of plaintiff's action in this case, is he entitled to

compensation for moral damages? Article 2219 of the Civil Code says the following:

Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in Article 309;

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

xxx xxx xxx

Of course enumerated in the just quoted Article 2219 only the first two may have any
bearing on the case at bar. We find, however, with regard to the first that the
defendant herein has not committed in connection with this case any "criminal
offense resulting in physical injuries". The one that committed the offense against the
plaintiff is Gregorio Mira, and that is why he has been already prosecuted and
punished therefor. Altho (a) owners and managers of an establishment and
enterprise are responsible for damages caused by their employees in the service of
the branches in which the latter are employed or on the occasion of their functions;
(b) employers are likewise liable for damages caused by their employees and
household helpers acting within the scope of their assigned task (Article 218 of the
Civil Code); and (c) employers and corporations engaged in any kind of industry are
subsidiary civilly liable for felonies committed by their employees in the discharge of
their duties (Art. 103, Revised Penal Code), plaintiff herein does not maintain this
action under the provisions of any of the articles of the codes just mentioned and
against all the persons who might be liable for the damages caused, but as a result
of an admitted breach of contract of carriage and against the defendant employer
alone. We, therefore, hold that the case at bar does not come within the exception of
paragraph 1, Article 2219 of the Civil Code.

The present complaint is not based either on a "quasi-delict causing physical

injuries" (Art. 2219, par. 2 of the Civil Code). From the report of the Code
Commission on the new Civil Code. We copy the following:

A question of nomenclature confronted the Commission. After a careful deliberation,

it was agreed to use the term "quasi-delict" for those obligations which do not arise
from law, contracts, quasi-contracts, or criminal offenses. They are known in
Spanish legal treaties as "culpa aquiliana", "culpa-extra-contractual" or "cuasi-
delitos". The phrase "culpa-extra-contractual" or its translation "extra-contractual-
fault" was eliminated because it did not exclude quasi-contractual or penal
obligations. "Aquilian fault" might have been selected, but it was thought inadvisable
to refer to so ancient a law as the "Lex Aquilia". So "quasi-delict" was chosen, which
more nearly corresponds to the Roman Law classification of the obligations and is in
harmony with the nature of this kind of liability.

The Commission also thought of the possibility of adopting the word "tort" from
Anglo-American law. But "tort" under that system is much broader than the Spanish-
Philippine concept of obligations arising from non-contractual negligence. "Tort" in
Anglo-American jurisprudence includes not only negligence, but also intentional
criminal act, such as assault and battery, false imprisonment and deceit. In the
general plan of the Philippine legal system, intentional and malicious acts are
governed by the Penal Code, although certain exceptions are made in the Project.
(Report of the Code Commission, pp. 161-162).

In the case of Cangco, vs. Manila Railroad, 38 Phil. 768, We established the
distinction between obligation derived from negligence and obligation as a result of a
breach of contract. Thus, we said:

It is important to note that the foundation of the legal liability of the defendant is the
contract of carriage, and that the obligation to respond for the damage which plaintiff
has suffered arises, if at all, from the breach of that contract by reason of the failure
of defendant to exercise due care in its performance. That is to say, its liability is
direct and immediate, differing essentially in the legal viewpoint from the
presumptive responsibility for the negligence of its servants, imposed by Article 1903
of the Civil Code (Art. 2180 of the new), which can be rebutted by proof of the
exercise of due care in their selection of supervision. Article 1903 is not applicable to
obligations arising EX CONTRACTU, but only to extra-contractual obligations — or
to use the technical form of expression, that article relates only to CULPA
AQUILIANA' and not to CULPA CONTRACTUAL. lawphil.net
The decisions in the cases of Castro vs. Acro Taxicab Co., (82 Phil., 359; 46 Off.
Gaz., No. 5, p. 2023); Lilius, et al. vs. Manila Railroad, 59 Phil., 758) and others,
wherein moral damages were awarded to the plaintiffs, are not applicable to the
case at bar because said decision were rendered before the effectivity of the new
Civil Code (August 30, 1950) and for the further reason that the complaints filed
therein were based on different causes of action.

In view of the foregoing the sum of P2,000 was awarded as moral damages by the
trial court has to be eliminated, for under the law it is not a compensation awardable
in a case like the one at bar.

What has been said heretofore relative to the moral damages claimed by Edgardo Cariaga
obviously applies with greater force to a similar claim (4th assignment of error) made by his

The claim made by said spouses for actual and compensatory damages is likewise without
merits. As held by the trial court, in so far as the LTB is concerned, the present action is
based upon a breach of contract of carriage to which said spouses were not a party, and
neither can they premise their claim upon the negligence or quasi-delict of the LTB for the
simple reason that they were not themselves injured as a result of the collision between the
LTB bus and train owned by the Manila Railroad Company.

Wherefore, modified as above indicated, the appealed judgement is hereby affirmed in all
other respects, with costs against appellant LTB.

Paras, C.J., Bengzon, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Gutierrez David,
and Paredes, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Monday, December 17, 2012

Villa Rey Transit vs. Ferrer Case Digest

Villa Rey Transit vs. Ferrer
[GR L-23893, 29 October 1968]

Facts: [preceding case] Prior to 1959, Jose M. Villarama was an operator of a bus transportation,
under the business name of Villa Rey Transit, pursuant to certificates of public convenience granted
him by the Public Service Commission (PSC) in Cases 44213 and 104651, which authorized him to
operate a total of 32 units on various routes or lines from Pangasinan to Manila, and vice-versa. On
8 January 1959, he sold the two certificates of public convenience to the Pangasinan Transportation
Company, Inc. (Pantranco), for P350,000.00 with the condition, among others, that the seller
(Villarama) "shall not for a period of 10 years from the date of this sale, apply for any TPU service
identical or competing with the buyer."

Barely 3 months thereafter, or on 6 March 1959: a corporation called Villa Rey Transit, Inc. (the
Corporation) was organized with a capital stock of P500,000.00 divided into 5,000 shares of the par
value of P100.00 each; P200,000.00 was the subscribed stock; Natividad R. Villarama (wife of Jose
M. Villarama) was one of the incorporators, and she subscribed for P1,000.00; the balance of
P199,000.00 was subscribed by the brother and sister-in-law of Jose M. Villarama; of the subscribed
capital stock, P105,000.00 was paid to the treasurer of the corporation, who was Natividad R.
Villarama. In less than a month after its registration with the Securities and Exchange Commission
(10 March 1959), the Corporation, on 7 April 1959, bought 5 certificates of public convenience, 49
buses, tools and equipment from one Valentin Fernando, for the sum of P249,000.00, of which
P100,000.00 was paid upon the signing of the contract; P50,000.00 was payable upon the final
approval of the sale by the PSC; P49,500.00 one year after the final approval of the sale; and the
balance of P50,000.00 "shall be paid by the BUYER to the different suppliers of the SELLER."

The very same day that the contract of sale was executed, the parties thereto immediately applied
with the PSC for its approval, with a prayer for the issuance of a provisional authority in favor of the
vendee Corporation to operate the service therein involved. On 19 May 1959, the PSC granted the
provisional permit prayed for, upon the condition that "it may be modified or revoked by the
Commission at any time, shall be subject to whatever action that may be taken on the basic
application and shall be valid only during the pendency of said application." Before the PSC could
take final action on said application for approval of sale, however, the Sheriff of Manila, on 7 July
1959, levied on 2 of the five certificates of public convenience involved therein, namely, those issued
under PSC cases 59494 and 63780, pursuant to a writ of execution issued by the Court of First
Instance of Pangasinan in Civil Case 13798, in favor of Eusebio E. Ferrer against Valentin
Fernando. The Sheriff made and entered the levy in the records of the PSC. On 16 July 1959, a
public sale was conducted by the Sheriff of the said two certificates of public convenience. Ferrer
was the highest bidder, and a certificate of sale was issued in his name. Thereafter, Ferrer sold the
two certificates of public convenience to Pantranco, and jointly submitted for approval their
corresponding contract of sale to the PSC. Pantranco therein prayed that it be authorized
provisionally to operate the service involved in the said two certificates.

The applications for approval of sale, filed before the PSC, by Fernando and the Corporation, Case
124057, and that of Ferrer and Pantranco, Case 126278, were scheduled for a joint hearing. In the
meantime, to wit, on 22 July 1959, the PSC issued an order disposing that during the pendency of
the cases and before a final resolution on the aforesaid applications, the Pantranco shall be the one
to operate provisionally the service under the two certificates embraced in the contract between
Ferrer and Pantranco. The Corporation took issue with this particular ruling of the PSC and elevated
the matter to the Supreme Court, which decreed, after deliberation, that until the issue on the
ownership of the disputed certificates shall have been finally settled by the proper court, the
Corporation should be the one to operate the lines provisionally.

[present case] On 4 November 1959, the Corporation filed in the Court of First Instance of Manila, a
complaint for the annulment of the sheriff's sale of the aforesaid two certificates of public
convenience (PSC Cases 59494 and 63780) in favor of Ferrer, and the subsequent sale thereof by
the latter to Pantranco, against Ferrer, Pantranco and the PSC. The Corporation prayed therein that
all the orders of the PSC relative to the parties' dispute over the said certificates be annulled. The
CFI of Manila declared the sheriff's sale of two certificates of public convenience in favor of Ferrer
and the subsequent sale thereof by the latter to Pantranco null and void; declared the Corporation to
be the lawful owner of the said certificates of public convenience; and ordered Ferrer and Pantranco,
jointly and severally, to pay the Corporation, the sum of P5,000.00 as and for attorney's fees. The
case against the PSC was dismissed. All parties appealed.

Issue: Whether the stipulation, "SHALL NOT FOR A PERIOD OF 10 YEARS FROM THE DATE OF
the contract between Villarama and Pantranco, binds the Corporation (the Villa Rey Transit, Inc.).

Held: Villarama supplied the organization expenses and the assets of the Corporation, such as
trucks and equipment; there was no actual payment by the original subscribers of the amounts of
P95,000.00 and P100,000.00 as appearing in the books; Villarama made use of the money of the
Corporation and deposited them to his private accounts; and the Corporation paid his personal
accounts. Villarama himself admitted that he mingled the corporate funds with his own money.
These circumstances are strong persuasive evidence showing that Villarama has been too much
involved in the affairs of the Corporation to altogether negative the claim that he was only a part-time
general manager. They show beyond doubt that the Corporation is his alter ego. The interference of
Villarama in the complex affairs of the corporation, and particularly its finances, are much too
inconsistent with the ends and purposes of the Corporation law, which, precisely, seeks to separate
personal responsibilities from corporate undertakings. It is the very essence of incorporation that the
acts and conduct of the corporation be carried out in its own corporate name because it has its own
personality. The doctrine that a corporation is a legal entity distinct and separate from the members
and stockholders who compose it is recognized and respected in all cases which are within reason
and the law. When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a
vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or
perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the
law covers and isolates the corporation from the members or stockholders who compose it will be
lifted to allow for its consideration merely as an aggregation of individuals. Hence, the Villa Rey
Transit, Inc. is an alter ego of Jose M. Villarama, and that the restrictive clause in the contract
entered into by the latter and Pantranco is also enforceable and binding against the said
Corporation. For the rule is that a seller or promisor may not make use of a corporate entity as a
means of evading the obligation of his covenant. Where the Corporation is substantially the alter ego
of the covenantor to the restrictive agreement, it can be enjoined from competing with the
317 Phil. 700

The case is of 1980 vintage. It originated from the Regional Trial Court,
appealed to the Court of Appeals, then finally elevated to this Court. From
the Court's disposition of the case stemmed incidents which are now the
subjects for resolution. To elaborate:

In an action for breach of contract of carriage, Korean Airlines, Co., Ltd.,

(KAL) was ordered by the trial court to pay actual/compensatory damages,
with legal interest, attorney's fees and costs of suit in favor of plaintiff
Juanito C. Lapuz.[1] Both parties appealed to the Court of Appeals, but the
trial court's judgment was merely modified: the award of compensatory
damages reduced, an award for moral and exemplary damages added, with
6% interest per annum from the date of filing of the complaint, and the
attorney's fees and costs deleted.

The parties subsequently elevated the case to this Court, docketed as G.R.
No. 114061 and G.R. No. 113842. On August 3, 1994, the Court in a
consolidated decision affirmed the decision of the Court of Appeals,
modified only as to the commencement date of the award of legal interest,
i.e., from the date of the decision of the trial court and not from the date of
filing of the complaint.[2] The parties filed their respective motions for
reconsideration with KAL, for the first time, assailing the Court's lack of
jurisdiction to impose legal interest as the complaint allegedly failed to pray
for its award. In a resolution dated September 21, 1994, the Court
resolved to deny both motions for reconsideration with finality.
Notwithstanding, KAL filed subsequent pleadings asking for
reconsideration of the Court's consolidated decision and again impugning
the award of legal interest. Lapuz, meanwhile, filed a motion for early
resolution of the case followed by a motion for execution dated March 14,
1995, praying for the issuance of a writ of execution. KAL, in response, filed
its Opposition and Supplemental Argument in Support of the Opposition
dated March 28, 1995, and March 30, 1995, respectively. Additionally, on
May 3, 1995, Lapuz filed another Urgent Motion for Early Resolution
stating that the case has been pending for fifteen years which KAL admitted
in its Comment filed two days later, albeit stressing that its pleadings were
not intended for delay.[3]
KAL's asseveration that the Court lacks jurisdiction to award legal interest
is devoid of merit. Both the complaint and amended complaint against
KAL dated November 27, 1980, and January 5, 1981, respectively, prayed
for reliefs and remedies to which Lapuz may be entitled in law and equity.
The award of legal interest is one such relief, as it is based on equitable
grounds duly sanctioned by Article 2210 of the Civil Code which provides
that: "[i]nterest may, in the discretion of the Court, be allowed upon
damages awarded for breach of contract".[4]

Furthermore, in its petition for review before the Court of Appeals, KAL did
not question the trial court's imposition of legal interest. Likewise, in its
appeal before the Court, KAL never bewailed the award of legal interest. In
fact, KAL took exception only with respect to the date when legal interest
should commence to run.[5] Indeed, it was only in its motion for
reconsideration when suddenly its imposition was assailed for having been
rendered without jurisdiction. To strengthen its languid position, KAL's
subsequent pleadings clothed its attack with constitutional import for
alleged violation of its right to due process. There is no cogent reason and
none appears on record that could sustain KAL's scheme as KAL was amply
given, in the courts below and in this Court, occasion to ventilate its case.
What is repugnant to due process is the denial of opportunity to be
heard[6] which opportunity KAL was extensively afforded. While it is a rule
that jurisdictional question may be raised at any time, this, however, admits
of an exception where, as in this case, estoppel has supervened.[7] This
Court has time and again frowned upon the undesirable practice of a party
submitting his case for decision and then accepting the judgment, only if
favorable, and attacking it for lack of jurisdiction when adverse.[8] The
Court shall not countenance KAL's undesirable move. What attenuates
KAL's unmeritorious importuning is that the assailed decision has long
acquired finality. It is a settled rule that a judgment which has acquired
finality becomes immutable and unalterable, hence may no longer be
modified in any respect except only to correct clerical errors or
mistake.[9] Once a judgment becomes final, all the issues between the
parties are deemed resolved and laid to rest.

KAL's filing of numerous pleadings delayed the disposition of the case

which for fifteen years remained pending. This practice may constitute
abuse of the Court's processes for it tends to impede, obstruct and degrade
the administration of justice. In Li Kim Tho v. Go Siu Ko, et. al.,[10] the
Court gave this reminder to litigants and lawyers' alike:
"Litigation must end and terminate sometime and somewhere, and it is
essential to an effective and efficient administration of justice that, once a
judgment has become final, the winning party be not, through a mere
subterfuge, deprived of the fruits of the verdict. Courts must therefore
guard against any scheme calculated to bring about that result. Constituted
as they are to put an end to controversies, courts should frown upon any
attempt to prolong them."[11]

Likewise, in Banogan v. Zerna[12] the Court reminded lawyers of their

responsibility as officers of the court in this manner:

"As officers of the court, lawyers have a responsibility to assist in the proper
administration of justice. They do not discharge this duty by filing
pointless petitions that only add to the workload of the judiciary, especially
this Court, which is burdened enough as it is. A judicious study of the facts
and the law should advise them when a case, such as this, should not be
permitted to be filed to merely clutter the already congested judicial
dockets. They do not advance the cause of law or their clients by
commencing litigations that for sheer lack of merit do not deserve the
attention of the courts."[13]

A lawyer owes fidelity to the cause of his client, but not at the expense of
truth and the administration of justice.[14] Counsel for KAL is reminded that
it is his duty not to unduly delay a case, impede the execution of a judgment
or misuse Court processes.[15]

With respect to Lapuz' motion for execution, suffice to state that the
application for a writ of execution should be addressed to the court of origin
and not to this Court. As the judgment has become final and executory
then all that is left of the trial court is the ministerial act of ordering the
execution thereof.

ACCORDINGLY, KAL's motion for reconsideration is DENIED. Counsel

for KAL is hereby warned that repetition of his undesirable practice shall be
dealt with severely.

Regalado, Puno, and Mendoza, JJ., concur.
Narvasa, C.J., (Chairman), on leave.

Decision dated November 14, 1990, Civil Case No. 82-2790, Br. 30, RTC


Penned by Cruz, J., with Davide,


Bellosillo, Quiason and Kapunan, JJ., Concurring; 234 SCRA 717


Rollo in G.R.No. 113842: Comment of KAL dated May 5, 1995,


p.2; rollo p. 203.

Cf. Cabral v. Court of Appeals, 178 SCRA 90 (1989); De Lima v.


Laguna Tayabas Co., 160 SCRA 70 (1988); Vda. de Bonifacio v.

B.L.T. Bus Co., Inc. 34 SCRA 618 (1970).

Rollo in G.R. No. 114061: Petition for Review on Certiorari of KAL dated

March 14, 1994, pp. 20-21; rollo pp. 29-30.

Caltex Phil. Inc. v. Castillo, 21 SCRA 1071, 1078 (1967); Bermejo


v. Barrios, 31 SCRA 764, 775-776 (1970).

[7] Suarez v. Court of Appeals, 186 SCRA 339, 342 (1990).

Sesbreno v. Court of Appeals, 240 SCRA 606, 612 (1995); Banaga


v. Commission on Settlement of Land Problems, 181 SCRA 599,

608-609 (1990); Tijam v. Sibonghanoy, 23 SCRA 29, 36 (1968).

[9] Lim v. Jabalde,172 SCRA 211, 223 (1989).

[10] 82 Phil. 776 (1949).

[11] Id., at 778.

[12] 154 SCRA 593 (1987).

[13] Id.,at 598.

[14] Garcia v. Francisco, 220 SCRA 512, 515 (1993).

[15] Canon 12, Rule 12.04, Canon of Professional Responsibility.

Cachero v. Manila Yellow Taxi Club


On December 13, 1952, Atty. Tranquilino Cachero boarded a Yellow Taxi driven by
Gregorio Mira Abinion. The taxicab bumped a Meralco post. The plaintiff fell out of the
vehicle to the ground and sustained slight physical injuries. On January 6, 1953, plaintiff
wrote a letter to the defendant, demanding payment for the sum of P79, 245.65 covering
actual transportation and medical expenses, monetary loss, compensatory and
exemplary damages. Defendant offered to settle the case amicably, but the parties were
not able to agree on the settlement amount. Plaintiff instituted an action for damages on
February 2, 1953. The Court of First Instance awarded: (1) P700 for medical and
transportation expenses, (2) P3,200 unearned professional fees, and (3) P2,000 moral
damages. The plaintiff filed this instant appeal.


Whether moral damages can be awarded


A mere perusal of plaintiff complaint will show that his action against the defendant is
predicated on an alleged breach of contract of carriage, i.e., the failure of the defendant
to bring him "safely and without mishaps" to his destination, and it is to be noted that
the chauffeur of defendant's taxicab that plaintiff used when he received the injuries
involved herein, Gregorio Mira, has not even been made a party defendant to this
case. The defendant herein has not committed in connection with this case any
"criminal offense resulting in physical injuries". The one that committed the offense
against the plaintiff is Gregorio Mira, and that is why he has been already prosecuted
and punished therefor. We, therefore, hold that the case at bar does not come within the
exception of paragraph 1, Article 2219 of the Civil Code. In view of the foregoing the sum
of P2,000 awarded as moral damages by the trial Court has to be eliminated, for under
the law it is not a compensation awardable in a case like the one at bar.
105 Phil. 266

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

Defendant-petitioner Paz Fores brings this petition for review of the
decision of the Court of Appeals (C. A. Case No. 1437-R) awarding to
the plaintiff-respondent Ireneo Miranda the sums of P5,000 by way of
actual damages and counsel fees, and P10,000 as moral damages, with

Respondent was one of the passengers on a jeepney driven by Eugenio

Luga. While the vehicle was descending the Sta. Mesa bridge at an
excessive rate of speed, the driver lost control thereof, causing it to swerve
and to hit the bridge wall. The accident occurred on the morning of
March 22, 1953. Five of the passengers were injured, including the
respondent who suffered a fracture of the upper right humerus. He was
taken to the National Orthopedic Hospital for treatment, and later was
subjected to a series of operations; the first on May 23, 1953, when wire
loops were wound around the broken bones and screwed into place; a
second, effected to insert a metal splint, and a third one to remove such
splint. At the time of the trial, it appears that respondent had not yet
recovered the use of his right arm.

The driver was charged with serious physical injuries through reckless
imprudence, and upon interposing a plea of guilty was sentenced

The contention that the evidence did not sufficiently establish the identity
of the vehicle as that belonging to the petitioner was rejected by the
appellate court which found, among other things, that it carried plate No.
TPU-1163, series of 1952, Quezon City, registered in the name of Paz
Fores, (appellant herein) and that the vehicle even had the name of "Dona
Paz" painted below its windshield. No evidence to the contrary was
introduced by the petitioner, who relied on an attack upon the credibility of
the two policemen who went to the scene of the incident.

A point to be further remarked is petitioner's contention that on March

21, 1953, or one day before the accident happened, she allegedly sold the
passenger jeep that was involved therein to a certain Carmen Sackerman.
The initial problem raised by the petitioner in this appeal may be
formulated thus "Is the approval of the Public Service Commission
necessary for the sale of a public service vehicle even without conveying
therewith the authority to operate the same?" Assuming the dubious sale
to be a fact, the Court of Appeals answered the query in the affirmative.
The ruling should be upheld. Section 20 of the Public Service Act
(Commonwealth Act No. 146) provides:

"SEC. 20. Subject to established limitations and exceptions and saving

provisions to the contrary, it shall be unlawful for any public service or for
the owner, lessee or operator thereof, without the previous approval and
authority of the Commission previously had

* * * * * * *

(g) To sell, alienate, mortgage, encumber or lease its property, franchises,

certificates, privileges, or rights, or any part thereof; or merge or
consolidate its property, franchises, privileges or rights, or any part
thereof, with those of any other public service. The approval herein
required shall be given, after notice to the public and after hearing the
persons interested at a public hearing, if it be shown that there are just and
reasonable grounds for making the mortgage or encumbrance, for
liabilities of more than one year maturity, or the sale, alienation, lease,
merger, or consolidation to be approved and that the same are not
detrimental to the public interest, and in case of. a sale, the date on which
the same is to be consummated shall be fixed in the order of
approval: Provided, however, That nothing herein contained shall be
construed to prevent the transaction from being negotiated or completed
before its approval or to prevent the sale, alienation, or lease by any public
service of any of its property in the ordinary course of its business."
Interpreting the effects of this particular provision of law, we have held in
the recent cases of Montoya vs. Ignacio,[* ]50 Off. Gaz. No. 1, p. 108;
Timbol vs. Osias, et al., G. R. No. L-7547, April 30, 1955, and
Medina vs. Cresencia, 99 Phil, 506; 52 Off. Gaz. No. 10, p. 4606, that
a transfer contemplated by the law, if made without the requisite approval
of the Public Service Commission, is not effective and binding in so far as
the responsibility of the grantee under the franchise in relation to the
public is concerned. Petitioner assails, however, the applicability of these
rulings to the instant case, contending that m those cases, the operator
did not convey, by lease or by sale, the vehicle independently of his rights
under the franchise. This line of reasoning does not find support in the
law. The provisions of the statute are clear and prohibit the sale, alienation,
lease, or encumbrance of the property, franchise, certificate, privileges or
rights, or any part thereof of the owner or operator of the public service
without approval or authorization of the Public Service Commission. The
law was designed primarily for the protection of the public interest; and
until the approval of the Public Service Commission is obtained the
vehicle is, in contemplation of law, still under the service of the owner or
operator standing in the records of the Commission which the public has a
right to rely upon.

The proviso contained in the aforequoted law, to the effect that nothing
therein shall be construed "to prevent the transaction from being
negotiated or completed before its approval", means only that the sale
without the required approval is still valid and binding between the
parties (Montoya vs. Ignacio, supra). The phrase "in the ordinary course
of its business" found in the other proviso "or to prevent the sale,
alienation, or lease by any public service of any of its property", as correctly
observed by the lower court, could not have been intended to include the
sale of the vehicle itself, but at most may refer only to such property that
may be conceivably disposed or by the carrier in the ordinary course of its
business, like junked equipment or spare parts.

The case of Indalecio de Torres vs. Vicente Ona (63 Phil., 594, 597) is
enlightening; and there, it was held:

"Under the law, the Public Service Commission has not only general
supervision and regulation of, but also full jurisdiction and control over all
public utilities including the property, equipment and facilities used, and
the property rights and franchises enjoyed by every individual and
company engaged in the performance of a public service in the sense this
phrase is used in the Public Service Act or Act No. 3108 (sec. 1308). By
virtue of the provisions of said Act, motor vehicles used in the performance
of a service, as the transportation of freight from one point to another,
have to this date been considered and they cannot but be so considered
public service property; and, by reason of its own nature, a TH truck, which
means that the operator thereof places it at the disposal of anybody who is
willing to pay a rental for its use, when he desires to transfer or carry
his effects, merchandise or any other cargo from one place to another, is
necessarily a public service property." (Emphasis supplied)
Of course, this Court has held in the case of Bachrach Motor
Co. vs. Zamboanga Transportation Co., 52 Phil., 244, that there may be a
mine pro tune authorization which has the effect of having the approval
retroact to the date of the transfer; but such outcome cannot prejudice
rights intervening in the meantime. It appears that no such approval was
given by the Commission before the accident occurred.

The P10,000 actual damages awarded by the Court of First Instance of

Manila were reduced by the Court of Appeals to only P2,000, on the
ground that a review of the records failed to disclose a sufficient basis for
the trial court's appraisal, since the only evidence presented on this point
consisted of respondent's bare statement that his expenses and loss of
income amounted to P20,000. On the other hand, "it cannot be denied,"
the lower court said, "that appellee (respondent) did incur expenses." It is
well to note further that respondent was a painter by profession and a
professor of Fine Arts, so that the amount of P2,000 awarded cannot be
said to be excessive (see Arts. 2224 and 2225, Civil Code of the
Philippines). The attorney's fees in the sum of P3,000 also awarded to
the respondent are assailed on the ground that the Court of First Instance
did not provide for the same, and since no appeal was interposed by said
respondent, it was allegedly error for the Court of Appeals to award
them motu proprio. Petitioner fails to note that attorney's fees are
included in the concept of actual damages under the Civil Code and may
be awarded whenever the court deems it just and equitable (Art. 2208,
Civil Code of the Philippines). We see no reason to alter these awards.

Anent the moral damages ordered to be paid to the respondent, the

same must be discarded. We have repeatedly ruled (Cachero vs. Manila
Yellow Taxicab Co. Inc., 101 Phil., 523; 54 Off. Gaz., [26], 6599; Necesito,
et al vs. Paras, 104 Phil., 75; 56 Off. Gaz., [23] 4023, that moral damages
are not recoverable in damage actions predicated on a breach of the
contract of transportation, in view of Articles 2219 and 2220 of the new
Civil Code, which provide as follows:

"Art. 2219. Moral damages may be recovered in the following and

analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;
* * * * * * *

Art. 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."
By contrasting the provisions of these two articles it immediately becomes
apparent that:

(a) In case of breach of contract (including one of transportation) proof

of bad faith or fraud (dolus), i.e., wanton or deliberately injurious
conduct, is essential to justify an award of moral damages; and

(b) That a breach of contract can not be considered included in the

descriptive term "analogous cases" used in Art. 2219; not only because Art.
2220 specifically provides for the damages that are caused by contractual
breach, but because the definition of quasi-delictin Art. 2176 of the Code
expressly excludes the cases where there is a "preexisting contractual
relation between the parties."

"Art. 2176. Whoever by act or omission causes damage to another, there

being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
The exception to the basic rule of damages now under consideration is a
mishap resulting in the death of a passenger, in which case Article 1764
makes the common carrier expressly subject to the rule of Art. 2206, that
entitles the spouse, descendants and ascendants of the deceased
passenger to "demand moral damages for mental anguish by reason of the
death of the deceased" (Necesito vs. Paras, 104 Phil., 84, Resolution on
motion to reconsider, September 11, 1958). But the exceptional rule of Art.
1764 makes it all the more evident that where the injured passenger does
not die, moral damages are not recoverable unless it is proved that the
carrier was guilty of malice or bad faith. We think it is clear that the mere
carelessness of the carrier's driver does not per se constitute or justify an
inference of malice or bad faith on the part of the carrier; and in the case
at bar there is no other evidence of such malice to support the award of
moral damages by the Court of Appeals. To award moral damages for
breach of contract, therefore, without proof of bad faith or malice on the
part of the defendant, as required by Art. 2220", would be to violate the
clear provisions of the law, and constitute unwarranted judicial legislation.

The Court of Appeals has invoked our rulings in Castro vs. Aero Taxicab
Co-, R. G. No. 49155, December 14, 1948 and Layda vs. Court of Appeals,
90 Phil., 724; but these doctrines were predicated upon our former law of
damages, before judicial discretion in fixing them became limited by the
express provisions of the new Civil Code (previously quoted). Hence, the
aforesaid rulings are now inapplicable.

Upon the other hand, the advantageous position of a party suing a carrier
for breach of the contract of transportation explains, to some extent, the
limitations imposed by the new Code on the amount of the recovery. The
action for breach of contract imposes on the defendant carrier a
presumption of liability upon mere proof of injury to the passenger; that
latter is relieved from the duty to establish the fault of the carrier, or of
his employees, and the burden is placed on the carrier to prove that it was
due to an unforseen event or to force majeure (Cangco vs. Manila Railroad
Co., 38 Phil, 768, 777). Moreover, the carrier, unlike in suits for quasi-
delict, may not escape liability by proving that it has exercised due
diligence in the selection and supervision of its employees (Art. 1759, new
Civil Code; Cangco vs. Manila Railroad Co., supra; Prado vs. Manila
Electric Co., 51 Phil., 900).

The difference in conditions, defenses and proof, as well as the codal

concept of quasi-delict as essentially extra contractual negligence, compel
us to differentiate between action ex contractu, and actions quasi ex delicto,
and prevent us from viewing the action for breach of contract as
simultaneously embodying an action on tort. Neither can this action be
taken as one to enforce on employee's liability under Art. 103 of the
Revised Penal Code, since the responsibility is not alleged to be
subsidiary, nor is there on record any averment or proof that the driver
of appellant was insolvent. In fact, he is not even made a party to the suit.

It is also suggested that a carrier's violation of its engagement to safely

transport the passenger involves a breach of the passenger's confidence,
and therefore should be regarded as a breach of contract in bad faith,
justifying recovery of moral damages under Art. 2220. This theory is
untenable, for under it the carrier would always be deemed in bad faith, in
every case its obligation to the passenger is infringed, and it would be
never accountable for simple negligence; while under the law (Art. 1756).
the presumption is that common carriers acted negligently (and not
maliciously), and Art. 1762 speaks of negligence of the common carrier.

"Art. 1756. In case of death of or injuries to passengers, common carriers

are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as prescribed in articles
1733 and 1755."

"Art. 1762. The contributory negligence of the passenger does not bar
recovery of damages for his death or injuries, if the proximate cause
thereof is the negligence of the common carrier, but the amount of
damages shall be equitably reduced."
The distinction between fraud, bad faith or malice in the sense of deliberate
or wanton wrong doing and negligence (as mere carelessness) is too
fundamental in our law to be ignored (Arts. 1170-1172); their
consequences being clearly differentiated by the Code.

"Art. 2201. In contracts and quasi-contracts, the damages for which the
obligor who acted in good faith is liable shall be those that are the natural
and probable consequences of the breach of the obligation, and which the
parties have foreseen or could have reasonably foreseen at the time the
obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the
non-performance of the obligation."
It is to be presumed, in the absence of statutory provision to the
contrary, that this difference was in the mind of the lawmakers when in
Art. 2220 they limited recovery of moral damages to breaches of contract
in bad faith. It is true that negligence may be occasionally so gross as to
amount to malice; but that fact must be shown in evidence, and a carrier's
bad faith is not to be lightly inferred from a mere finding that the
contract was breached through negligence of the carrier's employees.

In view of the foregoing considerations, the decision of the Court of Appeals

is modified by eliminating the award of P5.000.00 by way of moral
damages (Court of Appeals Resolution of May 5, 1957). In all other
respects, the judgment is affirmed. No costs in this instance. So
Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A. Bautista Angelo,
Labrador, Concepcion, and Endencia, JJ., concur.

Tan v. Northwest Airlines


On May 31, 1994, Priscilla Tan and Connie Tan boarded a Northwest Airlines plane in
Chicago bound to the Philippines with a stop-over at Detroit. Upon their arrival, they
found out that their baggage was missing. On June 3, they recovered the baggage and
discovered that some were destroyed and soiled. They filed an action for damages,
claiming that they suffered mental anguish, sleepless nights and great damage.
Northwest offered to reimburse the cost of repairs of the bags or purchase price of new
bags. The trial court awarded actual, moral and exemplary damages, and also attorney’s
fees. The Court of Appeals partially affirmed the decision by deleting moral and
exemplary damages. Hence, Tan filed this instant petition.


Whether respondent Airline is liable for moral and exemplary damages for willful
misconduct and breach of contract of carriage


We agree with the Court of Appeals that respondent was not guilty of willful misconduct.
"For willful misconduct to exist there must be a showing that the acts complained of
were impelled by an intention to violate the law, or were in persistent disregard of one's
rights. It must be evidenced by a flagrantly or shamefully wrong or improper conduct."
Contrary to petitioner's contention, there was nothing in the conduct of respondent
which showed that they were motivated by malice or bad faith in loading her baggages
on another plane. Due to weight and balance restrictions, as a safety measure,
respondent airline had to transport the baggages on a different flight, but with the same
expected date and time of arrival in the Philippines. It is admitted that respondent failed
to deliver petitioner's luggages on time. However, there was no showing of malice in
such failure. By its concern for safety, respondent had to ship the baggages in another
flight with the same date of arrival.
270 Phil. 108

Dr. Felipa Pablo -- an associate professor in the University of the
Philippines,[1] and a research grantee of the Philippine Atomic Energy
Agency -- was invited to take part at a meeting of the Department of
Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in
Food and Agriculture of the United Nations in Ispra, Italy.[2] She was
invited in view of her specialized knowledge in "foreign substances in food
and the agriculture environment." She accepted the invitation, and was
then scheduled by the organizers, to read a paper on "The Fate of
Radioactive Fusion Products Contaminating Vegetable Crops."[3] The
program announced that she would be the second speaker on the first day
of the meeting.[4] To fulfill this engagement, Dr. Pablo booked passage on
petitioner airline, ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the
itinerary and time table set for her by ALITALIA. She was however told by
the ALITALIA personnel there at Milan that her luggage was "delayed
inasmuch as the same ** (was) in one of the succeeding flights from Rome
to Milan."[5] Her luggage consisted of two (2) suitcases: one contained her
clothing and other personal items; the other, her scientific papers, slides
and other research material. But the other flights arriving from Rome did
not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags
herself. There, she inquired about her suitcases in the domestic and
international airports, and filled out the forms prescribed by ALITALIA for
people in her predicament. However, her baggage could not be
found. Completely distraught and discouraged, she returned to Manila
without attending the meeting in Ispra, Italy.
Once back in Manila she demanded that ALITALIA make reparation for the
damages thus suffered by her. ALITALIA offered her "free airline tickets to
compensate her for any alleged damages **." She rejected the offer, and
forthwith commenced the action[6] which has given rise to the present
appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded
to Ispra,[7] Italy, but only on the day after her scheduled appearance and
participation at the U.N. meeting there.[8] Of course Dr. Pablo was no
longer there to accept delivery; she was already on her way home to
Manila. And for some reason or other, the suitcases were not actually
restored to Prof. Pablo by ALITALIA until eleven (11) months later, and
four (4) months after institution of her action.[9]
After appropriate proceedings and trial, the Court of First Instance
rendered judgment in Dr. Pablo's favor:[10]
'(1) Ordering the defendant (ALITALIA) to pay ** (her) the sum of
TWENTY THOUSAND PESOS (P20,000.00), Philippine Currency, by way
of nominal damages;
(2) Ordering the defendant to pay ** (her) the sum of FIVE THOUSAND
PESOS (P5,000.00), Philippine Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to
obtain a reversal of the judgment.[11] Indeed, the Appellate Court not only
affirmed the Trial Court's decision but also increased the award of nominal
damages payable by ALITALIA to P40,000.00.[12]That increase it justified
as follows:[13]
"Considering the circumstances, as found by the Trial Court and the
negligence committed by defendant, the amount of P20,000.00 under
present inflationary conditions as awarded ** to the plaintiff as nominal
damages, is too little to make up for the plaintiffs frustration and
disappointment in not being able to appear at said conference; and for the
embarrassment and humiliation she suffered from the academic
community for failure to carry out an official mission for which she was
singled out by the faculty to represent her institution and the country. After
weighing carefully all the considerations, the amount awarded to the
plaintiff for nominal damages and attorney's fees should be increased to the
cost of her round trip air fare or at the present rate of peso to the dollar at
ALITALIA has appealed to this Court on certiorari. Here, it seeks to make
basically the same points it tried to make before the Trial Court and the
Intermediate Appellate Court, i.e.:
1) that the Warsaw Convention should have been applied to limit
ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the award to Dr. Pablo of
nominal damages and attorney's fees.[14]
In addition, ALITALIA postulates that it was error for the Intermediate
Appellate Court to have refused to pass on all the assigned errors and in not
stating the facts and the law on which its decision is based.[15]
Under the Warsaw Convention,[16] an air carrier is made liable for damages
1) the death, wounding or other bodily injury of a passenger if the accident
causing it took place on board the aircraft or in the course of its operations
of embarking or disembarking;[17]
2) the destruction or loss of, or damage to, any registered luggage or goods,
if the occurrence causing it took place during the carriage by air;"[18] and
3) delay in the transportation by air of passengers, luggage or goods.[19]
In these cases, it is provided in the Convention that the "action for
damages, however founded, can only be brought subject to the conditions
and limits set out" therein.[20]
The Convention also purports to limit the liability of the carrier in the
following manner:[21]
1. In the carriage of passengers the liability of the carrier for each
passenger is limited to the sum of 250,000 francs. *** Nevertheless, by
special contract, the carrier and the passenger may agree to a higher limit of
2. a) In the carriage of registered baggage and of cargo, the liability of
the carrier is limited to a sum of 250 francs per kilogramme, unless the
passenger or consignor has made, at the time when the package was
handed over to the carrier, a special declaration of interest in delivery at
destination and has paid a supplementary sum if the case so requires. In
that case the carrier, will be liable to pay a sum not exceeding the declared
sum, unless he proves that that sum is greater than the actual value to the
consignor at delivery.
b) In the case of loss, damage or delay of part of registered baggage or
cargo, or of any object contained therein, the weight to be taken into
consideration in determining the amount to which the carrier's liability is
limited shall be only the total weight of the package or packages
concerned. Nevertheless, when the loss, damage or delay of a part of the
registered baggage or cargo, or of an object contained therein, affects the
value of other packages covered by the same baggage check or the same air
waybill, the total weight of such package or packages shall also be taken
into consideration in determining the limit of liability.
3. As regards objects of which the passenger takes charge himself the
liability of the carrier is limited to 5000 francs per passenger.
4. The limits prescribed ** shall not prevent the court from awarding, in
accordance with its own law, in addition, the whole or part of the court
costs and of the other expenses of litigation incurred by the plaintiff. The
foregoing provision shall not apply if the amount of the damages awarded,
excluding court costs and other expenses of the litigation, does not exceed
the sum which the carrier has offered in writing to the plaintiff within a
period of six months from the date of the occurrence causing the damage,
or before the commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the
provisions which exclude or limit his liability, if the damage is caused by
his wilful misconduct or by such default on his part as, in accordance with
the law of the court seised of the case, is considered to be equivalent
to wilful misconduct," or "if the damage is (similarly) caused ** by any
agent of the carrier acting within the scope of his employment."[22] The
Hague Protocol amended the Warsaw Convention by removing the
provision that if the airline took all necessary steps to avoid the damage, it
could exculpate itself completely,[23] and declaring the stated limits of
liability not applicable "if it is proved that the damage resulted from an act
or omission of the carrier, its servants or agents, done with intent to cause
damage or recklessly and with knowledge that damage would probably
result." The same deletion was effected by the Montreal Agreement of 1966,
with the result that a passenger could recover unlimited damages upon
proof of wilful misconduct.[24]
The Convention does not thus operate as an exclusive enumeration of the
instances of an airline's liability, or as an absolute limit of the extent of that
liability. Such a proposition is not borne out by the language of the
Convention, as this Court has now, and at an earlier time, pointed
out.[25] Moreover, slight reflection readily leads to the conclusion that it
should be deemed a limit of liability only in those cases where the cause of
the death or injury to person, or destruction, loss or damage to property or
delay in its transport is not attributable to or attended by
any wilful misconduct, bad faith, recklessness, or otherwise improper
conduct on the part of any official or employee for which the carrier is
responsible, and there is otherwise no special or extraordinary form of
resulting injury. The Convention's provisions, in short, do not "regulate or
exclude liability for other breaches of contract by the carrier"[26] or
misconduct of its officers and employees, or for some particular or
exceptional type of damage. Otherwise, "an air carrier would be exempt
from any liability for damages in the event of its absolute refusal, in bad
faith, to comply with a contract of carriage, which is absurd."[27] Nor may it
for a moment be supposed that if a member of the aircraft complement
should inflict some physical injury on a passenger, or maliciously destroy or
damage the latter's property, the Convention might successfully be pleaded
as the sole gauge to determine the carrier's liability to the
passenger. Neither may the Convention be invoked to justify the disregard
of some extraordinary sort of damage resulting to a passenger and preclude
recovery therefor beyond the limits set by said Convention. It is in this
sense that the Convention has been applied, or ignored, depending on the
peculiar facts presented by each case.
In Pan American World Airways, Inc. v. I.A.C.,[28] for example, the
Warsaw Convention was applied as regards the limitation on the carrier's
liability, there being a simple loss of baggage without any otherwise
improper conduct on the part of the officials or employees of the airline or
other special injury sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been held
inapplicable, or as not restrictive of the carrier's liability, where there was
satisfactory evidence of malice or bad faith attributable to its officers and
employees.[29] Thus, an air carrier was sentenced to pay not only
compensatory but also moral and exemplary damages, and attorney's fees,
for instance, where its employees rudely put a passenger holding a first-
class ticket in the tourist or economy section,[30] or ousted a brown Asiatic
from the plane to give his seat to a white man,[31] or gave the seat of a
passenger with a confirmed reservation to another,[32] or subjected a
passenger to extremely rude, even barbaric treatment, as by calling him a
In the case at bar, no bad faith or otherwise improper conduct may be
ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was
eventually returned to her, belatedly, it is true, but without appreciable
damage. The fact is, nevertheless, that some special species of injury was
caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage
and failed to deliver it to her at the time appointed -- a breach of its
contract of carriage, to be sure -- with the result that she was unable to read
the paper and make the scientific presentation (consisting of
slides, autoradiograms or films, tables and tabulations) that she had
painstakingly labored over, at the prestigious international conference, to
attend which she had traveled hundreds of miles, to her chagrin and
embarrassment and the disappointment and annoyance of the
organizers. She felt, not unreasonably, that the invitation for
her to participate at the conference, extended by the Joint FAO/IAEA
Division of Atomic Energy in Food and Agriculture of the United Nations,
was a singular honor not only to herself, but to the University of the
Philippines and the country as well, an opportunity to make some sort of
impression among her colleagues in that field of scientific activity. The
opportunity to claim this honor or distinction was irretrievably lost to her
because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound
distress and anxiety, which gradually turned to panic and finally despair,
from the time she learned that her suitcases were missing up to the time
when, having gone to Rome, she finally realized that she would no longer be
able to take part in the conference. As she herself put it, she "was really
shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot
under the circumstances be restricted to that prescribed by the Warsaw
Convention for delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her
luggage. As already mentioned, her baggage was ultimately delivered to her
in Manila, tardily but safely. She is however entitled to nominal damages --
which, as the law says, is adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated
and recognized, and not for the purpose of indemnifying the plaintiff for
any loss suffered -- and this Court agrees that the respondent Court of
Appeals correctly set the amount thereof at P40,000.00. As to the purely
technical argument that the award to her of such nominal damages is
precluded by her omission to include a specific claim therefor in her
complaint, it suffices to draw attention to her general prayer, following her
plea for moral and exemplary damages and attorney's fees, "for such other
and further just and equitable relief in the premises," which certainly is
broad enough to comprehend an application as well for nominal
damages. Besides, petitioner should have realized that the explicit
assertion, and proof, that Dr. Pablo's right had been violated or invaded by
it -- absent any claim for actual on compensatory damages, the prayer
thereof having been voluntarily deleted by Dr. Pablo upon the return to her
of her baggage -- necessarily raised the issue, of nominal damages.
This Court also agrees that respondent Court of Appeals correctly awarded
attorney's fees to Dr. Pablo, and the amount of P5,000.00 set by it is
reasonable in the premises. The law authorizes recovery of attorney's
fees inter alia where, as here, "the defendant's act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest,"[34] or "where the court deems it just and equitable."[35]
WHEREFORE, no error being perceived in the challenged decision of the
Court of Appeals, it appearing on the contrary to be entirely in accord with
the facts and the law, said decision is hereby AFFIRMED, with costs against
the petitioner.

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

Teaching such natural science subjects as Botany, Biology and Plant


[2] Rollo, p. 36
[3] Ibid, reference being made to Exhs. "A-2-a" and "A-2-b"
[4] This was on November 6, 1972.
[5] Rollo, p. 88
[6] On June 7, 1973 (Rollo, p. 90)
Specifically to the Hotel Europa, as indicated by Prof. Pablo (Rollo, pp.

Rollo, p. 89. The baggage arrived on Nov. 7, 1972; but by that time, Prof.

Pablo had already left Rome for Hongkong.

Delivery appears to have been effected on October 17, 1973 (Rollo, p.

Rollo, p. 43: Record on Appeal, pp. 61-62. The decision was written by

Judge Ricardo D. Galano and is dated February 2, 1975.

[11] Its appeal was docketed as AC-G.R. CV No. 59501
Rollo, pp. 35-39. The decision was written for the Second Civil Cases

Division by Campos, Jr., J., with whom

concurred Pascual, Camilon and Jurado, JJ.
[13] Id., pp. 38-39
[14] Id., pp. 91-92
[15] Id., p. 91
[16]Full title: "Convention for the Unification of Certain Rules Relating to
International Carriage by Air signed at Warsaw, October 12, 1929" (League
of Nations -- Treaty Series), coming into force on Feb. 13, 1933; adhered to
by the Republic of the Philippines on Nov. 9, 1950 with reservation; the
Philippines deposited the Instrument of Adherence with the Polish
Government on Nov. 9, 1950; and the Convention entered into force for the
Philippines on Feb. 7, 1951 (Philippine Treaties Index [1946-1982] citing
137 League of Nations Treaties Series 11). The Warsaw Convention was
amended by (1) the Hague Protocol on September 28, 1955 (Id., and United
Nations, Treaty Series, Vol. 261, p. 423 and Vol. 266, p. 444), entering into
force for the Philippines on February 28, 1967; (2) the Montreal Agreement
in 1966, of which the Philippine Airlines and Alitalia are signatories; (3) the
Guatemala Protocol in 1971 (apparently not adhered to by IATA members);
and (4) the Montreal Protocols (Numbered 3 and 4) (1975) (also apparently
not effective among IATA members).
[17] ART. 17
ART. 18 (par.1), "transportation by air" being defined as "the period

during which the baggage or goods are in charge of the carrier whether in
an airport or on board an aircraft, or, in the case of a landing outside an
airport, in any place whatever," but not where saidbaggage or goods are
transported by land, sea or river outside an airport unless it be in "the
performance of a contract for transportation by air for the purpose of
loading, delivery or transshipment (pars. 2 and 3, ART. 18)
[19] ART. 19
[20]ART. 24, which also states that with regard to Article 17, the application
of the rule is "without prejudice to the questions as to who are the
persons who have the right to bring suit and what are their respective
ART. 22, as amended by the Hague Protocol, supra; the Montreal

Agreement of 1966 set the limitation of damages at $75,000 per passenger;

the Guatemala Protocol, 1971, boosted the limit to $100,000 per passenger,
liability for baggage was increased to $1,000, and the right to bring suit was
[22] ART. 25
ART. 20 (1). "The carrier is not liable if he proves that he and his agents

have taken all necessary measures to avoid the damage or that it was
impossible for him or them to take such measures."
Lisi v. Alitalia-Linee Aeree Italiane, 370 F 2d 508 [2nd Cir

1966] aff'd 390 US 455 [1968], rehearing denied 397 US 939 [1968] and
Egan v. Kallsman Instrument corp., 21 NY 2d 160, 287 NYS 2d 14 [1967],
CERT. DENIED 390 US 1039 [1968]
[25]Northwest Airlines, Inc. v. Cuenca, 14 SCRA 1065 (1965)
which inter alia states that the Convention "merely declares the carrier
liable for damages in the enumerated cases, if the conditions therein
specified are present."
[26] Id.
[27] Id.
[28]164 SCRA 268, citing Ong Yiu v. C.A. 91 SCRA 223; SEE
Burnett v. Trans World Airlines, Inc. (DC NM), 368 F Supp. 1152 holding
that the airline was not responsible to its passengers for mere mental
anguish sustained as a result of the hijacking, in the absence of physical
SEE KLM Royal Dutch Airlines v. Tuller, 119 App DC 282, 292 F 2d 775,

cert den 368 US 921, 7 L Ed 2d 136, 82 S Ct 243; American Airlines,

Inc. v. Ulen, 87 App DC 307, 186 F 2d 529; Goepp v. American Overseas
Airlines, Inc., 281 App Div 105, 117 NYS 2d 276, affd 305 NY 830, 114 NE
2d 37, cert den 346 US 874, 98 L Ed 382, 74 S Ct 124
Northwest Airlines, Inc. v. Cuenca, 14 SCRA 1063; Lopez v. Pan Am, 16

Air France v. Carrascoso, 18 SCRA 155. In Ortigas, Jr. v. Lufthansa

German Airlines, 64 SCRA 610 (1975), plaintiff's seat in the first-class

section was given to a Belgian, and consequently plaintiff, who held a first-
class ticket, confirmed and validated, was relegated to a tourist- or
economy-class seat.
Korean Airlines Co., Ltd. v. C.A., 154 SCRA 211; see also, KLM Royal

Dutch Airlines v. C.A., 65 SCRA 237

[33] Zulueta v. Pan Am, 43 SCRA 397
Civil Code, ART. 2208, par. (2); see Rivera v. Litum & Co., Inc., 4 SCRA

1072 (1962); Filipino Pipe & Foundry Corporation v. Central Bank, 23

SCRA 1044 (1968); Ganaban v. Bayle, 30 SCRA 365 (1969);
Valenzuela v. C.A., G.R. No. 56168, Dec. 22, 1988
Id., id., par. (11); see Civil Aeronautics Administration v. C.A., G.R. No.

51806, Nov. 8, 1988

Saludo vs. CA 207 SCRA 498

Crispina Saludo died in Illinois. Preparations were made by a funeral home for the shipment of
the remains to the Phil. The shipment was booked with TWA for the first route, and with PAL for
the second. Airway bills were issued. But somehow, the remains of Crispina were switched with
another. Thus, there was delay in the delivery of the cargo. Saludo then instituted an action for
damages alleging that the carriers failed to exercise extraordinary diligence over the cargo
received by them for shipment. To support such assertion, Saludo invoked the dictum that a bill
of lading is prima facie evidence of the receipt of the goods by the carrier Respondents,
however, deny liability alleging that they did not receive the remains.
WON TWA and PAL should be held liable.
The airway bills issued was not an evidence of receipt of delivery to the airline but merely a
confirmation of the booking.
A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier
has received the goods described therein for shipment.
Alhough an airway bill estops the carrier from denying receipt of goods of the quantity and
quality described in the bill, a further reading and a more faithful quotation of this authority would
reveal that (a) bill of lading may contain constituent elements of estoppel and thus become
something more than a contract between the shipper and the carrier. . . . However, as between
the shipper and the carrier, when no goods have been delivered for shipment no recitals in the
bill can estop the carrier from showing the true facts . . . Between the consignor of goods and
receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable
presumption that such goods were delivered for shipment. As between the consignor and a
receiving carrier, the fact must outweigh the recital.
Prudenciado v. Alliance Transport System
11/30/2015 0 Comments

Commercial Law. Transportation. Actions for Damages.

Prudenciado v. Alliance Transport System
G.R. No. L-33836, March 16, 1987
Paras, J.

While crossing Taft Avenue, Dra. Sofia Prudenciado was suddenly bumped by Jose Leyson
who was driving a taxicab owned and operated by Alliance Transport System, Inc. As a result,
Dra. Prudenciado suffered physical injuries in different parts of her body, including a brain
concussion which subjected her to several physical examinations.

After due hearing, Jose Leyson was found guilty of negligence in the performance of his duties
as a taxicab driver which is the proximate cause of the accident and that Alliance Transport
System failed to prove that it had exercised the required diligence of a good father of a family in
the selection, supervision, and control of its employees.

Petitioner questions the award of the damages of the Court of Appeals.

Whether or not the Court of Appeals is justified in modifying the grant of damages by the trial

YES and NO. A careful review of the record makes it readily apparent that the injuries sustained
by Dra. Prudenciado are not as serious or extensive as they were claimed to be, which proof
merely consisted in her own uncorroborated testimony, and which are not enough to warrant the
damages awarded by the trial court.

On the other hand, the reduction of the damages made by the Court of Appeals is both too
drastic and unrealistic to pass the test of reasonableness. Being a doctor by profession,
petitioner’s fears can be more real and intense than an ordinary person, thus, she is undeniably
a proper recipient of moral damages which are proportionate to her suffering.

With regard to exemplary damages, Article 2231 of the Civil Code provides that exemplary
damages may be had if the defendant acted with grave negligence. A driver running at full
speed on a rainy day, on a slippery road in complete disregard of the hazards to life and limbs
of other people cannot be said to be acting in anything less than gross negligence. The frequent
incidence of accidents of this nature caused by taxi drivers indeed demands corrective
GR No. L-22415, Mar 30, 1966 ]


123 Phil. 256


Plaintiffs and defendant appeal from a decision of the Court of First
Instance of Rizal. Since the value in controversy exceeds P200,000 the
appeals were taken directly to this Court upon all questions involved (Sec.
17, par. 3[5], Judiciary Act).
Stated briefly the facts not in dispute are as follows. Reservations for first
class accommodations in Flight No. 2 of Pan American World Airways
hereinafter otherwise called PAN AM from Tokyo to San Francisco on May
24, 1960 were made with PAN AM on March 29, 1960, by "Your Travel
Guide" agency, specifically, by Delfin Faustino, for then Senator Fernando
Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and
his daughter Mrs. Alfredo Montelibano, Jr. (Milagros Lopez Montelibano).
PAN AM's San Francisco head office confirmed the reservations on March
31, 1960.
First class tickets for the abovementioned flight were subsequently issued
by PAN AM on May 21 and 23, 1960, in favor of Senator Lopez and his
party. The total fare of P9,444 for all of them was fully paid before the
tickets were issued.
As scheduled Senator Lopez and party left Manila by Northwest Airlines on
May 24, 1960, arriving in Tokyo at 5:30 P.M. of that day. As soon as they
arrived Senator Lopez requested Minister Busuego of the Philippine
Embassy to contact PAN AM's Tokyo office regarding their first class
accommodations for that evening's flight. For the given reason that the first
class seats therein were all booked up, however, PAN AM's Tokyo office
informed Minister Busuego that PAN AM could not accommodate Senator
Lopez and party in that trip as first class passengers. Senator Lopez
thereupon gave their first class tickets to Minister Busuego for him to show
the same to PAN AM's Tokyo office, but the latter firmly reiterated that
there was no accommodation for them in the first class, stating that they
could not go in that flight unless they took the tourist class therein.
Due to pressing engagements awaiting Senator Lopez and his wife in the
United States he had to attend a business conference in San Francisco the
next day and she had to undergo a medical check-up in Mayo Clinic,
Rochester, Minnesota, on May 28, 1960 and needed three days rest before
that in San Francisco Senator Lopez and party were constrained to take
PAN AM's flight from Tokyo to San Francisco as tourist passengers. Senator
Lopez however made it clear, as indicated in his letter to PAN AM's Tokyo
office on that date (Exh. A), that they did so "under protest" and without
prejudice to further action against the airline.
Suit for damages was thereafter filed by Senator Lopez and party against
PAN AM on June 2, 1960 in the Court of First Instance of Rizal. Alleging
breach of contracts in bad faith by defendant, plaintiffs asked for P500,000
actual and moral damages, P100,000 exemplary damages, P25,000
attorney's fees, plus costs. PAN AM filed its answer on June 22, 1960,
asserting that its failure to provide first class accommodations to plaintiffs
was due to honest error of its employees. It also interposed a counterclaim
for attorney's fees of P25,000.
Subsequently, further pleadings were filed, thus: plaintiffs' answer to the
counterclaim, on July 25, 1960; plaintiffs' reply attached to motion for its
admittance, on December 2, 1961; defendant's supplemental answer, on
March 8, 1962; plaintiffs' reply to supplemental answer, on March 10, 1962;
and defendant's amended supplemental answer, on July 10, 1962.
After trial which took twenty-two (22) days ranging from November 25,
1960 to January 5, 1963 the Court of First Instance rendered its decision on
November 13, 1963, the dispositive portion stating:
rendered in favor of the plaintiffs and against the defendant, which is
accordingly ordered to pay the plaintiffs the following: (a) P100,000.00 as
moral damages; (b) P20,000.00 as exemplary damages; (c) P25,000.00 as
attorney's fees, and the costs of this action.
"So ordered."
Plaintiffs, however, on November 21, 1963, moved for reconsideration of
said judgment, asking that moral damages be increased to P400,000 and
that six per cent (6%) interest per annum on the amount of the award be
granted. And defendant opposed the same. Acting thereon the trial court
issued an order on December 14, 1963, reconsidering the dispositive part of
its decision to read as follows:
rendered in favor of the plaintiffs and against the defendant, which is
accordingly ordered to pay the plaintiffs the following: (a) P150,000.00 as
moral damages; (b) P25,000.00 as exemplary damages; with legal interest
on both from the date of the filing of the complaint until paid; and (c)
P25,000.00 as attorney's fees; and the costs of this action.
"So ordered."
It is from said judgment, as thus reconsidered, that both parties have
Defendant, as stated, has from the start admitted that it breached its
contracts with plaintiffs to provide them with first class accommodations in
its Tokyo-San Francisco flight of May 24, 1960. In its appeal, however, it
takes issue with the finding of the court a quothat it acted in bad faith in
the breach of said contracts. Plaintiffs, on the other hand, raise questions
on the amount of damages awarded in their favor, seeking that the same be
increased to a total of P650,000.
Anent the issue of bad faith the records show the respective contentions of
the parties as follows.
According to plaintiffs, defendant acted in bad faith because it deliberately
refused to comply with its contract to provide first class accommodations to
plaintiffs, out of racial prejudice against Orientals. And in support of its
contention that what was done to plaintiffs is an oft-repeated practice of
defendant, evidence was adduced relating to two previous instances of
alleged racial discrimination by defendant against Filipinos in favor of
"white" passengers. Said previous occasions are what allegedly happened to
(1) Benito Jalbuena and (2) Cenon S. Cervantes and his wife.
And from plaintiffs' evidence this is what allegedly happened. Jalbuena
bought a first class ticket from PAN AM on April 13, 1960; he confirmed it
on April 15, 1960 as to the Tokyo-Hongkong flight of April 20, 1960; PAN
AM similarly confirmed it on April 20, 1960. At the airport, he and another
Oriental Mr. Tung - were asked to step aside while other passengers
including "white" passengers boarded PAN AM's plane. Then PAN AM
officials told them that one of them had to stay behind. Since Mr. Tung was
going all the way to London, Jalbuena was chosen to be left behind. PAN
AM's officials could only explain by saying there was "some mistake".
Jalbuena thereafter wrote PAN AM to protest the incident (Exh. B).
As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN AM on
September 29, 1958 from Bangkok to Hongkong, he and his wife had to
take tourist class, although they had first class tickets, which they had
previously confirmed, because their seats in first class were given to
"passengers from London."
Against the foregoing, however, defendant's evidence would seek to
establish its theory of honest mistake, thus:
The first class reservations of Senator Lopez and party were made on March
29, 1960 together with those of four members of the Rufino family, for a
total of eight (8) seats, as shown in their joint reservation card (Exh. 1).
Subsequently, on March 30, 1960, two other Rufinos secured reservations
and were given a separate reservation card (Exh. 2). A new reservation card
consisting of two pages (Exhs. 3 and 4) was then made for the original
group of eight passengers, namely, Senator Lopez and party and four
members of the Rufino family, the first page (Exh. 3) referring to 2 Lopezes,
2 Montelibanos and 1 Rufino and the second page (Exh. 4) referring to 3
Rufinos. On April 18, 1960 "Your Travel Guide" agency cancelled the
reservations of the Rufinos. A telex message was thereupon sent on that
date to PAN AM's head office at San Francisco by Mariano Herranz, PAN
AM's reservations employee at its office in Escolta, Manila. (Annex A-
Acker's to Exh. 6) In said message, however, Herranz mistakenly cancelled
all the seats that had been reserved, that is, including those of Senator
Lopez and party.
The next day April 19 Herranz discovered his mistake, upon seeing the
reservation card newly prepared by his co-employee Pedro Asensi for
Senator Lopez and party to the exclusion of the Rufinos (Exh. 5). It was
then that Herranz sent another telex wire to the San Francisco head office,
stating his error and asking for the reinstatement of the four (4) first class
seats reserved for Senator Lopez and party (Annex A-Velasco's to Exh. 6).
San Francisco head office replied on April 22, 1960 that Senator Lopez and
party are waitlisted and that said office is unable to reinstate them (Annex
B-Velasco's to Exh. 6).
Since the flight involved was still more than a month away and confident
that reinstatement would be made, Herranz forgot the matter and told no
one about it except his co-employee, either Armando Davila or Pedro
Asensi or both of them (Tsn., 123-124, 127, Nov. 17, 1961).
Subsequently, on April 27, 1960, Armando Davila, PAN AM's reservations
employee working in the same Escolta office as Herranz, phoned PAN AM's
ticket sellers at its other office in the Manila Hotel, and confirmed the
reservations of Senator Lopez and party.
PAN AM's reservations supervisor, Alberto Jose, discovered Herranz's
mistake after "Your Travel Guide" phoned on May 18, 1960 to state that
Senator Lopez and party were going to depart as scheduled. Accordingly,
Jose sent a telex wire on that date to PAN AM's head office at San Francisco
to report the error and asked said office to continue holding the
reservations of Senator Lopez and party (Annex B-Acker's to Exh. 6). Said
message was reiterated by Jose in his telex wire of May 19, 1960 (Annex C-
Acker's to Exh. 6). San Francisco head office replied on May 19, 1960 that it
regrets being unable to confirm Senator Lopez and party for the reason that
the flight was solidly booked (Exh. 7). Jose sent a third telex wire on May
20, 1960 addressed to PAN AM's offices at San Francisco, New York
(Idlewild Airport), Tokyo and Hongkong, asking all-out assistance towards
restoring the cancelled spaces and for report of cancellations at their end
(Annex D-Acker's to Exh. 6). San Francisco head office reiterated on May
20, 1960 that it could not reinstate the spaces and referred Jose to the
Tokyo and Hongkong offices (Exh. 8). Also on May 20, the Tokyo office of
PAN AM wired Jose stating it will do everything possible (Exh. 9).
Expecting that some cancellations of bookings would be made before the
flight time, Jose decided to withhold from Senator Lopez and party, or their
agent, the information that their reservations had been cancelled.
Armando Davila having previously confirmed Senator Lopez and party's
first class reservations to PAN AM's ticket sellers at its Manila Hotel office,
the latter sold and issued in their favor the corresponding first class tickets
on the 21st and 23rd of May, 1960.
From the foregoing evidence of defendant it is in effect admitted that
defendant through its agents first cancelled plaintiffs' reservations by
mistake and thereafter deliberately and intentionally withheld from
plaintiffs or their travel agent the fact of said cancellation, letting them go
on believing that their first class reservations stood valid and confirmed. In
so misleading plaintiffs into purchasing first class tickets in the conviction
that they had confirmed reservations for the same, when in fact they had
none, defendant wilfully and knowingly placed itself into the position of
having to breach its aforesaid contracts with plaintiffs should there be no
last-minute cancellation by other passengers before flight time, as it turned
out in this case. Such actuation of defendant may indeed have been
prompted by nothing more than the promotion of its self-interest in
holding on to Senator Lopez and party as passengers in its flight and
foreclosing on their chances to seek the services of other airlines that may
have been able to afford them first class accommodations. All the time, in
legal contemplation such conduct already amounts to action in bad faith.
For bad faith means a breach of a known duty through some motive
of interest or ill will (Spiegel v. Beacon Participations 8 NE 2d 895, 907). As
stated in Kamm v. Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: "Self-
enrichment or fraternal interest, and not personal ill will, may well have
been the motive; but it is malice nevertheless."
As of May 18, 1960 defendant's reservations supervisor Alberto Jose knew
that plaintiffs' reservations had been cancelled. As of May 20 he knew that
the San Francisco head office stated with finality that it could not reinstate
plaintiffs' cancelled reservations. And yet said reservations supervisor made
the "decision" to use his own word to withhold the information from the
plaintiffs. Said Alberto Jose in his testimony:
"Q Why did you not notify them?
"A Well, you see, sir, in my fifteen (15) years of service with the air lines
business my experience is that even if the flights are solidly booked months
in advance, usually the flight departs with plenty of empty seats both on the
first class and tourist class. This is due to late cancellation of passengers, or
because passengers do not show up in the airport, and it was our hope
others come in from another flight and, therefore, are delayed and,
therefore, missed their connections. This experience of mine, coupled with
that wire from Tokyo that they would do everything possible prompted me
to withhold the information, but unfortunately, instead of the first class
seat that I was hoping for and which I anticipated only the tourists class
was open on which Senator and Mrs. Lopez, Mr. and Mrs. Montelibano
were accommodated. Well, I fully realize now the gravity of my decision in
not advising Senator and Mrs. Lopez, Mr. and Mrs. Montelibano nor their
agents about the erroneous cancellation and for which I would like them to
know that I am very sorry.
* * * * * * *
"Q So it was not your duty to notify Sen. Lopez and parties that their
reservations had been cancelled since May 18, 1960?
"A As I said before it was my duty. It was my duty but as I said again with
respect to that duty I have the power to make a decision or use my
discretion and judgment whether I should go ahead and tell the passenger
about the cancellation." (Tsn., pp. 17-19, 28-29, March 15, 1962)
At the time plaintiffs bought their tickets, defendant, therefore, in breach of
its known duty, made plaintiffs believe that their reservations had not been
cancelled. An additional indication of this is the fact that upon the face of
the two tickets of record, namely, the ticket issued to Alfredo Montelibano,
Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs. Alfredo Montelibano,
Jr., on May 23, 1960 (Exh. 23), the reservation status is stated as "OK".
Such wilfull non-disclosure of the cancellation or pretense that the
reservations for plaintiffs stood and not simply the erroneous cancellation
itself is the factor to which is attributable the breach of the resulting
contracts. And, as above-stated, in this respect defendant clearly acted in
bad faith.
As if to further emphasize its bad faith on the matter, defendant
subsequently promoted the employee who cancelled plaintiffs' reservations
and told them nothing about it. The record shows that said employee
Mariano Herranz was not subjected to investigation and suspension by
defendant but instead was given a reward in the form of an increase of
salary in June of the following year (Tsn., 86-88, Nov. 20, 1961).
At any rate, granting all the mistakes advanced by the defendant, there
would at least be negligence so gross and reckless as to amount to malice or
bad faith (Fores vs. Miranda,105 Phil. 266; Necesito vs. Paras, 104 Phil. 75).
Firstly, notwithstanding the entries in the reservation cards (Exhs. 1 & 3)
that the reservations cancelled are those of the Rufinos only, Herranz made
the mistake, after reading said entries, of sending a wire cancelling all the
reservations, including those of Senator Lopez and party (Tsn., pp. 103-108,
Nov. 17, 1961). Secondly, after sending a wire to San Francisco head office
on April 19, 1960 stating his error and asking for reinstatement, Herranz
simply forgot about the matter. Notwithstanding the reply of San Francisco
head office on April 22, 1960 that it cannot reinstate Senator Lopez and
party (Annex B-Velasco's to Exh. 6), it was assumed and taken for granted
that reinstatement would be made. Thirdly, Armando Davila confirmed
plaintiffs' reservations in a phone call on April 27, 1960 to defendant's
ticket sellers, when at the time it appeared in plaintiffs' reservation card
(Exh. 5) that they were only waitlisted passengers. Fourthly,defendant's
ticket sellers issued plaintiffs' tickets on May 21 and 23, 1960, without first
checking their reservations just before issuing said tickets. And, finally, no
one among defendant's agents notified Senator Lopez and party that their
reservations had been cancelled, a precaution that could have averted their
entering with defendant into contracts that the latter had already placed
beyond its power to perform.
Accordingly, there being a clear admission in defendant's evidence of facts
amounting to bad faith on its part in regard to the breach of its contracts
with plaintiffs, it becomes unnecessary to further discuss the evidence
adduced by plaintiffs to establish defendant's bad faith. For what is
admitted in the course of the trial does not need to be proved (Sec. 2, Rules
129, Rules of Court).
Addressing ourselves now to the question of damages, it is well to state at
the outset these rules and principles. First, moral damages are recoverable
in breach of contracts where the defendant acted fraudulently or in bad
faith (Art. 2220, New Civil Code). Second, in addition to moral damages,
exemplary or corrective damages may be imposed by way of example or
correction for the public good, in breach of contract where the defendant
acted in a wanton, fraudulent, reckless, oppressive or malevolent manner
(Articles 2229, 2232, New Civil Code). And, third, a written contract for an
attorney's services shall control the amount to be paid therefor unless
found by the court to be unconscionable or unreasonable (Sec. 24, Rule
138, Rules of Court).
First, then, as to moral damages. As a proximate result of defendant's
breach in bad faith of its contracts with plaintiffs, the latter suffered social
humiliation, wounded feelings, serious anxiety and mental anguish. For
plaintiffs were travelling with first class tickets issued by defendant and yet
they were given only the tourist class. At stop-overs, they were expected to
be among the first-class passengers by those awaiting to welcome them,
only to be found among the tourist passengers. It may not be humiliating to
travel as tourist passengers; it is humiliating to be compelled to travel as
such, contrary to what is rightfully to be expected from the contractual
Senator Lopez was then Senate President Pro Tempore. International
carriers like defendant know the prestige of such an office. For the Senate is
not only the Upper Chamber of the Philippine Congress, but the nation's
treaty-ratifying body. It may also be mentioned that in his aforesaid office
Senator Lopez was in a position to preside in impeachment cases should the
Senate sit as Impeachment Tribunal. And he was former Vice-President of
the Philippines. Senator Lopez was going to the United States to attend a
private business conference of the Binalbagan-Isabela Sugar Company; but
his aforesaid rank and position were by no means left behind, and in fact he
had a second engagement awaiting him in the United States; a banquet
tendered by Filipino friends in his honor as Senate President Pro
Tempore (Tsn., pp. 14-15, Nov. 25, 1960). For the moral damages sustained
by him, therefore, an award of P100,000.00 is appropriate.
Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and
therefore his humiliation. In addition, she suffered physical discomfort
during the 13-hour trip (5 hours from Tokyo to Honolulu and 8 hours from
Honolulu to San Francisco). Although Senator Lopez stated that "she was
quite well" (Tsn., p. 22, Nov. 25, 1960) - he obviously meant relatively well,
since the rest of his statement is that two months before, she was attacked
by severe flu and lost 10 pounds of weight and that she was advised by Dr.
Sison to go to the United States as soon as possible for medical check-up
and relaxation (Ibid.). In fact, Senator Lopez stated, as shown a few pages
after in the transcript of his testimony, that Mrs. Lopez was sick when she
left the Philippines:
"A Well, my wife really felt very bad during the entire trip from Tokyo to
San Francisco. In the first place, she was sick when we left the Philippines,
and then with that discomfort which she[experienced] or suffered during
that evening, it was her worst experience. I myself, who was not sick, could
not sleep because of the discomfort." (Tsn., pp. 27-28, Nov. 25, 1960)
It is not hard to see that in her condition then a physical discomfort
sustained for thirteen hours may well be considered a physical suffering.
And even without regard to the noise and trepidation inside the plane
which defendant contends, upon the strength of expert testimony, to be
practically the same in first class and tourist class the fact that the seating
spaces in the tourist class are quite narrower than in first class, there being
six seats to a row in the former as against four to a row in the latter, and
that in tourist class there is very little space for reclining in view of the
closer distance between rows (Tsn., p. 24, Nov. 25, 1960), will suffice to
show that the aforesaid passenger indeed experienced physical suffering
during the trip. Added to this, of course, was the painful thought that she
was deprived by defendant after having paid for and expected the same of
the most suitable place for her, the first class,where evidently the best of
everything would have been given her, the best seat, service, food and
treatment. Such difference in comfort between first class and tourist class is
too obvious to be recounted, is in fact the reason for the former's existence,
and is recognized by the airline in charging a higher fare for it and by the
passengers in paying said higher rate. Accordingly, considering the totality
of her suffering and humiliation, an award to Mrs. Maria J. Lopez of
P50,000.00 for moral damages will be reasonable.
Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate
members of the family of Senator Lopez. They formed part of the Senator's
party as shown also by the reservation cards of PAN AM. As such they
likewise shared his prestige and humiliation. Although defendant contends
that a few weeks before the flight they had asked their reservations to be
changed from first class to tourist class which did not materialize due to
alleged full booking in the tourist class the same does not mean they
suffered no shame in having to take tourist class during the flight. For by
that time they had already been made to pay for first class seats and
therefore to expect first class accommodations. As stated, it is one thing to
take the tourist class by free choice; a far different thing to be compelled to
take it notwithstanding having paid for first class seats. Plaintiffs-
appellants now ask P37,500.00 each for the two but we note that in their
motion for reconsideration filed in the court a quo, they were satisfied with
P25,000.00 each for said persons. (Record on Appeal, p. 102) For their
social humiliation, therefore, the award to them of P25,000.00 each is
The rationale behind exemplary or corrective damages is, as the name
implies, to provide an example or correction for public good. Defendant
having breached its contracts in bad faith, the court, as stated earlier, may
award exemplary damages in addition to moral damages (Articles 2229,
2232, New Civil Code).
In view of its nature, it should be imposed in such an amount as to
sufficiently and effectively deter similar breach of contracts in the future by
defendant or other airlines. In this light, we find it just to award
P75,000.00 as exemplary or corrective damages.
Now, as to attorney's fees, the record shows a written contract of services
executed on June 1, 1960 (Exh. F) whereunder plaintiffs-appellants
engaged the services of their counsel Atty. Vicente J. Francisco and agreed
to pay the sum of P25,000.00 as attorney's fees upon the termination of the
case in the Court of First Instance, and an additional sum of P25,000.00 in
the event the case is appealed to the Supreme Court. As said earlier, a
written contract for attorney's services shall control the amount to be paid
therefor unless found by the court to be unconscionable or unreasonable. A
consideration of the subject matter of the present controversy, of the
professional standing of the attorney for plaintiffs-appellants, and of the
extent of the services rendered by him, shows that said amount provided
for in the written agreement is reasonable. Said lawyer whose prominence
in the legal profession is well known studied the case, prepared and filed
the complaint, conferred with witnesses, analyzed documentary evidence,
personally appeared at the trial of the case in twenty-two days, during a
period of three years, prepared four sets of cross-interrogatories for
deposition taking, prepared several memoranda and the motion for
reconsideration, filed a joint record on appeal with defendant, filed a brief
for plaintiffs as appellants consisting of 45 printed pages and a brief for
plaintiffs as appellees consisting of 265 printed pages. And we are further
convinced of its reasonableness because defendant's counsel likewise
valued at P50,000.00 the proper compensation for his services rendered to
defendant in the trial court and on appeal.
In concluding, let it be stressed that the amount of damages awarded in this
appeal has been determined by adequately considering the official, political,
social, and financial standing of the offended parties on one hand, and the
business and financial position of the offender on the other
(Domingding vs. Ng, 55 Off. Gaz. 10). And further considering the present
rate of exchange and the terms at which the amount of damages awarded
would approximately be in U.S. dollars, this Court is all the more of the
view that said award is proper and reasonable.
WHEREFORE, the judgment appealed from is hereby modified so as to
award in favor of plaintiffs and against defendant, the following: (1)
P200,000.00 as moral damages, divided among plaintiffs, thus:
P100,000.00 for Senate President Pro Tempore Fernando Lopez;
P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his son-in-law
Alfredo Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo
Montelibano, Jr; (2) P75,000.00 as exemplary or corrective damages; (3)
interest at the legal rate of 6% per annum on the moral and exemplary
damages afore-stated, from December 14, 1963, the date of the amended
decision of the court a quo, until said damages are fully paid; (4)
P50,000.00 as attorney's fees; and (5) the costs. Counterclaim dismissed.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J. B. L., Barrera,
Regala, Makalintal, Zaldivar, and Sanchez, JJ., concur.
Eastern Shipping Lines, Inc. v CA (Credit Transactions)
G.R. No. 97412 July 12, 1994

COMPANY, INC., respondents.



This is an action against defendants shipping company, arrastre operator and broker-forwarder for damages
sustained by a shipment while in defendants' custody, filed by the insurer-subrogee who paid the consignee the
value of such losses/damages.

the losses/damages were sustained while in the respective and/or successive custody and possession of defendants
carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage).

As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the
aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee
against defendants.

DECISION OF LOWER COURTS: * trial court: ordered payment of damages, jointly and severally * CA: affirmed
trial court.


(a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several,
liability of the common carrier, the arrastre operator and the customs broker;

YES, it is solidary. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and
to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the

The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the
articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled
to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar
Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need not be an express
finding of negligence to hold it liable.

(b) whether the payment of legal interest on an award for loss or damage is to be computed from the time the
complaint is filed or from the date the decision appealed from is rendered; and


I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the
Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time the quantification of damages may be deemed to
have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.

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

(c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).

SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo
(Court of Appeals) AND A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on
such amount upon finality of the Supreme Court decision until the payment thereof.

RATIO: when the judgment awarding a sum of money becomes final and executory, the monetary award shall earn
interest at 12% per annum from the date of such finality until its satisfaction, regardless of whether the case
involves a loan or forbearance of money. The reason is that this interim period is deemed to be by then equivalent
to a forbearance of credit.

NOTES: the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance of
money, goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits,
and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in
the concept of damage arising from the breach or a delay in the performance of obligations in general. Observe,
too, that in these cases, a common time frame in the computation of the 6% interest per annum has been applied,
i.e., from the time the complaint is filed until the adjudged amount is fully paid.