TABLE OF CONTENTS

Duration of Obligation CASE TITLE PAGE British Airways vs CA 2 Macam vs CA 3 CIA Maritima vs Insurance Co 5 Dangwa Trans vs CA 7 LA Mallorca vs CA 9 Aboitiz Shipping vs CA 10 Amparo vs Phil Steam Navi 12 Samar Mining vs Nordeutscher 13 Edgar Cokaliong vs UCPB Sealand Service vs IAC 14 Belgian Overseas Chartering & Shipping et al Everett Steamship Corp vs CA 17 19

Davila vs PAL KLM vs CA United Airlines vs CA Zalamea vs CA Zullueta vs Pan AM Lopez vs Pan Am Victory Liner vs Gammad Sulpicio Lines vs CA People vs More Tugade vs CA

76 78 79 81 83 87 90 92 94 96

Baritua vs Mercader Japan airlines vs CA Tiu vs Arriesgado Yobido vs CA Baliwag Transit vs CA

Carriage of Passengers 21 24 25 30 31 33 35 38 39 41 43 46 48 49 53 56 57 60 63 68 70 73 74 DAMAGES

Sabena Belgian World Airlines vs CA Estacion vs Bernardo Calalas vs CA Singapore Airlines vs Fernandez British Airways vs CA Yu eng cho vs Pan AM Morris vs CA Japan Airlines vs Asuncion Japan Airlines vs Simangan Cathay Pacific Airways vs Vasquez Tan vs Northwest Airlines Santos III vs Northwest PAL vs CA (1996) PAL vs CA (1996) Northwest Airlines vs CA Mapa vs CA American Airlines vs CA United Airlines vs UY

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G.R. No. 92288

February 9, 1993

petitioner without any prior notice to either private respondent or the workers. Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner with 6 more workers booked for said flight. Unfortunately, the confirmed bookings of the 13 workers were again cancelled and rebooked to July 7, 1981. On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the receipt of the tax payments was submitted, the latter informed private respondent that it can only confirm the seats of the 12 workers on its July 7, 1981 flight. However, the confirmed seats of said workers were again cancelled without any prior notice either to the private respondent or said workers. The 12 workers were finally able to leave for Jeddah after private respondent had bought tickets from the other airlines. As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the damages it had incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings and payment of the corresponding travel taxes. On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay the amount of P350,000.00 representing damages and unrealized profit or income which was denied by the petitioner. On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the remaining recruited workers due to the delay in transporting the workers to Jeddah. 5 On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of Manila, Branch 1 in Civil Case No. 824653. On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from Jeddah on March 20, 1981 advising that the principal of private respondent had prepaid the airfares of 100 persons to transport private respondent's contract workers from Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice consequently not even one of the alleged 93 contract workers were booked in any of its flights. On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private respondent to Jeddah but the travel agent of the private respondent booked only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C"). 6 Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight but said travel agent cancelled the booking of 2 passengers while the other 3 passengers did not show up on said flight. Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the previous 5 contract workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner subject to reconfirmation.

BRITISH AIRWAYS, INC., petitioner, vs. THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL SERVICES, respondents. Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioner. Monina P. Lee for private respondent.

However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the bookings of private respondent's 12 contract workers. In the morning of July 7, 1981, the computer system of the petitioner was reinstalled and immediately petitioner tried to reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines but both airlines replied that no seat was available on that date and had to place the 12 workers on the wait list. Said information was duly relayed to the private respondent and the 12 workers before the scheduled flight. After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as follows: WHEREFORE, in view of all the foregoing, this Court renders judgment: 1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00; 2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00; 3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages; 4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and 5. To pay the costs. 7

NOCON, J.: This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of Appeals 1 affirming the decision of the trial court 2 in ordering petitioner British Airways, Inc. to pay private respondent First International Trading and General Services actual damages, moral damages, corrective or exemplary damages, attorney's fees and the costs as well as the Resolution dated February 15, 1990 3 denying petitioner's Motion for Reconsideration in the appealed decision. It appears on record that on February 15, 1981, private respondent First International Trading and General Services Co., a duly licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal. 4 During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare tickets for 93 contract workers with specific instruction to transport said workers to Jeddah on or before March 30, 1981. As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private respondent was immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private respondent instructed its travel agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but the latter failed to fly said workers, thereby compelling private respondent to borrow money in the amount of P304,416.00 in order to purchase airline tickets from the other airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave immediately since the visas of said workers are valid only for 45 days and the Bureau of Employment Services mandates that contract workers must be sent to the job site within a period of 30 days. Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had received a prepaid ticket advice from its Jeddah branch for the transportation of 27 contract workers. Immediatety, private respondent instructed its travel agent to book the 27 contract workers with the petitioner but the latter was only able to book and confirm 16 seats on its June 9, 1981 flight. However, on the date of the scheduled flight only 9 workers were able to board said flight while the remaining 7 workers were rebooked to June 30, 1981 which bookings were again cancelled by the

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its Motion for Reconsideration on February 28, 1986. On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of which reads: WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant. 8 On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied. Hence, this petition. It is the contention of petitioner that private respondent has no cause of action against it there being no perfected contract of carriage existing between them as no ticket was ever issued to private respondent's contract workers and, therefore, the obligation of the petitioner to transport said contract workers did not arise. Furthermore, private respondent's failure to attach any ticket in the complaint further proved that it was never a party to the alleged transaction. Petitioner's contention is untenable. Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of one party in violation of the legal right or rights of the other. 9 Petitioner's repeated failures to transport private ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 2

respondent's workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. In resolving petitioner's theory that private respondent has no cause of action in the instant case, the appellate court correctly held that: In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the same, namely: (a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract "of carriage" or "of common carriage" itself which should be considered as a real contract for not until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.) In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the mere consent of the parties. There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from Manila to Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's contract workers advising the appellant that it must transport the contract workers on or before the end of March, 1981 and the other batch in June, 1981. Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and the appellant had accepted such payment. The existence of this payment was never objected to nor questioned by the appellant in the lower court. Thus, the cause or consideration which is the fare paid for the passengers exists in this case. The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is the transport of the passengers from the place of departure to the place of destination as stated in the telex. Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing reciprocal obligations on both parties. In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its willingness for its contract workers to leave for their place of destination. On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract workers on their flight despite confirmation and bookings made by appellee's travelling agent. xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the appellee's contract workers who were recruited for ROLACO Engineering and the said contract workers were the intended passengers in the aircraft of the appellant, the said contract "to carry" also involved the appellee for as recruiter he had to see to it that the contract workers should be transported to ROLACO Engineering in Jeddah thru the appellant's transportation. For that matter, the involvement of the appellee in the said contract "to carry" was well demonstrated when the appellant upon receiving the PTA immediately advised the appellee thereof. 10 Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to private respondent since all expenses had already been subsequently reimbursed by the latter's principal. In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00 representing actual damages refers to private respondent's second cause of action involving the expenses incurred by the latter which were not reimbursed by ROLACO Engineering. However, in the Complaint 11 filed by private respondent, it was alleged that private respondent suffered actual damages in the amount of P308,016.00 representing the money it borrowed from friends and financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages private respondent seeks to recover are the airline tickets and travel taxes it spent for its workers which were already reimbursed by its principal and not for any other expenses it had incurred in the process of recruiting said contract workers. Inasmuch as all expenses including the processing fees incurred by private respondent had already been paid for by the latter's principal on a staggered basis as admitted in open court by its managing director, Mrs. Bienvenida Brusellas. 12 We do not find anymore justification in the appellate court's decision in granting actual damages to private respondent. Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract workers when petitioner failed to transport said workers, the reimbursements made by its principal to private respondent failed to support the latter's claim that it suffered actual damages as a result of petitioner's failure to transport said workers. It is undisputed that private respondent had consistently admitted that its principal had reimbursed all its expenses. Article 2199 of the Civil Code provides that: Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 13 However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a result of petitioner's failure to transport the

former's workers because of the latter's patent bad faith in the performance of its obligation. As correctly pointed out by the appellate court: As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract workers of the appellee on or before March 30, 1981 despite receipt of the payment for their airfares, and acceptance of the same by the appellant, with specific instructions from the appellee's principal to transport the contract workers on or before March 30, 1981. No previous notice was ever registered by the appellant that it could not comply with the same. And then followed the detestable act of appellant in unilaterally cancelling, booking and rebooking unreasonably the flight of appellee's contract workers in June to July, 1981 without prior notice. And all of these actuations of the appellant indeed constitute malice and evident bad faith which had caused damage and besmirched the reputation and business image of the appellee. 14 As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said damages was ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were mere afterthoughts when private respondent filed the present case. WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be deleted from said decision. SO ORDERED. [G.R. No. 125524. August 25, 1999] BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner, vs. COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC., respondents. DECISION BELLOSILLO, J.: On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent provision: "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order."[1] The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party. On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the total value of the shipment of US$20,223.46. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 3

Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of compliance therewith, and with emphasis that it could only be used if the passengers fly on BA. Under the circumstances, the appellant should have refused acceptance of the PTA from appellee's principal or to at least inform appellee that it could not accommodate the contract workers. xxx xxx xxx

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail. On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee. Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per request of petitioner himself because the shipment consisted of perishable goods. The telex dated 5 April 1989 conveying such request read AS PER SHPRS REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L[2] and bank guarantee since for prepaid shipt ofrt charges already fully paid our end x x x x[3] Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of the bill of lading as that usually takes time. As proof thereof, respondents apprised the trial court that for the duration of their twoyear business relationship with petitioner concerning similar shipments to GPC deliveries were effected without presentation of the bills of lading.[4] Respondents advanced next that the refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity and Quality. Respondents counterclaimed for attorneys fees and costs of suit. On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The counterclaims were dismissed for lack of merit.[5] The trial court opined that respondents breached the provision in the bill of lading requiring that "one of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order," when they released the shipment to GPC without presentation of the bills of lading and the bank guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment should not have been released to GPC at all since the instruction contained in the telex was to arrange delivery to the respective consignees and not to any party. The trial court observed that the only role of GPC in the transaction as notify party was precisely to be notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the consignee. Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous similar transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to notify party GPC without need of the bills of lading or bank guarantee.[6] Moreover, the bills of lading were viewed by respondent court to have been

properly superseded by the telex instruction and to implement the instruction, the delivery of the shipment must be to GPC, the real importer/buyer of the goods as shown by the export invoices,[7] and not to PAKISTAN BANK since the latter could very well present the bills of lading in its possession; likewise, if it were the PAKISTAN BANK to which the cargoes were to be strictly delivered it would no longer be proper to require a bank guarantee. Respondent court noted that besides, GPC was listed as a consignee in the telex. It observed further that the demand letter of petitioner to respondents never complained of misdelivery of goods. Lastly, respondent court found that petitioners claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the trial court and dismissed the complaint together with the counterclaims.[8] On 5 July 1996 reconsideration was denied.[9] Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or to a party designated or named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from the text of the telex, assuming there was such an instruction, the delivery of the shipment without the required bill of lading or bank guarantee should be made only to the designated consignee, referring to PAKISTAN BANK. We are not persuaded. The submission of petitioner that the fact that the shipment was not delivered to the consignee as stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof is a deviation from his cause of action before the trial court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank guarantee 6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release of the shipment issued by the consignee of the goods x x x x[10] Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent WALLEM demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and 99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank guarantee. We were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong, did not release or endorse the original bills of lading. As a result thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods x x x x[11] At any rate, we shall dwell on petitioners submission only as a prelude to our discussion on the imputed liability of respondents concerning the shipped goods. Article 1736 of the Civil Code provides Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738.[12]

We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them[13] was proper. The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee. Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and bank guarantee per the respective shippers request since for prepaid shipt ofrt charges already fully paid. Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims that this evidence is self-serving. From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his people. In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several years of business relationship with GPC and respondents, there was not a single instance when the bill of lading was first presented before the release of the cargoes. He admitted the existence of the telex of 3 July 1989 containing his request to deliver the shipment to the consignee without presentation of the bill of lading[14] but not the telex of 5 April 1989 because he could not remember having made such request. Consider pertinent portions of petitioners testimony Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the immediate release of your fresh fruits, perishable goods, to Great Prospect without the presentation of the original Bill of Lading? A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested the immediate release of the cargo because there was immediate payment. Q And you are referring, therefore, to this copy Telex release that you mentioned where your Companys name appears Ben-Mac? Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG (sic) 93023 and 93026 with Great Prospect Company. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 4

Atty. Ventura: Q: Is that the telegraphic transfer?

Q: So everytime you made a shipment on perishable goods you let your people to call? (sic) A: Not everytime, sir.

In view of petitioners utter failure to establish the liability of respondents over the cargoes, no reversible error was committed by respondent court in ruling against him. WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March 1996 dismissing the complaint of petitioner Benito Macam and the counterclaims of respondents China Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as well as its resolution of 5 July 1996 denying reconsideration, is AFFIRMED. SO ORDERED. G.R. No. L-18965 October 30, 1964

A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable. I thought Wallem Shipping Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is needed for the immediate release of the goods x x x x[15] Q: Mr. Witness, you testified that it is the practice of the shipper of the perishable goods to ask the shipping lines to release immediately the shipment. Is that correct? A: Yes, sir. Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the importer of goods without a Bill of Lading or Bank guarantee? A: No, it cannot be without the Bank Guarantee. Atty. Hernandez: Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping lines to the importer without the Bank guarantee and without the Bill of Lading? A: As far as telegraphic transfer is concerned. Q: Can you explain (to) this Honorable Court what telegraphic transfer is? A: Telegraphic transfer, it means advance payment that I am already fully paid x xxx Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that any of your shipment was released to Great Prospect by Wallem through telegraphic transfer? A: I could not recall but there were so many instances sir. Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through Wallem, you requested Wallem to release immediately your perishable goods to the buyer? A: Yes, that is the request of the shippers of the perishable goods x x x x[16] Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even without the presentation of OBL, how do you course it? A: Usually, I call up the Shipping Lines, sir x x x x[17] Q: You also testified you made this request through phone calls. Who of you talked whenever you made such phone call? A: Mostly I let my people to call, sir. (sic)

Q: You did not make this request in writing? A: No, sir. I think I have no written request with Wallem x x x x[18] Against petitioners claim of not remembering having made a request for delivery of subject cargoes to GPC without presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his testimony. He declared that it was his practice to ask the shipping lines to immediately release shipment of perishable goods through telephone calls by himself or his people. He no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without presentation of the bills of lading and bank guarantee. The instruction in the telex of 5 April 1989 was to deliver the shipment to respective consignees. And so petitioner argues that, assuming there was such an instruction, the consignee referred to was PAKISTAN BANK. We find the argument too simplistic. Respondent court analyzed the telex in its entirety and correctly arrived at the conclusion that the consignee referred to was not PAKISTAN BANK but GPC There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the Pakistani Bank. The appealed decision affirms this fact. Conformably, to implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate delivery thereof to the buyer/importer is essentially a factor to reckon with. Besides, GPC is listed as one among the several consignees in the telex (Exhibit 5-B) and the instruction in the telex was to arrange delivery of A/M shipment (not any party) to respective consignees without presentation of OB/L and bank guarantee x x x x[19] Apart from the foregoing obstacles to the success of petitioners cause, petitioner failed to substantiate his claim that he returned to SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched to entertain the notion, as did respondent court, that he merely accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from respondents. We note that it was SOLIDBANK which initially demanded payment from respondents through five (5) letters. SOLIDBANK must have realized the absence of privity of contract between itself and respondents. That is why petitioner conveniently took the cudgels for the bank.

COMPAIA MARITIMA, petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent. Rafael Dinglasan for petitioner. Ozaeta Gibbs & Ozaeta for respondent. BAUTISTA ANGELO, J.: Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compaia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compaia Maritima's branch office in Davao in compliance with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was completed on October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both barges issued the corresponding carrier's receipts and that issued by the patron of Barge No. 1025 reads in part: Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston. Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded. During the night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of 116,835.00. After reclassification, the value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 5

amount the sum of P8,863.30 representing Macleod's expenses in checking, grading, rebating, and other fees for washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02. All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a document which aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the insurance company wherein the former assigned to the latter its rights over the insured and damaged cargo. Having failed to recover from the carrier the sum of P60,421.02, which is the only amount supported by receipts, the insurance company instituted the present action on October 28, 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was affirmed by the Court of Appeals on December 14, 1960. Hence, this petition for review. The issues posed before us are: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability?; (3) Can respondent insurance company sue the carrier under its insurance contract as assignee of Macleod in spite of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of proof rule?; and (5) Can the insurance company maintain this suit without proof of its personality to do so? 1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by telephone the services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein as follows: . Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston. The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into

between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby subjecting them to the principles and usages of the maritime law. In other words, here we have a complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage. The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied) ... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the cotton been completely surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148). The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from Davao City to Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good order and condition." On the other hand, the authorities are to the effect that a bill of lading is not indispensable for the creation of a contract of carriage. Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of lading, although article 350 of the Code of Commerce provides that "the shipper as well as the carrier of merchandise or goods may mutua-lly demand that a bill of lading is not indispensable. As regards the form of the contract of carriage it can be said that provided that there is a meeting of the minds and from such meeting arise rights and obligations, there should be no limitations as to form." The bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations of railroad companies, or as a condition imposed in the contract by the agreement of the parties themselves. The bill of lading is juridically a documentary proof of the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs.

Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary requisite in the contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13) The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288) 2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim of force majeure or storm which occurred on the night of October 29, 1952. But the evidence fails to bear this out. Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may be inferred from the following findings of the Court of Appeals: Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4) conclusively showing that the barge was not seaworthy it should be noted that on the night of the nautical accident there was no storm, flood, or other natural disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959). The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals. 3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the cargo for the insurance amount it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged was insured with respondent company and the latter paid the amount represented by the loss, it is but fair that it be given the right to recover from the party responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but one between the shipper and the carrier, because the insurance company merely stepped into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such action cannot be asserted or availed of by the insurance company as a subrogee of the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 6

shipper. Nor can the carrier set up as a defense any defect in the insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting the following comments of the Court of Appeals: It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a party nor privy to this insurance contract, and therefore cannot avail itself of any defect in the policy which may constitute a valid reason for appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever defect the policy contained, if any, is deemed to have been waived by the subsequent payment of Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as above demonstrated, appellant is liable to Macleod and Company of the Philippines for the los or damage to the 1,162 bales of hemp after these were received in good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows that appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into the shoes of and substi-tuted the latter in demanding from appellant the payment for the loss and damage aforecited. 4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to order the production of the books of accounts of the Odell Plantation containing the charges it made for the loss of the damaged hemp for verification of its accountants, but later it desisted therefrom on the claim that it finds their production no longer necessary. This desistance notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the desistance of the carrier from producing the books of accounts of Odell Plantation implies an admission of the correctness of the statements of accounts contained therein, petitioner now contends that the Court of Appeals erred in basing the affirmance of the award on such erroneous interpretation. There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation presented in court is tantamount to an admission that the statements contained therein are correct and their verification not necessary because its main defense here, as well as below, was that it is not liable for the loss because there was no contract of carriage between it and the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's theory, the correctness of the account representing the loss was not so material as would necessitate the presentation of the books in question. At any rate, even if the books of accounts were not produced, the correctness of the accounts cannot now be disputed for the same is supported by the original documents on which the entries in said books were based which were presented by the shipper as part of its evidence. And according to the Court of Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of respondent. 5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find the same of no importance, for the attorney himself of the carrier admitted in open court that it is a foreign

corporation doing business in the Philippines with a personality to file the present action. WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

SO ORDERED. 2 Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the decision of the lower court, and ordered petitioners to pay private respondents: 1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat; 2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;

G.R. No. 95582

October 7, 1991

DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners, vs. COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat represented by Inocencia Cudiamat, respondents. Francisco S. Reyes Law Office for petitioners. Antonio C. de Guzman for private respondents.

3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages; 4. The costs of this suit. 4

Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5 hence this petition with the central issue herein being whether respondent court erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the damages claimed. It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are contrary to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. 6 In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim is guilty of negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the prope calibration of their conflicting factual findings and legal conclusions. The lower court, in declaring that the victim was negligent, made the following findings: This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding an umbrella. And, without having given the driver or the conductor any indication that he wishes to board the bus. But defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This, also considering that initially, defendant common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's heirs. 7 However, respondent court, in arriving at a different opinion, declares that: From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 7

REGALADO, J.:p On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first brought his other passengers and cargo to their respective destinations before banging said victim to the Lepanto Hospital where he expired. On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence required in the operation of the transportation company and the supervision of the employees, even as they add that they are not absolute insurers of the safety of the public at large. Further, it was alleged that it was the victim's own carelessness and negligence which gave rise to the subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their favor by way of a counterclaim. On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion: IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which negligence was the proximate cause of his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable settlement of the case. No costs.

Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his intention to board the bus as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus. Evidently, the incident took place due to the gross negligence of the appelleedriver in prematurely stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so when we take into account that the platform of the bus was at the time slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to the circumstances of each case (Article 1733, New Civil Code). 8 After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination as follows: Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing? A The way going to the mines but it is not being pass(ed) by the bus. Q And the incident happened before bunkhouse 56, is that not correct? A It happened between 54 and 53 bunkhouses. 9 The bus conductor, Martin Anglog, also declared: Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident that occurred? A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54. Q What happened when you delivered this passenger at this particular place in Lepanto? A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an umbrella about a split second and I signalled again the driver, so the driver stopped and we went down and we saw Pedrito Cudiamat asking for help because he was lying down. Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down from the bus how far was he? A It is about two to three meters. Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?

A At the back, sir. 10 (Emphasis supplied.) The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence. The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same. The premature acceleration of the bus in this case was a breach of such duty. 11 It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. 12 Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13 It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14 An ordinarily prudent person would have made the attempt board the moving conveyance under the same or similar circumstances. The fact that passengers board and alight from slowly moving vehicle is a matter of common experience both the driver and conductor in this case could not have been unaware of such an ordinary practice. The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those alighting therefrom. 15 Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the safety of the passengers transported by the according to all the circumstances of each case. 16 A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence very cautious persons, with a due regard for all the circumstances. 17

It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 18 Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was tersely and correctly confuted by respondent court: ... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and helpless husband. 19 Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. 20 In fact, it was only after the refrigerator was unloaded that one of the passengers thought of sending somebody to the house of the victim, as shown by the testimony of Virginia Abalos again, to wit: Q Why, what happened to your refrigerator at that particular time?

A I asked them to bring it down because that is the nearest place to our house and when I went down and asked somebody to bring down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat. COURT: Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat. Q A But nobody ask(ed) you to call for the family of Mr. Cudiamat? No sir. 21

With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual damages based on the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 8

gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and minus living and other incidental expenses. 22 We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48 years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on computation based on the net earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23 WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby AFFIRMED in all other respects. SO ORDERED. G.R. No. L-20761

carrying some of their baggages, was the first to get down the bus, followed by his wife and his children. Mariano led his companions to a shaded spot on the left pedestrians side of the road about four or five meters away from the vehicle. Afterwards, he returned to the bus in controversy to get his other bayong, which he had left behind, but in so doing, his daughter Raquel followed him, unnoticed by her father. While said Mariano Beltran was on the running board of the bus waiting for the conductor to hand him his bayong which he left under one of its seats near the door, the bus, whose motor was not shut off while unloading, suddenly started moving forward, evidently to resume its trip, notwithstanding the fact that the conductor has not given the driver the customary signal to start, since said conductor was still attending to the baggage left behind by Mariano Beltran. Incidentally, when the bus was again placed into a complete stop, it had travelled about ten meters from the point where the plaintiffs had gotten off. Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board without getting his bayong from the conductor. He landed on the side of the road almost in front of the shaded place where he left his wife and children. At that precise time, he saw people beginning to gather around the body of a child lying prostrate on the ground, her skull crushed, and without life. The child was none other than his daughter Raquel, who was run over by the bus in which she rode earlier together with her parents. For the death of their said child, the plaintiffs commenced the present suit against the defendant seeking to recover from the latter an aggregate amount of P16,000 to cover moral damages and actual damages sustained as a result thereof and attorney's fees. After trial on the merits, the court below rendered the judgment in question. On the basis of these facts, the trial court found defendant liable for breach of contract of carriage and sentenced it to pay P3,000.00 for the death of the child and P400.00 as compensatory damages representing burial expenses and costs. On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract in the case, for the reason that when the child met her death, she was no longer a passenger of the bus involved in the incident and, therefore, the contract of carriage had already terminated. Although the Court of Appeals sustained this theory, it nevertheless found the defendant-appellant guilty of quasi-delict and held the latter liable for damages, for the negligence of its driver, in accordance with Article 2180 of the Civil Code. And, the Court of Appeals did not only find the petitioner liable, but increased the damages awarded the plaintiffs-appellees to P6,000.00, instead of P3,000.00 granted by the trial court. In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable for quasi-delict, considering that respondents complaint was one for breach of contract, and (2) in raising the award of damages from P3,000.00 to P6,000.00 although respondents did not appeal from the decision of the lower court. Under the facts as found by the Court of Appeals, we have to sustain the judgement holding petitioner liable for damages for the death of the child, Raquel Beltran. It may be pointed out that although it is true that respondent Mariano Beltran, his wife, and their children (including the deceased child) had alighted from the bus at a place designated for disembarking or unloading of passengers, it was also established that the father had to return to the vehicle (which was still at a stop) to get one of his bags or bayong that was left under

one of the seats of the bus. There can be no controversy that as far as the father is concerned, when he returned to the bus for his bayong which was not unloaded, the relation of passenger and carrier between him and the petitioner remained subsisting. For, the relation of carrier and passenger does not necessarily cease where the latter, after alighting from the car, aids the carrier's servant or employee in removing his baggage from the car.1 The issue to be determined here is whether as to the child, who was already led by the father to a place about 5 meters away from the bus, the liability of the carrier for her safety under the contract of carriage also persisted. It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger.2 So also, where a passenger has alighted at his destination and is proceeding by the usual way to leave the company's premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad and company and its agents.3 In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Raquel, the child that she was, must have followed the father. However, although the father was still on the running board of the bus awaiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had exercised the "utmost diligence" of a "very cautions person" required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping the bus, nevertheless did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go and while the latter was still unloading part of the baggages of the passengers Mariano Beltran and family. The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage. But even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for the negligence of its driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the complaint, which reads That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want of exercise of the utmost diligence of a very cautious person on the part of the defendants and their agent, necessary to transport plaintiffs and their daughter safely as far as human care and foresight can provide in the operation of their vehicle. is clearly an allegation for quasi-delict. The inclusion of this averment for quasidelict, while incompatible with the other claim under the contract of carriage, is ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 9

July 27, 1966

LA MALLORCA, petitioner, vs. HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents. G. E. Yabut, R. Monterey and M.C. Lagman for petitioner. Ahmed Garcia for respondents. BARRERA, J.: La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No. 23267-R, holding it liable for quasi-delict and ordering it to pay to respondents Mariano Beltran, et al., P6,000.00 for the death of his minor daughter Raquel Beltran, plus P400.00 as actual damages. The facts of the case as found by the Court of Appeals, briefly are: On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with their minor daughters, namely, Milagros, 13 years old, Raquel, about 4 years old, and Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate TPU No. 757 (1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga, bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four pieces of baggages containing their personal belonging. The conductor of the bus, who happened to be a halfbrother of plaintiff Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full fares of the plaintiff and their eldest child, Milagros. No fare was charged on Raquel and Fe, since both were below the height at which fare is charged in accordance with the appellant's rules and regulations. After about an hour's trip, the bus reached Anao whereat it stopped to allow the passengers bound therefor, among whom were the plaintiffs and their children to get off. With respect to the group of the plaintiffs, Mariano Beltran, then

permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes of action in the alternative, be they compatible with each other or not, to the end that the real matter in controversy may be resolved and determined.4 The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated when it was alleged in the complaint that "the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want of exercise of the utmost diligence of a very cautious person on the part of the defendants and their agent." This allegation was also proved when it was established during the trial that the driver, even before receiving the proper signal from the conductor, and while there were still persons on the running board of the bus and near it, started to run off the vehicle. The presentation of proof of the negligence of its employee gave rise to the presumption that the defendant employer did not exercise the diligence of a good father of the family in the selection and supervision of its employees. And this presumption, as the Court of Appeals found, petitioner had failed to overcome. Consequently, petitioner must be adjudged peculiarily liable for the death of the child Raquel Beltran. The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals, however, cannot be sustained. Generally, the appellate court can only pass upon and consider questions or issues raised and argued in appellant's brief. Plaintiffs did not appeal from that portion of the judgment of the trial court awarding them on P3,000.00 damages for the death of their daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs have pointed out in their brief the inadequacy of the award, or that the inclusion of the figure P3,000.00 was merely a clerical error, in order that the matter may be treated as an exception to the general rule.5 Herein petitioner's contention, therefore, that the Court of Appeals committed error in raising the amount of the award for damages is, evidently, meritorious.1wph1.t Wherefore, the decision of the Court of Appeals is hereby modified by sentencing, the petitioner to pay to the respondents Mariano Beltran, et al., the sum of P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00 as actual damages. No costs in this instance. So ordered.

WHEREFORE, the judgment appealed from as modified by the order of October 27, 1982, is hereby affirmed with the modification that appellant Aboitiz Shipping is hereby ordered to pay plaintiff-appellees the amount of P30,000.00 for the death of Anacleto Viana; actual damages of P9,800.00; P150,000.00 for unearned income; P7,200.00 as support for deceased's parents; P20,000.00 as moral damages; P10,000.00 as attorney's fees; and to pay the costs. The undisputed facts of the case, as found by the court a quo and adopted by respondent court, are as follows: . The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia, owned by defendant, at the port at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket (No. 117392) in the sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North Harbor, Manila, and the passengers therein disembarked, a gangplank having been provided connecting the side of the vessel to the pier. Instead of using said gangplank Anacleto Viana disembarked on the third deck which was on the level with the pier. After said vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of Agreement dated July 26, 1975 (Exh. '2') between the third party defendant Pioneer Stevedoring Corporation and defendant Aboitiz Shipping Corporation. The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa was placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it started operation by unloading the cargoes from said vessel. While the crane was being operated, Anacleto Viana who had already disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the said vessel to the place where his cargoes were loaded that the crane hit him, pinning him between the side of the vessel and the crane. He was thereafter brought to the hospital where he later expired three (3) days thereafter, on May 15, 1975, the cause of his death according to the Death Certificate (Exh. "C") being "hypostatic pneumonia secondary to traumatic fracture of the pubic bone lacerating the urinary bladder" (See also Exh. "B"). For his hospitalization, medical, burial and other miscellaneous expenses, Anacleto's wife, herein plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana who was only forty (40) years old when he met said fateful accident (Exh. 'E') was in good health. His average annual income as a farmer or a farm supervisor was 400 cavans of palay annually. His parents, herein plaintiffs Antonio and Gorgonia Viana, prior to his death had been recipient of twenty (20) cavans of palay as support or P120.00 monthly. Because of Anacleto's death, plaintiffs suffered mental anguish and extreme worry or moral damages. For the filing of the instant case, they had to hire a lawyer for an agreed fee of ten thousand (P10,000.00) pesos. 2 Private respondents Vianas filed a complaint 3 for damages against petitioner corporation (Aboitiz, for brevity) for breach of contract of carriage. In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely under the control of respondent Pioneer Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. It is also averred that since the crane operator was not an employee of Aboitiz, the latter cannot be held liable under the fellow-servant rule.

Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer imputing liability thereto for Anacleto Viana's death as having been allegedly caused by the negligence of the crane operator who was an employee of Pioneer under its exclusive control and supervision. Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no cause of action against Pioneer considering that Aboitiz is being sued by the Vianas for breach of contract of carriage to which Pioneer is not a party; that Pioneer had observed the diligence of a good father of a family both in the selection and supervision of its employees as well as in the prevention of damage or injury to anyone including the victim Anacleto Viana; that Anacleto Viana's gross negligence was the direct and proximate cause of his death; and that the filing of the third-party complaint was premature by reason of the pendency of the criminal case for homicide through reckless imprudence filed against the crane operator, Alejo Figueroa. In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the Vianas for damages incurred, and Pioneer was ordered to reimburse Aboitiz for whatever amount the latter paid the Vianas. The dispositive portion of said decision provides: WHEREFORE, judgment is hereby rendered in favor of the plantiffs: (1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum of P12,000.00 for the death of Anacleto Viana P9,800.00 as actual damages; P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan; P10,000.00 as attorney's fees; F 5,000.00, value of the 100 cavans of palay as support for five (5) years for deceased (sic) parents, herein plaintiffs Antonio and Gorgonia Viana computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a month for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and (2) ordering the third party defendant Pioneer Stevedoring Corporation to reimburse defendant and third party plaintiff Aboitiz Shipping Corporation the said amounts that it is ordered to pay to herein plaintiffs. Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly raised the trial court's failure to declare that Anacleto Viana acted with gross negligence despite the overwhelming evidence presented in support thereof. In addition, Aboitiz alleged, in opposition to Pioneer's motion, that under the memorandum of agreement the liability of Pioneer as contractor is automatic for any damages or losses whatsoever occasioned by and arising from the operation of its arrastre and stevedoring service. In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of the Vianas and Aboitiz to preponderantly establish a case of negligence against the crane operator which the court a quo ruled is never presumed, aside from the fact that the memorandum of agreement supposedly refers only to Pioneer's liability in case of loss or damage to goods handled by it but not in the case of personal injuries, and, finally that Aboitiz cannot properly invoke the fellow-servant rule simply because its liability stems from a breach of contract of carriage. The dispositive portion of said order reads:

G.R. No. 84458

November 6, 1989

ABOITIZ SHIPPING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and GORGONIA VIANA, and PIONEER STEVEDORING CORPORATION, respondents. Herenio E. Martinez for petitioner. M.R. Villaluz Law Office for private respondent.

REGALADO, J.: In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the decision 1 of respondent Court of Appeals, dated July 29, 1988, the decretal portion of which reads:

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WHEREFORE, judgment is hereby modified insofar as third party defendant Pioneer Stevedoring Corporation is concerned rendered in favor of the plaintiffs,: (1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the sum of P12,000.00 for the death of Anacleto Viana; P9,000.00 (sic) as actual damages; P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan; P10,000.00 as attorney's fees; P5,000.00 value of the 100 cavans of palay as support for five (5) years for deceased's parents, herein plaintiffs Antonio and Gorgonia Viana,computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a month for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and costs; and (2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic) any liability for the death of Anacleto Viana the passenger of M/V Antonia owned by defendant third party plaintiff Aboitiz Shipping Corporation it appearing that the negligence of its crane operator has not been established therein. Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to respondent Court of Appeals which affirmed the findings of of the trial court except as to the amount of damages awarded to the Vianas. Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred: (A) In holding that the doctrine laid down by this honorable Court in La Mallorca vs. Court of Appeals, et al. (17 SCRA 739, July 27, 1966) is applicable to the case in the face of the undisputable fact that the factual situation under the La Mallorca case is radically different from the facts obtaining in this case; (B) In holding petitioner liable for damages in the face of the finding of the court a quo and confirmed by the Honorable respondent court of Appeals that the deceased, Anacleto Viana was guilty of contributory negligence, which, We respectfully submit contributory negligence was the proximate cause of his death; specifically the honorable respondent Court of Appeals failed to apply Art. 1762 of the New Civil Code; (C) In the alternative assuming the holding of the Honorable respondent Court of Appears that petitioner may be legally condemned to pay damages to the private respondents we respectfully submit that it committed a reversible error when it dismissed petitioner's third party complaint against private respondent Pioneer Stevedoring Corporation instead of compelling the latter to reimburse the petitioner for whatever damages it may be compelled to pay to the private respondents Vianas. 9 At threshold, it is to be observed that both the trial court and respondent Court of Appeals found the victim Anacleto Viana guilty of contributory negligence, but holding that it was the negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for the unloading of cargoes which was the direct, immediate and proximate cause of the victim's death. I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana disembarked from the vessel and that he was given more than ample opportunity to unload his cargoes prior to the operation of the

crane, his presence on the vessel was no longer reasonable e and he consequently ceased to be a passenger. Corollarily, it insists that the doctrine in La Mallorca vs. Court of Appeals, et al. 10 is not applicable to the case at bar. The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. 12 The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. 13 It was in accordance with this rationale that the doctrine in the aforesaid case of La Mallorca was enunciated, to wit: It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger. So also, where a passenger has alighted at his destination and is proceeding by the usual way to leave the company's premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad company and its agents. In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Racquel, the child that she was, must have followed the father. However, although the father was still on the running board of the bus waiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had exercised the 'utmost diligence' of a 'very cautious person' required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers. ... The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage. 14 It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account

such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause. It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage. It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the vessel. Petitioner failed to prove this. What is clear to us is that at the time the victim was taking his cargoes, the vessel had already docked an hour earlier. In consonance with common shipping procedure as to the minimum time of one (1) hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioner's premises was not without cause. The victim had to claim his baggage which was possible only one (1) hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the unloading operations shall start only after that time. Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death. II. Under the law, common carriers are, from the nature of their business and for reasons of public policy, bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. 15 More particularly, a common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. 16 Thus, where a passenger dies or is injured, the common carrier is presumed to have been at fault or to have acted negligently. 17 This gives rise to an action for breach of contract of carriage where all that is required of plaintiff is to prove the existence of the contract of carriage and its non-performance by the carrier, that is, the failure of the carrier to carry the passenger safely to his destination, 18 which, in the instant case, necessarily includes its failure to safeguard its passenger with extraordinary diligence while such relation subsists. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 11

The presumption is, therefore, established by law that in case of a passenger's death or injury the operator of the vessel was at fault or negligent, having failed to exercise extraordinary diligence, and it is incumbent upon it to rebut the same. This is in consonance with the avowed policy of the State to afford full protection to the passengers of common carriers which can be carried out only by imposing a stringent statutory obligation upon the latter. Concomitantly, this Court has likewise adopted a rigid posture in the application of the law by exacting the highest degree of care and diligence from common carriers, bearing utmost in mind the welfare of the passengers who often become hapless victims of indifferent and profit-oriented carriers. We cannot in reason deny that petitioner failed to rebut the presumption against it. Under the facts obtaining in the present case, it cannot be gainsaid that petitioner had inadequately complied with the required degree of diligence to prevent the accident from happening. As found by the Court of Appeals, the evidence does not show that there was a cordon of drums around the perimeter of the crane, as claimed by petitioner. It also adverted to the fact that the alleged presence of visible warning signs in the vicinity was disputable and not indubitably established. Thus, we are not inclined to accept petitioner's explanation that the victim and other passengers were sufficiently warned that merely venturing into the area in question was fraught with serious peril. Definitely, even assuming the existence of the supposed cordon of drums loosely placed around the unloading area and the guard's admonitions against entry therein, these were at most insufficient precautions which pale into insignificance if considered vis-a-vis the gravity of the danger to which the deceased was exposed. There is no showing that petitioner was extraordinarily diligent in requiring or seeing to it that said precautionary measures were strictly and actually enforced to subserve their purpose of preventing entry into the forbidden area. By no stretch of liberal evaluation can such perfunctory acts approximate the "utmost diligence of very cautious persons" to be exercised "as far as human care and foresight can provide" which is required by law of common carriers with respect to their passengers. While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise extraordinary diligence was the proximate and direct cause of, because it could definitely have prevented, the former's death. Moreover, in paragraph 5.6 of its petition, at bar, 19 petitioner has expressly conceded the factual finding of respondent Court of Appeals that petitioner did not present sufficient evidence in support of its submission that the deceased Anacleto Viana was guilty of gross negligence. Petitioner cannot now be heard to claim otherwise. No excepting circumstance being present, we are likewise bound by respondent court's declaration that there was no negligence on the part of Pioneer Stevedoring Corporation, a confirmation of the trial court's finding to that effect, hence our conformity to Pioneer's being absolved of any liability. As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross negligence of the victim, hence its present contention that the death of the passenger was due to the negligence of the crane operator cannot be sustained both on grounds, of estoppel and for lack of evidence on its present theory. Even in its answer filed in the court below it readily alleged that Pioneer had taken the necessary safeguards insofar as its unloading operations were concerned, a fact which appears to have been accepted by the plaintiff therein by not impleading Pioneer as a defendant, and likewise inceptively by Aboitiz by filing its third-party complaint only after ten (10) months from the institution of

the suit against it. Parenthetically, Pioneer is not within the ambit of the rule on extraordinary diligence required of, and the corresponding presumption of negligence foisted on, common carriers like Aboitiz. This, of course, does not detract from what we have said that no negligence can be imputed to Pioneer but, that on the contrary, the failure of Aboitiz to exercise extraordinary diligence for the safety of its passenger is the rationale for our finding on its liability G.R. No. L-36481-2 October 23, 1982

of the Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse was razed by a fire of unknown origin, destroying appellees' cargoes. Before the fire, however, appellee Uy Bico was able to take delivery of 907 cavans of rice 2 Appellees' claims for the value of said goods were rejected by the appellant. On the bases of the foregoing facts, the lower court rendered a decision, the decretal portion of which reads as follows: WHEREFORE, judgment is rendered as follows:

AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees, vs. PHILIPPINE STEAM NAVIGATION CO., defendant-appellant. Zoilo de la Cruz, Jr. & Associate for plaintiff-appellee Amparo Servando. Benedicto, Sumbingco & Associate for appellee Clara Uy Bico. Ross, Salcedo, del Rosario, Bito & Misa for defendant-appellant.

1. In case No. 7354, the defendant is hereby ordered to pay the plaintiff Amparo C. Servando the aggregate sum of P1,070.50 with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay the costs. 2. In case No. 7428, the defendant is hereby ordered to pay to plaintiff Clara Uy Bico the aggregate sum of P16,625.00 with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay the costs. Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary diligence from the moment the goods are unconditionally placed in their possession "until the same are delivered, actually or constructively, by the carrier to the consignee or to the person who has a right to receive them, without prejudice to the provisions of Article 1738. " The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the delivery contemplated by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss is chargeable against the appellant. It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit the responsibility of the carrier for the loss or damage that may be caused to the shipment by inserting therein the following stipulation: Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless such loss or damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage caused by force majeure, dangers or accidents of the sea or other waters; war; public enemies; . . . fire . ... We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy. Appellees would contend that the above stipulation does not bind them because it was printed in fine letters on the back-of the bills of lading; and that they did not sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu vs. Court of Appeals, promulgated June 29, 1979, 3 where the same issue was resolved in this wise: While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is nevertheless bound by the provisions thereof. 'Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation'. It is what is known as a contract of 'adhesion', in regards which it has been said that contracts of adhesion wherein one party imposes a ready made ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 12

ESCOLIN, J.: This appeal, originally brought to the Court of Appeals, seeks to set aside the decision of the Court of First Instance of Negros Occidental in Civil Cases Nos. 7354 and 7428, declaring appellant Philippine Steam Navigation liable for damages for the loss of the appellees' cargoes as a result of a fire which gutted the Bureau of Customs' warehouse in Pulupandan, Negros Occidental. The Court of Appeals certified the case to Us because only pure questions of law are raised therein. The facts culled from the pleadings and the stipulations submitted by the parties are as follows: On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the appellant's vessel, FS-176, for carriage from Manila to Pulupandan, Negros Occidental, the following cargoes, to wit: Clara Uy Bico 1,528 cavans of rice valued at P40,907.50; Amparo Servando 44 cartons of colored paper, toys and general merchandise valued at P1,070.50; as evidenced by the corresponding bills of lading issued by the appellant. 1 Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were discharged, complete and in good order, unto the warehouse

form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent." (Tolentino, Civil Code, Vol. IV, 1962 Ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49). Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of the basic principle of law written in Article 1 1 7 4 of the Civil Code: Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from liability for non-performance. The Partidas, 4 the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito' as 'an event that takes place by accident and could not have been foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robbers.' In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5 says: "In a legal sense and, consequently, also in relation to contracts, a 'caso fortuito' presents the following essential characteristics: (1) the cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will; (2) it must be impossible to foresee the event which constitutes the 'caso fortuito', or if it can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor." In the case at bar, the burning of the customs warehouse was an extraordinary event which happened independently of the will of the appellant. The latter could not have foreseen the event. There is nothing in the record to show that appellant carrier ,incurred in delay in the performance of its obligation. It appears that appellant had not only notified appellees of the arrival of their shipment, but had demanded that the same be withdrawn. In fact, pursuant to such demand, appellee Uy Bico had taken delivery of 907 cavans of rice before the burning of the warehouse. Nor can the appellant or its employees be charged with negligence. The storage of the goods in the Customs warehouse pending withdrawal thereof by the appellees was undoubtedly made with their knowledge and consent. Since the warehouse belonged to and was maintained by the government, it would be unfair to impute negligence to the appellant, the latter having no control whatsoever over the same. The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs. Ossorio 6, where this Court held the defendant liable for damages arising from a fire caused by the negligence of the defendant's employees while loading cases of gasoline and petroleon products. But unlike in the said case, there is not a shred of proof in the present case that the cause of the fire that broke out in the Custom's warehouse was in any way attributable to the negligence of the appellant or its employees. Under the circumstances, the appellant is plainly not responsible.

WHEREFORE, the judgment appealed from is hereby set aside. No costs. SO ORDERED. G.R. No. L-28673 October 23, 1984

SAMAR MINING COMPANY, INC., plaintiff-appellee, vs. NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendantsappellants.

Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of Optima welded wedge wire sieves was received by the carrier NORDEUTSCHER LLOYD at the "port of loading" which is Bremen, Germany, while the freight had been prepaid up to the port of destination or the "port of discharge of goods in this case, Davao, the carrier undertook to transport the goods in its vessel, M/S SCHWABENSTEIN only up to the "port of discharge from ship-Manila. Thereafter, the goods were to be transshipped by the carrier to the port of destination or "port of discharge of goods The stipulation is plainly indicated on the face of the bill which contains the following phrase printed below the space provided for the port of discharge from ship", thus: t.hqw if goods are to be transshipped at port of discharge, show destination under the column for "description of contents" 7

CUEVAS, J.:+.wph!1 This is an appeal taken directly to Us on certiorari from the decision of the defunct Court of First Instance of Manila, finding defendants carrier and agent, liable for the value of goods never delivered to plaintiff consignee. The issue raised is a pure question of law, which is, the liability of the defendants, now appellants, under the bill of lading covering the subject shipment. The case arose from an importation made by plaintiff, now appellee, SAMAR MINING COMPANY, INC., of one (1) crate Optima welded wedge wire sieves through the M/S SCHWABENSTEIN a vessel owned by defendant-appellant NORDEUTSCHER LLOYD, (represented in the Philippines by its agent, C.F. SHARP & CO., INC.), which shipment is covered by Bill of Lading No. 18 duly issued to consignee SAMAR MINING COMPANY, INC. Upon arrival of the aforesaid vessel at the port of Manila, the aforementioned importation was unloaded and delivered in good order and condition to the bonded warehouse of AMCYL. 1 The goods were however never delivered to, nor received by, the consignee at the port of destination Davao. When the letters of complaint sent to defendants failed to elicit the desired response, consignee herein appellee, filed a formal claim for P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at that time, against the former, but neither paid. Hence, the filing of the instant suit to enforce payment. Defendants-appellants brought in AMCYL as third party defendant. The trial court rendered judgment in favor of plaintiff, ordering defendants to pay the amount of P1,691.93 plus attorney's fees and costs. However, the Court stated that defendants may recoup whatever they may pay plaintiff by enforcing the judgment against third party defendant AMCYL which had earlier been declared in default. Only the defendants appealed from said decision. The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its various clauses and stipulations which should be examined in the light of pertinent legal provisions and settled jurisprudence. This undertaking is not only proper but necessary as well because of the nature of the bill of lading which operates both as a receipt for the goods; and more importantly, as a contract to transport and deliver the same as stipulated therein. 2 Being a contract, it is the law between the parties thereto 3 who are bound by its terms and conditions 4 provided that these are not contrary to law, morals, good customs, public order and public policy. 5

As instructed above, the following words appeared typewritten under the column for "description of contents": t.hqw PORT OF DISCHARGE OF GOODS: DAVAO FREIGHT PREPAID 8 It is clear, then, that in discharging the goods from the ship at the port of Manila, and delivering the same into the custody of AMCYL, the bonded warehouse, appellants were acting in full accord with the contractual stipulations contained in Bill of Lading No. 18. The delivery of the goods to AMCYL was part of appellants' duty to transship the goods from Manila to their port of destinationDavao. The word "transship" means: t.hqw to transfer for further transportation from one ship or conveyance to another 9 The extent of appellant carrier's responsibility and/or liability in the transshipment of the goods in question are spelled out and delineated under Section 1, paragraph 3 of Bill of Lading No. 18, to wit: t.hqw The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter ship's tackle to be loaded or after the goods leave ship's tackle to be discharged, transshipped or forwarded ... (Emphasis supplied) and in Section 11 of the same Bill, which provides: t.hqw Whenever the carrier or m aster may deem it advisable or in any case where the goods are placed at carrier's disposal at or consigned to a point where the ship does not expect to load or discharge, the carrier or master may, without notice, forward the whole or any part of the goods before or after loading at the original port of shipment, ... This carrier, in making arrangements for any transshipping or forwarding vessels or means of transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper and without any other responsibility whatsoever even though the freight for the whole transport has been collected by him. ... Pending or during forwarding or transshipping the carrier may store the goods ashore or afloat solely as agent of the shipper and at risk and expense of the goods and the carrier shall not be liable for detention nor responsible for the acts, neglect, delay or failure to act of anyone to whom the goods are entrusted or delivered for storage, handling or any service incidental thereto (Emphasis supplied) 10

||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 13

Defendants-appellants now shirk liability for the loss of the subject goods by claiming that they have discharged the same in full and good condition unto the custody of AMCYL at the port of discharge from ship Manila, and therefore, pursuant to the aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo had ceased. 11 We find merit in appellants' stand. The validity of stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the same are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968). Said case matches the present controversy not only as to the material facts but more importantly, as to the stipulations contained in the bill of lading concerned. As if to underline their awesome likeness, the goods in question in both cases were destined for Davao, but were discharged from ship in Manila, in accordance with their respective bills of lading. The stipulations in the bill of lading in the PHOENIX case which are substantially the same as the subject stipulations before Us, provides: t.hqw The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in its actual custody. (Par. 2, last subpar.) xxx xxx xxx

Civil Code on common carriers (Section 4, Title VIII, Book IV) directs our attention to Article 1736 thereof, which reads: t.hqw Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738. Article 1738 referred to in the foregoing provision runs thus: t.hqw

aborted by circumstances beyond its control. An agent who carries out the orders and instructions of the principal without being guilty of negligence, deceit or fraud, cannot be held responsible for the failure of the principal to accomplish the object of the agency, 21 This can be gleaned from the following provisions of the New Civil Code on the obligations of the agent: t.hqw Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance, the principal may suffer. xxx xxx xxx

Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them. There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where the goods had already reached their place of destination and are stored in the warehouse of the carrier. The subject goods were still awaiting transshipment to their port of destination, and were stored in the warehouse of a third party when last seen and/or heard of. However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of the same by the carrier to the consignee, or to the person who has a right to receive them. In sales, actual delivery has been defined as the ceding of corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by some person authorized by him to receive the goods as his representative for the purpose of custody or disposal. 17 By the same token, there is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. 18 The court a quo found that there was actual delivery to the consignee through its duly authorized agent, the carrier. It becomes necessary at this point to dissect the complex relationship that had developed between appellant and appellee in the course of the transactions that gave birth to the present suit. Two undertakings appeared embodied and/or provided for in the Bill of Lading 19 in question. The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao, with appellant acting as agent of the consignee. 20 At the hiatus between these two undertakings of appellant which is the moment when the subject goods are discharged in Manila, its personality changes from that of carrier to that of agent of the consignee. Thus, the character of appellant's possession also changes, from possession in its own name as carrier, into possession in the name of consignee as the latter's agent. Such being the case, there was, in effect, actual delivery of the goods from appellant as carrier to the same appellant as agent of the consignee. Upon such delivery, the appellant, as erstwhile carrier, ceases to be responsible for any loss or damage that may befall the goods from that point onwards. This is the full import of Article 1736, as applied to the case before Us. But even as agent of the consignee, the appellant cannot be made answerable for the value of the missing goods, It is true that the transshipment of the goods, which was the object of the agency, was not fully performed. However, appellant had commenced said performance, the completion of which was

Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer his own. Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute: (1) When he was not given the power to appoint one;

(2) When he was given such power but without designating the person and the person appointed was notoriously incompetent or insolvent. xxx xxx xxx

The carrier or master, in making arrangements with any person for or in connection with all transshipping or forwarding of the goods or the use of any means of transportation or forwarding of goods not used or operated by the carrier, shall be considered solely the agent of the shipper and consignee and without any other responsibility whatsoever or for the cost thereof ... (Par. 16). 12 Finding the above stipulations not contrary to law, morals, good customs, public order or public policy, We sustained their validity 13 Applying said stipulations as the law between the parties in the aforecited case, the Court concluded that: t.hqw ... The short form Bill of Lading ( ) states in no uncertain terms that the port of discharge of the cargo is Manila, but that the same was to be transshipped beyond the port of discharge to Davao City. Pursuant to the terms of the long form Bill of Lading ( ), appellee's responsibility as a common carrier ceased the moment the goods were unloaded in Manila and in the matter of transshipment, appellee acted merely as an agent of the shipper and consignee. ... (Emphasis supplied) 14 Coming now to the case before Us, We hold, that by the authority of the above pronouncements, and in conformity with the pertinent provisions of the New Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are valid stipulations between the parties insofar as they exempt the carrier from liability for loss or damage to the goods while the same are not in the latter's actual custody. The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to the Philippines is governed primarily by the New Civil Code. 15 In all matters not regulated by said Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. 16 A careful perusal of the provisions of the New

Article 1909. The agent is responsible not only for fraud, but also for negligence which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation. The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the Philippines. Neither is there any showing of notorious incompetence or insolvency on the part of AMCYT, which acted as appellant's substitute in storing the goods awaiting transshipment. The actions of appellant carrier and of its representative in the Philippines being in full faith with the lawful stipulations of Bill of Lading No. 18 and in conformity with the provisions of the New Civil Code on common carriers, agency and contracts, they incur no liability for the loss of the goods in question. WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's complaint is hereby DISMISSED. No costs. SO ORDERED.1wph1.t

G.R. No. 75118

August 31, 1987

SEA-LAND SERVICE, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing business under the name and style of "SEN HIAP HING," respondents. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 14

NARVASA, J.: The main issue here is whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of lading limiting to a fixed amount the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill. The factual antecedents, for the most part, are not in dispute. On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity), a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing the business name used by Paulino Cue in the wholesale and retail trade which he operated out of an establishment located on Borromeo and Plaridel Streets, Cebu City. The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The bill described the shipment only as "8 CTNS on 2 SKIDS-FILES. 1 Based on volume measurements Sea-land charged the shipper the total amount of US$209.28 2 for freight age and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port Of Cebu. The shipment arrived in Manila on February 12, 1981, and there discharged in Container No. 310996 into the custody of the arrastre contractor and the customs and port authorities. 3 Sometime between February 13 and 16, 1981, after the shipment had been transferred, along with other cargoes to Container No. 40158 near Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting transshipment to Cebu, it was stolen by pilferers and has never been recovered. 4 On March 10, 1981, Paulino Cue, the consignee, made formal claim upon SeaLand for the value of the lost shipment allegedly amounting to P179,643.48. 5 Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00. asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. 6 Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then Court of First Instance of Cebu, Branch X. 7 Said Court, after trial, rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the Philippine currency value of the lost cargo, P55,814.00 for unrealized profit with one (1%) percent monthly interest from the filing of the complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as litigation expenses. 8 Sea-Land appealed to the Intermediate Appellate Court. 9 That Court however affirmed the decision of the Trial Court xxx in all its parts ... . 10 Sea-Land thereupon filed the present petition for review which, as already stated, poses the question of whether, upon the facts above set forth, it can be held liable for the loss of the shipment in any amount beyond the limit of US$600.00 per package stipulated in the bill of lading. To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or damage to, goods being transported under said bill ,although that document may have been as in practice it oftentimes is drawn up only by the consignor and the

carrier without the intervention of the consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the Court delved at some length into the reasons behind this when, upon a claim made by the consignee of a motion picture film shipped by air that he was never a party to the contract of transportation and was a complete stranger thereto, it said: But appellant now contends that he is not suing on a breach of contract but on a tort as provided for in Art. 1902 of the Civil Code. We are a little perplexed as to this new theory of the appellant. First, he insists that the articles of the Code of Commerce should be applied: that he invokes the provisions of aid Code governing the obligations of a common carrier to make prompt delivery of goods given to it under a contract of transportation. Later, as already said, he says that he was never a party to the contract of transportation and was a complete stranger to it, and that he is now suing on a tort or a violation of his rights as a stranger (culpa aquiliana) If he does not invoke the contract of carriage entered into with the defendant company, then he would hardly have any leg to stand on. His right to prompt delivery of the can of film at the Phil. Air Port stems and is derived from the contract of carriage under which contract, the PAL undertook to carry the can of film safely and to deliver it to him promptly. Take away or ignore that contract and the obligation to carry and to deliver and right to prompt delivery disappear. Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties. In the present case, the findings of the trial court which as already stated, are accepted by the parties and which we must accept are to the effect that the LVN Pictures Inc. and Jose Mendoza on one side, and the defendant company on the other, entered into a contract of transportation (p. 29, Rec. on Appeal). One interpretation of said finding is that the LVN Pictures Inc. through previous agreement with Mendoza acted as the latter's agent. When he negotiated with the LVN Pictures Inc. to rent the film "Himala ng Birhen" and show it during the Naga town fiesta, he most probably authorized and enjoined the Picture Company to ship the film for him on the PAL on September 17th. Another interpretation is that even if the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza for the time being, made Mendoza as consignee, a stranger to the contract if that is possible, nevertheless when he, Mendoza appeared at the Phil Air Port armed with the copy of the Air Way Bill (Exh. 1) demanding the delivery of the shipment to him, he thereby made himself a party to the contract of transportation. The very citation made by appellant in his memorandum supports this view. Speaking of the possibility of a conflict between the order of the shipper on the one hand and the order of the consignee on the other, as when the shipper orders the shipping company to return or retain the goods shipped while the consignee demands their delivery, Malagarriga in his book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina Court of Appeals on commercial matters, cited by Tolentino in Vol. II of his book entitled "Commentaries and Jurisprudence on the Commercial Laws of the Philippines" p. 209, says that the right of the shipper to countermand the shipment terminates when the consignee or legitimate holder of the bill of lading appears with such big of lading before the carrier and makes himself a party to the contract. Prior to that time he is a stranger to the contract. Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old Civil Code (now Art, 1311, second paragraph) which reads thus:

Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment provided he has given notice of his acceptance to the person bound before the stipulation has been revoked. Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the stipulations of delivery to Mendoza as consignee. His demand for the delivery of the can of film to him at the Phil Air Port may be regarded as a notice of his acceptance of the stipulation of the delivery in his favor contained in the contract of carriage and delivery. In this case he also made himself a party to the contract, or at least has come to court to enforce it. His cause of action must necessarily be founded on its breach. Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is governed by the laws of the country of destination 12 and the goods in question were shipped from the United States to the Philippines, the liability of petitioner Sea-Land to the respondent consignee is governed primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not determined thereby, by the Code of Commerce and special laws. 13 One of these suppletory special laws is the Carriage of Goods by Sea Act, U.S. Public Act No. 521 which was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by Commonwealth Act No. 65, approved on October 22, 1936. Sec. 4(5) of said Act in part reads: (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained. xxx xxx xxx

Clause 22, first paragraph, of the long form bill of lading customarily issued by Sea-Land to its shipping clients 14 is a virtual copy of the first paragraph of the foregoing provision. It says: 22. VALUATION. In the event of any loss, damage or delay to or in connection with goods exceeding in actual value $500 per package, lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, the value of the goods shall be deemed to be $500 per package or per customary freight unit, as the case may be, and the carrier's liability, if any, shall be determined on the basis of a value of $500 per package or customary freight unit, unless the nature and a higher value shall be declared by the shipper in writing before shipment and inserted in this Bill of Lading. And in its second paragraph, the bill states: ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 15

If a value higher than $500 shag have been declared in writing by the shipper upon delivery to the carrier and inserted in this bill of lading and extra freight paid, if required and in such case if the actual value of the goods per package or per customary freight unit shall exceed such declared value, the value shall nevertheless be deemed to be declared value and the carrier's liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value. Since, as already pointed out, Article 1766 of the Civil Code expressly subjects the rights and obligations of common carriers to the provisions of the Code of Commerce and of special laws in matters not regulated by said (Civil) Code, the Court fails to fathom the reason or justification for the Appellate Court's pronouncement in its appealed Decision that the Carriage of Goods by Sea Act " ... has no application whatsoever in this case. 15 Not only is there nothing in the Civil Code which absolutely prohibits agreements between shipper and carrier limiting the latter's liability for loss of or damage to cargo shipped under contracts of carriage; it is also quite clear that said Code in fact has agreements of such character in contemplation in providing, in its Articles 1749 and 1750, that: ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is repugnant to or inconsistent with any of the just-cited provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather general terms of Article 1749 (without doing any violence to the plain intent thereof) and of Article 1750, to give effect to just agreements limiting carriers' liability for loss or damage which are freely and fairly entered into. It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justice and fairness of that law itself, and this the private respondent does not pretend to do. But over and above that consideration, the lust and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding acrrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading. And since the shipper here has not been heard to complaint of having been "rushed," imposed upon or deceived in any significant way into agreeing to ship the cargo under a bill of lading carrying such a stipulation in fact, it does not appear that said party has been heard from at all insofar as this dispute is concerned there is simply no ground for assuming that its agreement thereto was not as the law would require, freely and fairly sought and given.

The private respondent had no direct part or intervention in the execution of the contract of carriage between the shipper and the carrier as set forth in the bill of lading in question. As pointed out in Mendoza vs. PAL, supra, the right of a party in the same situation as respondent here, to recover for loss of a shipment consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may exist between him and the shipper or consignor, or his status as a stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when he demands fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped. In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case 16 where this Court found that a similar package limitation clause was "(printed in the smallest type on the back of the bill of lading, it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed therein by agreement of the parties. There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill. This pro position, moreover, rests upon an almost uniform weight of authority. 17 The issue of alleged deviation is also settled by Clause 13 of the bill of lading which expressly authorizes trans-shipment of the goods at any point in the voyage in these terms: 13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the exercise of its or his discretion and although transshipment or forwarding of the goods may not have been contemplated or provided for herein, may at port of discharge or any other place whatsoever transship or forward the goods or any part thereof by any means at the risk and expense of the goods and at any time, whether before or after loading on the ship named herein and by any route, whether within or outside the scope of the voyage or beyond the port of discharge or destination of the goods and without notice to the shipper or consignee. The carrier or master may delay such transshipping or forwarding for any reason, including but not limited to awaiting a vessel or other means of transportation whether by the carrier or others. Said provision obviates the necessity to offer any other justification for offloading the shipment in question in Manila for transshipment to Cebu City, the port of destination stipulated in the bill of lading. Nonetheless, the Court takes note of Sea-Land's explanation that it only directly serves the Port of Manila from abroad in the usual course of voyage of its carriers, hence its maintenance of arrangements with a local forwarder. Aboitiz and Company, for delivery of its imported cargo to the agreed final point of destination within the Philippines, such arrangements not being prohibited, but in fact recognized, by law. 18 Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea Act is applicable up to the final port of destination and that the fact that transshipment was made on an interisland vessel did not remove the contract of carriage of goods from the operation of said Act.

Private respondent also contends that the aforecited Clauses 22 and 13 of the bill of lading relied upon by petitioner Sea Land form no part of the short-form bill of lading attached to his complaint before the Trial Court and appear only in the long form of that document which, he claims. SeaLand offered (as its Exhibit 2) as an unused blank form with no entries or signatures therein. He, however, admitted in the Trial Court that several times in the past shipments had been delivered to him through Sea-Land, 20 from which the assumption may fairly follow that by the time of the consignment now in question, he was already reasonably apprised of the usual terms covering contracts of carriage with said petitioner. At any rate, as observed earlier, it has already been held that the provisions of the Carriage of Goods by Sea Act on package limitation [sec 4(5) of the Act hereinabove referred to] are as much a part of a bill of lading as though actually placed therein by agreement of the parties. 21 Private respondent, by making claim for loss on the basis of the bill of lading, to all intents and purposes accepted said bill. Having done so, he ... becomes bound by all stipulations contained therein whether on the front or the back thereof. Respondent cannot elude its provisions simply because they prejudice him and take advantage of those that are beneficial. Secondly, the fact that respondent shipped his goods on board the ship of petitioner and paid the corresponding freight thereon shows that he impliedly accepted the bill of lading which was issued in connection with the shipment in question, and so it may be said that the same is finding upon him as if it had been actually signed by him or by any other person in his behalf. ... 22. There is one final consideration. The private respondent admits 23 that as early as on April 22, 1981, Sea-Land had offered to settle his claim for US$4,000.00, the limit of said carrier's liability for loss of the shipment under the bill of lading. This Court having reached the conclusion that said sum is all that is justly due said respondent, it does not appear just or equitable that Sea-Land, which offered that amount in good faith as early as six years ago, should, by being made to pay at the current conversion rate of the dollar to the peso, bear for its own account all of the increase in said rate since the time of the offer of settlement. The decision of the Regional Trial Court awarding the private respondent P186,048.00 as the peso value of the lost shipment is clearly based on a conversion rate of P8.00 to US$1.00, said respondent having claimed a dollar value of $23,256.00 for said shipment. 24 All circumstances considered, it is just and fair that Sea-Land's dollar obligation be convertible at the same rate. WHEREFORE, the Decision of the Intermediate Appellate Court complained of is reversed and set aside. The stipulation in the questioned bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is held valid and binding on private respondent. There being no question of the fact that said shipment consisted of eight (8) cartons or packages, for the loss of which Sea-Land is therefore liable in the aggregate amount of US$4,000.00, it is the judgment of the Court that said petitioner discharge that obligation by paying private respondent the sum of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against private respondent. SO ORDERED. [G.R. No. 143133. June 5, 2002] ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 16

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondent. DECISION PANGANIBAN, J.: Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor. Statement of the Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision[1] and the May 2, 2000 Resolution[2] of the Court of Appeals[3] (CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as follows: WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following: 1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual damages, representing the value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on July 25, 1991, until fully paid; 2) Attorneys fees amounting to 20% of the claim; and 3) Costs of suit.[4] The assailed Resolution denied petitioners Motion for Reconsideration. The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendants counterclaim.[5] The Facts

Despite receipt of a formal demand, defendants-appellees refused to submit to the consignees claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latters rights and causes of action against defendantsappellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured. Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendantsappellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.[6] Ruling of the Trial Court The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law.[7] It likewise debunked petitioners counterclaim, because respondents suit was not manifestly frivolous or primarily intended to harass them.[8] Ruling of the Court of Appeals In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers. The CA further held as inadequately proven petitioners claim that the loss or the deterioration of the goods was due to pre-shipment damage.[9] It likewise opined that the notation metal envelopes rust stained and slightly dented placed on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.[10] As to the extent of petitioners liability, the CA held that the package limitation under COGSA was not applicable, because the words L/C No. 90/02447 indicated that a higher valuation of the cargo had been declared by the shipper. The CA, however, affirmed the award of attorneys fees. Hence, this Petition.[11]

II Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law; III Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and to exempt herein defendants from liability; IV Whether or not the PACKAGE LIMITATION of liability under Section 4 (5) of COGSA is applicable to the case at bar.[12] In sum, the issues boil down to three: 1. Whether petitioners have overcome the presumption of negligence of a common carrier 2. Whether the notice of loss was timely filed 3. Whether the package limitation of liability is applicable This Courts Ruling The Petition is partly meritorious. First Issue: Proof of Negligence Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony offered by private respondent. The contention is untenable. Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.[13] Thus, common carriers are required to render service with the greatest skill and foresight and to use all reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.[14] The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.[15] This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a contract of transportation with common carriers.[16] Even if it wants to, it cannot submit its own stipulations for their approval.[17] Hence, it merely adheres to the agreement prepared by them. Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 17

The factual antecedents of the case are summarized by the Court of Appeals in this wise: On June 13, 1990, CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.

Issues In their Memorandum, petitioners raise the following issues for the Courts consideration: I Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code;

transported deteriorated or got lost or destroyed.[18] That is, unless they prove that they exercised extraordinary diligence in transporting the goods.[19] In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence.[20] However, the presumption of fault or negligence will not arise[21] if the loss is due to any of the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority.[22] This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.[23] Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.[24] That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent.[25] First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany.[26] Second, prior to the unloading of the cargo, an Inspection Report[27] prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage.[29] Fourth, the Certificate of Analysis[30] stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition. These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions of his testimony are reproduce hereunder: Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you are connected? A. BM Santos Checkers Agency, sir. Q. How is BM Santos Checkers Agency related or connected with defendant Jardine Davies Transport Services?

A. It is the company who contracts the checkers, sir. Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities? A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes. xxx xxx xxx

avoid possible deterioration of the cargo. But none of these measures was taken.[38] Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four coils.[39] In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of the Civil Code. They cite the notation metal envelopes rust stained and slightly dented printed on the Bill of Lading as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage. We are not convinced. From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition noted on the Bill of Lading.[40] The aforecited exception refers to cases when goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals.[41] None of these is present in the instant case. Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition.[42] Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the present case.[43] Second Issue: Notice of Loss Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act[44] (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.[45] We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report[46] as to the condition of the goods was prepared and signed by representatives of both parties.[47] Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year.[48] This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.[49] In Loadstar Shipping Co., Inc. v. Court of Appeals,[50] we ruled that a claim is not barred by prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.: Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 18

Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker? A. Yes, sir. Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY? A. Yes, sir, I was there. xxx xxx xxx

Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY? ATTY. MACAMAY: Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is the document itself, Your Honor that shows the condition of the steel sheets. COURT: Let the witness answer. A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides.[32] All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils while in the possession of petitioner,[33] who notably failed to explain why.[34] Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow, to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.[35] True, the words metal envelopes rust stained and slightly dented were noted on the Bill of Lading; however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss.[36] Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit.[37] Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to

In the present case, the cargo was discharged on July 31, 1990, while the Complaint[51] was filed by respondent on July 25, 1991, within the one-year prescriptive period. Third Issue: Package Limitation Assuming arguendo they are liable for respondents claims, petitioners contend that their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)[52] of COGSA.[53] On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or L/C No. 90/02447 in the said Bill of Lading.[54] A bill of lading serves two functions. First, it is a receipt for the goods shipped.[55] Second, it is a contract by which three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities and assume stipulated obligations.[56] In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract.[57] Further, a stipulation in the bill of lading limiting to a certain sum the common carriers liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value[58] -- is sanctioned by law.[59] There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties.[60] The rationale for, this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.[61] It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per package.[62] In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws.[63] Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carriers liability in the absence of a shippers declaration of a higher value in the bill of lading.[64] The provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties.[65] In the case before us, there was no stipulation in the Bill of Lading[66] limiting the carriers liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words L/C No. 90/02447 cannot be the basis for petitioners liability. First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.[67] That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.[68] Second, in Keng Hua Paper Products v. Court of Appeals,[69] we held that a bill of lading was separate from the Other Letter of Credit arrangements. We ruled thus:

(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioners obligation to private respondent arising from the contract of transportation.[70] In the light of the foregoing, petitioners liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.[71] In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court[72] we explained the meaning of package: When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the package referred to in the liability limitation provision of Carriage of Goods by Sea Act. Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as the shipping unit subject to the US$500 limitation. WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs. SO ORDERED. [G.R. No. 122494. October 8, 1998] EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents. DECISION MARTINEZ, J.: Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision[1] of the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional Trial Court of Kalookan City, Branch 126, in Civil Case No. C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value of the lost cargo. Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in

Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by petitioners principal, Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN. Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner. Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126. At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed instead to file their respective memoranda. On July 16, 1993, the trial court rendered judgment[2] in favor of private respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and packaging cost; (c) 10% of the total amount as an award for and as contingent attorneys fees; and (d) to pay the cost of the suit. The trial court ruled: Considering defendants categorical admission of loss and its failure to overcome the presumption of negligence and fault, the Court conclusively finds defendant liable to the plaintiff. The next point of inquiry the Court wants to resolve is the extent of the liability of the defendant. As stated earlier, plaintiff contends that defendant should be held liable for the whole value for the loss of the goods in the amount of Y1,552,500.00 because the terms appearing at the back of the bill of lading was so written in fine prints and that the same was not signed by plaintiff or shipper thus, they are not bound by the clause stated in paragraph 18 of the bill of lading. On the other hand, defendant merely admitted that it lost the shipment but shall be liable only up to the amount of Y100,000.00. The Court subscribes to the provisions of Article 1750 of the New Civil Code Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and freely agreed upon. The requirements provided in Art. 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case at bar, the Court is of the view that the requirements of said article have not been met. The fact that those conditions are printed at the back of the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 19

bill of lading in letters so small that they are hard to read would not warrant the presumption that the plaintiff or its supplier was aware of these conditions such that he had fairly and freely agreed to these conditions. It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff. On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts findings with the additional observation that private respondent can not be bound by the terms and conditions of the bill of lading because it was not privy to the contract of carriage. It said: As to the amount of liability, no evidence appears on record to show that the appellee (Hernandez Trading Co.) consented to the terms of the Bill of Lading. The shipper named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.) contracted with for the transportation of the lost goods. Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of lading when it delivered the cargo to the appellant, still it does not necessarily follow that appellee Hernandez Trading Company as consignee is bound thereby considering that the latter was never privy to the shipping contract. xxx xxx xxx

reasonable and just under the circumstances, and has been freely and fairly agreed upon. Such limited-liability clause has also been consistently upheld by this Court in a number of cases.[3] Thus, in Sea Land Service, Inc. vs Intermediate Appellate Court[4], we ruled: It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading.. Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers liability for loss must be reasonable and just under the circumstances, and has been freely and fairly agreed upon. The bill of lading subject of the present controversy specifically provides, among others: 18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss. The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied) The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. The trial courts ratiocination that private respondent could not have fairly and freely agreed to the limited liability clause in the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid. We ruled in PAL, Inc. vs. Court of Appeals[5] that the jurisprudence on the matter reveals the consistent holding of the court that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof. Also, in Philippine American General Insurance Co., Inc. vs.

Sweet Lines , Inc.[6] this Court , speaking through the learned Justice Florenz D. Regalado, held: x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion wherein one party imposes a ready-made form of contract on the other x x x are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent. In the present case, not even an allegation of ignorance of a party excuses noncompliance with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or consignee as the case may be. (Emphasis supplied) It was further explained in Ong Yiu vs Court of Appeals[7] that stipulations in contracts of adhesion are valid and binding. While it may be true that petitioner had not signed the plane ticket x x, he is nevertheless bound by the provisions thereof. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latters lack of knowledge or assent to the regulation. It is what is known as a contract of adhesion, in regards which it has been said that contracts of adhesion wherein one party imposes a readymade form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. x x x , a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. (Emphasis supplied) Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be carefully scrutinized in order to shield the unwary (or weaker party) from deceptive schemes contained in readymade covenants,[8] such as the bill of lading in question. The stringent requirement which the courts are enjoined to observe is in recognition of Article 24 of the Civil Code which mandates that (i)n all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be ignorant of the business transactions it entered into involving the shipment of its goods to its customers. The shipper could not have known, or should know the stipulations in the bill of lading and there it should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioners vessel. In fact, it was not even impleaded in this case. The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill of lading is bound by the stipulations thereof. Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled: ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 20

Never having entered into a contract with the appellant, appellee should therefore not be bound by any of the terms and conditions in the bill of lading. Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which is not the breach of contract as appellee was never a privy to the any contract with the appellant, but is based on Article 1735 of the New Civil Code, there being no evidence to prove satisfactorily that the appellant has overcome the presumption of negligence provided for in the law. Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in holding that the carriers limited package liability as stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to fully recover the full alleged value of its lost cargo. We shall first resolve the validity of the limited liability clause in the bill of lading. A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide: ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is

To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or damage to goods being transported under said bill, although that document may have been- as in practice it oftentimes is-drawn up only by the consignor and the carrier without the intervention of the consignee. x x x. x x x the right of a party in the same situation as respondent here, to recover for loss of a shipment consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may exist between him and the shipper or consignor, or his status as stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when he demands fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped. In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15) where this Court found that a similar package limitation clause was printed in the smallest type on the back of the bill of lading, it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed therein by agreement of the parties. There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill. This proposition, moreover, rests upon an almost uniform weight of authority. (Underscoring supplied) When private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case against the latter based on the very same bill of lading, it (private respondent) accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it.[9] Thus, private respondent cannot now reject or disregard the carriers limited liability stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in the bill of lading and must respect the same. Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the shipment x x x, the contents of each crate, the dimensions, weight and value of the contents,"[10] as shown in the commercial Invoice No. MTM-941. This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the shipment which consisted of three prepacked crates described in Bill of Lading No. NGO-53MN merely as 3 CASES SPARE PARTS.[11] The bill of lading in question confirms petitioners contention. To defeat the carriers limited liability, the aforecited Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof by the carrier and insert the said declaration in the bill of

lading, with the extra freight paid. These requirements in the bill of lading were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the cargo as contended by private respondent. No other evidence was proffered by private respondent to support is contention. Thus, we are convinced that petitioner should be liable for the full value of the lost cargo. In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading. WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.G.R. CV No. 42803 is hereby REVERSED and SET ASIDE. SO ORDERED.

(a) As compensatory damages for the death of Dominador Mercader -P50,000.00; (b) For the loss of earnings of the late Dominador Mercader -- P1,660,000.00, more or less, based on the average life span of 75 years from the time of his death who earned a net income of P5,000.00 monthly out of his business; (c) Actual damages of P30,000.00 receipted purchases of goods in Manila; P5,750.00 for the first class coffin and a 15-day wake services evidenced by a receipt marked Exh. D; [P]850.00 for the 50 x 60 headstone, receipt marked Exh. E and P1,590.00 -- Deed of Absolute Sale of a burial lot, marked Exh. F; (d) 25% of whatever amount is collected by [respondents] from [petitioners] but no less than P50,000.00 plus P1,000.00 per hearing by way of attorneys fees; (e) As moral damages -- P50,000.00;

[G.R. No. 136048. January 23, 2001] (f) As exemplary damages -- P30,000.00; and JOSE BARITUA and JB LINE, petitioners, vs. NIMFA DIVINA MERCADER in her capacity and as guardian of DARWIN, GIOVANNI, RODEL and DENNIS, all surnamed MERCADER; LEONIDA Vda. de MERCADER on her behalf and on behalf of her minor child MARY JOY MERCADER; SHIRLEY MERCADER DELA CRUZ; MARIA THERESA MERCADER-GARCIA; DANILO MERCADER; JOSE DANTE MERCADER; and JOSEFINA MERCADER, respondents. DECISION PANGANIBAN, J.: The Manchester ruling requiring the payment of docket and other fees as a condition for the acquisition of jurisdiction has no retroactive effect and applies only to cases filed after its finality. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the April 17, 1998 Decision[1] and the October 28, 1998 Resolution[2] of the Court of Appeals (CA) in CA-GR CV No. 40772. The decretal portion of said Decision reads as follows: WHEREFORE, upon all the foregoing premises considered, the DECISION appealed from is AFFIRMED with the MODIFICATION that the loss of earnings of the late Dominador Mercader is reduced to P798,000.00.[3] The assailed Resolution denied petitioners Motion for Reconsideration. The Court of Appeals sustained the Decision of the Regional Trial Court (RTC) of Laoang, Northern Samar (Branch 21). Except for the modification of the loss of earnings, it affirmed all the monetary damages granted by the trial court to respondents. The decretal portion of the assailed RTC Decision reads as follows:[4] WHEREFORE, on preponderance of evidence, judgment is for [herein respondents] and against [herein petitioners], ordering the latter to pay the former: In an Order dated December 11, 1984 the trial court denied the aforesaid motion and admitted the amended complaint of [respondents] impleading Jose Baritua and alleged the following: (10) The late Dominador Mercader is a [b]usinessman mainly engaged in the buy and sell of dry goods in Laoang, N. Samar. He buys his goods from Manila and bring[s] them to Laoang, Northern Samar for sale at his store located in the said locality; (11) Sometime on March 16, 1983, the late Dominador Mercader boarded [petitioners] bus No. 142 with Plate No. 484 EU at [petitioners] Manila Station/terminal, bound for Brgy. Rawis, Laoang Northern Samar as a paying passenger; (12) At that time, Dominador Mercader had with him as his baggage, assorted goods (i.e. long pants, short pants, dusters, etc.) which he likewise loaded in [petitioners] bus; (13) The late Dominador Mercader was not able to reach his destination considering that on March 17, 1983 at Beily (Bugco) Bridge, Barangay Roxas, Mondragon, Northern Samar, while he was on board [petitioners] bus no. 142 ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 21 The original complaint was filed against JB Lines, Inc. [Petitioner JB Lines, Inc.] filed a motion to dismiss complaint, to strike out false-impertinent matters therefrom, and/or for bill of particulars on the primary grounds that [respondents] failed to implead Jose Baritua as an indispensable party and that the cause of action is a suit against a wrong and non-existent party. [Respondents] filed an opposition to the said motion and an amended complaint. (g) To pay the costs. The Facts The antecedents of the case are succinctly summarized by the Court of Appeals in this wise:

with Plate No. 484 EU, the said bus fell into the river as a result of which the late Dominador Mercader died. x x x. (14) The accident happened because [petitioners] driver negligently and recklessly operated the bus at a fast speed in wanton disregard of traffic rules and regulations and the prevailing conditions then existing that caused [the] bus to fall into the river. [Respondents] then filed a motion to declare [petitioners] in default which motion was opposed by [petitioners]. [Respondents] withdrew the said motion prompting the trial court to cancel the scheduled hearing of the said motion to declare [petitioners] in default in an Order dated January 23, 1985. In its answer, [petitioners] denied specifically all the material allegations in the complaint and alleged the following: 2. The alleged person of Dominador Mercader did not board bus 142 at [petitioners] Manila station/terminal x x x as a (supposed paying passenger). There is even no statement in the complaint that Dominador Mercader (if it were true that he was a passenger of bus 142 at the [petitioners] Manila station/terminal) was issued any passenger-freight ticket conformably with law and practice. It is a fact of public knowledge that, in compliance with existing rules and laws, [Petitioner] Baritua, as a public utility operator, issues, thru his conductors, in appropriate situations, to a true passenger, the familiar and known passenger and freight ticket which reads in part: NOTICE Baggage carried at owners risk x x x liability on prepaid freight otherwise declared. xxx xxx xxx

repair, improvement, maintenance, and safety purposes. So that, as a proximate and direct consequence of the aggregate officials nonfeasance, bad faith, negligence, serious inefficiency, and callous indifference to public safety, that Bugko Bridge collapsed inward and caved in ruin, on that March 17, 1983, while Barituas bus 142 was cautiously and prudently passing and travelling across the said bridge, as a result of which the bus fell into the river and sea waters, despite the exercise and compliance by Baritua and his driver of their duties in the matter of their requisite degree of diligence, caution and prudence, Baritua also exercised and complied with the requisite duty of diligence, care, and prudence in the selection and supervision over his driver, contrary to the baseless imputation in paragraphs 14 and 20 of the original and amended complaints. Moreover, Baritua and his driver did not violate any traffic rule and regulation, contrary to plaintiffs insinuation. 5. Furthermore, [Petitioner] Baritua and his driver have no causative connection with the alleged death of Dominador Mercader who, according to a reliable source, was already seriously suffering from a lingering illness even prior to his alleged demise. Baritua also learned lately, and so it is herein alleged that Dominador Mercader contributed considerably, to, and/or provided the proximate and direct cause of his own death, hence, he himself is to be blamed for whatever may have happened to him or for whatever may have been sustained by his supposed heirs, vis--vis the suit against the wrong party. 6. Baritua and his driver, as earlier stated, did not commit any actionable breach of contract with the alleged Dominador Mercader or the latters supposed heirs. 7. There is no factual nor any legal basis for plaintiffs proffered claims for damages. II. AFFIRMATIVE DEFENSES 8. Based on the preceding averments, plaintiffs have neither a cause nor a right of action against [Petitioner] Baritua and his driver. 8.1. The allegation that supposedly the x x x [p]laintiffs are the compulsory heirs of the late DOMINADOR MERCADER x x x (par. 8, complaint) is too vague and too broad, as the subject allegation is a bare and pure conclusionary averment unaccompanied by the requisite statement of ultimate facts constitutive of a cause or right of action. 8.2. Even assuming arguendo, without however conceding, plaintiffs statement of a cause of action, the complaint is nonetheless replete with false and impertinent matters which fit the rule on striking out pleadings or parts thereof. To mention only a glaring few: 8.2.a. The allegation on exemplary damages x x x is impertinent and immaterial in the complaint against a supposed employer. For, even theoretically assuming, without however admitting a negligent act-omission on the part of a driver, nevertheless, in such a hypothetical situation, the causative negligence, if any there was, is personal to the wrongdoer, i.e., the employee-driver, to the exclusion of the employer. 8.2.b. The allegation on supposed minimum life of 75 years and on he expects to earn no less than P1,680,000.00 x x x is false, a pure hyperbole, and bereft of factual and legal basis. Besides, what jurisprudential rule refers to is only net earning. The law abhors a claim, akin to plaintiffs allegation, which is manifestly

speculative, as it may not exist at all. Furthermore, the questioned allegation in the plaintiffs original and amended complaints is not preceded by the requisite statement of definitive facts, nor of any specific fact, which could possibly afford a rational basis for a reasonable expectation of supposed earning that could be lost, or impaired. 8.2.c. Likewise, the allegations that allegedly x x x the late Dominador Mercader boarded x x x Bus No. 142 x x x and that supposedly the latter had a baggage x x x containing drygoods x x x in which case [petitioners have] to pay the value thereof in such amount as may be proven by [respondents] in court during the trial x x x, apart from being false, are offensive to the rule on concise statement of ultimate facts. The assailed allegations also contravene Interim Rule 11, (i)f any demand is for damages in a civil action the amount thereof must be specifically alleged. In consequence of this averment, [respondents] have not yet paid the correct docket fee, for which reason, [respondents] case may be dismissed on that ground alone. 8.3. In violation also of the same Interim Rule 11, regarding the requisite definitive amount of claim, the allegation on the supposed funeral expense x x x does not also indicate any specific amount. So with the averment on supposed moral damage which may not be warranted because of absence of allegation of fraud or bad faith, if any, there was, apart from want of causative connection with the defendant. 8.4. The allegation in paragraph 15 of the original and amended complaint is also a pure conclusionary averment, without a factual premise. 9. [Petitioner] JB LINE, impleaded in the amended complaint, is merely a business name and sole proprietorship of defendant Baritua. As such, JB Line is not a juridical person, nor an entity authorized by law to sue and be sued, hence, it cannot legally be a party to any action. With this averment, correlated with that in paragraphs 4-5 hereof, [respondents] amended complaint is essentially a suit against a wrong party.[5] The RTC, after due trial, rendered the aforesaid assailed Decision. Ruling of the Court of Appeals As earlier stated, the Court of Appeals affirmed the trial courts award of monetary damages in favor of respondents, except the amount of Dominador Mercaders lost earnings, which it reduced to P798,000. It held that petitioners failed to rebut the presumption that in the event a passenger died or was injured, the carrier had acted negligently. Petitioners, it added, presented no sufficient proof that they had exercised extraordinary diligence. Hence, this Petition.[6] The Issues In their Memorandum, petitioners submit the following issues for our consideration: I Did the honorable Court of Appeals (CA) gravely abuse its discretion when it allowed to pass sub silencio the trial courts failure to rule frontally on ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 22

Whole Fare Paid P ______________ Declared value ____________ x x x. Description of Freight _____________________________ Signature of Owner. 3. It is also a fact of public knowledge that [Petitioner] Baritua does not have any Manila station/terminal, because what he has is a Pasay city station. 4. [Petitioner] Baritua had no prior knowledge that, on or about March 17, 1983, and/or previous thereto, the Bugko Bailey Bridge (across Catarman-Laoang road) in Barangay Roxas, Mondragon, Northern Samar, was in virtual dilapida[ted] and dangerous condition, in a state of decay and disrepair, thus calling for the concerned government and public officials performance of their coordinative and joint duties and responsibilities, to repair, improve and maintain that bridge, in good and reasonably safe condition, but, far from performing or complying with said subject duties and responsibilities, the adverted officials concerned, without just cause, not only failed and neglected to cause such needed repair, improvement and maintenance of the Bugko Bailey Bridge, on or prior to March 17, 1983, but also failed, and neglected to either close the Bugko Bridge to public use and travel, and/or to put appropriate warning and cautionary signs, for

petitioners plea for a bill of particulars, and ignored the nature of respondents prayer in the complaint pleading for an award of -a) P12,000.00 -- representing the death compensation; b) An amount to be proven in court, representing actual damages; c) P1,660,000.00 or more as may be proven during the trial, by way of loss of earnings; d) An amount to be proven in court as and by way of funeral expenses; e) An amount to be proven during the trial, representing moral damages; f) An amount to be determined by this Honorable Court, representing exemplary damages; g) An amount equivalent to 25% of whatever amount the plaintiffs would be able to collect from the defendant but in no case less than P50,000.00 plus an additional amount of P1,000.00 per hearing as and by way of Attorneys fees; II Did the CA also ignore the fact that the trial court was not paid the correct amount of the docket and other lawful fees; hence, without jurisdiction over the original and amended complaints or over the subject matter of the case; III Did the CA likewise arbitrarily disregard petitioners constitutional right to procedural due process and fairness when it ignored and thrust aside their right to present evidence and to expect that their evidence will be duly considered and appreciated; and IV In awarding excessive and extravagant damages, did the CA and the trial court adhere to the rule that their assailed decision must state clearly and distinctly the facts and the laws on which they are based?[7] Distilling the alleged errors cited above, petitioners raise two main issues for our consideration: (1) whether the CA erred in holding that the RTC had jurisdiction over the subject matter of the case, and (2) whether the CA disregarded petitioners procedural rights. The Courts Ruling The Petition is devoid of merit.

The Court, in Manchester Development Corporation v. CA,[8] held that [t]he court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the court, much less the payment of the docket fee based on the amounts sought in the amended pleading. x x x. Generally, the jurisdiction of a court is determined by the statute in force at the commencement of the action,[9] unless such statute provides for its retroactive application.[10] Once the jurisdiction of a court attaches, it continues until the case is finally terminated.[11] The trial court cannot be ousted therefrom by subsequent happenings or events, although of a character that would have prevented jurisdiction from attaching in the first instance.[12] The Manchester ruling, which became final in 1987, has no retroactive application and cannot be invoked in the subject Complaint filed in 1984. The Court explicitly declared: To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings should specify the amount of damages being prayed for not only in the body of the pleading but also in the prayer, and said damages shall be considered in the assessment of the filing fees in any case. Any pleading that fails to comply with this requirement shall not be accepted nor admitted, or shall otherwise be expunged from the record.[13] (emphasis supplied) Second Issue: Petitioners Procedural Rights Motion for a Bill of Particulars Petitioners argue that the Court of Appeals erred when it passed sub silencio on the trial courts failure to rule frontally on their plea for a bill of particulars. We are not impressed. It must be noted that petitioners counsel manifested in open court his desire to file a motion for a bill of particulars. The RTC gave him ten days from March 12, 1985 within which to do so.[14] He, however, filed the aforesaid motion only on April 2, 1985 or eleven days past the deadline set by the trial court.[15] Moreover, such motion was already moot and academic because, prior to its filing, petitioners had already filed their answer and several other pleadings to the amended Complaint. Section 1, Rule 12 of the Rules of Court, provides: Section 1. When applied for; purpose. -- Before responding to a pleading, a party may move for a more definite statement or for a bill of particulars of any matter which is not averred with sufficient definiteness or particularity to enable him properly to prepare his responsive pleading. If the pleading is a reply, the motion must be filed within ten (10) days from service thereof. Such motion shall point out the defects complained of, the paragraphs wherein they are contained, and the details desired.[16] (emphasis supplied) Petitioners Right to Adduce Evidence

in an overzealous manner and assum[ed] the dual role of magistrate and advocate.[17] These arguments are not meritorious. First, judges cannot be expected to rely on the testimonies of every witness. In ascertaining the facts, they determine who are credible and who are not. In doing so, they consider all the evidence before them. In other words, the mere fact that Judge Noynay based his decision on the testimonies of respondents witnesses does not necessarily mean that he did not consider those of petitioners. Second, we find no sufficient showing that Judge Operario was overzealous in questioning the witnesses. His questions merely sought to clarify their testimonies. In all, we reject petitioners contention that their right to adduce evidence was violated. Alleged Failure to State Clearly the Facts and the Law We are not convinced by petitioners contention, either, that both the trial and the appellate courts failed to state clearly and distinctly the facts and the law involved in the case. As can be gleaned from their Decisions, both courts clearly laid down their bases for awarding monetary damages to respondents. Both the RTC and the CA found that a contract of carriage existed between petitioners and Dominador Mercader when he boarded Bus No. 142 in Pasay City on March 16, 1983. Petitioners failed to transport him to his destination, because the bus fell into a river while traversing the Bugko Bailey Bridge. Although he survived the fall, he later died of asphyxia secondary to drowning. We agree with the findings of both courts that petitioners failed to observe extraordinary diligence[18] that fateful morning. It must be noted that a common carrier, by the nature of its business and for reasons of public policy, is bound to carry passengers safely as far as human care and foresight can provide. It is supposed to do so by using the utmost diligence of very cautious persons, with due regard for all the circumstances.[19] In case of death or injuries to passengers, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence as prescribed in Articles 1733 and 1755[20] of the Civil Code. We sustain the ruling of the CA that petitioners failed to prove that they had observed extraordinary diligence. First, petitioners did not present evidence on the skill or expertise of the driver of Bus No. 142 or the condition of that vehicle at the time of the incident. Second, the bus was overloaded at the time. In fact, several individuals were standing when the incident occurred.[21] Third, the bus was overspeeding. Its conductor testified that it had overtaken several buses before it reached the Bugko Bailey Bridge.[22] Moreover, prior to crossing the bridge, it had accelerated and maintained its speed towards the bridge.[23] We therefore believe that there is no reason to overturn the assailed CA Decision, which affirmed that of the RTC. It is a well-settled rule that the trial courts factual findings, when affirmed by the appellate court, are conclusive and binding, if they are not tainted with arbitrariness or oversight of some fact or circumstance of significance and influence.[24] As clearly discussed above, ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 23

First Issue: Jurisdiction Petitioners contend that since the correct amounts of docket and other lawful fees were not paid by respondents, then the trial court did not acquire jurisdiction over the subject matter of the case. Petitioners also argue that their right to present evidence was violated by the CA, because it did not consider their contention that the trial judges who heard the case were biased and impartial. Petitioners contend, as they did before the CA, that Judge Tomas B. Noynay based his Decision on certain chosen partial testimonies of [respondents] witnesses x x x. They further maintain that Judge Fortunato Operario, who initially handled the case, questioned some witnesses

petitioners have not presented sufficient ground to warrant a deviation from this rule. Finally, we cannot fault the appellate court in its computation of the damages and lost earnings, since it effectively computed only net earnings in accordance with existing jurisprudence.[25] WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED. Costs against petitioners. SO ORDERED. [G.R. No. 118664. August 7, 1998] JAPAN AIRLINES, petitioner, vs. THE COURT OF APPEALS ENRIQUE AGANA, MARIA ANGELA NINA AGANA, ADALIA B. FRANCISCO and JOSE MIRANDA, respondents. DECISION ROMERO, J.: Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal of the decision of the Court of Appeals,[1] which affirmed with modification the award of damages made by the trial court in favor of herein private respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose Miranda. On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San Francisco, California bound for Manila. Likewise, on the same day private respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left Los Angeles, California for Manila via JAL flight No. JL 061. As an incentive for travelling on the said airline, both flights were to make an overnight stopover at Narita, Japan, at the airlines expense, thereafter proceeding to Manila the following day. Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita for the night. The next day, private respondents, on the final leg of their journey, went to the airport to take their flight to Manila. However, due to the Mt. Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International Airport (NAIA), rendering it inaccessible to airline traffic. Hence, private respondents trip to Manila was cancelled indefinitely. To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers on flight No. 741 due to depart on June 16, 1991 and also paid for the hotel expenses for their unexpected overnight stay. On June 16, 1991, much to the dismay of the private respondents, their long anticipated flight to Manila was again cancelled due to NAIAs indefinite closure. At this point, JAL informed the private respondents that it would no longer defray their hotel and accommodation expense during their stay in Narita. Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to pay for their accommodations and meal expenses from their personal funds from June 16 to June 21, 1991. Their unexpected stay in Narita ended on June 22, 1991 when they arrived in Manila on board JL flight No. 741.

Obviously, still reeling from the experience, private respondents, on July 25, 1991, commenced an action for damages against JAL before the Regional Trial Court of Quezon City, Branch 104.[2] To support their claim, private respondents asserted that JAL failed to live up to its duty to provide care and comfort to its stranded passengers when it refused to pay for their hotel and accommodation expenses from June 16 to 21, 1991 at Narita, Japan. In other words, they insisted that JAL was obligated to shoulder their expenses as long as they were still stranded in Narita. On the other hand, JAL denied this allegation and averred that airline passengers have no vested right to these amenities in case a flight is cancelled due to force majeure. On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL liable for damages, viz.: WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant Japan Airlines to pay the plaintiffs Enrique Agana, Adalia B. Francisco and Maria Angela Nina Agana the sum of One million Two Hundred forty-six Thousand Nine Hundred Thirty-Six Pesos (P1,246,936.00) and Jose Miranda the sum of Three Hundred Twenty Thousand Six Hundred sixteen and 31/100 (P320,616.31) as actual, moral and exemplary damages and pay attorneys fees in the amount of Two Hundred Thousand Pesos (P200,000.00), and to pay the costs of suit. Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the exception of lowering the damages awarded affirmed the trial courts finding,[3] thus: Thus, the award of moral damages should be as it is hereby reduced to P200,000.00 for each of the plaintiffs, the exemplary damages to P300,000.00 and the attorneys fees to P100,000.00 plus the costs. WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby AFFIRMED in all other respects. JAL filed a motion for reconsideration which proved futile and unavailing.[4] Failing in its bid to reconsider the decision, JAL has now filed this instant petition. The issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of its stranded passengers until they have reached their final destination, even if the delay were caused by force majeure. To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to Manila on schedule. Likewise, private respondents concede that such event can be considered as force majeure since their delayed arrival in Manila was not imputable to JAL.[5] However, private respondents contend that while JAL cannot be held responsible for the delayed arrival in Manila, it was nevertheless liable for their living expenses during their unexpected stay in Narita since airlines have the obligation to ensure the comfort and convenience of its passengers. While we sympathize with the private respondents plight, we are unable to accept this contention.

We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a contract to transport passengers is quite different in kind and degree from any other contractual relation. It is safe to conclude that it is a relationship imbued with public interest. Failure on the part of the common carrier to live up to the exacting standards of care and diligence renders it liable for any damages that may be sustained by its passengers. However, this is not to say that common carriers are absolutely responsible for all injuries or damages even if the same were caused by a fortuitous event. To rule otherwise would render the defense of force majeure, as an exception from any liability, illusory and ineffective. Accordingly, there is no question that when a party is unable to fulfill his obligation because of force majeure, the general rule is that he cannot be held liable for damages for non-performance.[6] Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991. Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for the private respondents. To be sure, they underwent distress and anxiety during their unanticipated stay in Narita, but their predicament was not due to the fault or negligence of JAL but the closure of NAIA to international flights. Indeed, to hold JAL, in the absence of bad faith or negligence, liable for the amenities of its stranded passengers by reason of a fortuitous event is too much of a burden to assume. Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel.[7] In this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of which the passenger must assume or expect. After all, common carriers are not the insurer of all risks.[8] Paradoxically, the Court of Appeals, despite the presence of force majeure, still ruled against JAL relying in our decision in PAL v. Court of Appeals,[9] thus: The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PALs diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PALs contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carriers premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place. The reliance is misplaced. The factual background of the PAL case is different from the instant petition. In that case there was indeed a fortuitous event resulting in the diversion of the PAL flight. However, the unforeseen diversion was worsened when private respondents (passenger) was left at the airport and ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 24

could not even hitch a ride in a Ford Fiera loaded with PAL personnel,[10] not to mention the apparent apathy of the PAL station manager as to the predicament of the stranded passengers.[11] In light of these circumstances, we held that if the fortuitous event was accompanied by neglect and malfeasance by the carriers employees, an action for damages against the carrier is permissible. Unfortunately, for private respondents, none of these conditions are present in the instant petition. We are not prepared, however, to completely absolve petitioner JAL from any liability. It must be noted that private respondents bought tickets from the United States with Manila as their final destination. While JAL was no longer required to defray private respondents living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private respondents from transit passengers to new passengers as a result of which private respondents were obliged to make the necessary arrangements themselves for the next flight to Manila. Private respondents were placed on the waiting list from June 20 to June 24. To assure themselves of a seat on an available flight, they were compelled to stay in the airport the whole day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised that they could be accommodated in said flight which flew at about 9:00 a.m. the next day. We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21, 1991 caused considerable disruption in passenger booking and reservation. In fact, it would be unreasonable to expect, considering NAIAs closure, that JAL flight operations would be normal on the days affected. Nevertheless, this does not excuse JAL from its obligation to make the necessary arrangements to transport private respondents on its first available flight to Manila. After all, it had a contract to transport private respondents from the United States to Manila as their final destination. Consequently, the award of nominal damages is in order. Nominal damages are adjudicated in order that a right of a plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying any loss suffered by him.[12] The court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in every case where any property right has been invaded.[13] WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22, 1993 is hereby MODIFIED. The award of actual, moral and exemplary damages is hereby DELETED. Petitioner JAL is ordered to pay each of the private respondents nominal damages in the sum of P100,000.00 each including attorneys fees of P50,000.00 plus costs. SO ORDERED. [G.R. No. 138060. September 1, 2004] WILLIAM TIU, doing business under the name and style of D Rough Riders, and VIRGILIO TE LAS PIAS petitioners, vs. PEDRO A. ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO and PHILIPPINE PHOENIX SURETY AND INSURANCE, INC., respondents.

DECISION CALLEJO, SR., J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision[1] of the Court of Appeals in CA-G.R. CV No. 54354 affirming with modification the Decision[2] of the Regional Trial Court, 7th Judicial Region, Cebu City, Branch 20, in Civil Case No. CEB-5963 for breach of contract of carriage, damages and attorneys fees, and the Resolution dated February 26, 1999 denying the motion for reconsideration thereof. The following facts are undisputed: At about 10:00 p.m. of March 15, 1987, the cargo truck marked Condor Hollow Blocks and General Merchandise bearing plate number GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires exploded. The driver, Sergio Pedrano, then parked along the right side of the national highway and removed the damaged tire to have it vulcanized at a nearby shop, about 700 meters away.[3] Pedrano left his helper, Jose Mitante, Jr. to keep watch over the stalled vehicle, and instructed the latter to place a spare tire six fathoms away[4] behind the stalled truck to serve as a warning for oncoming vehicles. The trucks tail lights were also left on. It was about 12:00 a.m., March 16, 1987. At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP -724 driven by Virgilio Te Laspias was cruising along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu City, and had come from Maya, Daanbantayan, Cebu. Among its passengers were the Spouses Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side of the bus, about three (3) or four (4) places from the front seat. As the bus was approaching the bridge, Laspias saw the stalled truck, which was then about 25 meters away.[5] He applied the breaks and tried to swerve to the left to avoid hitting the truck. But it was too late; the bus rammed into the trucks left rear. The impact damaged the right side of the bus and left several passengers injured. Pedro Arriesgado lost consciousness and suffered a fracture in his right colles.[6] His wife, Felisa, was brought to the Danao City Hospital. She was later transferred to the Southern Island Medical Center where she died shortly thereafter.[7] Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage, damages and attorneys fees before the Regional Trial Court of Cebu City, Branch 20, against the petitioners, D Rough Riders bus operator William Tiu and his driver, Virgilio Te Laspias on May 27, 1987. The respondent alleged that the passenger bus in question was cruising at a fast and high speed along the national road, and that petitioner Laspias did not take precautionary measures to avoid the accident.[8] Thus: 6. That the accident resulted to the death of the plaintiffs wife, Felisa Pepito Arriesgado, as evidenced by a Certificate of Death, a xerox copy of which is hereto attached as integral part hereof and marked as ANNEX A, and physical injuries to several of its passengers, including plaintiff himself who suffered a COLLES FRACTURE RIGHT, per Medical Certificate, a xerox copy of which is hereto attached as integral part hereof and marked as ANNEX B hereof. 7. That due to the reckless and imprudent driving by defendant Virgilio Te Laspias of the said Rough Riders passenger bus, plaintiff and his wife, Felisa Pepito Arriesgado, failed to safely reach their destination which was Cebu City, the proximate cause of which was defendant-drivers failure to observe utmost diligence required of a very cautious person under all circumstances. 8. That defendant William Tiu, being the owner and operator of the said Rough Riders passenger bus which figured in the said accident, wherein plaintiff and his wife were riding at the time of the accident, is therefore directly liable for the breach of contract of carriage for his failure to transport plaintiff and his wife safely to their place of destination which was Cebu City, and which failure in his obligation to transport safely his passengers was due to and in consequence of his failure to exercise the diligence of a good father of the family in the selection and supervision of his employees, particularly defendant-driver Virgilio Te Laspias.[9] The respondent prayed that judgment be rendered in his favor and that the petitioners be condemned to pay the following damages: 1). To pay to plaintiff, jointly and severally, the amount of P30,000.00 for the death and untimely demise of plaintiffs wife, Felisa Pepito Arriesgado; 2). To pay to plaintiff, jointly and severally, the amount of P38,441.50, representing actual expenses incurred by the plaintiff in connection with the death/burial of plaintiffs wife; 3). To pay to plaintiff, jointly and severally, the amount of P1,113.80, representing medical/hospitalization expenses incurred by plaintiff for the injuries sustained by him; 4). To pay to plaintiff, jointly and severally, the amount of P50,000.00 for moral damages; 5). To pay to plaintiff, jointly and severally, the amount of P50,000.00 by way of exemplary damages; 6). To pay to plaintiff, jointly and severally, the amount of P20,000.00 for attorneys fees; 7). To pay to plaintiff, jointly and severally, the amount of P5,000.00 for litigation expenses. PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN LAW AND EQUITY.[10] The petitioners, for their part, filed a Third-Party Complaint[11] on August 21, 1987 against the following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tius insurer; respondent Benjamin Condor, the registered owner of the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They alleged that petitioner Laspias was negotiating the uphill climb along the national highway of Sitio Aggies, Poblacion, Compostela, in a moderate and normal speed. It was further alleged that the truck was parked in a slanted manner, its rear portion almost in the middle of the highway, and that no early warning device was displayed. Petitioner Laspias promptly applied the brakes and swerved to the left to avoid hitting the truck head-on, but despite his efforts ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 25

to avoid damage to property and physical injuries on the passengers, the right side portion of the bus hit the cargo trucks left rear. The petitioners further alleged, thus: 5. That the cargo truck mentioned in the aforequoted paragraph is owned and registered in the name of the third-party defendant Benjamin Condor and was left unattended by its driver Sergio Pedrano, one of the third-party defendants, at the time of the incident; 6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with marked (sic) Condor Hollow Blocks & General Merchandise, with Plate No. GBP-675 which was recklessly and imprudently parked along the national highway of Compostela, Cebu during the vehicular accident in question, and third-party defendant Benjamin Condor, as the registered owner of the cargo truck who failed to exercise due diligence in the selection and supervision of third-party defendant Sergio Pedrano, are jointly and severally liable to the thirdparty plaintiffs for whatever liability that may be adjudged against said thirdparty plaintiffs or are directly liable of (sic) the alleged death of plaintiffs wife; 7. That in addition to all that are stated above and in the answer which are intended to show reckless imprudence on the part of the third-party defendants, the third-party plaintiffs hereby declare that during the vehicular accident in question, third-party defendant was clearly violating Section 34, par. (g) of the Land Transportation and Traffic Code 10. That the aforesaid passenger bus, owned and operated by third-party plaintiff William Tiu, is covered by a common carrier liability insurance with Certificate of Cover No. 054940 issued by Philippine Phoenix Surety and Insurance, Inc., Cebu City Branch, in favor of third-party plaintiff William Tiu which covers the period from July 22, 1986 to July 22, 1987 and that the said insurance coverage was valid, binding and subsisting during the time of the aforementioned incident (Annex A as part hereof); 11. That after the aforesaid alleged incident, third-party plaintiff notified thirdparty defendant Philippine Phoenix Surety and Insurance, Inc., of the alleged incident hereto mentioned, but to no avail; 12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be adversely adjudged, they stand to pay damages sought by the plaintiff and therefore could also look up to the Philippine Phoenix Surety and Insurance, Inc., for contribution, indemnification and/or reimbursement of any liability or obligation that they might [be] adjudged per insurance coverage duly entered into by and between third-party plaintiff William Tiu and third-party defendant Philippine Phoenix Surety and Insurance, Inc.;[12] The respondent PPSII, for its part, admitted that it had an existing contract with petitioner Tiu, but averred that it had already attended to and settled the claims of those who were injured during the incident.[13] It could not accede to the claim of respondent Arriesgado, as such claim was way beyond the scheduled indemnity as contained in the contract of insurance. [14] After the parties presented their respective evidence, the trial court ruled in favor of respondent Arriesgado. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff as against defendant William Tiu ordering the latter to pay the plaintiff the following amounts: 1 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages; 2 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages; 3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE PESOS (P38,441.00) as actual damages; 4 - The sum of TWENTY THOUSAND PESOS (P20,000.00) as attorneys fees; 5 - The sum of FIVE THOUSAND PESOS (P5,000.00) as costs of suit; SO ORDERED.[15]

FACTUAL BASIS IN AWARDING EXCESSIVE MORAL DAMAGES, EX[E]MPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES TO PLAINTIFF APPELLEE; VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. IS LIABLE TO DEFENDANT- APPELLANT WILLIAM TIU.[17] The appellate court rendered judgment affirming the trial courts decision with the modification that the awards for moral and exemplary damages were reduced to P25,000. The dispositive portion reads: WHEREFORE, the appealed Decision dated November 6, 1995 is hereby MODIFIED such that the awards for moral and exemplary damages are each reduced to P25,000.00 or a total of P50,000.00 for both. The judgment is AFFIRMED in all other respects. SO ORDERED.[18]

According to the trial court, there was no dispute that petitioner William Tiu was engaged in business as a common carrier, in view of his admission that D Rough Rider passenger bus which figured in the accident was owned by him; that he had been engaged in the transportation business for 25 years with a sole proprietorship; and that he owned 34 buses. The trial court ruled that if petitioner Laspias had not been driving at a fast pace, he could have easily swerved to the left to avoid hitting the truck, thus, averting the unfortunate incident. It then concluded that petitioner Laspias was negligent. The trial court also ruled that the absence of an early warning device near the place where the truck was parked was not sufficient to impute negligence on the part of respondent Pedrano, since the tail lights of the truck were fully on, and the vicinity was well lighted by street lamps.[16] It also found that the testimony of petitioner Tiu, that he based the selection of his driver Laspias on efficiency and in-service training, and that the latter had been so far an efficient and good driver for the past six years of his employment, was insufficient to prove that he observed the diligence of a good father of a family in the selection and supervision of his employees. After the petitioners motion for reconsideration of the said decision was denied, the petitioners elevated the case to the Court of Appeals on the following issues: I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS AND IMPRUDENT WHEN HE PARKED THE CARGO TRUCK IN AN OBLIQUE MANNER; II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY LIABLE DIRECTLY TO PLAINTIFF-APPELLEE OR TO DEFENDANTS-APPELLANTS FOR WHATEVER LIABILITY THAT MAY BE ADJUDGED TO THE SAID DEFENDANTSAPPELLANTS; III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIAS WAS GUILTY OF GROSS NEGLIGENCE; IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE DUE DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF HIS DRIVERS; V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT WILLIAM TIU IS LIABLE TO PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL AND

According to the appellate court, the action of respondent Arriesgado was based not on quasi-delict but on breach of contract of carriage. As a common carrier, it was incumbent upon petitioner Tiu to prove that extraordinary diligence was observed in ensuring the safety of passengers during transportation. Since the latter failed to do so, he should be held liable for respondent Arriesgados claim. The CA also ruled that no evidence was presented against the respondent PPSII, and as such, it could not be held liable for respondent Arriesgados claim, nor for contribution, indemnification and/or reimbursement in case the petitioners were adjudged liable. The petitioners now come to this Court and ascribe the following errors committed by the appellate court: I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING RESPONDENTS BENJAMIN CONDOR AND SERGIO PEDRANO GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONERS FOR WHATEVER LIABILITY THAT MAY BE ADJUDGED AGAINST THEM. II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A. ARRIESGADO. III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER WILLIAM TIU LIABLE FOR EXEMPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES. IV.THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. LIABLE TO RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONER WILLIAM TIU.[19] According to the petitioners, the appellate court erred in failing to appreciate the absence of an early warning device and/or built-in reflectors at the front and back of the cargo truck, in clear violation of Section 34, par. (g) of the Land Transportation and Traffic Code. They aver that such violation is only a proof of respondent Pedranos negligence, as provided under Article 2185 of the New Civil Code. They also question the appellate courts failure to take into account that the truck was parked in an oblique manner, its rear portion almost at the center of the road. As such, the proximate cause of the incident was the gross ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 26

recklessness and imprudence of respondent Pedrano, creating the presumption of negligence on the part of respondent Condor in supervising his employees, which presumption was not rebutted. The petitioners then contend that respondents Condor and Pedrano should be held jointly and severally liable to respondent Arriesgado for the payment of the latters claim. The petitioners, likewise, aver that expert evidence should have been presented to prove that petitioner Laspias was driving at a very fast speed, and that the CA could not reach such conclusion by merely considering the damages on the cargo truck. It was also pointed out that petitioner Tiu presented evidence that he had exercised the diligence of a good father of a family in the selection and supervision of his drivers. The petitioners further allege that there is no legal and factual basis to require petitioner Tiu to pay exemplary damages as no evidence was presented to show that the latter acted in a fraudulent, reckless and oppressive manner, or that he had an active participation in the negligent act of petitioner Laspias. Finally, the petitioners contend that respondent PPSII admitted in its answer that while it had attended to and settled the claims of the other injured passengers, respondent Arriesgados claim remained unsettled as it was beyond the scheduled indemnity under the insurance contract. The petitioners argue that said respondent PPSII should have settled the said claim in accordance with the scheduled indemnity instead of just denying the same. On the other hand, respondent Arriesgado argues that two of the issues raised by the petitioners involved questions of fact, not reviewable by the Supreme Court: the finding of negligence on the part of the petitioners and their liability to him; and the award of exemplary damages, attorneys fees and litigation expenses in his favor. Invoking the principle of equity and justice, respondent Arriesgado pointed out that if there was an error to be reviewed in the CA decision, it should be geared towards the restoration of the moral and exemplary damages to P50,000 each, or a total of P100,000 which was reduced by the Court of Appeals to P25,000 each, or a total of only P50,000. Respondent Arriesgado also alleged that respondents Condor and Pedrano, and respondent Phoenix Surety, are parties with whom he had no contract of carriage, and had no cause of action against. It was pointed out that only the petitioners needed to be sued, as driver and operator of the ill-fated bus, on account of their failure to bring the Arriesgado Spouses to their place of destination as agreed upon in the contract of carriage, using the utmost diligence of very cautious persons with due regard for all circumstances. Respondents Condor and Pedrano point out that, as correctly ruled by the Court of Appeals, the proximate cause of the unfortunate incident was the fast speed at which petitioner Laspias was driving the bus owned by petitioner Tiu. According to the respondents, the allegation that the truck was not equipped with an early warning device could not in any way have prevented the incident from happening. It was also pointed out that respondent Condor had always exercised the due diligence required in the selection and supervision of his employees, and that he was not a party to the contract of carriage between the petitioners and respondent Arriesgado. Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner Tiu, it settled all the claims of those injured in accordance with the insurance contract. It further avers that it did not deny respondent Arriesgados claim, and

emphasizes that its liability should be within the scheduled limits of indemnity under the said contract. The respondent concludes that while it is true that insurance contracts are contracts of indemnity, the measure of the insurers liability is determined by the insureds compliance with the terms thereof. The Courts Ruling At the outset, it must be stressed that this Court is not a trier of facts.[20] Factual findings of the Court of Appeals are final and may not be reviewed on appeal by this Court, except when the lower court and the CA arrived at diverse factual findings.[21] The petitioners in this case assail the finding of both the trial and the appellate courts that petitioner Laspias was driving at a very fast speed before the bus owned by petitioner Tiu collided with respondent Condors stalled truck. This is clearly one of fact, not reviewable by the Court in a petition for review under Rule 45.[22] On this ground alone, the petition is destined to fail. However, considering that novel questions of law are likewise involved, the Court resolves to examine and rule on the merits of the case. Petitioner Laspias Was negligent in driving The Ill-fated bus In his testimony before the trial court, petitioner Laspias claimed that he was traversing the two-lane road at Compostela, Cebu at a speed of only forty (40) to fifty (50) kilometers per hour before the incident occurred.[23] He also admitted that he saw the truck which was parked in an oblique position at about 25 meters before impact,[24] and tried to avoid hitting it by swerving to the left. However, even in the absence of expert evidence, the damage sustained by the truck[25] itself supports the finding of both the trial court and the appellate court, that the D Rough Rider bus driven by petitioner Laspias was traveling at a fast pace. Since he saw the stalled truck at a distance of 25 meters, petitioner Laspias had more than enough time to swerve to his left to avoid hitting it; that is, if the speed of the bus was only 40 to 50 kilometers per hour as he claimed. As found by the Court of Appeals, it is easier to believe that petitioner Laspias was driving at a very fast speed, since at 4:45 a.m., the hour of the accident, there were no oncoming vehicles at the opposite direction. Petitioner Laspias could have swerved to the left lane with proper clearance, and, thus, could have avoided the truck.[26] Instinct, at the very least, would have prompted him to apply the breaks to avert the impending disaster which he must have foreseen when he caught sight of the stalled truck. As we had occasion to reiterate: A man must use common sense, and exercise due reflection in all his acts; it is his duty to be cautious, careful and prudent, if not from instinct, then through fear of recurring punishment. He is responsible for such results as anyone might foresee and for acts which no one would have performed except through culpable abandon. Otherwise, his own person, rights and property, and those of his fellow beings, would ever be exposed to all manner of danger and injury.[27] We agree with the following findings of the trial court, which were affirmed by the CA on appeal: A close study and evaluation of the testimonies and the documentary proofs submitted by the parties which have direct bearing on the issue of negligence,

this Court as shown by preponderance of evidence that defendant Virgilio Te Laspias failed to observe extraordinary diligence as a driver of the common carrier in this case. It is quite hard to accept his version of the incident that he did not see at a reasonable distance ahead the cargo truck that was parked when the Rough Rider [Bus] just came out of the bridge which is on an (sic) [more] elevated position than the place where the cargo truck was parked. With its headlights fully on, defendant driver of the Rough Rider was in a vantage position to see the cargo truck ahead which was parked and he could just easily have avoided hitting and bumping the same by maneuvering to the left without hitting the said cargo truck. Besides, it is (sic) shown that there was still much room or space for the Rough Rider to pass at the left lane of the said national highway even if the cargo truck had occupied the entire right lane thereof. It is not true that if the Rough Rider would proceed to pass through the left lane it would fall into a canal considering that there was much space for it to pass without hitting and bumping the cargo truck at the left lane of said national highway. The records, further, showed that there was no incoming vehicle at the opposite lane of the national highway which would have prevented the Rough Rider from not swerving to its left in order to avoid hitting and bumping the parked cargo truck. But the evidence showed that the Rough Rider instead of swerving to the still spacious left lane of the national highway plowed directly into the parked cargo truck hitting the latter at its rear portion; and thus, the (sic) causing damages not only to herein plaintiff but to the cargo truck as well.[28] Indeed, petitioner Laspias negligence in driving the bus is apparent in the records. By his own admission, he had just passed a bridge and was traversing the highway of Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the collision occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per hour.[29] And, as correctly pointed out by the trial court, petitioner Laspias also violated Section 35 of the Land Transportation and Traffic Code, Republic Act No. 4136, as amended: Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and or any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead.[30] Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at the time of the mishap, he was violating any traffic regulation.[31] Petitioner Tiu failed to Overcome the presumption Of negligence against him as One engaged in the business Of common carriage The rules which common carriers should observe as to the safety of their passengers are set forth in the Civil Code, Articles 1733,[32] 1755[33] and 1756.[34] In this case, respondent Arriesgado and his deceased wife contracted with petitioner Tiu, as owner and operator of D Rough Riders bus service, for transportation from Maya, Daanbantayan, Cebu, to Cebu City for the price of P18.00.[35] It is undisputed that the respondent and his wife were not safely transported to the destination agreed upon. In actions for breach of contract, ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 27

only the existence of such contract, and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination are the matters that need to be proved.[36] This is because under the said contract of carriage, the petitioners assumed the express obligation to transport the respondent and his wife to their destination safely and to observe extraordinary diligence with due regard for all circumstances.[37] Any injury suffered by the passengers in the course thereof is immediately attributable to the negligence of the carrier.[38] Upon the happening of the accident, the presumption of negligence at once arises, and it becomes the duty of a common carrier to prove that he observed extraordinary diligence in the care of his passengers.[39] It must be stressed that in requiring the highest possible degree of diligence from common carriers and in creating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers.[40] While evidence may be submitted to overcome such presumption of negligence, it must be shown that the carrier observed the required extraordinary diligence, which means that the carrier must show the utmost diligence of very cautious persons as far as human care and foresight can provide, or that the accident was caused by fortuitous event.[41] As correctly found by the trial court, petitioner Tiu failed to conclusively rebut such presumption. The negligence of petitioner Laspias as driver of the passenger bus is, thus, binding against petitioner Tiu, as the owner of the passenger bus engaged as a common carrier.[42] The Doctrine of Last Clear Chance Is Inapplicable in the Case at Bar Contrary to the petitioners contention, the principle of last clear chance is inapplicable in the instant case, as it only applies in a suit between the owners and drivers of two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations, for it would be inequitable to exempt the negligent driver and its owner on the ground that the other driver was likewise guilty of negligence.[43] The common law notion of last clear chance permitted courts to grant recovery to a plaintiff who has also been negligent provided that the defendant had the last clear chance to avoid the casualty and failed to do so. Accordingly, it is difficult to see what role, if any, the common law of last clear chance doctrine has to play in a jurisdiction where the common law concept of contributory negligence as an absolute bar to recovery by the plaintiff, has itself been rejected, as it has been in Article 2179 of the Civil Code.[44] Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgados wife due to the negligence of petitioner Laspias, his employee, on this score. Respondents Pedrano and Condor were likewise Negligent In Phoenix Construction, Inc. v. Intermediate Appellate Court,[45] where therein respondent Dionisio sustained injuries when his vehicle rammed against a dump truck parked askew, the Court ruled that the improper parking of a dump truck without any warning lights or reflector devices created an unreasonable risk for anyone driving within the vicinity, and for having created such risk, the truck

driver must be held responsible. In ruling against the petitioner therein, the Court elucidated, thus: In our view, Dionisios negligence, although later in point of time than the truck drivers negligence, and therefore closer to the accident, was not an efficient intervening or independent cause. What the petitioners describe as an intervening cause was no more than a foreseeable consequence of the risk created by the negligent manner in which the truck driver had parked the dump truck. In other words, the petitioner truck driver owed a duty to private respondent Dionisio and others similarly situated not to impose upon them the very risk the truck driver had created. Dionisios negligence was not that of an independent and overpowering nature as to cut, as it were, the chain of causation in fact between the improper parking of the dump truck and the accident, nor to sever the juris vinculum of liability. We hold that private respondent Dionisios negligence was only contributory, that the immediate and proximate cause of the injury remained the truck drivers lack of due care.[46] In this case, both the trial and the appellate courts failed to consider that respondent Pedrano was also negligent in leaving the truck parked askew without any warning lights or reflector devices to alert oncoming vehicles, and that such failure created the presumption of negligence on the part of his employer, respondent Condor, in supervising his employees properly and adequately. As we ruled in Poblete v. Fabros:[47] It is such a firmly established principle, as to have virtually formed part of the law itself, that the negligence of the employee gives rise to the presumption of negligence on the part of the employer. This is the presumed negligence in the selection and supervision of employee. The theory of presumed negligence, in contrast with the American doctrine of respondeat superior, where the negligence of the employee is conclusively presumed to be the negligence of the employer, is clearly deducible from the last paragraph of Article 2180 of the Civil Code which provides that the responsibility therein mentioned shall cease if the employers prove that they observed all the diligence of a good father of a family to prevent damages. [48] The petitioners were correct in invoking respondent Pedranos failure to observe Article IV, Section 34(g) of the Rep. Act No. 4136, which provides: (g) Lights when parked or disabled. Appropriate parking lights or flares visible one hundred meters away shall be displayed at a corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or is placed in such manner as to endanger passing traffic. The manner in which the truck was parked clearly endangered oncoming traffic on both sides, considering that the tire blowout which stalled the truck in the first place occurred in the wee hours of the morning. The Court can only now surmise that the unfortunate incident could have been averted had respondent Condor, the owner of the truck, equipped the said vehicle with lights, flares, or, at the very least, an early warning device.[49] Hence, we cannot subscribe to respondents Condor and Pedranos claim that they should be absolved from liability because, as found by the trial and appellate courts, the proximate cause of the collision was the fast speed at which petitioner Laspias drove the bus. To

accept this proposition would be to come too close to wiping out the fundamental principle of law that a man must respond for the foreseeable consequences of his own negligent act or omission. Indeed, our law on quasidelicts seeks to reduce the risks and burdens of living in society and to allocate them among its members. To accept this proposition would be to weaken the very bonds of society.[50] The Liability of Respondent PPSII as Insurer The trial court in this case did not rule on the liability of respondent PPSII, while the appellate court ruled that, as no evidence was presented against it, the insurance company is not liable. A perusal of the records will show that when the petitioners filed the Third-Party Complaint against respondent PPSII, they failed to attach a copy of the terms of the insurance contract itself. Only Certificate of Cover No. 054940[51] issued in favor of Mr. William Tiu, Lahug, Cebu City signed by Cosme H. Boniel was appended to the third-party complaint. The date of issuance, July 22, 1986, the period of insurance, from July 22, 1986 to July 22, 1987, as well as the following items, were also indicated therein: SCHEDULED VEHICLE MODEL MAKE TYPE OF BODY COLOR BLT FILE NO.

Isuzu Forward Bus blue mixed

PLATE NO. PBP-724 SERIAL/CHASSIS NO. SER450-1584124 MOTOR NO. 677836 AUTHORIZED CAPACITY 50 UNLADEN WEIGHT 6Cyls. Kgs. SECTION 1/11 ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 28

*LIMITS OF LIABILITY P50,000.00 PREMIUMS PAID A. THIRD PARTY LIABILITY B. PASSENGER LIABILITY Per Person P12,000.00 Per Accident P50,000 P540.0052 In its Answer53 to the Third-Party Complaint, the respondent PPSII admitted the existence of the contract of insurance, in view of its failure to specifically deny the same as required under then Section 8(a), Rule 8 of the Rules of Court,54 which reads: Sec. 8. How to contest genuineness of such documents. When an action or defense is founded upon a written instrument copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but the requirement of an oath does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for inspection of the original instrument is refused. In fact, respondent PPSII did not dispute the existence of such contract, and admitted that it was liable thereon. It claimed, however, that it had attended to and settled the claims of those injured during the incident, and set up the following as special affirmative defenses: Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby reiterates and incorporates by way of reference the preceding paragraphs and further states THAT:8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali Palces who sustained injuries during the incident in question. In fact, it settled financially their claims per vouchers duly signed by them and they duly executed Affidavit[s] of Desistance to that effect, xerox copies of which are hereto attached as Annexes 1, 2, 3, 4, 5, and 6 respectively; 9. With respect to the claim of plaintiff, herein answering third party defendant through its authorized insurance adjuster attended to said claim. In fact, there were negotiations to that effect. Only that it cannot accede to the demand of said claimant considering that the claim was way beyond the scheduled indemnity as per contract entered into with third party plaintiff William Tiu and third party defendant (Philippine Phoenix Surety and Insurance, Inc.). Third party Plaintiff William Tiu knew all along the limitation as earlier stated, he being an old hand in the transportation business; 55 Considering the admissions made by respondent PPSII, the existence of the insurance contract and the salient terms thereof cannot be dispatched. It must be noted that after filing its answer, respondent PPSII no longer objected to the

presentation of evidence by respondent Arriesgado and the insured petitioner Tiu. Even in its Memorandum56 before the Court, respondent PPSII admitted the existence of the contract, but averred as follows: Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification and/or reimbursement. This has no basis under the contract. Under the contract, PPSII will pay all sums necessary to discharge liability of the insured subject to the limits of liability but not to exceed the limits of liability as so stated in the contract. Also, it is stated in the contract that in the event of accident involving indemnity to more than one person, the limits of liability shall not exceed the aggregate amount so specified by law to all persons to be indemnified.57 As can be gleaned from the Certificate of Cover, such insurance contract was issued pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was expressly provided therein that the limit of the insurers liability for each person was P12,000, while the limit per accident was pegged at P50,000. An insurer in an indemnity contract for third party liability is directly liable to the injured party up to the extent specified in the agreement but it cannot be held solidarily liable beyond that amount.58 The respondent PPSII could not then just deny petitioner Tius claim; it should have paid P12,000 for the death of Felisa Arriesgado,59 and respondent Arriesgados hospitalization expenses of P1,113.80, which the trial court found to have been duly supported by receipts. The total amount of the claims, even when added to that of the other injured passengers which the respondent PPSII claimed to have settled,60 would not exceed the P50,000 limit under the insurance agreement. Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily intended to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of the negligent operation and use of motor vehicles. The victims and/or their dependents are assured of immediate financial assistance, regardless of the financial capacity of motor vehicle owners.61 As the Court, speaking through Associate Justice Leonardo A. Quisumbing, explained in Government Service Insurance System v. Court of Appeals:62 However, although the victim may proceed directly against the insurer for indemnity, the third party liability is only up to the extent of the insurance policy and those required by law. While it is true that where the insurance contract provides for indemnity against liability to third persons, and such persons can directly sue the insurer, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held liable in solidum with the insured and/or the other parties found at fault. For the liability of the insurer is based on contract; that of the insured carrier or vehicle owner is based on tort. Obviously, the insurer could be held liable only up to the extent of what was provided for by the contract of insurance, in accordance with the CMVLI law. At the time of the incident, the schedule of indemnities for death and bodily injuries, professional fees and other charges payable under a CMVLI coverage was provided for under the Insurance Memorandum Circular (IMC) No. 5-78 which was approved on November 10, 1978. As therein provided, the maximum indemnity for death was twelve thousand (P12,000.00) pesos per victim. The schedules for medical expenses were also provided by said IMC, specifically in paragraphs (C) to (G).63

Damages to be Awarded The trial court correctly awarded moral damages in the amount of P50,000 in favor of respondent Arriesgado. The award of exemplary damages by way of example or correction of the public good,64 is likewise in order. As the Court ratiocinated in Kapalaran Bus Line v. Coronado:65 While the immediate beneficiaries of the standard of extraordinary diligence are, of course, the passengers and owners of cargo carried by a common carrier, they are not the only persons that the law seeks to benefit. For if common carriers carefully observed the statutory standard of extraordinary diligence in respect of their own passengers, they cannot help but simultaneously benefit pedestrians and the passengers of other vehicles who are equally entitled to the safe and convenient use of our roads and highways. The law seeks to stop and prevent the slaughter and maiming of people (whether passengers or not) on our highways and buses, the very size and power of which seem to inflame the minds of their drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary damages in cases of quasi-delicts if the defendant acted with gross negligence.66 The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa Arriesgado, is entitled to indemnity in the amount of P50,000.00.67 The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly and severally liable for said amount, conformably with the following pronouncement of the Court in Fabre, Jr. vs. Court of Appeals:68 The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals, thus: Nor should it make difference that the liability of petitioner [bus owner] springs from contract while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi-delict.69 IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals is AFFIRMED with MODIFICATIONS: (1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William Tiu are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado the total amount of P13,113.80; (2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 29

P50,000.00 as indemnity; P26,441.50 as actual damages; P50,000.00 as moral damages; P50,000.00 as exemplary damages; and P20,000.00 as attorneys fees. SO ORDERED. [G.R. No. 113003. October 17, 1997] ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners, vs. COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY, respondents. DECISION ROMERO, J.: In this petition for review on certiorari of the decision of the Court of Appeals, the issue is whether or not the explosion of a newly installed tire of a passenger vehicle is a fortuitous event that exempts the carrier from liability for the death of a passenger. On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine around three (3) feet from the road and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy and physical injuries to other passengers. On November 21, 1988, a complaint for breach of contract of carriage, damages and attorneys fees was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver, before the Regional Trial Court of Davao City. When the defendants therein filed their answer to the complaint, they raised the affirmative defense of caso fortuito. They also filed a third-party complaint against Philippine Phoenix Surety and Insurance, Inc. This third-party defendant filed an answer with compulsory counterclaim. At the pretrial conference, the parties agreed to a stipulation of facts.[1] Upon a finding that the third party defendant was not liable under the insurance contract, the lower court dismissed the third party complaint. No amicable settlement having been arrived at by the parties, trial on the merits ensued. The plaintiffs asserted that violation of the contract of carriage between them and the defendants was brought about by the drivers failure to exercise the diligence required of the carrier in transporting passengers safely to their place of destination. According to Leny Tumboy, the bus left Mangagoy at 3:00 oclock in the afternoon. The winding road it traversed was not cemented and was wet due to the rain; it was rough with crushed rocks. The bus which was full of passengers had cargoes on top. Since it was running fast, she cautioned the driver to slow down but he merely stared at her through the mirror. At around 3:30 p.m., in Trento, she heard something explode and immediately, the bus fell into a ravine. For their part, the defendants tried to establish that the accident was due to a fortuitous event. Abundio Salce, who was the bus conductor when the incident happened, testified that the 42-seater bus was not full as there were only 32 passengers, such that he himself managed to get a seat. He added that the bus was running at a speed of 60 to 50 and that it was going slow because of the zigzag road. He affirmed that the left front tire that exploded was a brand new

tire that he mounted on the bus on April 21, 1988 or only five (5) days before the incident. The Yobido Liner secretary, Minerva Fernando, bought the new Goodyear tire from Davao Toyo Parts on April 20, 1988 and she was present when it was mounted on the bus by Salce. She stated that all driver applicants in Yobido Liner underwent actual driving tests before they were employed. Defendant Cresencio Yobido underwent such test and submitted his professional drivers license and clearances from the barangay, the fiscal and the police. On August 29, 1991, the lower court rendered a decision[2] dismissing the action for lack of merit. On the issue of whether or not the tire blowout was a caso fortuito, it found that the falling of the bus to the cliff was a result of no other outside factor than the tire blow-out. It held that the ruling in the La Mallorca and Pampanga Bus Co. v. De Jesus[3] that a tire blowout is a mechanical defect of the conveyance or a fault in its equipment which was easily discoverable if the bus had been subjected to a more thorough or rigid check-up before it took to the road that morning is inapplicable to this case. It reasoned out that in said case, it was found that the blowout was caused by the established fact that the inner tube of the left front tire was pressed between the inner circle of the left wheel and the rim which had slipped out of the wheel. In this case, however, the cause of the explosion remains a mystery until at present. As such, the court added, the tire blowout was a caso fortuito which is completely an extraordinary circumstance independent of the will of the defendants who should be relieved of whatever liability the plaintiffs may have suffered by reason of the explosion pursuant to Article 1174[4] of the Civil Code. Dissatisfied, the plaintiffs appealed to the Court of Appeals. They ascribed to the lower court the following errors: (a) finding that the tire blowout was a caso fortuito; (b) failing to hold that the defendants did not exercise utmost and/or extraordinary diligence required of carriers under Article 1755 of the Civil Code, and (c) deciding the case contrary to the ruling in Juntilla v. Fontanar,[5] and Necesito v. Paras.[6] On August 23, 1993, the Court of Appeals rendered the Decision[7] reversing that of the lower court. It held that: To Our mind, the explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there may have been adverse conditions on the road that were unforeseeable and/or inevitable, which could make the blow-out a caso fortuito. The fact that the cause of the blow-out was not known does not relieve the carrier of liability. Owing to the statutory presumption of negligence against the carrier and its obligation to exercise the utmost diligence of very cautious persons to carry the passenger safely as far as human care and foresight can provide, it is the burden of the defendants to prove that the cause of the blow-out was a fortuitous event. It is not incumbent upon the plaintiff to prove that the cause of the blow-out is not caso-fortuito. Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge defendants burden. As enunciated in Necesito vs. Paras, the passenger has neither choice nor control over the carrier in the selection and use of its equipment, and the good repute of the manufacturer will not necessarily relieve the carrier from liability. Moreover, there is evidence that the bus was moving fast, and the road was wet and rough. The driver could have explained that the blow-out that precipitated

the accident that caused the death of Toto Tumboy could not have been prevented even if he had exercised due care to avoid the same, but he was not presented as witness. The Court of Appeals thus disposed of the appeal as follows: WHEREFORE, the judgment of the court a quo is set aside and another one entered ordering defendants to pay plaintiffs the sum of P50,000.00 for the death of Tito Tumboy, P30,000.00 in moral damages, and P7,000.00 for funeral and burial expenses. SO ORDERED. The defendants filed a motion for reconsideration of said decision which was denied on November 4, 1993 by the Court of Appeals. Hence, the instant petition asserting the position that the tire blowout that caused the death of Tito Tumboy was a caso fortuito. Petitioners claim further that the Court of Appeals, in ruling contrary to that of the lower court, misapprehended facts and, therefore, its findings of fact cannot be considered final which shall bind this Court. Hence, they pray that this Court review the facts of the case. The Court did re-examine the facts and evidence in this case because of the inapplicability of the established principle that the factual findings of the Court of Appeals are final and may not be reviewed on appeal by this Court. This general principle is subject to exceptions such as the one present in this case, namely, that the lower court and the Court of Appeals arrived at diverse factual findings.[8] However, upon such re-examination, we found no reason to overturn the findings and conclusions of the Court of Appeals. As a rule, when a passenger boards a common carrier, he takes the risks incidental to the mode of travel he has taken. After all, a carrier is not an insurer of the safety of its passengers and is not bound absolutely and at all events to carry them safely and without injury.[9] However, when a passenger is injured or dies while travelling, the law presumes that the common carrier is negligent. Thus, the Civil Code provides: Art. 1756. In case of death 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. Article 1755 provides that (a) common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Accordingly, in culpa contractual, once a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently. This disputable presumption may only be overcome by evidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733,[10] 1755 and 1756 of the Civil Code or that the death or injury of the passenger was due to a fortuitous event.[11] Consequently, the court need not make an express finding of fault or negligence on the part of the carrier to hold it responsible for damages sought by the passenger.[12] In view of the foregoing, petitioners contention that they should be exempt from liability because the tire blowout was no more than a fortuitous event that could not have been foreseen, must fail. A fortuitous event is possessed of the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 30

following characteristics: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor.[13] As Article 1174 provides, no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. In other words, there must be an entire exclusion of human agency from the cause of injury or loss.[14] Under the circumstances of this case, the explosion of the new tire may not be considered a fortuitous event. There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days use. Be that as it may, it is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages.[15] Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident.[16] This Court has had occasion to state: While it may be true that the tire that blew-up was still good because the grooves of the tire were still visible, this fact alone does not make the explosion of the tire a fortuitous event. No evidence was presented to show that the accident was due to adverse road conditions or that precautions were taken by the jeepney driver to compensate for any conditions liable to cause accidents. The sudden blowing-up, therefore, could have been caused by too much air pressure injected into the tire coupled by the fact that the jeepney was overloaded and speeding at the time of the accident.[17] It is interesting to note that petitioners proved through the bus conductor, Salce, that the bus was running at 60-50 kilometers per hour only or within the prescribed lawful speed limit. However, they failed to rebut the testimony of Leny Tumboy that the bus was running so fast that she cautioned the driver to slow down. These contradictory facts must, therefore, be resolved in favor of liability in view of the presumption of negligence of the carrier in the law. Coupled with this is the established condition of the road rough, winding and wet due to the rain. It was incumbent upon the defense to establish that it took precautionary measures considering partially dangerous condition of the road. As stated above, proof that the tire was new and of good quality is not sufficient proof that it was not negligent. Petitioners should have shown that it undertook extraordinary diligence in the care of its carrier, such as conducting daily routinary check-ups of the vehicles parts. As the late Justice J.B.L. Reyes said: It may be impracticable, as appellee argues, to require of carriers to test the strength of each and every part of its vehicles before each trip; but we are of the opinion that a due regard for the carriers obligations toward the traveling public demands adequate periodical tests to determine the condition and strength of those vehicle portions the failure of which may endanger the safety of the passengers.[18]

Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages. Article 1764[19] in relation to Article 2206[20] of the Civil Code prescribes the amount of at least three thousand pesos as damages for the death of a passenger. Under prevailing jurisprudence, the award of damages under Article 2206 has been increased to fifty thousand pesos (P50,000.00).[21] Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger,[22] as in this case. Exemplary damages, awarded by way of example or correction for the public good when moral damages are awarded,[23] may likewise be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.[24] Because petitioners failed to exercise the extraordinary diligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted recklessly.[25] As such, private respondents shall be entitled to exemplary damages. WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED subject to the modification that petitioners shall, in addition to the monetary awards therein, be liable for the award of exemplary damages in the amount of P20,000.00. Costs against petitioners. SO ORDERED. [G.R. No. 116110. May 15,1996] BALIWAG TRANSIT, INC., petitioner, vs. COURT OF APPEALS, SPOUSES ANTONIO GARCIA & LETICIA GARCIA, A & J TRADING, AND JULIO RECONTIQUE, respondents. SYLLABUS 1. CIVIL LAW; CONTRACTS; SPECIAL CONTRACTS; COMMON CARRIERS; LIABILITY FOR DAMAGES; ESTABLISHED IN CASE AT BAR. As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan Garcia to their destination safe and sound. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. The records are bereft of any proof to show that Baliwag exercised extraordinary diligence. On the contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia testified that the bus was running at a very high speed despite the drizzle and the darkness of the highway. The passengers pleaded for its driver to slow down, but their plea was ignored. Leticia also revealed that the driver was smelling of liquor. She could smell him as she was seated right behind the driver. Another passenger, Felix Cruz testified that immediately before the collision, the bus driver was conversing with a co-employee. All these prove the bus driver's wanton disregard for the physical safety of his passengers, which

make Baliwag as a common carrier liable for damages under Article 1759 of the Civil Code. 2. ID.; ID.; ID.; ID.; LAND TRANSPORTATION AND TRAFFIC CODE; SECTION 34(g) THEREOF; SUBSTANTIALLY COMPLIED WITH IN CASE AT BAR. Baliwag cannot evade its liability by insisting that the accident was caused solely by the negligence of A & J Trading and Julio Recontique. It harps on their alleged non use of early warning device as testified to by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva Ecija who investigated the incident, and Francisco Romano, the bus conductor. The records do not bear out Baliwag's contention. Col. dela Cruz and Romano testified that they did not see any early warning device at the scene of the accident. They were referring to the triangular reflectorized plates in red and yellow issued by the Land Transportation Office. However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the road, near the rear portion of the truck to serve as an early warning device. This substantially complies with Section 34 (g) of the Land Transportation and Traffic Code, to wit: "(g) lights and reflector when parked or disabled. Appropriate parking lights or flares visible one hundred meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or, is placed in such manner as to endanger passing traffic. Furthermore, every motor vehicle shall be provided at all times with built-in reflectors or other similar warning devices either pasted, painted or attached at its front and back which shall likewise be visible at night at least one hundred meters away. No vehicle not provided with any of the requirements mentioned in this subsection shall be registered." Baliwag's argument that the kerosene lamp or torch does not substantially comply with the law is untenable. The aforequoted law clearly allows the use not only of an early warning device of the triangular reflectorized plates variety but also parking lights or flares visible one hundred meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable substitute for the reflectorized plates. No negligence, therefore, may be imputed to A & J Trading and its driver, Recontique. 3. ID.; DAMAGES; To PROVE ACTUAL DAMAGES, THE BEST EVIDENCE AVAILABLE TO THE PARTIES MUST BE PRESENTED. The propriety of the amount awarded as hospitalization and medical fees. The award of P25,000.00 is not supported by the evidence on record. The Garcias presented receipts marked as Exhibits "B-1 " to "B-42" but their total amounted only to P5,017.74. To be sure, Leticia testified as to the extra amount spent for her medical needs but without more reliable evidence, her lone testimony cannot justify the award of P25,000.00. To prove actual damages, the best evidence available to the injured party must be presented. The court cannot rely on uncorroborated testimony whose truth is suspect, but must depend upon competent proof that damages have been actually suffered. Thus, we reduce the actual damages for medical and hospitalization expenses to P5,017.74. 4. ID.; ID.; MORAL DAMAGES; RECOVERABLE IF THE CARRIER THROUGH ITS AGENT, ACTED FRAUDULENTLY OR IN BAD FAITH. The award of moral damages is in accord with law. In a breach of contract of carriage, moral damages are recoverable if the carrier, through its agent, acted fraudulently or in bad faith. The evidence shows the gross negligence of the driver of Baliwag bus which amounted to bad faith. Without doubt, Leticia and Allan experienced physical suffering, mental anguish and serious anxiety by reason of the accident. APPEARANCES OF COUNSEL ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 31

Leopoldo C. Sta. Maria for Baliwag Transit, Inc. Arturo D. Vallar for Sps. Antonio & Leticia Garcia. Allan A. Leynes for A & J Trading, and Julio Recontique. DECISION PUNO, J.: This is a petition for certiorari to review the Decision[1] of the Court of Appeals in CA-G.R. CV-31246 awarding damages in favor of the spouses Antonio and Leticia Garcia for breach of contract of carriage.[2] filed by the spouses Garcia questioning the same Court of Appeals' Decision which reduced their award of damages. On November 13, 1995, we denied their petition for review. The records show that on July 31, 1980, Leticia Garcia, and her five-year old son, Allan Garcia, boarded Baliwag Transit Bus No. 2036 bound for Cabanatuan City driven by Jaime Santiago. They took the seat behind the driver. At about 7:30 in the evening, in Malimba, Gapan, Nueva Ecija, the bus passengers saw a cargo truck parked at the shoulder of the national highway. Its left rear portion jutted to the outer lane, the shoulder of the road was too narrow to accommodate the whole truck. A kerosene lamp appeared at the edge of the road obviously to serve as a warning device. The truck driver, Julio Recontique, and his helper, Arturo Escala, were then replacing a flat tire. The truck is owned by respondent A & J Trading. Bus driver Santiago was driving at an inordinately fast speed and failed to notice the truck and the kerosene lamp at the edge of the road. Santiago's passengers urged him to slow down but he paid them no heed. Santiago even carried animated conversations with his co-employees while driving. When the danger of collision became imminent, the bus passengers shouted "Babangga tayo!". Santiago stepped on the brake, but it was too late. His bus rammed into the stalled cargo truck. It caused the instant death of Santiago and Escala, and injury to several others. Leticia and Allan Garcia were among the injured passengers. Leticia suffered a fracture in her pelvis and right leg. They rushed her to the provincial hospital in Cabanatuan City where she was given emergency treatment. After three days, she was transferred to the National Orthopedic Hospital where she was confined for more than a month.[3] She underwent an operation for partial hip prosthesis.[4] Allan, on the other hand, broke a leg. He was also given emergency treatment at the provincial hospital. Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J Trading and Julio Recontique for damages in the Regional Trial Court of Bulacan.[5] Leticia sued as an injured passenger of Baliwag and as mother of Allan. At the time of the complaint, Allan was a minor, hence, the suit initiated by his parents in his favor. Baliwag, A & J Trading and Recontique disclaimed responsibility for the mishap. Baliwag alleged that the accident was caused solely by the fault and negligence of A & J Trading and its driver, Recontique. Baliwag charged that Recontigue failed to place an early warning device at the corner of the disabled cargo truck to warn oncoming vehicles.[6] On the other hand, A & J Trading and Recontique alleged that the accident was the result of the negligence and reckless driving of Santiago, bus driver of Baliwag.[7]

After hearing, the trial court found all the defendants liable, thus: xxx xxx xxx

the bus driver's wanton disregard for the physical safety of his passengers, which makes Baliwag as a common carrier liable for damages under Article 1759 of the Civil Code: Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willfull acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers do not cease upon proof that they exercised all the diligence of a good father of a family in the selection or supervision of their employees. Baliwag cannot evade its liability by insisting that the accident was caused solely by the negligence of A & J Trading and Julio Recontique. It harps on their alleged non use of an early warning device as testified to by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva Ecija who investigated the incident, and Francisco Romano, the bus conductor. The records do not bear out Baliwag's contention. Col. dela Cruz and Romano testified that they did not see any early warning device at the scene of the accident.[16] They were referring to the triangular reflectorized plates in red and yellow issued by the Land Transportation Office. However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the road, near the rear portion of the truck to serve as an early warning device.[17] This substantially complies with Section 34 (g) of the Land Transportation and Traffic Code, to wit: (g) Lights and reflector when parked or disabled. Appropriate parking lights or flares visible one hundred meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or, is placed in such manner as to endanger passing traffic. Furthermore, every motor vehicle shall be provided at all times with built-in reflectors or other similar warning devices either pasted, painted or attached at its front and back which shall likewise be visible at night at least one hundred meters away. No vehicle not provided with any of the requirements mentioned in this subsection shall be registered. (Italics supplied) Baliwag's argument that the kerosene lamp or torch does not substantially comply with the law is untenable. The aforequoted law clearly allows the use not only of an early warning device of the triangular reflectorized plates variety but also parking lights or flares visible one hundred meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable substitute for the reflectorized plates.[18] No negligence, therefore, may be imputed to A & J Trading and its driver, Recontique. Anent this factual issue, the analysis of evidence made by the Court of Appeals deserves our concurrence, viz: xxx xxx xxx

"In view thereof, the Court holds that both defendants should be held liable; the defendant Baliwag Transit, Inc. for having failed to deliver the plaintiff and her son to their point of destination safely in violation of plaintiff's and defendant Baliwag Transit's contractual relation. The defendant A & J and Julio Recontique for failure to provide its cargo truck with an early warning device in violation of the Motor Vehicle Law."[8] The trial court ordered Baliwag, A & J Trading and Recontique to pay jointly and severally the Garcia spouses the following: (1) P25,000.00 hospitalization and medication fee, (2) P450,000.00 loss of earnings in eight (8) years, (3) P2,000.00 for the hospitalization of their son Allan Garcia, (4) P50,000.00 moral damages, and (5) P30,000.00 attorney's fee.[9] On appeal, the Court of Appeals modified the trial court's Decision by absolving A & J Trading from liability and by reducing the award of attorney's fees to P10,000.00 and loss of earnings to P300,000.00, respectively.[10] Baliwag filed the present petition for review raising the following issues: 1. Did the Court of Appeals err in absolving A & J Trading from liability and holding Baliwag solely liable for the injuries suffered by Leticia and Allan Garcia in the accident? 2. Is the amount of damages awarded by the Court of Appeals to the Garcia spouses correct? We affirm the factual findings of the Court of Appeals. I As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan Garcia to their destination safe and sound. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances.[11] In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code.[12] The records are bereft of any proof to show that Baliwag exercised extraordinary diligence. On the contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia testified that the bus was running at a very high speed despite the drizzle and the darkness of the highway. The passengers pleaded for its driver to slow down, but their plea was ignored.[13] Leticia also revealed that the driver was smelling of liquor.[14] She could smell him as she was seated right behind the driver. Another passenger, Felix Cruz testified that immediately before the collision, the bus driver was conversing with a co-employee.[15] All these prove

In the case at bar, both the injured passengers of the Baliwag involved in the accident testified that they saw some sort of kerosene or a torch on the rear portion of the truck before the accident. Baliwag Transit's conductor attempted to defeat such testimony by declaring that he noticed no early warning device in front of the truck. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 32

Among the testimonies offered by the witnesses who were present at the scene of the accident, we rule to uphold the affirmative testimonies given by the two injured passengers and give less credence to the testimony of the bus conductor who solely testified that no such early warning device exists. The testimonies of injured passengers who may well be considered as disinterested witness appear to be natural and more probable than the testimony given by Francisco Romano who is undoubtedly interested in the outcome of the case, being the conductor of the defendant-appellant Baliwag Transit Inc. It must be borne in mind that the situation then prevailing at the time of the accident was admittedly drizzly and all dark. This being so, it would be improbable and perhaps impossible on the part of the truck helper without the torch nor the kerosene to remove the flat tires of the truck. Moreover, witness including the bits conductor himself admitted that the passengers shouted, that they are going to bump before the collision which consequently caused the bus driver to apply the brake 3 to 4 meters away from the truck. Again, without the kerosene nor the torch in front of the truck, it would be improbable for the driver, more so the passengers to notice the truck to be bumped by the bus considering the darkness of the place at the time of the accident. xxx xxx xxx

P5,000.00 per month.[21] Her injuries forced her to stop working. Considering the nature and extent of her injuries and the length of time it would take her to recover,[22] we find it proper that Baliwag should compensate her lost income for five (5) years.[23] Third, the award of moral damages is in accord with law. In a breach of contract of carriage, moral damages are recoverable if the carrier, through its agent, acted fraudulently or in bad faith.[24] The evidence shows the gross negligence of the driver of Baliwag bus which amounted to bad faith. Without doubt, Leticia and Allan experienced physical suffering, mental anguish and serious anxiety by reason of the accident. Leticia underwent an operation to replace her broken hip bone with a metal plate. She was confined at the National Orthopedic Hospital for 45 days. The young Allan was also confined in the hospital for his foot injury. Contrary to the contention of Baliwag, the decision of the trial court as affirmed by the Court of Appeals awarded moral damages to Antonio and Leticia Garcia not in their capacity as parents of Allan. Leticia was given moral damages as an injured party. Allan was also granted moral damages as an injured party but because of his minority, the award in his favor has to be given to his father who represented him in the suit. Finally, we find the award of attorney's fees justified. The complaint for damages was instituted by the Garcia spouses on December 15, 1982, following the unjustified refusal of Baliwag to settle their claim. The Decision was promulgated by the trial court only on January 29, 1991 or about nine years later. Numerous pleadings were filed before the trial court, the appellate court and to this Court. Given the complexity of the case and the amount of damages involved,[25] the award of attorney's fee for P10,000.00 is just and reasonable. IN VIEW WHEREOF, the Decision of the respondent Court of Appeals in CA-G.R. CV-31246 is AFFIRMED with the MODIFICATION reducing the actual damages for hospitalization and medical fees to P5,017.74. No costs. SO ORDERED. [G.R. No. 104685. March 14, 1996] SABENA BELGIAN WORLD AIRLINES, petitioner, vs. HON. COURT OF APPEALS and MA. PAULA SAN AGUSTIN, respondents. DECISION

issued Tag No. 71423. She stayed overnight in Brussels and her luggage was left on board Flight SN 284. Plaintiff arrived at Manila International Airport on September 2, 1987 and immediately submitted her Tag No. 71423 to facilitate the release of her luggage hut the luggage was missing. She was advised to accomplish and submit a property Irregularity Report which she submitted and filed on the same day. She followed up her claim on September 14, 1987 but the luggage remained to be missing. On September 15, 1987, she filed her formal complaint with the office of Ferge Massed, defendants Local Manager, demanding immediate attention (Exh. A). On September 30, 1987, on the occasion of plaintiffs following up of her luggage claim, she was furnished copies of defendants telexes with an information that the Brussels Office of defendant found the luggage and that they have broken the locks for identification (Exhibit B). Plaintiff was assured by the defendant that it has notified its Manila Office that the luggage will be shipped to Manila on October 27, 1987. But unfortunately plaintiff was informed that the luggage was lost for the second time (Exhibits C and C-1). At the time of the filling of the complaint, the luggage with its content has not been found. Plaintiff demanded from the defendant the money value of the luggage and its contents amounting to $4,265.00 or its exchange value, but defendant refused to settle the claim. Defendant asserts in its Answer and its evidence tend to show that while it admits that the plaintiff was a passenger on board Flight No. SN 284 with a piece of checked in luggage bearing Tag No. 71423, the loss of the luggage was due to plaintiffs sole if not contributory negligence; that she did not declare the valuable items in her checked-in luggage at the flight counter when she checked in for her flight from Casablanca to Brussels so that either the representative of the defendant at the counter would have advised her to secure an insurance on the alleged valuable items and required her to pay additional charges, or would have refused acceptance of her baggage as required by the generally accepted practices of international carriers; that Section 9(a), Article IX of General Conditions of carriage requiring passengers to collect their checked baggage at the place of stopover, plaintiff neglected to claim her baggage at the Brussels Airport; that plaintiff should have retrieved her undeclared valuables from her baggage at the Brussels Airport since her flight from Brussels to Manila will still have to visit for confirmation inasmuch as only her flight from Casablanca to Brussels was confirmed; that defendant incorporated in all Sabena Plane Tickets, including Sabena Ticket No. 082422-72502241 issued to plaintiff in Manila on August 21, 1987, a warning that Items of value should be carried on your person and that some carriers assume no liability for fragile, valuable or perishable articles and that further information may he obtained from the carrier for guidance; that granting without conceding that defendant is liable, its liability is limited only to US $20.00 per kilo due to plaintiffs failure to declare a higher value on the contents of her checked in luggage and pay additional charges thereon.[2] The trial court rendered judgment ordering petitioner Sabena Belgian World Airlines to pay private respondent Ma. Paula San Agustin ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 33

While it is true that the investigating officer testified that he found no early warning device at the time of his investigation, We rule to give less credence to such testimony insofar as he himself admitted on cross examination that he did not notice the presence of any kerosene lamp at the back of the truck because when he arrived at the scene of the accident, there were already many people surrounding the place (TSN, Aug, 22, 1989, p. 13). He further admitted that there exists a probability that the lights of the truck may have been smashed by the bus at the time of the accident considering the location of the truck where its rear portion was connected with the front portion of the bus (TSN, March 29, 1985, pp. 11-13). Investigator's testimony therefore did not confirm nor deny the existence of such warning device, making his testimony of little probative value.[19] II We now review the amount of damages awarded to the Garcia spouses.

VITUG, J.: First, the propriety of the amount awarded as hospitalization and medical fees. The award of P25,000.00 is not supported by the evidence on record. The Garcias presented receipts marked as Exhibits B-1 to B 42 but their total amounted only to P5,017.74. To be sure, Leticia testified as to the extra amount spent for her medical needs but without more reliable evidence, her lone testimony cannot justify the award of P25,000.00. To prove actual damages, the best evidence available to the injured party must be presented. The court cannot rely on uncorroborated testimony whose truth is suspect, but must depend upon competent proof that damages have been actually suffered[20] Thus, we reduce the actual damages for medical and hospitalization expenses to P5,017.74. Second, we find as reasonable the award of P300,000.00 representing Leticia's lost earnings. Before the accident, Leticia was engaged in embroidery, earning The appeal before the Court involves the issue of an airlines liability for lost luggage. The petition for review assails the decision of the Court Appeals,[1] dated 27 February 1992, affirming an award of damages made by the trial court in a complaint filed by private respondent against petitioner. The factual background of the case, narrated by the trial court and reproduced at length by the appellate court, is hereunder quoted: On August 21, 1987, plaintiff was a passenger on board Flight SN 284 of defendant airline originating from Casablanca to Brussels, Belgium on her way back to Manila. Plaintiff checked in her luggage which contained her valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00; shoes/bag $150; accessories $75; luggage itself $10.00; or a total of $4,265.00, for which she was

(a) x x x US$4,265.00 or its legal exchange in Philippine pesos; (b) x x x P30,000.00 as moral damages; (c) x x x P10,000.00 as exemplary damages; (d) x x x P10,000.00 attorneys fees; and (e) (t)he costs of the suit.[3]

temporarily unloaded or stored in transit. And Art. 1735 establishes the presumption that if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they had observed extraordinary diligence as required in Article 1733. The only exceptions to the foregoing extraordinary responsibility of the common carrier is when the loss, destruction, or deterioration of the goods is due to any of the following causes: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

the appellate court, underscores the wanton negligence and lack of care on the part of the carrier. The above findings, which certainly cannot be said to be without basis, foreclose whatever rights petitioner might have had to the possible limitation of liabilities enjoyed by international air carriers under the Warsaw Convention (Convention for the Unification of Certain Rules Relating to International Carriage by Air, as amended by the Hague Protocol of 1955, the Montreal Agreement of 1966, the Guatemala Protocol of 1971 and the Montreal Protocols of 1975). In Alitalia vs. Intermediate Appellate Court,[8] now Chief Justice Andres R. Narvasa, speaking for the Court, has explained it well; he said: The Warsaw Convention however denies to the carrier availment of the provisions which exclude or limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court seized of the case, is considered to be equivalent to wilful misconduct, or if the damage is (similarly) caused x x x by any agent of the carrier acting within the scope of his employment. The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely, and declaring the stated limits of liability not applicable if it is proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result. The same deletion was effected by the Montreal Agreement of 1966, with the result that a passenger could recover unlimited damages upon proof of wilful misconduct. The Convention does not thus operate as an exclusive enumeration of the instances of an airlines liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the Convention, as this Court has now, and at an earlier time, pointed out. Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith, recklessness or otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The Contentions provisions, in short, do not regulate or exclude liability for other breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of damage. Otherwise, an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd. Nor may it for a moment be supposed that if a member of the aircraft complement should inflict some physical injury on a passenger, or maliciously destroy or damage the latters property, the Convention might successfully be pleaded as the sole gauge to determine the carriers liability to the passenger. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set by said Convention. It is in this sense that the Convention has been applied, or ignored, depending on the peculiar facts presented by each case. The Court thus sees no error in the preponderant application to the instant case by the appellate court, as well as by the trial court, of the usual rules on the extent of recoverable damages beyond the Warsaw limitations. Under domestic law and jurisprudence (the Philippines being the country of destination), the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 34

Sabena appealed the decision of the Regional Trial Court to the Court of Appeals. The appellate court, in its decision of 27 February 1992, affirmed in toto the trial courts judgment. Petitioner airline company, in contending that the alleged negligence of private respondent should be considered the primary cause for the loss of her luggage, avers that, despite her awareness that the flight ticket had been confirmed only for Casablanca and Brussels, and that her flight from Brussels to Manila had yet to be confirmed, she did not retrieve the luggage upon arrival in Brussels. Petitioner insists that private respondent, being a seasoned international traveler, must have likewise been familiar with the standard provisions contained in her flight ticket that items of value are required to be hand-carried by the passenger and that the liability of the airline or loss, delay or damage to baggage would be limited, in any event, to only US$20.00 per kilo unless a higher value is declared in advance and corresponding additional charges are paid thereon. At the Casablanca International Airport, private respondent, in checking in her luggage, evidently did not declare its contents or value. Petitioner cites Section 5(c), Article IX, of the General Conditions of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the Hague Protocol of 1955, generally observed by International carriers, stating, among other things, that: Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked baggage, fragile or perishable articles, money, jewelry, precious metals, negotiable papers, securities or other valuables.[4] Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation and corresponds with the circumstances of the person, of the time, and of the place. When the source of an obligation is derived from a contract, the mere breach or non-fulfillment of the prestation gives rise to the presumption of fault on the part of the obligor. This rule is not different in the case of common carriers in the carriage of goods which, indeed, are bound to observe not just the due diligence of a good father of a family but that of extraordinary care in the vigilance over the goods. The appellate court has aptly observed: x x x Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. This extraordinary responsibility, according to Art. 1736, lasts from the time the goods are unconditionally placed in the possession of and received by the carrier until they are delivered actually or constructively to the consignee or person who has the right to receive them. Art. 1737 states that the common carriers duty to observe extraordinary diligence in the vigilance over the goods transported by them remains in full force and effect even when they are

(2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. Not one of the above excepted causes obtains in this case.[5] The above rules remain basically unchanged even when the contract is breached by tort[6] although noncontradictory principles on quasi-delict may then be assimilated as also forming part of the governing law. Petitioner is not thus entirely off track when it has likewise raised in its defense the tort doctrine of proximate cause. Unfortunately for petitioner, however, the doctrine cannot, in this particular instance, support its case. Proximate cause is that which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have occurred. The exemplification by the Court in one case[7] is simple and explicit; viz: (T)he proximate legal cause is that acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and Continuous chain of events, each having a close causal Connection with its immediate predecessor, the final event in the chain immediately affecting the injury as a natural and probable result of the cause which first acted, under such circumstances that the person responsible for the first event should, as an ordinarily prudent, and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom. It remained undisputed that private respondents luggage was lost while it was in the custody of petitioner. It was supposed to arrive on the same flight that private respondent took in returning to Manila on 02 September 1987. When she discovered that the luggage was missing, she promptly accomplished and filed a Property Irregularity Report. She followed up her claim on 14 September 1987, and filed, on the following day, a formal letter-complaint with petitioner. She felt relieved when, on 23 October 1987, she was advised that her luggage had finally been found, with its contents intact when examined, and that she could expect it to arrive on 27 October 1987. She then waited anxiously only to be told later that her luggage had been lost for the second time. Thus, the appellate court, given all the facts before it, sustained the trial court in finding petitioner ultimately guilty of gross negligence in the handling of private respondents luggage. The loss of said baggage not only once by twice, said

attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier liable for all damages which can be reasonably attributed, although unforeseen, to the non-performance of the obligation,[9] including moral and exemplary damages.[10] WHEREFORE, the decision appealed from is AFFIRMED. Costs against petitioner. SO ORDERED. G.R. No. 144723 February 27, 2006

On February 18, 1993, respondent Noe, through his guardian ad litem Arlie Bernardo, filed with the RTC of Dumaguete City a complaint3 for damages arising from quasi delict against petitioner as the registered owner of the cargo truck and his driver Gerosano. He alleged that the proximate cause of his injuries and suffering was the reckless imprudence of Gerosano and petitioners negligence in the selection of a reckless driver and for operating a vehicle that was not roadworthy. He prayed for actual damages, loss of income, moral and exemplary damages, attorneys fees, litigation expenses and costs of suit. Petitioner and his driver Gerosano filed their Answer4 denying the material allegations in the complaint. They, in turn, filed a third party complaint5 against respondents Bandoquillo and Quinquillera, as owner and driver respectively of the Fiera. They alleged that it was the reckless imprudence of respondent driver Quinquillera and his clear violation of the traffic rules and regulations which was the proximate cause of the accident and asked for indemnification for whatever damages they would be sentenced to pay. Respondents Bandoquillo and Quinquillera filed their Answer to the third party complaint asking for the dismissal of the third party complaint and for payment of attorneys fees. Driver Gerosano was charged criminally for reckless imprudence resulting to multiple physical injuries with damage to property before the Municipal Circuit Trial Court (MCTC) of Pamplona-Amlan and San Jose, Negros Oriental. On November 16, 1987, the MCTC rendered its decision6 finding him guilty of the crime charged and was sentenced to four months and one day to two years and four months and to pay the costs. On February 18, 1993, the RTC rendered its judgment in the civil case,7 the dispositive portion of which reads: WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants Gerosano and Estacion, to pay plaintiff, jointly or solidarily, the following: 1. P129,584.20 for actual damages in the form of medical and hospitalization expenses; 2. P50,000.00 for moral damages, consisting of mental anguish, moral shock, serious anxiety and wounded feelings; 3. P10,000.00 for attorneys fees; and 4. P5,000.00 for litigation expenses. SO ORDERED.8 The trial court ruled that the negligence of Gerosano, petitioners driver, is the direct and proximate cause of the incident and of the injuries suffered by respondent Noe; that Gerosanos gross negligence and reckless imprudence had been confirmed by the Judgment in Criminal Case No. 463; that based on the findings of the police investigator, the faulty brakes caused the cargo truck to bump the Fiera; that the Traffic Accident Report showed that the tire mark of the cargo truck measuring 48 feet is visibly imprinted on the road where the incident took place indicating that the said vehicle was speeding fast; that the existence of one tire mark of the cargo truck proved that the said vehicle had a faulty brake, otherwise, it would have produced two tire marks on the road; and

that the photographs taken right after the incident also showed who the guilty party was. The trial court did not give credence to the argument of petitioner and his driver that the truck was properly checked by a mechanic before it was dispatched for a trip. It found that petitioner is negligent in maintaining his vehicle in good condition to prevent any accident to happen; that petitioner is liable under Article 2180 of the Civil Code as employer of driver Gerosano for being negligent in the selection and supervision of his driver as well as for maintaining and operating a vehicle that was not roadworthy; and that petitioner and his driver are solidarily liable for all the natural and probable consequences of their negligent acts or omissions. The trial court dismissed the third party complaint filed by petitioner and his driver against respondents Bandoquillo and Quinquillera. Dissatisfied, only petitioner appealed to the CA. On April 17, 2000, the CA rendered the assailed decision which affirmed in toto the decision of the trial court. Petitioners motion for reconsideration was denied in a Resolution dated August 16, 2000. Hence, the herein petition for review. Petitioner submits the following issues for resolution:9 WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER LARRY ESTACION EXERCISED THE DUE DILIGENCE OF A GOOD FATHER OF A FAMILY TO PREVENT DAMAGE DESPITE ABUNDANCE OF EVIDENCE TO THAT EFFECT; WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER LARRY ESTACION EXERCISED DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF HIS EMPLOYEE AND IN MAINTAINING HIS CARGO TRUCK ROADWORTHY AND IN GOOD OPERATING CONDITION; WHETHER THE COURT OF APPEALS ERRED IN EXONERATING RESPONDENTS CECILIA BANDOQUILLO AND GEMINIANO QUINQUILLERA. In his Memorandum, petitioner contends that he was able to establish that he observed the diligence of a good father of a family not only in the selection of his employees but also in maintaining his truck roadworthy and in good operating condition; that the CA erred in exonerating respondents Bandoquillo and Quinquillera, owner and driver, respectively of the Fiera from liability when their negligence was the proximate cause of respondent Noes injuries; that respondent Noes act of standing in the rear carrier of the Fiera is in itself negligence on his part which was aggravated by the fact that respondent Quinquillera overtook the cargo truck driven by Gerosano on the curve and suddenly cut into the latters lane; that due to the overloading of passengers, Gerosano was not able to see the brake lights of the Fiera when it suddenly stopped to pick up passengers; that overloading is in violation of the applicable traffic rules and regulations and Article 2185 is explicit when it provides that "unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation"; that since the Fiera driver was negligent, there arises a presumption that respondent Bandoquillo, as owner of the Fiera, is negligent in the selection and supervision of her employee; that assuming petitioner Estacion and his driver are not entirely blameless, the negligence of Quinquillera is ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 35

LARRY ESTACION, Petitioner, vs. NOE BERNARDO, thru and his guardian ad litem ARLIE BERNARDO, CECILIA BANDOQUILLO and GEMINIANO QUINQUILLERA, Respondents. DECISION AUSTRIA-MARTINEZ, J.: Before us is a petition for review on certiorari filed by Larry Estacion (petitioner) seeking to annul the Decision dated April 17, 20001 of the Court of Appeals (CA) in CA-GR CV No. 41447 which affirmed in toto the decision of the Regional Trial Court (RTC) of Dumaguete City, Branch 41, Negros Oriental, holding petitioner and his driver Bienvenido Gerosano (Gerosano) liable for damages for the injury sustained by Noe Bernardo (respondent Noe). Also assailed is the appellate courts Resolution dated August 16, 20002 denying petitioners motion for reconsideration. In the afternoon of October 16, 1982, respondent Noe was going home to Dumaguete from Cebu, via Bato and Tampi. At Tampi, he boarded a Ford Fiera passenger jeepney with plate no. NLD 720 driven by respondent Geminiano Quinquillera (Quinquillera), owned by respondent Cecilia Bandoquillo (Bandoquillo), and was seated on the extension seat placed at the center of the Fiera. From San Jose, an old woman wanted to ride, so respondent Noe offered his seat. Since the Fiera was already full, respondent Noe hung or stood on the left rear carrier of the vehicle. Somewhere along Barangay Sto. Nio, San Jose, Negros Oriental, between kilometers 13 and 14, the Fiera began to slow down and then stopped by the right shoulder of the road to pick up passengers. Suddenly, an Isuzu cargo truck, owned by petitioner and driven by Gerosano, which was traveling in the same direction, hit the rear end portion of the Fiera where respondent Noe was standing. Due to the tremendous force, the cargo truck smashed respondent Noe against the Fiera crushing his legs and feet which made him fall to the ground. A passing vehicle brought him to the Silliman University Medical Center where his lower left leg was amputated. Police investigation reports showed that respondent Noe was one of the 11 passengers of the Fiera who suffered injuries; that when the Fiera stopped to pick up a passenger, the cargo truck bumped the rear left portion of the Fiera; that only one tire mark from the front right wheel of the cargo truck was seen on the road. A sketch of the accident was drawn by investigator Mateo Rubia showing the relative positions of the two vehicles, their distances from the shoulder of the road and the skid marks of the right front wheel of the truck measuring about 48 feet.

sufficient basis why the respective liabilities should be delineated vis--vis their degree of negligence consistent with Article 217910 of the Civil Code. Respondent Noe filed his Memorandum alleging that the first and second issues raised are factual in nature which are beyond the ambit of a petition for review; that petitioner failed to overcome the presumption of negligence thus he is liable for the negligence of his driver Gerosano; and that the third issue is best addressed to respondents Bandoquillo and Quinquillera. Respondents Bandoquillo and Quinquillera failed to file their memorandum despite receipt of our Resolution requiring them to submit the same. We find it apropos to resolve first the third issue considering that the extent of the liability of petitioner and his driver is dependent on whether respondents Bandoquillo and Quinquillera are the ones negligent in the vehicular mishap that happened in the afternoon of October 16, 1982 where respondent Noe was injured, resulting in the amputation of his left leg. At the outset, the issue raised is factual in nature. Whether a person is negligent or not is a question of fact which we cannot pass upon in a petition for review on certiorari, as our jurisdiction is limited to reviewing errors of law.11 As a rule, factual findings of the trial court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal. The established exceptions are: (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) when the findings are grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the CA is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings of fact are conclusions without citation of specific evidence on which they are based; (8) when the CA manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (9) when the findings of fact of the CA are premised on the absence of evidence and are contradicted by the evidence on record.12 On the basis of the records of this case, we find that there is cogent reason for us to review the factual findings of the lower courts to conform to the evidence on record and consider this case as an exception to the general rule. The trial court and the appellate court had made a finding of fact that the proximate cause of the injury sustained by respondent Noe was the negligent and careless driving of petitioners driver, Gerosano, who was driving at a fast speed with a faulty brake when the accident happened. We see no cogent reason to disturb the trial courts finding in giving more credence to the testimony of respondent Noe than the testimony of Gerosano, petitioners truck driver. The correctness of such finding is borne by the records. In his testimony, Gerosano said that he was driving the truck at a speed of about 40 kilometers per hour;13 that the Fiera was behind him but upon reaching the curve, i.e., after passing San Jose going to Dumaguete, the Fiera overtook him and blocked his way;14 that he was 10 meters from the Fiera prior to the impact15 when he applied the brakes16 and tried to evade the Fiera but he still hit it.17 We agree with the trial court and the appellate court when they found that the truck was running at a fast speed because if Gerosano was really driving at a

speed of 40 kilometers per hour and considering that the distance between the truck and the Fiera in front was about 10 meters, he had more than enough time to slacken his speed and apply his break to avoid hitting the Fiera. However, from the way the truck reacted to the application of the brakes, it showed that Gerosano was driving at a fast speed because the brakes skidded a lengthy 48 feet as shown in the sketch of police investigator Rubia of the tire marks visibly printed on the road. Moreover, the photographs taken after the incident and the testimony of Gerosano as to the extent of damage to the truck, i.e. the trucks windshield was broken and its hood was damaged after the impact,18 further support the finding of both courts that Gerosano was driving at a fast pace. The accident was further caused by the faulty brakes of the truck. Based on the sketch report, there was only one tire mark of the right tire of the cargo truck during the incident which, as testified to by police investigator Rubia, meant that the brakes of the truck were not aligned otherwise there would be two tire marks impressions on the road.19 Although petitioner contends that there are other factors to explain why only one skid mark was found at the place of the incident, such as the angle and edges of the road as well as the balance of the weight of the cargo laden in the truck, he failed to show that indeed those factors were present to prove his defense. Such claim cannot be given credence considering that investigator Rubia testified that the body of the truck was very much on the road, i.e., not over the shoulder of the road,20 and the road was straight.21 Indeed, it is the negligent act of petitioners driver of driving the cargo truck at a fast speed coupled with faulty brakes which was the proximate cause of respondent Noes injury. Petitioners claim that right after overtaking the cargo truck, the Fiera driver suddenly stopped to pick up three passengers from the side of the road; that the overloading of passengers prevented his truck driver from determining that the Fiera had pulled over to pick up passengers as the latters brakelights were obstructed by the passengers standing on the rear portion of the Fiera were not substantiated at all. Respondent Quinquillera, the driver of the Fiera, testified that the distance from the curve of the road when he stopped and picked up passengers was estimated to be about 80 to 90 feet.22 In fact, from the sketch drawn by investigator Rubia, it showed a distance of 145 feet from the curve of the road to the speed tire mark (which measured about 48 feet) visibly printed on the road to the Fiera. This means that the Fiera driver did not stop immediately after the curve as what petitioner claims. Moreover, Gerosano admitted that his truck was at a distance of 10 meters prior to the impact. The distance between the two vehicles was such that it would be impossible for Gerosano not to have seen that the Fiera had pulled over to pick up passengers. However, we agree with petitioner that respondent Noes act of standing on the rear carrier of the Fiera exposing himself to bodily injury is in itself negligence on his part. We find that the trial court and the CA erred when they failed to consider that respondent Noe was also guilty of contributory negligence. Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection. 23 It has been established by the testimony of respondent Noe that he was with four or five other persons standing on the rear carrier of the Fiera since it was already full. Respondent Noes act of standing on the left rear carrier portion of the Fiera showed his lack of ordinary care and foresight that such act could cause

him harm or put his life in danger. It has been held that "to hold a person as having contributed to his injuries, it must be shown that he performed an act that brought about his injuries in disregard of warning or signs of an impending danger to health and body.24 Respondent Noes act of hanging on the Fiera is definitely dangerous to his life and limb. We likewise find merit in petitioners contention that respondent Quinquillera, the Fiera driver, was also negligent. There is merit to petitioners claim that there was overloading which is in violation of traffic rules and regulations. Respondent Noe himself had testified that he was standing at the rear portion of the Fiera because the Fiera was already full. Respondent Quinquillera should not have taken more passengers than what the Fiera can accommodate. If the Fiera was not overloaded, respondent Noe would not have been standing on the rear carrier and sustained such extent of injury. Furthermore, we find that respondent Quinquillera was negligent in allowing respondent Noe to stand on the Fieras rear portion. Section 32(c) of Article III of Republic Act No. 4136, otherwise known as "The Land Transportation and Traffic Code" provides: (c) Riding on running boards No driver shall allow any person to ride on running board, step board or mudguard of his motor vehicle for any purpose while the vehicle is in motion. Respondent Quinquilleras act of permitting respondent Noe to hang on the rear portion of the Fiera in such a dangerous position creates undue risk of harm to respondent Noe. Quinquillera failed to observe that degree of care, precaution and vigilance that the circumstances justly demand. Thus, respondent Noe suffered injury.25 Since respondent Quinquillera is negligent, there arises a presumption of negligence on the part of his employer, respondent Bandoquillo, in supervising her employees properly. Such presumption was not rebutted at all by Bandoquillo. Thus, the CA erred in affirming the dismissal of the third party complaint filed by petitioner against respondents Quinquillera and Bandoquillo. Petitioner contends that he was able to establish that he exercised the due diligence of a good father of a family in the selection of his employees as well as in the maintenance of his cargo truck in good operating condition. He claims that in addition to looking at Gerosanos drivers license, he accompanied the latter in his first two trips, during which he ascertained Gerosanos competence as a driver, petitioner being a driver himself; that the truck driven by Gerosano has never figured in any accident prior to the incident involved; that upon his acquisition of the cargo truck on March 16, 1982, only 7 months prior to the incident, the same was thoroughly checked up and reconditioned; and that he had in his employ a mechanic who conducted periodic check-ups of the engine and brake system of the cargo truck. We are not persuaded. Article 2180 of the Civil Code provides: Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for those of persons for whom one is responsible. xxx ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 36

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. xxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. As the employer of Gerosano, petitioner is primarily and solidarily liable for the quasi-delict committed by the former. Petitioner is presumed to be negligent in the selection and supervision of his employee by operation of law and may be relieved of responsibility for the negligent acts of his driver, who at the time was acting within the scope of his assigned task, only if he can show that he observed all the diligence of a good father of a family to prevent damage.26 In Yambao v. Zuniga,27 we have clarified the meaning of the diligence of a good father of a family, thus: The "diligence of a good father" referred to in the last paragraph of the aforecited statute means diligence in the selection and supervision of employees. Thus, when an employee, while performing his duties, causes damage to persons or property due to his own negligence, there arises the juris tantum presumption that the employer is negligent, either in the selection of the employee or in the supervision over him after the selection. For the employer to avoid the solidary liability for a tort committed by his employee, an employer must rebut the presumption by presenting adequate and convincing proof that in the selection and supervision of his employee, he or she exercises the care and diligence of a good father of a family. x x x Petitioners claim that she exercised due diligence in the selection and supervision of her driver, Venturina, deserves but scant consideration. Her allegation that before she hired Venturina she required him to submit his drivers license and clearances is worthless, in view of her failure to offer in evidence certified true copies of said license and clearances. Bare allegations, unsubstantiated by evidence, are not equivalent to proof under the rules of evidence. x x x In any case, assuming arguendo that Venturina did submit his license and clearances when he applied with petitioner in January 1992, the latter still fails the test of due diligence in the selection of her bus driver. Case law teaches that for an employer to have exercised the diligence of a good father of a family, he should not be satisfied with the applicants mere possession of a professional drivers license; he must also carefully examine the applicant for employment as to his qualifications, his experience and record of service. Petitioner failed to present convincing proof that she went to this extent of verifying Venturinas qualifications, safety record, and driving history. The presumption juris tantum that there was negligence in the selection of her bus driver, thus, remains unrebutted. Nor did petitioner show that she exercised due supervision over Venturina after his selection. For as pointed out by the Court of Appeals, petitioner did not present any proof that she drafted and implemented training programs and guidelines on road safety for her employees. In fact, the record is bare of any showing that petitioner required Venturina to attend periodic seminars on road

safety and traffic efficiency. Hence, petitioner cannot claim exemption from any liability arising from the recklessness or negligence of Venturina. In sum, petitioners liability to private respondents for the negligent and imprudent acts of her driver, Venturina, under Article 2180 of the Civil Code is both manifest and clear. Petitioner, having failed to rebut the legal presumption of negligence in the selection and supervision of her driver, is responsible for damages, the basis of the liability being the relationship of pater familias or on the employers own negligence. x x x28 (Emphasis supplied) Petitioner failed to show that he examined driver Gerosano as to his qualifications, experience and service records. In fact, the testimony of driver Gerosano in his cross-examination showed the non-observance of these requirements. Gerosano testified that petitioner was his first employer in Dumaguete and that he was accepted by petitioner on the very day he applied for the job;29 that his drivers license was issued in Mindanao where he came from30 and that while petitioner asked him about his driving record in Mindanao, he did not present any document of his driving record.31 Such admission clearly established that petitioner did not exercise due diligence in the selection of his driver Gerosano. Moreover, the fact that petitioners driver Gerosano was driving in an efficient manner when petitioner was with him in his first two trips would not conclusively establish that Gerosano was not at all reckless. It could not be considered as due diligence in the supervision of his driver to exempt petitioner from liability. In the supervision of his driver, petitioner must show that he had formulated training programs and guidelines on road safety for his driver which the records failed to show. We find that petitioner failed to rebut the presumption of negligence in the selection and supervision of his employees. Moreover, there was also no proof that he exercised diligence in maintaining his cargo truck roadworthy and in good operating condition. While petitioners mechanic driver testified that he made a routine check up on October 15, 1982, one day before the mishap happened, and found the truck operational, there was no record of such inspection. Turning now to the award of damages, since there was contributory negligence on the part of respondent Noe, petitioners liability should be mitigated in accordance with Article 2179 of the Civil Code which provides: When the plaintiffs own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendants lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. The underlying precept of the above article on contributory negligence is that a plaintiff who is partly responsible for his own injury should not be entitled to recover damages in full but must bear the consequences of his own negligence. The defendant must thus be held liable only for the damages actually caused by his negligence.32 In Phoenix Construction, Inc., v. Intermediate Appellate Court,33 where we held that the legal and proximate cause of the accident and of Dionisios injuries was the wrongful and negligent manner in which the dump truck was parked but found Dionisio guilty of contributory negligence on the night of the accident, we

allocated most of the damages on a 20-80 ratio. In said case, we required Dionisio to bear 20% of the damages awarded by the appellate court, except as to the award of exemplary damages, attorneys fees and costs. In the present case, taking into account the contributing negligence of respondent Noe, we likewise rule that the demands of substantial justice are satisfied by distributing the damages also on a 20-80 ratio excluding attorneys fees and litigation expenses.34 Consequently, 20% should be deducted from the actual and moral damages awarded by the trial court in favor of respondent Noe, that is: 20% of P129,584.20 for actual damages is P25,916.84 and 20% of P50,000.00 for moral damages is P10,000.00. Thus, after deducting the same, the award for actual damages should be P103,667.36 and P40,000.00 for moral damages or 80% of the damages so awarded. Petitioner and respondents Bandoquillo and Quinquillera are jointly and severally liable for the 80% of the damages as well as attorneys fees and litigation expenses conformably with our pronouncement in Tiu v. Arriesgado35 where we held: The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly and severally liable for said amount, conformably with the following pronouncement of the Court in Fabre, Jr. v. Court of Appeals: The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals, thus: "Nor should it make difference that the liability of petitioner [bus owner] springs from contract while that of respondents [owner and driver of other vehicle] arises from quasi delict. As early as 1913, we already ruled in Gutierrez v. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi delict."36 WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision of the Court of Appeals dated April 17, 2000 as well as its Resolution dated August 16, 2000 are AFFIRMED with MODIFICATION to the effect that the dispositive portion of the Decision dated February 18, 1993 of the Regional Trial Court of Dumaguete City in Civil Case No. 8122, should read as follows: "WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants Gerosano and Estacion, as well as third party defendants Bandoquillo and Quinquillera, to pay plaintiff, jointly and solidarily, the following: 1. P103,667.36 for actual damages in the form of medical and hospitalization expenses;

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2. P40,000.00 for moral damages, consisting of mental anguish, moral shock, serious anxiety and wounded feelings; 3. P10,000.00 for attorneys fees; and 4. P5,000.00 for litigation expenses.1avvphil.net SO ORDERED." [G.R. No. 122039. May 31, 2000] VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO SALVA, respondents. D E C I S I ON MENDOZA, J.: This is a petition for review on certiorari of the decision[1] of the Court of Appeals, dated March 31, 1991, reversing the contrary decision of the Regional Trial Court, Branch 36, Dumaguete City, and awarding damages instead to private respondent Eliza Jujeurche Sunga as plaintiff in an action for breach of contract of carriage. The facts, as found by the Court of Appeals, are as follows: At 10 oclock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then a college freshman majoring in Physical Education at the Siliman University, took a passenger jeepney owned and operated by petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the conductor an "extension seat," a wooden stool at the back of the door at the rear end of the vehicle. Sclaw On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured. She sustained a fracture of the "distal third of the left tibia-fibula with severe necrosis of the underlying skin." Closed reduction of the fracture, long leg circular casting, and case wedging were done under sedation. Her confinement in the hospital lasted from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she would remain on a cast for a period of three months and would have to ambulate in crutches during said period. On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by the former in failing to exercise the diligence required of him as a common carrier. Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck. Korte The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case (Civil Case No. 3490), filed by Calalas against Salva and Verena, for quasi-delict, in which

Branch 37 of the same court held Salva and his driver Verena jointly liable to Calalas for the damage to his jeepney. Rtcspped On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sungas cause of action was based on a contract of carriage, not quasi-delict, and that the common carrier failed to exercise the diligence required under the Civil Code. The appellate court dismissed the third-party complaint against Salva and adjudged Calalas liable for damages to Sunga. The dispositive portion of its decision reads: WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is entered ordering defendant-appellee Vicente Calalas to pay plaintiff-appellant: (1) P50,000.00 as actual and compensatory damages; (2) P50,000.00 as moral damages; (3) P10,000.00 as attorneys fees; and (4) P1,000.00 as expenses of litigation; and (5) to pay the costs. SO ORDERED. Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence of Verena was the proximate cause of the accident negates his liability and that to rule otherwise would be to make the common carrier an insurer of the safety of its passengers. He contends that the bumping of the jeepney by the truck owned by Salva was a caso fortuito. Petitioner further assails the award of moral damages to Sunga on the ground that it is not supported by evidence. Sdaadsc The petition has no merit. The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the owner of the truck liable for quasi-delict ignores the fact that she was never a party to that case and, therefore, the principle of res judicata does not apply. Missdaa Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil Case No. 3490 was whether Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioners jeepney. On the other hand, the issue in this case is whether petitioner is liable on his contract of carriage. The first, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor. The second, breach of contract or culpa contractual, is premised upon the negligence in the performance of a contractual obligation. Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination.[2] In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers are

presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof. Slxmis There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena liable for the damage to petitioners jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasidelict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. It provides: Slxsc Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1746, Nos. 5,6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756. Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed by articles 1733 and 1755. In the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became the duty of petitioner to prove that he had to observe extraordinary diligence in the care of his passengers. Scslx Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755? We do not think so. Several factors militate against petitioners contention. Slx First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being exposed about two meters from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. This is a violation of the R.A. No. 4136, as amended, or the Land Transportation and Traffic Code, which provides:

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Sec. 54. Obstruction of Traffic. - No person shall drive his motor vehicle in such a manner as to obstruct or impede the passage of any vehicle, nor, while discharging or taking on passengers or loading or unloading freight, obstruct the free passage of other vehicles on the highway. Second, it is undisputed that petitioners driver took in more passengers than the allowed seating capacity of the jeepney, a violation of 32(a) of the same law. It provides: Mesm Exceeding registered capacity. - No person operating any motor vehicle shall allow more passengers or more freight or cargo in his vehicle than its registered capacity. The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other passengers were exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence imposed on him for the injury sustained by Sunga, but also, the evidence shows he was actually negligent in transporting passengers. Calrky We find it hard to give serious thought to petitioners contention that Sungas taking an "extension seat" amounted to an implied assumption of risk. It is akin to arguing that the injuries to the many victims of the tragedies in our seas should not be compensated merely because those passengers assumed a greater risk of drowning by boarding an overloaded ferry. This is also true of petitioners contention that the jeepney being bumped while it was improperly parked constitutes caso fortuito. A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable.[3] This requires that the following requirements be present: (a) the cause of the breach is independent of the debtors will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the debtor did not take part in causing the injury to the creditor.[4] Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into the highway. Kycalr Finally, petitioner challenges the award of moral damages alleging that it is excessive and without basis in law. We find this contention well taken. In awarding moral damages, the Court of Appeals stated: Kyle Plaintiff-appellant at the time of the accident was a first-year college student in that school year 1989-1990 at the Silliman University, majoring in Physical Education. Because of the injury, she was not able to enroll in the second semester of that school year. She testified that she had no more intention of continuing with her schooling, because she could not walk and decided not to pursue her degree, major in Physical Education "because of my leg which has a defect already." Plaintiff-appellant likewise testified that even while she was under confinement, she cried in pain because of her injured left foot. As a result of her injury, the Orthopedic Surgeon also certified that she has "residual bowing of the fracture side." She likewise decided not to further pursue Physical Education as her major subject, because "my left leg x x x has a defect already." Those are her physical pains and moral sufferings, the inevitable bedfellows of the injuries that she suffered. Under Article 2219 of the Civil Code, she is entitled

to recover moral damages in the sum of P50,000.00, which is fair, just and reasonable. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Art. 2219 of the Civil Code.[5] As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220.[6] In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court that petitioner acted in bad faith in the performance of the contract of carriage. Sungas contention that petitioners admission in open court that the driver of the jeepney failed to assist her in going to a nearby hospital cannot be construed as an admission of bad faith. The fact that it was the driver of the Isuzu truck who took her to the hospital does not imply that petitioner was utterly indifferent to the plight of his injured passenger. If at all, it is merely implied recognition by Verena that he was the one at fault for the accident. Exsm WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its resolution, dated September 11, 1995, are AFFIRMED, with the MODIFICATION that the award of moral damages is DELETED. SO ORDERED. [G.R. No. 142305. December 10, 2003] SINGAPORE AIRLINES respondent. DECISION CALLEJO, SR., J.: This is a petition for review on certiorari assailing the Decision[1] of the Court of Appeals which affirmed in toto the decision[2] of the Regional Trial Court of Pasig City, Branch 164 in Civil Case No. 60985 filed by the respondent for damages. The Case for the Respondent Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and abroad. At the time of the incident, she was availing an educational grant from the Federal Republic of Germany, pursuing a Masters Degree in Music majoring in Voice.[3] She was invited to sing before the King and Queen of Malaysia on February 3 and 4, 1991. For this singing engagement, an airline passage ticket was purchased from petitioner Singapore Airlines which would transport her to Manila from Frankfurt, Germany on January 28, 1991. From Manila, she would proceed to Malaysia on the next day.[4] It was necessary for the respondent to pass by Manila in order to gather her wardrobe; and to rehearse and coordinate with her pianist her repertoire for the aforesaid performance. LIMITED, petitioner, vs. ANDION FERNANDEZ,

The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27, leaving Frankfurt, Germany on January 27, 1991 bound for Singapore with onward connections from Singapore to Manila. Flight No. SQ 27 was scheduled to leave Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving at Singapore at 8:50 in the morning of January 28, 1991. The connecting flight from Singapore to Manila, Flight No. SQ 72, was leaving Singapore at 11:00 in the morning of January 28, 1991, arriving in Manila at 2:20 in the afternoon of the same day.[5] On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours late or at about 11:00 in the morning of January 28, 1991. By then, the aircraft bound for Manila had left as scheduled, leaving the respondent and about 25 other passengers stranded in the Changi Airport in Singapore.[6] Upon disembarkation at Singapore, the respondent approached the transit counter who referred her to the nightstop counter and told the lady employee thereat that it was important for her to reach Manila on that day, January 28, 1991. The lady employee told her that there were no more flights to Manila for that day and that respondent had no choice but to stay in Singapore. Upon respondents persistence, she was told that she can actually fly to Hong Kong going to Manila but since her ticket was non-transferable, she would have to pay for the ticket. The respondent could not accept the offer because she had no money to pay for it.[7] Her pleas for the respondent to make arrangements to transport her to Manila were unheeded.[8] The respondent then requested the lady employee to use their phone to make a call to Manila. Over the employees reluctance, the respondent telephoned her mother to inform the latter that she missed the connecting flight. The respondent was able to contact a family friend who picked her up from the airport for her overnight stay in Singapore.[9] The next day, after being brought back to the airport, the respondent proceeded to petitioners counter which says: Immediate Attention To Passengers with Immediate Booking. There were four or five passengers in line. The respondent approached petitioners male employee at the counter to make arrangements for immediate booking only to be told: Cant you see I am doing something. She explained her predicament but the male employee uncaringly retorted: Its your problem, not ours.[10] The respondent never made it to Manila and was forced to take a direct flight from Singapore to Malaysia on January 29, 1991, through the efforts of her mother and travel agency in Manila. Her mother also had to travel to Malaysia bringing with her respondents wardrobe and personal things needed for the performance that caused them to incur an expense of about P50,000.[11] As a result of this incident, the respondents performance before the Royal Family of Malaysia was below par. Because of the rude and unkind treatment she received from the petitioners personnel in Singapore, the respondent was engulfed with fear, anxiety, humiliation and embarrassment causing her to suffer mental fatigue and skin rashes. She was thereby compelled to seek immediate medical attention upon her return to Manila for acute urticaria.[12] On June 15, 1993, the RTC rendered a decision with the following dispositive portion:

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ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay herein plaintiff Andion H. Fernandez the sum of: 1. damages; FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual

to the raging Gulf War at that time. It had to pass through the restricted Russian airspace which was more congested.[17] Under these circumstances, petitioner therefore alleged that it cannot be faulted for the delay in arriving in Singapore on January 28, 1991 and causing the respondent to miss her connecting flight to Manila. The petitioner further contends that it could not also be held in bad faith because its personnel did their best to look after the needs and interests of the passengers including the respondent. Because the respondent and the other 25 passengers missed their connecting flight to Manila, the petitioner automatically booked them to the flight the next day and gave them free hotel accommodations for the night. It was respondent who did not take petitioners offer and opted to stay with a family friend in Singapore. The petitioner also alleges that the action of the respondent was baseless and it tarnished its good name and image earned through the years for which, it was entitled to damages in the amount of P1,000,000; exemplary damages of P500,000; and attorneys fees also in the amount of P500,000.[18] The petition is barren of merit.

the comfort, convenience and safety of its stranded passengers until they have reached their final destination... ... ...If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the sole and only cause (Art. 1755 C.C., Art. 1733 C.C.). Since part of the failure to comply with the obligation of common carrier to deliver its passengers safely to their destination lay in the defendants failure to provide comfort and convenience to its stranded passengers using extraordinary diligence, the cause of non-fulfillment is not solely and exclusively due to fortuitous event, but due to something which defendant airline could have prevented, defendant becomes liable to plaintiff. Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill its obligation to transport the respondent safely as scheduled as far as human care and foresight can provide to her destination. Tagged as a premiere airline as it claims to be and with the complexities of air travel, it was certainly well-equipped to be able to foresee and deal with such situation. The petitioners indifference and negligence by its absence and insensitivity was exposed by the trial court, thus: (a) Under Section 9.1 of its Traffic Manual (Exhibit 4) flights can be delayed to await the uplift of connecting cargo and passengers arriving on a late inbound flight As adverted to by the trial court,Flight SQ-27/28 maybe delayed for about half an hour to transfer plaintiff to her connecting flight. As pointed out above, delay is normal in commercial air transportation (RTC Decision, p. 22); or (b) Petitioner airlines could have carried her on one of its flights bound for Hongkong and arranged for a connecting flight from Hongkong to Manila all on the same date. But then the airline personnel who informed her of such possibility told her that she has to pay for that flight. Regrettably, respondent did not have sufficient funds to pay for it. (TSN, 30 March 1992, pp.8-9; RTC Decision, pp. 22-23) Knowing the predicament of the respondent, petitioner did not offer to shoulder the cost of the ticket for that flight; or (c) As noted by the trial court from the account of petitioners witness, Bob Khkimyong, that a passenger such as the plaintiff could have been accommodated in another international airline such as Lufthansa to bring the plaintiff to Singapore early enough from Frankfurt provided that there was prior communication from that station to enable her to catch the connecting flight to Manila because of the urgency of her business in Manila(RTC Decision, p. 23) The petitioners diligence in communicating to its passengers the consequences of the delay in their flights was wanting. As elucidated by the trial court: It maybe that delay in the take off and arrival of commercial aircraft could not be avoided and may be caused by diverse factors such as those testified to by defendants pilot. However, knowing fully well that even before the plaintiff boarded defendants Jumbo aircraft in Frankfurt bound for Singapore, it has already incurred a delay of two hours. Nevertheless, defendant did not take the trouble of informing plaintiff, among its other passengers of such a delay and that in such a case, the usual practice of defendant airline will be that they have to stay overnight at their connecting airport; and much less did it inquire from the plaintiff and the other 25 passengers bound for Manila whether they are ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 40

2. TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral damages considering plaintiffs professional standing in the field of culture at home and abroad; 3. damages; 4. 5. ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary

SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorneys fees; and To pay the costs of suit.

SO ORDERED.[13] The petitioner appealed the decision to the Court of Appeals. On June 10, 1998, the CA promulgated the assailed decision finding no reversible error in the appealed decision of the trial court.[14] Forthwith, the petitioner filed the instant petition for review, raising the following errors: I THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION OF THE TRIAL COURT THAT AWARDED DAMAGES TO RESPONDENT FOR THE ALLEGED FAILURE OF THE PETITIONER TO EXERCISE EXTRAORDINARY DILIGENCE. II THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER ACTED IN BAD FAITH. III THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONERS COUNTERCLAIMS.[15] The petitioner assails the award of damages contending that it exercised the extraordinary diligence required by law under the given circumstances. The delay of Flight No. SQ 27 from Frankfurt to Singapore on January 28, 1991 for more than two hours was due to a fortuitous event and beyond petitioners control. Inclement weather prevented the petitioners plane coming from Copenhagen, Denmark to arrive in Frankfurt on time on January 27, 1991. The plane could not take off from the airport as the place was shrouded with fog. This delay caused a snowball effect whereby the other flights were consequently delayed. The plane carrying the respondent arrived in Singapore two (2) hours behind schedule.[16] The delay was even compounded when the plane could not travel the normal route which was through the Middle East due

When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger then has every right to expect that he be transported on that flight and on that date. If he does not, then the carrier opens itself to a suit for a breach of contract of carriage.[19] The contract of air carriage is a peculiar one. Imbued with public interest, the law requires common carriers to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons with due regard for all the circumstances.[20] In an action for breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that is necessary to prove is the existence of the contract and the fact of its non-performance by the carrier.[21] In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage with the petitioner, the respondent certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28, 1991. Since the petitioner did not transport the respondent as covenanted by it on said terms, the petitioner clearly breached its contract of carriage with the respondent. The respondent had every right to sue the petitioner for this breach. The defense that the delay was due to fortuitous events and beyond petitioners control is unavailing. In PAL vs. CA,[22] we held that: .... Undisputably, PALs diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PALs contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed to be equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carriers premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding

amenable to stay overnight in Singapore and to take the connecting flight to Manila the next day. Such information should have been given and inquiries made in Frankfurt because even the defendant airlines manual provides that in case of urgency to reach his or her destination on the same date, the head office of defendant in Singapore must be informed by telephone or telefax so as the latter may make certain arrangements with other airlines in Frankfurt to bring such a passenger with urgent business to Singapore in such a manner that the latter can catch up with her connecting flight such as S-27/28 without spending the night in Singapore[23] The respondent was not remiss in conveying her apprehension about the delay of the flight when she was still in Frankfurt. Upon the assurance of petitioners personnel in Frankfurt that she will be transported to Manila on the same date, she had every right to expect that obligation fulfilled. She testified, to wit: Q: Now, since you were late, when the plane that arrived from Frankfurt was late, did you not make arrangements so that your flight from Singapore to Manila would be adjusted? A: I asked the lady at the ticket counter, the one who gave the boarding pass in Frankfurt and I asked her, Since my flight going to Singapore would be late, what would happen to my Singapore-Manila flight? and then she said, Dont worry, Singapore Airlines would be responsible to bring you to Manila on the same date. And then they have informed the name of the officer, or whatever, that our flight is going to be late.[24] When a passenger contracts for a specific flight, he has a purpose in making that choice which must be respected. This choice, once exercised, must not be impaired by a breach on the part of the airline without the latter incurring any liability.[25] For petitioners failure to bring the respondent to her destination, as scheduled, we find the petitioner clearly liable for the breach of its contract of carriage with the respondent. We are convinced that the petitioner acted in bad faith. Bad faith means a breach of known duty through some motive of interest or ill will. Selfenrichment or fraternal interest, and not personal ill will, may well have been the motive; but it is malice nevertheless.[26] Bad faith was imputed by the trial court when it found that the petitioners employees at the Singapore airport did not accord the respondent the attention and treatment allegedly warranted under the circumstances. The lady employee at the counter was unkind and of no help to her. The respondent further alleged that without her threats of suing the company, she was not allowed to use the companys phone to make long distance calls to her mother in Manila. The male employee at the counter where it says: Immediate Attention to Passengers with Immediate Booking was rude to her when he curtly retorted that he was busy attending to other passengers in line. The trial court concluded that this inattentiveness and rudeness of petitioners personnel to respondents plight was gross enough amounting to bad faith. This is a finding that is generally binding upon the Court which we find no reason to disturb. Article 2232 of the Civil Code provides that in a contractual or quasi-contractual relationship, exemplary damages may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. In this case, petitioners employees acted in a wanton, oppressive or malevolent manner. The award of exemplary damages is, therefore, warranted in this case.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. SO ORDERED. [G.R. No. 121824. January 29, 1998] BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents. DECISION ROMERO, J.: In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of respondent Court of Appeals[1] promulgated on September 7, 1995, which affirmed the award of damages and attorneys fees made by the Regional Trial Court of Cebu, 7th Judicial Region, Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its third-party complaint against Philippine Airlines (PAL).[2] The material and relevant facts are as follows: On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA where the following itinerary was indicated:[3] CARRIER STATUS MANILA OK HONGKONG OK BOMBAY OK MANILA MNL HKG BOM MNL" PR 310Y BA 20 M BA 19 M 16 APR 16 APR 23 APR 1730 FLIGHT DATE TIME

Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages and attorneys fees[5] against BA and Mr. Gumar before the trial court, docketed as Civil Case No. CEB-9076. On September 4, 1990, BA filed its answer with counter claim[6] to the complaint raising, as special and affirmative defenses, that Mahtani did not have a cause of action against it. Likewise, on November 9, 1990, BA filed a thirdparty complaint[7] against PAL alleging that the reason for the non-transfer of the luggage was due to the latters late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtanis luggage to the BA aircraft bound for Bombay. On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing that there was, in fact, adequate time to transfer the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to Hongkong authorities should be considered as transfer to BA.[8] After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of Mahtani,[9] the dispositive portion of which reads as follows: WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendant for which defendant is ordered to pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the value of the two (2) suit cases; Four Hundred U.S. ($400.00) Dollars representing the value of the contents of plaintiffs luggage; Fifty Thousand (P50,000.00) Pesos for moral and actual damages and twenty percent (20%) of the total amount imposed against the defendant for attorneys fees and costs of this action. The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED for lack of cause of action. SO ORDERED.

2100 0840 Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial courts findings. Thus: WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed from to be in accordance with law and evidence, the same is hereby AFFIRMED in toto, with costs against defendant-appellant. SO ORDERED.[10] BA is now before us seeking the reversal of the Court of Appeals decision. In essence, BA assails the award of compensatory damages and attorneys fees, as well as the dismissal of its third-party complaint against PAL.[11] Regarding the first assigned issue, BA asserts that the award of compensatory damages in the separate sum of P7,000.00 for the loss of Mahtanis two pieces of luggage was without basis since Mahtani in his complaint[12] stated the following as the value of his personal belongings: 8. On said travel, plaintiff took with him the following items and its corresponding value, to wit: ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 41

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA. Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay. Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing the Property Irregularity Report.[4]

1. 2.

personal belonging - - - - - - - - - - - - - - P10,000.00 gifts for his parents and relatives - - - - - $5,000.00

Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided for in the ticket, which reads:[13] Liability for loss, delay, or damage to baggage is limited unless a higher value is declared in advance and additional charges are paid: 1. For most international travel (including domestic corporations of international journeys) the liability limit is approximately U.S. $9.07 per pound (U.S. $20.00) per kilo for checked baggage and U.S. $400 per passenger for unchecked baggage. Before we resolve the issues raised by BA, it is needful to state that the nature of an airlines contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their destination. A business intended to serve the travelling public primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting standard.[14] Neglect or malfeasance by the carriers employees could predictably furnish bases for an action for damages.[15] In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of cases[16] we have assessed the airlines culpability in the form of damages for breach of contract involving misplaced luggage. In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection to defendants acts.[17] In this regard, the trial court granted the following award as compensatory damages: Since plaintiff did not declare the value of the contents in his luggage and even failed to show receipts of the alleged gifts for the members of his family in Bombay, the most that can be expected for compensation of his lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or a combined value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos representing the contents plus Seven Thousand (P7,000.00) Pesos representing the purchase price of the two (2) suit cases. However, as earlier stated, it is the position of BA that there should have been no separate award for the luggage and the contents thereof since Mahtani failed to declare a separate higher valuation for the luggage,[18] and therefore, its liability is limited, at most, only to the amount stated in the ticket. Considering the facts of the case, we cannot assent to such specious argument.

(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery. American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being binding on the passenger regardless of the passengers lack of knowledge thereof or assent thereto.[20] This doctrine is recognized in this jurisdiction.[21] Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the facts and circumstances justify that they should be disregarded.[22] In addition, we have held that benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely objections during the trial when questions and answers regarding the actual claims and damages sustained by the passenger were asked.[23] Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of limited liability when it allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage, without any objection. In this regard, we quote the pertinent transcript of stenographic notes of Mahtanis direct testimony:[24] Q A Q A Q A Q A How much are you going to ask from this court? P100,000.00. What else? Exemplary damages. How much? P100,000.00.

lest silence when there is opportunity to speak may operate as a waiver of objections.[25] BA has precisely failed in this regard. To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even conducted his own cross-examination as well.[26] In the early case of Abrenica v. Gonda,[27] we ruled that: x x x (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the admission of any evidence must be made at the proper time, and that if not so made it will be understood to have been waived. The proper time to make a protest or objection is when, from the question addressed to the witness, or from the answer thereto, or from the presentation of proof, the inadmissibility of evidence is, or may be inferred. Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great respect.[28] Since the actual value of the luggage involved appreciation of evidence, a task within the competence of the Court of Appeals, its ruling regarding the amount is assuredly a question of fact, thus, a finding not reviewable by this Court.[29] As to the issue of the dismissal of BAs third-party complaint against PAL, the Court of Appeals justified its ruling in this wise, and we quote:[30] Lastly, we sustain the trial courts ruling dismissing appellants third-party complaint against PAL. The contract of air transportation in this case pursuant to the ticket issued by appellant to plaintiff-appellee was exclusively between the plaintiff Mahtani and defendant-appellant BA. When plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a subcontractor or agent of BA. This is shown by the fact that in the ticket issued by appellant to plaintiff-appellee, it is specifically provided on the Conditions of Contract, paragraph 4 thereof that: 4. x x x carriage to be performed hereunder by several successive carriers is regarded as a single operation. The rule that carriage by plane although performed by successive carriers is regarded as a single operation and that the carrier issuing the passengers ticket is considered the principal party and the other carrier merely subcontractors or agent, is a settled issue. We cannot agree with the dismissal of the third-complaint.

What else? The things I lost, $5,000.00 for the gifts I lost and my personal belongings, P10,000.00. In Firestone Tire and Rubber Company of the Philippines v. Tempengko,[31] we expounded on the nature of a third-party complaint thus: The third-party complaint is, therefore, a procedural device whereby a third party who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiffs claim. The third-party complaint is actually independent of and separate and distinct from the plaintiffs complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and separately from the original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party defendant or so to ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 42

Q A Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater amount. Article 22(1) of the Warsaw Convention,[19] provides as follows: x x x xxx xxx

What about the filing of this case? The court expenses and attorneys fees is 30%.

Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party to be inadmissible for any reason, the latter has the right to object. However, such right is a mere privilege which can be waived. Necessarily, the objection must be made at the earliest opportunity,

speak, to litigate his separate cause of action in respect of plaintiffs claim against a third-party in the original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts. Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally denies. In other words, BA and PAL are blaming each other for the incident. In resolving this issue, it is worth observing that the contract of air transportation was exclusively between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the formers journey to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the Conditions of Contracts of the ticket[32] issued by BA to Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay. 4. x x x carriage to be performed hereunder by several successive carriers is regarded as a single operation. Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted as the agent of BA. Parenthetically, the Court of Appeals should have been cognizant of the wellsettled rule that an agent is also responsible for any negligence in the performance of its function[33] and is liable for damages which the principal may suffer by reason of its negligent act.[34] Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or sub-contractor. Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship.[35] Therefore, in the instant case, the contractual relationship between BA and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the agent. Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German Airlines v. Court of Appeals.[36] In that case, Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines which was to carry Antiporda to a specific destination bumped him off. An action for damages was filed against Lufthansa which, however, denied any liability, contending that its responsibility towards its passenger is limited to the occurrence of a mishap on its own line. Consequently, when Antiporda transferred to Air Kenya, its obligation as a principal in the contract of carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya. In rejecting Lufthansas argument, we ruled: In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers. The

issuance of confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip aboard successive carriers concretely attest to this. Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals,[37] while not exactly in point, the case, however, illustrates the principle which governs this particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the performance of its duties. Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately determining who was primarily at fault as between them, is without legal basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases which would entail receiving the same or similar evidence for both cases and enforcing separate judgments therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay and circuity of action and to enable the controversy to be disposed of in one suit.[38] It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is proven that the latters negligence was the proximate cause of Mahtanis unfortunate experience, instead of totally absolving PAL from any liability. WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 43309 dated September 7, 1995 is hereby MODIFIED, reinstating the third-party complaint filed by British Airways dated November 9, 1990 against Philippine Airlines. No costs. SO ORDERED.

said defendant Claudia Tagunicar (Exhs. C & C-1). The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy to two (2) lines of infrared heating system processing textured plastic article (Exh. K). On said date, only the passage from Manila to Hongkong, then to Tokyo, were confirmed. [PAA] Flight 002 from Tokyo to San Francisco was on "RQ" status, meaning "on request". Per instruction of defendant Claudia Tagunicar, plaintiffs returned after a few days for the confirmation of the Tokyo-San Francisco segment of the trip. After calling up Canilao of TWSI, defendant Tagunicar told plaintiffs that their flight is now confirmed all the way. Thereafter, she attached the confirmation stickers on the plane tickets (Exhs. A & B). A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am office to verify the status of the flight. According to said Adrian Yu, a personnel of defendant Pan Am told him over the phone that plaintiffs' booking[s] are confirmed. On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They left Hongkong for Tokyo on July 28, 1978. Upon their arrival in Tokyo, they called up Pan-Am office for reconfirmation of their flight to San Francisco. Said office, however, informed them that their names are not in the manifest. Since plaintiffs were supposed to leave on the 29th of July, 1978, and could not remain in Japan for more than 72 hours, they were constrained to agree to accept airline tickets for Taipei instead, per advise of JAL officials. This is the only option left to them because Northwest Airlines was then on strike, hence, there was no chance for the plaintiffs to obtain airline seats to the United States within 72 hours. Plaintiffs paid for these tickets. Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they were forced to return back to Manila on August 3, 1978, instead of proceeding to the United States. [Japan] Air Lines (JAL) refunded the plaintiffs the difference of the price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I & J) in the total amount of P2,602.00. In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc. cancelled Yu Eng Cho's option to buy the two lines of infra-red heating system (Exh. K). The agreement was for him to inspect the equipment and make final arrangement[s] with the said company not later than August 7, 1978. From this business transaction, plaintiff Yu Eng Cho expected to realize a profit of P300,000.00 to P400,000.00. [A] scrutiny of defendants' respective evidence reveals the following: Plaintiffs, who were intending to go to the United States, were referred to defendant Claudia Tagunicar, an independent travel solicitor, for the purchase of their plane tickets. As such travel solicitor, she helps in the processing of travel papers like passport, plane tickets, booking of passengers and some assistance at the airport. She is known to defendants Pan-Am, TWSI/Julieta Canilao, ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 43

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners, vs. PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA CANILAO and CLAUDIA TAGUNICAR, respondents. PUNO, J.: This petition for review seeks a reversal of the 31 August 1995 Decision 1 and 11 January 1998 Resolution 2 of the Court of Appeals holding private respondent Claudia Tagunicar solely liable for moral and exemplary damages and attorney's fees, and deleting the trial court's award for actual damages. The facts as found by the trial court are as follows: Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In connection with [this] business, he travels from time to time to Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs bought plane tickets (Exhs. A & B) from defendant Claudia Tagunicar who represented herself to be an agent of defendant Tourist World Services, Inc. (TWSI). The destination[s] are Hongkong, Tokyo, San Francisco, U.S.A., for the amount of P25,000.00 per computation of

because she has been dealing with them in the past years. Defendant Tagunicar advised plaintiffs to take Pan-Am because Northwest Airlines was then on strike and plaintiffs are passing Hongkong, Tokyo, then San Francisco and Pan-Am has a flight from Tokyo to San Francisco. After verifying from defendant TWSI, thru Julieta Canilao, she informed plaintiffs that the fare would be P25,093.93 giving them a discount of P738.95 (Exhs. C, C-1). Plaintiffs, however, gave her a check in the amount of P25,000.00 only for the two round trip tickets. Out of this transaction, Tagunicar received a 7% commission and 1% commission for defendant TWSI. Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets from defendant Julieta Canilao with the following schedules: Origin Destination Airline Date Time/Travel Manila Hongkong CX900 7-23-78 1135/1325hrs Hongkong Tokyo CS500 7-28- 1615/2115hrs Tokyo San Francisco PA002 7-29-78 1930/1640hrs The use of another airline, like in this case it is Cathay Pacific out of Manila, is allowed, although the tickets issued are Pan-Am tickets, as long as it is in connection with a Pan-Am flight. When the two (2) tickets (Exhs. A & B) were issued to plaintiffs, the letter "RQ" appears below the printed word "status" for the flights from Tokyo to San Francisco which means "under request," (Exh. 3-A, 4-A Pan-Am). Before the date of the scheduled departure, defendant Tagunicar received several calls from the plaintiffs inquiring about the status of their bookings. Tagunicar in turn called up TWSI/Canilao to verify; and if Canilao would answer that the bookings are not yet confirmed, she would relate that to the plaintiffs. Defendant Tagunicar claims that on July 13, 1978, a few days before the scheduled flight, plaintiff Yu Eng Cho personally went to her office, pressing her about their flight. She called up defendant Julieta Canilao, and the latter told her "o sige Claudia, confirm na." She even noted this in her index card (Exh. L), that it was Julieta who confirmed the booking (Exh. L-1). It was then that she allegedly attached the confirmation stickers (Exhs. 2, 2-B TWSI) to the tickets. These stickers came from TWSI. Defendant Tagunicar alleges that it was only in the first week of August, 1978 that she learned from Adrian Yu, son of plaintiffs, that the latter were not able to take the flight from Tokyo to San Francisco, U.S.A. After a few days, said Adrian Yu came over with a gentleman and a lady, who turned out to be a lawyer and his secretary. Defendant Tagunicar claims that plaintiffs were asking for her help so that they could file an action against Pan-Am. Because of plaintiffs' promise she will not be involved, she agreed to sign the affidavit (Exh. M) prepared by the lawyer.
78

Defendants TWSI/Canilao denied having confirmed the Tokyo-San Francisco segment of plaintiffs' flight because flights then were really tight because of the on-going strike at Northwest Airlines. Defendant Claudia Tagunicar is very much aware that [said] particular segment was not confirmed, because on the very day of plaintiffs' departure, Tagunicar called up TWSI from the airport; defendant Canilao asked her why she attached stickers on the tickets when in fact that portion of the flight was not yet confirmed. Neither TWSI nor Pan-Am confirmed the flight and never authorized defendant Tagunicar to attach the confirmation stickers. In fact, the confirmation stickers used by defendant Tagunicar are stickers exclusively for use of PanAm only. Furthermore, if it is the travel agency that confirms the booking, the IATA number of said agency should appear on the validation or confirmation stickers. The IATA number that appears on the stickers attached to plaintiffs' tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when in fact TWSI's IATA number is 2-83-0770 (Exhs. 5, 5-A TWSI). 3 A complaint for damages was filed by petitioners against private respondents Pan American World Airways, Inc. (Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets and hotel accommodations when petitioners were compelled to stay in Hongkong and then in Tokyo by reason of the non-confirmation of their booking with Pan-Am. In a Decision dated November 14, 1991, the Regional Trial Court of Manila, Branch 3, held the defendants jointly and severally liable, except defendant Julieta Canilao, thus: WHEREFORE, judgment is hereby rendered for the plaintiffs and ordering defendants Pan American World Airways, Inc., Tourist World Services, Inc. and Claudia Tagunicar, jointly and severally, to pay plaintiffs the sum of P200,000.00 as actual damages, minus P2,602.00 already refunded to the plaintiffs; P200,000.00 as moral damages; P100,000.00 as exemplary damages; an amount equivalent to 20% of the award for and as attorney's fees, plus the sum of P30,000.00 as litigation expenses. Defendants' counterclaims are hereby dismissed for lack of merit. SO ORDERED. Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995, the appellate court rendered judgment modifying the amount of damages awarded, holding private respondent Tagunicar solely liable therefor, and absolving respondents Pan Am and TWSI from any and all liability, thus: PREMISES CONSIDERED, the decision of the Regional Trial Court is hereby SET ASIDE and a new one entered declaring appellant Tagunicar solely liable for: 1) Moral damages in the amount of P50,000.00;

2) Exemplary damages in the amount of P25,000.00; and 3) Attorney's fees in the amount of P10,000.00 plus costs of suit. The award of actual damages is hereby DELETED. SO ORDERED. In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not a duly authorized agent or representative of either Pan Am or TWSI. It held that their business transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as its agent and sub-agent, respectively. It further held that Tagunicar was not authorized to confirm the bookings of, nor issue validation stickers to, herein petitioners and hence, Pan Am and TWSI cannot be held responsible for her actions. Finally, it deleted the award for actual damages for lack of proof. Hence this petition based on the following assignment of errors: 1. the Court of Appeals, in reversing the decision of the trial court, misapplied the ruling in Nicos Industrial Corporation vs. Court of Appeals, et. al. [206 SCRA 127]; and 2. the findings of the Court of Appeals that petitioners' ticket reservations in question were not confirmed and that there is no agency relationship among PAN-AM, TWSI and Tagunicar are contrary to the judicial admissions of PAN-AM, TWSI and Tagunicar and likewise contrary to the findings of fact of the trial court. We affirm. I. The first issue deserves scant consideration. Petitioners contend that contrary to the ruling of the Court of Appeals, the decision of the trial court conforms to the standards of an ideal decision set in Nicos Industrial Corporation, et. al. vs. Court of Appeals, et. al., 4 as "that which, with welcome economy of words, arrives at the factual findings, reaches the legal conclusions, renders its ruling and, having done so, ends." It is averred that the trial court's decision contains a detailed statement of the relevant facts and evidence adduced by the parties which thereafter became the bases for the court's conclusions. A careful scrutiny of the decision rendered by the trial court will show that after narrating the evidence of the parties, it proceeded to dispose of the case with a one-paragraph generalization, to wit: On the basis of the foregoing facts, the Court is constrained to conclude that defendant Pan-Am is the principal, and defendants TWSI and Tagunicar, its authorized agent and sub-agent, respectively. Consequently, defendants Pan-Am, TWSI and Claudia Tagunicar should be held jointly and severally liable to plaintiffs for damages. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 44

Defendant Julieta Canilao, who acted in her official capacity as Office Manager of defendant TWSI should not be held personally liable. 5 The trial court's finding of facts is but a summary of the testimonies of the witnesses and the documentary evidence presented by the parties. It did not distinctly and clearly set forth, nor substantiate, the factual and legal bases for holding respondents TWSI, Pan Am and Tagunicar jointly and severally liable. In Del Mundo vs. CA, et al. 6 where the trial court, after summarizing the conflicting asseverations of the parties, disposed of the kernel issue in just two (2) paragraphs, we held: It is understandable that courts, with their heavy dockets and time constraints, often find themselves with little to spare in the preparation of decisions to the extent most desirable. We have thus pointed out that judges might learn to synthesize and to simplify their pronouncements. Nevertheless, concisely written such as they may be, decisions must still distinctly and clearly express, at least in minimum essence, its factual and legal bases. For failing to explain clearly and well the factual and legal bases of its award of moral damages, we set it aside in said case. Once more, we stress that nothing less than Section 14 of Article VIII of the Constitution requires that "no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based." This is demanded by the due process clause of the Constitution. In the case at bar, the decision of the trial court leaves much to be desired both in form and substance. Even while said decision infringes the Constitution, we will not belabor this infirmity and rather examine the sufficiency of the evidence submitted by the petitioners. II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized ticketing agent of Pan Am. Proceeding from this premise, they contend that TWSI and Pan Am should be held liable as principals for the acts of Tagunicar. Petitioners stubbornly insist that the existence of the agency relationship has been established by the judicial admissions allegedly made by respondents herein, to wit: (1) the admission made by Pan Am in its Answer that TWSI is its authorized ticket agent; (2) the affidavit executed by Tagunicar where she admitted that she is a duly authorized agent of TWSI; and (3) the admission made by Canilao that TWSI received commissions from ticket sales made by Tagunicar. We do not agree. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. 7 The elements of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority. 8 It is a settled rule that persons dealing with an assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. 9 In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated that she is an authorized agent of TWSI. This affidavit,

however, has weak probative value in light of respondent Tagunicar's testimony in court to the contrary. Affidavits, being taken ex parte, are almost always incomplete and often inaccurate, sometimes from partial suggestion, or for want of suggestion and inquiries. Their infirmity as a species of evidence is a matter of judicial experience and are thus considered inferior to the testimony given in court. 10Further, affidavits are not complete reproductions of what the declarant has in mind because they are generally prepared by the administering officer and the affiant simply signs them after the same have been read to her. 11Respondent Tagunicar testified that her affidavit was prepared and typewritten by the secretary of petitioners' lawyer, Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the latter went to see her at her office. This was confirmed by Adrian Yu who testified that Atty. Acebedo brought his notarial seal and notarized the affidavit of the same day. 12 The circumstances under which said affidavit was prepared put in doubt petitioners' claim that it was executed voluntarily by respondent Tagunicar. It appears that the affidavit was prepared and was based on the answers which respondent Tagunicar gave to the questions propounded to her by Atty. Acebedo. 13They never told her that the affidavit would be used in a case to be filed against her. 14 They even assured her that she would not be included as defendant if she agreed to execute the affidavit. 15 Respondent Tagunicar was prevailed upon by petitioners' son and their lawyer to sign the affidavit despite her objection to the statement therein that she was an agent of TWSI. They assured her that "it is immaterial"16 and that "if we file a suit against you we cannot get anything from you." 17 This purported admission of respondent Tagunicar cannot be used by petitioners to prove their agency relationship. At any rate, even if such affidavit is to be given any probative value, the existence of the agency relationship cannot be established on its sole basis. The declarations of the agent alone are generally insufficient to establish the fact or extent of his authority. 18 In addition, as between the negative allegation of respondents Canilao and Tagunicar that neither is an agent nor principal of the other, and the affirmative allegation of petitioners that an agency relationship exists, it is the latter who have the burden of evidence to prove their allegation, 19 failing in which, their claim must necessarily fail. We stress that respondent Tagunicar categorically denied in open court that she is a duly authorized agent of TWSI, and declared that she is an independent travel agent. 20 We have consistently ruled that in case of conflict between statements in the affidavit and testimonial declarations, the latter command greater weight. 21 As further proofs of agency, petitioners call our attention to TWSI's Exhibits "7", "7-A", and "8" which show that Tagunicar and TWSI received sales commissions from Pan Am. Exhibit "7" 22 is the Ticket Sales Report submitted by TWSI to Pan Am reflecting the commissions received by TWSI as an agent of Pan Am. Exhibit "7-A" 23 is a listing of the routes taken by passengers who were audited to TWSI's sales report. Exhibit "8" 24 is a receipt issued by TWSI covering the payment made by Tagunicar for the tickets she bought from TWSI. These documents cannot justify the decision that Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testified that when she pays TWSI, she already deducts in advance her commission and merely gives the net amount to TWSI. 25 From all sides of the legal prism, the transaction is simply a contract of sale wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her clients.

III. Petitioners included respondent Pan Am in the complainant on the supposition that since TWSI is its duly authorized agent, and respondent Tagunicar is an agent of TWSI, then Pan Am should also be held responsible for the acts of respondent Tagunicar. Our disquisitions above show that this contention lacks factual and legal bases. Indeed, there is nothing in the records to show that respondent Tagunicar has been employed by Pan Am as its agent, except the bare allegation of petitioners. The real motive of petitioners in suing Pan Am appears in its Amended Complaint that "[d]efendants TWSI, Canilao and Tagunicar may not be financially capable of paying plaintiffs the amounts herein sought to be recovered, and in such event, defendant Pan Am, being their ultimate principal, is primarily and/or subsidiary liable to pay the said amounts to plaintiffs." 26 This lends credence to respondent Tagunicar's testimony that she was persuaded to execute an affidavit implicating respondents because petitioners knew they would not be able to get anything of value from her. In the past, we have warned that this Court will not tolerate an abuse of judicial process by passengers in order to pry on international airlines for damage awards, like "trophies in a safari." 27 This meritless suit against Pan Am becomes more glaring with petitioner' inaction after they were bumped off in Tokyo. If petitioners were of the honest belief that Pan Am was responsible for the misfortune which beset them, there is no evidence to show that they lodged a protest with Pan Am's Tokyo office immediately after they were refused passage for the flight to San Francisco, or even upon their arrival in Manila. The testimony of petitioner Yu Eng Cho in this regard is of title value, viz: Atty. Jalandoni: . . . q Upon arrival at the Tokyo airport, what did you do if any in connection with your schedule[d] trip? a I went to the Hotel, Holiday Inn and from there I immediately called up Pan Am office in Tokyo to reconfirm my flight, but they told me that our names were not listed in the manifest, so next morning, very early in the morning I went to the airport, Pan Am office in the airport to verify and they told me the same and we were not allowed to leave. q You were scheduled to be in Tokyo for how long Mr. Yu? a We have to leave the next day 29th. q In other words, what was your status as a passenger? a Transient passengers. We cannot stay for more than 72 hours. xxx xxx xxx

q As a consequence of the fact that you claimed that the Pan Am office in Tokyo told you that your names were not in the manifest, what did you do, if any? ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 45

a I ask[ed] them if I can go anywhere in the State? They told me I can go to LA via Japan Airlines and I accepted it. q Do you have the tickets with you that they issued for Los Angels? a It was taken by the Japanese Airlines instead they issue[d] me a ticket to Taipei. xxx xxx xxx

accede to the passenger's wishes does not necessarily translate into damages in the absence of bad faith. 30 The settled rule is that the law presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive. 31 In the case at bar, we find the evidence presented by petitioners insufficient to overcome the presumption of good faith. They have failed to show any wanton, malevolent or reckless misconduct imputable to respondent Pan Am in its refusal to accommodate petitioners in its Tokyo-San Francisco flight. Pan Am could not have acted in bad faith because petitioners did not have confirmed tickets and more importantly, they were not in the passenger manifest. In not a few cases, this Court did not hesitable to hold an airline liable for damages for having acted in bad faith in refusing to accommodate a passenger who had a confirmed ticket and whose name appeared in the passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines Inc., 32 we ruled that there was a valid and binding contract between the airline and its passenger after finding that validating sticker on the passenger's ticket had the letters "O.K." appearing in the "Res. Status" box which means "space confirmed" and that the ticket is confirmed or validated. In Pan American World Airways Inc. v. IAC, et al. 33 where a would-be-passenger had the necessary ticket, baggage claim and clearance from immigration all clearly showing that she was a confirmed passenger and included in the passenger manifest and yet was denied accommodation in said flight, we awarded damages. InArmovit, et al. v. CA, et al., 34 we upheld the award of damages made against an airline for gross negligence committed in the issuance of tickets with erroneous entries as to the time of flight. In Alitalia Airways v. CA, et al., 35we held that when airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. And finally, an award of damages was held proper in the case of Zalamea, et al. v. CA, et al., 36 where a confirmed passenger included in the manifest was denied accommodation in such flight. On the other hand, the respondent airline in Sarreal, Sr. v. Japan Airlines Co., Ltd., 37 was held not liable for damages where the passenger was not allowed to board the plane because his ticket had not been confirmed. We ruled that "[t]he stub that the lady employee put on the petitioner's ticket showed among other coded items, under the column "status" the letters "RQ" which was understood to mean "Request." Clearly, this does not mean a confirmation but only a request. JAL Traffic Supervisor explained that it would have been different if what was written in the stub were the letter "ok" in which case the petitioner would have been assured of a seat on said flight. But in this case, the petitioner was more of a wait-listed passenger than a regularly booked passenger." In the case at bar, petitioners' ticket were on "RQ" status. They were not confirmed passengers and their names were not listed in the passenger manifest. In other words, this is not a case where Pan Am bound itself to transport petitioners and thereafter reneged on its obligation. Hence, respondent airline cannot be held liable for damages.

q Were you able to take the trip to Los Angeles via Pan Am tickets that was issued to you in lieu of the tickets to San Francisco? a No, sir. q Why not? a The Japanese Airlines said that there were no more available seats. q And as a consequence of that, what did you do, if any? a I am so much scared and worried, so the Japanese Airlines advised us to go to Taipei and I accepted it. xxx xxx xxx

IV. We hold that respondent Court of Appeals correctly rules that the tickets were never confirmed for good reasons: (1) The persistent calls made by respondent Tagunicar to Canilao, and those made by petitioners at the Manila, Hongkong and Tokyo offices in Pan Am, are eloquent indications that petitioners knew that their tickets have not been confirmed. For, as correctly observed by Pan Am, why would one continually try to have one's ticket confirmed if it had already been confirmed? (2) The validation stickers which respondent Tagunicar attached to petitioners' tickets were those intended for the exclusive use of airline companies. She had no authority to use them. Hence, said validation stickers, wherein the word "OK" appears in the status box, are not valid and binding. (3) The names of petitioners do not appear in the passengers manifest. (4) Respondent Tagunicar's "Exhibit 1" 38shows that the status of the San Francisco-New York segment was "Ok", meaning it was confirmed, but that the status of the Tokyo-San Francisco segment was still "on request". (5) Respondent Canilao testified that on the day that petitioners were to depart for Hongkong, respondent Tagunicar called her from the airport asking for confirmation of the Tokyo-San Francisco flight, and that when she told respondent Tagunicar that she should not have allowed petitioners to leave because their tickets have not been confirmed, respondent Tagunicar merely said "Bahala na." 39 This was never controverted nor refuted by respondent Tagunicar. (6) To prove that it really did not confirm the bookings of petitioners, respondent Canilao pointed out that the validation stickers which respondent Tagunicar attached to the tickets of petitioners had IATA No. 2-82-0770 stamped on it, whereas the IATA number of TWSI is 28-30770. 40 Undoubtedly, respondent Tagunicar should be liable for having acted in bad faith in misrepresenting to petitioners that their tickets have been confirmed. Her culpability, however, was properly mitigated. Petitioner Yu Eng Cho testified that he repeatedly tried to follow up on the confirmation of their tickets with Pan Am because he doubted the confirmation made by respondent Tagunicar. 41 This is clear proof that petitioners knew that they might be bumped off at Tokyo when they decided to proceed with the trip. Aware of this risk, petitioners exerted efforts to confirm their tickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly, we find the modification as to the amount of damages awarded just and equitable under the circumstances. WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners.1wphi1.nt SO ORDERED.

q Why did you accept the Japan Airlines offer for you to go to Taipei? a Because there is no chance for us to go to the United States within 72 hours because during that time Northwest Airlines [was] on strike so the seats are very scarce. So they advised me better left (sic) before the 72 hours otherwise you will have trouble with the Japanese immigration. q As a consequence of that you were force[d] to take the trip to Taipei? a Yes, sir. 28 (emphasis supplied) It grinds against the grain of human experience that petitioners did not insist that they be allowed to board, considering that it was then doubly difficult to get seats because of the ongoing Northwest Airlines strike. It is also perplexing that petitioners readily accepted whatever the Tokyo office had to offer as an alternative. Inexplicably too, no demand letter was sent to respondents TWSI and Canilao. 29 Nor was a demand letter sent to respondent Pan Am. To say the least, the motive of petitioners in suing Pan Am is suspect. We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to board to justify petitioners' claim for damages. Mere refusal to

[G.R. No. 127957. February 21, 2001] COLLIN A. MORRIS and THOMAS P. WHITTIER, petitioners, vs. COURT OF APPEALS (Tenth Division) and SCANDINAVIAN AIRLINES SYSTEM, respondents. DECISION PARDO, J.: Petitioners appeal via certiorari from the decision[1] of the Court of Appeals, which reversed the decision of the trial court and ordered the dismissal of ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 46

petitioners complaint for damages against respondent for breach of contract of air carriage. On February 14, 1978, petitioners filed with the Regional Trial Court, Makati, Branch 143 an action for damages for breach of contract of air carriage against respondent airline because they were bumped off from SAS Flight SK 893, Manila-Tokyo, on February 14, 1978, despite a confirmed booking in the first class section of the flight. Petitioners Collin A. Morris and Thomas P. Whittier were American citizens; the vice-president for technical services and the director for quality assurance, respectively, of Sterling Asia, a foreign corporation with regional headquarters at No. 8741 Paseo de Roxas, Makati City. Respondent Scandinavian Airline System (SAS for brevity) is and at times material hereto has been engaged in the commercial air transport of passengers globally. Petitioner Morris and co-petitioner Whittier had a series of business meetings with Japanese businessmen in Japan from February 14 to February 22, 1978. They requested their travel agent, Staats Travel Service, Inc. to book them as first class passengers in SAS Manila-Tokyo flight on February 14, 1978. Respondent booked them as first-class passengers on Flight SK 893, ManilaTokyo flight on February 14, 1978, at 3:50 in the afternoon. At 1:30 in the afternoon of February 14, 1978, a limousine service of the travel agency fetched petitioner Morris at his house in Urdaneta Village, Makati City. Thereafter, they went to Merville Park, Paraaque and fetched petitioner Whittier, arriving there at around 2:00 in the afternoon. From Paraaque, they went to the Manila International Airport and arrived at 2:35 in the afternoon. Upon arrival at the airport, representatives of the travel agency met petitioners. It took petitioners two to three minutes to clear their bags at the customs section. After that, they proceeded to the SAS check-in counter and presented their tickets, passports, immigration cards and travel documents to Ms. Erlinda Ponce at the reception desk. After about fifteen (15) minutes, petitioners noticed that their travel documents were not being processed at the check-in counter. They were informed that there were no more seats on the plane for which reason they could not be accommodated on the flight. Petitioner Morris contacted Staats Travel Service and asked the latter to contact the management of SAS to find out what was the problem. After ten (10) minutes, Staats Travel Service called and confirmed their booking. Thereafter, petitioners Morris and Whittier returned to respondents check-in counter anticipating that they would be allowed to check-in. However, the check-in counter was closed. When they informed Ms. Ponce, in-charge at the check-in counter that arrangements had been made with respondents office, she ignored them. Even respondents supervisor, Raul Basa, ignored them and refused to answer their question why they could not be accommodated in the flight despite their confirmed booking. When petitioners went to the supervisors desk to check the flight manifest, they saw that their names on top of the list of the first class section had been crossed out. They pressed the supervisor to allow them in the flight as they had

confirmed tickets. Mr. Basa informed them that it could not be done because the flight was closed and it was too late to do anything. They checked in at exactly 3:10 in the afternoon and the flight was scheduled to leave Manila International Airport at 3:50 in the afternoon.[2] Petitioner Morris said that they were advised to be at the airport at least an hour before departure time. This has been respondents policy in petitioners previous travels abroad.[3] Ms. Erlinda Ponce, SAS employee on duty at the check-in counter on February 14, 1978 testified that the economy class of SAS Flight SK 893 was overbooked; however, the first class section was open. She met petitioners, who were booked in the first class section, when they approached the counter to check-in. They were not accommodated on the flight because they checked-in after the flight manifest had been closed, forty (40) minutes prior to the planes departure. Petitioners seats were given to economy class passengers who were upgraded to first class.[4] Upon cross-examination, Ms. Ponce said that petitioners might have arrived at the airport earlier than 3:10 in the afternoon when the flight manifest was closed; she was sure that they arrived at the check-in counter at past 3:10 in the afternoon. The first class seats of petitioners were given to upgraded economy class passengers three (3) minutes before the flight manifest was closed.[5] Raul Cruz Basa, a supervisor of respondent airline company, testified that SAS Flight SK 893 on February 14, 1978 was overbooked in the economy class. Petitioner Morris and Whittier were among the names listed in the first class section of the flight manifest. However, their names were crossed out and the symbols NOSH, meaning NO SHOW, written after their names. The NO SHOW notation could mean either that the booked passengers or his travel documents were not at the counter at the time of the closing of the flight manifest. Mr. Basa said that he talked to petitioners at about 3:20 in the afternoon after receiving a radio call from the ground staff at the check-in counter about complaints from passengers. He learned from Ms. Ponce that petitioners checked in late after the flight manifest had been closed, after which time waitlisted passengers from the economy class had been upgraded. He explained to petitioners that they could not be accommodated on the plane because the seats were all filled up. He admitted that there were about six (6) passengers in the counter who were refused boarding because waitlisted passengers had been accepted. Most of those who were refused boarding came in late.[6] Alice Magtulac, another witness of the respondent, testified that she was supervisor of ticketing and reservation section. She said that petitioners Morris and Whittier had confirmed reservation tickets to the first class section of SAS Flight SK 893, Manila-Tokyo flight, on February 14, 1978. She confirmed that Ms. Thelma Lorraine Sayer was one of the economy class passengers who was not able to leave because the flight was overbooked on the economy class. Ms. Magtulac said that it was not SAS policy to upgrade economy passengers to first class if passengers booked for first class did not show up.[7]

On August 24, 1988, the trial court rendered a judgment against respondent and in favor of petitioners Morris and Whittier. The dispositive portion reads: WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiffs and against defendant, ordering the latter to pay the former the following: 1) Moral damages to plaintiff Collin A. Morris in the amount of P1,000,000.00 and to plaintiff Thomas P. Whittier the sum of P750,000.00; 2) 3) Exemplary damages in the sum of P200,00.00; Attorneys fees in the amount of P300,000.00, plus the costs of suit.

SO ORDERED. Makati, Metro Manila, August 24, 1988.

[ORIGINAL SIGNED] TEOFILO GUADIZ, JR. J u d g e[8] On October 5, 1988, respondent filed a notice of appeal.[9] Meanwhile, on October 6, 1988, petitioners Morris and Whittier moved for reconsideration of the decision as regards the award of damages. On November 2, 1988, respondent opposed the motion for reconsideration.[10] On February 26, 1992, the trial court issued an order granting petitioners motion for reconsideration, the decretal portion of which is quoted herein, to wit: WHEREFORE, in view of the foregoing, the Court hereby grants the Motion for Reconsideration. The dispositive portion of the Decision is hereby amended with respect to the amount of moral damages, ordering the defendant to pay moral damages to Collin Morris in the amount of P1,500,000.00 and to Thomas Whittier the amount of P1,000,000.00. SO ORDERED. Makati, Metro Manila, February 26, 1992.

[ORIGINAL SIGNED] TEOFILO GUADIZ, JR. J u d g e[11] Respondents appeal rested mainly on the ground that the trial court misappreciated the facts and evidence adduced during the trial. The thrust of its defense was petitioners lack of cause of action, considering that they checked-in at the SAS counter at the Manila International Airport after the flight manifest ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 47

was closed and after their first class seats were given to waitlisted economy class passengers.[12] On January 21, 1997, the Court of Appeals promulgated a decision reversing the decision of the court a quo, and ordering the dismissal of the complaint for damages. The dispositive portion of the decision provides: WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another one rendered dismissing plaintiffs-appellees complaint. SO ORDERED.[13] In reversing the trial courts decision, the Court of Appeals found petitioners statements self-serving. Petitioners failed to prove that they checked-in on time. The appellate court lent credence to respondents claim that petitioners were denied boarding on SAS Flight SK 893 because of their late arrival for check-in at the international airport. Respondents employee, Ms. Erlinda Ponce, testified that petitioners checked in after the flight manifest was closed. Hence, this petition.[14] Petitioners allege that the Court of Appeals gravely erred in dismissing their complaint for damages and in finding their testimonies self-serving. They contend that the trial court did not act arbitrarily in lending credence to their testimonies and finding their evidence sufficient to warrant the award of damages against respondent. In sum, they claim to be entitled to the award for damages because, as found by the trial court, they were wrongfully and in bad faith, bumped-off from SAS Flight SK 893 on February 14, 1978, despite their timely arrival at the airport for check-in and confirmed bookings as first class passengers.[15] The petition has no merit. To begin with, it must be emphasized that a contract to transport passengers is quite different in kind and degree from any other contractual relations, and this is because of the relation, which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail [themselves] of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carriers employees naturally could give ground for an action for damages.[16] In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith.[17] Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages.[18] Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger.[19] The award of exemplary damages has likewise no factual basis. It is a requisite that the act must be accompanied by bad faith or done in wanton, fraudulent or

malevolent manner--circumstances which are absent in this case. In addition, exemplary damages cannot be awarded as the requisite element of compensatory damages was not present."[20] In the instant case, assuming arguendo that breach of contract of carriage may be attributed to respondent, petitioners travails were directly traceable to their failure to check-in on time, which led to respondents refusal to accommodate them on the flight. The rule is that moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage only where (a) the mishap results in the death of a passenger and (b) it is proved that the carrier was guilty of fraud and bad faith even if death does not result.[21] For having arrived at the airport after the closure of the flight manifest, respondents employee could not be faulted for not entertaining petitioners tickets and travel documents for processing, as the checking in of passengers for SAS Flight SK 893 was finished. There was no fraud or bad faith as would justify the courts award of moral damages. Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will that partakes of the nature of fraud.[22] In the instant case, respondents denial of petitioners boarding on SAS Flight SK 893 was not attended by bad faith or malice. To the contrary, facts revealed that they were not allowed to board the plane due to their failure to check-in on time. Petitioner Morris admitted that they were at the check-in counter at around 3:10, exactly the same time that the flight manifest was closed, but still too late to be accommodated on the plane. Respondents supervisor, Raul C. Basa, testified that he met petitioners at about 3:20 in the afternoon after receiving a radio call from the ground staff regarding petitioners complaints. Clearly, petitioners did not arrive on time for check-in. As we find petitioners not entitled to moral damages, an award of exemplary damages is likewise baseless.[23] Where the award of moral and exemplary damages is eliminated, so must the award for attorneys fees be deleted.[24] WHEREFORE, the Court DENIES the petition for lack of merit. The Court AFFIRMS in toto the decision of the Court of Appeals in CA-G. R. CV. No. 38684. No costs. SO ORDERED. [G.R. No. 161730. January 28, 2005]

This petition for review seeks to reverse and set aside the October 9, 2002 decision[1] of the Court of Appeals and its January 12, 2004 resolution,[2] which affirmed in toto the June 10, 1997 decision of the Regional Trial Court of Makati City, Branch 61 in Civil Case No. 92-3635.[3] On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines (JAL) Flight 742 bound for Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko Etou-Higuchi of JAL endorsed their applications for shore pass and directed them to the Japanese immigration official.[4] A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of call for not more than 72 hours. During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his passport. Because of this inconsistency, respondents were denied shore pass entries and were brought instead to the Narita Airport Rest House where they were billeted overnight. The immigration official also handed Mrs. Higuchi a Notice[5] where it was stated that respondents were to be watched so as not to escape. Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japans Immigration Department to handle passengers who were denied shore pass entries, brought respondents to the Narita Airport Rest House where they stayed overnight until their departure the following day for Los Angeles. Respondents were charged US$400.00 each for their accommodation, security service and meals. On December 12, 1992, respondents filed a complaint for damages[6] claiming that JAL did not fully apprise them of their travel requirements and that they were rudely and forcibly detained at Narita Airport. JAL denied the allegations of respondents. It maintained that the refusal of the Japanese immigration authorities to issue shore passes to respondents is an act of state which JAL cannot interfere with or prevail upon. Consequently, it cannot impose upon the immigration authorities that respondents be billeted at Hotel Nikko instead of the airport resthouse.[7] On June 10, 1997, the trial court rendered its decision, the dispositive portion of which reads: WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiffs ordering defendant JAL to pay plaintiffs as follows: 1. the sum of US$800.00 representing the expenses incurred at the Narita Airport with interest at 12% per annum from March 27, 1992 until the sum is fully paid; 2. the sum of P200,000.00 for each plaintiff as moral damages;

JAPAN AIRLINES, petitioner, vs. MICHAEL ASUNCION and JEANETTE ASUNCION, respondents. DECISION YNARES-SANTIAGO, J.:

3. the amount of P100,000.00 for each plaintiff as exemplary damages; 4. the amount of P100,000.00 as attorneys fees; and 5. costs of suit. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 48

SO ORDERED.[8] The trial court dismissed JALs counterclaim for litigation expenses, exemplary damages and attorneys fees. On October 9, 2002, the Court of Appeals affirmed in toto the decision of the trial court. Its motion for reconsideration having been denied,[9] JAL now files the instant petition. The basic issue for resolution is whether JAL is guilty of breach of contract. Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger has every right to expect that he be transported on that flight and on that date and it becomes the carriers obligation to carry him and his luggage safely to the agreed destination.[10] If the passenger is not so transported or if in the process of transporting he dies or is injured, the carrier may be held liable for a breach of contract of carriage.[11] We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents shore pass applications. Prior to their departure, respondents were aware that upon arrival in Narita, they must secure shore pass entries for their overnight stay. Respondents mother, Mrs. Imelda Asuncion, insisted though that Ms. Linda Villavicencio of JAL assured her that her children would be granted the passes.[12] This assertion was satisfactorily refuted by Ms. Villavicencios testimony during the cross examination, to wit: ATTY. GONZAGA: Q I will show to you Exh. 9 which is the TIM and on page 184 hereof, particularly number 10, and I quote, Those holding tickets with confirmed seats and other documents for their onward journey and continuing their journey to a third country provided that they obtain an indorsement with an application of shore pass or transit pass from the airline ground personnel before clearing the immigration formality? WITNESS: A Q A Yes, Sir.

Q A Q

Are you sure? Yes, Sir.

passengers of JAL, and according to the plaintiff, they had vouchers to stay in that hotel that night? A: No, I couldnt do so. Why not?

Did you give a copy? Q:

A No, Sir, I did not give a copy but verbally I explained to her the procedure they have to undergo when they get to narita airport. . Q And you read the contents of this [TIM]?

A: This notice is evidence which shows the decision of immigration authorities. It shows there that the immigration inspector also designated Room 304 of the Narita Airport Resthouse as the place where the passengers were going to wait for their outbound flight. I cannot interfere with that decision.[15] Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the denial of respondents applications, Mrs. Higuchi immediately made reservations for respondents at the Narita Airport Rest House which is really more a hotel than a detention house as claimed by respondents.[16] More importantly, nowhere in respondent Michaels testimony did he state categorically that Mrs. Higuchi or any other employee of JAL treated them rudely or exhibited improper behavior throughout their stay. We therefore find JAL not remiss in its obligations as a common carrier. Moral damages may be recovered in cases where one willfully causes injury to property, or in cases of breach of contract where the other party acts fraudulently or in bad faith. Exemplary damages are imposed by way of example or correction for the public good, when the party to a contract acts in wanton, fraudulent, oppressive or malevolent manner. Attorneys fees are allowed when exemplary damages are awarded and when the party to a suit is compelled to incur expenses to protect his interest.[17] There being no breach of contract nor proof that JAL acted in wanton, fraudulent or malevolent manner, there is no basis for the award of any form of damages. Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It has been sufficiently proven that the amount pertained to ISC, an agency separate and distinct from JAL, in payment for the accommodations provided to respondents. The payments did not in any manner accrue to the benefit of JAL. However, we find that the Court of Appeals correctly dismissed JALs counterclaim for litigation expenses, exemplary damages and attorneys fees. The action was filed by respondents in utmost good faith and not manifestly frivolous. Respondents honestly believed that JAL breached its contract. A persons right to litigate should not be penalized by holding him liable for damages. This is especially true when the filing of the case is to enforce what he believes to be his rightful claim against another although found to be erroneous.[18] WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The October 9, 2002 decision of the Court of Appeals and its January 12, 2004 resolution in CA-G.R. CV No. 57440, are REVERSED and SET ASIDE insofar as the finding of breach on the part of petitioner and the award of damages, attorneys fees and costs of the suit in favor of respondents is concerned. Accordingly, there being no breach of contract on the part of petitioner, the award of actual, moral and exemplary damages, as well as attorneys fees and costs of the suit in favor of respondents Michael and Jeanette Asuncion, is DELETED for lack of basis. However, the dismissal for lack of merit of petitioners counterclaim for ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 49

A No, Sir, I did not read it to her but I explained to her the procedure that each passenger has to go through before when they get to narita airport before they line up in the immigration counter. Q In other words, you told Mrs. Asuncion the responsibility of securing shore passes bears solely on the passengers only? A Yes, Sir.

Q That the airline has no responsibility whatsoever with regards (sic) to the application for shore passes? A Yes, Sir.[13]

Next, respondents claimed that petitioner breached its contract of carriage when it failed to explain to the immigration authorities that they had overnight vouchers at the Hotel Nikko Narita. They imputed that JAL did not exhaust all means to prevent the denial of their shore pass entry applications. To reiterate, JAL or any of its representatives have no authority to interfere with or influence the immigration authorities. The most that could be expected of JAL is to endorse respondents applications, which Mrs. Higuchi did immediately upon their arrival in Narita. As Mrs. Higuchi stated during her deposition: ATTY. QUIMBO Q: Madam Witness, what assistance did you give, if any, to the plaintiffs during this interview? A: Q: No, I was not present during their interview. I cannot assist. Why not?

A: It is forbidden for a civilian personnel to interfere with the Immigration agents duties.[14] .

Did you tell this provision to Mrs. Asuncion? Yes, Sir. I did. Q: During the time that you were in that room and you were given this notice for you to sign, did you tell the immigration agent that Michael and Jeanette Asuncion should be allowed to stay at the Hotel Nikko Narita because, as

litigation expenses, exemplary damages and attorneys fees, is SUSTAINED. No pronouncement as to costs. SO ORDERED.

Having obtained an emergency U.S. visa, respondent purchased a round trip plane ticket from petitioner JAL for US$1,485.00 and was issued the corresponding boarding pass.[9] He was scheduled to a particular flight bound for Los Angeles, California, U.S.A. via Narita, Japan.[10] On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport in the company of several relatives and friends.[11] He was allowed to check-in at JALs counter.[12] His plane ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration and security routines.[13] After passing through said immigration and security procedures, respondent was allowed by JAL to enter its airplane.[14] While inside the airplane, JALs airline crew suspected respondent of carrying a falsified travel document and imputed that he would only use the trip to the United States as a pretext to stay and work in Japan.[15] The stewardess asked respondent to show his travel documents. Shortly after, the stewardess along with a Japanese and a Filipino haughtily ordered him to stand up and leave the plane.[16] Respondent protested, explaining that he was issued a U.S. visa. Just to allow him to board the plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in Narita.[17] His pleas were ignored. He was then constrained to go out of the plane.[18] In a nutshell, respondent was bumped off the flight. Respondent went to JALs ground office and waited there for three hours. Meanwhile, the plane took off and he was left behind.[19] Afterwards, he was informed that his travel documents were, indeed, in order.[20] Respondent was refunded the cost of his plane ticket less the sum of US$500.00 which was deducted by JAL.[21] Subsequently, respondents U.S. visa was cancelled.[22]

The RTC explained: In summarily and insolently ordering the plaintiff to disembark while the latter was already settled in his assigned seat, the defendant violated the contract of carriage; that when the plaintiff was ordered out of the plane under the pretext that the genuineness of his travel documents would be verified it had caused him embarrassment and besmirched reputation; and that when the plaintiff was finally not allowed to take the flight, he suffered more wounded feelings and social humiliation for which the plaintiff was asking to be awarded moral and exemplary damages as well as attorneys fees. The reason given by the defendant that what prompted them to investigate the genuineness of the travel documents of the plaintiff was that the plaintiff was not then carrying a regular visa but just a letter does not appear satisfactory. The defendant is engaged in transporting passengers by plane from country to country and is therefore conversant with the travel documents. The defendant should not be allowed to pretend, to the prejudice of the plaintiff not to know that the travel documents of the plaintiff are valid documents to allow him entry in the United States. The foregoing act of the defendant in ordering the plaintiff to deplane while already settled in his assigned seat clearly demonstrated that the defendant breached its contract of carriage with the plaintiff as passenger in bad faith and as such the plaintiff is entitled to moral and exemplary damages as well as to an award of attorneys fees.[30] Disagreeing with the RTC judgment, JAL appealed to the CA contending that it is not guilty of breach of contract of carriage, hence, not liable for damages.[31] It posited that it is the one entitled to recover on its counterclaim.[32] CA Ruling In a Decision[33] dated May 31, 2005, the CA affirmed the decision of the RTC with modification in that it lowered the amount of moral and exemplary damages and deleted the award of attorneys fees. The fallo of the CA decision reads:

JAPAN AIRLINES, Petitioner, Present: - versus -

G.R. No. 170141

YNARES-SANTIAGO, J., Chairperson, MARTINEZ,

CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: JESUS SIMANGAN, Respondent. April 22, 2008 x--------------------------------------------------x DECISION

REYES, R.T., J.:

WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage.[1] The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by Japan Airlines (JAL).[2] In this petition for review on certiorari,[3] petitioner JAL appeals the: (1) Decision[4] dated May 31, 2005 of the Court of Appeals (CA) ordering it to pay respondent Jesus Simangan moral and exemplary damages; and (2) Resolution[5] of the same court dated September 28, 2005 denying JALs motion for reconsideration. The Facts In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in UCLA School of Medicine in Los Angeles, California, U.S.A. Upon request of UCLA, respondent undertook a series of laboratory tests at the National Kidney Institute in Quezon City to verify whether his blood and tissue type are compatible with Loretos.[6] Fortunately, said tests proved that respondents blood and tissue type were well-matched with Loretos.[7] Respondent needed to go to the United States to complete his preliminary workup and donation surgery. Hence, to facilitate respondents travel to the United States, UCLA wrote a letter to the American Consulate in Manila to arrange for his visa. In due time, respondent was issued an emergency U.S. visa by the American Embassy in Manila.[8]

Displeased by the turn of events, respondent filed an action for damages against JAL with the Regional Trial Court (RTC) in Valenzuela City, docketed as Civil Case No. 4195-V-93. He claimed he was not able to donate his kidney to Loreto; and that he suffered terrible embarrassment and mental anguish.[23] He prayed that he be awarded P3 million as moral damages, P1.5 million as exemplary damages and P500,000.00 as attorneys fees.[24] JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow respondent to fly on his scheduled departure was due to a need for his travel documents to be authenticated by the United States Embassy[25] because no one from JALs airport staff had encountered a parole visa before.[26] It posited that the authentication required additional time; that respondent was advised to take the flight the following day, July 30, 1992. JAL alleged that respondent agreed to be rebooked on July 30, 1992.[27] JAL also lodged a counterclaim anchored on respondents alleged wrongful institution of the complaint. It prayed for litigation expenses, exemplary damages and attorneys fees.[28] On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of respondent (plaintiff), disposing as follows: WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the amount of P1,000,000.00 as moral damages, the amount of P500,000.00 as exemplary damages and the amount of P250,000.00 as attorneys fees, plus the cost of suit.[29]

WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION. Appellant JAPAN AIR LINES is ordered to pay appellee JESUS SIMANGAN the reduced sums, as follows: Five Hundred Thousand Pesos (P500,000.00) as moral damages, and Two Hundred Fifty Thousand Pesos (P250,000.00) as exemplary damages. The award of attorneys fees is hereby DELETED.[34] The CA elucidated that since JAL issued to respondent a round trip plane ticket for a lawful consideration, there arose a perfected contract between them.[35] It found that respondent was haughtily ejected[36] by JAL and that he was certainly embarrassed and humiliated[37] when, in the presence of other passengers, JALs airline staff shouted at him to stand up and arrogantly asked him to produce his travel papers, without the least courtesy every human being is entitled to;[38] and that he was compelled to deplane on the grounds that his papers were fake.[39] The CA ratiocinated: ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 50

While the protection of passengers must take precedence over convenience, the implementation of security measures must be attended by basic courtesies. In fact, breach of the contract of carriage creates against the carrier a presumption of liability, by a simple proof of injury, relieving the injured passenger of the duty to establish the fault of the carrier or of his employees; and placing on the carrier the burden to prove that it was due to an unforeseen event or to force majeure. That appellee possessed bogus travel documents and that he might stay illegally in Japan are allegations without substantiation. Also, appellants attempt to rebook appellee the following day was too late and did not relieve it from liability. The damage had been done. Besides, its belated theory of novation, i.e., that appellants original obligation to carry appellee to Narita and Los Angeles on July 29, 1992 was extinguished by novation when appellant and appellant agreed that appellee will instead take appellants flight to Narita on the following day, July 30, 1992, deserves little attention. It is inappropriate at bar. Questions not taken up during the trial cannot be raised for the first time on appeal.[40] (Underscoring ours and citations were omitted) Citing Ortigas, Jr. v. Lufthansa German Airlines,[41] the CA declared that (i)n contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passengers to the award of moral damages in accordance with Article 2220 of the Civil Code.[42] Nevertheless, the CA modified the damages awarded by the RTC. It explained: Fundamental in the law on damages is that one injured by a breach of a contract, or by a wrongful or negligent act or omission shall have a fair and just compensation commensurate to the loss sustained as consequence of the defendants act. Being discretionary on the court, the amount, however, should not be palpably and scandalously excessive. Here, the trial courts award of P1,000,000.00 as moral damages appears to be overblown. No other proof of appellees social standing, profession, financial capabilities was presented except that he was single and a businessman. To Us, the sum of 500,000.00 is just and fair. For, moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendants culpable action. Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced to a reasonable level. The award of exemplary damages is designed to permit the courts to mould behavior that has socially deleterious consequences and its imposition is required by public policy to suppress the wanton acts of the offender. Hence, the sum of P250,000.00 is adequate under the circumstances. The award of P250,000.00 as attorneys fees lacks factual basis. Appellee was definitely compelled to litigate in protecting his rights and in seeking relief from appellants misdeeds. Yet, the record is devoid of evidence to show the cost of the services of his counsel and/or the actual expenses incurred in prosecuting his action.[43] (Citations were omitted)

When JALs motion for reconsideration was denied, it resorted to the petition at bar. Issues JAL poses the following issues I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED TO MORAL DAMAGES, CONSIDERING THAT: A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT. B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF CONTRACT CASES ONLY WHEN THE BREACH IS ATTENDED BY FRAUD OR BAD FAITH. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT FRAUDULENTLY OR IN BAD FAITH AS TO ENTITLE RESPONDENT TO MORAL DAMAGES. C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH EFFECTED IN GOOD FAITH FROM ONE ATTENDED BY BAD FAITH. II. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED TO EXEMPLARY DAMAGES CONSIDERING THAT: A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN BREACH OF CONTRACT OF CARRIAGE UNLESS THE CARRIER IS GUILTY OF WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT CONDUCT. B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT IN A WANTON FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER AS TO ENTITLE RESPONDENT TO EXEMPLARY DAMAGES. III. ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN AWARD OF DAMAGES, WHETHER OR NOT THE COURT OF APPEALS AWARD OF P750,000 IN DAMAGES WAS EXCESSIVE AND UNPRECEDENTED. IV. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING FOR JAL ON ITS COUNTERCLAIM.[44] (Underscoring Ours) Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty of contract of carriage; (2) whether or not respondent is entitled to moral and exemplary damages; and (3) whether or not JAL is entitled to its counterclaim for damages. Our Ruling This Court is not a trier of facts. Chiefly, the issues are factual. The RTC findings of facts were affirmed by the CA. The CA also gave its nod to the reasoning of the RTC except as to the awards of damages, which were reduced, and that of attorneys fees, which was deleted.

We are not a trier of facts. We generally rely upon, and are bound by, the conclusions on this matter of the lower courts, which are better equipped and have better opportunity to assess the evidence first-hand, including the testimony of the witnesses.[45] We have repeatedly held that the findings of fact of the CA are final and conclusive and cannot be reviewed on appeal to the Supreme Court provided they are based on substantial evidence.[46] We have no jurisdiction, as a rule, to reverse their findings.[47] Among the exceptions to this rule are: (a) when the conclusion is a finding grounded entirely on speculations, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c) where there is grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of facts are conflicting; (f) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee.[48] The said exceptions, which are being invoked by JAL, are not found here. There is no indication that the findings of the CA are contrary to the evidence on record or that vital testimonies of JALs witnesses were disregarded. Neither did the CA commit misapprehension of facts nor did it fail to consider relevant facts. Likewise, there was no grave abuse of discretion in the appreciation of facts or mistaken and absurd inferences. We thus sustain the coherent facts as established by the courts below, there being no sufficient showing that the said courts committed reversible error in reaching their conclusions. JAL is guilty of breach of contract of carriage. That respondent purchased a round trip plane ticket from JAL and was issued the corresponding boarding pass is uncontroverted.[49] His plane ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration and security procedure.[50] After passing through said immigration and security procedure, he was allowed by JAL to enter its airplane to fly to Los Angeles, California, U.S.A. via Narita, Japan.[51] Concisely, there was a contract of carriage between JAL and respondent. Nevertheless, JAL made respondent get off the plane on his scheduled departure on July 29, 1992. He was not allowed by JAL to fly. JAL thus failed to comply with its obligation under the contract of carriage.

JAL justifies its action by arguing that there was a need to verify the authenticity of respondents travel document.[52] It alleged that no one from its airport staff had encountered a parole visa before.[53] It further contended that respondent agreed to fly the next day so that it could first verify his travel document, hence, there was novation.[54] It maintained that it was not guilty of breach of contract of carriage as respondent was not able to travel to the United States due to his own voluntary desistance.[55] We cannot agree. JAL did not allow respondent to fly. It informed respondent that there was a need to first check the authenticity of his travel documents with ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 51

the U.S. Embassy.[56] As admitted by JAL, the flight could not wait for Mr. Simangan because it was ready to depart.[57] Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left behind. The latter was unceremoniously bumped off despite his protestations and valid travel documents and notwithstanding his contract of carriage with JAL. Damage had already been done when respondent was offered to fly the next day on July 30, 1992. Said offer did not cure JALs default. Considering that respondent was forced to get out of the plane and left behind against his will, he could not have freely consented to be rebooked the next day. In short, he did not agree to the alleged novation. Since novation implies a waiver of the right the creditor had before the novation, such waiver must be express.[58] It cannot be supposed, without clear proof, that respondent had willingly done away with his right to fly on July 29, 1992. Moreover, the reason behind the bumping off incident, as found by the RTC and CA, was that JAL personnel imputed that respondent would only use the trip to the United States as a pretext to stay and work in Japan.[59] Apart from the fact that respondents plane ticket, boarding pass, travel authority and personal articles already passed the rigid immigration and security routines,[60] JAL, as a common carrier, ought to know the kind of valid travel documents respondent carried. As provided in Article 1755 of the New Civil Code: A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.[61] Thus, We find untenable JALs defense of verification of respondents documents in its breach of contract of carriage. It bears repeating that the power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL.[62] In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of such contract and its non-performance by the carrier through the latters failure to carry the passenger safely to his destination.[63] Respondent has complied with these twin requisites. Respondent is entitled to moral and exemplary damages and attorneys fees plus legal interest. With reference to moral damages, JAL alleged that they are not recoverable in actions ex contractu except only when the breach is attended by fraud or bad faith. It is contended that it did not act fraudulently or in bad faith towards respondent, hence, it may not be held liable for moral damages. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Article 2219 of the Civil Code.[64] As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Article 2220.[65]

The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached its contract of carriage with respondent in bad faith. JAL personnel summarily and insolently ordered respondent to disembark while the latter was already settled in his assigned seat. He was ordered out of the plane under the alleged reason that the genuineness of his travel documents should be verified. These findings of facts were upheld by the CA, to wit: x x x he was haughtily ejected by appellant. He was certainly embarrassed and humiliated when, in the presence of other passengers, the appellants airline staff shouted at him to stand up and arrogantly asked him to produce his travel papers, without the least courtesy every human being is entitled to. Then, he was compelled to deplane on the grounds that his papers were fake. His protestation of having been issued a U.S. visa coupled with his plea to appellant to closely monitor his movements when the aircraft stops over in Narita, were ignored. Worse, he was made to wait for many hours at the office of appellant only to be told later that he has valid travel documents.[66] (Underscoring ours)

The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary damages in respondents favor is, in Our view, reasonable and realistic. This award is reasonably sufficient to indemnify him for the humiliation and embarrassment he suffered. This also serves as an example to discourage the repetition of similar oppressive acts. With respect to attorney's fees, they may be awarded when defendants act or omission has compelled plaintiff to litigate with third persons or to incur expenses to protect his interest.[71] The Court, in Construction Development Corporation of the Philippines v. Estrella,[72] citing Traders Royal Bank Employees Union-Independent v. National Labor Relations Commission,[73] elucidated thus: There are two commonly accepted concepts of attorneys fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorneys fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with the client. In its extraordinary concept, an attorneys fee is an indemnity for damages ordered by the court to be paid by the losing party in a litigation. The basis of this is any of the cases provided by law where such award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.[74]

Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit.[67] JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and malevolent acts against respondent. Exemplary damages, which are awarded by way of example or correction for the public good, may be recovered in contractual obligations, as in this case, if defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.[68] Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is, in fact, that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property.[69]

It was therefore erroneous for the CA to delete the award of attorneys fees on the ground that the record is devoid of evidence to show the cost of the services of respondents counsel. The amount is actually discretionary upon the Court so long as it passes the test of reasonableness. They may be recovered as actual or compensatory damages when exemplary damages are awarded and whenever the court deems it just and equitable,[75] as in this case. Considering the factual backdrop of this case, attorneys fees in the amount of P200,000.00 is reasonably modest. The above liabilities of JAL in the total amount of P800,000.00 earn legal interest pursuant to the Courts ruling in Construction Development Corporation of the Philippines v. Estrella,[76] citing Eastern Shipping Lines, Inc. v. Court of Appeals,[77] to wit: Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the complaint, we held in Eastern Shipping Lines, Inc. v. Court of Appeals, that 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 payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit 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 ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 52

Neglect or malfeasance of the carriers employees could give ground for an action for damages. Passengers have a right to be treated by the carriers employees with kindness, respect, courtesy and due consideration and are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees.[70]

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 credit.[78] (Emphasis supplied and citations omitted) Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay respondent legal interest. Pursuant to the above ruling of the Court, the legal interest is 6% and it shall be reckoned from September 21, 2000 when the RTC rendered its judgment. From the time this Decision becomes final and executory, the interest rate shall be 12% until its satisfaction. JAL is not entitled to its counterclaim for damages. The counterclaim of JAL in its Answer[79] is a compulsory counterclaim for damages and attorneys fees arising from the filing of the complaint. There is no mention of any other counter claims. This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted inasmuch as the complaint against it is obviously not malicious or unfounded. It was filed by respondent precisely to claim his right to damages against JAL. Well-settled is the rule that the commencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not have meant to impose a penalty on the right to litigate.[80] We reiterate case law that if damages result from a partys exercise of a right, it is damnum absque injuria.[81] Lawful acts give rise to no injury. Walang perhuwisyong maaring idulot ang paggamit sa sariling karapatan. During the trial, however, JAL presented a witness who testified that JAL suffered further damages. Allegedly, respondent caused the publications of his subject complaint against JAL in the newspaper for which JAL suffered damages.[82] Although these additional damages allegedly suffered by JAL were not incorporated in its Answer as they arose subsequent to its filing, JALs witness was able to testify on the same before the RTC.[83] Hence, although these

issues were not raised by the pleadings, they shall be treated in all respects as if they had been raised in the pleadings. As provided in Section 5, Rule 10 of the Rules of Court, (w)hen issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Nevertheless, JALs counterclaim cannot be granted. JAL is a common carrier. JALs business is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it offers.[84] Since JAL deals with the public, its bumping off of respondent without a valid reason naturally drew public attention and generated a public issue. The publications involved matters about which the public has the right to be informed because they relate to a public issue. This public issue or concern is a legitimate topic of a public comment that may be validly published. Assuming that respondent, indeed, caused the publication of his complaint, he may not be held liable for damages for it. The constitutional guarantee of freedom of the speech and of the press includes fair commentaries on matters of public interest. This is explained by the Court in Borjal v. Court of Appeals,[85] to wit: To reiterate, fair commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or slander. The doctrine of fair comment means that while in general every discreditable imputation publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a public official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition. If the comment is an expression of opinion, based on established facts, then it is immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred from the facts.[86] (Citations omitted and underscoring ours) Even though JAL is not a public official, the rule on privileged commentaries on matters of public interest applies to it. The privilege applies not only to public officials but extends to a great variety of subjects, and includes matters of public concern, public men, and candidates for office.[87]

WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Appeals is AFFIRMED WITH MODIFICATION. As modified, petitioner Japan Airlines is ordered to pay respondent Jesus Simangan the following: (1) P500,000.00 as moral damages; (2) P100,000.00 as exemplary damages; and (3) P200,000.00 as attorneys fees. The total amount adjudged shall earn legal interest at the rate of 6% per annum from the date of judgment of the Regional Trial Court on September 21, 2000 until the finality of this Decision. From the time this Decision becomes final and executory, the unpaid amount, if any, shall earn legal interest at the rate of 12% per annum until its satisfaction. SO ORDERED. [G.R. No. 150843. March 14, 2003] CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL VAZQUEZ, respondents. DECISION DAVIDE, JR., C.J.: Is an involuntary upgrading of an airline passengers accommodation from one class to a more superior class at no extra cost a breach of contract of carriage that would entitle the passenger to an award of damages? This is a novel question that has to be resolved in this case. The facts in this case, as found by the Court of Appeals and adopted by petitioner Cathay Pacific Airways, Ltd., (hereinafter Cathay) are as follows: Cathay is a common carrier engaged in the business of transporting passengers and goods by air. Among the many routes it services is the Manila-HongkongManila course. As part of its marketing strategy, Cathay accords its frequent flyers membership in its Marco Polo Club. The members enjoy several privileges, such as priority for upgrading of booking without any extra charge whenever an opportunity arises. Thus, a frequent flyer booked in the Business Class has priority for upgrading to First Class if the Business Class Section is fully booked. Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are frequent flyers of Cathay and are Gold Card members of its Marco Polo Club. On 24 September 1996, the Vazquezes, together with their maid and two friends Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for pleasure and business. For their return flight to Manila on 28 September 1996, they were booked on Cathays Flight CX-905, with departure time at 9:20 p.m. Two hours before their time of departure, the Vazquezes and their companions checked in their luggage at Cathays check-in counter at Kai Tak Airport and were given their respective boarding passes, to wit, Business Class boarding passes for the Vazquezes and their two friends, and Economy Class for their maid. They then proceeded to the Business Class passenger lounge. When boarding time was announced, the Vazquezes and their two friends went to Departure Gate No. 28, which was designated for Business Class passengers. Dr. Vazquez presented his boarding pass to the ground stewardess, who in turn ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 53

Hence, pursuant to the Borjal case, there must be an actual malice in order that a discreditable imputation to a public person in his public capacity or to a public official may be actionable. To be considered malicious, the libelous statements must be shown to have been written or published with the knowledge that they are false or in reckless disregard of whether they are false or not.[88] Considering that the published articles involve matters of public interest and that its expressed opinion is not malicious but based on established facts, the imputations against JAL are not actionable. Therefore, JAL may not claim damages for them.

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

In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade passengers to the next better class of accommodation, whenever an opportunity arises, such as when a certain section is fully booked. Priority in upgrading is given to its frequent flyers, who are considered favored passengers like the Vazquezes. Thus, when the Business Class Section of Flight CX-905 was fully booked, Cathays computer sorted out the names of favored passengers for involuntary upgrading to First Class. When Ms. Chiu informed the Vazquezes that they were upgraded to First Class, Dr. Vazquez refused. He then stood at the entrance of the boarding apron, blocking the queue of passengers from boarding the plane, which inconvenienced other passengers. He shouted that it was impossible for him and his wife to be upgraded without his two friends who were traveling with them. Because of Dr. Vazquezs outburst, Ms. Chiu thought of upgrading the traveling companions of the Vazquezes. But when she checked the computer, she learned that the Vazquezes companions did not have priority for upgrading. She then tried to book the Vazquezes again to their original seats. However, since the Business Class Section was already fully booked, she politely informed Dr. Vazquez of such fact and explained that the upgrading was in recognition of their status as Cathays valued passengers. Finally, after talking to their guests, the Vazquezes eventually decided to take the First Class accommodation. Cathay also asserted that its employees at the Hong Kong airport acted in good faith in dealing with the Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of disrespect against them (the Vazquezes). Assuming that there was indeed a breach of contractual obligation, Cathay acted in good faith, which negates any basis for their claim for temperate, moral, and exemplary damages and attorneys fees. Hence, it prayed for the dismissal of the complaint and for payment of P100,000 for exemplary damages and P300,000 as attorneys fees and litigation expenses. During the trial, Dr. Vazquez testified to support the allegations in the complaint. His testimony was corroborated by his two friends who were with him at the time of the incident, namely, Pacita G. Cruz and Josefina Vergel de Dios. For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen; Ms. Chiu; Norma Barrientos, Comptroller of its retained counsel; and Mr. Robson. Yuen and Robson testified on Cathays policy of upgrading the seat accommodation of its Marco Polo Club members when an opportunity arises. The upgrading of the Vazquezes to First Class was done in good faith; in fact, the First Class Section is definitely much better than the Business Class in terms of comfort, quality of food, and service from the cabin crew. They also testified that overbooking is a widely accepted practice in the airline industry and is in accordance with the International Air Transport Association (IATA) regulations. Airlines overbook because a lot of passengers do not show up for their flight. With respect to Flight CX-905, there was no overall overbooking to a degree that a passenger was bumped off or downgraded. Yuen and Robson also stated that the demand letter of the Vazquezes was immediately acted upon. Reports were gathered from their office in Hong Kong and immediately forwarded to their counsel Atty. Remollo for legal advice. However, Atty. Remollo begged off because his services were likewise retained by the Vazquezes; nonetheless, he undertook to solve the problem in behalf of Cathay. But nothing happened until Cathay received a copy of the complaint in this case. For her part, Ms. Chiu denied that she shouted or used foul or impolite language against the Vazquezes. Ms. Barrientos testified on the amount of attorneys fees and other

litigation expenses, such as those for the taking of the depositions of Yuen and Chiu. In its decision[1] of 19 October 1998, the trial court found for the Vazquezes and decreed as follows: WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby rendered in favor of plaintiffs Vazquez spouses and against defendant Cathay Pacific Airways, Ltd., ordering the latter to pay each plaintiff the following: a) b) c) Nominal damages in the amount of P100,000.00 for each plaintiff; Moral damages in the amount of P2,000,000.00 for each plaintiff; Exemplary damages in the amount of P5,000,000.00 for each plaintiff;

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

SO ORDERED. According to the trial court, Cathay offers various classes of seats from which passengers are allowed to choose regardless of their reasons or motives, whether it be due to budgetary constraints or whim. The choice imposes a clear obligation on Cathay to transport the passengers in the class chosen by them. The carrier cannot, without exposing itself to liability, force a passenger to involuntarily change his choice. The upgrading of the Vazquezes accommodation over and above their vehement objections was due to the overbooking of the Business Class. It was a pretext to pack as many passengers as possible into the plane to maximize Cathays revenues. Cathays actuations in this case displayed deceit, gross negligence, and bad faith, which entitled the Vazquezes to awards for damages. On appeal by the petitioners, the Court of Appeals, in its decision of 24 July 2001,[2] deleted the award for exemplary damages; and it reduced the awards for moral and nominal damages for each of the Vazquezes to P250,000 and P50,000, respectively, and the attorneys fees and litigation expenses to P50,000 for both of them. The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class, Cathay novated the contract of carriage without the formers consent. There was a breach of contract not because Cathay overbooked the Business Class Section of Flight CX-905 but because the latter pushed through with the upgrading despite the objections of the Vazquezes. However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or meant to be discourteous to, Dr. Vazquez, although it might seemed that way to the latter, who was a member of the elite in Philippine society and was not therefore used to being harangued by anybody. Ms. Chiu was a Hong Kong Chinese whose fractured Chinese was difficult to understand and whose manner of speaking might sound harsh or shrill to Filipinos because of cultural differences. But the Court of Appeals did not find her to have acted with deliberate malice, deceit, gross negligence, or bad faith. If at all, she was ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 54

negligent in not offering the First Class accommodations to other passengers. Neither can the flight stewardess in the First Class Cabin be said to have been in bad faith when she failed to assist Dr. Vazquez in lifting his baggage into the overhead storage bin. There is no proof that he asked for help and was refused even after saying that he was suffering from bilateral carpal tunnel syndrome. Anent the delay of Yuen in responding to the demand letter of the Vazquezes, the Court of Appeals found it to have been sufficiently explained. The Vazquezes and Cathay separately filed motions for a reconsideration of the decision, both of which were denied by the Court of Appeals. Cathay seasonably filed with us this petition in this case. Cathay maintains that the award for moral damages has no basis, since the Court of Appeals found that there was no wanton, fraudulent, reckless and oppressive display of manners on the part of its personnel; and that the breach of contract was not attended by fraud, malice, or bad faith. If any damage had been suffered by the Vazquezes, it was damnum absque injuria, which is damage without injury, damage or injury inflicted without injustice, loss or damage without violation of a legal right, or a wrong done to a man for which the law provides no remedy. Cathay also invokes our decision in United Airlines, Inc. v. Court of Appeals[3] where we recognized that, in accordance with the Civil Aeronautics Boards Economic Regulation No. 7, as amended, an overbooking that does not exceed ten percent cannot be considered deliberate and done in bad faith. We thus deleted in that case the awards for moral and exemplary damages, as well as attorneys fees, for lack of proof of overbooking exceeding ten percent or of bad faith on the part of the airline carrier. On the other hand, the Vazquezes assert that the Court of Appeals was correct in granting awards for moral and nominal damages and attorneys fees in view of the breach of contract committed by Cathay for transferring them from the Business Class to First Class Section without prior notice or consent and over their vigorous objection. They likewise argue that the issuance of passenger tickets more than the seating capacity of each section of the plane is in itself fraudulent, malicious and tainted with bad faith. The key issues for our consideration are whether (1) by upgrading the seat accommodation of the Vazquezes from Business Class to First Class Cathay breached its contract of carriage with the Vazquezes; (2) the upgrading was tainted with fraud or bad faith; and (3) the Vazquezes are entitled to damages. We resolve the first issue in the affirmative. A contract is a meeting of minds between two persons whereby one agrees to give something or render some service to another for a consideration. There is no contract unless the following requisites concur: (1) consent of the contracting parties; (2) an object certain which is the subject of the contract; and (3) the cause of the obligation which is established.[4] Undoubtedly, a contract of carriage existed between Cathay and the Vazquezes. They voluntarily and freely gave their consent to an agreement whose object was the transportation of the Vazquezes from Manila to Hong Kong and back to Manila, with seats in the Business Class Section of the aircraft, and whose cause or consideration was the fare paid by the Vazquezes to Cathay. The only problem is the legal effect of the upgrading of the seat accommodation of the Vazquezes. Did it constitute a breach of contract?

Breach of contract is defined as the failure without legal reason to comply with the terms of a contract.[5] It is also defined as the [f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract.[6] In previous cases, the breach of contract of carriage consisted in either the bumping off of a passenger with confirmed reservation or the downgrading of a passengers seat accommodation from one class to a lower class. In this case, what happened was the reverse. The contract between the parties was for Cathay to transport the Vazquezes to Manila on a Business Class accommodation in Flight CX-905. After checking-in their luggage at the Kai Tak Airport in Hong Kong, the Vazquezes were given boarding cards indicating their seat assignments in the Business Class Section. However, during the boarding time, when the Vazquezes presented their boarding passes, they were informed that they had a seat change from Business Class to First Class. It turned out that the Business Class was overbooked in that there were more passengers than the number of seats. Thus, the seat assignments of the Vazquezes were given to waitlisted passengers, and the Vazquezes, being members of the Marco Polo Club, were upgraded from Business Class to First Class. We note that in all their pleadings, the Vazquezes never denied that they were members of Cathays Marco Polo Club. They knew that as members of the Club, they had priority for upgrading of their seat accommodation at no extra cost when an opportunity arises. But, just like other privileges, such priority could be waived. The Vazquezes should have been consulted first whether they wanted to avail themselves of the privilege or would consent to a change of seat accommodation before their seat assignments were given to other passengers. Normally, one would appreciate and accept an upgrading, for it would mean a better accommodation. But, whatever their reason was and however odd it might be, the Vazquezes had every right to decline the upgrade and insist on the Business Class accommodation they had booked for and which was designated in their boarding passes. They clearly waived their priority or preference when they asked that other passengers be given the upgrade. It should not have been imposed on them over their vehement objection. By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes. We are not, however, convinced that the upgrading or the breach of contract was attended by fraud or bad faith. Thus, we resolve the second issue in the negative. Bad faith and fraud are allegations of fact that demand clear and convincing proof. They are serious accusations that can be so conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans or mudslinging unless convincingly substantiated by whoever is alleging them. Fraud has been defined to include an inducement through insidious machination. Insidious machination refers to a deceitful scheme or plot with an evil or devious purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state material facts and, by reason of such omission or concealment, the other party was induced to give consent that would not otherwise have been given.[7] Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.[8]

We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were not induced to agree to the upgrading through insidious words or deceitful machination or through willful concealment of material facts. Upon boarding, Ms. Chiu told the Vazquezes that their accommodations were upgraded to First Class in view of their being Gold Card members of Cathays Marco Polo Club. She was honest in telling them that their seats were already given to other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to consider the remedy of offering the First Class seats to other passengers. But, we find no bad faith in her failure to do so, even if that amounted to an exercise of poor judgment. Neither was the transfer of the Vazquezes effected for some evil or devious purpose. As testified to by Mr. Robson, the First Class Section is better than the Business Class Section in terms of comfort, quality of food, and service from the cabin crew; thus, the difference in fare between the First Class and Business Class at that time was $250.[9] Needless to state, an upgrading is for the better condition and, definitely, for the benefit of the passenger. We are not persuaded by the Vazquezes argument that the overbooking of the Business Class Section constituted bad faith on the part of Cathay. Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board, as amended, provides: Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of flights or portions of flights originating from or terminating at, or serving a point within the territory of the Republic of the Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines, for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only honest mistakes on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful act of non-accommodation. It is clear from this section that an overbooking that does not exceed ten percent is not considered deliberate and therefore does not amount to bad faith.[10] Here, while there was admittedly an overbooking of the Business Class, there was no evidence of overbooking of the plane beyond ten percent, and no passenger was ever bumped off or was refused to board the aircraft. Now we come to the third issue on damages. The Court of Appeals awarded each of the Vazquezes moral damages in the amount of P250,000. Article 2220 of the Civil Code provides: Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Although incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendants wrongful act or omission.[11] Thus, case law establishes the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 55

following requisites for the award of moral damages: (1) there must be an injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219 of the Civil Code.[12] Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the carrier is guilty of fraud or bad faith or where the mishap resulted in the death of a passenger.[13] Where in breaching the contract of carriage the airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of the obligation which the parties had foreseen or could have reasonably foreseen. In such a case the liability does not include moral and exemplary damages.[14] In this case, we have ruled that the breach of contract of carriage, which consisted in the involuntary upgrading of the Vazquezes seat accommodation, was not attended by fraud or bad faith. The Court of Appeals award of moral damages has, therefore, no leg to stand on. The deletion of the award for exemplary damages by the Court of Appeals is correct. It is a requisite in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent or malevolent manner.[15] Such requisite is absent in this case. Moreover, to be entitled thereto the claimant must first establish his right to moral, temperate, or compensatory damages.[16] Since the Vazquezes are not entitled to any of these damages, the award for exemplary damages has no legal basis. And where the awards for moral and exemplary damages are eliminated, so must the award for attorneys fees.[17] The most that can be adjudged in favor of the Vazquezes for Cathays breach of contract is an award for nominal damages under Article 2221 of the Civil Code, which reads as follows: Article 2221 of the Civil Code provides: Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. Worth noting is the fact that in Cathays Memorandum filed with this Court, it prayed only for the deletion of the award for moral damages. It deferred to the Court of Appeals discretion in awarding nominal damages; thus: As far as the award of nominal damages is concerned, petitioner respectfully defers to the Honorable Court of Appeals discretion. Aware as it is that somehow, due to the resistance of respondents-spouses to the normallyappreciated gesture of petitioner to upgrade their accommodations, petitioner may have disturbed the respondents-spouses wish to be with their companions (who traveled to Hong Kong with them) at the Business Class on their flight to Manila. Petitioner regrets that in its desire to provide the respondents-spouses with additional amenities for the one and one-half (1 1/2) hour flight to Manila, unintended tension ensued.[18]

Nonetheless, considering that the breach was intended to give more benefit and advantage to the Vazquezes by upgrading their Business Class accommodation to First Class because of their valued status as Marco Polo members, we reduce the award for nominal damages to P5,000. Before writing finis to this decision, we find it well-worth to quote the apt observation of the Court of Appeals regarding the awards adjudged by the trial court: We are not amused but alarmed at the lower courts unbelievable alacrity, bordering on the scandalous, to award excessive amounts as damages. In their complaint, appellees asked for P1 million as moral damages but the lower court awarded P4 million; they asked for P500,000.00 as exemplary damages but the lower court cavalierly awarded a whooping P10 million; they asked for P250,000.00 as attorneys fees but were awarded P2 million; they did not ask for nominal damages but were awarded P200,000.00. It is as if the lower court went on a rampage, and why it acted that way is beyond all tests of reason. In fact the excessiveness of the total award invites the suspicion that it was the result of prejudice or corruption on the part of the trial court. The presiding judge of the lower court is enjoined to hearken to the Supreme Courts admonition in Singson vs. CA (282 SCRA 149 [1997]), where it said: The well-entrenched principle is that the grant of moral damages depends upon the discretion of the court based on the circumstances of each case. This discretion is limited by the principle that the amount awarded should not be palpably and scandalously excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court. and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held: Nonetheless, we agree with the injunction expressed by the Court of Appeals that passengers must not prey on international airlines for damage awards, like trophies in a safari. After all neither the social standing nor prestige of the passenger should determine the extent to which he would suffer because of a wrong done, since the dignity affronted in the individual is a quality inherent in him and not conferred by these social indicators. [19] We adopt as our own this observation of the Court of Appeals. WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the Court of Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED, and as modified, the awards for moral damages and attorneys fees are set aside and deleted, and the award for nominal damages is reduced to P5,000. No pronouncement on costs. SO ORDERED. [G.R. No. 135802. March 3, 2000] PRISCILLA L. TAN, petitioner, vs. NORTHWEST AIRLINES, INC., respondent.

Petitioner Priscilla L. Tan appeals via certiorari from the decision of the Court of Appeals[1] affirming with modification[2] the decision of the trial court,[3] ordering respondent to pay petitioner the following amounts: (1) P15,000.00, as actual damages; (2) P100,000.00, as moral damages; (3) P50,000.00, as exemplary damages; (4) P30,000.00, as and for attorney's fees; and (6) costs. The case before the Court traces its roots from an action for damages for breach of contract of air carrige for failure to deliver petitioner's baggages on the date of her arrival filed on June 29, 1994 with the Regional Trial Court, Makati, Branch 150 against respondent Northwest Airlines, Inc., a foreign corporation engaged in the business of air transportation. The antecedent facts are as follows: On May 31, 1994, Priscilla L. Tan and Connie Tan boarded Northwest Airlines Flight 29 in Chicago, U. S. A. bound for the Philippines, with a stop-over at Detroit, U. S. A. They arrived at the Ninoy Aquino International Airport (NAIA) on June 1, 1994 at about 10:40 in the evening. Upon their arrival, petitioner and her companion Connie Tan found that their baggages were missing. They returned to the airport in the evening of the following day and they were informed that their baggages might still be in another plane in Tokyo, Japan. On June 3, 1994, they recovered their baggages and discovered that some of its contents were destroyed and soiled. Claiming that they "suffered mental anguish, sleepless nights and great damage" because of Northwest's failure to inform them in advance that their baggages would not be loaded on the same flight they boarded and because of their delayed arrival, they demanded from Northwest Airlines compensation for the damages they suffered. On June 15, 1994 and June 22, 1994, petitioner sent demand letter to Northwest Airlines, but the latter did not respond. Hence, the filing of the case with the regional trial court. In its answer to the complaint, respondent Northwest Airlines did not deny that the baggages of petitioners were not loaded on Northwest Flight 29. Petitioner's baggages could not be carried on the same flight because of "weight and balance restrictions." However, the baggages were loaded in another Northwest Airlines flight, which arrived in the evening of June 2, 1994. When petitioner received her baggages in damaged condition, Northwest offered to either (1) reimburse the cost or repair of the bags; or (2) reimburse the cost for the purchase of new bags, upon submission of receipts. After due trial, on June 10, 1996, the trial court rendered decision finding respondent Northwest Airlines, Inc. liable for damages, as follows: "WHEREFORE, judgement is hereby rendered ordering the defendant to pay the plaintiff the following amounts: "1. P15,000.00, as actual damages;

DECISION "2. P100,000.00, as moral damages; PARDO, J.: ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 56

"3. P50,000.00, as exemplary damages; "4. P30,000.00, as and for attorney's fees and "5. Costs. "SO ORDERED. "Given this 10th day of June, 1996 at Makati City. "ERNA FALLORAN ALIPOSA "Judge"[4] Respondent Northwest Airlines, Inc. appealed from the trial court's decision to the Court of Appeals contending that the court a quo erred in finding it guilty of breach of contract of carriage and of willful misconduct and awarded damages which had no basis in fact or were otherwise excessive. On September 30, 1998, the Court of Appeals promulgated its decision partially granting the appeal by deleting the award of moral and exemplary damages and reducing the attorney's fees, specifically providing that: "WHEREFORE, PREMISES CONSIDERED, the appeal is hereby GRANTED partially. The Decision of the lower court dated June 10, 1996 is AFFIRMED with the modification that the award of moral and exemplary damages is deleted and the amount of attorney's fees is reduced to ten thousand pesos (P10,000.00). "No pronouncement as to costs. "SO ORDERED."[5] G.R. No. 101538 June 23, 1992 On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner appealed to the Court of Appeals, which affirmed the decision of the lower court. 3 On June 26, 1991, the petitioner filed a motion for reconsideration, but the same was denied. 4 The petitioner then came to this Court, raising substantially the same issues it submitted in the Court of Appeals. The assignment of errors may be grouped into two major issues, viz: (1) CRUZ, J.: This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows: Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination. The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch office in the Philippines. (2) the constitutionality of Article 28(1) of the Warsaw Convention; and the jurisdiction of Philippine courts over the case. On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987, NOA moved to dismiss the complaint on the ground of lack of jurisdiction. Citing the above-quoted article, it contended that the complaint could be instituted only in the territory of one of the High Contracting Parties, before: 1. 2. the court of the domicile of the carrier; the court of its principal place of business; On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date was specified for his return to San Francisco. 1 On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure to Manila. Despite a previous confirmation and re-confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He therefore had to be wait-listed.

as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." 5 The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country. The petitioner contends that Article 28(1) cannot be applied in the present case because it is unconstitutional. He argues that there is no substantial distinction between a person who purchases a ticket in Manila and a person who purchases his ticket in San Francisco. The classification of the places in which actions for damages may be brought is arbitrary and irrational and thus violates the due process and equal protection clauses. It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible of judicial determination; the constitutional question must have been opportunely raised by the proper party; and the resolution of the question is unavoidably necessary to the decision of the case itself. 6 Courts generally avoid having to decide a constitutional question. This attitude is based on the doctrine of separation of powers, which enjoins upon the departments of the government a becoming respect for each other's acts. The treaty which is the subject matter of this petition was a joint legislativeexecutive act. The presumption is that it was first carefully studied and determined to be constitutional before it was adopted and given the force of law in this country. The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the Convention considered the four places designated in Article 28 the most convenient forums for the litigation of any claim that may arise between the airline and its passenger, as distinguished from all other places. At any rate, we agree with the respondent court that this case can be decided on other grounds without the necessity of resolving the constitutional issue. B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention is inapplicable because of a fundamental change in the circumstances that served as its basis. The petitioner goes at great lengths to show that the provisions in the Convention were intended to protect airline companies under "the conditions prevailing then and which have long ceased to exist." He argues that in view of the significant developments in the airline industry through the years, the treaty has become irrelevant. Hence, to the extent that it has lost its basis for approval, it has become unconstitutional. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 57

3. the court where it has a place of business through which the contract had been made; 4. the court of the place of destination.

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

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

The petitioner also invokes Article 24 of the Civil Code on the protection of minors. I THE ISSUE OF CONSTITUTIONALITY A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention violates the constitutional guarantees of due process and equal protection. The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known

The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an attempt to formulate a legal principle which would justify non-performance of a treaty obligation if the conditions with relation to which the parties contracted have changed so materially and so unexpectedly as to create a situation in which the exaction of performance would be unreasonable." 7 The key element of this doctrine is the vital change in the condition of the contracting parties that they could not have foreseen at the time the treaty was concluded. The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8 The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air travel . . . The Warsaw delegates knew that, in the years to come, civil aviation would change in ways that they could not foresee. They wished to design a system of air law that would be both durable and flexible enough to keep pace with these changes . . . The ever-changing needs of the system of civil aviation can be served within the framework they created. It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However, that circumstance alone is not sufficient justification for the rejection of the treaty at this time. The changes recited by the petitioner were, realistically, not entirely unforeseen although they were expected in a general sense only. In fact, the Convention itself, anticipating such developments, contains the following significant provision: Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming into force of this convention to call for the assembling of a new international conference in order to consider any improvements which may be made in this convention. To this end, it will communicate with the Government of the French Republic which will take the necessary measures to make preparations for such conference. But the more important consideration is that the treaty has not been rejected by the Philippine government. The doctrine of rebus sic stantibus does not operate automatically to render the treaty inoperative. There is a necessity for a formal act of rejection, usually made by the head of State, with a statement of the reasons why compliance with the treaty is no longer required. In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such denunciation is authorized under its Article 39, viz: Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a notification addressed to the Government of the Republic of Poland, which shall at once inform the Government of each of the High Contracting Parties. (2) Denunciation shall take effect six months after the notification of denunciation, and shall operate only as regards the party which shall have proceeded to denunciation. Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a function of the courts but of the other branches of government. This is a political act. The conclusion and renunciation

of treaties is the prerogative of the political departments and may not be usurped by the judiciary. The courts are concerned only with the interpretation and application of laws and treaties in force and not with their wisdom or efficacy. C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United States, because this would deny him the right to access to our courts. The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a constructive denial of his right to access to our courts for the protection of his rights. He would consequently be deprived of this vital guaranty as embodied in the Bill of Rights. Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It does not mean that a person can go to any court for redress of his grievances regardless of the nature or value of his claim. If the petitioner is barred from filing his complaint before our courts, it is because they are not vested with the appropriate jurisdiction under the Warsaw Convention, which is part of the law of our land. II THE ISSUE OF JURISDICTION. A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention is a rule merely of venue and was waived by defendant when it did not move to dismiss on the ground of improper venue. By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire. International transportation is defined in paragraph (2) of Article 1 as follows: (2) For the purposes of this convention, the expression "international transportation" shall mean any transportation in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the transportation or a transshipment, are situated [either] within the territories of two High Contracting Parties . . . Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is the ticket. When the contract of carriage provides for the transportation of the passenger between certain designated terminals "within the territories of two High Contracting Parties," the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passenger. Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to the United States, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four places where an action for damages may be brought. Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the petitioner cites several cases holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are

later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional. 10 Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon d court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition exists against their alteration. 11 A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred. This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was held: . . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially when considered in the light of Article 32. Article 28(2) provides that "questions of procedure shall be governed by the law of the court to which the case is submitted" (Emphasis supplied). Section (2) thus may be read to leave for domestic decision questions regarding the suitability and location of a particular Warsaw Convention case. In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the court to which the case is submitted. The petitioner submits that since Article 32 states that the parties are precluded "before the damages occurred" from amending the rules of Article 28(1) as to the place where the action may be brought, it would follow that the Warsaw Convention was not intended to preclude them from doing so "after the damages occurred." Article 32 provides: Art. 32. Any clause contained in the contract and all special agreements entered into before the damage occurred by which the parties purport to infringe the rules laid down by this convention, whether by deciding the law to ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 58

be applied, or by altering the rules as to jurisdiction, shall be null and void. Nevertheless for the transportation of goods, arbitration clauses shall be allowed, subject to this convention, if the arbitration is to take place within one of the jurisdictions referred to in the first paragraph of Article 28. His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have) occurred," the article should be regarded as possessing the character of a "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss on the ground of lack of jurisdiction, the private respondent has waived improper venue as a ground to dismiss. The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any event, we agree that even granting arguendo that Article 28(1) is a venue and not a jurisdictional provision, dismissal of the case was still in order. The respondent court was correct in affirming the ruling of the trial court on this matter, thus: Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is that NOA averred in its MOTION TO DISMISS that the ground thereof is "the Court has no subject matter jurisdiction to entertain the Complaint" which SANTOS considers as equivalent to "lack of jurisdiction over the subject matter . . ." However, the gist of NOA's argument in its motion is that the Philippines is not the proper place where SANTOS could file the action meaning that the venue of the action is improperly laid. Even assuming then that the specified ground of the motion is erroneous, the fact is the proper ground of the motion improper venue has been discussed therein. Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are special circumstances justifying this conclusion, as in the petition at bar. As we observed in Javier vs. Intermediate Court of Appeals: 13 Legally, of course, the lack of proper venue was deemed waived by the petitioners when they failed to invoke it in their original motion to dismiss. Even so, the motivation of the private respondent should have been taken into account by both the trial judge and the respondent court in arriving at their decisions. The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where it was held that Article 28(1) is a venue provision. However, the private respondent avers that this was in effect reversed by the case of Aranas v. United Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision. Neither of these cases is binding on this Court, of course, nor was either of them appealed to us. Nevertheless, we here express our own preference for the later case of Aranas insofar as its pronouncements on jurisdiction conform to the judgment we now make in this petition. B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the Warsaw Convention, this case was properly filed in the Philippines, because Manila was the destination of the plaintiff. The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal. The date and time of departure were specified but not of the return flight. The plane crashed while on route from Montreal to Los Angeles, killing Mrs. Silverberg. Her administratrix

filed an action for damages against Air Canada in the U.S. District Court of California. The defendant moved to dismiss for lack of jurisdiction but the motion was denied thus: . . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as evidenced by the ticket booklets and the Flight Coupon No. 1, was a contract for Air Canada to carry Mrs. Silverberg to Los Angeles on a certain flight, a certain time and a certain class, but that the time for her to return remained completely in her power. Coupon No. 2 was only a continuing offer by Air Canada to give her a ticket to return to Montreal between certain dates. . . . The only conclusion that can be reached then, is that "the place of destination" as used in the Warsaw Convention is considered by both the Canadian C.T.C. and the United States C.A.B. to describe at least two "places of destination," viz., the "place of destination" of a particular flight either an "outward destination" from the "point of origin" or from the "outward point of destination" to any place in Canada. Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on which Mrs. Silverberg was killed, was Los Angeles according to the ticket, which was the contract between the parties and the suit is properly filed in this Court which has jurisdiction. The Petitioner avers that the present case falls squarely under the above ruling because the date and time of his return flight to San Francisco were, as in the Aanestad case, also left open. Consequently, Manila and not San Francisco should be considered the petitioner's destination. The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States District Court (Eastern District of Pennsylvania) said: . . . Although the authorities which addressed this precise issue are not extensive, both the cases and the commentators are almost unanimous in concluding that the "place of destination" referred to in the Warsaw Convention "in a trip consisting of several parts . . . is the ultimate destination that is accorded treaty jurisdiction." . . . But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad; whether the return portion of the ticket is characterized as an option or a contract, the carrier was legally bound to transport the passenger back to the place of origin within the prescribed time and. the passenger for her part agreed to pay the fare and, in fact, did pay the fare. Thus there was mutuality of obligation and a binding contract of carriage, The fact that the passenger could forego her rights under the contract does not make it any less a binding contract. Certainly, if the parties did not contemplate the return leg of the journey, the passenger would not have paid for it and the carrier would not have issued a round trip ticket. We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract of carriage or, specifically in this case, the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should therefore be considered merely an agreed stopping place and not the destination.

The petitioner submits that the Butz case could not have overruled the Aanestad case because these decisions are from different jurisdictions. But that is neither here nor there. In fact, neither of these cases is controlling on this Court. If we have preferred the Butz case, it is because, exercising our own freedom of choice, we have decided that it represents the better, and correct, interpretation of Article 28(1). Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction under the Convention. The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The use of the singular in this expression indicates the understanding of the parties to the Convention that every contract of carriage has one place of departure and one place of destination. An intermediate place where the carriage may be broken is not regarded as a "place of destination." C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the Warsaw Convention, this case was properly filed in the Philippines because the defendant has its domicile in the Philippines. The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its provisions, American courts have taken the broad view that the French legal meaning must govern. 18 In French, he says, the "domicile" of the carrier means every place where it has a branch office. The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held: The plaintiffs' first contention is that Air France is domiciled in the United States. They say that the domicile of a corporation includes any country where the airline carries on its business on "a regular and substantial basis," and that the United States qualifies under such definition. The meaning of domicile cannot, however, be so extended. The domicile of a corporation is customarily regarded as the place where it is incorporated, and the courts have given the meaning to the term as it is used in article 28(1) of the Convention. (See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v. Societe Anonyme Belge d' Exploitation de la Navigation Aerienne Sabena Belgian World Airlines (E.D. pa. 1962). 207 F. Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as a whole, is also incompatible with the plaintiffs' claim. The article, in stating that places of business are among the bases of the jurisdiction, sets out two places where an action for damages may be brought; the country where the carrier's principal place of business is located, and the country in which it has a place of business through which the particular contract in question was made, that is, where the ticket was bought, Adopting the plaintiffs' theory would at a minimum blur these carefully drawn distinctions by creating a third intermediate category. It would obviously introduce uncertainty into litigation under the article because of the necessity of having to determine, and without standards or criteria, whether the amount of business done by a carrier in a particular country was "regular" and "substantial." The plaintiff's request to adopt this basis of jurisdiction is in effect a request to create a new jurisdictional standard for the Convention. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 59

Furthermore, it was argued in another case 20 that: . . . In arriving at an interpretation of a treaty whose sole official language is French, are we bound to apply French law? . . . We think this question and the underlying choice of law issue warrant some discussion . . . We do not think this statement can be regarded as a conclusion that internal French law is to be "applied" in the choice of law sense, to determine the meaning and scope of the Convention's terms. Of course, French legal usage must be considered in arriving at an accurate English translation of the French. But when an accurate English translation is made and agreed upon, as here, the inquiry into meaning does not then revert to a quest for a past or present French law to be "applied" for revelation of the proper scope of the terms. It does not follow from the fact that the treaty is written in French that in interpreting it, we are forever chained to French law, either as it existed when the treaty was written or in its present state of development. There is no suggestion in the treaty that French law was intended to govern the meaning of Warsaw's terms, nor have we found any indication to this effect in its legislative history or from our study of its application and interpretation by other courts. Indeed, analysis of the cases indicates that the courts, in interpreting and applying the Warsaw Convention, have, not considered themselves bound to apply French law simply because the Convention is written in French. . . . We agree with these rulings. Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article 28(1). By specifying the three other places, to wit, the principal place of business of the carrier, its place of business where the contract was made, and the place of destination, the article clearly meant that these three other places were not comprehended in the term "domicile." D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention does not apply to actions based on tort. The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in bad faith, discriminated against the petitioner, and committed a willful misconduct because it canceled his confirmed reservation and gave his reserved seat to someone who had no better right to it. In short. the private respondent committed a tort. Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He argues that in at least two American cases, 21 it was held that Article 28(1) of the Warsaw Convention does not apply if the action is based on tort. This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was interpreted thus: . . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly excludes any relief not provided for in the Convention as modified by the Montreal Agreement. It does not, however, limit the kind of cause of action on which the relief may be founded; rather it provides that any action based on the injuries specified in Article 17 "however founded," i.e., regardless of the type of action on which relief is founded, can only be brought subject to the conditions and limitations established by the Warsaw System. Presumably, the reason for the use of the phrase "however founded," in twofold: to accommodate all of the multifarious bases on which a claim might be

founded in different countries, whether under code law or common law, whether under contract or tort, etc.; and to include all bases on which a claim seeking relief for an injury might be founded in any one country. In other words, if the injury occurs as described in Article 17, any relief available is subject to the conditions and limitations established by the Warsaw System, regardless of the particular cause of action which forms the basis on which a plaintiff could seek relief . . . The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention. The petitioner has apparently misconstrued the import of Article 25(l) of the Convention, which reads as follows: Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability. if the damage is caused by his willful misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to willful misconduct. It is understood under this article that the court called upon to determine the applicability of the limitation provision must first be vested with the appropriate jurisdiction. Article 28(1) is the provision in the Convention which defines that jurisdiction. Article 22 23 merely fixes the monetary ceiling for the liability of the carrier in cases covered by the Convention. If the carrier is indeed guilty of willful misconduct, it can avail itself of the limitations set forth in this article. But this can be done only if the action has first been commenced properly under the rules on jurisdiction set forth in Article 28(1). III THE ISSUE OF PROTECTION TO MINORS The petitioner calls our attention to Article 24 of the Civil Code, which states: Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. Application of this article to the present case is misplaced. The above provision assumes that the court is vested with jurisdiction to rule in favor of the disadvantaged minor, As already explained, such jurisdiction is absent in the case at bar. CONCLUSION A number of countries have signified their concern over the problem of citizens being denied access to their own courts because of the restrictive provision of Article 28(1) of the Warsaw Convention. Among these is the United States, which has proposed an amendment that would enable the passenger to sue in his own domicile if the carrier does business in that jurisdiction. The reason for this proposal is explained thus: In the event a US citizen temporarily residing abroad purchases a Rome to New York to Rome ticket on a foreign air carrier which is generally subject to the

jurisdiction of the US, Article 28 would prevent that person from suing the carrier in the US in a "Warsaw Case" even though such a suit could be brought in the absence of the Convention. The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was adopted at Guatemala City on March 8, 1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of contracting parties. Pending such ratification, the petitioner will still have to file his complaint only in any of the four places designated by Article 28(1) of the Warsaw Convention. The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the right to sue in his own courts simply because the defendant airline has a place of business in his country. The Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in his own country at least inconvenience. But we are unable to grant him the relief he seeks because we are limited by the provisions of the Warsaw Convention which continues to bind us. It may not be amiss to observe at this point that the mere fact that he will have to litigate in the American courts does not necessarily mean he will litigate in vain. The judicial system of that country in known for its sense of fairness and, generally, its strict adherence to the rule of law. WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered. PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS, DR. JOSEFINO MIRANDA and LUISA MIRANDA, respondents. SYLLABUS 1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF AIR CARRIAGE; A RELATION ATTENDED WITH PUBLIC DUTY; DISCOURTEOUS CONDUCT TOWARDS A PASSENGER GIVES RISE FOR AN ACTION FOR DAMAGES. - The Court has time and again ruled, and it cannot be over-emphasized, that a contract of air carriage generates a relation attended with a public duty and any discourteous conduct on the part of a carriers employee toward a passenger gives the latter an action for damages and, more so, where there is bad faith. While it may be true that there was no direct evidence on record of blatant rudeness on the part of PAL employees towards the Mirandas, the fact that private respondents were practically compelled to haggle for accommodations, a situation unbefitting persons of their stature, is rather demeaning and it partakes of discourtesy magnified by PALs condescending attitude. Moreover, it cannot be denied that the PAL employees herein concerned were definitely less than candid, to put it mildly, when they withheld information from private respondents that they could actually be accommodated in a hotel of their choice. 2. REMEDIAL LAW; EVIDENCE; FINDINGS OF THE TRIAL AND APPELLATE COURT ON THE EXISTENCE OF BAD FAITH ON THE PART OF THE CARRIER, GENERALLY NOT DISTURBED ON APPEAL. - It is settled that bad faith must be duly proved and not merely presumed. The existence of bad faith, being a factual question, and the Supreme Court not being a trier of facts, the findings thereon of the trial court as well as of the Court of Appeals shall not be disturbed on appeal and are entitled to great weight and respect. Said findings are final and conclusive upon the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 60

Supreme Court except, inter alia, where the findings of the Court of Appeals and the trial court are contrary to each other. 3. ID.; ID.; ID.; CASE AT BAR. - It is evident that the issues raised in this petition are the correctness of the factual findings of the Court of Appeals of bad faith on the part of petitioner and the award of damages against it. This Court has consistently held that the findings of the Court of Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions created by case law. As nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed. 4. CIVIL LAW; DAMAGES; MORAL DAMAGES; RECOVERABLE IN A BREACH OF CONTRACT ATTENDED WITH FRAUD OR BAD FAITH; INATTENTION TO AND LACK OF CARE FOR INTERESTS OF PASSENGERS AMOUNTS TO BAD FAITH. - It is now firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith. Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit. Such unprofessional and prescribed conduct is attributable to petitioner airline in the case at bar and the adverse doctrinal rule is accordingly applicable to it. 5. ID.; ID.; ID.; AWARDED TO COMPENSATE PLAINTIFFS INJURIES. - It must, of course, be borne in mind that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered. 6. ID.; ID.; EXEMPLARY DAMAGES; AWARDED WHERE DEFENDANT ACTED IN WANTON, FRAUDULENT AND OPPRESSIVE MANNER. - In a contractual or quasicontractual relationship, exemplary damages, on the other hand, may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 7. ID.; ID.; ATTORNEYS FEES; AWARDED WHERE THERE IS A FINDING OF BAD FAITH; CASE AT BAR. - Attorneys fees in the concept of damages may be awarded where there is a finding of bad faith. The evidence on record amply sustains, and we correspondingly find, that the awards assessed against petitioner on the aforestated items of damages are justified and reasonable. 8. ID.; OBLIGATIONS AND CONTRACTS; CONTRACT OF AIR CARRIAGE; LIABILITY OF CARRIER NOT LIMITED BY THE PROVISIONS OF WARSAW CONVENTION. Although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carriers employees is found or established. (Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., G.R. No. 60501, March 5, 1993)

APPEARANCES OF COUNSEL Siguion Reyna Montecillo & Ongsiako for petitioner. Noel P. Catre for private respondents. DECISION REGALADO, J.: In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) assails the decision of respondent Court of Appeals in CA-G.R. CV No. 291471 which affirmed the judgment of the trial court finding herein petitioner liable as follows: Wherefore, premises considered, judgment is hereby rendered ordering the defendant, Philippine Airlines or PAL, to pay to the plaintiffs, Dr. Josefino Miranda and Luisa Miranda, the sum of P100,000.00 as moral damages; P30,000.00 as exemplary or corrective damages; P 10,000.00 as attorneys fees; and the costs.2 The factual antecedents of the present petition reveal that sometime in May, 1988, Dr. Josefino Miranda and his wife, Luisa, who were residents of SurigaoCity, went to the United States of America on a regular flight of Philippine Airlines, Inc. (PAL). On June 19, 1988, after a stay of over a month there, they obtained confirmed bookings from PALs San Francisco Office for PAL Flight PR 101 from San Francisco to Manila via Honolulu on June 21, 1988; PAL Flight PR 851 from Manila to Cebu on June 24, 1988; and PAL Flight PR 905 from Cebu to Surigao also on June 24, 1988. Accordingly, on June 21, 1988, private respondents boarded PAL Flight PR 101 in San Francisco with five (5) pieces of baggage. After a stopover atHonolulu, and upon arrival in Manila on June 23, 1988, they were told by the PAL personnel that their baggage consisting of two balikbayan boxes, two pieces of luggage and one fishing rod case were off-loaded at Honolulu, Hawaii due to weight limitations. Consequently, private respondents missed their connecting flight fromManila to Cebu City, as originally scheduled, since they had to wait for their baggage which arrived the following day, June 24, 1988, after their prescheduled connecting flight had left. They consequently also missed their other scheduled connecting flight from Cebu City to Surigao City. On June 25, 1988, they departed for Cebu City and therefrom private respondents had to transfer to PAL Flight 471 for Surigao City. On the way to SurigaoCity, the pilot announced that they had to return to Mactan Airport due to some mechanical problem. While at Mactan Airport, the passengers were provided by PAL with lunch and were booked for the afternoon flight to Surigao City. However, said flight was also canceled. Since there were no more flights for Surigao City that day, private respondents asked to be billeted at the Cebu Plaza Hotel where they usually stay whenever they happen to be in Cebu City. They were, however, told by the PAL employees that they could not be accommodated at said hotel supposedly because it was fully booked. Contrarily, when Dr. Miranda called the hotel, he was informed that he and his wife could be accommodated there. Although reluctant at first, PAL eventually agreed to private respondents overnight stay at said hotel. Oscar Jereza, PAL duty manager, approved the corresponding hotel

authority with standard meals. It was only after private respondents insistence that their meals be ordered a la carte that they were allowed to do so by PAL provided that they sign for their orders. Inasmuch as the shuttle bus had already left by the time private respondents were ready to go to the hotel, PAL offered them P 150.00 to include the fare for the return trip to the airport. Dr. Miranda asked for P 150.00 more as he and his wife, along with all of their baggages, could not be accommodated in just one taxi, aside from the need for tipping money for hotel boys. Upon refusal of this simple request, Dr. Miranda then declared that he would forego the amenities offered by PAL. Thus, the voucher for P 150.00 and the authority for the hotel accommodations prepared by PAL were voided due to private respondents decision not to avail themselves thereof. To aggravate the muddled situation, when private respondents tried to retrieve their baggage, they were told this time that the same were loaded on another earlier PAL flight to Surigao City. Thus, private respondents proceeded to the hotel sans their baggage and of which they were deprived for the remainder of their trip. Private respondents were finally able to leave on board the first PAL flight to Surigao City only on June 26, 1988. Thereafter, they instituted an action for damages which, after trial as well as on appeal, was decided in their favor. Petitioner PAL has come to us via the instant petition for review on certiorari, wherein it challenges the affirmatory decision of respondent Court of Appeals3 (1) for applying Articles 2220, 2232 and 2208 of the Civil Code when it sustained the award of the court a quo for moral and exemplary damages and attorneys fees despite absence of bad faith on its part; and (2) for not applying the express provisions of the contract of carriage and pertinent provisions of the Warsaw Convention limiting its liability to US$20.00 per kilo of baggage. 1. Anent the first issue, petitioner argues that there was no bad faith on its part for while there was admittedly a delay in fulfilling its obligation under the contract of carriage with respect to the transport of passengers and the delivery of their baggage, such delay was justified by the paramount consideration of ensuring the safety of its passengers. It likewise maintains that its employees treated private respondents fairly and with courtesy to the extent of acceding to most of their demands in order to mitigate the inconvenience occasioned by the measures undertaken by the airline to ensure passenger safety.4 It reiterated its position that the off-loading of private respondents baggage was due to weight limitations, as lengthily explained by petitioner from an aeronautically technical viewpoint,5 taking into consideration such variable factors as flight distance, weather, air resistance, runway condition and fuel requirement. Given the variable weather conditions, it claimed that the weight limitation for each flight can only be ascertained shortly before take-off. While admittedly there would be a resulting inconvenience in the accommodations of the passengers and the handling of their cargo, the same is outweighed by the paramount concern for the safety of the flight. Petitioner moreover impugns the Court of Appeals allegedly improper reliance on the inaccurate interpretation of the testimony of PALs baggage service representative, Edgar Mondejar,* that private respondents baggage were off-loaded to give preference to baggage and/or cargo originating from Honolulu. PAL argues that Mondejars knowledge of what transpired in Honolulu was merely based on the telex report forwarded to PALs Manila station stating that the off-loading was due to weight limitations.6 ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 61

Petitioner enumerates the following incidents as indicative of its good faith in dealing with private respondents: (1) The cancellation of the flight to Surigao City due to mechanical/engine trouble was to ensure the safety of passengers and cargo; (2) PAL offered to shoulder private respondents preferred accommodations, meals and transportation while in Cebu City with more than the usual amenities given in cases of flight disruption, and gave them priority in the following days flight to Surigao City; (3) PAL employees did not act rudely towards private respondents and its managerial personnel even gave them special attention; (4) It was reasonable for PAL to limit the transportation expense to P150.00, considering that the fare between the airport and the hotel was only P75.00, and they would be picked up by the shuttle bus from the hotel to the airport, while the request for money for tips could not be justified; and (5) The inadvertent loading of private respondents baggage on the replacement flight to Surigao City was at most simple and excusable negligence due to the numerous flight disruptions and large number of baggages on that day. Petitioner strenuously, and understandably, insists that its employees did not lie to private respondents regarding the want of accommodations at the latters hotel of preference. The only reason why Cebu Plaza Hotel was not initially offered to them by PAL was because of the earlier advice of the hotel personnel that not all the stranded PAL passengers could be accommodated therein. It claimed that it was in accordance with the airlines policy of housing all affected passengers in one location for easy communication and transportation, which accommodations in this instance could be provided by Magellan Hotel. However, upon insistence of the Mirandas on their preference for Cebu Plaza Hotel, Jeremias Tumulak, PALs passenger relations officer, told them that they could use the office phone and that if they could arrange for such accommodation PAL would shoulder the expenses. This concession, so petitioner avers, negates any malicious intent on its part. Crucial to the determination of the propriety of the award of damages in this case is the lower courts findings on the matter of bad faith, which deserves to be quoted at length: These claims were reasonable and appeared to be supported by the evidence. Thus it cannot be denied that plaintiffs had to undergo some personal inconveniences in Manila for lack of their baggage. It is also highly probable that plaintiffs scheduled return to Surigao City was upset because of their having to wait for one day for their missing things. Consequently, it was quite evident that the off-loading of plaintiffs baggage in Honolulu was the proximate cause of plaintiffs subsequent inconveniences for which they claimed to have suffered social humiliation, wounded feelings, frustration and mental anguish. xxx xxx xxx

off by defendant airlines of plaintiffs baggage to give way to other passengers or cargo was an arbitrary and oppressive act which clearly amounted to a breach of contract committed in bad faith and with malice. In the aforecited case, the Supreme Court defined bad faith as a breach of a known duty through some motive of interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may have been the motive, but it is malice nevertheless (infra). As correctly pointed out in the Memorandum for Plaintiffs dated June 18, 1990 (pp. 4-5), the following excerpt from the testimony of Edgar Mondejar clearly demonstrated the act of discrimination perpetrated by defendant on the herein plaintiffs (TSN, Edgar Mondejar, Feb. 28, 1990, pp. 26-28), thus: Q: Before a plane departs, your office will see to it the plane loads the exact weight limitation insofar as the cargoes (sic) and passengers are concerned, is that correct? A: Yes. Q: And so with the PR 101 flight starting mainland USA, it complied with the weight limitation, passengers and baggages (sic) limitation, is that correct? A: Yes. Q: In other words the trip from the mainland USA started in Hawaii to off-load cargoes (sic), you complied with the weight limitation and so on? A: Yes. Q: But you are saying upon arriving in Honolulu certain containers were off-loaded? A: Yes. Q: That would be therefore some containers were off-loaded to give way to some other containers starting from Honolulu towards Manila? A: Yes. Q: In other words Mr. Mondejar, preference was given to cargoes (sic) newly loaded at Honolulu instead of the cargoes (sic) already from mainland USA, is that correct? A: Yes. The aforesaid testimony constituted a clear admission in defendants evidence of facts amounting to a breach of contract in bad faith. This being so, defendant must be held liable in damages for the consequences of its action.7 (Corrections indicated in original text.) The trial court further found that the situation was aggravated by the following incidents: the poor treatment of the Mirandas by the PAL employees during the stopover at Mactan Airport in Cebu; the cavalier and dubious response of petitioners personnel to the Miranda spouses request to be billeted at the Cebu Plaza Hotel by denying the same allegedly because it was fully booked, which claim was belied by the fact that Dr. Miranda was easily able to arrange for accommodations thereat; and, the PAL employees negligent, almost malicious, act of sending off the baggage of private respondents to Surigao City, while they were still in Cebu, without any explanation for this gross oversight.8

The Court of Appeals affirmed these findings of the trial court by stating that While we recognize an airlines prerogative to off-load baggag(e) to conform with weight limitations for the purpose of ensuring the safety of passengers, We, however, cannot sanction the motion (sic) and manner it was carried out in this case. It is uncontroverted that appellees baggag(e) were properly weighed and loaded in the plane when it left San Francisco for Honolulu. When they reached Honolulu, they were not informed that their baggag(e) would be offloaded. Ironically, if the purpose of the off-loading was to conform with the weight limitations, why were other containers loaded in Honolulu? The real reason was revealed by Edgar Mondejar, baggage service representative of the appellant. x x x9 xxx xxx xxx

As earlier noted, the off-loading of appellees baggag(e) was done in bad faith because it was not really for the purpose of complying with weight limitations but to give undue preference to newly-loaded baggag(e) in Honolulu. This was followed by another mishandling of said baggag(e) in the twice-cancelled connecting flight from Cebu to Surigao. Appellees sad experience was further aggravated by the misconduct of appellants personnel in Cebu, who lied to appellees in denying their request to be billeted at Cebu Plaza Hotel.10 The Court has time and again ruled, and it cannot be over-emphasized, that a contract of air carriage generates a relation attended with a public duty and any discourteous conduct on the part of a carriers employee toward a passenger gives the latter an action for damages and, more so, where there is bad faith.11 It is settled that bad faith must be duly proved and not merely presumed. The existence of bad faith, being a factual question, and the Supreme Court not being a trier of facts, the findings thereon of the trial court as well as of the Court of Appeals shall not be disturbed on appeal and are entitled to great weight and respect.12Said findings are final and conclusive upon the Supreme Court except, inter alia, where the findings of the Court of Appeals and the trial court are contrary to each other.13 It is evident that the issues raised in this petition are the correctness of the factual findings of the Court of Appeals of bad faith on the part of petitioner and the award of damages against it. This Court has consistently held that the findings of the Court of Appeals and the other lower courts are as a rule binding upon it, subject to certain exceptions created by case law. As nothing in the record indicates any of such exceptions, the factual conclusions of the appellate court must be affirmed.14 It is now firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith.15 Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 62

In the present case there was a breach of contract committed in bad faith by the defendant airlines. As previously noted, plaintiffs had a confirmed booking on PAL Flight PR 101 from San Francisco to Manila. Therefore plaintiffs were entitled to an assured passage not only for themselves but for their baggage as well. They had a legal right to rely on this. The evidence showed that plaintiffs baggage were properly loaded and stowed in the plane when it left San Francisco for Honolulu. The off-loading or bumping

ground for an award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit.16 Such unprofessional and proscribed conduct is attributable to petitioner airline in the case at bar and the adverse doctrinal rule is accordingly applicable to it. In Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al.,17 a case which is virtually on all fours with the present controversy, we stated: In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it failed to deliver the luggage of petitioner at the appointed place and time. We agree. x x x. While the mere failure of CATHAY to deliver respondents luggage at the agreed place and time did notipso facto amount to willful misconduct since the luggage was eventually delivered to private respondent, albeit belatedly, We are persuaded that the employees of CATHAY acted in bad faith. x x x x x x if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper. It must, of course, be borne in mind that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered.18 In a contractual or quasi-contractual relationship, exemplary damages, on the other hand, may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.19 Attorneys fees in the concept of damages may be awarded where there is a finding of bad faith.20 The evidence on record amply sustains, and we correspondingly find, that the awards assessed against petitioner on the aforestated items of damages are justified and reasonable. At this juncture, it may also be pointed out that it is PALs duty to provide assistance to private respondents and, for that matter, any other passenger similarly inconvenienced due to delay in the completion of the transport and the receipt of their baggage. Therefore, its unilateral and voluntary act of providing cash assistance is deemed part of its obligation as an air carrier, and is hardly anything to rave about. Likewise, arrangements for and verification of requested hotel accommodations for private respondents could and should have been done by PAL employees themselves, and not by Dr. Miranda. It was rather patronizing of PAL to make much of the fact that they allowed Dr. Miranda to use its office telephone in order to get a hotel room. While it may be true that there was no direct evidence on record of blatant rudeness on the part of PAL employees towards the Mirandas, the fact that private respondents were practically compelled to haggle for accommodations, a situation unbefitting persons of their stature, is rather demeaning and it partakes of discourtesy magnified by PALs condescending attitude. Moreover, it cannot be denied that the PAL employees herein concerned were definitely less than candid, to put it mildly, when they withheld information from private respondents that they could actually be accommodated in a hotel of their choice. Indeed, the flambuoyant testimony of Oscar Jereza,* as PALs duty manager, merely pays lip-service to, without putting into reality, the avowed company policy of invariably making available and always granting the requests for the kind and standard of accommodations demanded by and appropriate for

its passengers.21Certainly, a more efficient service, and not a lackadaisical and disorganized system, is expected of the nations flag carrier, especially on an international flight. For, on the picayune matter of transportation expenses, PAL was obviously and unduly scrimping even on the small amount to be given to the Mirandas. PAL failed to consider that they were making arrangements for two paying round-trip passengers, not penny-ante freeloaders, who had been inconvenienced by the numerous delays in flight services and careless handling of their belongings by PAL. The niggardly attitude of its personnel in this unfortunate incident, as well as their hair-splitting attempts at justification, is a disservice to the image which our national airline seeks to project in its costly advertisements. We agree with the findings of the lower court that the request of private respondents for monetary assistance of P300.00 for taxi fare was indeed justified, considering that there were two of them and they had several pieces of luggage which had to be ferried between the airport and the hotel. Also, the request for a small additional sum for tips is equally reasonable since tipping, especially in a first-rate hotel, is an accepted practice, of which the Court can take judicial notice. This is aside from the fact that private respondents, having just arrived from an extended trip abroad, had already run out of Philippine currency, which predicament was exacerbated by their additional stay in Manila due to the off-loading of their baggage. All these inconveniences should have warranted a commonsensical and more understanding treatment from PAL, considering that private respondents found themselves in this unpleasant situation through no fault of theirs. 2. On its second issue, petitioner avers that the express provisions on private respondents tickets stipulating that liability for delay in delivery of baggage shall be limited to US$20.00 per kilo of baggage delayed, unless the passenger declares a higher valuation, constitutes the contract of carriage between PAL and private respondents. It further contends that these express provisions are in compliance with the provisions of the Warsaw Convention for the Unification of Rules Relating to International Carrier by Air, to which the Philippines is a signatory. Thereunder, it is asserted that PAL flight PR 101 from San Francisco, U.S.A. to Manila,Philippines is an international transportation well within the coverage of the Warsaw Convention. Petitioner obstinately insists on the applicability of the provisions of the Warsaw Convention regarding the carriers limited liability since the off-loading was supposedly justified and not attended by bad faith. Neither was there any claim for loss of baggage as in fact private respondents baggage were, albeit delayed, received by them in good condition.22 The court a quo debunked petitioners arguments by this holding: The defense raised by defendant airlines that it can be held liable only under the terms of the Warsaw Convention (Answer, Special and Affirmative Defenses, datedOctober 26, 1988) is of no moment. For it has also been held that Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely declare the air carriers liable for damages in the cases enumerated therein, if the conditions specified are present. Neither the provisions of said articles nor others regulate or exclude liability for other breaches of contract by air carriers (Northwest Airlines, Inc. vs. Nicolas Cuenca, et al., 14 SCRA 1063).23

This ruling of the trial court was affirmed by respondent Court of Appeals, thus: We are not persuaded. Appellees do not seek payment for loss of any baggage. They are claiming damages arising from the discriminatory off-loading of their baggag(e). That cannot be limited by the printed conditions in the tickets and baggage checks. Neither can the Warsaw Convention exclude nor regulate the liability for other breaches of contract by air carriers. A recognition of the Warsaw Convention does not preclude the operation of our Civil Code and related laws in determining the extent of liability of common carriers in breach of contract of carriage, particularly for willful misconduct of their employees.24 The congruent finding of both the trial court and respondent court that there was discriminatory off-loading being a factual question is, as stated earlier, binding upon and can no longer be passed upon by this Court, especially in view of and in deference to the affirmance of the same by respondent appellate court. There was no error on the part of the Court of Appeals when it refused to apply the provisions of the Warsaw Convention, for in the words of this Court in the aforequoted Cathay Pacific case: x x x although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carriers employees is found or established, which is the case before Us. x x x ACCORDINGLY, finding no reversible error, the challenged judgment of respondent Court of Appeals is hereby AFFIRMED in toto. SO ORDERED. Regalado (Chairman), Romero, Puno, Mendoza, and Torres, Jr., JJ., concur. PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS and GILDA C. MEJIA, respondents. DECISION REGALADO, J.: This is definitely not a case of first impression. The incident which eventuated in the present controversy is a drama of common contentious occurrence between passengers and carriers whenever loss is sustained by the former. Withal, the exposition of the factual ambience and the legal precepts in ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 63

this adjudication may hopefully channel the assertiveness of passengers and the intransigence of carriers into the realization that at times a bad extrajudicial compromise could be better than a good judicial victory. Assailed in this petition for review is the decision of respondent Court of Appeals in CA-G.R. CV No. 42744[1] which affirmed the decision of the lower [2] court finding petitioner Philippine Air Lines, Inc. (PAL) liable as follows: ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines, Inc., to pay plaintiff Gilda C. Mejia: (1) (2) (3) (4) P30,000.00 by way of actual damages of the microwave oven; P10,000.00 by way of moral damages; P20,000.00 by way of exemplary damages; P10,000.00 as attorneys fee;

name Sharp under PAL Air Waybill No. 0-79-1013008-3 (Exh. A). When shipped, defendants office at San Francisco inspected it. It was in good condition with its front glass intact. She did not declare its value upon the advice of defendants personnel at San Francisco. When she arrived in Manila, she gave her sister Concepcion C. Dio authority to claim her baggag(e) (Exh. G) and took a connecting flight for Bacolod City. When Concepcion C. Dino claimed the baggag(e) (Exh. B) with defendant, then with the Bureau of Customs, the front glass of the microwave oven was already broken and cannot be repaired because of the danger of radiation. They demanded from defendant thru Atty. Paco P30,000.00 for the damages although a brand new one costs P40,000.00, but defendant refused to pay. Hence, plaintiff engaged the services of counsel. Despite demand (Exh. E) by counsel, defendant still refused to pay. The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and restaurant business. Hence, the necessity of the oven. Plaintiff suffered sleepless nights when defendant refused to pay her (for) the broken oven and claims P 10,000.00 moral damages, P20,000.00 exemplary damages, P10,000.00 attorneys fees plus P300.00 per court appearance and P15,000.00 monthly loss of income in her business beginning February, 1990. Defendant Philippine Airlines thru its employees Rodolfo Pandes and Vicente Villaruz posited that plaintiffs claim was not investigated until after the filing of the formal claim on August 13, 1990 (Exh. 6 also Exh. E). During the investigations, plaintiff failed to submit positive proof of the value of the cargo. Hence her claim was denied. Also plaintiffs claim was filed out of time under paragraph 12, a(1) of the Air Waybill (Exh. A, also Exh. 1) which provides: (a) the person entitled to delivery must make a complaint to the carrier in writing in case: (1) of visible damage to the goods, immediately after discovery of the damage and at the latest within 14 days from the receipt of the goods.[5] As stated at the outset, respondent Court of Appeals similarly ruled in favor of private respondent by affirming in full the trial courts judgment in Civil Case No. 6210, with costs against petitioner.[6] Consequently, petitioner now impugns respondent appellate courts ruling insofar as it agrees with (1) the conclusions of the trial court that since the air waybill is a contract of adhesion, its provisions should be strictly construed against herein petitioner; (2) the finding of the trial court that herein petitioners liability is not limited by the provisions of the air waybill; and (3) the award by the trial court to private respondent of moral and exemplary damages, attorneys fees and litigation expenses. The trial court relied on the ruling in the case of Fieldmens Insurance Co., Inc. vs. Vda. De Songco, et al.[7] in finding that the provisions of the air waybill should be strictly construed against petitioner. More particularly, the court below stated its findings thus:

In this case, it is seriously doubted whether plaintiff had read the printed conditions at the back of the Air Waybill (Exh. 1), or even if she had, if she was given a chance to negotiate on the conditions for loading her microwave oven. Instead she was advised by defendants employee at San Francisco, U.S.A., that there is no need to declare the value of her oven since it is not brand new. Further, plaintiff testified that she immediately submitted a formal claim for P30,000.00 with defendant. But their claim was referred from one employee to another th(e)n told to come back the next day, and the next day, until she was referred to a certain Atty. Paco. When they got tired and frustrated of coming without a settlement of their claim in sight, they consulted a lawyer who demanded from defendant onAugust 13, 1990 (Exh. E, an[d] Exh. 6). The conclusion that inescapably emerges from the above findings of fact is to concede it with credence. x x x.[8] Respondent appellate court approved said findings of the trial court in this manner: We cannot agree with defendant-appellants above contention. Under our jurisprudence, the Air Waybill is a contract of adhesion considering that all the provisions thereof are prepared and drafted only by the carrier (Sweet Lines v. Teves, 83 SCRA 361). The only participation left of the other party is to affix his signature thereto (BPI Credit Corporation vs. Court of Appeals, 204 SCRA 601; Saludo, Jr. vs. C.A., 207 SCRA 498; Maersk vs. Court of Appeals, 222 SCRA 108, among the recent cases). In the earlier case of Angeles v. Calasanz, 135 SCRA 323, the Supreme Court ruled that the terms of a contract (of adhesion) must be interpreted against the party who drafted the same. x x x.[9] Petitioner airlines argues that the legal principle enunciated in Fieldmens Insurance does not apply to the present case because the provisions of the contract involved here are neither ambiguous nor obscure. The front portion of the air waybill contains a simple warning that the shipment is subject to the conditions of the contract on the dorsal portion thereof regarding the limited liability of the carrier unless a higher valuation is declared, as well as the reglementary period within which to submit a written claim to the carrier in case of damage or loss to the cargo. Granting that the air waybill is a contract of adhesion, it has been ruled by the Court that such contracts are not entirely prohibited and are in fact binding regardless of whether or not respondent herein read the provisions thereof. Having contracted the services of petitioner carrier instead of other airlines, private respondent in effect negotiated the terms of the contract and thus became bound thereby.[10] Counsel for private respondent refutes these arguments by saying that due to her eagerness to ship the microwave oven to Manila, private respondent assented to the terms and conditions of the contract without any opportunity to question or change its terms which are practically on a take-it-or-leave-it basis, her only participation therein being the affixation of her signature. Further, reliance on the Fieldmens insurance case is misplaced since it is not the ambiguity or obscurity of the stipulation that renders necessary the strict interpretation of a contract of adhesion against the drafter, but the peculiarity of the transaction wherein one party, normally a corporation, drafts all the provisions of the contract without any participation whatsoever on the part of the other party other than affixment of signature.[11] ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 64

all in addition to the costs of the suit. Defendants counterclaim is hereby dismissed for lack of merit.[3] The facts as found by respondent Court of Appeals are as follows: On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one (1) unit microwave oven, with a gross weight of 33 kilograms fromSan Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article in Manila, Philippines, plaintiff discovered that its front glass door was broken and the damage rendered it unserviceable. Demands both oral and written were made by plaintiff against the defendant for the reimbursement of the value of the damaged microwave oven, and transportation charges paid by plaintiff to defendant company. But these demands fell on deaf ears. On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against defendant in the lower court. In its answer, defendant Airlines alleged inter alia, by way of special and affirmative defenses, that the court has no jurisdiction over the case; that plaintiff has no valid cause of action against defendant since it acted only in good faith and in compliance with the requirements of the law, regulations, conventions and contractual commitments; and that defendant had always exercised the required diligence in the selection, hiring and supervision of its employees.[4] What had theretofore transpired at the trial in the court a quo is narrated as follows: Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took defendants plane from San Francisco, U.S.A. for Manila, Philippines (Exh. F). Amongst her baggages (sic) was a slightly used microwave oven with the brand

A review of jurisprudence on the matter reveals the consistent holding of the Court that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof.[12] As explained in Ong Yiu vs. Court of Appeals, et al., supra: x x x. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latters lack of knowledge or assent to the regulation. It is what is known as a contract of adhesion, in regards which it has been said that contracts of adhesion wherein one party imposes a ready-made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. x x x, a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra: x x x, it should be borne in mind that a contract of adhesion may be struck down as void and unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. x x x. but subject to the caveat that

pronouncements regarding strict construction of ambiguous provisions in an adhesion contract against its drafter, which although made by the Court as an aside but has perforce evolved into a judicial tenet over time, was actually an incidental statement intended to emphasize the duty of the court to protect the weaker, as against the more dominant, party to a contract, as well as to prevent the iniquitous situation wherein the will of one party is imposed upon the other in the course of negotiation. Thus, there can be no further question as to the validity of the terms of the air waybill, even if the same constitutes a contract of adhesion. Whether or not the provisions thereof particularly on the limited liability of the carrier are binding on private respondent in this instance must be determined from the facts and circumstances involved vis-a-vis the nature of the provisions sought to be enforced, taking care that equity and fair play should characterize the transaction under review. On petitioners insistence that its liability for the damage to private respondents microwave oven, if any, should be limited by the provisions of the air waybill, the lower court had this to say: By and large, defendants evidence is anchored principally on plaintiffs alleged failure to comply with paragraph 12, a(1) (Exh. 1-C-2) of the Air waybill (Exh.A, also Exh. 1), by filing a formal claim immediately after discovery of the damage. Plaintiff filed her formal claim only on August 13, 1990 (Exh. 6, also Exh.E). And, failed to present positive proof on the value of the damaged microwave oven. Hence, the denial of her claim. This Court has misgivings about these pretensions of defendant.

declaration was made by private respondent, as she admitted during crossexamination, the liability of petitioner, if any, should be limited to 28 kilograms multiplied by US$20, or$560. Moreover, the validity of these conditions has been upheld in the leading case of Ong Yiu vs. Court of Appeals, et al., supra, and subsequent cases, for being a mere reiteration of the limitation of liability under the. Warsaw Convention, which treaty has the force and effect of law.[16] It is additionally averred that since private respondent was merely advised, not ordered, that she need not declare a higher value for her cargo, the final decision of refraining from making such a declaration fell on private respondent and should not put the petitioner in estoppel from invoking its limited liability.[17] In refutation, private respondent explains that the reason for the absence of a declaration of a higher value was precisely because petitioners personnel in San Francisco, U.S.A. advised her not to declare the value of her cargo, which testimony has not at all been rebutted by petitioner. This being so, petitioner is estopped from faulting private respondent for her failure to declare the value of the microwave oven.[18] The validity of provisions limiting the liability of carriers contained in bills of lading have been consistently upheld for the following reason: x x x. The stipulation in the bill of lading limiting the common carriers liability to the value of goods appearing in the bill, unless the shipper or owner declares a greater value, is valid and binding. The limitation of the carriers liability is sanctioned by the freedom of the contracting parties to establish such stipulations, clauses, terms, or conditions as they may deem convenient, provided they are not contrary to law, morals, good customs and public policy. x x x.[19] However, the Court has likewise cautioned against blind reliance on adhesion contracts where the facts and circumstances warrant that they should be disregarded.[20] In the case at bar, it will be noted that private respondent signified an intention to declare the value of the microwave oven prior to shipment, but was explicitly advised against doing so by PALs personnel in San Francisco, U.S.A., as borne out by her testimony in court: xxx xxx xxx Q Did you declare the value of the shipment? A No. I was advised not to.

x x x. Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and fully operative in this transaction, it does not mean, and let this serve as fair warning to respondent carriers, that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of said Condition No. 5 xx x. The peculiar nature of such contracts behooves the Court to closely scrutinize the factual milieu to which the provisions are intended to apply. Thus, just as consistently and unhesitatingly, but without categorically invalidating such contracts, the Court has construed obscurities and ambiguities in the restrictive provisions of contracts of adhesion strictly albeit not unreasonably against the drafter thereof when justified in light of the operative facts and surrounding circumstances.[13] We find nothing objectionable about the lower courts reliance upon the Fieldmens Insurance case, the principles wherein squarely apply to the present petition. The parallelism between the aforementioned case and this one is readily apparent for, just as in the instant case, it is the binding effect of the provisions in a contract of adhesion (an insurance policy in Fieldmens Insurance) that is put to test. A judicious reading of the case reveals that what was pivotal in the judgment of liability against petitioner insurance company therein, and necessarily interpreting the provisions of the insurance policy as ineffective, was the finding that the representations made by the agent of the insurance company rendered it impossible to comply with the conditions of the contract in question, rather than the mere ambiguity of its terms. The extended

xxx xxx

xxx

Finally, the Court finds no merit to defendants contention that under the Warsaw Convention, its liability if any, cannot exceed U.S. $20.00 based on weight as plaintiff did not declare the contents of her baggage nor pay additional charges before the flight.[14] The appellate court declared correct the non-application by the trial court of the limited liability of therein defendant-appellant under the Conditions of the Contract contained in the air waybill , based on the ruling in Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al.,[15] which substantially enunciates the rule that while the Warsaw Convention has the force and effect of law in the Philippines, being a treaty commitment by the government and as a signatory thereto, the same does not operate as an exclusive enumeration of the instances when a carrier shall be liable for breach of contract or as an absolute limit of the extent of liability, nor does it preclude the operation of the Civil Code or other pertinent laws. Petitioner insists that both respondent court and the trial court erred in finding that petitioners liability, if any, is not limited by the provisions of the air waybill, for, as evidence of the contract of carriage between petitioner and private respondent, it substantially states that the shipper certifies to the correctness of the entries contained therein and accepts that the carriers liability is limited to US$20 per kilogram of goods lost, damaged or destroyed unless a value is declared and a supplementary charge paid. Inasmuch as no such

Q Who advised you? A At the PAL Air Cargo.[21] It cannot be denied that the attention of PAL through its personnel in San Francisco was sufficiently called to the fact that private respondents cargo was highly susceptible to breakage as would necessitate the declaration of its actual value. Petitioner had all the opportunity to check the condition and manner of packing prior to acceptance for shipment,[22] as well as during the preparation of the air waybill by PALsAcceptance Personnel based on information supplied by the shipper,[23] and to reject the cargo if the contents or the packing did not ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 65

meet the companys required specifications. Certainly, PAL could not have been otherwise prevailed upon to merely accept the cargo. While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of incident, posited that there may have been inadequate and improper packing of the cargo,[24] which by itself could be a ground for refusing carriage of the goods presented for shipment, he nonetheless admitted on crossexamination that private respondents cargo was accepted by PAL in its San Francisco office: ATTY. VINCO So that, be that as it may, my particular concern is that, it is the PAL personnel that accepts the baggage? WITNESS Yes, sir. ATTY. VINCO Also, if he comes from abroad like in this particular case, it is the PAL personnel who accepts the baggage? WITNESS Yes, sir. ATTY. VINCO And the PAL personnel may or may not accept the baggage? WITNESS Yes, sir. ATTY. VINCO According to what is stated as in the acceptance of the cargo, it is to the best interest of the airlines, that is, he want(s) also that the airlines would be free from any liability. Could that be one of the grounds for not admitting a baggage? WITNESS Safety is number one (I) xxx xxx xxx ATTY. VINCO So, this baggage was accepted and admitted in San Francisco? WITNESS Yes, sir. ATTY. VINCO And you could not show any document to the Court that would suggest that this baggage was denied admittance by your office at San Francisco? WITNESS

No, I cannot show. ATTY. VINCO Now, can you show any document that would suggest that there was insufficient pac(k)aging on this particular baggage from abroad? WITNESS No, sir.[25] In response to the trial courts questions during the trial, he also stated that while the passengers declaration regarding the general or fragile character of the cargo is to a certain extent determinative of its classification, PAL nevertheless has and exercises discretion as to the manner of handling required by the nature of the cargo it accepts for carriage. He further opined that the microwave oven was only a general, not a fragile, cargo which did not require any special handling.[26] There is no absolute obligation on the part of a carrier to accept a cargo. Where a common carrier accepts a cargo for shipment for valuable consideration, it takes the risk of delivering it in good condition as when it was loaded. And if the fact of improper packing is known to the carrier or its personnel, or apparent upon observation but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom.[27] The acceptance in due course by PAL of private respondents cargo as packed and its advice against the need for declaration of its actual value operated as an assurance to private respondent that in fact there was no need for such a declaration. Petitioner can hardly be faulted for relying on the representations of PALs own personnel. In other words, private respondent Mejia could and would have complied with the conditions stated in the air waybill, i.e., declaration of a higher value and payment of supplemental transportation charges, entitling her to recovery of damages beyond the stipulated limit of US$20 per kilogram of cargo in the event of loss or damage, had she not been effectively prevented from doing so upon the advice of PALs personnel for reasons best known to themselves. As pointed out by private respondent, the aforestated facts were not denied by PAL in any of its pleadings nor rebutted by way of evidence presented in the course of the trial, and thus in effect it judicially admitted that such an advice was given by its personnel in San Francisco,U.S.A. Petitioner, therefore, is estopped from blaming private respondent for not declaring the value of the cargo shipped and which would have otherwise entitled her to recover a higher amount of damages. The Courts bidding in the Fieldmens Insurance case once again rings true: x x x. As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice. We likewise uphold the lower courts finding that private respondent complied with the requirement for the immediate filing of a formal claim for damages as required in the air waybill or, at least, we find that there was substantial compliance therewith.

Private respondent testified that she authorized her sister, Concepcion Dio, to claim her cargo consisting of a microwave oven since the former had to take a connecting flight to Bacolod City on the very same afternoon of the day of her arrival.[28] As instructed, Concepcion Diopromptly proceeded to PALs Import Section the next day to claim the oven. Upon discovering that the glass door was broken, she immediately filed a claim by way of the baggage freight claim[29] on which was duly annotated the damage sustained by the oven.[30] Her testimony relates what took place thereafter: ATTY. VINCO So, after that inspection, what did you do? WITNESS After that annotation placed by Mr. Villaruz, I went home and I followed it up the next day with the Clerk of PAL cargo office. ATTY. VINCO What did the clerk tell you? WITNESS She told me that the claim was being processed and I made several phone calls after that. I started my follow-ups February up to June 1990. ATTY. VINCO And what results did those follow-ups produce? WITNESS All they said (was) that the document was being processed, that they were waiting for Atty. Paco to report to the office and they could refer the matter to Atty. Paco. ATTY. VINCO Who is this Atty. Paco? WITNESS He was the one in-charge of approving our claim. ATTY. VINCO Were you able to see Atty. Paco? WITNESS Yes, sir. I personally visited Atty. Paco together with my auntie who was a former PAL employee. xxx xxx xxx ATTY. VINCO So, what did you do, did you make a report or did you tell Atty. Paco of your scouting around for a possible replacement? ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 66

WITNESS I did call him back at his office. I made a telephone call. ATTY. VINCO And what answer did Atty. Paco make after you have reported back to him? WITNESS They told me that they were going to process the claim based on the price that I gave them but there was no definite result. ATTY. VINCO How many times did you go and see Atty. Paco regarding the claim of your sister? WITNESS I made one personal visit and several follow-up calls. With Atty. Paco, I made one phone call but I made several phone calls with his secretary or the clerk at PAL cargo office and I was trying to locate him but unfortunately, he was always out of his office.[31] PAL claims processor, Rodolfo Pandes,* confirmed having received the baggage freight claim on January 30, 1990[32] and the referral to and extended pendency of the private respondents claim with the office of Atty. Paco, to wit: ATTY. VINCO: Q And you did instruct the claimant to see the Claim Officer of the company, right? WITNESS: A Yes, sir.

xxx xxx xxx WITNESS: A Yes, sir.

ATTY. VINCO. Q You know this fact because a personnel saw you in one of the pre-trial here when this case was heard before the sala of Judge Moscardon, is that correct? WITNESS: A Yes.

claim was supposedly in the honest belief that the same had prescribed, there being no timely formal claim filed; and despite having been given an opportunity to submit positive proof of the value of the damaged microwave oven, no such proof was submitted. Petitioner insists that its failure to deliver the oven in the condition in which it was shipped could hardly be considered as amounting to bad faith.[38] Private respondent counters that petitioners failure to deliver the microwave oven in the condition in which it was received can be describe as gross negligence amounting to bad faith, on the further consideration that it failed to prove that it exercised the extraordinary diligence required by law, and that no explanation whatsoever was given as to why the front glass of the oven was broken.[39] The trial court justified its award of actual, moral and exemplary damages, and attorneys fees in favor of private respondent in this wise: Since the plaintiffs baggage destination was the Philippines, Philippine law governs the liability of the defendant for damages for the microwave oven. The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735 and 1753 x x x. xxx xxx xxx

ATTY. VINCO: Q In other words, the plaintiff rather had never stop(ped) in her desire for your company to settle this claim, right? WITNESS A Yes, sir.[33] Considering the abovementioned incidents and private respondent Mejias own zealous efforts in following up the claim,[34] it was clearly not her fault that the letter of demand for damages could only be filed, after months of exasperating follow-up of the claim, on August 13, 1990.[35] If there was any failure at all to file the formal claim within the prescriptive period contemplated in the air waybill, this was largely because of PALsown doing, the consequences of which cannot, in all fairness, be attributed to private respondent. Even if the claim for damages was conditioned on the timely filing of a formal claim, under Article 1186 of the Civil Code that condition was deemed fulfilled, considering that the collective action of PALs personnel in tossing around the claim and leaving it unresolved for an indefinite period of time was tantamount to voluntarily preventing its fulfillment. On grounds of equity, the filing of the baggage freight claim, which sufficiently informed PAL of the damage sustained by private respondents cargo, constituted substantial compliance with the requirement in the contract for the filing of a formal claim. All told, therefore, respondent appellate court did not err in ruling that the provision on limited liability is not applicable in this case. We, however, note in passing that while the facts and circumstances of this case do not call for the direct application of the provisions of the Warsaw Convention, it should be stressed that, indeed, recognition of the Warsaw Convention does not preclude the operation of the Civil Code and other pertinent laws in the determination of the extent of liability of the common carrier.[36] The Warsaw Convention, being a treaty to which the Philippines is a signatory, is as much a part of Philippine law as the Civil Code, Code of Commerce and other municipal special laws.[37] The provisions therein contained, specifically on the limitation of carriers liability, are operative in the Philippines but only in appropriate situations. Petitioner ascribes ultimate error in the award of moral exemplary damages and attorneys fees in favor of private respondent in that other than the statement of the trial court that petitioner acted in bad faith in denying private respondents claim, which was affirmed by the Court of Appeals, there is no evidence on record that the same is true. The denial of private respondents

In this case, defendant failed to overcome, not only the presumption but more importantly, plaintiffs evidence that defendants negligence was the proximate cause of the damages of the microwave oven. Further, plaintiff has established that defendant acted in bad faith when it denied the formers claim on the ground that the formal claim was filed beyond the period as provided in paragraph 12 (a-1) (Exh. 1-C-2) of the Air Waybill (Exh. 1, also Exh A), when actually, ConcepcionDio, sister of plaintiff has immediately filed the formal claim upon discovery of the damage.[40] Respondent appellate court was in full agreement with the trial courts finding of bad faith on the part of petitioner as a basis for the award of the aforestated damages, declaring that: As to the last assigned error, a perusal of the facts and law of the case reveals that the lower courts award of moral and exemplary damages, attorneys fees and costs of suit to plaintiff-appellee is in accordance with current laws and jurisprudence on the matter. Indeed, aside from the fact that defendantappellant acted in bad faith in breaching the contract and in denying plaintiffs valid claim for damages, plaintiff-appellee underwent profound distress, sleepless nights, and anxiety upon knowledge of her damaged microwave oven in possession of defendant-appellant, entitling her to the award of moral and exemplary damages (Cathay Pacific Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221, New Civil Code), and certainly plaintiff-appellants unjust refusal to comply with her valid demand for payment, thereby also entitling her to reasonable attorneys fees [Art. 2208 (2) and (11), id.].[41] It will be noted that petitioner never denied that the damage to the microwave oven was sustained while the same was in its custody. The possibility ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 67

ATTY. VINCO: Q And the Claim Officer happened to be Atty. Paco? WITNESS: A Yes, sir.

ATTY. VINCO: Q And you know that the plaintiff thru her authorized representative Concepcion Dio, who is her sister had many times gone to Atty. Paco, in connection with this claim of her sister? WITNESS: A Yes, sir.

ATTY. VINCO: Q As a matter of fact even when the complaint was already filed here in Court the claimant had continued to call about the settlement of her claim with Atty. Paco, is that correct?

that said damage was due to causes beyond the control of PAL has effectively been ruled out since the entire process in handling of the cargo - from the unloading thereof from the plane, the towing and transfer to the PAL warehouse, the transfer to the Customs examination area, and its release thereafter to the shipper - was done almost exclusively by, and with the intervention or, at the very least, under the direct supervision of a responsible PAL personnel.[42] The very admissions of PAL, through Vicente Villaruz of its Import Section, as follows: ATTY. VINCO So that, you now claim, Mr. Witness, that from the time the cargo was unloaded from the plane until the time it reaches the Customs counter where it was inspected, all the way, it was the PAL personnel who did all these things? WITNESS Yes, however, there is also what we call the Customs storekeeper and the Customs guard along with the cargo. ATTY. VINCO You made mention about a locator? WITNESS Yes, sir. ATTY. VINCO This locator, is he an employee of the PAL or the Customs? WITNESS He is a PAL employee.[43] lead to the inevitable conclusion that whatever damage may have been sustained by the cargo is due to causes attributable to PALs personnel or, at all events, under their responsibility. Moreover, the trial court underscored the fact that petitioner was not able to overcome the statutory presumption of negligence in Article 1735 which, as a common carrier, it was laboring under in case of loss, destruction or deterioration of goods, through proper showing of the exercise of extraordinary diligence. Neither did it prove that the damage to the microwave oven was because of any of the excepting causes under Article 1734, all of the same Code. Inasmuch as the subject item was received in apparent good condition, no contrary notation or exception having been made on the air waybill upon its acceptance for shipment, the fact that it was delivered with a broken glass door raises the presumption that PALs personnel were negligent in the carriage and handling of the cargo.[44] Furthermore, there was glaringly no attempt what so ever on the part of petitioner to explain the cause of the damage to the oven. The unexplained cause of damage to private respondents cargo constitutes gross carelessness or negligence which by itself justifies the present award of damages.[45] The equally unexplained and inordinate delay in acting on the claim upon referral thereof to the claims officer, Atty. Paco, and the noncommittal responses to private

respondents entreaties for settlement of her claim for damages belies petitioners pretension that there was no bad faith on its part. This unprofessional indifference of PALs personnel despite full and actual knowledge of the damage to private respondents cargo, just to be exculpated from liability on pure technicality and bureaucratic subterfuge, smacks of willful misconduct and insensitivity to a passengers plight tantamount to bad faith[46] and renders unquestionable petitioners liability for damages. In sum, there is no reason to disturb the findings of the trial court in this case, especially with its full affirmance by respondent Court of Appeals. On this note, the case at bar goes into the annals of our jurisprudence after six years and recedes into the memories of our legal experience as just another inexplicable inevitability. We will never know exactly how many manhours went into the preparation, litigation and adjudication of this simple dispute over an oven, which the parties will no doubt insist they contested as a matter of principle. One thing, however, is certain. As long as the first letter in principle is somehow outplaced by the peso sign, the courts will always have to resolve similar controversies although mutual goodwill could have dispensed with judicial recourse. IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent Court of Appeals is AFFIRMED in toto. SO ORDERED.

his travel to Chicago and back to Manila. Via defendants flight, plaintiff left for United States. After purchasing firearms and on the way back to Manila, plaintiff checkedin and presented before defendants representative his two identical baggage, one of which contained firearms. Defendants representative required the baggage to be opened and the supporting evidence to be presented. Plaintiff showed them his authorization from the Philippine government and the purchase receipts. Plaintiff thereafter sealed the baggage and defendants representative placed a red tag on the baggage with firearms with the marking "CONTAINS FIREARMS". Upon arrival in Manila on June 22, 1988 plaintiff was not able to claim one of his baggages. Plaintiff was informed by defendants representative that his baggage containing firearms was recalled back to Chicago by defendant for US Customs verification. A telex to this effect was shown to plaintiff. On June 28, 1988, after being advised of the arrival of his other baggage, plaintiff claimed and opened the baggage in the presence of defendants representative and found out that the firearms were missing. A Personal Property Missing Damage Report was issued by defendant to plaintiff. On account of the continuous refusal of defendant to settle amicably, plaintiff then prayed before the trial court that defendant be ordered to pay actual damages, moral damages, temperate damages, exemplary damages and attorney's fees (pp. 1-6, Complaint; p. 1, Record). In its answer, defendant pleaded: a) that it was the agents from the US Customs who ordered for the return of the weapons which plaintiff checked-in; b) that when opened in the presence of US Customs agents the box contained no firearms; and c) that since the baggage which was returned back to Chicago did not contain any firearms, then the baggage which plaintiff received upon arrival in Manila must have contained the firearms (pp. 3-5, Answer; pp. 32-34, Record). After plaintiff had presented its evidence, defendant filed a "Motion to Dismiss (By Way of Demurrer to the Evidence with Motion for Summary Judgment)" dated April 24, 1989. In said motion, defendant moved for the dismissal of the complaint in so far as it prays for moral, exemplary and temperate damages and attorney's fees and further moved for "Summary Judgment to be rendered awarding the plaintiff $640.00 as actual damages." (Motion to Dismiss By Way of Demurrer to Evidence with Motion for Summary Judgment; p. 115, Records). Plaintiff on the other hand, offered no objection to the submission of the case for decision but insisted that he is entitled to damages as prayed for (p. 1, Comment on Defendant's Motion to Dismiss by Way of Demurrer to Evidence with Summary Judgment; pp. 136-169, Records). We add to this summary the following relevant matters:

NORTHWEST AIRLINES, INC. petitioner, vs. COURT OF APPEALS and ROLANDO I. TORRES respondents.

[G.R. No. 120337. January 20, 1998]

ROLANDO I. TORRES, petitioner, vs. COURT OF APPEALS and NORTHWEST AIRLINES, INC., respondents. DECISION DAVIDE, JR., J.: Unable to accept the decision of the Court of Appeals in CA-G.R. CV No. 24068,[1] petitioner Northwest Airlines, Inc., (hereafter NORTHWEST) and petitioner Rolando I. Torres (hereafter TORRES) filed separate petitions for review under Rule 45 of the Rules of Court, which were docketed as G.R. No. 120334 and G.R. No. 120337 and thereafter consolidated. The antecedents of these cases were summarized by the Court of Appeals as follows:[2] The plaintiff, [Torres], allegedly on a special mission to purchase firearms for the Philippine Senate, purchased a round trip ticket from defendant [Northwest] for

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NORTHWEST argued in its motion for summary judgment that the Warsaw Convention and the contract of carriage limited its liability to US$640 and that the evidence presented by TORRES did not entitle him to moral, exemplary, and temperate damages and attorneys fees.[3] Instead of just ruling on NORTHWESTs Motion to Dismiss (By Way of Demurrer to Evidence) with Motion for Summary Judgment, which it considered submitted for resolution in the order of 14 June 1989,[4] the trial court rendered on 13 September 1989 a full-blown decision[5]ordering NORTHWEST to pay TORRES the following amounts: 1. The amount of $9,009.32, with legal interest thereon from the date of the filing of the complaint, in its peso equivalent at the official rate of exchange at the time payment is made, representing the value of the goods lost by the plaintiff; 2. The amount of P100,000.00 by way of attorney's fees; 3. The amount of P5,181.09 as filing fees paid by the plaintiff and the amount of P20,000.00 for expenses of litigation, representing travel expenses and hotel accommodations of plaintiff's counsels; and 4. The amount of P50,000.00 as moral damages.

Convention which entitled TORRES to claim actual damages in excess of the limitation provided for under Section 22(2) of said Convention. Nevertheless, the Court of Appeals held that while the trial court properly ruled on the right of TORRES to actual damages, it erred in determining by way of summary judgment the amount of damages; for under Section 3 of Rule 34 of the Rules of Court, a summary judgment may be rendered upon proper motion except as to the amount of damages. As to the trial courts act of disposing of the entire case by way of summary judgment, the Court of Appeals noted that NORTHWEST categorically moved for summary judgment only on the issue of actual damages, but not on the claims for moral damages and attorneys fees. NORTHWEST moved for the dismissal of the latter claims by way of demurrer to evidence. That being so, the trial court could not, by way of summary judgment, dispose of the case on its entirety. Section 2 of Rule 34 of the Rules of Court required that summary judgment should be issued only after the motion therefor has been heard. Since there was no such motion as to the claims for moral damages and attorneys fees, no summary judgment thereon could be made. Anent the demurrer to evidence, the Court of Appeals held that the trial court had to either grant or deny it. If granted, no award therefor could have been validly made. If denied, then under Section 1 of Rule 35 of the Rules of Court, NORTHWEST should have been allowed to present its evidence, as it was not deemed to have waived that right. This section provided: SECTION 1. Effect of judgment on demurrer to evidence. -- After the plaintiff has completed the presentation of his evidence, the defendant without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon facts and the law the plaintiff has shown no right to relief. However, if the motion is granted and order of dismissal is reversed on appeal, the movant loses his right to present evidence in his behalf.[9] The Court of Appeals then held that since the demurrer was impliedly denied by the trial court, NORTHWEST should have been allowed to present its evidence in accordance with the above rule. Accordingly, the Court of Appeals affirmed the trial courts finding as to the right of TORRES to actual damages but set aside the rest of the appealed decision. It then remanded the case to the court a quo for further proceedings. On 23 May 1995, the Court of Appeals denied[10] NORTHWESTs motion for a partial reconsideration of the decision. Hence, the present petitions. NORTHWEST contests the right of TORRES to actual damages on the following grounds: (1) the loss of firearms was disputed; (2) the finding of willful misconduct was arbitrary; and (3) TORRES failed to produce a United States license for the shipment of the firearms; hence, the importation was illegal and no damages could arise therefrom. TORRES, on the other hand, claims that the Court of Appeals erred (1) in setting aside the appealed decision of the court a quo as to the awards of damages, attorneys fees, and cost of suit; (2) in remanding the case to the court a quo for further proceedings; and (3) in failing to award other damages

for breach of contract and willful misconduct committed by Northwest for mishandling the cargo. NORTHWESTs Motion to Dismiss (By Way of Demurrer to Evidence) with Motion for Summary Judgment involved two distinct and separate processes, viz: (1) demurrer to evidence, which was then governed by Rule 35, now by Rule 33; and (2) motion for summary judgment, which was then governed by Rule 34, now Rule 35, of the Rules of Court. The subject of the demurrer were the claims for moral, exemplary, and temperate damages and attorneys fees; while the target of the motion for summary judgment was the claim for actual damages. We agree with the Court of Appeals in its holding that the trial court erred in deciding the entire case on its merits. Indeed, as to the demurrer to evidence, the trial court should have been solely guided by the procedure laid down in the abovementioned rule on demurrer to evidence. It had no choice other than to grant or to deny the demurrer. It could not, without committing grave abuse of discretion amounting to excess of jurisdiction, deny the motion and then forthwith grant TORRES claims on a finding that TORRES has established a preponderance of evidence in support of such claims. In the instant case, the trial court did just that insofar as moral damages, attorneys fees, and expenses of litigation were concerned. What it should have done was to merely deny the demurrer and set a date for the reception of NORTHWESTs evidence in chief. As to the motion for summary judgment, both the trial court and the Court of Appeals were in error . Summary judgments were formerly governed by Rule 34 of the Rules of Court. The rule is now Rule 35 of the 1987 Rules of Civil Procedure with the amendments allowing the parties to submit not only affidavits but also depositions or admissions in support of their respective contentions.[11] Motions for summary judgment may be filed by the claimant or by the defending party. Sections 1, 2, and 3 of the old Rule 34, the governing law in this case, provided as follows: SECTION 1. Summary judgment for claimant. -- A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits for a summary judgment in his favor upon all or any part thereof. SEC. 2. Summary judgment for defending party. -- A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits for a summary judgment in his favor as to all or any part thereof. SEC. 3. Motion and proceedings thereon. -- The motion shall be served at least ten (10) days before the time specified for the hearing. The adverse party prior to the day of hearing may serve opposing affidavits. After the hearing, the judgment sought shall be rendered forthwith if the pleadings, depositions, and admissions on file together with the affidavits, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. NORTHWEST, the defending party, moved for summary judgment on the claim for actual damages after TORRES had presented his evidence in chief. This was allowed by Section 2 where the motion may be filed at any time, as ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 69

The award of US$9,009.32, representing the value of the lost firearms, was grounded on the trial courts finding that the act of [NORTHWESTs] personnel in Tokyo or Narita Airport in just guessing which baggage contained the firearms was careless and imprudent, amounting to careless disregard for the safety of the luggage of the passenger. According to the trial court, such act constituted willful misconduct which brought the case beyond the application of Section 22(2) of the Warsaw Convention, thereby depriving NORTHWEST of the limitation of the liability provided for in said section. The awards of attorneys fees and expenses of litigation were premised on NORTHWESTs having ignored the demands of TORRES forcing the latter to litigate in order to assert his right. TORRES was also awarded moral damages because of the inconvenience, anxiety and worry he suffered by reason of NORTHWESTs unjustifiable refusal to settle his claim. Both TORRES and NORTHWEST appealed from the decision to the Court of Appeals, which docketed the case as CA-G.R. CV No. 24068. Torres assailed the failure of the trial court to award the actual, moral, and exemplary damages prayed for by him.[6] Northwest, on the other hand, alleged that in prematurely resolving the case on the merits the court prevented it from presenting evidence, thereby denying it due process; and that even assuming that the trial court could resolve the entire case on the merits, it erred in awarding damages, attorneys fees, and expenses of litigation.[7] In its Decision[8] of 14 September 1994, the Court of Appeals sustained the trial courts judgment that TORRES was entitled to actual damages, since NORTHWEST had, in effect, admitted the loss of the firearms when it insisted that its liability was limited to $9.07 per pound or $20 per kilo. The appellate court then concluded that NORTHWESTs guessing of which luggage contained the firearms amounted to willful misconduct under Section 25(1) of the Warsaw

distinguished from section 1 where theclaimant, like TORRES, may file the motion at any time after the answer is filed. Summary judgment is allowed if, except as to the amount of damages, there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. In this case, NORTHWEST denied in its Answer the material allegations in the complaint and asserted, in fact, that it was not liable for actual damages because the box containing the alleged lost firearms was the one received by TORRES when he arrived in Manila. It likewise contended that, even granting that the firearms were lost, its liability was limited by the Warsaw Convention and the contract of transportation to $9.07 per pound, or a total of $640 as the box weighed 70 pounds.[12] It also denied having acted fraudulently or in bad faith.[13] In thus submitting for summary judgment the matter of its liability only to the maximum allowed in Section 22(2) of the Warsaw Convention, NORTHWEST was deemed to have hypothetically admitted arguendo that the firearms were lost. It did not waive the presentation of evidence that it was not in fact liable for the alleged loss of firearms. And even if it were so liable, NORTHWEST could still prove at the appropriate time that it was not liable beyond the maximum provided in said Section 22(2). Notably, TORRES prayed for actual damages in the amounts of (1) $9,009.32 representing the value of the lost firearms; and (2) P39,065[14] representing the cost of his plane tickets. Concretely then, there remained a genuine issue on the fact and amount of actual damages. The motion for summary judgment was not therefore in order. NORTHWEST must have resorted to it, in like manner as it did in filing the demurrer, to delay the progress of the trial of the case. Verily, it was grave abuse of discretion on the part of the trial court to grant such motion and award TORRES actual damages commensurate to the value of the firearms and based on his evidence alone. We, however, agree with both the trial court and the Court of Appeals that NORTHWESTs liability for actual damages may not be limited to that prescribed in Section 22(2) of the Warsaw Convention. In Alitalia v. Intermediate Appellate Court,[15] we held: The [Warsaw] Convention does not operate as an exclusive enumeration of the instances of an airlines liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the Convention, as this Court has now, and at an earlier time, pointed out. Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any willful 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 Conventions provisions, in short, do not regulate or exclude liability for other breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of damage. IN VIEW WHEREOF, judgment is hereby rendered (1) PARTLY GRANTING the petition in G.R. No. 120334 by setting aside that portion of the challenged decision of the Court of Appeals in CA-G.R. CV No. 24068 affirming the summary

judgment as to the right of respondent ROLANDO I. TORRES to actual damages; (2) DENYING for want of merit the petition in G.R. No. 120337; and (3) REMANDING this case to the trial court for the reception of the evidence for Northwest Airlines, Inc. in Civil Case No. 88-46117 and, thereafter, for the rendition of the judgment therein on the merits. No pronouncement as to costs. SO ORDERED. PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA, petitioners, vs. COURT OF APPEALS and TRANS-WORLD AIRLINES INC., respondents. DECISION DAVIDE, JR., J.: The main issue in this petition for review under Rule 45 of the Rules of Court is the applicability of Article 28(1) of the Warsaw Convention,[1]which provides as follows: ARTICLE 28. (1) An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination. We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court of Appeals in CA-G.R. CV No. 39896[2] affirming the 24 July 1992 Order of the Regional Trial Court of Quezon City, Branch 102, which dismissed Civil Case No. Q-91-9620[3] on the ground of lack of jurisdiction in view of the aforementioned Article 28(1) of the Warsaw Convention. The antecedent facts, as summarized by the Court of Appeals, are as follows: Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society. Mr. Mapa is an established businessman and currently the Regional General Manager of Akerlund and Rausing, a multinational packaging material manufacturer based in Manila. He was previously the Senior Vice President of Phimco Industries, an affiliate company of Swedish Match Company. Mrs. Mapa is a successful businesswoman engaged in the commercial transactions of high value antique and oriental arts decor items originating from Asian countries. Carmina S. Mapa is the daughter of plaintiffs Purita and Cornelio and is a graduate of the International School in Bangkok, Thailand, now presently enrolled at the Boston University where she is majoring in communication. Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidenced by TWA ticket Nos. 015:9475:153:304 and 015:9475:153:305, purchased in Bangkok, Thailand. Said TWA tickets are for Los Angeles-New YorkBoston-St. Louis-Chicago .... Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is Kansas City, Missouri, USA. TWAs place of business through which

the contracts were made is Bangkok, Thailand. The place of destination is Chicago, USA. On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104 for Los Angeles. Carmina was to commence schooling and thus was accompanied by Purita to assist her in settling down at the University. They arrived in Los Angeles on the same date and stayed there until August 14, 1990 when they left for New York City. On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F. Kennedy (JFK) Airport, New York, on TWA Flight No. 904. On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a connecting flight on TWAs carrier, TW 0901, from JFK Airport, New York, to Bostons Logan Airport, checking in seven (7) pieces of luggage at the TWA counter in the JFK Airport. The seven baggages were received by a porter who issued seven TWA baggage receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor. From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded to TWAs ticket counter and presented their confirmed TWA tickets numbered 015:9475:153:304 and 015:9475:153:305 with a 3:00 p.m. departure time. They were issued their boarding passes and were instructed to proceed to gate 35 for boarding. At about 2:40 p.m., plaintiffs noticed that there was still no instruction to board the aircraft so they made inquiries. The TWA ground stewardess informed plaintiffs that they were at the wrong gate because their flight was boarding at gate 1. Upon hearing this, plaintiffs rushed to gate 1 which was in another building terminal. At gate 1, they were told by a TWA ground stewardess that flight 901 had just departed. However, they were consoled that another TWA flight was leaving for Boston after 30 minutes and plaintiffs could use the same boarding pass for the next flight. At around 3:15 p.m., plaintiffs Purita and Carmina were able to board the next flight. However, the plane was not immediately cleared for take off on account of a thunderstorm. The passengers were instructed to stay inside the aircraft until 6:00 p.m. when the plane finally left for Boston. Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim their baggages and found only three out of the seven they checked in, to wit: one Samsonite on the carousel, another Samsonite lying on the floor near the carousel and a third baggage, an American Tourister, inside the unclaimed baggage office. Plaintiffs immediately reported the loss of their four baggages to the TWA Baggage Office at Logan Airport. TWAs representative confidently assured them that their baggages would be located within 24 hours and not more than 48 hours. On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler, Customer Relations-Baggage Service, apologizing for TWAs failure to locate the missing luggage and requesting plaintiffs to accomplish a passenger property questionnaire to facilitate a further intensive and computerized search for the lost luggage. Plaintiffs duly accomplished the passenger property questionnaire, taking pains to write down in detail the contents of each missing baggage. The total value of the lost items amounted to $11, 283.79. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 70

On September 20, 1990, plaintiffs counsel wrote TWA thru its General Sales Manager in the Philippines, Daniel Tuason, with office address at Ground Floor, Saville Building, Sen. Gil J. Puyat Avenue corner Paseo de Roxas, Makati, Metro Manila demanding indemnification for the grave damage and injury suffered by the plaintiffs. TWA again assured plaintiffs that intensive search was being conducted. On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffsappellants two options: (a) transportation credit for future TWA travel or (b) cash settlement. Five months lapsed without any result on TWAs intensive search. On January 3, 1991, plaintiffs-appellants opted for transportation credit for future TWA travel. On January 11, 1991, TWA disregarded plaintiffs option and unilaterally declared the payment of $2,560.00 as constituting full satisfaction of the plaintiffs claim. On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the actual cost of their lost baggages and their contents. Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and redress plaintiffs for the grave injury and damages they have suffered.[4] Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then filed with the trial court on 1 August 1991 a complaint[5] for damages,[6] which was docketed as Civil Case No. Q-91-9620. Before a responsive pleading was filed, the petitioners filed an Amended Complaint.[7] They prayed that after due trial private respondent Trans-World Airlines, Inc. (hereafter, TWA), be ordered to pay them the following amounts: (1) US$8,723.79, or its equivalent in Philippine currency, representing the cost of the lost luggage and its contents; (2) US$2,949.50, or its equivalent in Philippine currency, representing the cost of hotel, board and lodging, and communication expenses; (3) P1 million, by way of moral damages; (4) P1 million, by way of exemplary damages, with legal interest on said amounts from the date of extrajudicial demand thereof; and (5) P500,000.00 as attorney's fees, costs of the suit, and other expenses of litigation.[8] On 26 February 1992, TWA filed its Answer to the Amended Complaint raising, as special and affirmative defense, lack of jurisdiction of Philippine courts over the action for damages in that pursuant to Article 28(1) of the Warsaw Convention, the action could only be brought either in Bangkok where the contract was entered into, or in Boston which was the place of destination, or in Kansas City which is the carrier's domicile and principal place of business. TWA further alleged that pursuant to the Warsaw Convention and the Notice of Baggage Limitations at the back of the tickets, its liability to the petitioners is limited to US$9.07 per pound, or US$20.00 per kilo, which is in lieu of actual and compensatory damages. Even assuming that petitioners bag weighed the maximum acceptable weight of 70 pounds, TWAs maximum

liability is $640.00 per bag or $2,560.00 for the four pieces of baggage, which the petitioners have been offered and have accepted. TWA also submitted that it could not be liable for moral and exemplary damages and attorneys fees because it did not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner.[9] On 7 February 1992, the petitioners filed their second Amended Complaint[10] to include a claim of US$2,500, or its equivalent in Philippine Currency, representing the additional replacement cost of the items and personal effects contained in their lost luggage; and US$4,500 representing the travel expenses, hotel, lodging, food and other expenses of petitioner Cornelio Mapa, who was constrained to join his family in Boston to extend the necessary assistance in connection with the lost luggage. After the filing of TWAs Answer to the second Amended Complaint,[11] and petitioners Reply thereto, the trial court gave TWA ten days within which to submit a memorandum in support of its affirmative defenses; after which the incident would be deemed submitted for resolution.[12] However, after TWA filed its Memorandum,[13] the trial court gave the petitioners five days within which to file a reply memorandum; and TWA, two days from receipt of the latter to file its comment thereon.[14] The petitioners then filed their Opposition (by way of Reply Memorandum)[15] to which TWA filed a Reply.[16] Thereafter, the petitioners submitted a Rejoinder[17]; TWA, a Surrejoinder.[18] On 24 July 1992, the trial court issued an Order[19] dismissing the case for lack of jurisdiction in light of Article 28(1) of the Warsaw Convention. Thus: It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case because plaintiffs' contract of transportation does not constitute "international transportation" as defined in said convention. This however is belied by the Passenger Property Questionnaire which is Annex C of plaintiffs' amended complaint. Page two of said questionnaire accomplished by plaintiffs under the heading "Your Complete Itinerary" shows that the TWA tickets issued to the plaintiffs form part of the contract of transportation to be performed from Manila to the United States. Since the Philippines and the United States are parties to the convention, plaintiffs' contracts of transportation come within the meaning of International Transportation. ...

(3) The court where it has a place of business through which the contract had been made; (4) The court of the place of destination. In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in the same case of Augusto Benedicto Santos vs. Northwest Airlines held: "Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the petitioner cites several cases holding that Article 28(1) refers to venue rather that jurisdiction, there are later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional. Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong country may be waived by the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition exists against their alteration. A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred. ...

On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to the case at bar, even if the basis of plaintiffs' present action is breach of contract of carriage under the New Civil Code. The next question to be resolved is whether or not the Court has jurisdiction to try the present case in the light of the provision of Art. 28(1) above-quoted. Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted only in any of the following places/courts: (1) The court of the domicile of the carrier; (2) The court of its principal place of business;

It has been shown by the defendant that the domicile of the defendant Trans World Airlines, Inc. is Kansas City, Missouri, its principal place of business is also in Kansas City, Missouri, the carrier's place of business through which the contracts were made is Bangkok (Annexes A and A-1, Amended Complaint), and the place of destination was Boston. The Philippines not being one of the places specified in Art. 28(1) above-quoted where the complaint may be instituted, this Court therefore, does not have jurisdiction over the present case. Evidently discontented with the trial court's order, the petitioners appealed to the Court of Appeals, contending that the lower court erred in not ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 71

holding that (1) it has jurisdiction over the instant case and (2) the Warsaw Convention is inapplicable in the instant case because the subject matter of the case is not included within the coverage of the said convention.[20] They claimed that their cause of action could be based on breach of contract of air carriage founded on Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code governing common carriers or Article 2176 of the same Code governing tort or quasi-delict. The appellate court disagreed with the petitioners and affirmed the order of the trial court. It held that the Warsaw Convention is the law which governs the dispute between the petitioners and TWA because what is involved is international transportation defined by said Convention in Article I(2). This holding is founded on its determination that the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago purchased in Bangkok, Thailand, were issued in conjunction with, and therefore formed part of, the contract of transportation performed from Manila, Philippines, to the United States. The respondent court further held that the cause of action of the petitioners arose from the loss of the four checked pieces of baggage, which then falls under Article 18(1), Chapter III (Liability of the Carrier) of the Warsaw Convention.[21] Pursuant to Article 24(1) of the Convention, all actions for damages, whether based on tort, code law or common law, arising from loss of baggage under Article 18 of the Warsaw Convention, can only be brought subject to the conditions and limits set forth in the Warsaw Convention. Article 28(1) thereof sets forth conditions and limits in that the action for damages may be instituted only in the territory of one of the High Contracting Parties, before the court of (1) the domicile of the carrier, (2) the carriers principal place of business, (3) the place of business through which the contract has been made, or (4) the place of destination. Since the Philippines is not one of these places, a Philippine Court, like the RTC, has no jurisdiction over the complaint for damages. Respondent Court of Appeals likewise held that the petitioners could not claim application of Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code on common carriers without taking into consideration Article 1753 of the same Code, which provides that the law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction, or deterioration. Since the country of ultimate destination is Chicago, the law of Chicago shall govern the liability of TWA for the loss of the four pieces of baggage. Neither is Article 2176 of the New Civil Code on torts or quasi-delicts applicable in view of the private international law principle of lex loci delicti commissi.[22] In addition, comformably with Santos III v. Northwest Orient Airlines,[23] mere allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention. Failing in their bid to reconsider the decision, the petitioners filed this petition. They aver that respondent Court of Appeals gravely erred (1) in holding that the Warsaw Convention is applicable to this case and (2) in applying Article 1753 of the Civil Code and the principle of lex loci delicti commissi.[24] We resolved to give due course to the petition after the filing by TWA of its Comment on the petition and noted without action for the reasons stated in the resolution of 25 September 1996 petitioners Reply and Rejoinder. We then required the parties to submit their respective memoranda. They did in due time.

The petitioners insist that the Warsaw Convention is not applicable to their case because the contracts they had with TWA did not involve aninternational transportation. Whether the contracts were of international transportation is to be solely determined from the TWA tickets issued to them in Bangkok, Thailand, which showed that their itinerary was Los Angeles-New YorkBoston-St. Louis-Chicago. Accordingly, since the place of departure (Los Angeles) and the place of destination (Chicago) are both within the territory of one High Contracting Party, with no agreed stopping place in a territory subject to the sovereignty, mandate, suzerainty or authority of another Power, the contracts did not constitute international transportation as defined by the convention. They also claim to be without legal basis the contention of TWA that their transportation contracts were of international character because of the handwritten notations in the tickets re INTL TKT #079-4402956821-2 and INTL TKT #079-4402956819. Notwithstanding such notations, the TWA tickets, viz., (a) No. 015.9475:153:304 and (b) No. 015:9475:153:305 did not cease to be for the itinerary therein designated. Besides, it is a fact that petitioners Purita and Carmina Mapa traveled from Manila to Los Angeles via Philippine Airlines (PAL) by virtue of PAL tickets issued independently of the TWA tickets. The pith issue to be resolved under the petitioners first assigned error is whether the contracts of transportation between Purita and Carmina Mapa, on the one hand, and TWA, on the other, were contracts of international transportation under the Warsaw Convention. If they were, then we should sustain the trial court and the Court of Appeals in light of our ruling in Santos v. Northwest Orient Airlines.[25] It appears clear to us that TWA itself, the trial court, and the Court of Appeals impliedly admit that if the sole basis were the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago, the contracts cannot be brought within the term international transportation, as defined in Article I(2) of the Warsaw Convention. As provided therein, a contract is one of international transportation only if according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the transportation or a transshipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though that power is not a party to this convention. There are then two categories of international transportation, viz., (1) that where the place of departure and the place of destination are situated within the territories of two High Contracting Parties regardless of whether or not there be a break in the transportation or a transshipment; and (2) that where the place of departure and the place of destination are within the territory of a single High Contracting Party if there is an agreed stopping place within a territory subject to the sovereignty, mandate, or authority of another power, even though the power is not a party to the Convention. The High Contracting Parties referred to in the Convention are the signatories thereto and those which subsequently adhered to it. In the case of the Philippines, the Convention was concurred in by the Senate, through Resolution No. 19, on 16 May 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on 13 October 1950 and was deposited with the Polish Government on 9 November 1950. The Convention became

applicable to the Philippines on 9 February 1951. Then, on 23 September 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring the Philippines formal adherence thereto, to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof.[26] The contracts of transportation in this case are evidenced by the two TWA tickets, No. 015:9475:153:304 and No. 015:9475:153:305, both purchased and issued in Bangkok, Thailand. On the basis alone of the provisions therein, it is obvious that the place of departure and the place of destination are all in the territory of the United States, or of a single High Contracting Party. The contracts, therefore, cannot come within the purview of the first category of international transportation. Neither can it be under the second category since there was NO agreed stopping place within a territory subject to the sovereignty, mandate, or authority of another power. The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and TWA, on the other, within the first category of international transportation is to link them with, or to make them an integral part of, the Manila-Los Angeles travel of Purita and Carmina through PAL aircraft. The linkages which have been pointed out by the TWA, the trial court, and the Court of Appeals are (1) the handwritten notations,viz., INTL TKT # 0794402956821-2 and INTL TKT # 079-4402956819, on the two TWA tickets; and (2) the entries made by petitioners Purita and Carmina Mapa in column YOUR COMPLETE ITINERARY in TWAs Passenger Property Questionnaire, wherein they mentioned their travel from Manila to Los Angeles in flight PR 102. The alleged international tickets mentioned in the notations in conjunction with which the two TWA tickets were issued were not presented. Clearly then, there is at all no factual basis of the finding that the TWA tickets were issued in conjunction with the international tickets, which are even, at least as of now, non-existent. As regards the petitioners entry in YOUR COMPLETE ITINERARY column of the Passenger Property Questionnaire wherein they included the Manila-Los Angeles travel, it must be pointed out that this was made on 4 September 1990[27] by petitioners Purita and Carmina Mapa, and only in connection with their claim for their lost pieces of baggage. The loss occurred much earlier, or on 27 August 1990. The entry can by no means be considered as a part of, or supplement to, their contracts of transportation evidenced by the TWA tickets which covered transportation within the United States only. It must be underscored that the first category of international transportation under the Warsaw Convention is based on the contract made by the parties. TWA does not claim that the Manila-Los Angeles contracts of transportation which brought Purita and Carmina to Los Angeles were also its contracts. It does not deny the assertion of the petitioners that those contracts were independent of the TWA tickets issued in Bangkok, Thailand. No evidence was offered that TWA and PAL had an agreement concerning transportation of passengers from points of departures not served with aircrafts of one or the other. There could have been no difficulty for such agreement, since TWA admitted without qualification in paragraph 1 of its Answer[28] to the second Amended Complaint the allegation in paragraph 1.1 of the latter[29] that TWA is a foreign corporation licensed to do business in the Philippines with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue, corner Paseo de Roxas, Makati, Metro Manila. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 72

TWA relies on Article I(3) of the Convention, which provides as follows: 3. A carriage to be performed by several successive air carriers is deemed, for the purposes of this Convention, to be one undivided carriage, if it has been regarded by the parties as a single operation, whether it had been agreed upon under the form of a single contract or of a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party. It also points to Article 15 of the IATA Recommend Practice 1724, which provides: Carriage to be performed by several successive carriers under one ticket, or under a ticket and any conjunction ticket issued in connection therewith, is regarded as a single operation.[30] The flaw of respondents position is the presumption that the parties have regarded as an undivided carriage or as a single operation the carriage from Manila to Los Angeles through PAL then to New York-Boston- St. LouisChicago through TWA. The dismissal then of the second Amended Complaint by the trial court and the Court of Appeals affirmance of the dismissal were not based on indubitable facts or grounds, but on inferences without established factual basis. TWA should have offered evidence for its affirmative defenses at the preliminary hearing therefor. Section 5 of Rule 16 of the Rules of Court expressly provides: SEC. 5. Pleading grounds as affirmative defenses. -- Any of the grounds for dismissal provided for in this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed. Without any further evidence as earlier discussed, the trial court should have denied the affirmative defense of lack of jurisdiction because it did not appear to be indubitable. Section 3 of Rule 16 of the Rules of Court provides: SEC. 3. Hearing and order. -- After hearing the court may deny or grant the motion or allow amendment of pleading, or may defer the hearing and determination of the motion until the trial if the ground alleged therein does not appear to be indubitable. WHEREFORE, the instant petition is GRANTED and the challenged decision of 31 May 1995 of respondent Court of Appeals in CA-G.R. CV No. 39896, as well as the Order of 24 July 1992 of the Regional Trial Court of Quezon City, Branch 102, in Civil Case No. Q-91-9620, is REVERSED and SET ASIDE. The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to proceed with the pre-trial, if it has not been terminated, and with the trial on the merits of the case and then to render judgment thereon, taking into account the foregoing observations on the issue of jurisdiction. SO ORDERED.

AMERICAN AIRLINES, petitioner, vs. COURT OF APPEALS, HON. BERNARDO LL. SALAS and DEMOCRITO MENDOZA, respondents. Oldmis o DECISION GONZAGA_REYES, J.: Before us is a petition for review of the decision dated December 24, 1993 rendered by the Court of Appeals in the consolidated cases docketed as CA-G.R. SP nos. 30946 and 31452 entitled American Airlines vs. The Presiding Judge Branch 8 of the Regional Trial Court of Cebu and Democrito Mendoza, petitions for certiorari and prohibition. In SP no. 30946, the petitioner assails the trial courts order denying the petitioners motion to dismiss the action for damages filed by the private respondent for lack of jurisdiction under section 28 (1) of the Warsaw Convention; and in SP No. 31452 the petitioner challenges the validity of the trial courts order striking off the record the deposition of the petitioners security officer taken in Geneva, Switzerland for failure of the said security officer to answer the cross interrogatories propounded by the private respondent. Ncm The sole issue raised in SP No. 30946 is the questioned jurisdiction of the Regional Trial Court of Cebu to take cognizance of the action for damages filed by the private respondent against herein petitioner in view of Art 28 (1) of the Warsaw Convention.[1] It is undisputed that the private respondent purchased from Singapore Airlines in Manila conjunction tickets for Manila - Singapore Athens - Larnaca - Rome - Turin - Zurich - Geneva - Copenhagen - New York. The petitioner was not a participating airline in any of the segments in the itinerary under the said conjunction tickets. In Geneva the petitioner decided to forego his trip to Copenhagen and to go straight to New York and in the absence of a direct flight under his conjunction tickets from Geneva to New York, the private respondent on June 7, 1989 exchanged the unused portion of the conjunction ticket for a one-way ticket from Geneva to New York from the petitioner airline. Petitioner issued its own ticket to the private respondent in Geneva and claimed the value of the unused portion of the conjunction ticket from the IATA[2] clearing house in Geneva. Ncmmis In September 1989, private respondent filed an action for damages before the regional trial court of Cebu for the alleged embarassment and mental anguish he suffered at the Geneva Airport when the petitioners security officers prevented him from boarding the plane, detained him for about an hour and allowed him to board the plane only after all the other passengers have boarded. The petitioner filed a motion to dismiss for lack of jurisdiction of Philippine courts to entertain the said proceedings under Art. 28 (1) of the Warsaw Convention. The trial court denied the motion. The order of denial was elevated to the Court of Appeals which affirmed the ruling of the trial court. Both the trial and that appellate courts held that the suit may be brought in the Philippines under the pool partnership agreement among the IATA members, which include Singapore Airlines and American Airlines, wherein the members act as agents of each other in the issuance of tickets to those who may need their services. The contract of carriage perfected in Manila between the private respondent and Singapore Airlines binds the petitioner as an agent of Singapore Airlines and considering that the petitioner has a place of business in Manila, the third option of the plaintiff under the Warsaw Convention i.e. the action may be brought in the

place where the contract was perfected and where the airline has a place of business, is applicable. Hence this petition assailing the order upholding the jurisdiction of Philippine courts over the instant action. Scnc m Both parties filed simultaneous memoranda pursuant to the resolution of this Court giving due course to the petition. The petitioners theory is as follows: Under Art 28 (1) of the Warsaw convention an action for damages must be brought at the option of the plaintiff either before the court of the 1) domicile of the carrier; 2) the carriers principal place of business; 3) the place where the carrier has a place of business through which the contract was made; 4) the place of destination. The petitioner asserts that the Philippines is neither the domicile nor the principal place of business of the defendant airline; nor is it the place of destination. As regards the third option of the plaintiff, the petitioner contends that since the Philippines is not the place where the contract of carriage was made between the parties herein, Philippine courts do not have jurisdiction over this action for damages. The issuance of petitioners own ticket in Geneva in exchange for the conjunction ticket issued by Singapore Airlines for the final leg of the private respondents trip gave rise to a separate and distinct contract of carriage from that entered into by the private respondent with Singapore Airlines in Manila. Petitioner lays stress on the fact that the plane ticket for a direct flight from Geneva to New York was purchased by the private respondent from the petitioner by "exchange and cash" which signifies that the contract of carriage with Singapore Airlines was terminated and a second contract was perfected. Moreover, the second contract of carriage cannot be deemed to have been an extension of the first as the petitioner airline is not a participating airline in any of the destinations under the first contract. The petitioner claims that the private respondents argument that the petitioner is bound under the IATA Rules as agent of the principal airline is irrelevant and the alleged bad faith of the airline does not remove the case from the applicability of the Warsaw Convention. Further, the IATA Rule cited by the private respondent which is admittedly printed on the ticket issued by the petitioner to him which states, "An air carrier issuing a ticket for carriage over the lines of another carrier does so only as its agent" does not apply herein, as neither Singapore Airlines nor the petitioner issued a ticket to the private respondent covering the route of the other. Since the conjunction tickets issued by Singapore Airlines do not include the route covered by the ticket issued by the petitioner, the petitioner airline submits that it did not act as an agent of Singapore Airlines. Sdaa miso Private respondent controverts the applicability of the Warsaw Convention in this case. He posits that under Article 17 of the Warsaw Convention[3] a carrier may be held liable for damages if the "accident" occurred on board the airline or in the course of "embarking or disembarking" from the carrier and that under Article 25 (1)[4] thereof the provisions of the convention will not apply if the damage is caused by the "willful misconduct" of the carrier. He argues that his cause of action is based on the incident at the pre-departure area of the Geneva airport and not during the process of embarking nor disembarking from the carrier and that security officers of the petitioner airline acted in bad faith. Accordingly, this case is released from the terms of the Convention. Private respondent argues that assuming that the convention applies, his trip to nine cities in different countries performed by different carriers under the conjunction tickets issued in Manila by Singapore Airlines is regarded as a single transaction; as such the final leg of his trip from Geneva to New York with the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 73

petitioner airline is part and parcel of the original contract of carriage perfected in Manila. Thus, the third option of the plaintiff under Art. 28 (1) e.g., where the carrier has a place of business through which the contract of carriage was made, applies herein and the case was properly filed in the Philippines. The private respondent seeks affirmance of the ruling of the lower courts that the petitioner acted as an agent of Singapore Airlines under the IATA Rules and as an agent of the principal carrier the petitioner may be held liable under the contract of carriage perfected in Manila, citing the judicial admission made by the petitioner that it claimed the value of the unused portion of the private respondents conjunction tickets from the IATA Clearing House in Geneva where the accounts of both airlines are respectively credited and debited. Accordingly, the petitioner cannot now deny the contract of agency with Singapore Airlines after it honored the conjunction tickets issued by the latter. Sdaad The petition is without merit. The Warsaw Convention to which the Republic of the Philippines is a party and which has the force and effect of law in this country applies to all international transportation of persons, baggage or goods performed by an aircraft gratuitously or for hire.[5] As enumerated in the Preamble of the Convention, one of the objectives is "to regulate in a uniform manner the conditions of international transportation by air".[6] The contract of carriage entered into by the private respondent with Singapore Airlines, and subsequently with the petitioner, to transport him to nine cities in different countries with New York as the final destination is a contract of international transportation and the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passengers.[7] This includes section 28 (1) which enumerates the four places where an action for damages may be brought. Scs daad The threshold issue of jurisdiction of Philippine courts under Art 28 (1) must first be resolved before any pronouncements may be made on the liability of the carrier thereunder.[8] The objections raised by the private respondent that this case is released from the terms of the Convention because the incident on which this action is predicated did not occur in the process of embarking and disembarking from the carrier under Art 17[9] and that the employees of the petitioner airline acted with malice and bad faith under Art 25 (1)[10] pertain to the merits of the case which may be examined only if the action has first been properly commenced under the rules on jurisdiction set forth in Art. 28 (1). Art (28) (1) of the Warsaw Convention states: Sup rema Art 28 (1) An action for damages must be brought at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business or where he has a place of business through which the contract has been made, or before the court at the place of destination. There is no dispute that petitioner issued the ticket in Geneva which was neither the domicile nor the principal place of business of petitioner nor the respondents place of destination.

The question is whether the contract of transportation between the petitioner and the private respondent would be considered as a single operation and part of the contract of transportation entered into by the latter with Singapore Airlines in Manila. Petitioner disputes the ruling of the lower court that it is. Petitioners main argument is that the issuance of a new ticket in Geneva created a contract of carriage separate and distinct from that entered by the private respondent in Manila. We find the petitioners argument without merit. Juris Art 1(3) of the Warsaw Convention which states: "Transportation to be performed by several successive carriers shall be deemed, for the purposes of this convention, to be one undivided transportation, if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or a series of contracts, and it shall not lose its international character merely because one contract or series of contracts is to be performed entirely within the territory subject of the sovereignty, suzerainty, mandate or authority of the same High contracting Party." Sc juris The contract of carriage between the private respondent and Singapore Airlines although performed by different carriers under a series of airline tickets, including that issued by petitioner, constitutes a single operation. Members of the IATA are under a general pool partnership agreement wherein they act as agent of each other in the issuance of tickets[11] to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world. Booking and reservation among airline members are allowed even by telephone and it has become an accepted practice among them.[12] A member airline which enters into a contract of carriage consisting of a series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and through the required process of interline settlement of accounts by way of the IATA clearing house an airline is duly compensated for the segment of the trip serviced.[13] Thus, when the petitioner accepted the unused portion of the conjunction tickets, entered it in the IATA clearing house and undertook to transport the private respondent over the route covered by the unused portion of the conjunction tickets, i.e., Geneva to New York, the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as agent of the principal contracting airline, Singapore Airlines, as to the segment of the trip the petitioner agreed to undertake. As such, the petitioner thereby assumed the obligation to take the place of the carrier originally designated in the original conjunction ticket. The petitioners argument that it is not a designated carrier in the original conjunction tickets and that it issued its own ticket is not decisive of its liability. The new ticket was simply a replacement for the unused portion of the conjunction ticket, both tickets being for the same amount of US$ 2,760 and having the same points of departure and destination.[14] By constituting itself as an agent of the principal carrier the petitioners undertaking should be taken as part of a single operation under the contract of carriage executed by the private respondent and Singapore Airlines in Manila.

The quoted provisions of the Warsaw Convention Art. 1(3) clearly states that a contract of air transportation is taken as a single operation whether it is founded on a single contract or a series of contracts. The number of tickets issued does not detract from the oneness of the contract of carriage as long as the parties regard the contract as a single operation. The evident purpose underlying this Article is to promote international air travel by facilitating the procurement of a series of contracts for air transportation through a single principal and obligating different airlines to be bound by one contract of transportation. Petitioners acquiescence to take the place of the original designated carrier binds it under the contract of carriage entered into by the private respondent and Singapore Airlines in Manila. Juris sc The third option of the plaintiff under Art 28 (1) of the Warsaw Convention e.g., to sue in the place of business of the carrier wherein the contract was made, is therefore, Manila, and Philippine courts are clothed with jurisdiction over this case. We note that while this case was filed in Cebu and not in Manila the issue of venue is no longer an issue as the petitioner is deemed to have waived it when it presented evidence before the trial court. The issue raised in SP No. 31452 which is whether or not the trial court committed grave abuse of discretion in ordering the deposition of the petitioners security officer taken in Geneva to be stricken off the record for failure of the said security officer to appear before the Philippine consul in Geneva to answer the cross-interrogatories filed by the private respondent does not have to be resolved. The subsequent appearance of the said security officer before the Philippine consul in Geneva on September 19, 1994 and the answer to the cross-interrogatories propounded by the private respondent was transmitted to the trial court by the Philippine consul in Geneva on September 23, 1994[15] should be deemed as full compliance with the requisites of the right of the private respondent to cross-examine the petitioners witness. The deposition filed by the petitioner should be reinstated as part of the evidence and considered together with the answer to the cross-interrogatories. WHEREFORE, the judgment of the appellate court in CA-G.R. SP No. 30946 is affirmed. The case is ordered remanded to the court of origin for further proceedings. The decision of the appellate court in CA-G.R. SP. No. 31452 is set aside. The deposition of the petitioners security officer is reinstated as part of the evidence. Misj uris SO ORDERED. UNITED AIRLINES, petitioner, vs. WILLIE J. UY, respondent. DECISION BELLOSILLO, J.: UNITED AIRLINES assails in this petition for review on certiorari under Rule 45 the 29 August 1995 Decision of the Court of Appeals in CA-G.R. CV No. 39761 which reversed the 7 August 1992 order issued by the trial court in Civil Case No. Q-92-12410[1] granting petitioner's motion to dismiss based on prescription of cause of action. The issues sought to be resolved are whether the notice of ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 74

appeal to the appellate court was timely filed, and whether Art. 29 of the Warsaw Convention[2] should apply to the case at bar. On 13 October 1989 respondent Willie J. Uy, a revenue passenger on United Airlines Flight No. 819 for the San Francisco - Manila route, checked in together with his luggage one piece of which was found to be overweight at the airline counter. To his utter humiliation, an employee of petitioner rebuked him saying that he should have known the maximum weight allowance to be 70 kgs. per bag and that he should have packed his things accordingly. Then, in a loud voice in front of the milling crowd, she told respondent to repack his things and transfer some of them from the overweight luggage to the lighter ones. Not wishing to create further scene, respondent acceded only to find his luggage still overweight. The airline then billed him overweight charges which he offered to pay with a miscellaneous charge order (MCO) or an airline pre-paid credit. However, the airlines employee, and later its airport supervisor, adamantly refused to honor the MCO pointing out that there were conflicting figures listed on it. Despite the explanation from respondent that the last figure written on the MCO represented his balance, petitioners employees did not accommodate him. Faced with the prospect of leaving without his luggage, respondent paid the overweight charges with his American Express credit card. Respondents troubles did not end there. Upon arrival in Manila, he discovered that one of his bags had been slashed and its contents stolen. He particularized his losses to be around US $5,310.00. In a letter dated 16 October 1989 respondent bewailed the insult, embarrassment and humiliating treatment he suffered in the hands of United Airlines employees, notified petitioner of his loss and requested reimbursement thereof. Petitioner United Airlines, through Central Baggage Specialist Joan Kroll, did not refute any of respondents allegations and mailed a check representing the payment of his loss based on the maximum liability of US $9.70 per pound. Respondent, thinking the amount to be grossly inadequate to compensate him for his losses, as well as for the indignities he was subjected to, sent two (2) more letters to petitioner airline, one dated 4 January 1990 through a certain Atty. Pesigan, and another dated 28 October 1991 through Atty. Ramon U. Ampil demanding an out-of-court settlement of P1,000,000.00. Petitioner United Airlines did not accede to his demands. Consequently, on 9 June 1992 respondent filed a complaint for damages against United Airlines alleging that he was a person of good station, sitting in the board of directors of several top 500 corporations and holding senior executive positions for such similar firms;[3] that petitioner airline accorded him ill and shabby treatment to his extreme embarrassment and humiliation; and, as such he should be paid moral damages of at least P1,000,000.00, exemplary damages of at leastP500,000.00, plus attorney's fees of at least P50,000.00. Similarly, he alleged that the damage to his luggage and its stolen contents amounted to around $5,310.00, and requested reimbursement therefor. United Airlines moved to dismiss the complaint on the ground that respondents cause of action had prescribed, invoking Art. 29 of the Warsaw Convention which provides Art. 29 (1) The right to damages shall be extinguished if an action is not brought within two (2) years, reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the transportation stopped.

(2) The method of calculating the period of limitation shall be determined by the law of the court to which the case is submitted. Respondent countered that par. (1) of Art. 29 of the Warsaw Convention must be reconciled with par. (2) thereof which states that "the method of calculating the period of limitation shall be determined by the law of the court to which the case is submitted." Interpreting thus, respondent noted that according to Philippine laws the prescription of actions is interrupted "when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor."[4] Since he made several demands upon United Airlines: first, through his personal letter dated 16 October 1989; second, through a letter dated 4 January 1990 from Atty. Pesigan; and, finally, through a letter dated 28 October 1991 written for him by Atty. Ampil, the two (2)-year period of limitation had not yet been exhausted. On 2 August 1992 the trial court ordered the dismissal of the action holding that the language of Art. 29 is clear that the action must be brought within two (2) years from the date of arrival at the destination. It held that although the second paragraph of Art. 29 speaks of deference to the law of the local court in "calculating the period of limitation," the same does not refer to the local forums rules in interrupting the prescriptive period but only to the rules of determining the time in which the action may be deemed commenced, and within our jurisdiction the action shall be deemed "brought" or commenced by the filing of a complaint. Hence, the trial court concluded that Art. 29 excludes the application of our interruption rules. Respondent received a copy of the dismissal order on 17 August 1992. On 31 August 1992, or fourteen (14) days later, he moved for the reconsideration of the trial courts order. The trial court denied the motion and respondent received copy of the denial order on 28 September 1992. Two (2) days later, on 1 October 1992 respondent filed his notice of appeal. United Airlines once again moved for the dismissal of the case this time pointing out that respondents fifteen (15)-day period to appeal had already elapsed. Petitioner argued that having used fourteen (14) days of the reglementary period for appeal, respondent Uy had only one (1) day remaining to perfect his appeal, and since he filed his notice of appeal two (2) days later, he failed to meet the deadline. In its questioned Decision dated 29 August 1995[5] the appellate court gave due course to the appeal holding that respondents delay of two (2) days in filing his notice of appeal did not hinder it from reviewing the appealed order of dismissal since jurisprudence dictates that an appeal may be entertained despite procedural lapses anchored on equity and justice. On the applicability of the Warsaw Convention, the appellate court ruled that the Warsaw Convention did not preclude the operation of the Civil Code and other pertinent laws. Respondents failure to file his complaint within the two (2)-year limitation provided in the Warsaw Convention did not bar his action since he could still hold petitioner liable for breach of other provisions of the Civil Code which prescribe a different period or procedure for instituting an action. Further, under Philippine laws, prescription of actions is interrupted where, among others, there is a written extrajudicial demand by the creditors, and since respondent Uy sent several demand letters to petitioner United Airlines, the running of the two (2)-year prescriptive period was in effect

suspended. Hence, the appellate court ruled that respondents cause of action had not yet prescribed and ordered the records remanded to the Quezon City trial court for further proceedings. Petitioner now contends that the appellate court erred in assuming jurisdiction over respondent's appeal since it is clear that the notice of appeal was filed out of time. It argues that the courts relax the stringent rule on perfection of appeals only when there are extraordinary circumstances, e.g., when the Republic stands to lose hundreds of hectares of land already titled and used for educational purposes; when the counsel of record was already dead; and wherein appellant was the owner of the trademark for more than thirty (30) years, and the circumstances of the present case do not compare to the above exceptional cases.[6] Section 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that "a party may appeal by certiorari, from a judgment of the Court of Appeals, by filing with the Supreme Court a petition for certiorari, within fifteen (15) days from notice of judgment or of the denial of his motion for reconsideration filed in due time x x x x" This Rule however should not be interpreted as "to sacrifice the substantial right of the appellant in the sophisticated altar of technicalities with impairment of the sacred principles of justice."[7] It should be borne in mind that the real purpose behind the limitation of the period of appeal is to forestall or avoid an unreasonable delay in the administration of justice. Thus, we have ruled that delay in the filing of a notice of appeal does not justify the dismissal of the appeal where the circumstances of the case show that there is no intent to delay the administration of justice on the part of appellant's counsel,[8] or when there are no substantial rights affected,[9] or when appellant's counsel committed a mistake in the computation of the period of appeal, an error not attributable to negligence or bad faith.[10] In the instant case, respondent filed his notice of appeal two (2) days later than the prescribed period. Although his counsel failed to give the reason for the delay, we are inclined to give due course to his appeal due to the unique and peculiar facts of the case and the serious question of law it poses. In the now almost trite but still good principle, technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration.[11] Petitioner likewise contends that the appellate court erred in ruling that respondent's cause of action has not prescribed since delegates to the Warsaw Convention clearly intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar to suit and not to be made subject to the various tolling provisions of the laws of the forum. Petitioner argues that in construing the second paragraph of Art. 29 private respondent cannot read into it Philippine rules on interruption of prescriptive periods and state that his extrajudicial demand has interrupted the period of prescription.[12] American jurisprudence has declared that "Art. 29 (2) was not intended to permit forums to consider local limitation tolling provisions but only to let local law determine whether an action had been commenced within the two-year period, since the method of commencing a suit varies from country to country."[13] Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored, depending on the peculiar facts presented by each case.[14] Thus, we have ruled that the Convention's provisions do not regulate or exclude liability for other breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of damage.[15] Neither may the Convention be invoked to justify the disregard of ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 75

some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set by said Convention.[16] Likewise, we have held that the Convention does not preclude the operation of the Civil Code and other pertinent laws.[17] It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier's employees is found or established.[18] Respondent's complaint reveals that he is suing on two (2) causes of action: (a) the shabby and humiliating treatment he received from petitioner's employees at the San Francisco Airport which caused him extreme embarrassment and social humiliation; and, (b) the slashing of his luggage and the loss of his personal effects amounting to US $5,310.00. While his second cause of action - an action for damages arising from theft or damage to property or goods - is well within the bounds of the Warsaw Convention, his first cause of action -an action for damages arising from the misconduct of the airline employees and the violation of respondent's rights as passenger - clearly is not. Consequently, insofar as the first cause of action is concerned, respondent's failure to file his complaint within the two (2)-year limitation of the Warsaw Convention does not bar his action since petitioner airline may still be held liable for breach of other provisions of the Civil Code which prescribe a different period or procedure for instituting the action, specifically, Art. 1146 thereof which prescribes four (4) years for filing an action based on torts. As for respondent's second cause of action, indeed the travaux preparatories of the Warsaw Convention reveal that the delegates thereto intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar to suit and not to be made subject to the various tolling provisions of the laws of the forum. This therefore forecloses the application of our own rules on interruption of prescriptive periods. Article 29, par. (2), was intended only to let local laws determine whether an action had been commenced within the two (2)-year period, and within our jurisdiction an action shall be deemed commenced upon the filing of a complaint. Since it is indisputable that respondent filed the present action beyond the two (2)-year time frame his second cause of action must be barred. Nonetheless, it cannot be doubted that respondent exerted efforts to immediately convey his loss to petitioner, even employed the services of two (2) lawyers to follow up his claims, and that the filing of the action itself was delayed because of petitioner's evasion. In this regard, Philippine Airlines, Inc. v. Court of Appeals[19] is instructive. In this case of PAL, private respondent filed an action for damages against petitioner airline for the breakage of the front glass of the microwave oven which she shipped under PAL Air Waybill No. 0-79-1013008-3. Petitioner averred that, the action having been filed seven (7) months after her arrival at her port of destination, she failed to comply with par. 12, subpar. (a) (1), of the Air Waybill which expressly provided that the person entitled to delivery must make a complaint to the carrier in writing in case of visible damage to the goods, immediately after discovery of the damage and at the latest within 14 days from receipt of the goods. Despite non-compliance therewith the Court held that by private respondent's immediate submission of a formal claim to petitioner, which however was not immediately entertained as it was referred from one employee to another, she was deemed to have substantially complied with the requirement. The Court noted that with private respondent's own zealous efforts in pursuing her claim it was clearly not her fault that the letter of demand

for damages could only be filed, after months of exasperating follow-up of the claim, on 13 August 1990, and that if there was any failure at all to file the formal claim within the prescriptive period contemplated in the Air Waybill, this was largely because of the carrier's own doing, the consequences of which could not in all fairness be attributed to private respondent. In the same vein must we rule upon the circumstances brought before us. Verily, respondent filed his complaint more than two (2) years later, beyond the period of limitation prescribed by the Warsaw Convention for filing a claim for damages. However, it is obvious that respondent was forestalled from immediately filing an action because petitioner airline gave him the runaround, answering his letters but not giving in to his demands. True, respondent should have already filed an action at the first instance when his claims were denied by petitioner but the same could only be due to his desire to make an out-of-court settlement for which he cannot be faulted. Hence, despite the express mandate of Art. 29 of the Warsaw Convention that an action for damages should be filed within two (2) years from the arrival at the place of destination, such rule shall not be applied in the instant case because of the delaying tactics employed by petitioner airline itself. Thus, private respondent's second cause of action cannot be considered as time-barred under Art. 29 of the Warsaw Convention. WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside the appealed order of the trial court granting the motion to dismiss the complaint, as well as its Resolution denying reconsideration, is AFFIRMED. Let the records of the case be remanded to the court of origin for further proceedings taking its bearings from this disquisition. SO ORDERED. V. DAMAGES PEDRO R. DAVILA and PRECIOSA vs. PHILIPPINE AIR LINES, defendant-appellant. C. TIRO, plaintiffs-appellants,

(2) For the loss of the earning capacity of the deceased at the rate of P12,000.00 per annum for five (5) years in the amount of Sixty Thousand Pesos. (P60,000.00); (3) For moral damages in favor of the plaintiffs Ten Thousand Pesos (P10,000.00); (4) For exemplary damages in the amount of Ten Thousand Pesos (P10,000.00); (5) For actual damages the amount of Five Thousand Pesos (P5,000.00) broken down to as follows: A rolex watch valued at P600.00; a pistol worth P300.00; burial expenses P600.00; for the lot and the mausoleum P3,500.00; (6) For Attorney's fees the amount of Ten Thousand Pesos (P10,000.00) or a total amount of One Hundred and One Thousand Pesos (P101,000.00) To pay the costs of this proceedings. Both parties appealed directly to this Court in view of the aggregate of the amounts awarded, the judgment having been rendered before the effectivity of Rep. Act No. 5440. In this appeal the plaintiffs seek an increase in said amounts, and the defendant, complete exoneration from, or at least mitigation of, liability. The case arose from the tragic crash of a passenger plane of the defendant which took the lives of all its crew and passengers. The plane, identified as PIC133, was a DC-3 type of aircraft, manufactured in 1942 and acquired by the defendant in 1948. It had flown almost 18,000 hours at the time of its ill-fated flight. Despite its age, however, it had been certified as airworthy by the Civil Aeronautics Administration. On November 23, 1960, at 5:30 in the afternoon, it took off from the Manduriao Airport, Iloilo, on its way to Manila, with 33 people on board, including the plane's complement. It did not reach its destination, but crashed at Mt. Baco, Mindoro, one hour and fifteen minutes after take-off. A massive search was undertaken by the defendant and by other parties as soon as it was realized that the plane's arrival in Manila was overdue. The plaintiffs, parents of Pedro T. Davila, Jr., who was one of the passengers, had no definite news of what had happened to their son, getting what information they could only from conflicting newspaper reports, until they received, on December 19, 1960, a letter of condolence from the defendant's president Andres Soriano, informing them that their son had died in the crash. And it was only on December 29 that his body was recovered an taken back to Iloilo. The issues before the trial court, and now before Us in this appeal, are whether or not the defendant is liable for violation of its contract of carriage and if so, for how much. The provisions of the Civil Code on this substantive question of liability are clear and explicit. Article 1733 binds common carriers, "from the nature of their business and by reasons of public policy, ... to observe extraordinary diligence in the vigilance ... for the safety of the passengers transported by them according to all the circumstances of each case." Article 1755 establishes the standard of care required of a common carrier, which is, "to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." Article 1756 fixes the burden of proof by providing that "in case ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 76

Dizon, De Guzman and Vitug and Pedro R. Davila for plaintiffs-appellants. Siguion Reyna, Montecillo, Belo and Ongsiako for defendant-appellant.

MAKALINTAL, J.: In Civil Case No. 5728 of the Court of First Instance of Iloilo (Pedro R. Davila and Preciosa C. Tirol, plaintiffs, vs. Philippine Air Lines, Inc., defendant) judgment was rendered ordering the defendant to pay the plaintiffs various sums of money, as follows: (1) For the death of Pedro T. Davila, Jr. the amount of P6,000.00;

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." Lastly, Article 1757 states that "the responsibility of a common carrier for the safety of passengers ... cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise." The route prescribed by the Civil Aeronautics Administration for the flight of plane PI-C113 in the afternoon of November 23, 1960 was Iloilo-RomblonManila, the latter stage, denominated as airway "Amber I," being a straight lane from Romblon to Manila. The prescribed elevation of the flight was 6,000 ft. The plane reported its position after take-off and again when it was abeam the Roxas homer. However, it did not intercept airway "Amber I" over Romblon as it was supposed to do, and the pilot did not give his position then although Romblon was a compulsory checking point. The fact was that the plane had deviated from the prescribed route by 32 miles to the west when it crashed at Mt. Baco. The reading of the altimeter of the plane when its wreckage was found was 6,800 ft. There is a suggestion that in the course of the flight between Romblon and Mindoro the aircraft was drifted westward by the cross-winds then blowing in the region. The defendant, however, has not given a definite explanation as to why, if such was the case, the pilot failed to make the necessary correction in his flight to compensate for the drift. According to the defendant's witness, Maj. Mijares, Chief of the Aviation Safety Division of the Civil Aeronautics Administration and Chairman of the CAA Investigating Committee, there was a navigational error, to which several factors contributed: "the weather observation at that time from the Weather Bureau was not so good between Mt. Baco and Romblon and the wind aloft was quite strong, which would be also one of the causes for the drifting of the aircraft; and the other strong probability, I would say, would be the malfunction of the aircraft's navigational instrument." He further explained that "a cross-wind can drift the plane if the pilot will not make the necessary correction, if his navigational instrument is malfunctioning and the visual reference outside the aircraft could not make the necessary corrections." There is nothing in the testimony of Maj. Mijares to show just how strong the cross-winds were in the region at the time, although in the investigation of the accident by the Senate Committee on transportation there was testimony that the cross-winds had a velocity of either 20 to 25 knots or 25 to 35 knots an hour. Considering the relatively short distance from Romblon to Mt. Baco and the brief span of time it would take to fly that distance, cross-winds with the velocity stated could not have possibly deviated the plane by as much as 32 miles. The defendant points out that the navigational instrument on board the plane consisted of two (2) sets of automatic direction finders (ADF) which, when found after the crash, showed a reading that the aircraft was heading north, which was the proper flight direction. This point, however, is of no vital significance in this case since it does not explain why the aircraft was 32 miles off its prescribed route in the first place. It is suggested that the pilot did not notice the drift of his plane because of poor visibility due to thick clouds, which prevented him from making the corresponding correction on the basis of visual references to the terrain outside. But according to Maj. Mijares himself the report from the Weather Bureau at the time showed that visibility was 15 miles between Romblon and Mt. Baco and that the clouds from 2,700 to 7,000 ft. elevation

were "scattered." And the profile of the probable weather cross-section along airway "Amber I" during the flight (Exh. 33-A) shows that at 6,000 ft. the airlane was clear and free of clouds. The suggestion therefore that the pilot was practically flying blind and consequently failed to notice the drift of the aircraft is not justified by the evidence. Indeed even the investigating team of the defendant under the chairmanship of Capt. Jaime Manzano concluded in its report that "based on the limited evidences available, the board is of the opinion that the probable cause was the inability of the pilot to intersect airway "Amber I" over Romblon and to maintain track within its designated airway lane for reasons unknown." What is undisputed therefore is that the pilot did not follow the route prescribed for his flight, at least between Romblon and Manila. Since up to that point over Romblon, where he was supposed to intersect airway "Amber I" the weather was clear, the most reasonable conclusion is that his failure to do so was intentional, and that he probably wanted to fly on a straight line to Manila. It was a violation of air-craft traffic rules to which, under the circumstances, the accident may be directly attributable. In any case, absent a satisfactory explanation on the part of the defendant as to how and why the accident occurred, the presumption is that it was at fault, under Article 1756 of the Civil Code. The next question relates to the amount of damages that should be awarded to the plaintiffs, parents of the deceased. The trial court fixed the indemnity for his death in the amount of P6,000.00. Pursuant to current jurisprudence on the point it should be increased to P12,000.00. 1 The deceased was employed as manager of a radio station 2, from which he was earning P8,400.00 a year, consisting of a monthly salary of P600.00 and allowance of P100.00. As a lawyer and junior partner of his father in the law office, he had an annual income of P3,600.00. From farming he was getting an average of P3,000.00. All in all therefore the deceased had gross earnings of P15,000.00 a year. According to Article 2206, paragraph (1), of the Civil Code, "the defendant shall be liable for the loss of the earning capacity of the deceased and indemnity shall be paid to the heirs of the latter." This Article, while referring to "damages for death caused by crime or quasi-delict," is expressly made applicable by Article 1764 "to the death of a passenger caused by the breach of contract by a common carrier." The deceased, Pedro Davila, Jr., was single and 30 years of age when he died. At that age one's normal life expectancy is 33-1/3 years, according to the formula (2/3 x [80-30]) adopted by this Court in the case of Villa Rey Transit, Inc. vs. Court of Appeals 3 on the basis of the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. However, although the deceased was in relatively good health, his medical history shows that he had complained of and been treated for such ailments as backaches, chest pains and occasional feelings of tiredness. It is reasonable to make an allowance for these circumstances and consider, for purposes of this case, a reduction of his life expectancy to 25 years.

In the same case of Villa Revenue Transit this Court stated: "... earning capacity, as an element of damages to one's estate for his death by wrongful act is necessarily his net earning capacity or his capacity to acquire money, less the necessary expense for his own living. Stated otherwise, the amount recoverable is not loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses." Considering the fact that the deceased was getting his income from three (3) different sources, namely from managing a radio station, from law practice and from farming, the expenses incidental to the generation of such income were necessarily more than if he had only one source. Together with his living expenses, a deduction of P600.00 a month, or P7,200.00 a year, seems to Us reasonable, leaving a net yearly income of P7,800.00. This amount, multiplied by 25 years, or P195,000.00 is the amount which should be awarded to the plaintiffs in this particular respect. Actual losses sustained consist of the following, as found by the trial court: "Rolex Watch P600.00; pistol P300.00; Burial Expenses P600.00; and cost of cemetery lot and mausoleum - P3,500.00." Under Article 2206, in relation to Article 1764, of the Civil Code, the parents of the deceased are entitled to moral damages for their mental anguish. The trial court awarded P10,000.00 in this concept, and We find no justification to change the award, considering the long period of uncertainty and suffering the plaintiffs underwent from November 23, when the plane crash occurred, to December 19, when they received a letter from the defendant's president confirming the death of their son, and again to the following December 29, when his body was finally recovered and taken back to them. With respect to the award of P10,000.00 as exemplary damages, it is Our opinion that the same should be eliminated. According to Article 2232 of the Civil Code, in contracts and quasi-contracts the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The failure of the defendant here to exercise extraordinary diligence, as required by law, does not amount to anyone of the circumstances contemplated in the said provision. The trial court has awarded attorney's fees of P10,000.00. We do not find this award groundless or the amount thereof unreasonable. The total of the different items above enumerated is P232,000.00. The judgment of the court a quo is therefore modified accordingly and the defendant is ordered to pay the said amount to the plaintiffs, with legal interest thereon from the finality of this judgment. With costs against the defendant. Concepcion, C.J., Zaldivar, Castro, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ., concur. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 77

KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., otherwise known as KLM ROYAL DUTCH AIRLINES,petitioner, vs. THE HONORABLE COURT OF APPEALS, CONSUELO T. MENDOZA and RUFINO T. MENDOZA, respondents. Picazo, Agcaoili, Santayana, Reyes and Tayao for petitioner. Bengzon, Villegas, Zarraga, Narciso and Cudala for respondents.

Lingus of seat reservations on flight 861. After meandering in London, Paris and Lisbon, the foursome finally took wing to Barcelona for their trip to Lourdes, France. In the afternoon of June 22, 1965 the respondents with their wards went to the Barcelona airport to take their plane which arrived at 4:00 o'clock. At the airport, the manager of Aer Lingus directed the respondents to check in. They did so as instructed and were accepted for passage. However, although their daughter and niece were allowed to take the plane, the respondents were off-loaded on orders of the Aer Lingus manager who brusquely shoved them aside with the aid of a policeman and who shouted at them, "Conos! Ignorantes Filipinos!" Mrs. Mendoza later called up the manager of Aer Lingus and requested that they provide her and her husband means to get to Lourdes, but the request was denied. A stranger, however, advised them to take a train, which the two did; despite the third class accommodations and lack of food service, they reached Lourdes the following morning. During the train trip the respondents had to suffer draft winds as they wore only minimum clothing, their luggage having gone ahead with the Aer Lingus plane. They spent $50 for that train trip; their plane passage was worth $43.35. On March 17, 1966 the respondents, referring to KLM as the principal of Aer Lingus, filed a complaint for damages with the Court of First Instance of Manila arising from breach of contract of carriage and for the humiliating treatment received by them at the hands of the Aer Lingus manager in Barcelona. After due hearing, the trial court awarded damages to the respondents as follows: $43.35 or its peso equivalent as actual damages, P10,000 as moral damages, P5,000 as exemplary damages, and P5,000 as attorney's fees, and expenses of litigation. Both parties appealed to the Court of Appeals. The KLM sought complete exoneration; the respondents prayed for an increase in the award of damages. In its decision of August 14, 1969 the Court of Appeals decreed as follows: "Appellant KLM is condemned to pay unto the plaintiffs the sum of $43.35 as actual damages; P50,000 as moral damages; and P6,000 as attorney's fees and costs." Hence, the present recourse by the KLM. The KLM prays for exculpation from damages on the strength of the following particulars which were advanced to but rejected by the Court of Appeals: (a) The air tickets issued to the respondents stipulate that carriage thereunder is subject to the "Convention for the Unification of Certain Rules Relating to International Transportation by Air," otherwise known as the "Warsaw Convention," to which the Philippine Government is a party by adherence, and which pertinently provides. 1 ART. 30. (1) In the case of transportation to be performed by various successive carriers and failing within the definition set out in the third paragraph of Article I, each carrier who accepts passengers, baggage, or goods shall be subject to the rules set out in the convention, and shall be deemed to be one of the contracting

parties to the contract of transportation insofar as the contract deals with that part of transportation which is performed under his supervision. 2 (2) In the case of transportation of this nature, the passenger or his representative can take action only against the carrier who performed the transportation during which the accident or the delay occured, save in the case where, by express agreement, the first carrier has assumed liability for the whole journey. (emphasis supplied) (b) On the inside front cover of each ticket the following appears under the heading "Conditions of Contract": 1 ... (a) Liability of carrier for damages shall be limited to occurrences on its own line, except in the case of checked baggage as to which the passenger also has a right of action against the first or last carrier. A carrier issuing a ticket or checking baggage for carriage over the lines of others does so only as agent.. (c) All that the KLM did after the respondents completed their arrangements with the travel agency was to request for seat reservations among the airlines called for by the itinerary submitted to the KLM and to issue tickets for the entire flight as a ticket-issuing agent. The respondents rebut the foregoing arguments, thus: (a) Article 30 of the Warsaw Convention has no application in the case at bar which involves, not an accident or delay, but a willful misconduct on the part of the KLM's agent, the Aer Lingus. Under article 25 of the same Convention the following is prescribed: ART. 25. (1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the damage is caused by his willful misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to willful misconduct. 3 (2) Similarly, the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused under the same circumstances by any agent of the carrier acting within the scope of his employment. (emphasis by respondents) (b) The condition in their tickets which purportedly excuse the KLM from liability appears in very small print, to read which, as found by the Court of Appeals, one has practically to use a magnifying glass. (c) The first paragraph of the "Conditions of Contract" appearing identically on the KLM tickets issued to them idubitably shows that their contract was one of continuous air transportation around the world: 1 ... "carriage" includes the air carrier issuing this ticket and all carriers that carry or undertake to carry the passenger or his baggage hereunder or perform any ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 78

CASTRO, J.: In this appeal by way of certiorari the Koninklijke Luchtvaart Maatschappij N.V., otherwise known as the KLM Royal Dutch Airlines (hereinafter referred to as the KLM) assails the award of damages made by the Court of Appeals in CA-G.R. 40620 in favor of the spouses Rufino T. Mendoza and Consuelo T. Mendoza (hereinafter referred to as the respondents).1wph1.t Sometime in March 1965 the respondents approached Tirso Reyes, manager of a branch of the Philippine Travel Bureau, a travel agency, for consultations about a world tour which they were intending to make with their daughter and a niece. Reyes submitted to them, after preliminary discussions, a tentative itinerary which prescribed a trip of thirty-five legs; the respondents would fly on different airlines. Three segments of the trip, the longest, would be via KLM. The respondents expressed a desire to visit Lourdes, France, and discussed with Reyes two alternate routes, namely, Paris to Lourdes and Barcelona to Lourdes. The respondents decided on the Barcelona-Lourdes route with knowledge that only one airline, Aer Lingus, serviced it. The Philippine Travel Bureau to which Reyes was accredited was an agent for international air carriers which are members of the International Air Transport Association, popularly known as the "IATA," of which both the KLM and the Aer Lingus are members. After about two weeks, the respondents approved the itinerary prepared for them, and asked Reyes to make the necessary plane reservations. Reyes went to the KLM, for which the respondents had expressed preference. The KLM thereafter secured seat reservations for the respondents and their two companions from the carriers which would ferry them throughout their trip, with the exception of Aer Lingus. When the respondents left the Philippines (without their young wards who had enplaned much earlier), they were issued KLM tickets for their entire trip. However, their coupon for the Aer Lingus portion (Flight 861 for June 22, 1965) was marked "RQ" which meant "on request". After sightseeing in American and European cities (they were in the meantime joined by their two young companions), the respondents arrived in Frankfurt, Germany. They went to a KLM office there and obtained a confirmation from Aer

other service incidental to such air carriage... Carriage to be performed hereunder by several successive carrier is regarded as a single operation. (d) The contract of air transportation was exclusively between the respondents and the KLM, the latter merely endorsing its performance to other carriers, like Aer Lingus, as its subcontractors or agents, as evidenced by the passage tickets themselves which on their face disclose that they are KLM tickets. Moreover, the respondents dealt only with KLM through the travel agency. 1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to transport the respondents to their planned and contracted destination. 2. The argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus because of the provision printed on the respondents' tickets expressly limiting the KLM's liability for damages only to occurrences on its own lines is unacceptable. As noted by the Court of Appeals that condition was printed in letters so small that one would have to use a magnifying glass to read the words. Under the circumstances, it would be unfair and inequitable to charge the respondents with automatic knowledge or notice of the said condition so as to preclude any doubt that it was fairly and freely agreed upon by the respondents when they accepted the passage tickets issued to them by the KLM. As the airline which issued those tickets with the knowledge that the respondents would be flown on the various legs of their journey by different air carriers, the KLM was chargeable with the duty and responsibility of specifically informing the respondents of conditions prescribed in their tickets or, in the very least, to ascertain that the respondents read them before they accepted their passage tickets. A thorough search of the record, however, inexplicably fails to show that any effort was exerted by the KLM officials or employees to discharge in a proper manner this responsibility to the respondents. Consequently, we hold that the respondents cannot be bound by the provision in question by which KLM unilaterally assumed the role of a mere ticket-issuing agent for other airlines and limited its liability only to untoward occurrences on its own lines. 3. Moreover, as maintained by the respondents and the Court of Appeals, the passage tickets of the respondents provide that the carriage to be performed thereunder by several successive carriers "is to be regarded as a single operation," which is diametrically incompatible with the theory of the KLM that the respondents entered into a series of independent contracts with the carriers which took them on the various segments of their trip. This position of KLM we reject. The respondents dealt exclusively with the KLM which issued them tickets for their entire trip and which in effect guaranteed to them that they would have sure space in Aer Lingus flight 861. The respondents, under that assurance of the internationally prestigious KLM, naturally had the right to expect that their tickets would be honored by Aer Lingus to which, in the legal sense, the KLM had indorsed and in effect guaranteed the performance of its principal engagement to carry out the respondents' scheduled itinerary previously and mutually agreed upon between the parties.

4. The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to transport the respondents on the Barcelona-Lourdes segment of their itinerary. It is but just and in full accord with the policy expressly embodied in our civil law which enjoins courts to be more vigilant for the protection of a contracting party who occupies an inferior position with respect to the other contracting party, that the KLM should be held responsible for the abuse, injury and embarrassment suffered by the respondents at the hands of a supercilious boor of the Aer Lingus. ACCORDINGLY, the judgment of the Court of Appeals dated August 14, 1969 is affirmed, at KLM's cost. Makalintal, C.J., Makasiar, Esguerra and Muoz Palma, JJ., concur. UNITED AIRLINES, INC., petitioner, vs. COURT OF APPEALS, ANICETO FONTANILLA, in his personal capacity and in behalf of his minor son MYCHAL ANDREW FONTANILLA respondents. DECISION KAPUNAN, J.: On March 1, 1989, private respondent Aniceto Fontanilla purchased from petitioner United Airlines, through the Philippine Travel Bureau in Manila, three (3) Visit the U.S.A. tickets for himself, his wife and his minor son Mychal for the following routes: (a) San Francisco to Washington (15 April 1989); (b) Washington to Chicago (25 April 1989); (c) Chicago to Los Angeles (29 April 1989); (d) Los Angeles to San Francisco (01 May 1989 for petitioners wife and 05 May 1989 for petitioner and his son).[1] All flights had been confirmed previously by United Airlines.[2] The Fontanillas proceeded to the United States as planned, where they used the first coupon from San Francisco to Washington. On April 24, 1989, Aniceto Fontanilla bought two (2) additional coupons each for himself, his wife and his son from petitioner at its office in Washington Dulles Airport. After paying the penalty for rewriting their tickets, the Fontanillas were issued tickets with corresponding boarding passes with the words CHECK-IN REQUIRED, for United Airlines Flight No. 1108, set to leave from Los Angeles to San Francisco at 10:30 a.m. on May 5, 1989.[3] The cause of the non-boarding of the Fontanillas on United Airlines Flight No. 1108 makes up the bone of contention of this controversy. Private respondents' version is as follows:

Aniceto Fontanilla and his son Mychal claim that on May 5, 1989, upon their arrival at the Los Angeles Airport for their flight, they proceeded to United Airlines counter where they were attended by an employee wearing a nameplate bearing the name LINDA. Linda examined their tickets, punched something into her computer and then told them that boarding would be in fifteen minutes.[4] When the flight was called, the Fontanillas proceeded to the plane. To their surprise, the stewardess at the gate did not allow them to board the plane, as they had no assigned seat numbers. They were then directed to go back to the check-in counter where Linda subsequently informed them that the flight had been overbooked and asked them to wait.[5] The Fontanillas tried to explain to Linda the special circumstances of their visit. However, Linda told them in arrogant manner, So what, I can not do anything about it.[6] Subsequently, three other passengers with Caucasian features were graciously allowed to board, after the Fontanillas were told that the flight had been overbooked.[7] The plane then took off with the Fontanillas baggage in tow, leaving them behind.[8] The Fontanillas then complained to Linda, who in turn gave them an ugly stare and rudely uttered, Its not my fault. Its the fault of the company. Just sit down and wait.[9] When Mr. Fontanilla reminded Linda of the inconvenience being caused to them, she bluntly retorted, Who do you think you are? You lousy Flips are good for nothing beggars. You always ask for American aid. After which she remarked Dont worry about your baggage. Anyway there is nothing in there. What are you doing here anyway? I will report you to immigration. You Filipinos should go home.[10] Such rude statements were made in front of other people in the airport causing the Fontanillas to suffer shame, humiliation and embarrassment. The chastening situation even caused the younger Fontanilla to break into tears.[11] After some time, Linda, without any explanation, offered the Fontanillas $50.00 each. She simply said Take it or leave it. This, the Fontanillas declined.[12] The Fontanillas then proceeded to the United Airlines customer service counter to plead their case. The male employee at the counter reacted by shouting that he was ready for it and left without saying anything.[13] The Fontanillas were not booked on the next flight, which departed for San Francisco at 11:00 a.m. It was only at 12:00 noon that they were able to leave Los Angeles on United Airlines Flight No. 803. Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on May 5, 1989. According to United Airlines, the Fontanillas did not initially go to the check-in counter to get their seat assignments for UA Flight 1108. They instead proceeded to join the queue boarding the aircraft without first securing their seat assignments as required in their ticket and boarding passes. Having no seat assignments, the stewardess at the door of the plane instructed them to go to the check-in counter. When the Fontanillas proceeded to the check-in counter, Linda Allen, the United Airlines Customer Representative at the counter ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 79

informed them that the flight was overbooked. She booked them on the next available flight and offered them denied boarding compensation. Allen vehemently denies uttering the derogatory and racist words attributed to her by the Fontanillas.[14] The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages before the Regional Trial Court of Makati. After trial on the merits, the trial court rendered a decision, the dispositive portion of which reads as follows: WHEREFORE, judgment is rendered dismissing the complaint. The counterclaim is likewise dismissed as it appears that plaintiffs were not actuated by legal malice when they filed the instant complaint.[15] On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate court found that there was an admission on the part of United Airlines that the Fontanillas did in fact observe the check-in requirement. It ruled further that even assuming there was a failure to observe the check-in requirement, United Airlines failed to comply with the procedure laid down in cases where a passenger is denied boarding. The appellate court likewise gave credence to the claim of Aniceto Fontanilla that the employees of United Airlines were discourteous and arbitrary and, worse, discriminatory. In light of such treatment, the Fontanillas were entitled to moral damages. The dispositive portion of the decision of the respondent Court of Appeals dated 29 September 1995, states as follows: WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby REVERSED and SET ASIDE, and a new judgment is entered ordering defendantappellee to pay plaintiff-appellant the following: a) P200,000.00 as moral damages; b) P200,000.00 as exemplary damages; c) P50, 000.00 as attorneys fees. No pronouncement as to costs. SO ORDERED.[16] Petitioner United Airlines now comes to this Court raising the following assignment of errors: I RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE TRIAL COURT WAS WRONG IN FAILING TO CONSIDER THE ALLEGED ADMISSION THAT PRIVATE RESPONDENT OBSERVED THE CHECK-IN REQUIREMENT. II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENTS FAILURE TO CHECK-IN WILL NOT DEFEAT HIS CLAIMS BECAUSE THE DENIED BOARDING RULES WERE NOT COMPLIED WITH. III RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO MORAL DAMAGES OF P200, 000. IV RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO EXEMPLARY DAMAGES OF P200,000. V RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO ATTORNEYS FEES OF P50, 000.[17] On the first issue raised by the petitioner, the respondent Court of Appeals ruled that when Rule 9, Section 1 of the Rules of Court,[18] there was an implied admission in petitioner's answer in the allegations in the complaint that private respondent and his son observed the check-in requirement at the Los Angeles Airport. Thus: A perusal of the above pleadings filed before the trial court disclosed that there exists a blatant admission on the part of the defendant-appellee that the plaintiffs-appellants indeed observed the check-in requirement at the Los Angeles Airport on May 5, 1989. In view of defendant-appellees admission of plaintiffs-appellants material averment in the complaint, We find no reason why the trial court should rule against such admission.[19] We disagree with the above conclusion reached by respondent Court of Appeals. Paragraph 7 of private respondents' complaint states: 7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendants designated counter at the airport in Los Angeles for their scheduled flight to San Francisco on defendants Flight No. 1108.[20] Responding to the above allegations, petitioner averred in paragraph 4 of its answer, thus: 4. Admits the allegation set forth in paragraph 7 of the complaint except to deny that plaintiff and his son checked in at 9:45 a.m., for lack of knowledge or information at this point in time as to the truth thereof.[21] The rule authorizing an answer that the defendant has no knowledge or information sufficient to form a belief as to the truth of an averment and giving such answer the effect of a denial, does not apply where the fact as to which want of knowledge is asserted is so plainly and necessarily within the defendant's knowledge that his averment of ignorance must be palpably

untrue.[22] Whether or not private respondents checked in at petitioner's designated counter at the airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioner's knowledge. While there was no specific denial as to the fact of compliance with the check-in requirement by private respondents, petitioner presented evidence to support its contention that there indeed was no compliance. Private respondents then are said to have waived the rule on admission. It not only presented evidence to support its contention that there was compliance with the check-in requirement, it even allowed petitioner to present rebuttal evidence. In the case of Yu Chuck vs. "Kong Li Po," we ruled that: The object of the rule is to relieve a party of the trouble and expense in proving in the first instance an alleged fact, the existence or non-existence of which is necessarily within the knowledge of the adverse party, and of the necessity (to his opponents case) of establishing which such adverse party is notified by his opponents pleadings. The plaintiff may, of course, waive the rule and that is what must be considered to have done (sic) by introducing evidence as to the execution of the document and failing to object to the defendants evidence in refutation; all this evidence is now competent and the case must be decided thereupon.[23] The determination of the other issues raised is dependent on whether or not there was a breach of contract in bad faith on the part of the petitioner in not allowing the Fontanillas to board United Airlines Flight 1108. It must be remembered that the general rule in civil cases is that the party having the burden of proof of an essential fact must produce a preponderance of evidence thereon.[24] Although the evidence adduced by the plaintiff is stronger than that presented by the defendant, a judgment cannot be entered in favor of the former, if his evidence is not sufficient to sustain his cause of action. The plaintiff must rely on the strength of his own evidence and not upon the weakness of the defendants.[25] Proceeding from this, and considering the contradictory findings of facts by the Regional Trial Court and the Court of Appeals, the question before this Court is whether or not private respondents were able to prove with adequate evidence his allegations of breach of contract in bad faith. We rule in the negative. Time and again, the Court has pronounced that appellate courts should not, unless for strong and cogent reasons, reverse the findings of facts of trial courts. This is so because trial judges are in a better position to examine real evidence and at a vantage point to observe the actuation and the demeanor of the witnesses.[26]While not the sole indicator of the credibility of a witness, it is of such weight that it has been said to be the touchstone of credibility.[27] Aniceto Fontanillas assertion that upon arrival at the airport at 9:45 a.m., he immediately proceeded to the check-in counter, and that Linda Allen punched in something into the computer is specious and not supported by the evidence on record. In support of their allegations, private respondents submitted a copy of the boarding pass. Explicitly printed on the boarding pass are the words Check-In Required. Curiously, the said pass did not indicate any ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 80

seat number. If indeed the Fontanillas checked in at the designated time as they claimed, why then were they not assigned seat numbers? Absent any showing that Linda was so motivated, we do not buy into private respondents' claim that Linda intentionally deceived him, and made him the laughing stock among the passengers.[28] Hence, as correctly observed by the trial court: Plaintiffs fail to realize that their failure to check in, as expressly required in their boarding passes, is the very reason why they were not given their respective seat numbers, which resulted in their being denied boarding.[29] Neither do we agree with the conclusion reached by the appellate court that private respondents' failure to comply with the check-in requirement will not defeat his claim as the denied boarding rules were not complied with. Notably, the appellate court relied on the Code of Federal Regulation Part on Oversales, which states: 250.6 Exceptions to eligibility for denied boarding compensation. A passenger denied board involuntarily from an oversold flight shall not be eligible for denied board compensation if: (a) The passenger does not comply with the carriers contract of carriage or tariff provisions regarding ticketing, reconfirmation, check-in, and acceptability for transformation. The appellate court, however, erred in applying the laws of the United States as, in the case at bar, Philippine law is the applicable law. Although, the contract of carriage was to be performed in the United States, the tickets were purchased through petitioners agent in Manila. It is true that the tickets were rewritten in Washington, D.C. However, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila. In the case of Zalamea vs. Court of Appeals, this Court applied the doctrine of lex loci contractus. According to the doctrine, as a general rule, the law of the place where a contract is made or entered into governs with respect to its nature and validity, obligation and interpretation. This has been said to be the rule even though the place where the contract was made is different from the place where it is to be performed, and particularly so, if the place of the making and the place of performance are the same. Hence, the court should apply the law of the place where the airline ticket was issued, when the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline. The law of the forum on the subject matter is Economic Regulations No. 7 as amended by Boarding Priority and Denied Boarding Compensation of the Civil Aeronautics Board, which provides that the check-in requirement be complied with before a passenger may claim against a carrier for being denied boarding: SEC. 5. Amount of Denied Boarding Compensation Subject to the exceptions provided hereinafter under Section 6, carriers shall pay to passengers holding confirmed reserved space and who have presented themselves at the proper place and time and fully complied with the carriers check-in and reconfirmation procedures and who are acceptable for carriage under the
[30]

Carriers tariffs but who have been denied boarding for lack of space, a compensation at the rate of: xx Private respondents' narration that they were subjected to harsh and derogatory remarks seems incredulous. However, this Court will not attempt to surmise what really happened. Suffice to say, private respondent was not able to prove his cause of action, for as the trial court correctly observed: xxx plaintiffs claim to have been discriminated against and insulted in the presence of several people. Unfortunately, plaintiffs limited their evidence to the testimony [of] Aniceto Fontanilla, without any corroboration by the people who saw or heard the discriminatory remarks and insults; while such limited testimony could possibly be true, it does not enable the Court to reach the conclusion that plaintiffs have, by a preponderance of evidence, proven that they are entitled to P1,650,000.00 damages from defendant.[31] As to the award of moral and exemplary damages, we find error in the award of such by the Court of Appeals. For the plaintiff to be entitled to an award of moral damages arising from a breach of contract of carriage, the carrier must have acted with fraud or bad faith. The appellate court predicated its award on our pronouncement in the case of Zalamea vs. Court of Appeals, supra, where we stated: Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling passengers concerned to an award of moral damages. In Alitalia Airways v. Court of Appeals, where passengers with confirmed booking were refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for check in. For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to moral damages. (Emphasis supplied.) However, the Courts ruling in said case should be read in consonance with existing laws, particularly, Economic Regulations No. 7, as amended, of the Civil Aeronautics Board: Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of flights or portions of flights originating from or terminating at, or serving a point within the territory of the Republic of the Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines, for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only honest mistakes on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful act of non-accommodation. What this Court considers as bad faith is the willful and deliberate overbooking on the part of the airline carrier. The above-mentioned law clearly

states that when the overbooking does not exceed ten percent (10%), it is not considered as deliberate and therefore does not amount to bad faith. While there may have been overbooking in this case, private respondents were not able to prove that the overbooking on United Airlines Flight 1108 exceeded ten percent. As earlier stated, the Court is of the opinion that the private respondents were not able to prove that they were subjected to coarse and harsh treatment by the ground crew of United Airlines. Neither were they able to show that there was bad faith on part of the carrier airline. Hence, the award of moral and exemplary damages by the Court of Appeals is improper. Corollarily, the award of attorney's fees is, likewise, denied for lack of any legal and factual basis. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 37044 is hereby REVERSED and SET ASIDE. The decision of the Regional Trial Court of Makati City in Civil Case No. 89-4268 dated April 8, 1991 is hereby REINSTATED. SO ORDERED. SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners, vs. HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents. Sycip, Salazar, Hernandez, Gatmaitan for petitioners. Quisumbing, Torres & Evangelista for private-respondent.

NOCON, J.: Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007 departing from New York to Los Angeles on June 6, 1984 despite possession of confirmed tickets, petitioners filed an action for damages before the Regional Trial Court of Makati, Metro Manila, Branch 145. Advocating petitioner's position, the trial court categorically ruled that respondent TransWorld Airlines (TWA) breached its contract of carriage with petitioners and that said breach was "characterized by bad faith." On appeal, however, the appellate court found that while there was a breach of contract on respondent TWA's part, there was neither fraud nor bad faith because under the Code of Federal Regulations by the Civil Aeronautics Board of the United States of America it is allowed to overbook flights. The factual backdrop of the case is as follows: Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea, purchased three (3) airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a flight to New York to Los Angeles on June 6, 1984. The tickets of petitioners-spouses were purchased at a discount of 75% while that of their daughter was a full fare ticket. All three tickets represented confirmed reservations. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 81

While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their reservations for said flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list because the number of passengers who had checked in before them had already taken all the seats available on the flight. Liana Zalamea appeared as the No. 13 on the waitlist while the two other Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names on the wait list, the first 22 names were eventually allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The two others, on the other hand, at No. 34, being ranked lower than 22, were not able to fly. As it were, those holding full-fare tickets were given first priority among the wait-listed passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter, was allowed to board the plane; while his wife and daughter, who presented the discounted tickets were denied boarding. According to Mr. Zalamea, it was only later when he discovered the he was holding his daughter's full-fare ticket. Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated because it was also fully booked. Thus, they were constrained to book in another flight and purchased two tickets from American Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars. Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch 145. As aforesaid, the lower court ruled in favor of petitioners in its decision 1 dated January 9, 1989 the dispositive portion of which states as follows: WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the following amounts: (1) US $918.00, or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City; (2) US $159.49, or its peso equivalent at the time of payment, representing the price of Suthira Zalamea's ticket for TWA Flight 007; (3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50, Philippine Currency, representing the price of Liana Zalamea's ticket for TWA Flight 007, (4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral damages for all the plaintiffs' (5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for attorney's fees; and (6) The costs of suit. SO ORDERED.
2

On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage only where there is fraud or bad faith. Since it is a matter of record that overbooking of flights is a common and accepted practice of airlines in the United States and is specifically allowed under the Code of Federal Regulations by the Civil Aeronautics Board, no fraud nor bad faith could be imputed on respondent TransWorld Airlines. Moreover, while respondent TWA was remiss in not informing petitioners that the flight was overbooked and that even a person with a confirmed reservation may be denied accommodation on an overbooked flight, nevertheless it ruled that such omission or negligence cannot under the circumstances be considered to be so gross as to amount to bad faith. Finally, it also held that there was no bad faith in placing petitioners in the waitlist along with forty-eight (48) other passengers where full-fare first class tickets were given priority over discounted tickets. The dispositive portion of the decision of respondent Court of Appeals 3 dated October 25, 1991 states as follows: WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED in that the award of moral and exemplary damages to the plaintiffs is eliminated, and the defendant-appellant is hereby ordered to pay the plaintiff the following amounts: (1) US$159.49, or its peso equivalent at the time of the payment, representing the price of Suthira Zalamea's ticket for TWA Flight 007; (2) US$159.49, or its peso equivalent at the time of the payment, representing the price of Cesar Zalamea's ticket for TWA Flight 007; (3) P50,000.00 as and for attorney's fees. (4) The costs of suit. SO ORDERED. 4 Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and alleged the following errors committed by the respondent Court of Appeals, to wit: I. . . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF RESPONDENT TWA BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS. II. . . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.

III. . . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND PAYMENT FOR THE AMERICAN AIRLINES TICKETS. 5 That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or regulation allegedly authorizing overbooking has never been proved. Foreign laws do not prove themselves nor can the courts take judicial notice of them. Like any other fact, they must be alleged and proved. 6 Written law may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied with a certificate that such officer has custody. The certificate may be made by a secretary of an embassy or legation, consul general, consul, vice-consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. 7 Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside from said statement, no official publication of said code was presented as evidence. Thus, respondent court's finding that overbooking is specifically allowed by the US Code of Federal Regulations has no basis in fact. Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in accordance with the principle of lex loci contractus which require that the law of the place where the airline ticket was issued should be applied by the court where the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline. 8 Since the tickets were sold and issued in the Philippines, the applicable law in this case would be Philippine law. Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to an award of moral damages. In Alitalia Airways v. Court of Appeals, 9 where passengers with confirmed bookings were refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for the check in. For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an award of moral damages. Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not allowed to board the plane because her seat had already been given to another passenger even before the allowable period for passengers to check in had lapsed despite the fact that she had a confirmed ticket and she had arrived on time, this Court held that petitioner airline acted in ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 82

bad faith in violating private respondent's rights under their contract of carriage and is therefore liable for the injuries she has sustained as a result. In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts to bad faith. In Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-be passenger had the necessary ticket, baggage claim and clearance from immigration all clearly and unmistakably showing that she was, in fact, included in the passenger manifest of said flight, and yet was denied accommodation in said flight, this Court did not hesitate to affirm the lower court's finding awarding her damages. A contract to transport passengers is quite different in kind and degree from any other contractual relation. So ruled this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a contract of carriage generates a relation attended with public duty a duty to provide public service and convenience to its passengers which must be paramount to self-interest or enrichment. Thus, it was also held that the switch of planes from Lockheed 1011 to a smaller Boeing 707 because there were only 138 confirmed economy class passengers who could very well be accommodated in the smaller planes, thereby sacrificing the comfort of its first class passengers for the sake of economy, amounts to bad faith. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost consideration entitles the passenger to an award of moral damages. 13 Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not informing its passengers beforehand that it could breach the contract of carriage even if they have confirmed tickets if there was overbooking. Respondent TWA should have incorporated stipulations on overbooking on the tickets issued or to properly inform its passengers about these policies so that the latter would be prepared for such eventuality or would have the choice to ride with another airline. Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the name of the passenger and the points of origin and destination, contained such a notice. An examination of Exhibit I does not bear this out. At any rate, said exhibit was not offered for the purpose of showing the existence of a notice of overbooking but to show that Exhibit I was used for flight 007 in first class of June 11, 1984 from New York to Los Angeles. Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of giving less priority to discounted tickets. While the petitioners had checked in at the same time, and held confirmed tickets, yet, only one of them was allowed to board the plane ten minutes before departure time because the full-fare ticket he was holding was given priority over discounted tickets. The other two petitioners were left behind. It is respondent TWA's position that the practice of overbooking and the airline system of boarding priorities are reasonable policies, which when implemented do not amount to bad faith. But the issue raised in this case is not the reasonableness of said policies but whether or not said policies were incorporated or deemed written on petitioners' contracts of carriage. Respondent TWA failed to show that there are provisions to that effect. Neither did it present any argument of substance to show that petitioners were duly

apprised of the overbooked condition of the flight or that there is a hierarchy of boarding priorities in booking passengers. It is evident that petitioners had the right to rely upon the assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets represented confirmed seats without any qualification. The failure of respondent TWA to so inform them when it could easily have done so thereby enabling respondent to hold on to them as passengers up to the last minute amounts to bad faith. Evidently, respondent TWA placed its self-interest over the rights of petitioners under their contracts of carriage. Such conscious disregard of petitioners' rights makes respondent TWA liable for moral damages. To deter breach of contracts by respondent TWA in similar fashion in the future, we adjudge respondent TWA liable for exemplary damages, as well. Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's ticket because the ticket was used by her father. On this score, we uphold the respondent court. Petitioners had not shown with certainty that the act of respondent TWA in allowing Mr. Zalamea to use the ticket of her daughter was due to inadvertence or deliberate act. Petitioners had also failed to establish that they did not accede to said agreement. The logical conclusion, therefore, is that both petitioners and respondent TWA agreed, albeit impliedly, to the course of action taken. The respondent court erred, however, in not ordering the refund of the American Airlines tickets purchased and used by petitioners Suthira and Liana. The evidence shows that petitioners Suthira and Liana were constrained to take the American Airlines flight to Los Angeles not because they "opted not to use their TWA tickets on another TWA flight" but because respondent TWA could not accommodate them either on the next TWA flight which was also fully booked. 14 The purchase of the American Airlines tickets by petitioners Suthira and Liana was the consequence of respondent TWA's unjustifiable breach of its contracts of carriage with petitioners. In accordance with Article 2201, New Civil Code, respondent TWA should, therefore, be responsible for all damages which may be reasonably attributed to the non-performance of its obligation. In the previously cited case of Alitalia Airways v. Court of Appeals, 15 this Court explicitly held that a passenger is entitled to be reimbursed for the cost of the tickets he had to buy for a flight to another airline. Thus, instead of simply being refunded for the cost of the unused TWA tickets, petitioners should be awarded the actual cost of their flight from New York to Los Angeles. On this score, we differ from the trial court's ruling which ordered not only the reimbursement of the American Airlines tickets but also the refund of the unused TWA tickets. To require both prestations would have enabled petitioners to fly from New York to Los Angeles without any fare being paid. The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code which allows recovery when the defendant's act or omission has compelled plaintiff to litigate or to incur expenses to protect his interest. However, the award for moral damages and exemplary damages by the trial court is excessive in the light of the fact that only Suthira and Liana Zalamea were actually "bumped off." An award of P50,000.00 moral damages and another P50,000.00 exemplary damages would suffice under the circumstances obtaining in the instant case. WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is hereby MODIFIED to the extent of adjudging

respondent TransWorld Airlines to pay damages to petitioners in the following amounts, to wit: (1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City; (2) P50,000.00 as moral damages; (3) P50,000.00 as exemplary damages; (4) P50,000.00 as attorney's fees; and (5) Costs of suit. SO ORDERED. RAFAEL ZULUETA, ET AL., plaintiffs-appellees, vs. PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant. Alfredo L. Benipayo for plaintiffs-appellee Rafael Zulueta and Carolina Zulueta. Justo L. Albert for plaintiff-appellee Telly Albert Zulueta. V.E. del Rosario and Associates and Salcedo, Del Rosario, Bito, Misa and Lozada for defendant-appellant. RESOLUTION

CONCEPCION, C.J.: Both parties in this case have moved for the reconsideration of the decision of this Court promulgated on February 29, 1972. Plaintiffs maintain that the decision appealed from should be affirmed in toto. The defendant, in turn, prays that the decision of this Court be "set aside ... with or without a new trial, ... and that the complaint be dismissed, with costs; or, in the alternative, that the amount of the award embodied therein be considerably reduced." . Subsequently to the filing of its motion for reconsideration, the defendant filed a "petition to annul proceedings and/or to order the dismissal of plaintiffsappellees' complaint" upon the ground that "appellees' complaint actually seeks the recovery of only P5,502.85 as actual damages, because, for the purpose of determining the jurisdiction of the lower court, the unspecified sums representing items of alleged damages, may not be considered, under the settled doctrines of this Honorable Court," and "the jurisdiction of courts of first instance when the complaint in the present case was filed on Sept. 30, 1965" ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 83

was limited to cases "in which the demand, exclusive of interest, or the value of the property in controversy amounts to more than ten thousand pesos" and "the mere fact that the complaint also prays for unspecified moral damages and attorney's fees, does not bring the action within the jurisdiction of the lower court." We find no merit in this contention. To begin with, it is not true that "the unspecified sums representing items or other alleged damages, may not be considered" for the purpose of determining the jurisdiction of the court "under the settled doctrines of this Honorable Court." In fact, not a single case has been cited in support of this allegation. Secondly, it has been held that a clam for moral damages is one not susceptible of pecuniary estimation. 1 In fact, Article 2217 of the Civil Code of the Philippines explicitly provides that "(t)hough incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission." Hence, "(n)o proof pecuniary loss necessary" pursuant to Article 2216 of the same Code "in order that moral ... damages may be adjudicated." And "(t)he assessment of such damages ... is left to the discretion of the court" - said article adds - "according to the circumstances of each case." Appellees' complaint is, therefore, within the original jurisdiction of courts of first instance, which includes "all civil actions in which the subject of the litigation is not capable of pecuniary estimation." 2 Thirdly, in its answer to plaintiffs' original and amended complainants, defendant had set up a counterclaim in the aggregate sum of P12,000, which is, also, within the original jurisdiction of said courts, thereby curing the alleged defect if any, in plaintiffs' complaint. 3 We need not consider the jurisdictional controversy as to the amount the appellant sues to recover because the counterclaim interposed establishes the jurisdiction of the District Court. Merchants' Heat & Light Co. v. James B. Clow & Sons, 204 U.S. 286, 27 S. Ct. 285, 51 L. Ed. 488; O. J. Lewis Mercantile Co. v. Klepner, 176 F. 343 (C.C.A. 2), certiorari denied 216 U.S. 620, 30 S Ct. 575, 54 L. Ed. 641. ... . 4 ... courts have said that "when the jurisdictional amount is in question, the tendering of a counterclaim in an amount which in itself, or added to the amount claimed in the petition, makes up a sum equal to the amount necessary to the jurisdiction of this court, jurisdiction is established, whatever may be the state of the plaintiff's complaint." American Sheet & Tin Plate Co. v. Winzeler (D.C.) 227 F. 321, 324. 5 Thus, in Ago v. Buslon, 6 We held: ... . Then, too, petitioner's counterclaim for P37,000.00 was, also, within the exclusive original jurisdiction of the latter courts, and there are ample precedents to the effect that "although the original claim involves less than the jurisdictional amount, ... jurisdiction can be sustained if the counterclaim (of the compulsory type)" such as the one set up by petitioner herein, based upon the damages allegedly suffered by him in consequence of the filing of said complaint "exceeds the jurisdictional amount." (Moore Federal Practice, 2nd ed. [1948], Vol. 3, p. 41; Ginsburg vs. Pacific Mutual Life Ins. Co. of California, 69 Fed. [2d]

97; Home Life Ins. Co. vs. Sipp., 11 Fed. [2d]474; American Sheet & Tin Plate Co. vs. Winzeler [D.C.], 227 Fed. 321, 324; Brix vs. People's Mutual Life Ins. Co., 41 P. 2d. 537, 2 Cal. 2d. 446; Emery vs. Pacific Employees Ins. Co., 67 P. 2d. 1046, 8 Cal. 2d. 663). Needless to say, having not only failed to question the jurisdiction of the trial court either in that court or in this Court, before the rendition of the latter's decision, and even subsequently thereto, by filing the aforementioned motion for reconsideration and seeking the reliefs therein prayed for but, also, urged both courts to exercise jurisdiction over the merits of the case, defendant is now estopped from impugning said jurisdiction. 7 Before taking up the specific questions raised in defendant's motion for reconsideration, it should be noted that the same is mainly predicated upon the premise that plaintiffs' version is inherently incredible, and that this Court should accept the theory of the defense to the effect that petitioner was off-loaded because of a bomb-scare allegedly arising from his delay in boarding the aircraft and subsequent refusal to open his bags for inspection. We need not repeat here the reasons given in Our decision for rejecting defendant's contention and not disturbing the findings of fact of His Honor, the Trial Judge, who had the decided advantage denied to Us of observing the behaviour of the witnesses in the course of the trial and found those of the plaintiffs worthy of credence, not the evidence for the defense. It may not be amiss however, to stress the fact that, in his written report, made in transit from Wake to Manila orimmediately after the occurrence and before the legal implications or consequences thereof could have been the object of mature deliberation, so that it could, in a way, be considered as part of the res gestae Capt. Zentner stated that Zulueta had been off-loaded "due to drinking" and "belligerent attitude," thereby belying the story of the defense about said alleged bomb-scare, and confirming the view that said agent of the defendant had acted out of resentment because his ego had been hurt by Mr. Zulueta's adamant refusal to be bullied by him. Indeed, had there been an iota of truth in said story of the defense, Capt. Zentner would have caused every one of the passengers to be frisked or searched and the luggage of all of them examined as it is done now before resuming the flight from Wake Island. His failure to do so merely makes the artificious nature of defendant's version more manifest. Indeed, the fact that Mrs. Zulueta and Miss Zulueta were on board the plane shows beyond doubt that Mr. Zulueta could not possibly have intended to blow it up. The defense tries to explain its failure to introduce any evidence to contradict the testimony of Mr. Zulueta as to why he had gone to the beach and what he did there, alleging that, in the very nature of things, nobody else could have witnessed it. Moreover, the defense insists, inter alia, that the testimony of Mr. Zulueta is inherently incredible because he had no idea as to how many toilets the plane had; it could not have taken him an hour to relieve himself in the beach; there were eight (8) commodes at the terminal toilet for men ; if he felt the need of relieving himself, he would have seen to it that the soldiers did not beat him to the terminal toilets; he did not tell anybody about the reason for going to the beach, until after the plane had taken off from Wake.

We find this pretense devoid of merit. Although Mr. Zulueta had to look for a secluded place in the beach to relieve himself, beyond the view of others, defendant's airport manager, whom Mr. Zulueta informed about it, soon afterthe departure of the plane, could have forthwith checked the veracity of Mr. Zulueta's statement by asking him to indicate the specific place where he had been in the beach and then proceeding thereto for purposes of verification. Then, again, the passenger of a plane seldom knows how many toilets it has. As a general rule, his knowledge is limited to the toilets for the class first class or tourist class in which he is. Then, too, it takes several minutes for the passengers of big aircrafts, like those flying from the U.S. to the Philippines, to deplane. Besides, the speed with which a given passenger may do so depends, largely, upon the location of his seat in relation to the exit door. He cannot go over the heads of those nearer than he thereto. Again, Mr. Zulueta may have stayed in the toilet terminal for some time, expecting one of the commodes therein to be vacated soon enough, before deciding to go elsewhere to look for a place suitable to his purpose. But he had to walk, first, from the plane to the terminal building and, then, after vainly waiting therein for a while, cover a distance of about 400 yards therefrom to the beach, and seek there a place not visible by the people in the plane and in the terminal, inasmuch as the terrain at Wake Island is flat. What is more, he must have had to takeoff part, at least, of his clothing, because, without the facilities of a toilet, he had to wash himself and, then, dry himself up before he could be properly attired and walk back the 400 yards that separated him from the terminal building and/or the plane. Considering, in addition to the foregoing, the fact that he was not feeling well, at that time, We are not prepared to hold that it could not have taken him around an hour to perform the acts narrated by him. But, why asks the defendant did he not reveal the same before the plane took off? The record shows that, even before Mr. Zulueta had reached the ramp leading to the plane, Capt. Zentner was already demonstrating at him in an intemperate and arrogant tone and attitude ("What do you think you are?), thereby impelling Mr. Zulueta to answer back in the same vein. As a consequence, there immediately ensued an altercation in the course of which each apparently tried to show that he could not be cowed by the other. Then came the order of Capt. Zentner to off-load all of the Zuluetas, including Mrs. Zulueta and the minor Miss Zulueta, as well as their luggage, their overcoats and other effects handcarried by them; but, Mr. Zulueta requested that the ladies be allowed to continue the trip. Meanwhile, it had taken time to locate his four (4) pieces of luggage. As a matter of fact, only three (3) of them were found, and the fourth eventually remained in the plane. In short, the issue between Capt. Zentner and Mr. Zulueta had been limited to determining whether the latter would allow himself to be browbeaten by the former. In the heat of the altercation, nobody had inquired about the cause of Mr. Zulueta's delay in returning to the plane, apart from the fact that it was rather embarrassing for him to explain, in the presence and within the hearing of the passengers and the crew, then assembled around them, why he had gone to the beach and why it had taken him some time to answer there a call of nature, instead of doing so in the terminal building. Defendant's motion for reconsideration assails: (1) the amount of damages awarded as excessive; (2) the propriety of accepting as credible plaintiffs' theory; (3) plaintiffs' right to recover either moral or exemplary damages; (4) plaintiffs' right to recover attorney's fees; and (5) the non-enforcement of the compromise ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 84

agreement between the defendant and plaintiff's wife, Mrs. Zulueta. Upon the other hand, plaintiffs' motion for reconsideration contests the decision of this Court reducing the amount of damages awarded by the trial court to approximately one-half thereof, upon the ground, not only that, contrary to the findings of this Court, in said decision, plaintiff had not contributed to the aggravation of his altercation or incident with Capt. Zentner by reacting to his provocation with extreme belligerency thereby allowing himself to be dragged down to the level on which said agent of the defendant had placed himself, but, also, because the purchasing power of our local currency is now much lower than when the trial court rendered its appealed decision, over five (5) years ago, on July 5, 1967, which is an undeniable and undisputed fact. Precisely, for this reason, defendant's characterization as exorbitant of the aggregate award of over P700,000 by way of damages, apart from attorney's fees in the sum of P75,000, is untenable. Indeed, said award is now barely equivalent to around 100,000 U. S. dollars. It further support of its contention, defendant cites the damages awarded in previous cases to passengers of airlines, 8 as well as in several criminal cases, and some cases for libel and slander. None of these cases is, however, in point. Said cases against airlines referred to passengers who were merely constrained to take a tourist class accommodation, despite the fact that they had first class tickets, and that although, in one of such cases, there was proof that the airline involved had acted as it did to give preference to a "white" passenger, this motive was not disclosed until the trial in court. In the case at bar, plaintiff Rafael Zulueta was "off-loaded" at Wake Island, for having dared to retort to defendant's agent in a tone and manner matching, if not befitting his intemperate language and arrogant attitude. As a consequence, Capt. Zentner's attempt to humiliate Rafael Zulueta had boomeranged against him (Zentner), in the presence of the other passengers and the crew. It was, also, in their presence that defendant's agent had referred to the plaintiffs as "monkeys," a racial insult not made openly and publicly in the abovementioned previous cases against airlines. In other words, Mr. Zulueta was off-loaded, not to protect the safety of the aircraft and its passengers, but to retaliate and punish him for the embarrassment and loss of face thus suffered by defendant's agent. This vindictive motive is made more manifest by the note delivered to Mr. Zulueta by defendant's airport manager at Wake Island, Mr. Sitton, stating that the former's stay therein would be "for a minimum of one week," during which he would be charged $13.30 per day. This reference to a "minimum of one week" revealed the intention to keep him there stranded that long, for no other plane, headed for Manila, was expected within said period of time, although Mr. Zulueta managed to board, days later, a plane that brought him to Hawaii, whence he flew back to the Philippines, via Japan. Neither may criminal cases, nor the cases for libel and slander cited in the defendant's motion for reconsideration, be equated with the present case. Indeed, in ordinary criminal cases, the award for damages is, in actual practice, of purely academic value, for the convicts generally belong to the poorest class of society. There is, moreover, a fundamental difference between said cases and the one at bar. The Zuluetas had a contract of carriage with the defendant, as a common carrier, pursuant to which the latter was bound, for a substantial monetary considerationpaid by the former, not merely to transport them to Manila, but, also, to do so with "extraordinary diligence" or "utmost

diligence." 9 The responsibility of the common carrier, under said contract, as regards the passenger's safety, is of such a nature, affecting as it does public interest, that it "cannot be dispensed with" or even "lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise." 10 In the present case, the defendant did not only fail to comply with its obligation to transport Mr. Zulueta to Manila, but, also, acted in a manner calculated to humiliate him, to chastise him, to make him suffer, to cause to him the greatest possible inconvenience, by leaving him in a desolate island, in the expectation that he would be stranded there for a "minimum of one week" and, in addition thereto, charged therefor $13.30 a day. It is urged by the defendant that exemplary damages are not recoverable in quasi-delicts, pursuant to Article 2231 of our Civil Code, except when the defendant has acted with "gross negligence," and that there is no specific finding that it had so acted. It is obvious, however, that in off-loading plaintiff at Wake Island, under the circumstances heretofore adverted to, defendant's agents had acted with malice aforethought and evident bad faith. If "gross negligence" warrants the award of exemplary damages, with more reason is its imposition justified when the act performed is deliberate, malicious and tainted with bad faith. Thus, in Lopez v. PANAM, 11 We held: The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages (Articles 2229, 2232, New Civil Code.) Similarly, in NWA v. Cuenca, 12 this Court declared that an award for exemplary damages was justified by the fact that the airline's "agent had acted in a wanton, reckless and oppressive manner" in compelling Cuenca, upon arrival at Okinawa, to transfer, over his objection, from the first class, where he was accommodated from Manila to Okinawa, to the tourist class, in his trip to Japan, "under threat of otherwise leaving him in Okinawa," despite the fact that he had paid in full the first class fare and was issued in Manila a first class ticket. Defendant cites Rotea v. Halili, 13 in support of the proposition that a principal is not liable for exemplary damages owing to acts of his agent unless the former has participated in said acts or ratified the same. Said case involved, however, the subsidiary civil liability of an employer arising from criminal acts of his employee, and "exemplary damages ... may be imposed when the crime was committed with one or more aggravating circumstances." 14 Accordingly, the Rotea case is not in point, for the case at bar involves a breach of contract, as well as a quasi-delict. Neither may the case of Palisoc v. Brillantes, 15 invoked by the defendant, be equated with the case at bar. The Palisoc case dealt with the liability of school officials for damages arising from the death of a student (Palisoc) due to fist blows given by another student (Daffon), in the course of a quarrel between them, while in a laboratory room of the Manila Technical Institute. In an action for damages, the head thereof and the teacher in charge of said laboratory were held jointly and severally liable with the student who caused said death, for failure of the school to provide "adequate supervision over the activities of the students in the school premises," to protect them "from harm, whether at the

hands of fellow students or other parties." Such liability was predicated upon Article 2180 of our Civil Code, the pertinent part of which reads: ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. xxx xxx xxx Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody. xxx xxx xxx Obviously, the amount of damages warded in the Palisoc case is not and cannot serve as the measure of the damages recoverable in the present case, the latter having been caused directly and intentionally by an employee or agent of the defendant, whereas the student who killed the young Palisoc was in no wise an agent of the school. Moreover, upon her arrival in the Philippines, Mrs. Zulueta reported her husband's predicament to defendant's local manager and asked him to forthwith have him (Mr. Zulueta) brought to Manila, which defendant's aforementioned manager refused to do, thereby impliedly ratifying the offloading of Mr. Zulueta at Wake Island. It is next urged that, under the contract of carriage with the defendant, Mr. Zulueta was bound to be present at the time scheduled for the departure of defendant's plane and that he had, consequently, violated said contract when he did not show up at such time. This argument might have had some weight had defendant's plane taken offbefore Mr. Zulueta had shown up. But the fact is that he was ready, willing and able to board the plane about two hours before it actually took off, and that he was deliberately and maliciously off-loaded on account of his altercation with Capt. Zentner. It should, also, be noted that, although Mr. Zulueta was delayed some 20 to 30 minutes, the arrival or departure of planes is often delayed for much longer periods of time. Followed to its logical conclusion, the argument adduced by the defense suggests that airlines should be held liable for damages due to the inconvenience and anxiety, aside from actual damages, suffered by many passengers either in their haste to arrive at the airport on scheduled time just to find that their plane will not take off until later, or by reason of the late arrival of the aircraft at its destination. PANAM impugns the award of attorney's fees upon the ground that no penalty should be imposed upon the right to litigate; that, by law, it may be awarded only in exceptional cases; that the claim for attorney's fees has not been proven; and that said defendant was justified in resisting plaintiff's claim "because it was patently exorbitant." Nothing, however, can be farther from the truth. Indeed apart from plaintiff's claim for actual damages, the amount of which is not contested, plaintiffs did not ask any specific sum by way of exemplary and moral damages, as well as attorney's fees, and left the amount thereof to the "sound discretion" of the lower court. This, precisely, is the reason why PANAM, now, alleges without ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 85

justification that the lower court had no jurisdiction over the subject matter of the present case. Moreover, Article 2208 of our Civil Code expressly authorizes the award of attorney's fees "when exemplary damages are awarded," as they are in this case as well as "in any other case where the court deems it just and equitable that attorney's fees ... be recovered," and We so deem it just and equitable in the present case, considering the "exceptional" circumstances obtaining therein, particularly the bad faith with which defendant's agent had acted, the place where and the conditions under which Rafael Zulueta was left at Wake Island, the absolute refusal of defendant's manager in Manila to take any step whatsoever to alleviate Mr. Zulueta's predicament at Wake and have him brought to Manila which, under their contract of carriage, was defendant's obligation to discharge with "extra-ordinary" or "utmost" diligence and, the "racial" factor that had, likewise, tainted the decision of defendant's agent, Capt. Zentner, to off-load him at Wake Island. As regards the evidence necessary to justify the sum of P75,000 awarded as attorney's fees in this case, suffice it to say that the quantity and quality of the services rendered by plaintiffs' counsel appearing on record, apart from the nature of the case and the amount involved therein, as well as his prestige as one of the most distinguished members of the legal profession in the Philippines, of which judicial cognizance may be taken, amply justify said award, which is a little over 10% of the damages (P700,000) collectible by plaintiffs herein. Indeed, the attorney's fees in this case is proportionally much less than that adjudged in Lopez v. PANAM 16 in which the judgment rendered for attorney's fees (P50,000) was almost 20% of the damages (P275,000) recovered by the plaintiffs therein. The defense assails the last part of the decision sought to be reconsidered, in which relying upon Article 172 of our Civil Code, which provides that "(t)he wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law," and it is not claimed that this is one of such cases We denied a motion, filed by Mrs. Zulueta, for the dismissal of this case, insofar as she is concerned - she having settled all her differences with the defendant, which appears to have paid her the sum of P50,000 therefor "without prejudice to this sum being deducted from the award made in said decision." Defendant now alleges that this is tantamount to holding that said compromise agreement is both effective and ineffective. This, of course, is not true. The payment is effective, insofar as it is deductible from the award, and, because it is due (or part of the amount due) from the defendant, with or without its compromise agreement with Mrs. Zulueta. What is ineffective is the compromise agreement, insofar as the conjugal partnership is concerned. Mrs. Zulueta's motion was for the dismissal of the case insofar as she was concerned, and the defense cited in support thereof Article 113 of said Code, pursuant to which "(t)he husband must be joined in all suits by or against the wife except: ... (2) If they have in fact been separated for at least one year." This provision, We held, however, refers to suits in which the wife is the principal or real party in interest, not to the case at bar, "in which the husband is the main party in interest, both as the person principally aggrieved and as administrator of the conjugal partnership ... he having acted in this capacity in entering into the contract of carriage with PANAM and paid the amount due to the latter, under the contract, with funds of the conjugal partnership," to which the amounts

recoverable for breach of said contract, accordingly, belong. The damages suffered by Mrs. Zulueta were mainly an in accident of the humiliation to which her husband had been subjected. The Court ordered that said sum of P50,00 paid by PANAM to Mrs. Zulueta be deducted from the aggregate award in favor of the plaintiffs herein for the simple reason that upon liquidation of the conjugal partnership, as provided by law, said amount would have to be reckoned with, either as part of her share in the partnership, or as part of the support which might have been or may be due to her as wife of Rafael Zulueta. It would surely be inane to sentence the defendant to pay the P700,000 due to the plaintiffs and to direct Mrs. Zulueta to return said P50,000 to the defendant. In this connection, it is noteworthy that, for obvious reasons of public policy, she is not allowed by law to waive her share in the conjugal partnership, before the dissolution thereof. 17 She cannot even acquire any property by gratuitous title, without the husband's consent, except from her ascendants, descendants, parents-in-law, and collateral relatives within the fourth degree. 18 It is true that the law favors and encourages the settlement of litigations by compromise agreement between the contending parties, but, it certainly does not favor a settlement with one of the spouses, both of whom are plaintiffs or defendants in a common cause, such as the defense of the rights of the conjugal partnership, when the effect, even if indirect, of the compromise is to jeopardize "the solidarity of the family" which the law 19 seeks to protect by creating an additional cause for the misunderstanding that had arisen between such spouses during the litigation, and thus rendering more difficult a reconciliation between them. It is urged that there is no proof as to the purpose of the trip of the plaintiffs, that neither is there any evidence that the money used to pay the plane tickets came from the conjugal funds and that the award to Mrs. Zulueta was for her personal suffering or injuries. There was, however, no individual or specific award in favor of Mrs. Zulueta or any of the plaintiffs. The award was made in their favor collectively. Again, in the absence of said proof, the presumption is that the purpose of the trip was for the common benefit of the plaintiffs and that the money had come from the conjugal funds, for, unless there is proof to the contrary, it is presumed "(t)hat things have happened according to the ordinary course of nature and the ordinary habits of life." 20 In fact Manresa maintains 21that they are deemed conjugal, when the source of the money used therefor is not established, even if the purchase had been made by the wife. 22 And this is the rule obtaining in the Philippines. Even property registered, under the Torrens system, in the name of one of the spouses, or in that of the wife only, if acquired during the marriage, is presumed to belong to the conjugal partnership, unless there is competent proof to the contrary. 23 PANAM maintains that the damages involved in the case at bar are not among those forming part of the conjugal partnership pursuant to Article 153 of the Civil Code, reading: ART. 153. The following are conjugal partnership property: (1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;

(2) That which is obtained by the industry, or work, or as salary of the spouses, or of either of them; (3) The fruits, rents or interests received or due during the marriage, coming from the common property or from the exclusive property of each spouse. Considering that the damages in question have arisen from, inter alia, a breach of plaintiffs' contract of carriage with the defendant, for which plaintiffs paid their fare with funds presumably belonging to the conjugal partnership, We hold that said damages fall under paragraph (1) of said Article 153, the right thereto having been "acquired byonerous title during the marriage ... ." This conclusion is bolstered up by Article 148 of our Civil Code, according to which: ART. 148. The following shall be the exclusive property of each spouse: (1) That which is brought to the marriage as his or her own; (2) That which each acquires, during the marriage, by lucrative title; (3) That which is acquired by right of redemption or by exchange with other property belonging to only one of the spouses; (4) That which is purchased with exclusive money of the wife or of the husband. The damages involved in the case at bar do not come under any of these provisions or of the other provisions forming part of Chapter 3, Title VI, of Book I of the Civil Code, which chapter is entitled "Paraphernal Property." What is more, if "(t)hat which is acquired by right of redemption or by exchange with other property belonging to only one of the spouses," and "(t)hat which is purchased with exclusive money of the wife or of the husband," 24belong exclusively to such wife or husband, it follows necessarily that that which is acquired with money of the conjugal partnership belongs thereto or forms part thereof. The rulings in Maramba v. Lozano 25 and Perez v. Lantin, 26 cited in defendant's motion for reconsideration, are, in effect, adverse thereto. In both cases, it was merely held that the presumption under Article 160 of our Civil Code to the effect that all property of the marriage belong to the conjugal partnership does not apply unless it is shown that it was acquired during marriage. In the present case, the contract of carriage was concededly entered into, and the damages claimed by the plaintiffs were incurred, during marriage. Hence, the rights accruing from said contract, including those resulting from breach thereof by the defendant, are presumed to belong to the conjugal partnership of Mr. and Mrs. Zulueta. The fact that such breach of contract was coupled, also, with a quasi-delict constitutes an aggravating circumstance and can not possibly have the effect of depriving the conjugal partnership of such property rights. Defendant insists that the use of conjugal funds to redeem property does not make the property redeemed conjugal if the right of redemption pertained to the wife. In the absence, however, of proof that such right of redemption pertains to the wife and there is no proof that the contract of carriage with PANAM or the money paid therefor belongs to Mrs. Zulueta the property involved, or the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 86

rights arising therefrom, must be presumed, therefore, to form part of the conjugal partnership. It is true that in Lilius v. Manila Railroad Co., 27 it was held that the "patrimonial and moral damages" awarded to a young and beautiful woman by reason of a scar in consequence of an injury resulting from an automobile accident which disfigured her face and fractured her left leg, as well as caused a permanent deformity, are her paraphernal property. Defendant cites, also, in support of its contention the following passage from Colin y Capitant: No esta resuelta expresamente en la legislacion espaola la cuestion de si las indemnizaciones debidas por accidentes del trabaho tienen la consideracion de gananciales, o son bienes particulares de los conyuges. Inclinan a la solucion de que estas indemnizaciones deben ser consideradas como gananciales, el hecho de que la sociedad pierde la capacidad de trabajocon el accidente, que a ella le pertenece, puesto que de la sociedad son losfrutos de ese trabajo; en cambio, la consideracion de que igual manera que losbienes que sustituyen a los que cada conyuge lleva al matrimonio como propiostienen el caracter de propios, hace pensar que las indemnizaciones que vengana suplir la capacidad de trabajo aportada por cada conyuge a la sociedad, debenser juridicamente reputadas como bienes propios del conyuge que haya sufrido elaccidente. Asi se llega a la misma solucion aportada por la jurisprudencia francesca. 28 This opinion is, however, undecisive, to say the least. It should be noted that Colin y Capitant were commenting on the French Civil Code; that their comment referred to indemnities due in consequence of "accidentes del trabajo "resulting in physical injuries sustained by one of the spouses (which Mrs. Zulueta has not suffered); and that said commentators admit that the question whether or not said damages are paraphernal property or belong to the conjugal partnership is not settled under the Spanish law. 29 Besides, the French law and jurisprudence to which the comments of Planiol and Ripert, likewise, refer are inapposite to the question under consideration, because they differ basically from the Spanish law in the treatment of the property relations between husband and wife. Indeed, our Civil Code, like the Spanish Civil Code, favors the system of conjugal partnership of gains. Accordingly, the former provides that, "(i)n the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains ... shall govern the property relations between" the spouses. 30 Hence, "(a)ll property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife." 31 No similar rules are found in the French Civil Code. What is more, under the provisions thereof, the conjugal partnership exists only when so stipulated in the "capitulaciones matrimoniales" or by way of exception. In the language of Manresa Prescindimos de los preceptos de los Condigos de Francia, Italia, Holanda, Portugal, Alemania y Suiza, porsue solo excepcionalmente, o cuando asi se pacta en las capitulaciones, admiten el sistema de gananciales. 32

Again, Colin y Capitant, as well as the Lilius case, refer to damages recovered for physical injuries suffered by the wife. In the case at bar, the party mainly injured, although not physically, is the husband. Accordingly, the other Philippine cases 33 and those from Louisiana whose civil law is based upon the French Civil Code cited by the defendant, which similarly refer to moral damages due to physical injuries suffered by the wife, are, likewise, inapplicable to the case at bar. We find, therefore, no plausible reason to disturb the views expressed in Our decision promulgated on February 29, 1972. WHEREFORE, the motions for reconsideration above-referred to should be, as they are hereby denied. FERNANDO LOPEZ, ET AL., plaintiffs-appellants, vs. PAN AMERICAN WORLD AIRWAYS, defendant-appellant. Ross, Selph and Carrascoso for Vicente J. Francisco for the plaintiffs-appellants. BENGZON, J.P., J.: Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal. Since the value in controversy exceeds P200,000 the appeals were taken directly to this Court upon all questions involved (Sec. 17, par. 3[5], Judiciary Act). Stated briefly the facts not in dispute are as follows: Reservations for first class accommodations in Flight No. 2 of Pan American World Airways hereinafter otherwise called PAN-AM from Tokyo to San Francisco on May 24, 1960 were made with PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for then Senator Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano, Jr., (Milagros Lopez Montelibano). PAN-AM's San Francisco head office confirmed the reservations on March 31, 1960. First class tickets for the abovementioned flight were subsequently issued by PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444 for all of them was fully paid before the tickets were issued. As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in Tokyo at 5:30 P.M. of that day. As soon as they arrived Senator Lopez requested Minister Busuego of the Philippine Embassy to contact PAN-AM's Tokyo office regarding their first class accommodations for that evening's flight. For the given reason that the first class seats therein were all booked up, however, PAN-AM's Tokyo office informed Minister Busuego that PAN-AM could not accommodate Senator Lopez and party in that trip as first class passengers. Senator Lopez thereupon gave their first class tickets to the defendant-appellant.

Minister Busuego for him to show the same to PAN-AM's Tokyo office, but the latter firmly reiterated that there was no accommodation for them in the first class, stating that they could not go in that flight unless they took the tourist class therein. Due to pressing engagements awaiting Senator Lopez and his wife, in the United States he had to attend a business conference in San Francisco the next day and she had to undergo a medical check-up in Mayo Clinic, Rochester, Minnesota, on May 28, 1960 and needed three days rest before that in San Francisco Senator Lopez and party were constrained to take PAN-AM's flight from Tokyo to San Francisco as tourist passengers. Senator Lopez however made it clear, as indicated in his letter to PAN-AM's Tokyo office on that date (Exh. A), that they did so "under protest" and without prejudice to further action against the airline.1wph1.t Suit for damages was thereafter filed by Senator Lopez and party against PANAM on June 2, 1960 in the Court of First Instance of Rizal. Alleging breach of contracts in bad faith by defendant, plaintiffs asked for P500,000 actual and moral damages, P100,000 exemplary damages, P25,000 attorney's fees plus costs. PAN-AM filed its answer on June 22, 1960, asserting that its failure to provide first class accommodations to plaintiffs was due to honest error of its employees. It also interposed a counterclaim for attorney's fees of P25,000. Subsequently, further pleadings were filed, thus: plaintiffs' answer to the counterclaim, on July 25, 1960; plaintiffs' reply attached to motion for its admittance, on December 2, 1961; defendant's supplemental answer, on March 8, 1962; plaintiffs' reply to supplemental answer, on March 10, 1962; and defendant's amended supplemental answer, on July 10, 1962. After trial which took twenty-two (22) days ranging from November 25, 1960 to January 5, 1963 the Court of First Instance rendered its decision on November 13, 1963, the dispositive portion stating: In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant, which is accordingly ordered to pay the plaintiffs the following: (a) P100,000.00 as moral damages; (b) P20,000.00 as exemplary damages; (c) P25,000.00 as attorney's fees, and the costs of this action. So ordered. Plaintiffs, however, on November 21, 1963, moved for reconsideration of said judgment, asking that moral damages be increased to P400,000 and that six per cent (6%) interest per annum on the amount of the award be granted. And defendant opposed the same. Acting thereon the trial court issued an order on December 14, 1963, reconsidering the dispositive part of its decision to read as follows: In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant, which is accordingly ordered to pay the plaintiffs the following: (a) P150,000.00 as moral damages; (b) P25,000.00 as exemplary damages; with legal interest on both from the date of the filing of the ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 87

complaint until paid; and (c) P25,000.00 as attorney's fees; and the costs of this action. So ordered. It is from said judgment, as thus reconsidered, that both parties have appealed. Defendant, as stated, has from the start admitted that it breached its contracts with plaintiffs to provide them with first class accommodations in its Tokyo-San Francisco flight of May 24, 1960. In its appeal, however, it takes issue with the finding of the court a quo that it acted in bad faith in the branch of said contracts. Plaintiffs, on the other hand, raise questions on the amount of damages awarded in their favor, seeking that the same be increased to a total of P650,000. Anent the issue of bad faith the records show the respective contentions of the parties as follows. According to plaintiffs, defendant acted in bad faith because it deliberately refused to comply with its contract to provide first class accommodations to plaintiffs, out of racial prejudice against Orientals. And in support of its contention that what was done to plaintiffs is an oftrepeated practice of defendant, evidence was adduced relating to two previous instances of alleged racial discrimination by defendant against Filipinos in favor of "white" passengers. Said previous occasions are what allegedly happened to (1) Benito Jalbuena and (2) Cenon S. Cervantes and his wife. And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first class ticket from PAN-AM on April 13, 1960; he confirmed it on April 15, 1960 as to the Tokyo-Hongkong flight of April 20, 1960; PAN-AM similarly confirmed it on April 20, 1960. At the airport he and another Oriental Mr. Tung were asked to step aside while other passengers - including "white" passengers boarded PAN-AM's plane. Then PAN-AM officials told them that one of them had to stay behind. Since Mr. Tung was going all the way to London, Jalbuena was chosen to be left behind. PAN-AM's officials could only explain by saying there was "some mistake". Jalbuena thereafter wrote PAN-AM to protest the incident (Exh. B). As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on September 29, 1958 from Bangkok to Hongkong, he and his wife had to take tourist class, although they had first class tickets, which they had previously confirmed, because their seats in first class were given to "passengers from London." Against the foregoing, however, defendant's evidence would seek to establish its theory of honest mistake, thus: The first class reservations of Senator Lopez and party were made on March 29, 1960 together with those of four members of the Rufino family, for a total of eight (8) seats, as shown in their joint reservation card (Exh. 1). Subsequently on March 30, 1960, two other Rufinos secured reservations and were given a separate reservation card (Exh. 2). A new reservation card consisting of two

pages (Exhs. 3 and 4) was then made for the original of eight passengers, namely, Senator Lopez and party and four members of the Rufino family, the first page (Exh. 3) referring to 2 Lopezes, 2 Montelibanos and 1 Rufino and the second page (Exh. 4) referring to 3 Rufinos. On April 18, 1960 "Your Travel Guide" agency cancelled the reservations of the Rufinos. A telex message was thereupon sent on that date to PAN-AM's head office at San Francisco by Mariano Herranz, PAN-AM's reservations employee at its office in Escolta, Manila. (Annex A-Acker's to Exh. 6.) In said message, however, Herranz mistakenly cancelled all the seats that had been reserved, that is, including those of Senator Lopez and party. The next day April 1960 Herranz discovered his mistake, upon seeing the reservation card newly prepared by his co-employee Pedro Asensi for Sen. Lopez and party to the exclusion of the Rufinos (Exh. 5). It was then that Herranz sent another telex wire to the San Francisco head office, stating his error and asking for the reinstatement of the four (4) first class seats reserved for Senator Lopez and party (Annex A-Velasco's to Exh. 6). San Francisco head office replied on April 22, 1960 that Senator Lopez and party are waitlisted and that said office is unable to reinstate them (Annex B-Velasco's to Exh. 6). Since the flight involved was still more than a month away and confident that reinstatement would be made, Herranz forgot the matter and told no one about it except his co-employee, either Armando Davila or Pedro Asensi or both of them (Tsn., 123-124, 127, Nov. 17, 1961). Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations employee working in the same Escolta office as Herranz, phoned PAN-AM's ticket sellers at its other office in the Manila Hotel, and confirmed the reservations of Senator Lopez and party. PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's mistake after "Your Travel Guide" phone on May 18, 1960 to state that Senator Lopez and party were going to depart as scheduled. Accordingly, Jose sent a telex wire on that date to PAN-AM's head office at San Francisco to report the error and asked said office to continue holding the reservations of Senator Lopez and party (Annex B-Acker's to Exh. 6). Said message was reiterated by Jose in his telex wire of May 19, 1960 (Annex C-Acker's to Exh. 6). San Francisco head office replied on May 19, 1960 that it regrets being unable to confirm Senator Lopez and party for the reason that the flight was solidly booked (Exh. 7). Jose sent a third telex wire on May 20, 1960 addressed to PAN-AM's offices at San Francisco, New York (Idlewild Airport), Tokyo and Hongkong, asking all-out assistance towards restoring the cancelled spaces and for report of cancellations at their end (Annex D-Acker's to Exh. 6). San Francisco head office reiterated on May 20, 1960 that it could not reinstate the spaces and referred Jose to the Tokyo and Hongkong offices (Exh. 8). Also on May 20, the Tokyo office of PAN-AM wired Jose stating it will do everything possible (Exh. 9). Expecting that some cancellations of bookings would be made before the flight time, Jose decided to withhold from Senator Lopez and party, or their agent, the information that their reservations had been cancelled. Armando Davila having previously confirmed Senator Lopez and party's first class reservations to PAN-AM's ticket sellers at its Manila Hotel office, the latter sold

and issued in their favor the corresponding first class tickets on the 21st and 23rd of May, 1960. From the foregoing evidence of defendant it is in effect admitted that defendant through its agents first cancelled plaintiffs, reservations by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel agent the fact of said cancellation, letting them go on believing that their first class reservations stood valid and confirmed. In so misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed reservations for the same, when in fact they had none, defendant wilfully and knowingly placed itself into the position of having to breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation by other passengers before flight time, as it turned out in this case. Such actuation of defendant may indeed have been prompted by nothing more than the promotion of its self-interest in holding on to Senator Lopez and party as passengers in its flight and foreclosing on their chances to seek the services of other airlines that may have been able to afford them first class accommodations. All the time, in legal contemplation such conduct already amounts to action in bad faith. For bad faith means a breach of a known duty through some motive of interest or ill-will (Spiegel vs. Beacon Participations, 8 NE 2d 895, 907). As stated in Kamm v. Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: "Self-enrichment or fraternal interest, and not personal ill-will, may well have been the motive; but it is malice nevertheless." As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew that plaintiffs' reservations had been cancelled. As of May 20 he knew that the San Francisco head office stated with finality that it could not reinstate plaintiffs' cancelled reservations. And yet said reservations supervisor made the "decision" to use his own, word to withhold the information from the plaintiffs. Said Alberto Jose in his testimony: Q Why did you not notify them? A Well, you see, sir, in my fifteen (15) years of service with the air lines business my experience is that even if the flights are solidly booked months in advance, usually the flight departs with plenty of empty seats both on the first class and tourist class. This is due to late cancellation of passengers, or because passengers do not show up in the airport, and it was our hope others come in from another flight and, therefore, are delayed and, therefore, missed their connections. This experience of mine, coupled with that wire from Tokyo that they would do everything possible prompted me to withhold the information, but unfortunately, instead of the first class seat that I was hoping for and which I anticipated only the tourists class was open on which Senator and Mrs. Lopez, Mr. and Mrs. Montelibano were accommodated. Well, I fully realize now the gravity of my decision in not advising Senator and Mrs. Lopez, Mr. and Mrs. Montelibano nor their agents about the erroneous cancellation and for which I would like them to know that I am very sorry. xxx xxx xxx

Q So it was not your duty to notify Sen. Lopez and parties that their reservations had been cancelled since May 18, 1960? ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 88

A As I said before it was my duty. It was my duty but as I said again with respect to that duty I have the power to make a decision or use my discretion and judgment whether I should go ahead and tell the passenger about the cancellation. (Tsn., pp. 17-19, 28-29, March 15, 1962.) At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that their reservation had not been cancelled. An additional indication of this is the fact that upon the face of the two tickets of record, namely, the ticket issued to Alfredo Montelibano, Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs. Alfredo Montelibano, Jr., on May 23, 1960 (Exh. 23), the reservation status is stated as "OK". Such willful-nondisclosure of the cancellation or pretense that the reservations for plaintiffs stood and not simply the erroneous cancellation itself is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in this respect defendant clearly acted in bad faith. As if to further emphasize its bad faith on the matter, defendant subsequently promoted the employee who cancelled plaintiffs' reservations and told them nothing about it. The record shows that said employee Mariano Herranz was not subjected to investigation and suspension by defendant but instead was given a reward in the form of an increase of salary in June of the following year (Tsn., 86-88, Nov. 20, 1961). At any rate, granting all the mistakes advanced by the defendant, there would at least be negligence so gross and reckless as to amount to malice or bad faith (Fores vs. Miranda, L-12163, March 4, 1959; Necesito v. Paras, L-10605-06, June 30, 1958). Firstly, notwithstanding the entries in the reservation cards (Exhs. 1 & 3) that the reservations cancelled are those of the Rufinos only, Herranz made the mistake, after reading said entries, of sending a wire cancelling all the reservations, including those of Senator Lopez and party (Tsn., pp. 108-109, Nov. 17, 1961). Secondly, after sending a wire to San Francisco head office on April 19, 1960 stating his error and asking for reinstatement, Herranz simply forgot about the matter. Notwithstanding the reply of San Francisco head Office on April 22, 1960 that it cannot reinstate Senator Lopez and party (Annex BVelasco's to Exh. 6), it was assumed and taken for granted that reinstatement would be made. Thirdly, Armando Davila confirmed plaintiff's reservations in a phone call on April 27, 1960 to defendant's ticket sellers, when at the time it appeared in plaintiffs' reservation card (Exh. 5) that they were only waitlisted passengers. Fourthly, defendant's ticket sellers issued plaintiffs' tickets on May 21 and 23, 1960, without first checking their reservations just before issuing said tickets. And, finally, no one among defendant's agents notified Senator Lopez and party that their reservations had been cancelled, a precaution that could have averted their entering with defendant into contracts that the latter had already placed beyond its power to perform. Accordingly, there being a clear admission in defendant's evidence of facts amounting to a bad faith on its part in regard to the breach of its contracts with plaintiffs, it becomes unnecessary to further discuss the evidence adduced by plaintiffs to establish defendant's bad faith. For what is admitted in the course of the trial does not need to be proved (Sec. 2, Rule 129, Rules of Court). Addressing ourselves now to the question of damages, it is well to state at the outset those rules and principles. First, moral damages are recoverable in breach

of contracts where the defendant acted fraudulently or in bad faith (Art. 2220, New Civil Code). Second, in addition to moral damages, exemplary or corrective damages may be imposed by way of example or correction for the public good, in breach of contract where the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner (Articles 2229, 2232, New Civil Code). And, third, a written contract for an attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable (Sec. 24, Rule 138, Rules of Court). First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets issued by defendant and yet they were given only the tourist class. At stop-overs, they were expected to be among the firstclass passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. Senator Lopez was then Senate President Pro Tempore. International carriers like defendant know the prestige of such an office. For the Senate is not only the Upper Chamber of the Philippine Congress, but the nation's treaty-ratifying body. It may also be mentioned that in his aforesaid office Senator Lopez was in a position to preside in impeachment cases should the Senate sit as Impeachment Tribunal. And he was former Vice-President of the Philippines. Senator Lopez was going to the United States to attend a private business conference of the Binalbagan-Isabela Sugar Company; but his aforesaid rank and position were by no means left behind, and in fact he had a second engagement awaiting him in the United States: a banquet tendered by Filipino friends in his honor as Senate President Pro Tempore (Tsn., pp. 14-15, Nov. 25, 1960). For the moral damages sustained by him, therefore, an award of P100,000.00 is appropriate. Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and therefore his humiliation. In addition she suffered physical discomfort during the 13-hour trip,(5 hours from Tokyo to Honolulu and 8 hours from Honolulu to San Francisco). Although Senator Lopez stated that "she was quite well" (Tsn., p. 22, Nov. 25, 1960) he obviously meant relatively well, since the rest of his statement is that two months before, she was attackedby severe flu and lost 10 pounds of weight and that she was advised by Dr. Sison to go to the United States as soon as possible for medical check-up and relaxation, (Ibid). In fact, Senator Lopez stated, as shown a few pages after in the transcript of his testimony, that Mrs. Lopez was sick when she left the Philippines: A. Well, my wife really felt very bad during the entire trip from Tokyo to San Francisco. In the first place, she was sick when we left the Philippines, and then with that discomfort which she [experienced] or suffered during that evening, it was her worst experience. I myself, who was not sick, could not sleep because of the discomfort. (Tsn., pp. 27-28, Nov. 25, 1960). It is not hard to see that in her condition then a physical discomfort sustained for thirteen hours may well be considered a physical suffering. And even without regard to the noise and trepidation inside the plane which defendant

contends, upon the strengh of expert testimony, to be practically the same in first class and tourist class the fact that the seating spaces in the tourist class are quite narrower than in first class, there beingsix seats to a row in the former as against four to a row in the latter, and that in tourist class there is very little space for reclining in view of the closer distance between rows (Tsn., p. 24, Nov. 25, 1960), will suffice to show that the aforesaid passenger indeed experienced physical suffering during the trip. Added to this, of course, was the painfull thought that she was deprived by defendant after having paid for and expected the same of the most suitable, place for her, the first class, where evidently the best of everything would have been given her, the best seat, service, food and treatment. Such difference in comfort between first class and tourist class is too obvious to be recounted, is in fact the reason for the former's existence, and is recognized by the airline in charging a higher fare for it and by the passengers in paying said higher rate Accordingly, considering the totality of her suffering and humiliation, an award to Mrs. Maria J. Lopez of P50,000.00 for moral damages will be reasonable. Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate members of the family of Senator Lopez. They formed part of the Senator's party as shown also by the reservation cards of PAN-AM. As such they likewise shared his prestige and humiliation. Although defendant contends that a few weeks before the flight they had asked their reservations to be charged from first class to tourist class which did not materialize due to alleged full booking in the tourist class the same does not mean they suffered no shared in having to take tourist class during the flight. For by that time they had already been made to pay for first class seats and therefore to expect first class accommodations. As stated, it is one thing to take the tourist class by free choice; a far different thing to be compelled to take it notwithstanding having paid for first class seats. Plaintiffs-appellants now ask P37,500.00 each for the two but we note that in their motion for reconsideration filed in the court a quo, they were satisfied with P25,000.00 each for said persons. (Record on Appeal, p. 102). For their social humiliation, therefore, the award to them of P25,000.00 each is reasonable. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages (Articles 2229, 2232, New Civil Code). In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts in the future by defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or corrective damages. Now, as to attorney's fees, the record shows a written contract of services executed on June 1, 1960 (Exh. F) whereunder plaintiffs-appellants engaged the services of their counsel Atty. Vicente J. Francisco and agreedto pay the sum of P25,000.00 as attorney's fees upon the termination of the case in the Court of First Instance, and an additional sum of P25,000.00 in the event the case is appealed to the Supreme Court. As said earlier, a written contract for attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable. A consideration of the subject matter of the present controversy, of the professional standing of the attorney for plaintiffs-appellants, and of the extent of the service rendered by him, shows that said amount provided for in the written agreement is reasonable. Said ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 89

lawyer whose prominence in the legal profession is well known studied the case, prepared and filed the complaint, conferred with witnesses, analyzed documentary evidence, personally appeared at the trial of the case in twentytwo days, during a period of three years, prepared four sets of crossinterrogatories for deposition taking, prepared several memoranda and the motion for reconsideration, filed a joint record on appeal with defendant, filed a brief for plaintiffs as appellants consisting of 45 printed pages and a brief for plaintiffs as appellees consisting of 265 printed pages. And we are further convinced of its reasonableness because defendant's counsel likewise valued at P50,000.00 the proper compensation for his services rendered to defendant in the trial court and on appeal. In concluding, let it be stressed that the amount of damages awarded in this appeal has been determined by adequately considering the official, political, social, and financial standing of the offended parties on one hand, and the business and financial position of the offender on the other (Domingding v. Ng, 55 O.G. 10). And further considering the present rate of exchange and the terms at which the amount of damages awarded would approximately be in U.S. dollars, this Court is all the more of the view that said award is proper and reasonable. Wherefore, the judgment appealed from is hereby modified so as to award in favor of plaintiffs and against defendant, the following: (1) P200,000.00 as moral damages, divided among plaintiffs, thus: P100,000.00 for Senate President Pro Tempore Fernando Lopez; P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his son-in-law Alfredo Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo Montelibano, Jr.; (2) P75,000.00 as exemplary or corrective damages; (3) interest at the legal rate of 6% per annum on the moral and exemplary damages aforestated, from December 14, 1963, the date of the amended decision of the court a quo, until said damages are fully paid; (4) P50,000.00 as attorney's fees; and (5) the costs. Counterclaim dismissed.So ordered.

petitioner claimed that the incident was purely accidental and that it has always exercised extraordinary diligence in its 50 years of operation. After several re-settings,[7] pre-trial was set on April 10, 1997.[8] For failure 4. to appear on the said date, petitioner was declared as in default.[9] However, on petitioners motion[10] to lift the order of default, the same was granted by the trial court.[11] At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the deceased was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for their part, did not accept petitioners proposal to pay P50,000.00.[12] After respondent Rosalito Gammad completed his direct testimony, crossexamination was scheduled for November 17, 1997[13] but moved to December 8, 1997,[14] because the parties and the counsel failed to appear. On December 8, 1997, counsel of petitioner was absent despite due notice and was deemed to have waived right to cross-examine respondent Rosalito.[15] Petitioners motion to reset the presentation of its evidence to March 25, 1998[16] was granted. However, on March 24, 1998, the counsel of petitioner sent the court a telegram[17] requesting postponement but the telegram was received by the trial court on March 25, 1998, after it had issued an order considering the case submitted for decision for failure of petitioner and counsel to appear.[18] On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive portion of which reads: WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered in favor of the plaintiffs and against the defendant Victory Liner, Incorporated, ordering the latter to pay the following: 1. 2. 3. 4. 5. 6. Actual Damages -------------------- P 122,000.00 Death Indemnity --------------------50,000.00 Exemplary and Moral Damages----- 400,000.00 Compensatory Damages ---------- 1,500,000.00 Attorneys Fees ------------ 10% of the total amount granted Cost of the Suit.

3.

Moral and Exemplary Damages in the amount of P400,000.00; and

Attorneys fees equivalent to 10% of the sum of the actual, compensatory, moral, and exemplary damages herein adjudged. The court a quos judgment of the cost of the suit against defendant-appellant is hereby AFFIRMED. SO ORDERED.[20] Represented by a new counsel, petitioner on May 21, 2003 filed a motion for reconsideration praying that the case be remanded to the trial court for cross- examination of respondents witness and for the presentation of its evidence; or in the alternative, dismiss the respondents complaint.[21] Invoking APEX Mining, Inc. v. Court of Appeals,[22] petitioner argues, inter alia, that the decision of the trial court should be set aside because the negligence of its former counsel, Atty. Antonio B. Paguirigan, in failing to appear at the scheduled hearings and move for reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents witness and right to present evidence, deprived petitioner of its day in court. On August 21, 2003, the Court of Appeals denied petitioners motion for reconsideration.[23] Hence, this petition for review principally based on the fact that the mistake or gross negligence of its counsel deprived petitioner of due process of law. Petitioner also argues that the trial courts award of damages were without basis and should be deleted. The issues for resolution are: (1) whether petitioners counsel was guilty of gross negligence; (2) whether petitioner should be held liable for breach of contract of carriage; and (3) whether the award of damages was proper. It is settled that the negligence of counsel binds the client. This is based on the rule that any act performed by a counsel within the scope of his general or implied authority is regarded as an act of his client. Consequently, the mistake or negligence of counsel may result in the rendition of an unfavorable judgment against the client. However, the application of the general rule to a given case should be looked into and adopted according to the surrounding circumstances obtaining. Thus, exceptions to the foregoing have been recognized by the court in cases where reckless or gross negligence of counsel deprives the client of due process of law, or when its application will result in outright deprivation of the clients liberty or property or where the interests of justice so require, and accord relief to the client who suffered by reason of the lawyers gross or palpable mistake or negligence.[24] The exceptions, however, are not present in this case. The record shows that Atty. Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially declared as in default, Atty. Paguirigan successfully moved for the setting aside of the order of default. In fact, petitioner was represented by Atty. Paguirigan at the pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed to file motions for reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents witness and to present evidence, he nevertheless, filed a timely appeal with the Court of ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 90

CTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI ROZANO P. GAMMAD and DIANA FRANCES P. GAMMAD, respondents. DECISION YNARES-SANTIAGO, J.: Assailed in this petition for review on certiorari is the April 11, 2003 decision[1] of the Court of Appeals in CA-G.R. CV No. 63290 which affirmed with modification the November 6, 1998 decision[2] of the Regional Trial Court of Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of carriage in Civil Case No. 5023. The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace Pagulayan-Gammad,[3] was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries to other passengers.[4] On May 14, 1996, respondent heirs of the deceased filed a complaint[5] for damages arising from culpa contractual against petitioner. In its answer,[6] the

SO ORDERED.[19] On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification as follows: [T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the following are hereby adjudged in favor of plaintiffs-appellees: 1. 2. Actual Damages in the amount of P88,270.00; Compensatory Damages in the amount of P1,135,536,10;

Appeals assailing the decision of the trial court. Hence, petitioners claim that it was denied due process lacks basis. Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it as in default for not appearing at the pre-trial, three notices (dated October 23, 1996,[25] January 30, 1997,[26] and March 26, 1997,[27]) requiring attendance at the pre-trial were sent and duly received by petitioner. However, it was only on April 27, 1997, after the issuance of the April 10, 1997 order of default for failure to appear at the pre-trial when petitioner, through its finance and administrative manager, executed a special power of attorney[28] authorizing Atty. Paguirigan or any member of his law firm to represent petitioner at the pre-trial. Petitioner is guilty, at the least, of contributory negligence and fault cannot be imputed solely on previous counsel. The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case at bar. In APEX, the negligent counsel not only allowed the adverse decision against his client to become final and executory, but deliberately misrepresented in the progress report that the case was still pending with the Court of Appeals when the same was dismissed 16 months ago.[29] These circumstances are absent in this case because Atty. Paguirigan timely filed an appeal from the decision of the trial court with the Court of Appeals. In Gold Line Transit, Inc. v. Ramos, the Court was similarly confronted with the issue of whether or not the client should bear the adverse consequences of its counsels negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer failed to appear at the pre-trial despite notice and was declared as in default. After the plaintiffs presentation of evidence ex parte, the trial court rendered decision ordering Gold Line to pay damages to the heirs of its deceased passenger. The decision became final and executory because counsel of Gold Line did not file any appeal. Finding that Goldline was not denied due process of law and is thus bound by the negligence of its lawyer, the Court held as follows This leads us to the question of whether the negligence of counsel was so gross and reckless that petitioner was deprived of its right to due process of law. We do not believe so. It cannot be denied that the requirements of due process were observed in the instant case. Petitioner was never deprived of its day in court, as in fact it was afforded every opportunity to be heard. Thus, it is of record that notices were sent to petitioner and that its counsel was able to file a motion to dismiss the complaint, an answer to the complaint, and even a pretrial brief. What was irretrievably lost by petitioner was its opportunity to participate in the trial of the case and to adduce evidence in its behalf because of negligence. In the application of the principle of due process, what is sought to be safeguarded against is not the lack of previous notice but the denial of the opportunity to be heard. The question is not whether petitioner succeeded in defending its rights and interests, but simply, whether it had the opportunity to present its side of the controversy. Verily, as petitioner retained the services of counsel of its choice, it should, as far as this suit is concerned, bear the consequences of its choice of a faulty option. Its plea that it was deprived of due process echoes on hollow ground and certainly cannot elicit approval nor sympathy.
[30]

To cater to petitioners arguments and reinstate its petition for relief from judgment would put a premium on the negligence of its former counsel and encourage the non-termination of this case by reason thereof. This is one case where petitioner has to bear the adverse consequences of its counsels act, for a client is bound by the action of his counsel in the conduct of a case and he cannot thereafter be heard to complain that the result might have been different had his counsel proceeded differently. The rationale for the rule is easily discernible. If the negligence of counsel be admitted as a reason for opening cases, there would never be an end to a suit so long as a new counsel could be hired every time it is shown that the prior counsel had not been sufficiently diligent, experienced or learned.[31] Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation employee charged with dishonesty was not able to file an answer and position paper. He was found guilty solely on the basis of complainants evidence and was dismissed with forfeiture of all benefits and disqualification from government service. Challenging the decision of the Ombudsman, the employee contended that the gross negligence of his counsel deprived him of due process of law. In debunking his contention, the Court said Neither can he claim that he is not bound by his lawyers actions; it is only in case of gross or palpable negligence of counsel when the courts can step in and accord relief to a client who would have suffered thereby. If every perceived mistake, failure of diligence, lack of experience or insufficient legal knowledge of the lawyer would be admitted as a reason for the reopening of a case, there would be no end to controversy. Fundamental to our judicial system is the principle that every litigation must come to an end. It would be a clear mockery if it were otherwise. Access to the courts is guaranteed, but there must be a limit to it. Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument that it was denied due process of law due to negligence of its counsel would set a dangerous precedent. It would enable every party to render inutile any adverse order or decision through the simple expedient of alleging gross negligence on the part of its counsel. The Court will not countenance such a farce which contradicts long-settled doctrines of trial and procedure.[33] Anent the second issue, petitioner was correctly found liable for breach of contract of carriage. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard to all the circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.[34] In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of Marie Graces death was the negligence of petitioner. Hence, the courts below correctly ruled that petitioner was guilty of breach of contract of carriage. Nevertheless, the award of damages should be modified.

Article 1764[35] in relation to Article 2206[36] of the Civil Code, holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages. In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace which under current jurisprudence is fixed at P50,000.00.[37] The award of compensatory damages for the loss of the deceaseds earning capacity should be deleted for lack of basis. As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the deceaseds line of work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.[38] In People v. Oco,[39] the evidence presented by the prosecution to recover damages for loss of earning capacity was the bare testimony of the deceaseds wife that her husband was earning P8,000.00 monthly as a legal researcher of a private corporation. Finding that the deceased was neither self-employed nor employed as a daily-wage worker earning less than the minimum wage under the labor laws existing at the time of his death, the Court held that testimonial evidence alone is insufficient to justify an award for loss of earning capacity. Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not awarded because the circumstances of the 3 deceased did not fall within the recognized exceptions, and except for the testimony of their wives, no documentary proof about their income was presented by the prosecution. Thus The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio Castro Jr. were not self-employed or employed as daily-wage workers earning less than the minimum wage under the labor laws existing at the time of their death. Placido Agustin was a Social Security System employee who received a monthly salary of P5,000. Roberto Raagas was the President of Sinclair Security and Allied Services, a family owned corporation, with a monthly compensation of P30,000. Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily earning of P500 or a monthly earning of P7,500. Clearly, these cases do not fall under the exceptions where indemnity for loss of earning capacity can be given despite lack of documentary evidence. Therefore, for lack of documentary proof, no indemnity for loss of earning capacity can be given in these cases. (Emphasis supplied) Here, the trial court and the Court of Appeals computed the award of compensatory damages for loss of earning capacity only on the basis of the testimony of respondent Rosalito that the deceased was 39 years of age and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a salary of P83,088.00 per annum when she died.[41] No other evidence was presented. The award is clearly erroneous because the deceaseds earnings does not fall within the exceptions.

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However, the fact of loss having been established, temperate damages in the amount of P500,000.00 should be awarded to respondents. Under Article 2224 of the Civil Code, temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty. In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of P200,000.00 as temperate damages in lieu of actual damages for loss of earning capacity because the income of the victim was not sufficiently proven, thus The trial court based the amounts of damages awarded to the petitioner on the following circumstances: As to the loss or impairment of earning capacity, there is no doubt that Pleno is an ent[re]preneur and the founder of his own corporation, the Mayon Ceramics Corporation. It appears also that he is an industrious and resourceful person with several projects in line, and were it not for the incident, might have pushed them through. On the day of the incident, Pleno was driving homeward with geologist Longley after an ocular inspection of the site of the Mayon Ceramics Corporation. His actual income however has not been sufficiently established so that this Court cannot award actual damages, but, an award of temperate or moderate damages may still be made on loss or impairment of earning capacity. That Pleno sustained a permanent deformity due to a shortened left leg and that he also suffers from double vision in his left eye is also established. Because of this, he suffers from some inferiority complex and is no longer active in business as well as in social life. In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage, et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et al., L-11394, Sept. 9, 1958, the proper award of damages were given. We rule that the lower courts awards of damages are more consonant with the factual circumstances of the instant case. The trial courts findings of facts are clear and well-developed. Each item of damages is adequately supported by evidence on record. Article 2224 of the Civil Code was likewise applied in the recent cases of People v. Singh[43] and People v. Almedilla,[44] to justify the award of temperate damages in lieu of damages for loss of earning capacity which was not substantiated by the required documentary proof. Anent the award of moral damages, the same cannot be lumped with exemplary damages because they are based on different jural foundations.[45] These damages are different in nature and require separate determination.[46] In culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of contractual obligations and, as in this case, when the act of breach of contract itself

constitutes the tort that results in physical injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also be awarded in case the death of a passenger results from a breach of carriage.[47] On the other hand, exemplary damages, which are awarded by way of example or correction for the public good may be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.[48] Respondents in the instant case should be awarded moral damages to compensate for the grief caused by the death of the deceased resulting from the petitioners breach of contract of carriage. Furthermore, the petitioner failed to prove that it exercised the extraordinary diligence required for common carriers, it is presumed to have acted recklessly.[49] Thus, the award of exemplary damages is proper. Under the circumstances, we find it reasonable to award respondents the amount of P100,000.00 as moral damages and P100,000.00 as exemplary damages. These amounts are not excessive.[50] The actual damages awarded by the trial court reduced by the Court of Appeals should be further reduced. In People v. Duban,[51] it was held that only substantiated and proven expenses or those that appear to have been genuinely incurred in connection with the death, wake or burial of the victim will be recognized. A list of expenses (Exhibit J),[52] and the contract/receipt for the construction of the tomb (Exhibit F)[53] in this case, cannot be considered competent proof and cannot replace the official receipts necessary to justify the award. Hence, actual damages should be further reduced to P78,160.00,[54] which was the amount supported by official receipts. Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be recovered in the case at bar where exemplary damages are awarded. The Court finds the award of attorneys fees equivalent to 10% of the total amount adjudged against petitioner reasonable. Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held that when an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit 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 credit. (Emphasis supplied). In the instant case, petitioner should be held liable for payment of interest as damages for breach of contract of carriage. Considering that the amounts payable by petitioner has been determined with certainty only in the instant petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, per paragraph 3 of the aforecited rule.[57] WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The April 11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which modified the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3) P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5) P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys fees; and the costs of suit. Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12% per annum computed from the finality of this decision until fully paid. SO ORDERED. SULPICIO LINES, INC., Petitioner, vs. The Honorable COURT OF APPEALS and TITO DURAN TABUQUILDE and ANGELINA DE PAZ TABUQUILDE,respondents.

QUIASON, J.: This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the decision of the Court of Appeals in CA-G.R. CV No. 32864, which affirmed the decision of the Regional Trial Court, Branch 85, Quezon City in Civil Case No. Q-89-3048. I The Court of Appeals found:

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On October 23, 1988, plaintiff Tito Duran Tabuquilde (hereinafter, "Tito") and his three-year old daughter Jennifer Anne boarded the M/V Dona Marilyn at North Harbor, Manila, bringing with them several pieces of luggage. In the morning of October 24, 1988, the M/V Dona Marilyn, while in transit, encountered inclement weather which caused huge waves due to Typhoon Unsang. Notwithstanding the fact that Storm Signal No. 2 had been raised by the PAGASA authorities over Leyte as early as 5:30 P.M. of October 23, 1988 and which signal was raised to Signal No. 3 by 10 P.M. of the same day, the ship captain ordered the vessel to proceed to Tacloban when prudence dictated that he should have taken it to the nearest port for shelter, thus violating his duty to exercise extraordinary diligence in the carrying of passengers safely to their destination. At about the same time, plaintiff-appellee Angelina Tabuquilde (hereinafter, "Angelina") mother of Jennifer Anne, contacted the Sulpicio Office to verify radio reports that the vessel M/V Dona Marilyn was missing. Employees of said Sulpicio Lines assured her that the ship was merely "hiding" thereby assuaging her anxiety. At around 2:00 P.M. of October 24, 1988, said vessel capsized, throwing plaintiffappellee Tito and Jennifer Anne, along with hundreds of passengers, into the tumultuous sea. Tito tried to keep himself and his daughter afloat but to no avail as the waves got stronger and he was subsequently separated from his daughter despite his efforts. He found himself on Almagro Island in Samar the next day at round (sic) 11:00 A.M. and immediately searched for his daughter among the survivors in the island, but the search proved fruitless. In the meantime, Angelina tried to seek the assistance of the Sulpicio Lines in Manila to no avail, the latter refusing to entertain her and hundreds of relatives of the other passengers who waited long hours outside the Manila Office. Angelina spent sleepless nights worrying about her husband Tito and daughter Jennifer Anne in view of the refusal of Sulpicio Lines to release a verification of the sinking of the ship. On October 26, 1988, Tito and other survivors in the Almagro Island were fetched and were brought to Tacloban Medical Center for treatment. On October 31, 1988, Tito reported the loss of his daughter, was informed that the corpse of a child with his daughter's description had been found. Subsequently, Tito wrote a letter to his wife, reporting the sad fact that Jennifer Anne was dead. Angelina suffered from shock and severe grief upon receipt of the news.

On November 3, 1988, the coffin bearing the corpse of Jennifer Anne was buried in Tanauan, Leyte. On November 24, 1988, a claim for damages was filed by Tito with the defendant Sulpicio Lines in connection with the death of the plaintiff-appellee's daughter and the loss of Tito's belongings worth P27,580.00. (Appellees' Brief, pp. 2-4) ( Rollo, pp. 52-54). On January 3, 1991, the trial court rendered a decision in Civil Case No. Q-893048 in favor of the plaintiffs Tito Duran Tabuquilde and Angelina de Paz Tabuquilde (private respondents herein) and against defendant Sulpicio Lines, Inc. (petitioner herein) ordering defendant to pay P27,580.00 as actual damages, P30,000.00 for the death of Jennifer Tabuquilde, P100,000.00 as moral damages, P50,000.00 as exemplary damages, and P50,000.00 as attorney's fees, and costs. Petitioner appealed to the Court of Appeals which affirmed the decision of the trial court. Petitioner then filed a motion for reconsideration which was denied. Hence, this petition. II Generally, the findings of fact of the trial court are entitled to great weight and not disturbed except for cogent reasons (Gatmaitan v. Court of Appeals, 200 SCRA 37 [1991]). One of the accepted reasons is when the findings of fact are not supported by the evidence (Sandoval Shipyard, Inc. v. Clave, 94 SCRA 472 [1979]). Corollary to this is the rule that actual or compensatory damages, to be recovered, must be proved; otherwise, if the proof is flimsy, no damages will be awarded (Dichoso v. Court of Appeals, 192 SCRA 169 [1990]). In the case at bench, the trial court merely mentioned the fact of the loss and the value of the contents of the pieces of baggage without stating the evidence on which it based its findings. There is no showing that the value of the contents of the lost pieces of baggage was based on the bill of lading or was previously declared by respondent Tito D. Tabuquilde before he boarded the ship. Hence, there can be no basis to award actual damages in the amount of P27,850.00. The Court of Appeals was correct in confirming the award of damages for the death of the daughter of private respondents, a passenger on board the stricken vessel of petitioner. It is true that under Article 2206 of the Civil Code of the Philippines, only deaths caused by a crime as quasi delict are entitled to actual and compensatory damages without the need of proof of the said damages. Said Article provides: The amount of damages for death caused by a crime or quasi delict shall be at least Three Thousand Pesos, even though there may have been mitigating circumstances. . . . Deducing alone from said provision, one can conclude that damages arising from culpa contractual are not compensable without proof of special damages sustained by the heirs of the victim.

However, the Civil Code, in Article 1764 thereof, expressly makes Article 2206 applicable "to the death of a passenger caused by the breach of contract by a common carrier." Accordingly, a common carrier is liable for actual or compensatory damages under Article 2206 in relation to Article 1764 of the Civil Code for deaths of its passengers caused by the breach of the contract of transportation. The trial court awarded an indemnity of P30,000.00 for the death of the daughter of private respondents. The award of damages under Article 2206 has been increased to P50,000.00 (People v. Flores, 237 SCRA 653 [1994]). With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa contractual except when the presence of bad faith was proven (Trans World Air Lines v. Court of Appeals, 165 SCRA 143 [1988]). However, in breach of contract of carriage, moral damages may be recovered when it results in the death of a passenger (Philippine Rabbit Bus Lines, Inc. v. Esguerra, 117 SCRA 741 [1982]; Vasquez v. Court of Appeals, 138 SCRA 553 [1985]). With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the Court the discretion to grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless manner (Air France v. Carrascoso, 18 SCRA 155 [1966]). Furthermore, in the case of Mecenas v. Court of Appeals, 180 SCRA 83 (1989), we ruled that: . . . . The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. . . . (at p. 100). A common carrier is obliged to transport its passengers to their destinations with the utmost diligence of a very cautious person (Laguna Tayabas Bus Co. v. Tiongson, 16 SCRA 940 [1966]). The trial court found that petitioner failed to exercise the extraordinary diligence required of a common carrier, which resulted in the sinking of the M/V Dona Marilyn. The trial court correctly concluded that the sinking of M/V Dona Marilyn was due to gross negligence, thus: . . . [i]t is undisputed that Typhoon Unsang entered the Philippine Area of Responsibility on October 21, 1988. The rain in Metro Manila started after lunch of October 23, 1988, and at about 5:00 p.m. Public Storm Signal No. 1 was hoisted over Metro Manila, Signal No. 2 in Leyte and Signal No. 3 in Samar. But at 10:00 o'clock (sic) in the morning of October 23, 1988, Public Storm Signal No. 1 was already hoisted over the province of Leyte, which is the destination of M/V ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 93

Dona Marilyn. This was raised to Signal No. 2 at 4:00 p.m. and Signal No. 3 at 10:00 p.m. on the same date. The following day, October 24, 1988, at 4:00 a.m. and 10:00 a.m., Storm Signal No. 3 remained hoisted in Leyte. At 4 p.m. on October 24, 1988, Storm Signal No. 3 remained hoisted in Leyte but was reduced to Storm Signal No. 2 (Exh. G). Signal No. 1 has maximum winds at 60 kph within 36 hours; Signal No. 2 has maximum winds of from 60 kph to 100 kph within a period of 24 hours; and Signal No. 3 has maximum winds of 100 kph and above within a period of 12 hours. Warnings of the storm signal are issued by PAG-ASA thru DZZA, Office of Civil Defense, Philippine Navy, Coast Guard, Radio Stations, and other offices, every six (6) hours as soon as a cyclone enters the Philippine Area of Responsibility. At 10:30 a.m. on October 24, 1988, the vessel was estimated to be between Mindoro and Masbate, and the center of the typhoon then was around 130 degrees longitude with maximum winds of 65 kph (Exh. G-3), with a "radius of rough to phenomenal sea at that time of 450 kms. North and 350 kms. elsewhere; 350 kms. North center and all throughout the rest" (p. 12, TSN, Lumalda, Feb. 19, 1990). xxx xxx xxx In the same manner, (referring to the negligence of the crew of the ship that sank in Vasquez v. Court of Appeals, 138 SCRA 553 [1985]) the crew of the vessel M/V Dona Marilyn took a calculated risk when it proceeded despite the typhoon brewing somewhere in the general direction to which the vessel was going. The crew assumed a greater risk when, instead of dropping anchor in or at the periphery of the Port of Calapan, or returning to the port of Manila which is nearer, proceeded on its voyage on the assumption that it will be able to beat and race with the typhoon and reach its destination before it (Unsang) passes ( Rollo, pp. 45-47). The award of attorney's fees by the trial court to respondents is also assailed by petitioner, citing Mirasol v. De la Cruz, 84 SCRA 337 (1978). In this case, the petitioner filed before the Municipal Court an action for forcible entry against the private respondent. The said court dismissed the complaint. On appeal, the Court of First Instance of Camarines Sur sustained the decision of the lower court, dismissed the appeal and awarded attorney's fees in the sum of not less than P500.00 in favor of private respondent. Upon appeal to us, we deleted the award of attorney's fees because the text of the appealed decision was bereft of any findings of fact and law to justify such an award. Moreover, there was no proof, other than the bare allegation of harassment that the adverse party had acted in bad faith. The aforementioned decision is inapposite to the instant case where the decision clearly mentions the facts and the law upon which the award of attorney's fees were based. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the award of P27,580.00 as actual damages for the loss of the contents of the pieces of baggage is deleted and that the award of P30,000.00 under Article 2206 in relation Article 1764 is increased to P50,000.00. SO ORDERED.

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. GAUDIOSO ERNESTO, MORE and JERWIN MORE, accused-appellants. DECISION BELLOSILLO, J.:

MORE,

GAUDIOSO, ERNESTO and JERWIN, all surnamed MORE, were found guilty of murder by the trial court for the killing of Valentino Pagumay on 22 February 1994 and sentenced to reclusion perpetua with all its accessory penalties and to pay P28,977.00 for funeral services and other expenses, P133,333.00 for loss of income for five (5) years, P100,000.00 for moral damages, and the costs.[1] They now come to us appealing their conviction. The factual backdrop: On 22 February 1994 at about six o'clock in the evening, Valentino Pagumay and Romeo Muralla were walking along the river in Brgy. Igsoligue, Miag-ao, Iloilo, on their way to nearby Brgy. Igbogo to get some tuba when they chanced upon the More brothers Gaudioso alias "Nono," Ernesto alias "Didoy" and Jerwin alias "Max" some three hundred (300) meters away. As they drew near, the accused who were armed with a gun and knives, inexplicably shouted why Valentino and Romeo were pointing guns at them. Both Valentino and Romeo were unarmed. When Valentino nervously told Romeo, who had no quarrel with the accused, that the More brothers were going to kill him, the duo ran as fast as they could. But the accused chased them. About three hundred (300) meters from where the chase began, the accused led by Jerwin finally caught up with Valentino who was lagging behind Romeo. Jerwin stabbed Valentino at the left side of his mouth. Ernesto followed by stabbing the victim in the chest. While Jerwin and Ernesto were stabbing Valentino Gaudioso held their captive by the shoulders. Gaudioso then took his turn and stabbed Valentino on the chest causing the latter to fall to the ground. The three (3) accused persisted in their criminal design and pinned their victim down with their hands and knees. They took turns in stabbing him again several times. As the stabbing progressed Romeo was having an unobstructed view of the occurrence some ten (10) meters away. After they were through with Valentino the accused turned to Romeo and warned him against telling anybody about the incident and ordered him to go home. The three (3) More brothers then ran away. When the More brothers were already farther down the river Romeo noticed Juanito Faromal standing a few meters away from the crime scene. After seeing Valentino already lifeless Romeo left to inform the victim's wife, but on the way he met Sgt. Romeo Gersa so he reported the matter to him.[2] Sgt. Gersa pursued the accused but could not apprehend them as he already got tired. When he fired a warning shot the three (3) accused retaliated and fired three (3) shots instead. Juanito corroborated the testimony of Romeo regarding the assault except that according to him it was only Gaudioso who stabbed the victim while his brothers Jerwin and Ernesto only assisted in restraining the victim. The accused, on their part, invoked self defense. The version of Ernesto and Jerwin was that at about six o'clock in the evening of 22 February 1994 they were walking along a road in Brgy. Igsoligue about ten (10) arms' length ahead of

their brother Gaudioso when they heard someone ask the latter for a light for his cigarette. Ernesto and Jerwin did not recognize the voice. About two (2) minutes later they heard a gun explode. They looked back and saw Gaudioso and Valentino already on the ground wrestling with each other. Gaudioso was sitting astride Valentino as he stabbed the latter.[3] Ernesto and Jerwin rushed towards the two (2) - Gaudioso and Valentino - entreating Gaudioso to stop, but to no avail. Gaudioso only stopped when Valentino was already dead. Gaudioso then explained to his brothers that he stabbed Valentino because the latter was going to shoot him. Afterwards they went home and did not report the incident anymore to the barangay captain since it was already late. Gaudioso claimed that when he handed his cigarette to Valentino upon the latter's request he, instead of taking the cigarette, suddenly drew a .38 caliber gun and pointed it at him with the words: "I will shoot you.[4] Reacting immediately, Gaudioso, using both hands, frustrated Valentino's attempt by grabbing the latter's right hand that was holding the gun, twisted it, and then used his foot to outbalance Valentino sending the latter to the ground. Thus Valentino was not able to fire his gun. Gaudioso then straddled Valentino and pinned his left hand with his right knee while his left hand held Valentino's right that was clutching the gun. In this position, Gaudioso repeatedly stabbed Valentino until the latter died.[5] On 9 May 1996 the trial court found all three (3) accused, Gaudioso, Ernesto and Jerwin More, guilty as principals by conspiracy for the murder of Valentino Pagumay, qualified by abuse of superior strength. The trial court sustained the version of the prosecution and rejected the theory of self-defense primarily in view of the eighteen (18) stab wounds sustained by the victim and the fact that they were caused by at least two (2) different knives, one singlebladed and the other double-bladed, indicating that there were at least two (2) assailants. The three (3) accused were accordingly sentenced to suffer the penalty of reclusion perpetua with all its accessory penalties, and to pay damages in the total amount of P262,310.00 plus the costs. Accused-appellants contend in this appeal that the trial court erred: (a) in not appreciating in their favor the justifying circumstance of self-defense, insisting that all the elements thereof were successfully established, and, (b) in finding them guilty beyond reasonable doubt of murder notwithstanding the inconsistencies in the testimonies of prosecution witnesses Romeo Muralla, Juanito Faromal and Sgt. Gersa. We find no merit in the appeal. When self-defense is invoked by an accused charged with murder or homicide he necessarily owns up to the killing but may escape criminal liability by proving that it was justified and that he incurred no criminal liability therefor.[6] Hence, the three (3) elements of selfdefense, namely: (a) unlawful aggression on the part of the victim; (b) reasonable necessity of the means employed to prevent or repel the aggression; and, (c) lack of sufficient provocation on the part of the person defending himself, which must be proved by clear and convincing evidence.[7] However, without unlawful aggression there can be no self-defense, either complete or incomplete.[8] In the instant case, accused-appellants sought to establish unlawful aggression on the part of Valentino Pagumay by testifying that the latter, after asking Gaudioso for a light for his cigarette, suddenly and for no reason at all, drew his gun and pointed it at Gaudioso with the threatening words, "I will shoot you."However, quite an enlightening and revealing narrative follows thus: ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 94

Q: When Valentino Pagumay drew his gun from his waist what did you do? A: Both my hands caught his hand holding the firearm x x x x Q: When you were able to grab the hand of Valentino Pagumay what happened next? A: He fell to the ground. Q: So you want to tell the Court that immediately after you grabbed or took hold of his hand he immediately fell to the ground? A: Yes sir because he wrestled with me when I took hold both of his hand (sic) and twisted his arm. Q: When Valentino Pagumay fell to the ground what did you do? A: After he fell to the ground I sat on his abdomen. My right knee was pinning down his left hand while my left hand was pinning on the ground his right hand and then I delivered several successive stab blows on his breast x x x x Q: And how many times did you stab him? A: I was not able to count the number of times because I was stabbing him successively. Q: And you cannot estimate the number of stab blows you delivered to him? A: I was not able to count the number of blows because I was stabbing and hitting him until his death (underscoring ours).[9] Clearly, the unlawful aggression allegedly started by Valentino - assuming it to be true - had already ceased by the time Gaudioso repeatedly stabbed Valentino to death. Gaudioso himself testified that after Valentino threatened to shoot him, he was able to grab Valentino's right hand which was holding the gun, outbalance him, and then pin both his hands while the latter was lying prone on the ground. Having thus immobilized Valentino, there was obviously no more reason for Gaudioso to stab Valentino eighteen (18) times as he did because the alleged unlawful aggression from Valentino had stopped. In legitimate self-defense the aggression must still be existing or continuing when the person making the defense attacks or injures the aggressor.[10] Thus when the unlawful aggression ceases to exist, the one making the defense has no more right to kill the former aggressor.[11] In such cases, less violent means would have sufficed; hence, if not resorted to, the plea of self-defense must fail.[12] In the instant case Valentino was already effectively immobilized by Gaudioso, hence, the latter could have either simply boxed the former with his free right hand, hit him on a non-vital part of his body,[13] or better yet, summoned his brothers Ernesto and Jerwin who were just standing a few meters away to help him in ensuring no further aggression from Valentino. However, quite inconsistent with his plea of self-defense, Gaudioso did none of these things. Instead, he even ignored his brothers' entreaties for him to stop, rebuffed their efforts to the extent of even accidentally hitting Jerwin as claimed by the latter,[14] and continued stabbing Valentino successively until the latter died.[15] Considering all these, the plea of self-defense cannot but be received with incredulity and disbelief. In addition to the foregoing, several other circumstances exist to further undermine the plea of self-defense and establish accused-appellants' collective guilt.

First, the trial court correctly noted that the victim sustained a total of eighteen (18) stab wounds, fourteen (14) of which were inflicted on the anterior chest alone, and four (4) of which were fatal. It is an oft-repeated rule that the presence of a large number of wounds on the part of the victim negates selfdefense because, rather than suggest an effort to defend oneself, it instead strongly indicates a determined effort to kill the victim.[16] Second, the claim that Gaudioso alone killed Valentino in self-defense and that Ernesto and Jerwin had nothing to do with the killing was disproved not only by Romeo and Juanito's positive identification of Ernesto and Jerwin as co-conspirators (at least) to the crime but, more importantly, by the fact that the stab wounds themselves indicated that there was actually more than one assailant. As testified to by Dr. Mary Joyce M. Faeldan, the Acting Municipal Health Officer of Miag-ao who autopsied the cadaver, the eighteen (18) stab wounds sustained by the victim were not all caused by a single weapon but by two (2) kinds of knives, i.e., one single-bladed, and the other, double-bladed. While three (3) stab wounds had blunt and contussed extremities indicating that they were inflicted with the use of a blunt single-bladed knife, the remaining fourteen (14) stab wounds had regular distinct clean-cut edges and sharp extremities indicating a sharp doublebladed knife as the murder weapon.[17] Since only Gaudioso's right hand was free to hold a weapon, his left hand already gripping Valentino's right hand, then it is quite obvious that his brothers likewise participated in the assault as claimed by the prosecution witnesses because Gaudioso, evidently, could not have managed two (2) weapons at the same time with only his right hand free. Third, accused-appellants did not inform the authorities about the incident. If they were really innocent as they claimed to be, they should have told the authorities about the accidental killing.[18] Their excuse that it was already late is not only shallow but quite incredible considering three (3) factors: (a) accused-appellants managed to get home at the relatively early hour of 6:30 in the evening;[19] (b) the house of the barangay captain to whom they could have reported the incident was a mere fifty (50) meters away from their own house;[20] and, (c) Gaudioso was himself a barangay official making it easier for him to approach the other barangay authorities who were but his colleagues.[21] Fourth, accused-appellants do not deny that they did not surrender to Sgt. Gersa when the latter saw them immediately after the killing. In fact, they ignored his warning shot and ran away. Worse, accused-appellants even returned fire with three (3) gunshots of their own, continued their flight until Sgt. Gersa gave up the chase through sheer exhaustion, and yielded only when they were already invited for questioning by the police after having been identified as the killers by eyewitnesses Romeo Muralla and Juanito Faromal. On the alleged inconsistencies in the testimonies of the prosecution witnesses, suffice it to say that inconsistencies on minor and trivial matters do not diminish but rather bolster a witness's credibility as they in fact manifest spontaneity and lack of scheming.[22] In other words, they are badges of truth rather than indicia of falsehood.[23] Thus the alleged contradictions on the relative positions of Romeo and Valentino while the latter was being stabbed, whether it was Romeo or Juanito who informed the victim's wife about the incident, and whether Juanito was indeed taken by Sgt. Gersa to Camp Monteclaro after the incident, are but trivial and minor inconsistencies which neither detract from the essential integrity of the prosecution's evidence nor strengthen accused-appellants' flagging plea of self-defense. Having already pleaded self-defense, accused-appellants could not invoke the alleged weakness of the prosecution's evidence, for, even if the latter were weak (which is

certainly not so in the instant case), it could not be disbelieved in view of their open admission of responsibility for the killing.[24] On the civil liabilities of accused-appellants a modification of the amounts awarded by the trial court is in order. By way of moral damages, the trial court awarded P100,000.00. Since the award is not meant to enrich the heirs of the victim but only to compensate them for injuries sustained to their feelings we reduce the amount to P50,000.00 consistent with prevailing jurisprudence.[25] A reduction of the actual damages awarded is likewise proper. The trial court awardedP28,977.00 for various expenses incurred by the victim's widow as a result of the killing. However, since only the costs of the tomb, coffin, embalming and funeral services in the total amount of P8,977.00 were properly receipted[26] the estimated amount of P20,000.00 allegedly spent for food and drinks consumed during the wake must be disallowed for not having been competently proved. The Court can only give credit to expenses which have been duly substantiated.[27] On the victim's loss of earning capacity, Victoria Pagumay testified that her husband, a farmer, was 53 years old when he was killed, with an average annual income of P40,000.00 to P50,000.00.[28] Using P40,000.00 as the deceased's average annual income while still alive, the trial court awarded P133,333.00 for loss of earning capacity after multiplying two-thirds (P26,666.67) of the victim's average annual income[29]by five (5) years. No reason was given, and no legal basis exists, why lost income was awarded for only five (5) years. On the contrary, the victim's lost earnings are to be computed according to the formula adopted by the Court in several decided cases,[30] to wit: net earning capacity ("X") equals life expectancy[31] multiplied by gross annual income[32] less living expenses.[33] Thus, the victim's lost earning capacity amounted to P405,000.00 as may be shown hereunder X = 2(80-53) x [P45,000 - P22,500] 3 X = 2 (27) x P22,500 3 X = 54 x P22,500 3 X = 18 x P22, 500 X = P405,000.00 Finally, an award of another P50,000.00 is warranted as civil indemnity for the death of the victim without need of evidence or proof of damages.[34] WHEREFORE, the appealed Decision dated 9 May 1996 of the Regional Trial Court of Iloilo City, Branch 25, finding accused-appellants GAUDIOSO MORE, ERNESTO MORE and JERWIN MORE guilty beyond reasonable doubt of Murder is AFFIRMED. Accused-appellants are ordered to pay, jointly and severally, the heirs of Valentino Pagumay the following amounts: (a) P50,000.00 as civil indemnity; (b) P50,000.00 as moral damages; (c) P8,977.00 as actual damages; and, (d) P405,000.00 for loss of earning capacity. Costs against accusedappellants. SO ORDERED.

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NAPOLEON TUGADE, SR., and RIZALINA FABRO-TUGADE, substituted by her heirs, namely, Napoleon Sr., Napoleon Jr., and Zenaida, all surnamed TUGADE, petitioners, vs. COURT OF APPEALS and PANGASINAN ELECTRIC 1. COOPERATIVE, INC., respondents. DECISION AUSTRIA-MARTINEZ, J.: 3. While this Court is not a trier of facts, there are instances however when we are called upon to re-examine the factual findings of the trial court and the Court of Appeals and weigh, after considering the records of the case, which of the conflicting findings is more in accord with law and justice.[1] Such is the case at bar. The antecedent facts of this case are as follows: On June 12, 1980 at around 12:00 noon, Engr. Henry Tugade of the Pangasinan Electric Cooperative, Inc. (Panelco) rode in a company rover jeep together with four other employees bound from the Panelco compound in Bani to Bolinao, Pangasinan. Somewhere in Tiep, Pangasinan, a Dagupan bus that was also headed for Bolinao, began to follow the rover jeep. While the bus was trying to overtake the jeep, the latter turned turtle and caused four of its five occupants to fall out of the jeep causing the death of Tugade and another passenger by the name of Consuelo Estolonio.[2] Separate cases for damages, docketed as Civil Cases Nos. A-1368 and A1384 were filed by the heirs of the two deceased before the Regional Trial Court of Pangasinan against Panelco and Dagupan Bus Co. and their respective drivers, Honorato Areola and Renato Quiambao. It is Civil Case No. A-1368 filed by the heirs of Henry Tugade, which is now the subject of the present petition. The Regional Trial Court of Pangasinan (Branch 55) held Panelco and its driver liable, thus: As a consequence and in view of the evidence on record, the Court holds and so finds that the accident occurred due to the fault or negligence of Panelco and its driver Honorato Areola. The negligence of Panelco consists in having allowed its rover jeep which is mechanically defective, unsafe and not roadworthy to be operated on a highway. On the other hand, the defendant-driver Honorato Areola was likewise, negligent in driving a vehicle which was not roadworthy, unsafe and with a mechanical defect. The Court finds that the defendants Panelco and Honorato Areola are liable to pay to the plaintiffs in Civil Case No. A-1368 damages, as follows: actual damages, P99,131.00 (Exhibits H to H-3, I to I-4 and K), attorneys fees, P20,000.00, moral damages, P20,000.00 and exemplary damages, P10,000.00 As to loss of earning capacity, it has been held in Villa-Rey Transit vs. Court of Appeals, 31 SCRA 511, that this is based on net earnings and not gross earnings. No evidence was introduced to show the net earnings. However, under the Circumstances, the Court holds that a monthly net earning of P500.00 would be reasonable. Using the formula in the Villa-Rey case, the life expectancy of the late Henry Tugade would be 36 years, hence the Court awards P216,000.00 for loss of earning capacity. 2.

WHEREFORE, the Court hereby renders judgment: Dismissing the complaint and cross-claim as against Dagupan Bus in Civil Case No. A1368; Dismissing the complaint in Civil Case No. A-1384; In Civil Case No. A-1368, ordering the defendants Pangasinan Electric Cooperative, Inc., and Honorato Areola to pay, jointly and severally, to the plaintiffs, the following: P 99,131.00 as actual damages; 216,000.00 for loss of earning capacity; 20,000.00 moral damages; and 10,000.00 exemplary damages; and 20,000.00 attorneys fees With costs against said defendants.[3] In arriving at its decision, the trial court explained that: xxx Rosie Castrence, a passenger of Bus No. 244 who saw the accident testified categorically that the rover jeep turned turtle in front of the Dagupan Bus when the jeep was about 5 meters in front of the Bus and the jeep turned turtle even without being bumped by the Dagupan Bus. The Court considers this witness as an unbiased witness as she appears not to be an interested party. She was also in a good position to observe in detail what actually happened at the scene of the accident as she was seated on the right front seat of the bus. The Court believes this witness more than the other witnesses who do not appear to be disinterested. Furthermore, it is not credible that if the rover jeep was hit on its left rear, it will turn turtle on its left side. The natural effect or tendency is for the jeep to be pushed or even thrown towards its right side. If the jeep turned turtle towards the left, it must have been due to some other cause than being hit by the bus on its left side. The physical facts which do not lie as well as testimonial evidence support the stand of Dagupan Bus that the bus did not hit the left rear of the rover jeep. If the bus did not hit the left rear of the jeep what then caused the latter to turn turtle. There is merit in the contention of defendant Dagupan Bus that the cause was due to some mechanical defect. By Defendant Areolas own admission, the rover jeep was being fixed by the Chief mechanic at the motor pool of Panelco, when he arrived at their compound, and that the jeep was Quite old. Likewise, Rosie Castrence also testified that when she first saw the Panelco jeep at Tiep, Bani, Pangasinan, the jeep was already zig-zagging and wiggling, a sign that indeed the jeep had some mechanical defect.

Another mark of a mechanical defect in the jeep was the fact that the right front wheel and rear wheel of the jeep were detached because their spindles were broken. This came from the mouth of Panelcos witness Florencio Celeste. The next issue to be resolved is what was the cause of death of Henry Tugade? Plaintiffs theory is, of course, that Henry Tugade died because he was run over and pinned under the left front wheel of Dagupan Bus No. 244 crushing his head and upper body. This is the same theory of defendants Panelco and Areola. Defendants Dagupan Bus and Quiambao deny this claim and their theory is that Henry Tugades death was caused by the violent impact of his head against the hard pavement of the road when he was thrown out of the rover jeep. The plaintiffs theory is, however, contradicted by their own medico legal expert Dr. Wilfredo Nazareno who testified positively that the fatal injury which caused the death of Henry Tugade were the fractures on his head which could have been due to the impact of the head against the asphalted road. Again plaintiffs theory is contradicted by Panelcos own witness Florencio Celeste, Chief Engineer, who was the only one who did not fall out of the jeep, when he testified that the left front wheel of the bus did not rest on the head of Henry Tugade and the wheel of the bus did not run over the head of the victim. Rosie Castrence, a disinterested witness, also declared that the left front tire of the bus did not run over the head of Henry Tugade.[4] Petitioners went to the Court of Appeals questioning only the award of damages and attorneys fees.[5] They claimed that the lower court erred in: finding that the monthly earnings of the late Henry Tugade at the time of his death was only P500.00; disregarding the evidence on record showing the monthly earnings of the late Henry Tugade; not considering the social, educational and economic status of the plaintiffs in its assessment of the moral and exemplary damages; and setting the sum of P20,000.00 as attorneys fees.[6] Respondent Panelco also appealed to the Court of Appeals from the decision of the trial court and assailed its ruling that the negligence of Panelco and its driver was the proximate cause of the accident.[7] In its decision dated September 7, 1994,[8] the Court of Appeals reversed the findings of the trial court, declared that Dagupan Bus, as an employer, had exercised due diligence in the selection and supervision of its employees and disposed of the case in this wise: WHEREFORE, in view of all the foregoing, the decision of the court a quo is reversed, but only insofar as it holds defendant Pangasinan Electric Cooperative, Inc. liable, and defendant Renato Quiambao is ordered to pay to defendantappellant Pangasinan Electric Cooperative, Inc., P7,500.00 as temperate damages, P10,000.00 as attorneys fees and costs of suit.[9] The appellate court explained, thus: The testimony of Castrence, on which the court a quo heavily relied in its finding of facts, is contradicted by the greater weight of evidence on record. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 96

First, there is no evidence whatsoever --- for either one of the parties --- of a blown-out tire. What the evidence on record indicates is that the two right wheels of the jeep were detached. The testimony regarding a blown-out tire is not even in consonance with the theory of Dagupan, that is, that the wheels were detached due to mechanical defects. Second, her testimony that the jeep was wiggling and zigzagging is contradicted by the testimonies of Florencio Celeste and Cipriano Nacar, passengers of the jeep and witnesses for plaintiffs Tugade, to the effect that their ride was smooth and normal. (TSN, September 29, 1983, pp. 10, 43 & 66; November 20, 1984, p. 7) Third, her testimony regarding the sitting arrangement of passengers of the jeep is contradicted by the testimony of Cipriano Nacar, passenger of the jeep and witness for plaintiffs Tugade. According to Nacar, he and Estolonio were seated at the rear of the jeep; the driver Areola was behind the steering wheel, with Celeste to his right and Tugade on the rightmost. In other words, Celeste was between Areola and Tugade, and no one was seated to the left of the driver. (TSN, September 29, 1983, pp. 9-10) Fourth, her testimony that Tugades head was about one foot from the left front tire of the bus is likewise contradicted by the testimonies of Cipriano Nacar and Honorato Areola that the tire of the bus was partly resting on the head of Tugade. In fact, the bus driver Renato Quiambao even had to back up the bus so that Tugades body may be pulled out from below. (ibid., pp. 22-23) Fifth, her testimony that Tugades shirt was checkered is also contradicted by Exhibit G, a photograph of the deceased as he lay on the ground. The photograph shows Tugade wearing a plain white shirt. Finally, her testimony that she did not see Estolonio after the accident because the latter was inside the jeep is again contradicted by the finding of the court a quo that all the passengers of the rover jeep were thrown out of the vehicle except Florencio Celeste and the body of Henry Tugade landed on the left lane of the road and was in front of the left front wheel of Bus No. 244. (underscoring ours, Decision, p. 2) In other words, Estolonio, just like Tugade, was sprawled on the ground. (ibid., p. 22) Castrences testimony is also marred by improbabilities. First, she claims to have noticed the color of Tugades pants who was seated --in the front of the jeep. It is quite improbable that Castrence, being seated inside the bus, could see the color of the pants of Tugade who was seated on the front seat of the jeep. Second, while she noticed the passengers in the front of the jeep --- indeed she even noticed the color of the pants one of them was wearing --- she could not tell whether or not there were passengers at the back. Third, it is also improbable that the driver and the passengers of the jeep simply continued with their journey, oblivious to the wiggling and zigzagging of their vehicle. Moreover, even disregarding the incredibility of Castrences testimony, still the version that the accident was due to a mechanical defect that allowed the

wheels to be detached cannot be given credence. If the cause of the accident was that both wheels on the right side were detached, then the jeep would not have turned turtle to its left, but to its right. If there had been no wheels to support its right side, the jeep should have turned turtle to its right, but it turned to its left instead. The court a quo reasons that it is not credible that if the rover jeep was hit on its left rear, it will turn turtle on its left side. The natural effect or tendency is for the jeep to be pushed or even thrown towards its right side. (Decision, p. 3) The court a quo, however, seems to have disregarded the testimony of Honorato Areola that the jeep first swerved to the right, then to the left. (TSN, October 15, 1984, p. 48) To be noted also is that a jeep is inherently maneuverable, and may easily swerve from side to side when hit from its left rear portion. Moreover, after the accident, both the jeep and the bus were at the left side of the highway. If the bus were not attempting to overtake the jeep, why then was it at the left side of the highway? As may be seen from the foregoing, the court a quo failed to take into account the discrepancies and inconsistencies of Castrences testimony vis--vis established facts and other evidence on record. Moreover, the court a quo misappreciated the testimony of Areola that the jeep was being checked up at the Panelco motor pool, and interpreted such testimony to mean that the jeep was being fixed or repaired due to a mechanical defect. First, the mere fact that the jeep was at the motor pool does not mean that it was there due to a mechanical defect. As testified by Areola, it was being subjected to a check-up (TSN, October 9, 1984, pp. 41-42), which may have been simply routinary. Second, even assuming that the jeep had a mechanical defect, its presence at the motor pool may also mean that such defect had been repaired and that the jeep was quite old does not necessarily mean that it had a mechanical defect. That two wheels were detached from the jeep and that its spindle was broken can be just as reasonably explained by the fact that the jeep turned turtle after being sideswiped by an overtaking bus. On the contrary, Celeste and Nacar, witnesses for the plaintiffs Tugade, consistently testified that their ride was normal and smooth. In light of the foregoing, the conclusion must be that the accident was caused by the negligence of Quiambao in driving Bus No. 244, as testified to by Areola, Nacar and Celeste, for which he must be held civilly liable.[10]xxx Hence, petitioner filed the present petition for certiorari[11] of the decision of the Court of Appeals and the resolution dated June 27, 1995 denying petitioners motion for reconsideration. Petitioners contend that the Court of Appeals: I COMMITTED AN ERROR OF LAW AND VIOLATED THE RULES OF EVIDENCE BY REJECTING THE TESTIMONY OF A DISINTERESTED WITNESS AND ADMITTED THE BIASED TESTIMONIES OF THE EMPLOYEES-WITNESSES FOR PRIVATE RESPONDENT PANELCO.

II COMMITTED AN ERROR OF LAW BY SUBSTITUTING ITS FINDINGS OF FACTS TO THAT OF THE TRIAL COURT WHICH WAS IN A BETTER POSITION TO EVALUATE AT FIRST HAND THE EVIDENCE ADDUCED BY THE PARTIES, PARTICULARLY THE SITUATION, DEMEANOR AND SINCERITY OF THE WITNESSES. III MISINTERPRETED, IF NOT DELIBERATELY DISREGARDED, THE BREAKING OF THE SPINDLE AND THE DETACHMENTS OF THE FRONT RIGHT AND REAR WHEELS OF THE ROVER JEEP OF PRIVATE RESPONDENT PANELCO WHICH ARE CONCLUSIVE PROOF OF THE ROAD UNWORTHINESS OF THE ROVER JEEP THAT TURNED TURTLE CAUSING THE DEATH OF THE LATE HENRY TUGADE. IV ERRED IN ARRIVING AT A CONCLUSION THAT PRIVATE RESPONDENT WAS NOT NEGLIGENT AT THE TIME OF THE ACCIDENT AND IS NOT THEREFORE LIABLE FOR THE UNTIMELY DEATH OF HENRY TUGADE. V ERRED IN NOT APPLYING PERTINENT JURISPRUDENCE AND PROVISIONS OF LAWS IN REVERSING THE DECISION OF THE TRIAL COURT.[12] Petitioners stress that they only questioned before the Court of Appeals the amount of damages, loss of earning capacity and attorneys fees awarded by the trial court in its decision, but the appellate court disregarded the factual findings and conclusions of the trial court and substituted its own findings of fact. Petitioners claim that this violates the doctrine that the findings of the trial court on the credibility of witnesses are entitled to great weight on appeal as it is in a better position to decide the question on credibility having seen and heard the witnesses themselves. Petitioners further claim that: the Court of Appeals erroneously disregarded the testimony of Rosie Castrence which the trial court found to be a disinterested party, based on minor and trivial inconsistencies;[13] the appellate court overlooked or failed to consider the breaking of the spindles and the detachment of the front and rear wheels of the rover jeep owned by and belonging to respondent Panelco which led the trial court to conclude that the accident was due to the negligence of private respondent as it allowed its rover jeep which is mechanically defective and not roadworthy to be operated on a highway and due to the negligence of defendant Honorato Areola in driving a vehicle which was not roadworthy.[14] In its Comment, respondent Panelco points out that the factual findings of the Court of Appeals is not reviewable by the Supreme Court.[15] Petitioners in their Reply, meanwhile, argue that where the findings of the Court of Appeals and the trial court are contrary to each other, such as in this case, the Supreme Court may scrutinize the evidence on record.[16] In its Rejoinder, respondent Panelco reiterates that: the petitioners raised only factual issues which in effect will make this Court a trier of facts; the Court ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 97

of Appeals, contrary to the contention of petitioners, actually set the record straight by carefully scrutinizing the factual evidence; the appellate court pointed out in detail the inconsistencies in the findings of the lower court unlike the haphazard way by which the lower court reached its conclusions.[17] We find the petition to be impressed with merit. As mentioned earlier, it is settled that as a rule, our jurisdiction in cases brought to us from the Court of Appeals is limited to the review and revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed conclusive and we are not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below.[18] However, we have consistently enunciated that we may review the findings of fact of the Court of Appeals: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and, (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.[19] [Emphasis ours] In this case, the factual findings of the trial court and the Court of Appeals are conflicting. Thus, it behooves this Court to review the findings of facts of the lower courts. The trial court gave weight to the testimony of Rosie Castrence, a passenger of Dagupan bus who testified that the Panelco rover jeep turned turtle without being hit by the bus from behind; while the Court of Appeals pointed out inconsistencies in her testimony and gave weight to the version of the employees of Panelco that the jeep turned turtle because it was hit by the bus from behind. The trial court reasoned that Castrence, a fish vendor who happened to be a passenger at the time of the accident, was credible and unbiased being a disinterested witness, unlike the other witnesses who are employees of Panelco. It also explained that she was in a good position to observe in detail what actually happened at the scene of the accident as she was seated at the right front seat of the bus.[20] On the other hand, the Court of Appeals considered her testimony not worthy of belief because of inconsistencies especially vis-a-vis the testimonies of the employees of Panelco, namely: Areola, Nacar and Celeste,[21] to which the appellate court gave greater weight and on which basis it concluded that the accident was caused by the negligence of Quiambao in driving Bus No. 244 for which he must be held civilly liable.[22]

In ascertaining the facts of the case, it would have greatly aided the courts if photographs of the vehicles were presented during the trial. However, none was presented. Hence, we are constrained to rely mainly on the testimonies of the witnesses. After reviewing the entire records of the case, we find compelling reasons to reverse the findings of the Court of Appeals, and affirm the appreciation of facts of the trial court. It is basic that findings of facts of trial courts are accorded by appellate courts with great, if not conclusive effect. This is because of the unique advantage enjoyed by trial courts of observing at close range the demeanor, deportment and conduct of witnesses as they give their testimonies.[23] Trial courts have the unique advantage of being able to observe that elusive and incommunicable evidence of the witness deportment on the stand while testifying --- the brazen face of the liar, the glibness of the schooled witness in reciting a lesson, the itching over-eagerness of the swift witness, as well as the honest face of the truthful one.[24] Indeed, assignment of values to declarations on the witness stand is best done by the trial judge who, unlike appellate magistrates, can weigh firsthand the testimony of a witness.[25] While there may be inaccuracies in Castrences testimony as pointed out by the appellate court---the mention of a blown out tire, the seating arrangement of the passengers of the rover jeep, the color of the shirt of the deceased, and the location of all the passengers of the jeep after it turned turtle--we deem such discrepancies negligible considering the totality of her testimony. Records show that she was called to the witness stand six years after the accident happened. It is therefore understandable that she would miss recalling some details. As we held in the recent case of People vs. Delim: The inconsistencies in the testimonies of [witnesses] do not render them incredible or their testimonies barren of probative weight. It must be borne in mind that human memory is not as unerring as a photograph and a persons sense of observation is impaired by many factors A truth-telling witness is not always expected to give an error-free testimony considering the lapse of time and the treachery of human memory. What is primordial is that the mass of testimony jibes on material points, the slight clashing of statements dilute neither the witnesses credibility nor the veracity of his testimonyInconsistencies on minor and trivial matters only serve to strengthen rather than weaken the credibility of witnesses for they erase the suspicion of rehearsed testimony.[26] In her testimony, Rosie Castrence said that she saw the jeep turn turtle in front of their bus. Q Mrs. Witness, you testified that the PANELCO jeep turned turtle infront of the Dagupan Bus, how close was the Dagupan Bus to the PANELCO jeep when you saw it turn turtle? A About five (5) meters infront the Dagupan Bus when it turn (sic) turtle, sir.

She also testified that before the jeep turned turtle she saw that it was wiggling. A When we were still at Barangay Tiep I have seen already that jeep. xxx xxx Q What did you observe if any about the jeep that you were following? A The jeep was already wiggling and was zigzagging along the way.[28] We find this testimony not only credible but also consistent with the physical evidence as well as the testimonies of Panelcos own employees. Engr. Florencio Celeste, who was seated beside Henry Tugade, testified that after the jeep turned turtle he saw that the right wheels were detached and that the spindle was broken. Q If it turned turtle, did you observe the jeep suffered (sic) any mechanical defect or parts were broken? A After the jeep turned turtle, I noticed that the right front wheel and rear wheel of the jeep were detached, sir. xxx xxx Q Did you see how the wheels were detached? A The spindle were (sic) broken, sir.[29] Engr. Agustin Erezo, the Officer In Charge of the Motorpool of Panelco at the time of the accident, also admitted in his testimony that the rover jeep was merely assembled in their motorpool, thus: Q You mentioned that the rover jeep was assembled in February 1980, if it was assembled in February 1980, what was the condition before you assembled? (sic) A We put all the spare parts new, we bought all the spare parts new, all spare parts are new. xxx xxx

Q So you want to make us understand that it was almost a junk at the time you repair it? A We bought the chassis, the engine and everything so all the spare parts are new.

Q At the time you repaired it in 1980 (interruption) A I assembled it.[30] xxx xxx Q Before you repaired it in February 1980, was it in running condition? A Before we repaired it, it was not in running condition, there was no jeep before the repair, they are all spare parts and we assembled it.[31] xxx

Q In other words, the jeep turned turtle even without being bumped by the Dagupan Bus? A Yes, sir.
[27]

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The driver of the jeep and one of the defendants, Honorato Areola, also admitted that the engine of the jeep at the time of the accident was already old. Q And what year Mr. Witness is the model of the rover jeep if you really know the model of the different vehicles? A I already forgot, sir. It is diesel model.

Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for those of persons for whom one is responsible. xxx xxx Employers shall be liable for the damage caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. xxx xxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. xxx xxx

What was admitted was the fact that it was his first time to drive said vehicle[35] and that he did not know whether or not the vehicle was registered at the time of the accident. Q xxx You are aware that the rover jeep was not registered for that year 1980, the jeep you were driving, is that correct? A That is what I do not know, sir. xxx xxx Q Is it a matter of your practice, that when you drive a vehicle you do not determine and find out anymore whether the registration certificate is found in the vehicle? A I relied that the papers are complete, sir. xxx

Q To make specific Mr. Witness, what year was this model, was it the model 69, 65 or what? A I cannot remember, sir.

Q But in your experience as driver, did this rover jeepney, new or old, at the time you drove it on June 12, 1980. A Quite old already, sir.

Q What about the body of the jeepney, also old like the engine? A The body is newly assembled, sir.[32] Worth noting also is the admission of Engr. Celeste that the jeep did not have a speedometer. Q Now, you estimated the speed of the jeep at 45 to 50 kilometers per hour, because according to you you are also a driver and you always look at the speedometer is that correct? A Yes, sir.

Q But you yourself do not examine anymore whether the vehicle that you are driving, that you are going to drive has with the registration certificate. A No more, sir.[36] Panelco meanwhile is liable both as owner of the mechanically defective vehicle under Art. 2176 and as employer of the negligent driver under Art. 2180.

Areola, as driver of the vehicle, did not personally check the condition of the vehicle before using it. Q And when you arrive at the Panelco compound this jeep was already ready to be driven? A It was in the motor pool we were checking up.

Q This rover jeep having been made, home made at the Panelco Motor pool, did not have speedometer, is that correct? A It does not have speedometer, so the speedometer does not function, sir.

Under Art. 2180, Panelco as employer of Areola is primarily and solidarily liable for the quasi-delict committed by the latter. It is presumed to be negligent in the selection and supervision of its employees by operation of law and may be relieved of responsibility for the negligent acts of its driver, who at the time was acting within the scope of his assigned task, only if it can show that it observed all the diligence of a good father of a family to prevent damage.[37] In this case, Panelco failed to show that it exercised the diligence of a good father of a family to prevent the damage and that it was diligent in the selection and supervision of its employees. Areola in his testimony admitted that he did not undergo physical examination when he was hired as driver of the company[38] and that there were no records of his examination and interview during his application for employment.[39] He also admitted that Panelco never gave them seminars regarding driving but only received personal advice from the managers.[40] The use of a vehicle with a defective speedometer has been held by this Court as an indication of the owners laxity in the operation of its business and in the supervision of its employees; clearly, a conduct below the diligence required by law.[41] In this case, the rover jeep of Panelco did not have a speedometer at all. Finding both Panelco and its driver liable for the death of Henry Tugade, we now consider the amount of damages that should be awarded to the heirs of the deceased. Following Art. 2206 of the Civil Code and recent jurisprudence, the heirs of the victim in this case are automatically entitled to P50,000.00 as indemnity for the death of Henry Tugade.[42] Actual damages to be recoverable, must actually be proved and supported by receipts. In this case, the petitioners failed to present any receipt to prove the expenses they incurred. Nonetheless, temperate damages may still be given ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 99

Q But you yourself did not go to the motor pool to get the jeep? A I just see the jeep but I did not go under the jeep, sir.

Q Aside from the speedometer there were many parts of the jeep which were not functioning is that correct? A All of those parts in the Panel board except its speedometer cable.

Q You mean to say that the jeep was in an elevated flat (sic) form at the time when you saw it at the Panelco compound being checked up? A Its not in the elevated place but it was in the Panelco compound, I am looking for the Chief Mechanic checking up the jeep. I was looking at the jeep being checked up by the Chief Mechanic, sir.

Q And so, when you said that the jeep was running about 45 to 50 kilometers the truth is the speed could have been even less than 45 kilometers or more than 50 kilometers. A That is approximate, sir.
[33]

Q How many mechanics were attending this rover jeep at the time you were looking at the jeep? A They were many but who was looking after was the Chief Mechanic, sir. xxx xxx Q And these mechanics of the Panelco were helping or attending the Chief Mechanic? A I do not know, sir, because they were doing something. xxx

In sum, we find that with the testimony of Castrence, the broken spindle of the rover jeep and the admissions of Panelcos own employees that the jeep was merely assembled, had an old engine, and did not have any speedometer, manifest gross negligence on the part of Panelco and its driver Honorato Areola for which they should be held liable to pay damages. The trial court correctly held both Panelco and its driver liable for using an unsafe vehicle in transporting Panelcos employees. As provided for in the New Civil Code: Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done

Q So all these persons were working on the rover jeep, is that correct? A No, sir.[34] (sic)

to the heirs of the victim under Art. 2224 of the Civil Code.[43] Based on prevailing jurisprudence, the amount of P25,000.00 as temperate damages is in order.[44] We also find that petitioners are entitled to the award of attorneys fees which is proper where the acts and omissions of a party have compelled another to litigate or incur expenses to protect his rights and when deemed by the court as just and equitable.[45] We find no cogent reason to disturb the award of P20,000.00 as attorneys fees fixed by the trial court. Moral damages should also be awarded for the mental anguish and moral suffering suffered by the heirs of Henry Tugade brought about by his untimely demise. As held by this Court, the award of moral damages is aimed at a restoration, within the limits possible, of the spiritual status quo ante and therefore must be proportionate to the suffering inflicted.[46] In this case, Napoleon Tugade, father of the deceased, testified as follows: Q How many children do you have? A We have three (3), sir. xxx xxx xxx

I was miserably shocked, sir.

Q Aside from the shock, what else. A Well, I lost my hope, my pride and happiness.[48] Under Art. 2206 of the Civil Code, the ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. Under the circumstances of the case at bar an award of P100,000.00 would be appropriate.[49] As to indemnity for loss of earning capacity, we take note of Exh. L1[50] showing Henry Tugades compensation to be Eight Hundred Three Pesos (P803.00) a month which amounts to an annual income of P9,636.00. He was 26 years old at the time of his death. Using the formula enunciated in People vs. Napalit,[51] we compute his lost earning capacity thus: Net earning capacity = 2/3 x (80-26) x [P9,636.00 (P9,636.00)] = 2/3 x (54) x P4,818.00 = 36 x P4,818.00

Q about your second child, what is his profession or employment at present, will you name your second child? A He is the late Henry Tugade, an Agricultural Engineer. xxx xxx Q At the time you learn the death of your son Henry, how did you feel? A I was shocked and had a little mental torture because its a shock that he is still young to die and professional and he is the only one earning among my children, 1. so there was mental torture also to my wife and to my family.[47] 2. Rizalina Tugade, mother of the victim, also testified as follows: 3. Q And Mrs. Witness, at the time your son died do you know if he was a member of some civic organizations or associations? A 4. During his lifetime when he was studying, when he was student, at the Araneta Univeristy, he was the President of the Engineers Club Society. 5. xxx

= P 173,448.00 WHEREFORE, we REVERSE and SET ASIDE the decision of the Court of Appeals; AFFIRM the decision of the Regional Trial Court dated July 24, 1990 with the MODIFICATION that Pangasinan Electric Cooperative, Inc. (PANELCO) and Honorato Areola are ordered to pay jointly and severally the following amounts to the heirs of Henry Tugade: Death indemnity in the amount of Fifty Thousand Pesos (P50,000.00); Temperate damages in the amount of Twenty-Five Thousand Pesos (P25,000.00); Attorneys fees in the amount of Twenty Thousand Pesos (P20,000.00); Moral damages in the amount of One Hundred Thousand Pesos (P100,000.00); Loss of earning capacity in the amount of One Hundred Seventy Three Thousand, Three Hundred and Forty Eight Pesos (P173,448.00); and the costs of suit. SO ORDERED.

Q And of course as a mother, having his son that caliber, if said Henry your son, how did you feel on those occasions, as he was a member of some organizations. A I had a feeling of great pride, sir. 6.

Q This pride enjoyed as a mother, did it continue to be still in you as a pride enjoyed by a mother. A Well, my pride is no more sir, he already died.

Q And when at the time you learned for the first time of the death of your son Mrs. Witness, how did you feel as mother. ||GOD DOESNT PLAY DICE||Transpo Part III- V FULL TEXT 100