La Mallorca vs.

Court of Appeals
(G.R. No. L-20761, 27 July 1966, 17 SCRA 739)

Facts: Plaintiffs, husband and wife, together with their three minor daughters (Milagros,
13 years old, Raquel, about 4 years old and Fe, 2 years old) boarded the Pambusco at
San Fernando Pampanga, bound for Anao, Mexico, Pampanga. Such bus is owned and
operated by the defendant.

They were carrying with them four pieces of baggage containing their personal
belonging. The conductor of the b us issued three tickets 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 which fare is charged in accordance with plaintiff’s rules and
regulations.

After about an hour’s trip, the bus reached Anao where it stopped to allow the
passengers bound therefore, among whom were the plaintiffs and their children to get
off. Mariano Beltran, carrying some of their baggage was the first to get down the bus,
followed by his wife and children. Mariano led his companion to a shaded spot on the
left pedestrian side of the road about four or five meters away from the vehicle.
Afterwards, he returned to the bus in controversy to get his paying, which he had left
behind, but in so doing, his daughter followed him unnoticed by his father. While said
Mariano Beltran was on he running board of the bus waiting for the conductor to hand
him his bayong which he left under one 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 was still attending to the baggage left
behind by Mariano Beltran. Incidentally, when the bus was again placed in a complete
stop, it had traveled about 10 meters from point where plaintiffs had gotten off.

Sensing the bus was again in motion; Mariano immediately jumped form the running
board without getting his bayong from conductor. He landed on the side of the road
almost board in front of the shaded place where he left his wife and his children. At that
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 her
parent.

For the death of the said child, plaintiffs comment the suit against the defendant to
recover from the latter damages.

Issue: Whether or not the child was no longer the passenger of the bus involved in the
incident, and therefore, the contract of carriage was already terminated?

Held: 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. 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.

It is a rule that the relation of carrier and passenger does not cease 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.

The father returned to the bus to get one of his baggages which was not unloaded when
they alighted from the bus. Raquel must have followed her 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 had jumped down from
the moving vehicle. It was that 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 driver, although stopping the bus,
nevertheless did not put off the engine. He started to run the bus even before the
conductor gave him the signal to go and while the latter was still unloading part of the
baggage of the passengers Beltran and family. The presence of the 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.

FULL TEXT

124 Phil. 145

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 4-1/2 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 belongings. The conductor of
the bus who happened to be a half-brother of plaintiff Mariano Beltran, issued three
tickets (Exhs. A, B, & C) covering the full fares of the plaintiff and their eldest child,
Milagros. No fare was charged on Raquel and Fe, since both were below the height at
which fare is charged in accordance with the appellant's rules and regulations.
"After about an hour's trip, the bus reached Anao, whereat it stopped to allow the
passengers bound therefor, among whom were the plaintiffs and their children to get off.
With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of their
baggages, was the first to get down the bus, followed by his wife and his children.
Mariano led his companions to a shaded spot on the left pedestrians side of the road
about four or five meters away from the vehicle. Afterwards, he returned to the bus in
controversy to get his other bayong, which he had left behind, but in so doing, his
daughter Raquel followed him unnoticed by her father. While said Mariano Beltran was
on the running board of the bus waiting for the conductor to hand him his bayong which
he left under one of its seats near the door, the bus, whose motor was not shut off while
unloading, suddenly started moving forward, evidently to resume its trip,
notwithstanding the fact that the conductor has not given the driver the customary signal
to start, since said conductor was still attending to the baggage left behind by Mariano
Beltran. Incidentally, when the bus was again placed into a complete stop, it had
travelled about ten meters from the point where the plaintiffs had gotten off.

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

"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 P6,000 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 now 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 judgment
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 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. 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, plaintiff's
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 and care and foresight can
provide in the operation of their vehicle."
is clearly an allegation for quási-delict. The inclusion of averment for quasi-delict, while
incompatible with the other claim under the contract of carriage, is permissible under
Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes
of action in the alternative, be they compatible with each other or not, to the end that the
real matter in controversy may be resolved and determined.[4]

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

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.
 Cathay Pacific v. Vazquez
G.R. No. 150843; 14 March 2003

Facts:
Sps. Dr. Daniel and Maria Luisa Vazquez, resposdents, together with their maid and
two friends went to Hongkong for pleasure and business. On their return flight, they
booked Cathay Pacific Airways. While boarding, they were advised that there was a
seat change from Business Class to First Class. Dr. Vazquez refused the upgrade for
the reason that it would not look nice for them as hosts to travel First Class and their
guests, in the Business Class; and that they were going to discuss business matter
during the flight. Cathay informed the Vazquezes that the Business Class was fully
booked, and that since they are Marco Polo Club members, they had the priority to be
upgraded to first class. Dr. Vazquez eventually gave in, after being prohibited to take
the flight if they would not avail themselves of the privilege. Upon their return to Manila,
the Vazquezes filed a complaint and demanded to be indemnified for the humiliation
and embarrassment caused by Cathay’s employees.

Issues:
Are the Vazquezes obliged to avail the privilege and take the First Class flight?

Held:
No. 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 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.
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.

Art. 1244. The debtor of a thing cannot compel the creditor to receive a different one,
although the latter may be of the same value as, or more valuable than that which is
due.

In obligations to do or not to do, an act or forbearance cannot be substituted by another

act or forbearance against the obligee’s will.

FULL TEXT

CATHAY PACIFIC AIRWAYS, LTD., petitioner,

vs.
SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL VAZQUEZ,
respondents.

DAVIDE, JR., C.J.:

Is an involuntary upgrading of an airline passenger’s accommodation from one class to

a more superior class at no extra cost a breach of contract of carriage that would entitle
the passenger to an award of damages? This is a novel question that has to be
resolved in this case.

The facts in this case, as found by the Court of Appeals and adopted by petitioner
Cathay Pacific Airways, Ltd., (hereinafter Cathay) are as follows:

Cathay is a common carrier engaged in the business of transporting passengers and

goods by air. Among the many routes it services is the Manila-Hongkong-Manila course.
As part of its marketing strategy, Cathay accords its frequent flyers membership in its
Marco Polo Club. The members enjoy several privileges, such as priority for upgrading
of booking without any extra charge whenever an opportunity arises. Thus, a frequent
flyer booked in the Business Class has priority for upgrading to First Class if the
Business Class Section is fully booked.

Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal

Vazquez are frequent flyers of Cathay and are Gold Card members of its Marco Polo
Club. On 24 September 1996, the Vazquezes, together with their maid and two friends
Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for pleasure and business.

For their return flight to Manila on 28 September 1996, they were booked on Cathay’s
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 Cathay’s
check-in counter at Kai Tak Airport and were given their respective boarding passes, to
wit, Business Class boarding passes for the Vazquezes and their two friends, and
Economy Class for their maid. They then proceeded to the Business Class passenger
lounge.

When boarding time was announced, the Vazquezes and their two friends went to
Departure Gate No. 28, which was designated for Business Class passengers. Dr.
Vazquez presented his boarding pass to the ground stewardess, who in turn inserted it
into an electronic machine reader or computer at the gate. The ground stewardess was
assisted by a ground attendant by the name of Clara Lai Han Chiu. When Ms. Chiu
glanced at the computer monitor, she saw a message that there was a "seat change"
from Business Class to First Class for the Vazquezes.

Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’ accommodations
were upgraded to First Class. Dr. Vazquez refused the upgrade, reasoning that it would
not look nice for them as hosts to travel in First Class and their guests, in the Business
Class; and moreover, they were going to discuss business matters during the flight. He
also told Ms. Chiu that she could have other passengers instead transferred to the First
Class Section. Taken aback by the refusal for upgrading, Ms. Chiu consulted her
supervisor, who told her to handle the situation and convince the Vazquezes to accept
the upgrading. Ms. Chiu informed the latter that the Business Class was fully booked,
and that since they were Marco Polo Club members they had the priority to be
upgraded to the First Class. Dr. Vazquez continued to refuse, so Ms. Chiu told them
that if they would not avail themselves of the privilege, they would not be allowed to take
the flight. Eventually, after talking to his two friends, Dr. Vazquez gave in. He and Mrs.
Vazquez then proceeded to the First Class Cabin.

Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to
Cathay’s 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 Cathay’s Country
Manager Argus Guy Robson, informed the Vazquezes that Cathay would investigate
the incident and get back to them within a week’s time.

On 8 November 1996, after Cathay’s 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 attorney’s 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.
Chiu’s 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, Cathay’s 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. Vazquez’s 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 Cathay’s 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
attorney’s fees. Hence, it prayed for the dismissal of the complaint and for payment of
P100,000 for exemplary damages and P300,000 as attorney’s 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 Cathay’s 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
attorney’s fees and other litigation expenses, such as those for the taking of the
depositions of Yuen and Chiu.

In its decision1 of 19 October 1998, the trial court found for the Vazquezes and decreed
as follows:

WHEREFORE, finding preponderance of evidence to sustain the instant

complaint, judgment is hereby rendered in favor of plaintiffs Vazquez spouses
and against defendant Cathay Pacific Airways, Ltd., ordering the latter to pay
each plaintiff the following:

a) Nominal damages in the amount of P100,000.00 for each plaintiff;

b) Moral damages in the amount of P2,000,000.00 for each plaintiff;

c) Exemplary damages in the amount of P5,000,000.00 for each plaintiff;

d) Attorney’s 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 Cathay’s revenues. Cathay’s
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 attorney’s 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 former’s consent. There was a
breach of contract not because Cathay overbooked the Business Class Section of Flight
CX-905 but because the latter pushed through with the upgrading despite the objections
of the Vazquezes.
However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or meant to
be discourteous to, Dr. Vazquez, although it might seemed that way to the latter, who
was a member of the elite in Philippine society and was not therefore used to being
harangued by anybody. Ms. Chiu was a Hong Kong Chinese whose fractured Chinese
was difficult to understand and whose manner of speaking might sound harsh or shrill to
Filipinos because of cultural differences. But the Court of Appeals did not find her to
have acted with deliberate malice, deceit, gross negligence, or bad faith. If at all, she
was negligent in not offering the First Class accommodations to other passengers.
Neither can the flight stewardess in the First Class Cabin be said to have been in bad
faith when she failed to assist Dr. Vazquez in lifting his baggage into the overhead
storage bin. There is no proof that he asked for help and was refused even after saying
that he was suffering from "bilateral carpal tunnel syndrome." Anent the delay of Yuen in
responding to the demand letter of the Vazquezes, the Court of Appeals found it to have
been sufficiently explained.

The Vazquezes and Cathay separately filed motions for a reconsideration of the
decision, both of which were denied by the Court of Appeals.

Cathay seasonably filed with us this petition in this case. Cathay maintains that the
award for moral damages has no basis, since the Court of Appeals found that there was
no "wanton, fraudulent, reckless and oppressive" display of manners on the part of its
personnel; and that the breach of contract was not attended by fraud, malice, or bad
faith. If any damage had been suffered by the Vazquezes, it was damnum absque
injuria, which is damage without injury, damage or injury inflicted without injustice, loss
or damage without violation of a legal right, or a wrong done to a man for which the law
provides no remedy. Cathay also invokes our decision in United Airlines, Inc. v. Court of
Appeals3 where we recognized that, in accordance with the Civil Aeronautics Board’s
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 attorney’s 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 attorney’s 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 passenger’s 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 Cathay’s 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 Cathay’s 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 defendant’s wrongful act or omission. 11 Thus, case
law establishes the following requisites for the award of moral damages: (1) there must
be an injury clearly sustained by the claimant, whether physical, mental or
psychological; (2) there must be a culpable act or omission factually established; (3) the
wrongful act or omission of the defendant is the proximate cause of the injury sustained
by the claimant; and (4) the award for damages is predicated on any of the cases stated
in Article 2219 of the Civil Code.12

Moral damages predicated upon a breach of contract of carriage may only be

recoverable in instances where the carrier is guilty of fraud or bad faith or where the
mishap resulted in the death of a passenger.13 Where in breaching the contract of
carriage the airline is not shown to have acted fraudulently or in bad faith, liability for
damages is limited to the natural and probable consequences of the breach of the
obligation which the parties had foreseen or could have reasonably foreseen. In such a
case the liability does not include moral and exemplary damages. 14

In this case, we have ruled that the breach of contract of carriage, which consisted in
the involuntary upgrading of the Vazquezes’ seat accommodation, was not attended by
fraud or bad faith. The Court of Appeals’ award of moral damages has, therefore, no leg
to stand on.
The deletion of the award for exemplary damages by the Court of Appeals is correct. It
is a requisite in the grant of exemplary damages that the act of the offender must be
accompanied by bad faith or done in wanton, fraudulent or malevolent manner. 15 Such
requisite is absent in this case. Moreover, to be entitled thereto the claimant must first
establish his right to moral, temperate, or compensatory damages.16 Since the
Vazquezes are not entitled to any of these damages, the award for exemplary damages
has no legal basis. And where the awards for moral and exemplary damages are
eliminated, so must the award for attorney’s fees.17

The most that can be adjudged in favor of the Vazquezes for Cathay’s 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 Cathay’s Memorandum filed with this Court, it prayed
only for the deletion of the award for moral damages. It deferred to the Court of Appeals’
discretion in awarding nominal damages; thus:

As far as the award of nominal damages is concerned, petitioner respectfully

defers to the Honorable Court of Appeals’ discretion. Aware as it is that
somehow, due to the resistance of respondents-spouses to the normally-
appreciated gesture of petitioner to upgrade their accommodations, petitioner
may have disturbed the respondents-spouses’ wish to be with their companions
(who traveled to Hong Kong with them) at the Business Class on their flight to
Manila. Petitioner regrets that in its desire to provide the respondents-spouses
with additional amenities for the one and one-half (1 1/2) hour flight to Manila,
unintended tension ensued.18

Nonetheless, considering that the breach was intended to give more benefit and
advantage to the Vazquezes by upgrading their Business Class accommodation to First
Class because of their valued status as Marco Polo members, we reduce the award for
nominal damages to P5,000.

Before writing finis to this decision, we find it well-worth to quote the apt observation of
the Court of Appeals regarding the awards adjudged by the trial court:

We are not amused but alarmed at the lower court’s 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 attorney’s 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
Court’s admonition in Singson vs. CA (282 SCRA 149 [1997]), where it said:

The well-entrenched principle is that the grant of moral damages depends

upon the discretion of the court based on the circumstances of each case.
This discretion is limited by the principle that the amount awarded should
not be palpably and scandalously excessive as to indicate that it was the
result of prejudice or corruption on the part of the trial court….

and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held:

Nonetheless, we agree with the injunction expressed by the Court of

Appeals that passengers must not prey on international airlines for
damage awards, like "trophies in a safari." After all neither the social
standing nor prestige of the passenger should determine the extent to
which he would suffer because of a wrong done, since the dignity
affronted in the individual is a quality inherent in him and not conferred by
these social indicators. 19

We adopt as our own this observation of the Court of Appeals.

WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the
Court of Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED, and
as modified, the awards for moral damages and attorney’s fees are set aside and
deleted, and the award for nominal damages is reduced to P5,000.

No pronouncement on costs.

Spouses Estrada vs. Philippine Rabbit Bus Lines FACTS:

A collision between passenger bus driven by respondent Saylan and owned by

Philippine Rabbit Bus (PRB) and an Isuzu truck driven by Urez and registered to Cuyton
Jr. occurred which injured
petitioner Estrada’s arm and was later amputated.
Petitioner filed a complaint for damages that pursuant to the contract of carriage
between him and PRB.

Petitioner claims are as follows: P500k for moral damages, P60k for actual damages,
and P25k
for attorney’s fees.

RTC rules in favor of petitioner concluding PRB driver was negligent in driving the PRB
bus as he was tailgating, did not apply the breaks when necessary and instead
swerved, and operated the bus at a speed greater than what was reasonably necessary
for a full stop. Also established by
Art. 2185 of the NCC “It is presumed that a person driving a motor vechilce has been negligent if
at the time of the mishap he was violating any traffic regulation, unless there is proof to
the
contrary.” Which the driver failed to rebut. Last clear chance is inapplicable in this case as the
suit is between passenger and common carrier. RTC awarded the moral damages,
actual
damages, and attorney’s fees.

The CA partially granted the a

ppeal and agreed with PRB’s contention that moral damages are
not recoverable in actions for damages predicated on a breach of contract, unless death
or a passenger results, or it is proven that the carrier was guilty of fraud or bad faith,
even if death does not result.

The CA ruled that the RTC erred in ruling PRB bus company and respondent driver are
jointly and severally liable because a driver may not be held liable under the contract of
carriage, not being a party of the same. The carrier thus is exclusively responsible to the
passenger, even if such breach be due to the negligence of his driver.

The basis of a cause of action of a passenger against the driver is either culpa criminal
or culpa aquiliana. A passenger may file a criminal case based on culpa criminal
punishable by RPC or a civil case based on culpa aquiliana under the Civil Code, both
have separate and distinct causes of action.
ISSUE:
W/N the CA erred in declaring that there was no evidence to indicate bad faith or fraud
on PRB bus company to make it liable for moral damages.
HELD:
No, CA ruled correctly. There being no evidence of bad faith or fraud, moral damages
cannot be awarded in a contract of carriage.
RATIO:
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral damages may be recovered if
they are the proximate result of the defendant's wrongful act or omission.

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

It has been held, however, that "allegations of bad faith and fraud must be proved by
clear and convincing evidence."In this case, the fraud or bad faith that must be
convincingly proved by petitioners should be one which was committed by Philippine
Rabbit in breaching its contract of carriage with Dionisio. Unfortunately for petitioners,
the Court finds no persuasive proof of such fraud or bad faith

SPOUSES DIONISIO ESTRADA AND JOVITA R. ESTRADA, PETITIONERS, V.

PHILIPPINE RABBIT BUS LINES, INC. AND EDUARDO R. SAYLAN,
RESPONDENTS.

DECISION

DEL CASTILLO, J.:

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

This Petition for Review on Certiorari assails the May 16, 2012 Decision[3] and October
1, 2012 Resolution[4] of the Court of Appeals (CA) in CA-G.R. CV No. 95520, which
partially granted the appeal filed therewith by respondent Philippine Rabbit Bus Lines,
Inc. (Philippine Rabbit) and denied petitioners spouses Dionisio C. Estrada (Dionisio)
and Jovita R. Estrada's motion for reconsideration thereto.

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

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

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

Dionisio argued that pursuant to the contract of carriage between him and Philippine
Rabbit, respondents were duty-bound to carry him safely as far as human care and
foresight can provide, with utmost diligence of a very cautious person, and with due
regard for all the circumstances from the point of his origin in Urdaneta City to his
destination in Pugo, La Union. However, through the fault and negligence of Philippine
Rabbit's driver, Eduardo, and without human care foresight, and due regard for all
circumstances, respondents failed to transport him safely by reason of the
aforementioned collision which resulted in the amputation of Dionisio's right arm. And
since demands for Philippine Rabbit[7] to pay him damages for the injury he sustained
remained unheeded, Dionisio filed the said complaint wherein he prayed for the
following awards: moral damages of P500,000, actual damages of P60,000.00, and
attorney's fees of P25,000.00.

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

9. [The] amount of P500,000.00 as moral damages for the amputation of [Dionisio's]

right arm for life including his moral sufferings for such [loss] of right arm is reasonable.

Said amount is computed and derived using the formula (2/3 x [80- age of the
complainant when the injury is sustained] = life expectancy) adopted in the American
Expectancy Table of Mortality or the actuarial of Combined Experience Table of
Mortality. From such formula, [Dionisio] is expected to live for 18 years, which is
equivalent [to] about 6570 days. For each day, [Dionisio] is claiming P80.00 as he is
expected to work for 8 hours a day with his amputated arm or to enjoy the same for at
least 8 hours a day (or is claiming P10.00 for each hour) for 18 years (6570 days). The
amount that can be computed thereof would be P525,600.00 (6570 days x P80.00).
[Dionisio] then [rounded] it off to P500,000.00, the moral damages consisted [of] his
moral sufferings due to the [loss] of his right arm for life;[8]

Denying any liability, Philippine Rabbit in its Answer[9] averred that it carried Dionisio
safely as far as human care and foresight could provide with the utmost diligence of a
very cautious person and with due regard for all the circumstances prevailing. While it
did not contest that its bus figured in an accident, Philippine Rabbit nevertheless argued
that the cause thereof was an extraordinary circumstance independent of its driver's
action or a fortuitous event. Hence, it claimed to be exempt from any liability arising
therefrom. In any case, Philippine Rabbit averred that it was the Isuzu truck coming
from the opposite direction which had the last clear chance to avoid the mishap. Instead
of slowing down upon seeing the bus, the said truck continued its speed such that it
bumped into the right side of the bus. The proximate cause of the accident, therefore,
was the wrongful and negligent manner in which the Isuzu truck was operated by its
driver. In view of this, Philippine Rabbit believed that Dionisio has no cause of action
against it.

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

Ruling of the Regional Trial Court

Treating petitioners' Complaint for damages as one predicated on breach of contract of

carriage, the RTC rendered its Decision[11] on December 1, 2009.

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

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

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

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

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

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

It is presumed that a person driving a motor vehicle has been negligent if at the time of
the mishap, he was violating any traffic regulation, unless there is proof to the contrary
(Article 2185 of the Civil Code). [Eduardo] failed to rebut this legal presumption as he
chose not answer the complaint and to testify in court. [Philippine Rabbit was also]
unsuccessful in overthrowing the said legal presumption. x x x

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

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

The RTC then proceeded to determine whether Philippine Rabbit, as it claimed,

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

The emotional anguish and suffering of x x x Dionisio Estrada as a consequence of the

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

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

WHEREFORE, judgment is hereby rendered ordering x x x Philippine Rabbit Bus Lines,

Inc. and Eduardo Saylan to pay jointly and severally x x x Dionisio Estrada the following
amounts:

1. Five Hundred Thousand Pesos (P500,000.00) as moral damages;

2. Fifty Seven Thousand Seven Hundred Sixty Six Pesos and Twenty Five Centavos
(P57,766.25), as actual damages; and

3. Twenty Five Thousand Pesos (P25,000.00), as attorney's fees; and the costs of suit.
SO ORDERED.[13]

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

Ruling of the Court of Appeals

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

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

Based from [sic] the aforecited allegations in the complaint, it was rightly regarded by
the trial court as an action to recover damages arising from breach of contract of
carriage. There was in fact, an admission that [Dionisio] was a passenger of a bus
owned by [Philippine Rabbit]. In an action for breach of contract of carriage, all that is
required is to prove the existence of such contract and its non-performance by the
carrier through the latter's failure to carry the passenger safely to his destination. In the
present case, it was duly established that there was a collision and as a result of which,
[Dionisio] sustained an injury.

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

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

Such negligence and recklessness is binding against [Philippine Rabbit] pursuant to

Article 1759 of the Civil Code which provides:
Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former's employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.

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

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

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

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

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

xxxx

The trial court therefore erred in ruling that [Philippine Rabbit] bus company and
[respondent] driver are jointly and severally liable. The driver cannot be held jointly and
severally liable with the carrier in case of breach of the contract of carriage. The
contract of carriage is between the carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively responsible [therefor] to the passenger,
even if such breach be due to the negligence of his driver. The carrier can neither shift
his liability on the contract to his driver nor share it with him for his driver's negligence is
his.[17]
Accordingly, the CA modified the RTC Decision in that it declared Philippine Rabbit as
solely and exclusively liable to Dionisio for actual damages in the amount of P57,766.25
and deleted the award of moral damages and attorney's fees.

Petitioners filed a Motion for Reconsideration[18] but the same was denied by the CA for
lack of merit in a Resolution[19] dated October 1, 2012.

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

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

DECLARING THAT THERE WAS NO EVIDENCE ON RECORD INDICATIVE OF
FRAUD OR BAD FAITH ON [PHILIPPINE RABBIT'S] PART.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT

[CONSIDERING] X X X THE [COST OF THE] REPLACEMENT OF PETITIONER
[DIONISIO'S AMPUTATED RIGHT ARM] WITH [AN] ARTIFICIAL ONE AS ACTUAL
DAMAGES.[20]

The Parties' Arguments

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

In justifying their claim for moral damages, petitioners aver that in their Complaint, they
did not seek for moral damages in terms of physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury per se, but for moral damages based purely on the fact
that Dionisio lost his right arm. They argue that while in a strict sense, Dionisio incurred
actual damages through the amputation of his right arm, such loss may rightly be
considered as falling under moral damages. This is because a right arm is beyond the
commerce of man and loss thereof necessarily brings physical suffering, mental
anguish, besmirched reputation, social humiliation and similar injury to a person. At any
rate, should this Court award the amount of P500,000.00 as actual damages due to the
loss of Dionisio's right arm, petitioners also find the same proper and appropriate under
the circumstances.

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

Our Ruling

The Court modifies the CA ruling.

Moral damages; Instances when moral

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

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

Under Article 2219 of the Civil Code, moral damages are recoverable in the following
and analogous cases: (1) a criminal offense resulting in physical injuries; (2) quasi-
delicts causing physical injuries; (3) seduction, abduction, rape or other lascivious acts;
(4) adultery or concubinage; (5) illegal or arbitrary detention or arrest; (6) illegal search;
(7) libel, slander, or any other form of defamation; (8) malicious prosecution; (9) acts
mentioned in Article 309;[22] and (1) acts and actions referred to in Articles 21,[23] 26,[24]
27,[25] 28,[26] 29,[27] 30,[28] 32,[29] 34,[30] and 35.[31]

x x x [C]ase law establishes the following requisites for the award of moral damages: (1)
there must be an injury clearly sustained by the claimant, whether physical, mental or
psychological; (2) there must be a culpable act or omission factually established; (3) the
wrongful act or omission of the defendant is the proximate cause of the injury sustained
by the claimant; and (4) the award for damages is predicated on any of the cases stated
in Article 2219 of the Civil Code.[32]

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

x x x As an exception, such damages are recoverable [in an action for breach of

contract:] (1) in cases in which the mishap results in the death of a passenger, as
provided in Article 1764,[34] in relation to Article 2206(3)[35] of the Civil Code; and (2) in x
x x cases in which the carrier is guilty of fraud or bad faith, as provided in Article
2220[36].[37]

Moral damages are not recoverable in

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

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

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

Fraud has been defined to include an inducement through insidious machination.

Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state
material facts and, by reason of such omission or concealment, the other party was
induced to give consent that would not otherwise have been given. [41]

Bad faith, on the other hand, "does not simply connote bad judgment or negligence; it
imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a
breach of a known duty through some motive or interest or ill will that partakes of the
nature of fraud."[42]

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

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

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

Actual damages for loss/impairment of

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

In an attempt to recover the P500,000.00 awarded by the RTC as moral damages but
deleted by the CA, petitioners would instead want this Court to grant them the same
amount as just and proper compensation for the loss of Dionisio's right arm.

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

9. [The] amount of P500,000.00 as moral damages for the amputation of [Dionisio's]

right arm for life including his moral sufferings for such [loss] of right arm is reasonable.

Said amount is computed and derived using the formula (2/3 x [80- age of the
complainant when the injury is sustained] = life expectancy) adopted in the American
Expectancy Table of Mortality or the actuarial of Combined Experience Table of
Mortality. From such formula, [Dionisio] is expected to live for 18 years, which is
equivalent [to] about 6570 days. For each day, [Dionisio] is claiming P80.00 as he is
expected to work for 8 hours a day with his amputated arm or to enjoy the same for at
least 8 hours a day (or is claiming P10.00 for each hour) for 18 years (6570 days). The
amount that can be computed thereof would be P525,600.00 (6570 days x P80.00).
[Dionisio] then [rounded] it off to P500,000.00, the moral damages consisted [of] his
moral sufferings due to the [loss] of his right arm for life;[44]

It thus appears that while petitioners denominated their claim for P500,000.00 as moral
damages, their computation was actually based on the supposed loss/impairment of
Dionisio's earning capacity.

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

Art. 2205. Damages may be recovered:

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

personal injury;

xxxx

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

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

Thus, as a rule, documentary evidence should be presented to substantiate the claim

for damages for loss of earning capacity. By way of exception, damages for loss [or
impairment] of earning capacity may be awarded despite the absence of documentary
evidence when (1) the deceased [or the injured] was self-employed and earning
less than the minimum wage under current labor laws, in which case, judicial
notice may be taken of the fact that in the deceased's line of work no
documentary evidence is available; or (2) the deceased was employed as a daily
worker earning less than the minimum wage under current labor laws.[47]

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

COURT:
Q: By the way, why did you submit the original copy of your exhibits to the GSIS?
A: I am claiming my GSIS compensation because I am a government employee.
ATTY. SEVILLEJA:
Q: What particular government [agency do] you belong?
A: DECS.
Q: You are a teacher?
A: Yes sir.
Q: You are still continuing your profession as a teacher until now?
A: Yes sir.
By the way Mr. witness, you are claiming x x x moral damages of P500,000.00?
Q:
How did you compute that P500,000.00?
A: I based that from [sic] my income which is about P80.00 a day or P10.00 per hour.
Q: Is that x x x gross or not?
A: A: Net sir.
Q: What are your other sideline?
A: I know [how] to drive a tricycle.
Because of [the] amputation of your right arm, you mean to say you [cannot] drive
Q:
anymore a tricycle?
A: Yes sir.
Q: By the way Mr. witness, how old are you when you met [the] accident?
A: More than 53 years old sir, less than 54.
If you are claiming for x x x moral damages of P80.00 a day, how come you are
Q:
asking for P500,000.00?
If you compute that it is P2,400.00 monthly. If I still [live by] about 20-30 years
A:
[more], I can still [earn] that amount.[48]

It must be emphasized, though, that documentary proof of Dionisio's actual income

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

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

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

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

In Pleno v. Court of Appeals, we sustained the award of temperate damages in the

amount of P200,000.00 instead of actual damages for loss of earning capacity because
the plaintiff's income was not sufficiently proven.

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

Similarly, in Victory Liner, Inc. v. Gammad, we deleted the award of damages for loss of
earning capacity for lack of evidentiary basis of the actual extent of the loss.
Nevertheless, because the income-earning capacity lost was clearly established, we
awarded the heirs P500,000.00 as temperate damages.[50]

Accordingly, the Court in Tan awarded to the heirs of the therein deceased victim, who
was working as a tailor at the time of his death, temperate damages in the amount of
P300,000.00 in lieu of compensatory damages.[51]
In the subsequent case of Orix Metro Leasing and Finance Corporation v.
Mangalinao,[52] the Court likewise awarded temperate damages as follows:

While the net income had not been sufficiently established, the Court recognizes the
fact that the Mangalinao heirs had suffered loss deserving of compensation. What the
CA awarded is in actuality a form of temperate damages. Such form of damages under
Article 2224 of the Civil Code is given in the absence of competent proof on the actual
damages suffered. In the past, we awarded temperate damages in lieu of actual
damages for loss of earning capacity where earning capacity plainly established but no
evidence was presented to support the allegation of the injured party's actual income. In
this case, Roberto Mangalinao, the breadwinner of the family, was a businessman
engaged in buying and selling palay and agricultural supplies that required high capital
in its operations and was only 37 at the time of his death. Moreover, the Pathfinder
which the Mangalinaos own, became a total wreck. Under the circumstances, we find
the award of P500,000.00 as temperate damages as reasonable.[53]

And in the more recent case of People v. Salahuddin,[54] the lower courts' award of
P4,398,000.00 as compensation for loss of earning capacity of a murdered lawyer was
disallowed due to insufficiency of evidence. Again in lieu thereof, temperate damages of
P1,000,000.00 was awarded.[55]

In view of the above rulings and under the circumstances of this case, the Court finds
reasonable to award Dionisio temperate damages of P500,000.00 in lieu of actual
damages for the loss/impairment of his earning capacity.

Actual damages by way of medical

expenses must be supported by official
receipts.

Anent petitioners' assertion that actual damages should be awarded to them for the cost
of replacement of Dionisio's amputated right arm, suffice it to state that petitioners failed
to show during trial that the said amputated right arm was actually replaced by an
artificial one. All that petitioners submitted was a quotation of P160,000.00 for a unit of
elbow prosthesis[56] and nothing more. It has been held that actual proof of expenses
incurred for medicines and other medical supplies necessary for treatment and
rehabilitation must be presented by the claimant, in the form of official receipts, to show
the exact cost of his medication and to prove that he indeed went through medication
and rehabilitation. In the absence of the same, such claim must be negated.[57]

At any rate, the RTC already granted petitioners actual damages by way of medical
expenses based on the official hospital receipts submitted.[58] There is, however, a need
to correct the amount, that is, the same should be P57,658.25 as borne by the receipts
and not P57,766.25.

Legal interest is imposed on the

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

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed May 16,
2012 Decision and October 1, 2012 Resolution of the Court of Appeals in CA-G.R. CV
No. 95520 are AFFIRMED with MODIFICATIONS as follows: (1) petitioners are
declared entitled to temperate damages of P500,000.00; (2) the award of actual
damages is set at the amount of P57,658.25; and (3) all damages awarded are subject
to legal interest of 6% per annum from the finality of this Decision until full satisfaction.

SO ORDERED.

CATHAY PACIFIC AIRWAYS v. SPOUSES ARNULFO & EVELYN FUENTEBELLA,

GR No. 188283, 2016-07-20

Facts:

case... originated from a Complaint[4] for damages filed by respondents Arnulfo and
Evelyn Fuentebella against petitioner Cathay Pacific Airways Ltd

Respondents prayed for a total of PI3 million in damages for the alleged besmirched
reputation and honor, as well as the public embarrassment they had suffered as a result
of a series of involuntary downgrades of their trip from Manila to Sydney via Hong Kong
on 25 October 1993 and from Hong Kong to Manila on 2 November 1993.

In 1993, the Speaker of the House authorized Congressmen Arnulfo Fuentebella

(respondent Fuentebella), Alberto Lopez (Cong. Lopez) and Leonardo Fugoso (Cong.
Fugoso) to travel on official business to Sydney, Australia, to confer with their
counterparts in the Australian Parliament from 25 October to 6 November 1993.[8

On 22 October 1993, respondents bought Business Class tickets for Manila to Sydney
via Hong Kong and back.[9] They changed their minds, however, and decided to
upgrade to First Clas

According to petitioner, on 23 October 1993, one of the passengers called to request

that the booking be divided into two: one for the Spouses Lopez and Spouses Fugoso,
and a separate booking for respondents

Cong. Lopez... admitted that he had called up petitioner, but only to request an upgrade
of their tickets from Business Class to First Class

There was no showing whether the First Class tickets issued to Sps. Lopez and Sps.
Fugoso were open-dated or otherwise, but it appears that they were able to fly First
Class on all the segments of the trip, while respondents were not.[
They only discovered that they had not been given First Class seats when they were
denied entry into the First Class lounge

Respondent Fuentebella went back to the check-in counter to demand that they be
given First Class seats or at the very least, access to the First Class Lounge. He
recalled that he was treated by the ground staff in a discourteous, arrogant and rude
manner

Montillana admitted that First Class tickets had been issued to respondents, but
qualified that those tickets were open-dated

Upon arrival in the Philippines, respondents demanded a formal apology and payment
of damages from petitioner

The trial court ordered petitioner to pay P5 million as moral damages, P1 million as
exemplary damages, and P500,000 as attorney's fee

The CA affirmed the RTC Decision with the modification that the attorney's fees be
reduced to P100,000

Issues:

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

There was a breach of contract

There is basis for the award of moral and exemplary damages; however, the amounts
were excessive

Moral and exemplary damages are not ordinarily awarded in breach of contract cases.
This Court has held that damages may be awarded only when the breach is wanton and
deliberately injurious, or the one responsible had acted fraudulently or with malice or
bad faith

Ruling:

RULING OF THE COURT

In Air France v. Gillego[68] this Court ruled that in an action based on a breach of
contract of carriage, the aggrieved party does not have to prove that the common carrier
was at fault or was negligent; all that he has to prove is the existence of the contract
and the fact of its nonperformance by the carrier
In FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation,[73] We
recognized the interests of the injured party in breach of contract cases:

A breach upon the contract confers upon the injured party a valid cause for recovering
that which may have been lost or suffered

According to Montillana, a reservation is deemed confirmed when there is a seat

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

Petitioner tries to downplay the factual finding that no explanation was given to
respondents with regard to the types of ticket that were issued to them. It ventured that
respondents were seasoned travelers and therefore familiar with the concept of open-
dated tickets

In the present case, no evidence was presented to show that respondents were indeed
familiar with the concept of open-dated ticket. In fact, the tickets do not even contain the
term "open-dated."... when

Moral and exemplary damages are not ordinarily awarded in breach of contract cases.
This Court has held that damages may be awarded only when the breach is wanton and
deliberately injurious, or the one responsible had acted fraudulently or with malice or
bad faith

However, the award of P5 million as moral damages is excessive, considering that the
highest amount ever awarded by this Court for moral damages in cases involving
airlines is P500,000.[82] As We said in Air France v. Gillego,[83] the mere fact that
respondent was a Congressman should not result in an automatic increase in the moral
and exemplary damages."

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

WHEREFORE, the Petition is PARTIALLY GRANTED. The Court of Appeals Decision

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

Principles:
Bad faith is a question of fact that must be proven by clear and convincing evidence

Both the trial and the appellate courts found that petitioner had

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

CATHAY PACIFIC AIRWAYS, LTD., Petitioner, v. SPOUSES ARNULFO AND

EVELYN FUENTEBELLA, Respondents.

DECISION

SERENO, C.J.:

This is a Petition for Review on Certiorari filed by Cathay Pacific Airways Ltd. from the
Court of Appeals (CA) Decision1 and Resolution2 in CA-G.R. CV No. 87698. The CA
affirmed with modification the Decision 3 issued by the Regional Trial Court (RTC)
Branch 30 in San Jose, Camarines Sur, in Civil Case No. T-635.

The Case

The case originated from a Complaint4 for damages filed by respondents Arnulfo and
Evelyn Fuentebella against petitioner Cathay Pacific Airways Ltd., a foreign corporation
licensed to do business in the Philippines. Respondents prayed for a total of PI3 million
in damages for the alleged besmirched reputation and honor, as well as the public
embarrassment they had suffered as a result of a series of involuntary downgrades of
their trip from Manila to Sydney via Hong Kong on 25 October 1993 and from Hong
Kong to Manila on 2 November 1993.5 In its Answer,6 petitioner maintained that
respondents had flown on the sections and sectors they had booked and confirmed.

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

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

Facts

In 1993, the Speaker of the House authorized Congressmen Arnulfo Fuentebella

(respondent Fuentebella), Alberto Lopez (Cong. Lopez) and Leonardo Fugoso (Cong.
Fugoso) to travel on official business to Sydney, Australia, to confer with their
counterparts in the Australian Parliament from 25 October to 6 November
1993.8chanrobleslaw
On 22 October 1993, respondents bought Business Class tickets for Manila to Sydney
via Hong Kong and back.9 They changed their minds, however, and decided to upgrade
to First Class.10 From this point, the parties presented divergent versions of facts. The
overarching disagreement was on whether respondents should have been given First
Class seat accommodations for all the segments of their itinerary.

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

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

On 25 October 1993, respondents queued in front of the First Class counter in the
airport. 22 They were issued boarding passes for Business Class seats on board CX 902
bound for Hong Kong from Manila and Economy Class seats on board CX 101 bound
for Sydney from Hong Kong.23 They only discovered that they had not been given First
Class seats when they were denied entry into the First Class lounge.24 Respondent
Fuentebella went back to the check-in counter to demand that they be given First Class
seats or at the very least, access to the First Class Lounge. He recalled that he was
treated by the ground staff in a discourteous, arrogant and rude manner. 25cralawred He
was allegedly told that the plane would leave with or without them. 26 Both the trial court
and the CA gave credence to the testimony of respondent Fuentebella.

During trial, petitioner offered the transcript of the deposition of its senior reservation
supervisor, Nenita Montillana (Montillana).27 She said that based on the record locator,
respondents had confirmed reservations for Business Class seats for the Manila-Hong
Kong, Sydney-Hong Kong, and Hong Kong-Manila flights; but the booking for Business
Class seats for the Hong Kong-Sydney leg was "under request;" and due to the flight
being full, petitioner was not able to approve the request. 28chanrobleslaw
Montillana admitted that First Class tickets had been issued to respondents, but
qualified that those tickets were open-dated. 29 She referred to the plane tickets, which
bore the annotations "OPEN F OPEN" for all sectors of the flight.30 Petitioner explained
that while respondents expressed their desire to travel First Class, they could not be
accommodated because they had failed to confirm and the sections were full on the
date and time of their scheduled and booked flights.31 Petitioner also denied that its
personnel exhibited arrogance in dealing with respondents; on the contrary, it was
allegedly respondent Fuentebella who was hostile in dealing with the ground
staff.32chanrobleslaw

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

Petitioner used the deposition of Manuel Benipayo (Benipayo), airport service officer,
and Raquel Galvez-Leonio (Galvez-Leonio), airport services supervisor, to contradict
the claims of respondents. Benipayo identified himself as the ground staff who had dealt
with respondents' complaint. 37 He testified that around five o'clock on 25 October 1993,
respondent Fuentebella loudly insisted that he be accommodated on First Class. But
upon checking their records, he found out that respondents were only booked on
Business Class. 38 Benipayo tried to explain this to respondents in a very polite manner,
39 and he exerted his best effort to secure First Class seats for them, but the plane was

already full. 40 He presented a telex sent to their Hong Kong office, in which he
requested assistance to accommodate respondents in First Class for the Hong Kong-
Sydney flight. 41 He claimed that he was intimidated by respondent Fuentebella into
making the notations "Involuntary Downgrading" and "fare difference to be refunded" on
the tickets.42chanrobleslaw

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

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

Respondents were able to travel First Class for their trip from Sydney to Hong Kong on
30 October 1993. 46 However, on the last segment of the itinerary from Hong Kong to
Manila on 2 November 1993, they were issued boarding passes for Business
Class.47chanrobleslaw
Upon arrival in the Philippines, respondents demanded a formal apology and payment
of damages from petitioner. 48 The latter conducted an investigation, after which it
maintained that no undue harm had been done to them. 49 Ruling of the Regional Trial
Court

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

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

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

xxxx

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

The trial court ordered petitioner to pay P5 million as moral damages, P1 million as
exemplary damages, and P500,000 as attorney's fees. In setting the award for moral
damages, the RTC considered the prestigious position held by respondent Fuentebella,
as well as the bad faith exhibited by petitioner.54 According to the trial court, the contract
was flagrantly violated in four instances: first, when respondents were denied entry to
the First Class lounge; second, at the check-in counter when the airport services officer
failed to adequately address their concern; third, at the Hong Kong airport when they
were ignored; and fourth, when respondents became the butt of jokes upon their arrival
in Sydney.55chanrobleslaw

RULING OF THE COURT OF APPEALS

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

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

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

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

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

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

RULING OF THE COURT

There was a breach of contract.

In Air France v. Gillego68 this Court ruled that in an action based on a breach of contract
of carriage, the aggrieved party does not have to prove that the common carrier was at
fault or was negligent; all that he has to prove is the existence of the contract and the
fact of its nonperformance by the carrier. In this case, both the trial and appellate courts
found that respondents were entitled to First Class accommodations under the contract
of carriage, and that petitioner failed to perform its obligation. We shall not delve into
this issue more deeply than is necessary because We have decided to accord respect
to the factual findings of the trial and appellate courts. We must, however, point out a
crucial fact We have uncovered from the records that further debunks petitioner's
suggestion69 that two sets of tickets were issued to respondents - one for Business
Class and another for open-dated First Class tickets with the following
entries:70chanrobleslaw

Business Class Tickets Date First Class Tickets Date of Actual

Segment of Issue: 23 October 1993 Issue: 5 October 1993 Class
Boarded
Flight Class Status Flight Class Status

Manila- CX902 C OK OPEN F - Business

Hong Kong

Hong Kong- CX 101 C RQ OPEN F - Economy

Sydney

Sydney- CX 100 C OK OPEN F - First

Hong Kong

Hong Kong- CX901 C OK OPEN F - Business

Manila

The First Class tickets issued on 25 October 1993 indicate that they were "issued in
exchange for Ticket Nos. 160-401123987 and 160- 4474920334/5."71 The latter set of
tickets numbered 160-4474920334/5 correspond to the Business Class tickets issued
on 23 October 1993, which in turn originated from Ticket No. 160-4011239858 issued
on 22 October 1993.72chanrobleslaw

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

In FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation,73 We

recognized the interests of the injured party in breach of contract cases:

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

According to Montillana, a reservation is deemed confirmed when there is a seat

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

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

There is basis for the award of moral and exemplary

damages; however, the amounts were excessive.

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

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

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

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

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

WHEREFORE, the Petition is PARTIALLY GRANTED. The Court of Appeals Decision

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

SO ORDERED.

30 Phil 768 – Civil Law – Torts and Damages – Distinction of Liability of Employers
Under Article 2180 and Their Liability for Breach of Contract

On January 20, 1915, Cangco was riding the train of Manila Railroad Co (MRC). He
was an employee of the latter and he was given a pass so that he could ride the train for
free. When he was nearing his destination at about 7pm, he arose from his seat even
though the train was not at full stop. When he was about to alight from the train (which
was still slightly moving) he accidentally stepped on a sack of watermelons which he
failed to notice due to the fact that it was dim. This caused him to lose his balance at the
door and he fell and his arm was crushed by the train and he suffered other serious
injuries. He was dragged a few meters more as the train slowed down.

It was established that the employees of MRC were negligent in piling the sacks of
watermelons. MRC raised as a defense the fact that Cangco was also negligent as he
failed to exercise diligence in alighting from the train as he did not wait for it to stop.

ISSUE: Whether or not Manila Railroad Co is liable for damages.

HELD: Yes. Alighting from a moving train while it is slowing down is a common practice
and a lot of people are doing so every day without suffering injury. Cangco has the vigor
and agility of young manhood, and it was by no means so risky for him to get off while
the train was yet moving as the same act would have been in an aged or feeble person.
He was also ignorant of the fact that sacks of watermelons were there as there were no
appropriate warnings and the place was dimly lit.

The Court also elucidated on the distinction between the liability of employers under
Article 2180 and their liability for breach of contract [of carriage]:

NOTES: But, if the master has not been guilty of any negligence whatever in the
selection and direction of the servant, he is not liable for the acts of the latter, whatever
done within the scope of his employment or not, if the damage done by the servant
does not amount to a breach of the contract between the master and the person injured.

The liability arising from extra-contractual culpa is always based upon a voluntary act or
omission which, without willful intent, but by mere negligence or inattention, has caused
damage to another.

These two fields, figuratively speaking, concentric; that is to say, the mere fact that a
person is bound to another by contract does not relieve him from extra-contractual
liability to such person. When such a contractual relation exists the obligor may break
the contract under such conditions that the same act which constitutes the source of an
extra-contractual obligation had no contract existed between the parties.

Manresa: Whether negligence occurs an incident in the course of the performance of a

contractual undertaking or in itself the source of an extra-contractual undertaking
obligation, its essential characteristics are identical.
Vinculum Juris: (def) It means “an obligation of law”, or the right of the obligee to
enforce a civil matter in a court of law.

In determining the question of contributory negligence in performing such act – that is to

say, whether the passenger acted prudently or recklessly – the age, sex, and physical
condition of the passenger are circumstances necessarily affecting the safety of the
passenger, and should be considered.

The place was perfectly familiar to the plaintiff as it was his daily custom to get on and
off the train at the station. There could, therefore, be no uncertainty in his mind with
regard either to the length of the step which he was required to take or the character of
the platform where he was alighting. The Supreme Court’s conclusion was that the
conduct of the plaintiff in undertaking to alight while the train was yet slightly under way
was not characterized by imprudence and that therefore he was not guilty of
contributory negligence.

FULLTEXT

JOSE CANGCO, plaintiff-appellant,

vs.
MANILA RAILROAD CO., defendant-appellee.

Ramon Sotelo for appellant.

Kincaid & Hartigan for appellee.

FISHER, J.:

At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco,
was in the employment of Manila Railroad Company in the capacity of clerk, with a
monthly wage of P25. He lived in the pueblo of San Mateo, in the province of Rizal,
which is located upon the line of the defendant railroad company; and in coming daily by
train to the company's office in the city of Manila where he worked, he used a pass,
supplied by the company, which entitled him to ride upon the company's trains free of
charge. Upon the occasion in question, January 20, 1915, the plaintiff arose from his
seat in the second class-car where he was riding and, making, his exit through the door,
took his position upon the steps of the coach, seizing the upright guardrail with his right
hand for support.

On the side of the train where passengers alight at the San Mateo station there is a
cement platform which begins to rise with a moderate gradient some distance away
from the company's office and extends along in front of said office for a distance
sufficient to cover the length of several coaches. As the train slowed down another
passenger, named Emilio Zuñiga, also an employee of the railroad company, got off the
same car, alighting safely at the point where the platform begins to rise from the level of
the ground. When the train had proceeded a little farther the plaintiff Jose Cangco
stepped off also, but one or both of his feet came in contact with a sack of watermelons
with the result that his feet slipped from under him and he fell violently on the platform.
His body at once rolled from the platform and was drawn under the moving car, where
his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted
from the train the car moved forward possibly six meters before it came to a full stop.

The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad
station was lighted dimly by a single light located some distance away, objects on the
platform where the accident occurred were difficult to discern especially to a person
emerging from a lighted car.

The explanation of the presence of a sack of melons on the platform where the plaintiff
alighted is found in the fact that it was the customary season for harvesting these
melons and a large lot had been brought to the station for the shipment to the market.
They were contained in numerous sacks which has been piled on the platform in a row
one upon another. The testimony shows that this row of sacks was so placed of melons
and the edge of platform; and it is clear that the fall of the plaintiff was due to the fact
that his foot alighted upon one of these melons at the moment he stepped upon the
platform. His statement that he failed to see these objects in the darkness is readily to
be credited.

The plaintiff was drawn from under the car in an unconscious condition, and it appeared
that the injuries which he had received were very serious. He was therefore brought at
once to a certain hospital in the city of Manila where an examination was made and his
arm was amputated. The result of this operation was unsatisfactory, and the plaintiff
was then carried to another hospital where a second operation was performed and the
member was again amputated higher up near the shoulder. It appears in evidence that
the plaintiff expended the sum of P790.25 in the form of medical and surgical fees and
for other expenses in connection with the process of his curation.

Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the
city of Manila to recover damages of the defendant company, founding his action upon
the negligence of the servants and employees of the defendant in placing the sacks of
melons upon the platform and leaving them so placed as to be a menace to the security
of passenger alighting from the company's trains. At the hearing in the Court of First
Instance, his Honor, the trial judge, found the facts substantially as above stated, and
drew therefrom his conclusion to the effect that, although negligence was attributable to
the defendant by reason of the fact that the sacks of melons were so placed as to
obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself had
failed to use due caution in alighting from the coach and was therefore precluded form
recovering. Judgment was accordingly entered in favor of the defendant company, and
the plaintiff appealed.

It can not be doubted that the employees of the railroad company were guilty of
negligence in piling these sacks on the platform in the manner above stated; that their
presence caused the plaintiff to fall as he alighted from the train; and that they therefore
constituted an effective legal cause of the injuries sustained by the plaintiff. It
necessarily follows that the defendant company is liable for the damage thereby
occasioned unless recovery is barred by the plaintiff's own contributory negligence. In
resolving this problem it is necessary that each of these conceptions of liability, to-wit,
the primary responsibility of the defendant company and the contributory negligence of
the plaintiff should be separately examined.

It is important to note that the foundation of the legal liability of the defendant is the
contract of carriage, and that the obligation to respond for the damage which plaintiff
has suffered arises, if at all, from the breach of that contract by reason of the failure of
defendant to exercise due care in its performance. That is to say, its liability is direct and
immediate, differing essentially, in legal viewpoint from that presumptive responsibility
for the negligence of its servants, imposed by article 1903 of the Civil Code, which can
be rebutted by proof of the exercise of due care in their selection and supervision.
Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but
only to extra-contractual obligations — or to use the technical form of expression, that
article relates only to culpa aquiliana and not to culpa contractual.

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil
Code, clearly points out this distinction, which was also recognized by this Court in its
decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In
commenting upon article 1093 Manresa clearly points out the difference between
"culpa, substantive and independent, which of itself constitutes the source of an
obligation between persons not formerly connected by any legal tie" and culpa
considered as an accident in the performance of an obligation already existing . . . ."

In the Rakes case (supra) the decision of this court was made to rest squarely upon the
proposition that article 1903 of the Civil Code is not applicable to acts of negligence
which constitute the breach of a contract.

Upon this point the Court said:

The acts to which these articles [1902 and 1903 of the Civil Code] are applicable
are understood to be those not growing out of pre-existing duties of the parties to
one another. But where relations already formed give rise to duties, whether
springing from contract or quasi-contract, then breaches of those duties are
subject to article 1101, 1103, and 1104 of the same code. (Rakes vs. Atlantic,
Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)

This distinction is of the utmost importance. The liability, which, under the Spanish law,
is, in certain cases imposed upon employers with respect to damages occasioned by
the negligence of their employees to persons to whom they are not bound by contract,
is not based, as in the English Common Law, upon the principle of respondeat superior
— if it were, the master would be liable in every case and unconditionally — but upon
the principle announced in article 1902 of the Civil Code, which imposes upon all
persons who by their fault or negligence, do injury to another, the obligation of making
good the damage caused. One who places a powerful automobile in the hands of a
servant whom he knows to be ignorant of the method of managing such a vehicle, is
himself guilty of an act of negligence which makes him liable for all the consequences of
his imprudence. The obligation to make good the damage arises at the very instant that
the unskillful servant, while acting within the scope of his employment causes the injury.
The liability of the master is personal and direct. But, if the master has not been guilty of
any negligence whatever in the selection and direction of the servant, he is not liable for
the acts of the latter, whatever done within the scope of his employment or not, if the
damage done by the servant does not amount to a breach of the contract between the
master and the person injured.

It is not accurate to say that proof of diligence and care in the selection and control of
the servant relieves the master from liability for the latter's acts — on the contrary, that
proof shows that the responsibility has never existed. As Manresa says (vol. 8, p. 68)
the liability arising from extra-contractual culpa is always based upon a voluntary act or
omission which, without willful intent, but by mere negligence or inattention, has caused
damage to another. A master who exercises all possible care in the selection of his
servant, taking into consideration the qualifications they should possess for the
discharge of the duties which it is his purpose to confide to them, and directs them with
equal diligence, thereby performs his duty to third persons to whom he is bound by no
contractual ties, and he incurs no liability whatever if, by reason of the negligence of his
servants, even within the scope of their employment, such third person suffer damage.
True it is that under article 1903 of the Civil Code the law creates a presumption that he
has been negligent in the selection or direction of his servant, but the presumption is
rebuttable and yield to proof of due care and diligence in this respect.

The supreme court of Porto Rico, in interpreting identical provisions, as found in the
Porto Rico Code, has held that these articles are applicable to cases of extra-
contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico Reports, 215.)

This distinction was again made patent by this Court in its decision in the case of Bahia
vs. Litonjua and Leynes, (30 Phil. rep., 624), which was an action brought upon the
theory of the extra-contractual liability of the defendant to respond for the damage
caused by the carelessness of his employee while acting within the scope of his
employment. The Court, after citing the last paragraph of article 1903 of the Civil Code,
said:

From this article two things are apparent: (1) That when an injury is caused by
the negligence of a servant or employee there instantly arises a presumption of
law that there was negligence on the part of the master or employer either in
selection of the servant or employee, or in supervision over him after the
selection, or both; and (2) that that presumption is juris tantum and not juris et de
jure, and consequently, may be rebutted. It follows necessarily that if the
employer shows to the satisfaction of the court that in selection and supervision
 he has exercised the care and diligence of a good father of a family, the
presumption is overcome and he is relieved from liability.

This theory bases the responsibility of the master ultimately on his own
negligence and not on that of his servant. This is the notable peculiarity of the
Spanish law of negligence. It is, of course, in striking contrast to the American
doctrine that, in relations with strangers, the negligence of the servant in
conclusively the negligence of the master.

The opinion there expressed by this Court, to the effect that in case of extra-contractual
culpa based upon negligence, it is necessary that there shall have been some fault
attributable to the defendant personally, and that the last paragraph of article 1903
merely establishes a rebuttable presumption, is in complete accord with the
authoritative opinion of Manresa, who says (vol. 12, p. 611) that the liability created by
article 1903 is imposed by reason of the breach of the duties inherent in the special
relations of authority or superiority existing between the person called upon to repair the
damage and the one who, by his act or omission, was the cause of it.

On the other hand, the liability of masters and employers for the negligent acts or
omissions of their servants or agents, when such acts or omissions cause damages
which amount to the breach of a contact, is not based upon a mere presumption of the
master's negligence in their selection or control, and proof of exercise of the utmost
diligence and care in this regard does not relieve the master of his liability for the breach
of his contract.

Every legal obligation must of necessity be extra-contractual or contractual. Extra-

contractual obligation has its source in the breach or omission of those mutual duties
which civilized society imposes upon it members, or which arise from these relations,
other than contractual, of certain members of society to others, generally embraced in
the concept of status. The legal rights of each member of society constitute the
measure of the corresponding legal duties, mainly negative in character, which the
existence of those rights imposes upon all other members of society. The breach of
these general duties whether due to willful intent or to mere inattention, if productive of
injury, give rise to an obligation to indemnify the injured party. The fundamental
distinction between obligations of this character and those which arise from contract,
rests upon the fact that in cases of non-contractual obligation it is the wrongful or
negligent act or omission itself which creates the vinculum juris, whereas in contractual
relations the vinculum exists independently of the breach of the voluntary duty assumed
by the parties when entering into the contractual relation.

With respect to extra-contractual obligation arising from negligence, whether of act or

omission, it is competent for the legislature to elect — and our Legislature has so
elected — whom such an obligation is imposed is morally culpable, or, on the contrary,
for reasons of public policy, to extend that liability, without regard to the lack of moral
culpability, so as to include responsibility for the negligence of those person who acts or
mission are imputable, by a legal fiction, to others who are in a position to exercise an
absolute or limited control over them. The legislature which adopted our Civil Code has
elected to limit extra-contractual liability — with certain well-defined exceptions — to
cases in which moral culpability can be directly imputed to the persons to be charged.
This moral responsibility may consist in having failed to exercise due care in the
selection and control of one's agents or servants, or in the control of persons who, by
reason of their status, occupy a position of dependency with respect to the person made
liable for their conduct.

The position of a natural or juridical person who has undertaken by contract to render
service to another, is wholly different from that to which article 1903 relates. When the
sources of the obligation upon which plaintiff's cause of action depends is a negligent
act or omission, the burden of proof rests upon plaintiff to prove the negligence — if he
does not his action fails. But when the facts averred show a contractual undertaking by
defendant for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused to
perform the contract, it is not necessary for plaintiff to specify in his pleadings whether
the breach of the contract is due to willful fault or to negligence on the part of the
defendant, or of his servants or agents. Proof of the contract and of its nonperformance
is sufficient prima facie to warrant a recovery.

As a general rule . . . it is logical that in case of extra-contractual culpa, a suing

creditor should assume the burden of proof of its existence, as the only fact upon
which his action is based; while on the contrary, in a case of negligence which
presupposes the existence of a contractual obligation, if the creditor shows that it
exists and that it has been broken, it is not necessary for him to prove
negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).

As it is not necessary for the plaintiff in an action for the breach of a contract to show
that the breach was due to the negligent conduct of defendant or of his servants, even
though such be in fact the actual cause of the breach, it is obvious that proof on the part
of defendant that the negligence or omission of his servants or agents caused the
breach of the contract would not constitute a defense to the action. If the negligence of
servants or agents could be invoked as a means of discharging the liability arising from
contract, the anomalous result would be that person acting through the medium of
agents or servants in the performance of their contracts, would be in a better position
than those acting in person. If one delivers a valuable watch to watchmaker who
contract to repair it, and the bailee, by a personal negligent act causes its destruction,
he is unquestionably liable. Would it be logical to free him from his liability for the breach
of his contract, which involves the duty to exercise due care in the preservation of the
watch, if he shows that it was his servant whose negligence caused the injury? If such a
theory could be accepted, juridical persons would enjoy practically complete immunity
from damages arising from the breach of their contracts if caused by negligent acts as
such juridical persons can of necessity only act through agents or servants, and it would
no doubt be true in most instances that reasonable care had been taken in selection
and direction of such servants. If one delivers securities to a banking corporation as
collateral, and they are lost by reason of the negligence of some clerk employed by the
bank, would it be just and reasonable to permit the bank to relieve itself of liability for the
breach of its contract to return the collateral upon the payment of the debt by proving
that due care had been exercised in the selection and direction of the clerk?

This distinction between culpa aquiliana, as the source of an obligation, and culpa
contractual as a mere incident to the performance of a contract has frequently been
recognized by the supreme court of Spain. (Sentencias of June 27, 1894; November 20,
1896; and December 13, 1896.) In the decisions of November 20, 1896, it appeared
that plaintiff's action arose ex contractu, but that defendant sought to avail himself of the
provisions of article 1902 of the Civil Code as a defense. The Spanish Supreme Court
rejected defendant's contention, saying:

These are not cases of injury caused, without any pre-existing obligation, by fault
or negligence, such as those to which article 1902 of the Civil Code relates, but
of damages caused by the defendant's failure to carry out the undertakings
imposed by the contracts . . . .

A brief review of the earlier decision of this court involving the liability of employers for
damage done by the negligent acts of their servants will show that in no case has the
court ever decided that the negligence of the defendant's servants has been held to
constitute a defense to an action for damages for breach of contract.

In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a
carriage was not liable for the damages caused by the negligence of his driver. In that
case the court commented on the fact that no evidence had been adduced in the trial
court that the defendant had been negligent in the employment of the driver, or that he
had any knowledge of his lack of skill or carefulness.

In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep.,
215), the plaintiff sued the defendant for damages caused by the loss of a barge
belonging to plaintiff which was allowed to get adrift by the negligence of defendant's
servants in the course of the performance of a contract of towage. The court held, citing
Manresa (vol. 8, pp. 29, 69) that if the "obligation of the defendant grew out of a contract
made between it and the plaintiff . . . we do not think that the provisions of articles 1902
and 1903 are applicable to the case."

In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the
defendant to recover damages for the personal injuries caused by the negligence of
defendant's chauffeur while driving defendant's automobile in which defendant was
riding at the time. The court found that the damages were caused by the negligence of
the driver of the automobile, but held that the master was not liable, although he was
present at the time, saying:

. . . unless the negligent acts of the driver are continued for a length of time as to
give the owner a reasonable opportunity to observe them and to direct the driver
to desist therefrom. . . . The act complained of must be continued in the presence
 of the owner for such length of time that the owner by his acquiescence, makes
the driver's acts his own.

In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33
Phil. Rep., 8), it is true that the court rested its conclusion as to the liability of the
defendant upon article 1903, although the facts disclosed that the injury complaint of by
plaintiff constituted a breach of the duty to him arising out of the contract of
transportation. The express ground of the decision in this case was that article 1903, in
dealing with the liability of a master for the negligent acts of his servants "makes the
distinction between private individuals and public enterprise;" that as to the latter the law
creates a rebuttable presumption of negligence in the selection or direction of servants;
and that in the particular case the presumption of negligence had not been overcome.

It is evident, therefore that in its decision Yamada case, the court treated plaintiff's
action as though founded in tort rather than as based upon the breach of the contract of
carriage, and an examination of the pleadings and of the briefs shows that the questions
of law were in fact discussed upon this theory. Viewed from the standpoint of the
defendant the practical result must have been the same in any event. The proof
disclosed beyond doubt that the defendant's servant was grossly negligent and that his
negligence was the proximate cause of plaintiff's injury. It also affirmatively appeared
that defendant had been guilty of negligence in its failure to exercise proper discretion in
the direction of the servant. Defendant was, therefore, liable for the injury suffered by
plaintiff, whether the breach of the duty were to be regarded as constituting culpa
aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29 and 69) whether
negligence occurs an incident in the course of the performance of a contractual
undertaking or its itself the source of an extra-contractual undertaking obligation, its
essential characteristics are identical. There is always an act or omission productive of
damage due to carelessness or inattention on the part of the defendant. Consequently,
when the court holds that a defendant is liable in damages for having failed to exercise
due care, either directly, or in failing to exercise proper care in the selection and
direction of his servants, the practical result is identical in either case. Therefore, it
follows that it is not to be inferred, because the court held in the Yamada case that
defendant was liable for the damages negligently caused by its servants to a person to
whom it was bound by contract, and made reference to the fact that the defendant was
negligent in the selection and control of its servants, that in such a case the court would
have held that it would have been a good defense to the action, if presented squarely
upon the theory of the breach of the contract, for defendant to have proved that it did in
fact exercise care in the selection and control of the servant.

The true explanation of such cases is to be found by directing the attention to the
relative spheres of contractual and extra-contractual obligations. The field of non-
contractual obligation is much more broader than that of contractual obligations,
comprising, as it does, the whole extent of juridical human relations. These two fields,
figuratively speaking, concentric; that is to say, the mere fact that a person is bound to
another by contract does not relieve him from extra-contractual liability to such person.
When such a contractual relation exists the obligor may break the contract under such
conditions that the same act which constitutes the source of an extra-contractual
obligation had no contract existed between the parties.

The contract of defendant to transport plaintiff carried with it, by implication, the duty to
carry him in safety and to provide safe means of entering and leaving its trains (civil
code, article 1258). That duty, being contractual, was direct and immediate, and its non-
performance could not be excused by proof that the fault was morally imputable to
defendant's servants.

The railroad company's defense involves the assumption that even granting that the
negligent conduct of its servants in placing an obstruction upon the platform was a
breach of its contractual obligation to maintain safe means of approaching and leaving
its trains, the direct and proximate cause of the injury suffered by plaintiff was his own
contributory negligence in failing to wait until the train had come to a complete stop
before alighting. Under the doctrine of comparative negligence announced in the Rakes
case (supra), if the accident was caused by plaintiff's own negligence, no liability is
imposed upon defendant's negligence and plaintiff's negligence merely contributed to
his injury, the damages should be apportioned. It is, therefore, important to ascertain if
defendant was in fact guilty of negligence.

It may be admitted that had plaintiff waited until the train had come to a full stop before
alighting, the particular injury suffered by him could not have occurred. Defendant
contends, and cites many authorities in support of the contention, that it is negligence
per se for a passenger to alight from a moving train. We are not disposed to subscribe
to this doctrine in its absolute form. We are of the opinion that this proposition is too
badly stated and is at variance with the experience of every-day life. In this particular
instance, that the train was barely moving when plaintiff alighted is shown conclusively
by the fact that it came to stop within six meters from the place where he stepped from
it. Thousands of person alight from trains under these conditions every day of the year,
and sustain no injury where the company has kept its platform free from dangerous
obstructions. There is no reason to believe that plaintiff would have suffered any injury
whatever in alighting as he did had it not been for defendant's negligent failure to
perform its duty to provide a safe alighting place.

We are of the opinion that the correct doctrine relating to this subject is that expressed
in Thompson's work on Negligence (vol. 3, sec. 3010) as follows:

The test by which to determine whether the passenger has been guilty of
negligence in attempting to alight from a moving railway train, is that of ordinary
or reasonable care. It is to be considered whether an ordinarily prudent person,
of the age, sex and condition of the passenger, would have acted as the
passenger acted under the circumstances disclosed by the evidence. This care
has been defined to be, not the care which may or should be used by the prudent
man generally, but the care which a man of ordinary prudence would use under
similar circumstances, to avoid injury." (Thompson, Commentaries on
Negligence, vol. 3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37
Phil. rep., 809), we may say that the test is this; Was there anything in the
circumstances surrounding the plaintiff at the time he alighted from the train which
would have admonished a person of average prudence that to get off the train under the
conditions then existing was dangerous? If so, the plaintiff should have desisted from
alighting; and his failure so to desist was contributory negligence.1awph!l.net

As the case now before us presents itself, the only fact from which a conclusion can be
drawn to the effect that plaintiff was guilty of contributory negligence is that he stepped
off the car without being able to discern clearly the condition of the platform and while
the train was yet slowly moving. In considering the situation thus presented, it should
not be overlooked that the plaintiff was, as we find, ignorant of the fact that the
obstruction which was caused by the sacks of melons piled on the platform existed; and
as the defendant was bound by reason of its duty as a public carrier to afford to its
passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in
the absence of some circumstance to warn him to the contrary, that the platform was
clear. The place, as we have already stated, was dark, or dimly lighted, and this also is
proof of a failure upon the part of the defendant in the performance of a duty owing by it
to the plaintiff; for if it were by any possibility concede that it had right to pile these sacks
in the path of alighting passengers, the placing of them adequately so that their
presence would be revealed.

As pertinent to the question of contributory negligence on the part of the plaintiff in this
case the following circumstances are to be noted: The company's platform was
constructed upon a level higher than that of the roadbed and the surrounding ground.
The distance from the steps of the car to the spot where the alighting passenger would
place his feet on the platform was thus reduced, thereby decreasing the risk incident to
stepping off. The nature of the platform, constructed as it was of cement material, also
assured to the passenger a stable and even surface on which to alight. Furthermore,
the plaintiff was possessed of the vigor and agility of young manhood, and it was by no
means so risky for him to get off while the train was yet moving as the same act would
have been in an aged or feeble person. In determining the question of contributory
negligence in performing such act — that is to say, whether the passenger acted
prudently or recklessly — the age, sex, and physical condition of the passenger are
circumstances necessarily affecting the safety of the passenger, and should be
considered. Women, it has been observed, as a general rule are less capable than men
of alighting with safety under such conditions, as the nature of their wearing apparel
obstructs the free movement of the limbs. Again, it may be noted that the place was
perfectly familiar to the plaintiff as it was his daily custom to get on and of the train at
this station. There could, therefore, be no uncertainty in his mind with regard either to
the length of the step which he was required to take or the character of the platform
where he was alighting. Our conclusion is that the conduct of the plaintiff in undertaking
to alight while the train was yet slightly under way was not characterized by imprudence
and that therefore he was not guilty of contributory negligence.
The evidence shows that the plaintiff, at the time of the accident, was earning P25 a
month as a copyist clerk, and that the injuries he has suffered have permanently
disabled him from continuing that employment. Defendant has not shown that any other
gainful occupation is open to plaintiff. His expectancy of life, according to the standard
mortality tables, is approximately thirty-three years. We are of the opinion that a fair
compensation for the damage suffered by him for his permanent disability is the sum of
P2,500, and that he is also entitled to recover of defendant the additional sum of
P790.25 for medical attention, hospital services, and other incidental expenditures
connected with the treatment of his injuries.

The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the
sum of P3,290.25, and for the costs of both instances. So ordered.

Arellano, C.J., Torres, Street and Avanceña, JJ., concur.

Separate Opinions

MALCOLM, J., dissenting:

With one sentence in the majority decision, we are of full accord, namely, "It may be
admitted that had plaintiff waited until the train had come to a full stop before alighting,
the particular injury suffered by him could not have occurred." With the general rule
relative to a passenger's contributory negligence, we are likewise in full accord, namely,
"An attempt to alight from a moving train is negligence per se." Adding these two points
together, should be absolved from the complaint, and judgment affirmed.

PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF

THE VESSEL M/V “NATIONAL HONOR,” NATIONAL SHIPPING CORPORATION OF
THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC.
[G.R. No. 161833. July 8, 2005]

FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a shipment
on board the vessel M/V “National Honor,” represented in the Philippines by its agent,
National Shipping Corporation of the Philippines (NSCP).

The M/V “National Honor” arrived at the Manila International Container Terminal (MICT).
The International Container Terminal Services, Incorporated (ICTSI) was furnished with
a copy of the crate cargo list and bill of lading, and it knew the contents of the crate. The
following day, the vessel started discharging its cargoes using its winch crane. The
crane was operated by Olegario Balsa, a winchman from the ICTSI, exclusive arrastre
operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the
surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the
hatches, checked the cargo and found it in apparent good condition. Claudio Cansino,
the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling
cable was fastened on the mid-portion of the crate. In Dauz’s experience, this was a
normal procedure. As the crate was being hoisted from the vessel’s hatch, the mid-
portion of the wooden flooring suddenly snapped in the air, about five feet high from the
vessel’s twin deck, sending all its contents crashing down hard, resulting in extensive
damage to the shipment.

PCIC paid the damage, and as subrogee, filed a case against M/V National Honor,
NSCP and ICTSI. Both RTC and CA dismissed the complaint.

ISSUE:
Whether or not the presumption of negligence is applicable in the instant case.

HELD:
No.
We agree with the contention of the petitioner that common carriers, from the nature of
their business and for reasons of public policy, are mandated 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. he Court has
defined extraordinary diligence in the vigilance over the goods as follows:

The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for avoiding
damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It
requires common carriers to render service with the greatest skill and foresight and “to
use all reasonable means to ascertain the nature and characteristic of goods tendered
for shipment, and to exercise due care in the handling and stowage, including such
methods as their nature requires.”

The common carrier’s duty to observe the requisite diligence in the shipment of goods
lasts from the time the articles are surrendered to or unconditionally placed in the
possession of, and received by, the carrier for transportation until delivered to, or until
the lapse of a reasonable time for their acceptance, by the person entitled to receive
them.] >When the goods shipped are either lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it liable. To overcome the
presumption of negligence in the case of loss, destruction or deterioration of the goods,
the common carrier must prove that it exercised extraordinary diligence.
However, under Article 1734 of the New Civil Code, the presumption of negligence does
not apply to any of the following causes:

1. Flood, storm, earthquake, lightning or other natural disaster or calamity;

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.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which
exempts the common carrier for the loss or damage to the cargo is a closed list. To
exculpate itself from liability for the loss/damage to the cargo under any of the causes,
the common carrier is burdened to prove any of the aforecited causes claimed by it by a
preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to
the shipper to prove that the carrier is negligent.

“Defect” is the want or absence of something necessary for completeness or perfection;

a lack or absence of something essential to completeness; a deficiency in something
essential to the proper use for the purpose for which a thing is to be used. On the other
hand, inferior means of poor quality, mediocre, or second rate. A thing may be of inferior
quality but not necessarily defective. In other words, “defectiveness” is not synonymous
with “inferiority.”

xxx

In the present case, the trial court declared that based on the record, the loss of the
shipment was caused by the negligence of the petitioner as the shipper:

The same may be said with respect to defendant ICTSI. The breakage and collapse of
Crate No. 1 and the total destruction of its contents were not imputable to any fault or
negligence on the part of said defendant in handling the unloading of the cargoes from
the carrying vessel, but was due solely to the inherent defect and weakness of the
materials used in the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side by side
underneath or on the flooring of the crate to support the weight of its contents.

FULL TEXT

PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioners,

vs.
UNKNOWN OWNER OF THE VESSEL M/V "NATIONAL HONOR," NATIONAL
SHIPPING CORPORATION OF THE PHILIPPINES and INTERNATIONAL
CONTAINER SERVICES, INC., Respondents.
 DECISION

CALLEJO, SR., J.:

This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure
assailing the Decision1 dated January 19, 2004 of the Court of Appeals (CA) in CA-G.R.
CV No. 57357 which affirmed the Decision dated February 17, 1997 of the Regional
Trial Court (RTC) of Manila, Branch 37, in Civil Case No. 95-73338.

The Antecedent

On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four
units of parts and accessories in the port of Pusan, Korea, on board the vessel M/V
"National Honor," represented in the Philippines by its agent, National Shipping
Corporation of the Philippines (NSCP). The shipment was for delivery to Manila,
Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued Bill of Lading No.
SH94103062 in the name of the shipper consigned to the order of Metropolitan Bank
and Trust Company with arrival notice in Manila to ultimate consignee Blue Mono
International Company, Incorporated (BMICI), Binondo, Manila.

NSCP, for its part, issued Bill of Lading No. NSGPBSML5125653 in the name of the
freight forwarder, as shipper, consigned to the order of Stamm International Inc., Makati,
Philippines. It is provided therein that:

12. This Bill of Lading shall be prima facie evidence of the receipt of the Carrier in
apparent good order and condition except as, otherwise, noted of the total number of
Containers or other packages or units enumerated overleaf. Proof to the contrary shall
be admissible when this Bill of Lading has been transferred to a third party acting in
good faith. No representation is made by the Carrier as to the weight, contents,
measure, quantity, quality, description, condition, marks, numbers, or value of the
Goods and the Carrier shall be under no responsibility whatsoever in respect of such
description or particulars.

13. The shipper, whether principal or agent, represents and warrants that the goods are
properly described, marked, secured, and packed and may be handled in ordinary
course without damage to the goods, ship, or property or persons and guarantees the
correctness of the particulars, weight or each piece or package and description of the
goods and agrees to ascertain and to disclose in writing on shipment, any condition,
nature, quality, ingredient or characteristic that may cause damage, injury or detriment
to the goods, other property, the ship or to persons, and for the failure to do so the
shipper agrees to be liable for and fully indemnify the carrier and hold it harmless in
respect of any injury or death of any person and loss or damage to cargo or property.
The carrier shall be responsible as to the correctness of any such mark, descriptions or
representations.4
The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate No.
2, complete and in good order condition, covered by Commercial Invoice No. YJ-73564
DTD5 and a Packing List.6 There were no markings on the outer portion of the crates
except the name of the consignee.7 Crate No. 1 measured 24 cubic meters and
weighed 3,620 kgs. It contained the following articles: one (1) unit Lathe Machine
complete with parts and accessories; one (1) unit Surface Grinder complete with parts
and accessories; and one (1) unit Milling Machine complete with parts and accessories.
On the flooring of the wooden crates were three wooden battens placed side by side to
support the weight of the cargo. Crate No. 2, on the other hand, measured 10 cubic
meters and weighed 2,060 kgs. The Lathe Machine was stuffed in the crate. The
shipment had a total invoice value of US$90,000.00 C&F Manila.8 It was insured for
₱2,547,270.00 with the Philippine Charter Insurance Corporation (PCIC) thru its general
agent, Family Insurance and Investment Corporation,9 under Marine Risk Note No.
68043 dated October 24, 1994.10

The M/V "National Honor" arrived at the Manila International Container Terminal (MICT)
on November 14, 1995. The International Container Terminal Services, Incorporated
(ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew
the contents of the crate.11 The following day, the vessel started discharging its cargoes
using its winch crane. The crane was operated by Olegario Balsa, a winchman from the
ICTSI,12 the exclusive arrastre operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the
surveyor of the ICTSI, conducted an inspection of the cargo.13 They inspected the
hatches, checked the cargo and found it in apparent good condition.14 Claudio Cansino,
the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. 15 No
sling cable was fastened on the mid-portion of the crate. In Dauz’s experience, this was
a normal procedure.16 As the crate was being hoisted from the vessel’s hatch, the mid-
portion of the wooden flooring suddenly snapped in the air, about five feet high from the
vessel’s twin deck, sending all its contents crashing down hard,17 resulting in extensive
damage to the shipment.

BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such damaged
condition.18 Upon receipt of the damaged shipment, BMICI found that the same could
no longer be used for the intended purpose. The Mariners’ Adjustment Corporation
hired by PCIC conducted a survey and declared that the packing of the shipment was
considered insufficient. It ruled out the possibility of taxes due to insufficiency of
packing. It opined that three to four pieces of cable or wire rope slings, held in all equal
setting, never by-passing the center of the crate, should have been used, considering
that the crate contained heavy machinery.19

BMICI subsequently filed separate claims against the NSCP,20 the ICTSI,21 and its
insurer, the PCIC,22 for US$61,500.00. When the other companies denied liability, PCIC
paid the claim and was issued a Subrogation Receipt23 for ₱1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a
Complaint for Damages24 against the "Unknown owner of the vessel M/V National
Honor," NSCP and ICTSI, as defendants.

PCIC alleged that the loss was due to the fault and negligence of the defendants. It
prayed, among others –

WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be

rendered ordering defendants to pay plaintiff, jointly or in the alternative, the following:

1. Actual damages in the amount of ₱1,740,634.50 plus legal interest at the time of the
filing of this complaint until fully paid;

2. Attorney’s fees in the amount of ₱100,000.00;

3. Cost of suit.25

ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its co-
defendant NSCP, claiming that the loss/damage of the shipment was caused
exclusively by the defective material of the wooden battens of the shipment, insufficient
packing or acts of the shipper.

At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified that the wooden
battens placed on the wooden flooring of the crate was of good material but was not
strong enough to support the weight of the machines inside the crate. He averred that
most stevedores did not know how to read and write; hence, he placed the sling cables
only on those portions of the crate where the arrow signs were placed, as in the case of
fragile cargo. He said that unless otherwise indicated by arrow signs, the ICTSI used
only two cable slings on each side of the crate and would not place a sling cable in the
mid-section.26 He declared that the crate fell from the cranes because the wooden
batten in the mid-portion was broken as it was being lifted.27 He concluded that the
loss/damage was caused by the failure of the shipper or its packer to place wooden
battens of strong materials under the flooring of the crate, and to place a sign in its mid-
term section where the sling cables would be placed.

The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that the
damage to the cargo could be attributed to insufficient packing and unbalanced weight
distribution of the cargo inside the crate as evidenced by the types and shapes of items
found.28

The trial court rendered judgment for PCIC and ordered the complaint dismissed, thus:

WHEREFORE, the complaint of the plaintiff, and the respective counterclaims of the
two defendants are dismissed, with costs against the plaintiff.

SO ORDERED.29
According to the trial court, the loss of the shipment contained in Crate No. 1 was due to
the internal defect and weakness of the materials used in the fabrication of the crates.
The middle wooden batten had a hole (bukong-bukong). The trial court rejected the
certification30 of the shipper, stating that the shipment was properly packed and
secured, as mere hearsay and devoid of any evidentiary weight, the affiant not having
testified.

Not satisfied, PCIC appealed31 to the CA which rendered judgment on January 19, 2004
affirming in toto the appealed decision, with this fallo –

WHEREFORE, the decision of the Regional Trial Court of Manila, Branch 35, dated
February 17, 1997, is AFFIRMED.

SO ORDERED.32

The appellate court held, inter alia, that it was bound by the finding of facts of the RTC,
especially so where the evidence in support thereof is more than substantial. It
ratiocinated that the loss of the shipment was due to an excepted cause – "[t]he
character of the goods or defects in the packing or in the containers" and the failure of
the shipper to indicate signs to notify the stevedores that extra care should be employed
in handling the shipment.33 It blamed the shipper for its failure to use materials of
stronger quality to support the heavy machines and to indicate an arrow in the middle
portion of the cargo where additional slings should be attached.34 The CA concluded
that common carriers are not absolute insurers against all risks in the transport of the
goods.35

Hence, this petition by the PCIC, where it alleges that:

I.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN NOT

HOLDING THAT RESPONDENT COMMON CARRIER IS LIABLE FOR THE DAMAGE
SUSTAINED BY THE SHIPMENT IN THE POSSESSION OF THE ARRASTRE
OPERATOR.

II.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN NOT

APPLYING THE STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE IN
THE CASE AT BAR.

III.

THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE FACTS IN

FINDING THAT THE DAMAGE SUSTAINED BY THE [SHIPMENT] WAS DUE TO ITS
DEFECTIVE PACKING AND NOT TO THE FAULT AND NEGLIGENCE OF THE
RESPONDENTS.36

The petitioner asserts that the mere proof of receipt of the shipment by the common
carrier (to the carrier) in good order, and their arrival at the place of destination in bad
order makes out a prima facie case against it; in such case, it is liable for the loss or
damage to the cargo absent satisfactory explanation given by the carrier as to the
exercise of extraordinary diligence. The petitioner avers that the shipment was
sufficiently packed in wooden boxes, as shown by the fact that it was accepted on board
the vessel and arrived in Manila safely. It emphasizes that the respondents did not
contest the contents of the bill of lading, and that the respondents knew that the manner
and condition of the packing of the cargo was normal and barren of defects. It maintains
that it behooved the respondent ICTSI to place three to four cables or wire slings in
equal settings, including the center portion of the crate to prevent damage to the cargo:

… [A] simple look at the manifesto of the cargo and the bill of lading would have alerted
respondents of the nature of the cargo consisting of thick and heavy machinery. Extra-
care should have been made and extended in the discharge of the subject shipment.
Had the respondent only bothered to check the list of its contents, they would have
been nervous enough to place additional slings and cables to support those massive
machines, which were composed almost entirely of thick steel, clearly intended for
heavy industries. As indicated in the list, the boxes contained one lat[h]e machine, one
milling machine and one grinding machine-all coming with complete parts and
accessories. Yet, not one among the respondents were cautious enough. Here lies the
utter failure of the respondents to observed extraordinary diligence in the handling of the
cargo in their custody and possession, which the Court of Appeals should have readily
observed in its appreciation of the pertinent facts.37

The petitioner posits that the loss/damage was caused by the mishandling of the
shipment by therein respondent ICTSI, the arrastre operator, and not by its negligence.

The petitioner insists that the respondents did not observe extraordinary diligence in the
care of the goods. It argues that in the performance of its obligations, the respondent
ICTSI should observe the same degree of diligence as that required of a common
carrier under the New Civil Code of the Philippines. Citing Eastern Shipping Lines, Inc.
v. Court of Appeals,38 it posits that respondents are liable in solidum to it, inasmuch as
both are charged with the obligation to deliver the goods in good condition to its
consignee, BMICI.

Respondent NSCP counters that if ever respondent ICTSI is adjudged liable, it is not
solidarily liable with it. It further avers that the "carrier cannot discharge directly to the
consignee because cargo discharging is the monopoly of the arrastre." Liability,
therefore, falls solely upon the shoulder of respondent ICTSI, inasmuch as the
discharging of cargoes from the vessel was its exclusive responsibility. Besides, the
petitioner is raising questions of facts, improper in a petition for review on certiorari.39
Respondent ICTSI avers that the issues raised are factual, hence, improper under Rule
45 of the Rules of Court. It claims that it is merely a depository and not a common
carrier; hence, it is not obliged to exercise extraordinary diligence. It reiterates that the
loss/damage was caused by the failure of the shipper or his packer to place a sign on
the sides and middle portion of the crate that extra care should be employed in handling
the shipment, and that the middle wooden batten on the flooring of the crate had a hole.
The respondent asserts that the testimony of Anthony Abarquez, who conducted his
investigation at the site of the incident, should prevail over that of Rolando Balatbat. As
an alternative, it argues that if ever adjudged liable, its liability is limited only to
₱3,500.00 as expressed in the liability clause of Gate Pass CFS-BR-GP No. 319773.

The petition has no merit.

The well-entrenched rule in our jurisdiction is that only questions of law may be
entertained by this Court in a petition for review on certiorari. This rule, however, is not
ironclad and admits certain exceptions, such as when (1) the conclusion is grounded on
speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd
or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation
of specific evidence on which the factual findings are based; (7) the findings of absence
of facts are contradicted by the presence of evidence on record; (8) the findings of the
Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals
manifestly overlooked certain relevant and undisputed facts that, if properly considered,
would justify a different conclusion; (10) the findings of the Court of Appeals are beyond
the issues of the case; and (11) such findings are contrary to the admissions of both
parties.40

We have reviewed the records and find no justification to warrant the application of any
exception to the general rule.

We agree with the contention of the petitioner that common carriers, from the nature of
their business and for reasons of public policy, are mandated 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.41 The Court has
defined extraordinary diligence in the vigilance over the goods as follows:

The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for avoiding
damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It
requires common carriers to render service with the greatest skill and foresight and "to
use all reasonable means to ascertain the nature and characteristic of goods tendered
for shipment, and to exercise due care in the handling and stowage, including such
methods as their nature requires."42

The common carrier’s duty to observe the requisite diligence in the shipment of goods
lasts from the time the articles are surrendered to or unconditionally placed in the
possession of, and received by, the carrier for transportation until delivered to, or until
the lapse of a reasonable time for their acceptance, by the person entitled to receive
them.43 When the goods shipped are either lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it liable.44 To overcome the
presumption of negligence in the case of loss, destruction or deterioration of the goods,
the common carrier must prove that it exercised extraordinary diligence.45

However, under Article 1734 of the New Civil Code, the presumption of negligence does
not apply to any of the following causes:

1. Flood, storm, earthquake, lightning or other natural disaster or calamity;

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.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which
exempts the common carrier for the loss or damage to the cargo is a closed list. 46 To
exculpate itself from liability for the loss/damage to the cargo under any of the causes,
the common carrier is burdened to prove any of the aforecited causes claimed by it by a
preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to
the shipper to prove that the carrier is negligent.47

"Defect" is the want or absence of something necessary for completeness or perfection;

a lack or absence of something essential to completeness; a deficiency in something
essential to the proper use for the purpose for which a thing is to be used. 48 On the
other hand, inferior means of poor quality, mediocre, or second rate.49 A thing may be of
inferior quality but not necessarily defective. In other words, "defectiveness" is not
synonymous with "inferiority."

In the present case, the trial court declared that based on the record, the loss of the
shipment was caused by the negligence of the petitioner as the shipper:

The same may be said with respect to defendant ICTSI. The breakage and collapse of
Crate No. 1 and the total destruction of its contents were not imputable to any fault or
negligence on the part of said defendant in handling the unloading of the cargoes from
the carrying vessel, but was due solely to the inherent defect and weakness of the
materials used in the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side by side
underneath or on the flooring of the crate to support the weight of its contents. However,
in the case of the crate in dispute, although there were three wooden battens placed
side by side on its flooring, the middle wooden batten, which carried substantial volume
of the weight of the crate’s contents, had a knot hole or "bukong-bukong," which
considerably affected, reduced and weakened its strength. Because of the enormous
weight of the machineries inside this crate, the middle wooden batten gave way and
collapsed. As the combined strength of the other two wooden battens were not sufficient
to hold and carry the load, they too simultaneously with the middle wooden battens
gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).

Crate No. 1 was provided by the shipper of the machineries in Seoul, Korea. There is
nothing in the record which would indicate that defendant ICTSI had any role in the
choice of the materials used in fabricating this crate. Said defendant, therefore, cannot
be held as blame worthy for the loss of the machineries contained in Crate No. 1.50

The CA affirmed the ruling of the RTC, thus:

The case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil
Code, particularly number (4) thereof, i.e., the character of the goods or defects in the
packing or in the containers. The trial court found that the breakage of the crate was not
due to the fault or negligence of ICTSI, but to the inherent defect and weakness of the
materials used in the fabrication of the said crate.

Upon examination of the records, We find no compelling reason to depart from the
factual findings of the trial court.

It appears that the wooden batten used as support for the flooring was not made of
good materials, which caused the middle portion thereof to give way when it was lifted.
The shipper also failed to indicate signs to notify the stevedores that extra care should
be employed in handling the shipment.

Claudio Cansino, a stevedore of ICTSI, testified before the court their duties and
responsibilities:

"Q: With regard to crates, what do you do with the crates?

A: Everyday with the crates, there is an arrow drawn where the sling is placed, Ma’am.

Q: When the crates have arrows drawn and where you placed the slings, what do you
do with these crates?

A: A sling is placed on it, Ma’am.

Q: After you placed the slings, what do you do with the crates?

A: After I have placed a sling properly, I ask the crane (sic) to haul it, Ma’am.
…

Q: Now, what, if any, were written or were marked on the crate?

A: The thing that was marked on the cargo is an arrow just like of a chain, Ma’am.

Q: And where did you see or what parts of the crate did you see those arrows?

A: At the corner of the crate, Ma’am.

Q: How many arrows did you see?

A: Four (4) on both sides, Ma’am.

Q: What did you do with the arrows?

A: When I saw the arrows, that’s where I placed the slings, Ma’am.

Q: Now, did you find any other marks on the crate?

A: Nothing more, Ma’am.

Q: Now, Mr. Witness, if there are no arrows, would you place slings on the parts where
there are no arrows?

A: You can not place slings if there are no arrows, Ma’am."

Appellant’s allegation that since the cargo arrived safely from the port of [P]usan, Korea
without defect, the fault should be attributed to the arrastre operator who mishandled
the cargo, is without merit. The cargo fell while it was being carried only at about five (5)
feet high above the ground. It would not have so easily collapsed had the cargo been
properly packed. The shipper should have used materials of stronger quality to support
the heavy machines. Not only did the shipper fail to properly pack the cargo, it also
failed to indicate an arrow in the middle portion of the cargo where additional slings
should be attached. At any rate, the issue of negligence is factual in nature and in this
regard, it is settled that factual findings of the lower courts are entitled to great weight
and respect on appeal, and, in fact, accorded finality when supported by substantial
evidence.51

We agree with the trial and appellate courts.

The petitioner failed to adduce any evidence to counter that of respondent ICTSI. The
petitioner failed to rebut the testimony of Dauz, that the crates were sealed and that the
contents thereof could not be seen from the outside.52 While it is true that the crate
contained machineries and spare parts, it cannot thereby be concluded that the
respondents knew or should have known that the middle wooden batten had a hole, or
that it was not strong enough to bear the weight of the shipment.

There is no showing in the Bill of Lading that the shipment was in good order or
condition when the carrier received the cargo, or that the three wooden battens under
the flooring of the cargo were not defective or insufficient or inadequate. On the other
hand, under Bill of Lading No. NSGPBSML512565 issued by the respondent NSCP and
accepted by the petitioner, the latter represented and warranted that the goods were
properly packed, and disclosed in writing the "condition, nature, quality or characteristic
that may cause damage, injury or detriment to the goods." Absent any signs on the
shipment requiring the placement of a sling cable in the mid-portion of the crate, the
respondent ICTSI was not obliged to do so.

The statement in the Bill of Lading, that the shipment was in apparent good condition, is
sufficient to sustain a finding of absence of defects in the merchandise. Case law has it
that such statement will create a prima facie presumption only as to the external
condition and not to that not open to inspection.53

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.

SO ORDERED.

G.R. No. 95536

REGALADO, J.:

Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951
of respondent Court of Appeals[1] which affirmed the decision of the trial court[2]
dismissing for lack of evidence herein petitioners' complaint in Civil Case No. R-2101 of
the then Court of First Instance of Southern Leyte, Branch I.

The facts, as recounted by the court a quo and adopted by respondent court after
"considering the evidence on record," are as follows:

"After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago, Illinois, (on)
October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago, made the
necessary preparations and arrangements for the shipment of the remains from
Chicago to the Philippines. The funeral home had the remains embalmed (Exh. D) and
secured a permit for the disposition of dead human body on October 25, 1976 (Exh. C).
Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on
October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case
containing a hermetically sealed casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date,
October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary arrangements such as
flights, transfers, etc.; C.M.A.S. is a national service used by undertakers throughout the
nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see
that the remains are taken to the proper air freight terminal (Exh. 6-TWA). C.M.A.S.
booked the shipment with PAL thru the carrier's agent Air Care International, with
Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL, Airway
Bill No. 079-01180454 Ordinary was issued wherein the requested routing was from
Chicago to San Francisco on board TWA Flight 131 of October 27, 1976, and from San
Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to
Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh. 1-PAL).
"In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel
agent, were booked with United Airlines from Chicago to California, and with PAL from
California to Manila. She then went to the funeral director of Pomierski Funeral Home
who had her mother's remains and she told the director that they were booked with
United Airlines. But the director told her that the remains were booked with TWA flight to
California. This upset her, and she and her brother had to change reservations from UA
to the TWA flight after she confirmed by phone that her mother's remains would be on
that TWA flight. They went to the airport and watched from the look-out area. She saw
no body being brought. So, she went to the TWA counter again, and she was told there
was no body on that flight. Reluctantly, they took the TWA flight upon assurance of her
cousin, Ani Bantug, that he would look into the matter and inform her about it on the
plane or have it radioed to her. But no confirmation from her cousin reached her that her
mother was on the West Coast.
"Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to
inquire about her mother's remains. She was told they did not know anything about it.
"She then called Pomierski that her mother's remains were not at the West Coast
terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes
informed him that the remains were on a plane to Mexico City, that there were two
bodies at the terminal, and somehow they were switched; he relayed this information to
Miss Saluda in California; later C.M.A.S. called and told him they were sending the
remains back to California via Texas (see Exh. 6-TWA).
"It turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-
01180454 on TWA Flight 603 of October 27, 1976, a flight earlier than TWA Flight 131
of the same date. TWA delivered or transferred the said shipment said to contain
human remains to PAL at 1400H or 2:00 p.m. of the same date, October 27, 1976 (See
Exh. 1?TWA). 'Due to a switch(ing) in Chicago', this shipment was withdrawn from PAL
by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-PAL, see Exh.
3-a-PAL).
"What transpired at the Chicago (A)irport is explained in a memo or incident report by
Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to said memo and
enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to herein plaintiff's
counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6-TWA), it is stated
that the remains (of Crispina Saludo) were taken to CMAS at the airport; that there were
two bodies at the (Chicago Airport) terminal, and somehow they were switched, that the
remains (of Crispina Saludo) were on a plane to Mexico City; that CMAS is a national
service used by undertakers throughout the nation (U.S.A.), makes all the necessary
arrangements, such as flights, transfers, etc., and see(s) to it that the remains are taken
to the proper air freight terminal.
"The following day October 28, 1976, the shipment or remains of Crispina Saludo
arrived (in) San Francisco from Mexico on board American Airlines. This shipment was
transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL).
This casket bearing the remains of Crispina Saludo, which was mistakenly sent to
Mexico and was opened (there), was resealed by Crispin F. Padagas for shipment to
the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for
Manila that same evening and arrived (in) Manila on October 30, 1976, a day after its
expected arrival on October 29, 1976."[3]

In a letter dated December 15, 1976,[4] petitioners' counsel informed private respondent
Trans World Airlines (TWA) of the misshipment and eventual delay in the delivery of the
cargo containing the remains of the late Crispina Saludo, and of the discourtesy of its
employees to petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate
letter on June 10, 1977 addressed to co-respondent Philippine Airlines (PAL),[5]
petitioners stated that they were holding PAL liable for said delay in delivery and would
commence judicial action should no favorable explanation be given.

Both private respondents denied liability. Thus, a damage suit[6] was filed by petitioners
before the then Court of First Instance, Branch III, Leyte, praying for the award of actual
damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages,
attorney's fees and costs of suit.

As earlier stated, the court below absolved the two respondent airline companies of
liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a
subsequent resolution,[7] denied herein petitioners' motion for reconsideration for lack of
merit.

In predictable disagreement and dissatisfaction with the conclusions reached by

respondent appellate court, petitioners now urge this Court to review the appealed
decision and to resolve whether or not (1) the delay in the delivery of the casketed
remains of petitioners' mother was due to the fault of respondent airline companies, (2)
the one-day delay in the delivery of the same constitutes contractual breach as would
entitle petitioners to damages, (3) damages are recoverable by petitioners for the
humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and (4)
private respondents should be held liable for actual, moral and exemplary damages,
aside from attorney's fees and litigation expenses.[8]

At the outset and in view of the spirited exchanges of the parties on this aspect, it is to
be stressed that only questions of law may be raised in a petition filed in this Court to
review on certiorari the decision of the Court of Appeals.[9] This being so, the factual
findings of the Court of Appeals are final and conclusive and cannot be reviewed by the
Supreme Court. The rule, however, admits of established exceptions, to wit: (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; [10] (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;[11] 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.[12]

To distinguish, a question of law is one which involves a doubt or controversy on what

the law is on a certain state of facts; and, a question of fact, contrarily, is one in which
there is a doubt or difference as to the truth or falsehood of the alleged facts. [13] One
test, it has been held, is whether the appellate court can determine the issue raised
without reviewing or evaluating the evidence, in which case it is a question of law,
otherwise it will be a question of fact.[14]

Respondent airline companies object to the present recourse of petitioners on the

ground that this petition raises only factual questions.[15] Petitioners maintain otherwise
or, alternatively, they are of the position that, assuming that the petition raises factual
questions, the same are within the recognized exceptions to the general rule as would
render the petition cognizable and worthy of review by the Court. [16]

Since it is precisely the soundness of the inferences or conclusions that may be drawn
from the factual issues which are here being assayed, we find that the issues raised in
the instant petition indeed warrant a second look if this litigation is to come to a
reasonable denouement. A discussion seriatim of said issues will further reveal that the
sequence of the events involved is in effect disputed. Likewise to be settled is whether
or not the conclusions of the Court of Appeals subject of this review indeed find
evidentiary and legal support.

I. Petitioners fault respondent court for "not finding that private respondents failed to
exercise extra?ordinary diligence required by law which resulted in the switching and/or
misdelivery of the remains of Crispina Saludo to Mexico causing gross delay in its
shipment to the Philippines, and consequently, damages to petitioners." [17]

Petitioners allege that private respondents received the casketed remains of petitioners'
mother on October 26, 1976, as evidenced by the issuance of PAL Air Waybill No. 079-
01180454[18] by Air Care International as carrier's agent; and from said date, private
respondents were charged with the responsibility to exercise extraordinary diligence so
much so that for the alleged switching of the caskets on October 27, 1976, or one day
after private respondents received the cargo, the latter must necessarily be liable.

To support their assertion, petitioners rely on the jurisprudential dictum, both under
American and Philippine law, that "(t)he issuance of a bill of lading carries the
presumption that the goods were delivered to the carrier issuing the bill, for immediate
shipment, and it is nowhere questioned that a bill of lading is prima facie evidence of the
receipt of the goods by the carrier. x x x In the absence of convincing testimony
establishing mistake, recitals in the bill of lading showing that the carrier received the
goods for shipment on a specified date control (13 C.J.S. 235)."[19]

A bill of lading is a written acknowledgment of the receipt of the goods and an

agreement to transport and deliver them at a specified place to a person named or on
his order. Such instrument may be called a shipping receipt, forwarder's receipt and
receipt for transportation.[20] The designation, however, is immaterial. It has been held
that freight tickets for bus companies as well as receipts for cargo transported by all
forms of transportation, whether by sea or land, fall within the definition. Under the Tariff
and Customs Code, a bill of lading includes airway bills of lading.[21] The two-fold
character of a pill of lading is all too familiar: it is a receipt as to the quantity and
description of the goods shipped and a contract to transport the goods to the consignee
or other person therein designated, on the terms specified in such instrument.[22]

Logically, since a bill of lading acknowledges receipt of goods to be transported,

delivery of the goods to the carrier normally precedes the issuance of the bill; or, to
some extent, delivery of the good sand issuance of the bill are regarded in commercial
practice as simultaneous acts.[23] However, except as may be prohibited by law, there is
nothing to prevent an inverse order of events, that is, the execution of the bill of lading
even prior to actual possession and control by the carrier of the cargo to be transported.
There is no law which requires that the delivery of the goods for carriage and the
issuance of the covering bill of lading must coincide in point of time or, for that matter,
that the former should precede the latter.

Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive,
evidence of delivery to the carrier. A bill of lading, when properly executed and delivered
to a shipper, is evidence that the carrier has received the goods described therein for
shipment. Except as modified by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a bill of lading is issued reciting
that goods have been received for transportation, that the recital being in essence a
receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or
other evidence.[24]

While we agree with petitioners' statement that "an airway bill estops the carrier from
denying receipt of goods of the quantity and quality described in the bill," a further
reading and a more faithful quotation of the authority cited would reveal that "(a) bill of
lading may contain constituent elements of estoppel and thus become something more
than a contract between the shipper and the carrier. x x x (However), as between the
shipper and the carrier, when no goods have been delivered for shipment no recitals in
the bill can estop the carrier from showing the true facts x x x. Between the consignor of
goods and a receiving carrier, recitals in a bill of lading as to the goods shipped raise
only a rebuttable presumption that such goods were delivered for shipment. As between
the consignor and a receiving carrier, the fact must outweigh the recital."[25] (Emphasis
supplied.)

For this reason, we must perforce allow explanation by private respondents why,
despite the issuance of the airway bill and the date thereof, they deny having received
the remains of Crispina Saludo on October 26, 1976 as alleged by petitioners.

The findings of the trial court, as favorably adopted by the Court of Appeals and which
we have earlier quoted, provide us with the explanation that sufficiently overcomes the
presumption relied on by petitioners in insisting that the remains of their mother were
delivered to and received by private respondents on October 26, 1976. Thus -

"x x x Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on
October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case
containing a hermetically sealed casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date
October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary arrangements such as
flights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout the
nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see
that the remains are taken to the proper air freight terminal (Exh. G-TWA). C.M.A.S.
booked the shipment with PAL thru the carrier's agent Air Care International, with
Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway
Bill No. 079-01180454 Ordinary was issued wherein the requested routing was from
Chicago to San Francisco on board TWA Flight 131 of October 27, 1976, and from San
Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to
Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh. 1-PAL)."[26]
(Emphasis ours.)

Moreover, we are persuaded to believe private respondent PAL's account as to what

transpired on October 26, 1976:

"x x x Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of
Pomierski, F.H., the shipper requested booking of the casketed remains of Mrs. Cristina
(sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on October 27,
1976.
"2. To signify acceptance and confirmation of said booking, PAL issued to said
Pomierski F.H., PAL Airway Bill No. 079-01180454 dated October 27, 1976 (sic,
'10/26/76'). PAL confirmed the booking and transporting of the shipment on board of its
Flight PR 107 on October 27, 1976 on the basis of the representation of the shipper
and/or CMAS that the said cargo would arrive in San Francisco from Chicago on board
United Airlines Flight US 121 on 27 October 1976."[27]

In other words, on October 26, 1976 the cargo containing the casketed remains of
Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for
Manila on October 27, 1976. PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a
confirmation of the booking thus made for the San Francisco-Manila flight scheduled on
October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical
delivery of the body at San Francisco, as duly evidenced by the Interline Freight
Transfer Manifest of the American Airline Freight System and signed for by Virgilio
Rosales at 1945H, or 7:45 P.M. on said date.[28]

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered to the
carrier. This responsibility remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or owner exercises the right
of stoppage in transitu,[29] and terminates only after the lapse of a reasonable time for
the acceptance of the goods by the consignee or such other person entitled to receive
them.[30] And, there is delivery to the carrier when the goods are ready for and have
been placed in the exclusive possession, custody and control of the carrier for the
purpose of their immediate transportation and the carrier has accepted them.[31] Where
such a delivery has thus been accepted by the carrier, the liability of the common carrier
commences eo instanti.[32]

Hence, while we agree with petitioners that the extraordinary diligence statutorily
required to be observed by the carrier instantaneously commences upon delivery of the
goods thereto, for such duty to commence there must in fact have been delivery of the
cargo subject of the contract of carriage. Only when such fact of delivery has been
unequivocally established can the liability for loss, destruction or deterioration of goods
in the custody of the carrier, absent the excepting causes under Article 1734, attach and
the presumption of fault of the carrier under Article 1735 be invoked.

As already demonstrated, the facts in the case at bar belie the averment that there was
delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained,
the body intended to be shipped as agreed upon was really placed in the possession
and control of PAL on October 28, 1976 and it was from that date that private
respondents became responsible for the agreed cargo under their undertakings in PAL
Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto
which was not caused by them, and subsequent events caused thereby, private
respondents cannot be held liable.

Petitioners, proceeding on the premise that there was delivery of the cargo to private
respondents on October 26, 1976 and that the latter's extraordinary responsibility had
by then become operative, insist on foisting the blame on private respondents for the
switching of the two caskets which occurred on October 27, 1976. It is argued that since
there is no clear evidence establishing the fault of Continental Mortuary Air Services
(CMAS) for the mix-up, private respondents are presumably negligent pursuant to
Article 1735 of the Civil Code and, for failure to rebut such presumption, they must
necessarily be held liable; or, assuming that CMAS was at fault, the same does not
absolve private respondents of liability because whoever brought the cargo to the
airport or loaded it on the plane did so as agent of private respondents.

This contention is without merit. As pithily explained by the Court of Appeals:

"The airway bill expressly provides that 'Carrier certifies goods described below were
received for carriage', and said cargo was 'casketed human remains of Crispina
Saludo', with 'Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air Care
International as carrier's agent.' On the face of the said airway bill, the specific flight
numbers, specific routes of shipment and dates of departure and arrival were
typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San
Francisco by PAL 107 on October 27, 1976 to Philippines and to Cebu via PAL Flight
149 on October 29, 1976. The airway bill also contains the following typewritten words,
as follows: all documents have been examined (sic). Human remains of Crispina
Saludo. Please return back (sic) first available flight to SFO.
"But, as it turned out and was discovered later the casketed human remains which was
issued PAL Airway Bill #079-1180454 was not the remains of Crispina Saludo, the
casket containing her remains having been shipped to Mexico City.
"However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's remains,
hired Continental Mortuary Services (hereafter referred to as C.M.A.S.), which is
engaged in the business of transporting and forwarding human remains. Thus, C.M.A.S.
made all the necessary arrangements - such as flights, transfers, etc. for shipment of
the remains of Crispina Saludo.

'The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These
people made all the necessary arrangements, such as flights, transfers, etc. This is a
national service used by undertakers throughout the nation. They furnished the air
pouch which the casket is enclosed in, and they see that the remains are taken to the
proper air freight terminal. I was very surprised when Miss Saludo called me to say that
the remains were not at the west coast terminal. I immediately called C.M.A.S. They
called me back in a matter of ten minutes to inform me that the remains were on a plane
to Mexico City. The man said that there were two bodies at the terminal, and somehow
they were switched. x x x (Exh. 6-'TWA', which is the memo or incident report enclosed
in the stationery of Walter Pomierski & Sons Ltd.)'

"Consequently, when the cargo was received from C.M.A.S. at the Chicago airport
terminal for shipment, which was supposed to contain the remains of Crispina Saludo,
Air Care International and/or TWA, had no way of determining its actual contents, since
the casket was hermetically sealed by the Philippine Vice?Consul in Chicago and in an
air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had to rely on
the information furnished by the shipper regarding the cargo's content. Neither could Air
Care International and/or TWA open the casket for further verification, since they were
not only without authority to do so, but even prohibited.
"Thus, under said circumstances, no fault and/or negligence can be attributed to PAL
(even if Air Care International should be considered as an agent of PAL) and/or TWA,
the entire fault or negligence being exclusively with C.M.A.S." [33] (Emphasis supplied.)

It can correctly and logically be concluded, therefore that the switching occurred or,
more accurately, was discovered on October 27, 1976; and based on the above findings
of the Court of Appeals, it happened while the cargo was still with CMAS, well before
the same was placed in the custody of private respondents.

Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976[34] was signed
by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating
acknowledgment by PAL of the transfer to them by TWA of what was in truth the
erroneous cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as
shown by the notation on another copy of said manifest [35] stating "Received by CMAS -
Due to switch in Chicago 10/27-1805H," the authenticity of which was never challenged.
This shows that said misshipped cargo was in fact withdrawn by CMAS from PAL and
the correct shipment containing the body of Crispina Saludo was received by PAL only
on October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight
Transfer Manifest No. AA204312.[36]

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:

"ATTY. JUAN COLLAS, JR.:

On that date, do (sic) you have occasion to handle or deal with the transfer of cargo
from TWA Flight No. 603 to PAL San Francisco?
MICHAEL GIOSSO:
Yes, I did.
ATTY. JUAN COLLAS, JR.:
What was your participation with the transfer of the cargo?
MICHAEL GIOSSO:
I manifested the freight on a transfer manifest and physically moved it to PAL and
concluded the transfer by signing it off.
ATTY. JUAN COLLAS, JR.:
You brought it there yourself?
MICHAEL GIOSSO:
Yes sir.
ATTY. JUAN COLLAS, JR.:
Do you have anything to show that PAL received the cargo from TWA on October 27,
1976?
MICHAEL GIOSSO:
Yes, I do.
(Witness presenting a document)
ATTY. JUAN COLLAS, JR.:
For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.
xxx
ATTY. JUAN COLLAS, JR.:
This Exhibit I-TWA, could you tell what it is what it shows?
MICHAEL GIOSSO:
It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two
signatures as it completed the transfer.
ATTY. JUAN COLLAS, JR.:
Very good. Who was the PAL employee who received the cargo?
MICHAEL GIOSSO:
The name is Garry Marcial."[37]

The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as

deponent-witness for PAL, makes this further clarification:

"ATTY. CESAR P. MANALAYSAY:

You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL Airway Bill Number
01180454 which for purposes of evidence, I would like to request that the same be
marked as evidence Exhibit I for PAL.
xxx
In what circumstances did you encounter Exhibit I-PAL?
ALBERTO A. LIM:
If I recall correctly, I was queried by Manila, our Manila office with regard to a certain
complaint that a consignee filed that this shipment did not arrive on the day that the
consignee expects the shipment to arrive.
ATTY. CESAR P. MANALAYSAY:
Okay. Now, upon receipt of that query from your Manila office, did you conduct any
investigation to pinpoint the possible causes of mishandling?
ALBERTO A. LIM:
Yes.
xxx
ATTY. CESAR P. MANALAYSAY:
What is the result of your investigation?
ALBERTO A. LIM:
In the course of my investigation. I found that we received the body on October 28,
1976, from American Airlines.
ATTY. CESAR P. MANALAYSAY:
What body are you referring to?
xxx
ALBERTO A. LIM:
The remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY:
Is that the same body mentioned in this Airway Bill?
ALBERTO A. LIM:
Yes.
ATTY. CESAR P MANALAYSAY:
What time did you receive said body on October 28, 1976?
ALBERTO A. LIM:
If I recall correctly, approximately 7:45 of October 28, 1976.
ATTY. CESAR P. MANALAYSAY:
Do you have any proof with you to back the statement?
ALBERTO A. LIM:
Yes. We have on our records a Transfer Manifest from American Airlines Number
204312 showing that we received a human remains shipment belong to Mrs. Cristina
(sic) Saludo or the human remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY:
At this juncture, may I request that the Transfer Manifest referred to by the witness be
marked as an evidence as Exhibit II-PAL.
xxx
Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit I evidence
tending to show that on October 27, 1976 at about 2:00 in the afternoon they delivered
to you a cargo bearing human remains. Could you go over this Exhibit I and please give
us your comments as to that exhibit?
ATTY. ALBERTO C. MENDOZA:
That is a vague question. I would rather request that counsel propound specific
questions rather than asking for comments on Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY:
In that case, I will reform my question. Could you tell us whether TWA in fact delivered
to you the human remains as indicated in that Transfer Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of TWA Marked as Exhibit I-TWA bears the same
numbers or the same entries as the Airway Bill marked as Exhibit I-A PAL tending to
show that this is the human remains of Mrs Cristina (sic) Saludo. Could you tell us
whether this is true?
ALBERTO A. LIM:
It is true that we received human remains shipment from TWA as indicated on this
Transfer Manifest. But in the course of investigation, it was found out that the human
remains transferred to us is not the remains of Mrs. Cristina (sic) Saludo which is the
reason why we did not board it on our flight."[38]

Petitioners consider TWA's statement that "it had to rely on the information furnished by
the shipper" a lame excuse and that its failure to prove that its personnel verified and
identified the contents of the casket before loading the same constituted negligence on
the part of TWA.[39]

We uphold the favorable consideration by the Court of Appeals of the following findings
of the trial court:

"It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered
the casket containing the remains of Crispina Saludo. TWA would have no knowledge
therefore that the remains of Crispina Saludo were not the ones inside the casket that
was being presented to it for shipment. TWA would have to rely on the representations
of C.M.A.S. The casket was hermetically sealed and also sealed by the Philippine Vice
Consul in Chicago. TWA or any airline for that matter would not have opened such a
sealed casket just for the purpose of ascertaining whose body was inside and to make
sure that the remains inside were those of the particular person indicated to be by
C.M.A.S. TWA had to accept whatever information was being furnished by the shipper
or by the one presenting the casket for shipment. And so as a matter of fact, TWA
carried to San Francisco and transferred to defendant PAL a shipment covered by or
under PAL Airway Bill No. 079-ORD-01180454, the airway bill for the shipment of the
casketed remains of Crispina Saludo. Only, it turned out later, while the casket was
already with PAL, that what was inside the casket was not the body of Crispina Saludo
so much so that it had to be withdrawn by C.M.A.S. from PAL. The body of Crispina
Saludo had been shipped to Mexico. The casket containing the remains of Crispina
Saludo, was transshipped from Mexico and arrived in San Francisco the following day
on board American Airlines. It was immediately loaded by PAL on its flight for Manila.
"The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the
ONE responsible for the switching or mix-up of the two bodies at the Chicago Airport
terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo
and a one-day delay in the delivery thereof to its destination.[40]

Verily, no amount of inspection by respondent airline companies could have guarded

against the switching that had already taken place. Or, granting that they could have
opened the casket to inspect its contents, private respondents had no means of
ascertaining whether the body therein contained was indeed that of Crispina Saludo
except, possibly, if the body was that of a male person and such fact was visually
apparent upon opening the casket. However, to repeat, private respondents had no
authority to unseal and open the same nor did they have any reason or justification to
resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver
goods to be carried, or enter into contracts with it, and inasmuch as the freight may
depend on the value of the article to be carried, the carrier ordinarily has the right to
inquire as to its value. Ordinarily, too, it is the duty of the carrier to make inquiry as to
the general nature of the articles shipped and of their value before it consents to carry
them; and its failure to do so cannot defeat the shipper's right to recovery of the full
value of the package if lost, in the absence of showing of fraud or deceit on the part of
the shipper. In the absence of more definite information, the carrier has the right to
accept shipper's marks as to the contents of the package offered for transportation and
is not bound to inquire particularly about them in order to take advantage of a false
classification and where a shipper expressly represents the contents of a package to be
of a designated character, it is not the duty of the carrier to ask for a repetition of the
statement nor disbelieve it and open the box and see for itself.[41] However, where a
common carrier has reasonable ground to suspect that the offered goods are of a
dangerous or illegal character, the carrier has the right to know the character of such
goods and to insist on an inspection, if reasonable and practical under the
circumstances, as a condition of receiving and transporting such goods.[42]

It can safely be said then that a common carrier is entitled to fair representation of the
nature and value of the goods to be carried, with the concomitant right to rely thereon,
and further noting at this juncture that a carrier has no obligation to inquire into the
correctness or sufficiency of such information.[43] The consequent duty to conduct an
inspection thereof arises in the event that there should be reason to doubt the veracity
of such representations. Therefore, to be subjected to unusual search, other than the
routinary inspection procedure customarily undertaken, there must exist proof that
would justify cause for apprehension that the baggage is dangerous as to warrant
exhaustive inspection, or even refusal to accept carriage of the same; and it is the
failure of the carrier to act accordingly in the face of such proof that constitutes the basis
of the common carrier's liability.[44]

In the case at bar, private respondents had no reason whatsoever to doubt the truth of
the shipper's representations. The airway bill expressly providing that "carrier certifies
goods received below were received for carriage," and that the cargo contained
"casketed human remains of Crispina Saludo," was issued on the basis of such
representations. The reliance thereon by private respondents was reasonable and, for
so doing, they cannot be said to have acted negligently. Likewise, no evidence was
adduced to suggest even an iota of suspicion that the cargo presented for transportation
was anything other than what it was declared to be, as would require more than routine
inspection or call for the carrier to insist that the same be opened for scrutiny of its
contents per declaration.

Neither can private respondents be held accountable on the basis of petitioners'

preposterous proposition that whoever brought the cargo to the airport or loaded it on
the airplane did so as agent of private respondents, so that even if CMAS whose
services were engaged for the transit arrangements for the remains was indeed at fault,
the liability therefor would supposedly still be attributable to private respondents.

While we agree that the actual participation of CMAS has been sufficiently and correctly
established, to hold that it acted as agent for private respondents would be both an
inaccurate appraisal and an unwarranted categorization of the legal position it held in
the entire transaction.

It bears repeating that CMAS was hired to handle all the necessary shipping
arrangements for the transportation of the human remains of Crispina Saludo to Manila.
Hence, it was to CMAS that, the Pomierski & Son Funeral Home, as shipper, brought
the remains of petitioners' mother for shipment, with Maria Saludo as consignee.
Thereafter, CMAS booked the shipment with PAL through the carrier's agent, Air Care
International.[45] With its aforestated functions, CMAS may accordingly be classified as a
forwarder which, by accepted commercial practice, is regarded as an agent of the
shipper and not of the carrier. As such, it merely contracts for the transportation of
goods by carriers, and has no interest in the freight but receives compensation from the
shipper as his agent.[46]

At this point, it can be categorically stated that, as culled from the findings of both the
trial court and appellate courts, the entire chain of events which culminated in the
present controversy was not due to the fault or negligence of private respondents.
Rather, the facts of the case would point to CMAS as the culprit. Equally telling of the
more likely possibility of CMAS' liability is petitioners' letter to and demanding an
explanation from CMAS regarding the statement of private respondents laying the
blame on CMAS for the incident, portions of which, reading as follows:

"x x x we were informed that the unfortunate a mix-up occurred due to your negligence.
x x x.
"Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence were
presented to prove that allegation.
"On the face of this overwhelming evidence we could and should have filed a case
against you. x x x."[47]

clearly allude to CMAS as the party at fault. This is tantamount to an admission by

petitioners that they consider private respondents without fault, or is at the very least
indicative of the fact that petitioners entertained serious doubts as to whether herein
private respondents were responsible for the unfortunate turn of events.
Undeniably, petitioners' grief over the death of their mother was aggravated by the
unnecessary inconvenience and anxiety that attended their efforts to bring her body
home for a decent burial. This is unfortunate and calls for sincere commiseration with
petitioners. But, much as we would like to give them consolation for their undeserved
distress, we are barred by the inequity of allowing recovery of the damages prayed for
by them at the expense of private respondents whose fault or negligence in the very
acts imputed to them has not been convincingly and legally demonstrated.

Neither are we prepared to delve into, much less definitively rule on, the possible liability
of CMAS as the evaluation and adjudication of the same is not what is presently at
issue here and is best deferred to another time and addressed to another forum.

II. Petitioners further fault the Court of Appeals for ruling that there was no contractual
breach on the part of private respondents as would entitle petitioners to damages.

Petitioners hold that respondent TWA, by agreeing to transport the remains of

petitioners' mother on its Flight 131 from Chicago to San Francisco on October 27,
1976, made itself a party to the contract of carriage and, therefore, was bound by the
terms of the issued airway bill. When TWA undertook to ship the remains on its Flight
603, ten hours earlier than scheduled, it supposedly violated the express agreement
embodied in the airway bill. It was allegedly this breach of obligation which
compounded, if not directly caused, the switching of the caskets.

In addition, petitioners maintain that since there is no evidence as to who placed the
body on board Flight 603, or that CMAS actually put the cargo on that flight, or that the
two caskets at the Chicago airport were to be transported by the same airline, or that
they came from the same funeral home, or that both caskets were received by CMAS,
then the employees or agents of TWA presumably caused the mix-up by loading the
wrong casket on the plane. For said error, they contend, TWA must necessarily be
presumed negligent and this presumption of negligence stands undisturbed unless
rebutting evidence is presented to show that the switching or misdelivery was due to
circumstances that would exempt the carrier from liability.

Private respondent TWA professes otherwise. Having duly delivered or transferred the
cargo to its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the
TWA Transfer Manifest, TWA faithfully complied with its obligation under the airway bill.
Said faithful compliance was not affected by the fact that the remains were shipped on
an earlier flight as there was no fixed time for completion of carriage stipulated on.
Moreover, the carrier did not undertake to carry the cargo aboard any specified aircraft,
in view of the condition on the back of the airway bill which provides:

"CONDITIONS OF CONTRACT
xxx
"It is agreed that no time is fixed for the completion of carriage hereunder and that
Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes no
obligation to carry the goods by any specified aircraft or over any particular route or
routes or to make connection at any point according to any particular schedule, and
Carrier is hereby authorized to select, or deviate from the route or routes of shipment,
notwithstanding that the same may be stated on the face hereof. The shipper
guarantees payment of all charges and advances."[48]

Hence, when respondent TWA shipped the body on an earlier flight and on a different
aircraft, it was acting well within its rights. We find this argument tenable.

The contention that there was contractual breach on the part of private respondents is
founded on the postulation that there was ambiguity in the terms of the airway bill,
hence petitioners' insistence on the application of the rules on interpretation of contracts
and documents. We find no such ambiguity. The terms are clear enough as to preclude
the necessity to probe beyond the apparent intendment of the contractual provisions.

The hornbook rule on interpretation of contracts consecrates the primacy of the

intention of the parties, the same having the force of law between them. When the terms
of the agreement are clear and explicit, that they do not justify an attempt to read into
any alleged intention of the parties, the terms are to be understood literally just as they
appear on the face of the contract.[49] The various stipulations of a contract shall be
interpreted together[50] and such a construction is to be adopted as will give effect to all
provisions thereof.[51] A contract cannot be construed by parts, but its clauses should be
interpreted in relation to one another. The whole contract must be interpreted or read
together in order to arrive at its true meaning. Certain stipulations cannot be segregated
and then made to control; neither do particular words or phrases necessarily determine
the character of a contract. The legal effect of the contract is not to be determined alone
by any particular provision disconnected from all others, but in the ruling intention of the
parties as gathered from all the language they have used and from their
contemporaneous and subsequent acts.[52]

Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-
01180454, respondent court approvingly quoted the trial court's disquisition on the
aforequoted condition appearing on the reverse side of the airway bill and its disposition
of this particular assigned error:

"The foregoing stipulation fully answers plaintiffs' objections to the one-day delay and
the shipping of the remains in TWA Flight 603 instead of TWA Flight 131. Under the
stipulation, parties agreed that no time was fixed to complete the contract of carriage
and that the carrier may, without notice, substitute alternate carriers or aircraft. The
carrier did not assume the obligation to carry the shipment on any specified aircraft.
xxx
"Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air
Waybill are big enough, to be read and noticed. Also, the mere fact that the cargo in
question was shipped in TWA Flight 603, a flight earlier on the same day than TWA
Flight 131, did not in any way cause or add to the one-day delay complained of and/or
the switching or mix-up of the bodies."[53]
Indubitably, that private respondent can use substitute aircraft even without notice and
without the assumption of any obligation whatsoever to carry the goods on any specified
aircraft is clearly sanctioned by the contract of carriage as specifically provided for
under the conditions thereof.

Petitioners' invocation of the interpretative rule in the Rules of Court that written words
control printed words in documents,[54] to bolster their assertion that the typewritten
provisions regarding the routing and flight schedule prevail over the printed conditions,
is tenuous. Said rule may be considered only when there is inconsistency between the
written and printed words of the contract.

As previously stated, we find no ambiguity in the contract subject of this case that would
call for the application of said rule. In any event, the contract has provided for such a
situation by explicitly stating that the above condition remains effective "notwithstanding
that the same (fixed time for completion of carriage, specified aircraft, or any particular
route or schedule) may be stated on the face hereof." While petitioners hinge private
respondents' culpability on the fact that the carrier "certifies goods described below
were received for carriage," they may have overlooked that the statement on the face of
the airway bill properly and completely reads -

"Carrier certifies goods described below were received for carriage subject to the
Conditions on the reverse hereof the goods then being in apparent good order and
condition except as noted hereon."[55] (Emphasis ours.)

Private respondents further aptly observe that the carrier's certification regarding receipt
of the goods for carriage "was of a smaller print than the condition of the Air Waybill,
including Condition No. 5 - and thus if plaintiffs-appellants had recognized the former,
then with more reason they were aware of the latter."[56]

In the same vein, it would also be incorrect to accede to the suggestion of petitioners
that the typewritten specifications of the flight, routes and dates of departures and
arrivals on the face of the airway bill constitute a special contract which modifies the
printed conditions at the back thereof. We reiterate that typewritten provisions of the
contract are to be read and understood subject to and in view of the printed conditions,
fully reconciling and giving effect to the manifest intention of the parties to the
agreement.

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a
special contract, a carrier is not an insurer against delay in transportation of goods.
When a common carrier undertakes to convey goods, the law implies a contract that
they shall be delivered at destination within a reasonable time, in the absence of any
agreement as to the time of delivery.[57] But where a carrier has made an express
contract to transport and deliver property within a specified time, it is bound to fulfill its
contract and is liable for any delay, no matter from what cause it may have arisen.[58]
This result logically follows from the well-settled rule that where the law creates a duty
or charge, and the party is disabled from performing it without any default in himself,
and has no remedy over, then the law will excuse him, but where the party by his own
contract creates a duty or charge upon himself, he is bound to make it good
notwithstanding any accident or delay by inevitable necessity because he might have
provided against it by contract. Whether or not there has been such an undertaking on
the part of the carrier is to be determined from the circumstances surrounding the case
and by application of the ordinary rules for the interpretation of contracts.[59]

Echoing the findings of the trial court, the respondent court correctly declared that ?

"In a similar case of delayed delivery of air cargo under a very similar stipulation
contained in the airway bill which reads: 'The carrier does not obligate itself to carry the
goods by any specified aircraft or on a specified time. Said carrier being hereby
authorized to deviate from the route of the shipment without any liability therefor', our
Supreme Court ruled that 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 (Mendoza vs.
PAL, 90 Phil. 836).
"There is no showing by plaintiffs that such a special or specific contract had been
entered into between them and the defendant airline companies.
"And this special contract for prompt delivery should call the attention of the carrier to
the circumstances surrounding the case and the approximate amount of damages to be
suffered in case of delay (See Mendoza vs. PAL, supra). There was no such contract
entered into in the instant case."[60]

Also, the theory of petitioners that the specification of the flights and dates of departures
and arrivals constitute a special contract that could prevail over the printed stipulations
at the back of the airway bill is vacuous. To countenance such a postulate would unduly
burden the common carrier for that would have the effect of unilaterally transforming
every single bill of lading or trip ticket into a special contract by the simple expedient of
filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon
the carrier duties and/or obligations which it may not have been ready or willing to
assume had it been timely advised thereof.

Neither does the fact that the challenged condition No. 5 was printed at the back of the
airway bill militate against its binding effect on petitioners as parties to the contract, for
there were sufficient indications on the face of said bill that would alert them to the
presence of such additional condition to put them on their guard. Ordinary prudence on
the part of any person entering or contemplating to enter into a contract would prompt
even a cursory examination of any such conditions, terms and/or stipulations.

There is a holding in most jurisdictions that the acceptance of a bill of lading without
dissent raises a presumption that all terms therein were brought to the knowledge of the
shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped
from thereafter denying that he assented to such terms. This rule applies with particular
force where a shipper accepts a bill of lading with full knowledge of its contents, and
acceptance under such circumstances makes it a binding contract. In order that any
presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier
may arise, it must appear that the clause containing this exemption from liability plainly
formed a part of the contract contained in the bill of lading. A stipulation printed on the
back of a receipt or bill of lading or on papers attached to such receipt will be quite as
effective as if printed on its face, if it is shown that the consignor knew of its terms.
Thus, where a shipper accepts a receipt which states that its conditions are to be found
on the back, such receipt comes within the general rule, and the shipper is held to have
accepted and to be bound by the conditions there to be found. [61]

Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion
and as such must be construed strictly against the party who drafted the same or gave
rise to any ambiguity therein, 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.[62] However, Ong Yiu vs. Court of Appeals, et
al.[63] instructs us that contracts of adhesion are 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. Accordingly, petitioners, far from being the weaker party in this situation, duly
signified their presumed assent to all terms of the contract through their acceptance of
the airway bill and are consequently bound thereby. It cannot be gainsaid that
petitioners were not without several choices as to carriers in Chicago with its numerous
airways and airlines servicing the same.

We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is
productive of mischief as it would validate delay in delivery, sanction violations of
contractual obligations with impunity or put a premium on breaches of contract.

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 or arbitrarily vary
routes, flights and schedules to the prejudice of their customers. This condition only
serves to insulate the carrier from liability in those instances when changes in routes,
flights and schedules are clearly justified by the peculiar circumstances of a particular
case, or by general transportation practices, customs and usages, or by contingencies
or emergencies in aviation such as weather turbulence, mechanical failure,
requirements of national security and the like. And even as it is conceded that specific
routing and other navigational arrangements for a trip, flight or voyage, or variations
therein, generally lie within the discretion of the carrier in the absence of specific routing
instructions or directions by the shipper, it is plainly incumbent upon the carrier to
exercise its rights with due deference to the rights, interests and convenience of its
customers.
A common carrier undertaking to transport property has the implicit duty to carry and
deliver it within a reasonable time, absent any particular stipulation regarding time of
delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall
be liable for damages immediately and proximately resulting from such neglect of
duty.[64] As found by the trial court, the delay in the delivery of the remains of Crispina
Saludo, undeniable and regrettable as it was, cannot be attributed to the fault,
negligence or malice of private respondents,[65] a conclusion concurred in by respondent
court and which we are not inclined to disturb.

We are further convinced that when TWA opted to ship the remains of Crispina Saludo
on an earlier flight, it did so in the exercise of sound discretion and with reasonable
prudence, as shown by the explanation of its counsel in his letter of February 19, 1977
in response to petitioners' demand letter:

"Investigation of TWA's handling of this matter reveals that although the shipment was
scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded on TWA
Flight 603 of the same day, approximately 10 hours earlier, in order to assure that the
shipment would be received in San Francisco in sufficient time for transfer to PAL. This
transfer was effected in San Francisco at 2:00 P.M. on October 27, 1976.[66]

Precisely, private respondent TWA knew of the urgency of the shipment by reason of
this notation on the lower portion of the airway bill: "All documents have been certified.
Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO."
Accordingly, TWA took it upon itself to carry the remains of Crispina Saludo on an
earlier flight, which we emphasize it could do under the terms of the airway bill, to make
sure that there would be enough time for loading said remains on the transfer flight on
board PAL.

III. Petitioners challenge the validity of respondent court's finding that private
respondents are not liable for tort on account of the humiliating, arrogant and indifferent
acts of their officers and personnel. They posit that since their mother's remains were
transported ten hours earlier than originally scheduled, there was no reason for private
respondents' personnel to disclaim knowledge of the arrival or whereabouts of the same
other than their sheer arrogance, indifference and extreme insensitivity to the feelings of
petitioners. Moreover, being passengers and not merely consignors of goods,
petitioners had the right to be treated with courtesy, respect, kindness and due
consideration.

In riposte, TWA claims that its employees have always dealt politely with all clients,
customers and the public in general. PAL, on the other hand, declares that in the
performance of its obligation to the riding public, other customers and clients, it has
always acted with justice, honesty, courtesy and good faith.

Respondent appellate court found merit in and reproduced the trial court's refutation of
this assigned error:
"About the only evidence of plaintiffs that may have reference to the manner with which
the personnel of defendants treated the two plaintiffs at the San Francisco Airport are
the following pertinent portions of Maria Saludo's testimony:
'Q - When you arrived there, what did you do, if any?
A - I immediately went to the TWA counter and I inquired about whether my mother was
there or if they knew anything about it.
Q - What was the answer?
A - They said they do not know. So, we waited.
Q - About what time was that when you reached San Francisco from Chicago?
A - I think 5 o'clock. Somewhere around that in the afternoon.
Q - You made inquiry it was immediately thereafter?
A - Right after we got off the plane.
Q - Up to what time did you stay in the airport to wait until the TWA people could tell you
the whereabouts?
A - Sorry, Sir, but the TWA did not tell us anything We stayed there until about 9 o'clock.
They have not heard anything about it. They did not say anything.
Q - Do you want to convey to the Court that from 5 up to 9 o'clock in the evening you
yourself went back to the TWA and they could not tell you where the remains of your
mother were?
A - Yes sir.
Q - And after nine o'clock, what did you do?
A - I told my brother my Mom was supposed to be on the Philippine Airlines flight. 'Why
don't we check with PAL instead to see if she was there?' We tried to comfort each
other. I told him anyway that was a shortest flight from Chicago to California. We will be
with our mother on this longer flight. So, we checked with the PAL.
Q - What did you find?
A - We learned, Yes, my Mom would be on the flight.
Q - Who was that brother?
A - Saturnino Saludo.
Q - And did you find what was your flight from San Francisco to the Philippines?
A - I do not know the number. It was the evening flight of the Philippine Airline(s) from
San Francisco to Manila.
Q - You took that flight with your mother?
A - We were scheduled to, Sir.
Q - Now, you could not locate the remains of your mother in San Francisco could you
tell us what did you feel?
A - After we were told that my mother was not there?
Q - After you learned that your mother could not fly with you from Chicago to California?
A - Well, I was very upset. Of course, I wanted the confirmation that my mother was in
the West Coast. The flight was about 5 hours from Chicago to California. We waited
anxiously all that time on the plane. I wanted to be assured about my mother's remains.
But there was nothing and we could not get any assurance from anyone about it.
Q - Your feeling when you reached San Francisco and you could not find out from the
TWA the whereabouts of the remains, what did you feel?
A - Something nobody would be able to describe unless he experiences it himself. It is a
kind of panic. I think it's a feeling you are about to go crazy. It is something I do not want
to live through again.' (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).'
"The foregoing does not show any humiliating or arrogant manner with which the
personnel of both defendants treated the two plaintiffs. Even their alleged indifference is
not clearly established. The initial answer of the TWA personnel at the counter that they
did not know anything about the remains, and later, their answer that they have not
heard anything about the remains, and the inability of the TWA counter personnel to
inform the two plaintiffs of the whereabouts of the remains, cannot be said to be total or
complete indifference to the said plaintiffs. At any rate, it is any rude or discourteous
conduct, malfeasance or neglect, the use of abusive or insulting language calculated to
humiliate and shame passenger or bad faith by or on the part of the employees of the
carrier that gives the passenger an action for damages against the carrier (Zulueta vs.
Pan American World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18
SCRA 155; Lopez, et al. vs. Pan American World Airways, 16 SCRA 431; Northwest
Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is obtaining in the
instant case."[67]

We stand by respondent court's findings on this point, but only to the extent where it
holds that the manner in which private respondent TWA's employees dealt with
petitioners was not grossly humiliating, arrogant or indifferent as would assume the
proportions of malice or bad faith and lay the basis for an award of the damages
claimed. It must however, be pointed out that the lamentable actuations of respondent
TWA's employees leave much to be desired, particularly so in the face of petitioners'
grief over the death of their mother, exacerbated by the tension and anxiety wrought by
the impasse and confusion over the failure to ascertain over an appreciable period of
time what happened to her remains.

Airline companies are hereby sternly admonished that it is their duty not only to cursorily
instruct but to strictly require their personnel to be more accommodating towards
customers, passengers and the general public. After all, common carriers such as
airline companies are in the business of rendering public service, which is the primary
reason for their enfranchisement and recognition in our law. Because the passengers in
a contract of carriage do not contract merely for transportation, they have a right to be
treated with kindness, respect, courtesy and consideration.[68] A contract to transport
passengers is quite different in kind and degree from any other contractual relation, and
generates a relation attended with public duty. The operation of a common carrier is a
business affected with public interest and must be directed to serve the comfort and
convenience of passengers.[69] Passengers are human beings with human feelings and
emotions; they should not be treated as mere numbers or statistics for revenue.

The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized
for nearly five hours, over the possibility of losing their mother's mortal remains,
unattended to and without any assurance from the employees of TWA that they were
doing anything about the situation. This is not to say that petitioners were to be regaled
with extra special attention. They were, however, entitled to the understanding and
humane consideration called for by and commensurate with the extraordinary diligence
required of common carriers, and not the cold insensitivity to their predicament. It is
hard to believe that the airline's counter personnel were totally helpless about the
situation. Common sense could and should have dictated that they exert a little extra
effort in making a more extensive inquiry, by themselves or through their superiors,
rather than just shrug off the problem with a callous and uncaring remark that they had
no knowledge about it. With all the modern communications equipment readily available
to them, which could have easily facilitated said inquiry and which are used as a matter
of course by airline companies in their daily operations, their apathetic stance while not
legally reprehensible is morally deplorable.

Losing a loved one, especially one's parent, is a painful experience. Our culture accords
the tenderest human feelings toward and in reverence to the dead. That the remains of
the deceased were subsequently delivered, albeit belatedly, and eventually laid in her
final resting place is of little consolation. The imperviousness displayed by the airline's
personnel, even for just that fraction of time, was especially condemnable particularly in
the hour of bereavement of the family of Crispina Saludo, intensified by anguish due to
the uncertainty of the whereabouts of their mother's remains. Hence, it is quite apparent
that private respondents' personnel were remiss in the observance of that genuine
human concern and professional attentiveness required and expected of them.

The foregoing observations, however, do not appear to be applicable or imputable to

respondent PAL or its employees. No attribution of discourtesy or indifference has been
made against PAL, by petitioners and, in fact, petitioner Maria Saludo testified that it
was to PAL, that they repaired after failing to receive proper attention from TWA. It was
from PAL that they received confirmation that their mother's remains would be on the
same flight to Manila with them.

We find the following substantiation on this particular episode from the deposition of
Alberto A. Lim, PAL's cargo supervisor earlier adverted to, regarding their investigation
of and the action taken on learning of petitioner's problem:

"ATTY. ALBERTO C. MENDOZA:

Yes.
Mr. Lim, what exactly was your procedure adopted in your so called investigation?
ALBERTO A. LIM:
I called the lead agent on duty at that time and requested for a copy of airway bill,
transfer manifest and other documents concerning the shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?
ALBERTO A. LIM:
They proceeded to analyze exactly where PAL failed, if any, in forwarding the human
remains of Mrs. Cristina (sic) Saludo. And I found out that there was not (sic) delay in
shipping the remains of Mrs. Saludo to Manila. Since we received the body from
American Airlines on 28 October at 7:45 and we expedited the shipment so that it could
have been loaded on our flight leaving at 9:00 in the evening or just barely one hour and
15 minutes prior to the departure of the aircraft. That is so (sic) being the case, I
reported to Manila these circumstances."[70]

IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their
mother's remains allegedly caused by wilful contractual breach, on their entitlement to
actual, moral and exemplary damages as well as attorney's fees, litigation expenses,
and legal interest.

The uniform decisional tenet in our jurisdiction holds that moral damages may be
awarded for wilful or fraudulent breach of contract[71] or when such breach is attended
by malice or bad faith.[72] However, in the absence of strong and positive evidence of
fraud, malice or bad faith, said damages cannot be awarded.[73] Neither can there be an
award of exemplary damages[74] nor of attorney's fees[75] as an item of damages in the
absence of proof that defendant acted with malice, fraud or bad faith.

The censurable conduct of TWA's employees cannot, however, be said to have

approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a
lethargic reaction produced and engrained in some people by the mechanically routine
nature of their work and a racial or societal culture which stultifies what would have
been their accustomed human response to a human need under a former and different
ambience.

Nonetheless, the facts show that petitioners' right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by every
common carrier was violated by TWA and this entitles them, at least, to nominal
damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that
nominal damages are not intended for indemnification of loss suffered but for the
vindication or recognition of a right violated or invaded. They are recoverable where
some injury has been done but the amount of which the evidence fails to show, the
assessment of damages being left to the discretion of the court according to the
circumstances of the case.[76] In the exercise of our discretion, we find an award of
P40,000.00 as nominal damages in favor of petitioners to be a reasonable amount
under the circumstances of this case.
WHEREFORE, with the modification that an award of P40,000.00 as and by way of
nominal damages is hereby granted in favor of petitioners to be paid by respondent
Trans World Airlines, the appealed decision is AFFIRMED in all other respects.

SO ORDERED.

G.R. No. 110398 November 7, 1997

NEGROS NAVIGATION CO., INC., petitioner,
vs.
THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE
LA VICTORIA, respondents.

Facts:

Private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc.
four special cabin tickets. The tickets were for Voyage No. 457-A of the M/V Don Juan,
leaving Manila and going to Bacolod.

Subsequently, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T
Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and
the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don
Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some
of the victims were found and brought to shore, but the four members of private
respondents’ families were never found.

Private respondents filed a complaint against the Negros Navigation, the Philippine
National Oil Company (PNOC), and the PNOC Shipping and Transport Corporation
(PNOC/STC), seeking damages for the death. Petitioner, however, denied that the four
relatives of private respondents actually boarded the vessel as shown by the fact that
their bodies were never recovered. Petitioner further averred that the Don Juan was
seaworthy and manned by a full and competent crew, and that the collision was entirely
due to the fault of the crew of the M/T Tacloban City.

In finding petitioner guilty of negligence and in failing to exercise the extraordinary

diligence required of it in the carriage of passengers, both the trial court and the
appellate court relied on the findings of this Court in Mecenas v. Intermediate Appellate
Court, which case was brought for the death of other passengers. In Mecenas, SC
found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and
crew members in playing mahjong during the voyage, (2) in failing to maintain the
vessel seaworthy and (3) in allowing the ship to carry more passengers than it was
allowed to carry. Petitioner is, therefore, clearly liable for damages to the full extent.

Petitioner criticizes the lower court’s reliance on the Mecenas case, arguing that,
although this case arose out of the same incident as that involved in Mecenas, the
parties are different and trial was conducted separately. Petitioner contends that the
decision in this case should be based on the allegations and defenses pleaded and
evidence adduced in it or, in short, on the record of this case.

Issues:

1. Whether the ruling in Mecenas v. Court of Appeals, finding the crew members of
petitioner to be grossly negligent in the performance of their duties, is binding in this
case;

2. Whether the award for damages in Mecenas v. Court of Appeals is applicable in this
case.

Held:

1. No. The contention is without merit.

Adherence to the Mecenas case is dictated by this Court’s policy of maintaining stability
in jurisprudence. Where, as in this case, the same questions relating to the same event
have been put forward by parties similarly situated as in a previous case litigated and
decided by a competent court, the rule of stare decisis is a bar to any attempt to
relitigate the same issue.

2. No, it is not applicable.

Petitioner contends that, assuming that the Mecenas case applies, private respondents
should be allowed to claim only P43,857.14 each as moral damages because in the
Mecenascase, the amount of P307,500.00 was awarded to the seven children of the
Mecenas couple. Here is where the principle of stare decisis does not apply in view of
differences in the personal circumstances of the victims. For that matter, differentiation
would be justified even if private respondents had joined the private respondents in the
Mecenas case.

The doctrine of stare decisis works as a bar only against issues litigated in a previous
case. Where the issue involved was not raised nor presented to the court and not
passed upon by the court in the previous case, the decision in the previous case is not
stare decisis of the question presently presented.

The Mecenas case cannot be made the basis for determining the award for attorney’s
fees. The award would naturally vary or differ in each case.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and
petitioner is ORDERED to pay private respondents damages.

FULL TEXT
NEGROS NAVIGATION CO., INC., petitioner,
vs.
THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE
LA VICTORIA, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals affirming
with modification the Regional Trial Court's award of damages to private respondents
for the death of relatives as a result of the sinking of petitioner's vessel.

In April of 1980, private respondent Ramon Miranda purchased from the Negros
Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his
wife, daughter, son and niece who were going to Bacolod City to attend a family
reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at
1:00 p.m. on April 22, 1980.

The ship sailed from the port of Manila on schedule.

At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas
Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine
National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation
(PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished
in the sea tragedy. The bodies of some of the victims were found and brought to shore,
but the four members of private respondents' families were never found.

Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of
Manila, Branch 34, against the Negros Navigation, the Philippine National Oil Company
(PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking
damages for the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19,
Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26.

In its answer, petitioner admitted that private respondents purchased ticket numbers
74411, 74412, 74413 and 74414; that the ticket numbers were listed in the passenger
manifest; and that the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and
sank that night after being rammed by the oil tanker M/T Tacloban City, and that, as a
result of the collision, some of the passengers of the M/V Don Juan died. Petitioner,
however, denied that the four relatives of private respondents actually boarded the
vessel as shown by the fact that their bodies were never recovered. Petitioner further
averred that the Don Juan was seaworthy and manned by a full and competent crew,
and that the collision was entirely due to the fault of the crew of the M/T Tacloban City.

On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into
a compromise agreement whereby petitioner assumed full responsibility for the payment
and satisfaction of all claims arising out of or in connection with the collision and
releasing the PNOC and the PNOC/STC from any liability to it. The agreement was
subsequently held by the trial court to be binding upon petitioner, PNOC and
PNOC/STC. Private respondents did not join in the agreement.

After trial, the court rendered judgment on February 21, 1991, the dispositive portion of
which leads as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of

the plaintiffs, ordering all the defendants to pay jointly and severally to the
plaintiffs damages as follows:

To Ramon Miranda:

P42,025.00 for actual damages;

P152,654.55 as compensatory damages for loss of

earning capacity of his wife;

P90,000.00 as compensatory damages for wrongful

death of three (3) victims;

P300,000.00 as moral damages;

P50,000.00 as exemplary damages, all in the total

amount of P634,679.55; and

P40,000.00 as attorney's fees.

To Spouses Ricardo and Virginia de la Victoria:

P12,000.00 for actual damages;

P158,899.00 as compensatory damages for loss of

earning capacity;

P30,000.00 as compensatory damages for wrongful

death;

P100,000.00 as moral damages;

P20,000.00 as exemplary damages, all in the total

amount of P320,899.00; and

P15,000.00 as attorney's fees.

On appeal, the Court of Appeals1 affirmed the decision of the Regional Trial Court with
modification —

1. Ordering and sentencing defendants-appellants, jointly and severally, to pay

plaintiff-appellee Ramon Miranda the amount of P23,075.00 as actual damages
instead of P42,025.00;

2. Ordering and sentencing defendants-appellants, jointly and severally, to pay

plaintiff-appellee Ramon Miranda the amount of P150,000.00, instead of
P90,000.00, as compensatory damages for the death of his wife and two
children;

3. Ordering and sentencing defendants-appellants, jointly and severally, to pay

plaintiffs-appellees Dela Victoria spouses the amount of P50,000.00, instead of
P30,000.00, as compensatory damages for the death of their daughter Elfreda
Dela Victoria;

Hence this petition, raising the following issues:

(1) whether the members of private respondents' families were actually passengers of
the Don Juan;

(2) whether the ruling in Mecenas v. Court of Appeals,2 finding the crew members of
petitioner to be grossly negligent in the performance of their duties, is binding in this
case;

(3) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and

(4) whether the damages awarded by the appellate court are excessive, unreasonable
and unwarranted.

First. The trial court held that the fact that the victims were passengers of the M/V Don
Juan was sufficiently proven by private respondent Ramon Miranda, who testified that
he purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from
the Makati office of petitioner for Voyage No. 47-A of the M/V Don Juan, which was
leaving Manila on April 22, 1980. This was corroborated by the passenger manifest
(Exh. E) on which the numbers of the tickets and the names of Ardita Miranda and her
children and Elfreda de la Victoria appear.

Petitioner contends that the purchase of the tickets does not necessarily mean that the
alleged victims actually took the trip. Petitioner asserts that it is common knowledge that
passengers purchase tickets in advance but do not actually use them. Hence, private
respondent should also prove the presence of the victims on the ship. The witnesses
who affirmed that the victims were on the ship were biased and unreliable.
This contention is without merit. Private respondent Ramon Miranda testified that he
personally took his family and his niece to the vessel on the day of the voyage and
stayed with them on the ship until it was time for it to leave. There is no reason he
should claim members of his family to have perished in the accident just to maintain an
action. People do not normally lie about so grave a matter as the loss of dear ones. It
would be more difficult for private respondents to keep the existence of their relatives if
indeed they are alive than it is for petitioner to show the contrary. Petitioner's only proof
is that the bodies of the supposed victims were not among those recovered from the site
of the mishap. But so were the bodies of the other passengers reported missing not
recovered, as this Court noted in the Mecenas3 case.

Private respondent Miranda's testimony was corroborated by Edgardo Ramirez.

Ramirez was a seminarian and one of the survivors of the collision. He testified that he
saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with them.
He knew Mrs. Miranda who was his teacher in the grade school. He also knew Elfreda
who was his childhood friend and townmate. Ramirez said he was with Mrs. Miranda
and her children and niece from 7:00 p.m. until 10:00 p.m. when the collision happened
and that he in fact had dinner with them. Ramirez said he and Elfreda stayed on the
deck after dinner and it was there where they were jolted by the collision of the two
vessels. Recounting the moments after the collision, Ramirez testified that Elfreda ran
to fetch Mrs. Miranda. He escorted her to the room and then tried to go back to the deck
when the lights went out. He tried to return to the cabin but was not able to do so
because it was dark and there was a stampede of passengers from the deck.

Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have
talked with the victims for about three hours and not run out of stories to tell, unless
Ramirez had a "storehouse" of stories. But what is incredible about acquaintances
thrown together on a long journey staying together for hours on end, in idle conversation
precisely to while the hours away?

Petitioner also points out that it took Ramirez three (3) days before he finally contacted
private respondent Ramon Miranda to tell him about the fate of his family. But it is not
improbable that it took Ramirez three days before calling on private respondent Miranda
to tell him about the last hours of Mrs. Miranda and her children and niece, in view of
the confusion in the days following the collision as rescue teams and relatives searched
for survivors.

Indeed, given the facts of this case, it is improper for petitioner to even suggest that
private respondents' relatives did not board the ill-fated vessel and perish in the
accident simply because their bodies were not recovered.

Second. In finding petitioner guilty of negligence and in failing to exercise the

extraordinary diligence required of it in the carriage of passengers, both the trial court
and the appellate court relied on the findings of this Court in Mecenas v. Intermediate
Appellate Court,4 which case was brought for the death of other passengers. In that
case it was found that although the proximate cause of the mishap was the negligence
of the crew of the M/T Tacloban City, the crew of the Don Juan was equally negligent as
it found that the latter's master, Capt. Rogelio Santisteban, was playing mahjong at the
time of collision, and the officer on watch, Senior Third Mate Rogelio De Vera, admitted
that he failed to call the attention of Santisteban to the imminent danger facing them.
This Court found that Capt. Santisteban and the crew of the M/V Don Juan failed to take
steps to prevent the collision or at least delay the sinking of the ship and supervise the
abandoning of the ship.

Petitioner Negros Navigation was found equally negligent in tolerating the playing of
mahjong by the ship captain and other crew members while on board the ship and
failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to
15 minutes of its impact with the M/T Tacloban City.

In addition, the Court found that the Don Juan was overloaded. The Certificate of
Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander
at Iloilo City stated that the total number of persons allowed on the ship was 864, of
whom 810 are passengers, but there were actually 1,004 on board the vessel when it
sank, 140 persons more than the maximum number that could be safely carried by it.

Taking these circumstances together, and the fact that the M/V Don Juan, as the faster
and better-equipped vessel, could have avoided a collision with the PNOC tanker, this
Court held that even if the Tacloban City had been at fault for failing to observe an
internationally-recognized rule of navigation, the Don Juan was guilty of contributory
negligence. Through Justice Feliciano, this Court held:

The grossness of the negligence of the "Don Juan" is underscored when one
considers the foregoing circumstances in the context of the following facts:
Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The
"Don Juan's" top speed was 17 knots; while that of the "Tacloban City" was 6.3.
knots. Secondly, the "Don Juan" carried the full complement of officers and crew
members specified for a passenger vessel of her class. Thirdly, the "Don Juan"
was equipped with radar which was functioning that night. Fourthly, the "Don
Juan's officer on-watch had sighted the "Tacloban City" on his radar screen while
the latter was still four (4) nautical miles away. Visual confirmation of radar
contact was established by the "Don Juan" while the "Tacloban City" was still 2.7
miles away. In the total set of circumstances which existed in the instant case,
the "Don Juan," had it taken seriously its duty of extraordinary diligence, could
have easily avoided the collision with the "Tacloban City." Indeed, the "Don Juan"
might well have avoided the collision even if it had exercised ordinary diligence
merely.

It is true that the "Tacloban City" failed to follow Rule 18 of the International
Rules of the Road which requires two (2) power-driven vessels meeting end on
or nearly end on each to alter her course to starboard (right) so that each vessel
may pass on the port side (left) of the other. The "Tacloban City," when the two
(2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second
 time) 15° to port side while the "Don Juan" veered hard to starboard. . . . [But]
"route observance" of the International Rules of the Road will not relieve a vessel
from responsibility if the collision could have been avoided by proper care and
skill on her part or even by a departure from the rules.

In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it
was still a long way off was negligent in failing to take early preventive action and
in allowing the two (2) vessels to come to such close quarters as to render the
collision inevitable when there was no necessity for passing so near to the
"Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could
choose its own distance. It is noteworthy that the "Tacloban City," upon turning
hard to port shortly before the moment of collision, signalled its intention to do so
by giving two (2) short blasts with its horn. The "Don Juan" gave no answering
horn blast to signal its own intention and proceeded to turn hard to starboard.

We conclude that Capt. Santisteban and Negros Navigation are properly held
liable for gross negligence in connection with the collision of the "Don Juan" and
"Tacloban City" and the sinking of the "Don Juan" leading to the death of
hundreds of passengers. . . .5

Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that,
although this case arose out of the same incident as that involved in Mecenas, the
parties are different and trial was conducted separately. Petitioner contends that the
decision in this case should be based on the allegations and defenses pleaded and
evidence adduced in it or, in short, on the record of this case.

The contention is without merit. What petitioner contends may be true with respect to
the merits of the individual claims against petitioner but not as to the cause of the
sinking of its ship on April 22, 1980 and its liability for such accident, of which there can
only be one truth. Otherwise, one would be subscribing to the sophistry: truth on one
side of the Pyrenees, falsehood on the other!

Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability
in jurisprudence in accordance with the legal maxim "stare decisis et non quieta
movere" (Follow past precedents and do not disturb what has been settled.) Where, as
in this case, the same questions relating to the same event have been put forward by
parties similarly situated as in a previous case litigated and decided by a competent
court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.6 In
Woulfe v. Associated Realties Corporation,7 the Supreme Court of New Jersey held
that where substantially similar cases to the pending case were presented and
applicable principles declared in prior decisions, the court was bound by the principle of
stare decisis. Similarly, in State ex rel. Tollinger v. Gill,8 it was held that under the
doctrine of stare decisis a ruling is final even as to parties who are strangers to the
original proceeding and not bound by the judgment under the res judicata doctrine. The
Philadelphia court expressed itself in this wise: "Stare decisis simply declares that, for
the sake of certainty, a conclusion reached in one case should be applied to those
which follow, if the facts are substantially the same, even though the parties may be
different."9 Thus, in J.M. Tuason v. Mariano, supra, this Court relied on its rulings in
other cases involving different parties in sustaining the validity of a land title on the
principle of "stare decisis et non quieta movere."

Indeed, the evidence presented in this case was the same as those presented in the
Mecenas case, to wit:

Document Mecenas case This case

Decision of Commandant, Exh. 10 10 Exh. 11-B-NN/X

Phil. Coast Guard
in BMI Case No.
415-80 dated 3/26/81

Decision of the Minister Exh. 11 11 Exh. ZZ

of National Defense
dated 3/12/82

Resolution on the Exh. 13 12 Exh. AAA

motion for reconsideration (private
of the decision of the respondents)
Minister of National
defense dated 7/27/84

Certificate of Exh. 1-A 13 Exh. 19-NN

inspection dated
8/27/79

Certificate of Stability Exh. 6-A 14 Exh. 19-D-NN

dated 12/16/76

Nor is it true that the trial court merely based its decision on the Mecenas case. The trial
court made its own independent findings on the basis of the testimonies of witnesses,
such as Senior Third Mate Rogelio de Vera, who incidentally gave substantially the
same testimony on petitioner's behalf before the Board of Marine Inquiry. The trial court
agreed with the conclusions of the then Minister of National Defense finding both
vessels to be negligent.

Third. The next issue is whether petitioner is liable to pay damages notwithstanding the
total loss of its ship. The issue is not one of first impression. The rule is well-entrenched
in our jurisprudence that a shipowner may be held liable for injuries to passengers
notwithstanding the exclusively real and hypothecary nature of maritime law if fault can
be attributed to the shipowner. 15
In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating
the ship captain and crew members in playing mahjong during the voyage, (2) in failing
to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers
than it was allowed to carry. Petitioner is, therefore, clearly liable for damages to the full
extent.

Fourth. Petitioner contends that, assuming that the Mecenas case applies, private
respondents should be allowed to claim only P43,857.14 each as moral damages
because in the Mecenas case, the amount of P307,500.00 was awarded to the seven
children of the Mecenas couple. Under petitioner's formula, Ramon Miranda should
receive P43,857.14, while the De la Victoria spouses should receive P97,714.28.

Here is where the principle of stare decisis does not apply in view of differences in the
personal circumstances of the victims. For that matter, differentiation would be justified
even if private respondents had joined the private respondents in the Mecenas case.
The doctrine of stare decisis works as a bar only against issues litigated in a previous
case. Where the issue involved was not raised nor presented to the court and not
passed upon by the court in the previous case, the decision in the previous case is not
stare decisis of the question presently presented. 16 The decision in the Mecenas case
relates to damages for which petitioner was liable to the claimants in that case.

In the case at bar, the award of P300,000.00 for moral damages is reasonable
considering the grief petitioner Ramon Miranda suffered as a result of the loss of his
entire family. As a matter of fact, three months after the collision, he developed a heart
condition undoubtedly caused by the strain of the loss of his family. The P100,000.00
given to Mr. and Mrs. de la Victoria is likewise reasonable and should be affirmed.

As for the amount of civil indemnity awarded to private respondents, the appellate
court's award of P50,000.00 per victim should be sustained. The amount of P30,000.00
formerly set in De Lima v. Laguna Tayabas Co., 17 Heirs of Amparo delos Santos v.
Court of Appeals, 18 and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate
Court 19 as benchmark was subsequently increased to P50,000.00 in the case of
Sulpicio Lines, Inc. v. Court of Appeals, 20 which involved the sinking of another
interisland ship on October 24, 1988.

We now turn to the determination of the earning capacity of the victims. With respect to
Ardita Miranda, the trial court awarded damages computed as follows: 21

In the case of victim Ardita V. Miranda whose age at the time of the accident was
48 years, her life expectancy was computed to be 21.33 years, and therefore,
she could have lived up to almost 70 years old. Her gross earnings for 21.33
years based on P10,224.00 per annum, would be P218,077.92. Deducting
therefrom 30% as her living expenses, her net earnings would be P152,654.55,
to which plaintiff Ramon Miranda is entitled to compensatory damages for the
loss of earning capacity of his wife. In considering 30% as the living expenses of
Ardita Miranda, the Court takes into account the fact that plaintiff and his wife
 were supporting their daughter and son who were both college students taking
Medicine and Law respectively.

In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals, 22 we think
the life expectancy of Ardita Miranda was correctly determined to be 21.33 years, or up
to age 69. Petitioner contends, however, that Mrs. Miranda would have retired from her
job as a public school teacher at 65, hence her loss of earning capacity should be
reckoned up to 17.33 years only.

The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the
age of the deceased). It may be that in the Philippines the age of retirement generally is
65 but, in calculating the life expectancy of individuals for the purpose of determining
loss of earning capacity under Art. 2206(1) of the Civil Code, it is assumed that the
deceased would have earned income even after retirement from a particular job. In this
case, the trial court took into account the fact that Mrs. Miranda had a master's degree
and a good prospect of becoming principal of the school in which she was teaching.
There was reason to believe that her income would have increased through the years
and she could still earn more after her retirement, e.g., by becoming a consultant, had
she not died. The gross earnings which Mrs. Miranda could reasonably be expected to
earn were it not for her untimely death was, therefore, correctly computed by the trial
court to be P218,077.92 (given a gross annual income of P10,224.00 and life
expectancy of 21.33 years).

Petitioner contends that from the amount of gross earnings, 60% should be deducted as
necessary living expenses, not merely 30% as the trial court allowed. Petitioner
contends that 30% is unrealistic, considering that Mrs. Miranda's earnings would have
been subject to taxes, social security deductions and inflation.

We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals, 23 the
Court allowed a deduction of P1,184.00 for living expenses from the P2,184.00 annual
salary of the victim, which is roughly 54.2% thereof. The deceased was 29 years old
and a training assistant in the Bacnotan Cement Industries. In People v. Quilation, 24
the deceased was a 26-year old laborer earning a daily wage. The court allowed a
deduction of P120,000.00 which was 51.3% of his annual gross earnings of
P234,000.00. In People v. Teehankee, 25 the court allowed a deduction of P19,800.00,
roughly 42.4% thereof from the deceased's annual salary of P46,659.21. The deceased,
Maureen Hultman, was 17 years old and had just received her first paycheck as a
secretary. In the case at bar, we hold that a deduction of 50% from Mrs. Miranda's gross
earnings (P218,077.92) would be reasonable, so that her net earning capacity should
be P109,038.96. There is no basis for supposing that her living expenses constituted a
smaller percentage of her gross income than the living expenses in the decided cases.
To hold that she would have used only a small part of her income for herself, a larger
part going to the support of her children would be conjectural and unreasonable.

As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was
26 years old, a teacher in a private school in Malolos, Bulacan, earning P6,192.00 per
annum. Although a probationary employee, she had already been working in the school
for two years at the time of her death and she had a general efficiency rating of 92.85%
and it can be presumed that, if not for her untimely death, she would have become a
regular teacher. Hence, her loss of earning capacity is P111,456.00, computed as
follows:

net earning = life x gross less reasonable

capacity (x) expectancy annual & necessary

income living expenses

(50%)

x = [2(80-26)] x [P6,192.00 - P3,096.00]

————

= 36 x 3,096.00

= P111,456.00

On the other hand, the award of actual damages in the amount of P23,075.00 was
determined by the Court of Appeals on the basis receipts submitted by private
respondents. This amount is reasonable considering the expenses incurred by private
respondent Miranda in organizing three search teams to look for his family, spending for
transportation in going to places such as Batangas City and Iloilo, where survivors and
the bodies of other victims were found, making long distance calls, erecting a
monument in honor of the four victims, spending for obituaries in the Bulletin Today and
for food, masses and novenas.

Petitioner's contention that the expenses for the erection of a monument and other
expenses for memorial services for the victims should be considered included in the
indemnity for death awarded to private respondents is without merit. Indemnity for death
is given to compensate for violation of the rights of the deceased, i.e., his right to life
and physical integrity. 26 On the other hand, damages incidental to or arising out of
such death are for pecuniary losses of the beneficiaries of the deceased.

As for the award of attorney's fees, we agree with the Court of Appeals that the amount
of P40,000.00 for private respondent Ramon Miranda and P15,000.00 for the de la
Victoria spouses is justified. The appellate court correctly held:

The Mecenas case cannot be made the basis for determining the award for
attorney's fees. The award would naturally vary or differ in each case. While it is
 admitted that plaintiff-appellee Ramon Miranda who is himself a lawyer,
represented also plaintiffs-appellees Dela Victoria spouses, we note that
separate testimonial evidence were adduced by plaintiff-appellee Ramon
Miranda (TSN, February 26, 1982, p. 6) and plaintiffs-appellees spouses Dela
Victoria (TSN, August 13, 1981, p. 43). Considering the amount of work and
effort put into the case as indicated by the voluminous transcripts of stenographic
notes, we find no reason to disturb the award of P40,000.00 for plaintiff-appellee
Ramon Miranda and P15,000.00 for plaintiffs-appellees Dela Victoria spouses.
27

The award of exemplary damages should be increased to P300,000.00 for Ramon

Miranda and P100,000.00 for the de la Victoria spouses in accordance with our ruling in
the Mecenas case:

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. 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 vessels in our waters, crowds of people continue to travel
by sea. This Court is prepared to use the instruments given to it by the law for
securing the ends of law and public policy. One of those instruments is the
institution of exemplary damages; one of those ends, of special importance in an
archipelagic state like the Philippines, is the safe and reliable carriage of people
and goods by sea. 28

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and
petitioner is ORDERED to pay private respondents damages as follows:

To private respondent Ramon Miranda:

P23,075.00 for actual damages;

P109,038.96 as compensatory damages for loss of

earning capacity of his wife;

P150,000.00 as compensatory damages for wrongful

death of three (3) victims;

P300,000.00 as moral damages;

 P300,000.00 as exemplary damages, all in the total
amount of P882,113.96; and

P40,000.00 as attorney's fees.

To private respondents Spouses Ricardo and Virginia de la Victoria:

P12,000.00 for actual damages;

P111,456.00 as compensatory damages for loss of

earning capacity;

P50,000.00 as compensatory damages for wrongful

death;

P100,000.00 as moral damages;

P100,000.00 as exemplary damages, all in the total

amount of P373,456.00; and

P15,000.00 as attorney's fees.

Petitioners are further ordered to pay costs of suit.

In the event the Philippine National Oil Company and/or the PNOC Shipping and
Transport Corporation pay or are required to pay all or a portion of the amounts
adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such
amount or amounts as either may have paid, and in the event of failure of Negros
Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or PNOC/STC
shall be entitled to a writ of execution without need of filing another action.

SO ORDERED.

Regalado and Puno, JJ., concur.