FIRST DIVISION

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

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

FUENTEBELLA, Respondents.

DECISION

SERENO, C.J.:

This is a Petition for Review on Certiorari filed by Cathay Pacific Airways Ltd. from the Court of Appeals (CA)
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.24Respondent Fuentebella went back to the
check-in counter to demand that they be given First Class seats or at the very least, access to the First Class Lounge.
He recalled that he was treated by the ground staff in a discourteous, arrogant and rude manner.25cralawred He was
allegedly told that the plane would leave with or without them.26 Both the trial court and the CA gave credence to
the testimony of respondent Fuentebella.

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

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

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

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

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

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

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

Upon arrival in the Philippines, respondents demanded a formal apology and payment of damages from
petitioner. 48 The latter conducted an investigation, after which it maintained that no undue harm had been done to
them. 49 Ruling of the Regional Trial Court
In resolving the case, the trial court first identified the ticket as a contract of adhesion whose terms, as such, should
be construed against petitioner.50 It found that respondents had entered into the contract because of the assurance
that they would be given First Class seats.51chanrobleslaw

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

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

xxxx

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

The trial court ordered petitioner to pay P5 million as moral damages, P1 million as exemplary damages, and
P500,000 as attorney's fees. In setting the award for moral damages, the RTC considered the prestigious position
held by respondent Fuentebella, as well as the bad faith exhibited by petitioner.54According to the trial court, the
contract was flagrantly violated in four instances: first, when respondents were denied entry to the First Class
lounge; second, at the check-in counter when the airport services officer failed to adequately address their concern;
third, 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 of First Class Tickets Date of Issue: 5 Actual
Issue: 23 October 1993 October 1993 Class
Segment Boarded
Flight Class Status Flight Class Status

Manila-Hong CX902 C OK OPEN F - Business

Kong

Hong Kong- CX 101 C RQ OPEN F - Economy

Sydney

Sydney-Hong CX 100 C OK OPEN F - First

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

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

There is basis for the award of moral and exemplary

damages; however, the amounts were excessive.

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

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

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

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

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

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

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 111127 July 26, 1996

MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE
ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA,
ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA,
YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN,
FRANCIS NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C.
CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES,
MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA,
MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T.
RADOC and BERNADETTE FERRER, respondents.

MENDOZA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals1 in CA-GR No. 28245, dated
September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch
58, ordering petitioners jointly and severally to pay damages to private respondent Amyline Antonio, and its
resolution which denied petitioners' motion for reconsideration for lack of merit.

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school children which they operated in Manila. The couple had a
driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks, His job was to take school
children to and from the St. Scholastica's College in Malate, Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with
petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in
consideration of which private respondent paid petitioners the amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However, as several
members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA
until 8:00 o'clock in the evening. Petitioner Porfirio Cabil drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under
repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to
take a detour through the town of Baay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a
sharp curve on the highway, running on a south to east direction, which he described as "siete." The road was
slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to
the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one
Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The
bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned
down by a wooden seat which came down by a wooden seat which came off after being unscrewed. It took three
persons to safely remove her from this portion. She was in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar with
the area and he could not have seen the curve despite the care he took in driving the bus, because it was dark and
there was no sign on the road. He said that he saw the curve when he was already within 15 to 30 meters of it. He
allegedly slowed down to 30 kilometers per hour, but it was too late.

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding they
filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional
Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latter's fence. On the basis of
Escano's affidavit of desistance the case against petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result of
the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the
trial she described the operations she underwent and adduced evidence regarding the cost of her treatment and
therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Baay, Lingayen. As this hospital
was not adequately equipped, she was transferred to the Sto. Niño Hospital, also in the town of Ba-ay, where she
was given sedatives. An x-ray was taken and the damage to her spine was determined to be too severe to be treated
there. She was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati Medical
Center where she underwent an operation to correct the dislocation of her spine.

In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip and that
the driver was properly screened and tested before being admitted for employment. Indeed, all the evidence
presented have shown the negligent act of the defendants which ultimately resulted to the accident subject of this
case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the only
ones who adduced evidence in support of their claim for damages, the Court is therefore not in a position to award
damages to the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs. Engracio
Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said
defendants are ordered to pay jointly and severally to the plaintiffs the following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorney's fees;

6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it with
respect to the other plaintiffs on the ground that they failed to prove their respective claims. The Court of Appeals
modified the award of damages as follows:

1) P93,657.11 as actual damages;

2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

 4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorney's fees; and

6) Costs of suit.

The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise due care and
precaution in the operation of his vehicle considering the time and the place of the accident. The Court of Appeals
held that the Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise the following
issues:

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE INJURIES

SUFFERED BY PRIVATE RESPONDENTS.

III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE

POSITIVE, UP TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is
insisted that, on the assumption that petitioners are liable an award of P600,000.00 is unconscionable and highly
speculative. Amyline Antonio testified that she was a casual employee of a company called "Suaco," earning
P1,650.00 a month, and a dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners contend
that as casual employees do not have security of tenure, the award of P600,000.00, considering Amyline Antonio's
earnings, is without factual basis as there is no assurance that she would be regularly earning these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners are
liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as
both the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and carrier is
"contractual both in origin and nature," nevertheless "the act that breaks the contract may be also a tort." 2 In either
case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent.

The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to
exercise the diligence of a good father of the family in the selection and supervision of their employee is fully
supported by the evidence on record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining,
and as a consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to see that
there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per
hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. 3 By then it was too late for him
to avoid falling off the road. Given the conditions of the road and considering that the trip was Cabil's first one
outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony 4 that the vehicles
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour,
Cabil was running at a very high speed.

Considering the foregoing — the fact that it was raining and the road was slippery, that it was dark, that he drove his
bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that he
was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by
private respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers,
the Fabres, were themselves negligent in the selection and supervisions of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional
driver's license. The employer should also examine the applicant for his qualifications, experience and record of
service. 5 Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the
guidance of employees and issuance of proper instructions as well as actual implementation and monitoring of
consistent compliance with the rules.6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that
Cabil had been driving for school children only, from their homes to the St. Scholastica's College in Metro
Manila. 7They had hired him only after a two-week apprenticeship. They had hired him only after a two-week
apprenticeship. They had tested him for certain matters, such as whether he could remember the names of the
children he would be taking to school, which were irrelevant to his qualification to drive on a long distance travel,
especially considering that the trip to La Union was his first. The existence of hiring procedures and supervisory
policies cannot be casually invoked to overturn the presumption of negligence on the part of an employer. 8

Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the congregation's
delayed meeting) could have a averted the mishap and (2) under the contract, the WWCF was directly responsible
for the conduct of the trip. Neither of these contentions hold water. The hour of departure had not been fixed. Even
if it had been, the delay did not bear directly on the cause of the accident. With respect to the second contention, it
was held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to be
conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of negligence of
the latter or prevented from recovering for injuries suffered from a collision between the automobile and a train,
caused by the negligence or the automobile driver. 9

As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be
engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to
them. As this Court has held: 10

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

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

As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof that
they exercise the diligence of a good father of the family in the selection and supervision of their
employee. As Art. 1759 of the Code 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.
The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings them guilty of breach of
contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of Appeals
erred in increasing the amount of compensatory damages because private respondents did not question this award as
inadequate. 11 To the contrary, the award of P500,000.00 for compensatory damages which the Regional Trial Court
made is reasonable considering the contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able to work again has not been
foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ her again.

With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not sufficiently
indicate the factual and legal basis for them, we find that they are nevertheless supported by evidence in the records
of this case. Viewed as an action for quasi delict, this case falls squarely within the purview of Art. 2219(2)
providing for the payment of moral damages in cases of quasi delict. On the theory that petitioners are liable for
breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since
Cabil's gross negligence amounted to bad faith.12 Amyline Antonio's testimony, as well as the testimonies of her
father and copassengers, fully establish the physical suffering and mental anguish she endured as a result of the
injuries caused by petitioners' negligence.

The award of exemplary damages and attorney's fees was also properly made. However, for the same reason that it
was error for the appellate court to increase the award of compensatory damages, we hold that it was also error for it
to increase the award of moral damages and reduce the award of attorney's fees, inasmuch as private respondents, in
whose favor the awards were made, have not appealed. 13

As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that
of breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners and
driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may be.
In Dangwa Trans. Co. Inc. v. Court of Appeals, 14 on facts similar to those in this case, this Court held the bus
company and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again,
in Bachelor Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a fellow passenger
ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered injuries, was held also
jointly and severally liable with the bus company to the injured passengers.

The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff
was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an
accident. In Anuran v. Buño, 16 Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, 17 and Metro
Manila Transit Corporation v. Court of Appeals, 18 the bus company, its driver, the operator of the other vehicle and
the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters' heirs. The basis
of this allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:

Nor should it make any difference that the liability of petitioner [bus owner] springs from contract
while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as
1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a
passenger due to the negligence of the driver of the bus on which he was riding and of the driver
of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally
liable for damages. Some members of the Court, though, are of the view that under the
circumstances they are liable on quasi-delict. 20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the jeepney driver
from liability to the injured passengers and their families while holding the owners of the jeepney jointly and
severally liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa
contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and Carreon (the
jeepney owners) were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally
liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with carrier in case of breach
of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between
the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his
driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). 22

As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out their claim against the
carrier and the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was
permitted for them to allege alternative causes of action and join as many parties as may be liable on such causes of
action 23 so long as private respondent and her coplaintiffs do not recover twice for the same injury. What is clear
from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus, justifying the
holding that the carrier and the driver were jointly and severally liable because their separate and distinct acts
concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to award of
damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the
following amounts:

1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorney's fees; and

6) costs of suit.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-21438 September 28, 1966

AIR FRANCE, petitioner,

vs.
RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.
Lichauco, Picazo and Agcaoili for petitioner.
Bengzon Villegas and Zarraga for respondent R. Carrascoso.

SANCHEZ, J.:

The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso P25,000.00 by way
of moral damages; P10,000.00 as exemplary damages; P393.20 representing the difference in fare between first
class and tourist class for the portion of the trip Bangkok-Rome, these various amounts with interest at the legal rate,
from the date of the filing of the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of suit.

On appeal,2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from P393.20 to
P383.10, and voted to affirm the appealed decision "in all other respects", with costs against petitioner.

The case is now before us for review on certiorari.

The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:

Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on
March 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines, Inc.,
issued to plaintiff a "first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok,
plaintiff travelled in "first class", but at Bangkok, the Manager of the defendant airline forced plaintiff to
vacate the "first class" seat that he was occupying because, in the words of the witness Ernesto G. Cuento,
there was a "white man", who, the Manager alleged, had a "better right" to the seat. When asked to vacate
his "first class" seat, the plaintiff, as was to be expected, refused, and told defendant's Manager that his seat
would be taken over his dead body; a commotion ensued, and, according to said Ernesto G. Cuento, "many
of the Filipino passengers got nervous in the tourist class; when they found out that Mr. Carrascoso was
having a hot discussion with the white man [manager], they came all across to Mr. Carrascoso and pacified
Mr. Carrascoso to give his seat to the white man" (Transcript, p. 12, Hearing of May 26, 1959); and
plaintiff reluctantly gave his "first class" seat in the plane.3

1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent Court of Appeals.
Petitioner charges that respondent court failed to make complete findings of fact on all the issues properly laid
before it. We are asked to consider facts favorable to petitioner, and then, to overturn the appellate court's decision.

Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record without
expressing therein clearly and distinctly the facts and the law on which it is based". 5 This is echoed in the statutory
demand that a judgment determining the merits of the case shall state "clearly and distinctly the facts and the law on
which it is based"; 6 and that "Every decision of the Court of Appeals shall contain complete findings of fact on all
issues properly raised before it". 7

A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law, however, solely
insists that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn. 9 A court of
justice is not hidebound to write in its decision every bit and piece of evidence 10 presented by one party and the
other upon the issues raised. Neither is it to be burdened with the obligation "to specify in the sentence the
facts" which a party "considered as proved". 11 This is but a part of the mental process from which the Court draws
the essential ultimate facts. A decision is not to be so clogged with details such that prolixity, if not confusion, may
result. So long as the decision of the Court of Appeals contains the necessary facts to warrant its conclusions, it is no
error for said court to withhold therefrom "any specific finding of facts with respect to the evidence for the defense".
Because as this Court well observed, "There is no law that so requires". 12 Indeed, "the mere failure to specify (in the
decision) the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the
same contrary to the requirements of the provisions of law and the Constitution". It is in this setting that
in Manigque, it was held that the mere fact that the findings "were based entirely on the evidence for the prosecution
without taking into consideration or even mentioning the appellant's side in the controversy as shown by his own
testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the testimony of each witness
for, or each item of evidence presented by, the defeated party, it does not mean that the court has overlooked such
testimony or such item of evidence. 14 At any rate, the legal presumptions are that official duty has been regularly
performed, and that all the matters within an issue in a case were laid before the court and passed upon by it. 15

Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written statement of the
ultimate facts as found by the court ... and essential to support the decision and judgment rendered thereon". 16They
consist of the court's "conclusions" with respect to the determinative facts in issue". 17 A question of law, upon the
other hand, has been declared as "one which does not call for an examination of the probative value of the evidence
presented by the parties." 18

2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court of
Appeals. 19 That judgment is conclusive as to the facts. It is not appropriately the business of this Court to alter the
facts or to review the questions of fact. 20

With these guideposts, we now face the problem of whether the findings of fact of the Court of Appeals support its
judgment.

3. Was Carrascoso entitled to the first class seat he claims?

It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first class ticket. But
petitioner asserts that said ticket did not represent the true and complete intent and agreement of the parties; that said
respondent knew that he did not have confirmed reservations for first class on any specific flight, although he had
tourist class protection; that, accordingly, the issuance of a first class ticket was no guarantee that he would have a
first class ride, but that such would depend upon the availability of first class seats.

These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of Appeals
under its third assignment of error, which reads: "The trial court erred in finding that plaintiff had confirmed
reservations for, and a right to, first class seats on the "definite" segments of his journey, particularly that from
Saigon to Beirut". 21

And, the Court of Appeals disposed of this contention thus:

Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that
the passenger to whom the same had been issued, would be accommodated in the first-class compartment,
for as in the case of plaintiff he had yet to make arrangements upon arrival at every station for the
necessary first-class reservation. We are not impressed by such a reasoning. We cannot understand how a
reputable firm like defendant airplane company could have the indiscretion to give out tickets it never
meant to honor at all. It received the corresponding amount in payment of first-class tickets and yet it
allowed the passenger to be at the mercy of its employees. It is more in keeping with the ordinary course of
business that the company should know whether or riot the tickets it issues are to be honored or not.22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention, thus:

On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question. Apart from his
testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and defendant's own witness,
Rafael Altonaga, confirmed plaintiff's testimony and testified as follows:

Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?

A. That the space is confirmed.

 Q. Confirmed for first class?

A. Yes, "first class". (Transcript, p. 169)

xxx xxx xxx

Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that although
plaintiff paid for, and was issued a "first class" airplane ticket, the ticket was subject to confirmation in Hongkong.
The court cannot give credit to the testimony of said witnesses. Oral evidence cannot prevail over written evidence,
and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and "C-1" belie the testimony of said witnesses, and clearly show
that the plaintiff was issued, and paid for, a first class ticket without any reservation whatever.

Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the reservation for a
"first class" accommodation for the plaintiff was confirmed. The court cannot believe that after such confirmation
defendant had a verbal understanding with plaintiff that the "first class" ticket issued to him by defendant would be
subject to confirmation in Hongkong. 23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on
Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the Court of Appeals in all other
respects. We hold the view that such a judgment of affirmance has merged the judgment of the lower
court. 24Implicit in that affirmance is a determination by the Court of Appeals that the proceeding in the Court of
First Instance was free from prejudicial error and "all questions raised by the assignments of error and all questions
that might have been raised are to be regarded as finally adjudicated against the appellant". So also, the judgment
affirmed "must be regarded as free from all error". 25 We reached this policy construction because nothing in the
decision of the Court of Appeals on this point would suggest that its findings of fact are in any way at war with those
of the trial court. Nor was said affirmance by the Court of Appeals upon a ground or grounds different from those
which were made the basis of the conclusions of the trial court. 26

If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding the fact that
seat availability in specific flights is therein confirmed, then an air passenger is placed in the hollow of the hands of
an airline. What security then can a passenger have? It will always be an easy matter for an airline aided by its
employees, to strike out the very stipulations in the ticket, and say that there was a verbal agreement to the contrary.
What if the passenger had a schedule to fulfill? We have long learned that, as a rule, a written document speaks a
uniform language; that spoken word could be notoriously unreliable. If only to achieve stability in the relations
between passenger and air carrier, adherence to the ticket so issued is desirable. Such is the case here. The lower
courts refused to believe the oral evidence intended to defeat the covenants in the ticket.

The foregoing are the considerations which point to the conclusion that there are facts upon which the Court of
Appeals predicated the finding that respondent Carrascoso had a first class ticket and was entitled to a first class seat
at Bangkok, which is a stopover in the Saigon to Beirut leg of the flight. 27 We perceive no "welter of distortions by
the Court of Appeals of petitioner's statement of its position", as charged by petitioner. 28 Nor do we subscribe to
petitioner's accusation that respondent Carrascoso "surreptitiously took a first class seat to provoke an issue". 29And
this because, as petitioner states, Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat
and because from Saigon I was told again to see the Manager". 30 Why, then, was he allowed to take a first class seat
in the plane at Bangkok, if he had no seat? Or, if another had a better right to the seat?

4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that Carrascoso's
action is planted upon breach of contract; that to authorize an award for moral damages there must be an averment
of fraud or bad faith;31 and that the decision of the Court of Appeals fails to make a finding of bad faith. The pivotal
allegations in the complaint bearing on this issue are:

3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable
consideration, the latter acting as general agents for and in behalf of the defendant, under which said
contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff, First Class passage on defendant's
plane during the entire duration of plaintiff's tour of Europe with Hongkong as starting point up to and until
plaintiff's return trip to Manila, ... .
 4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok,
defendant furnished to the plaintiff First Class accommodation but only after protestations, arguments
and/or insistence were made by the plaintiff with defendant's employees.

5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff
only Tourist Class accommodations from Bangkok to Teheran and/or Casablanca, ... the plaintiff has
been compelled by defendant's employees to leave the First Class accommodation berths at Bangkok after
he was already seated.

6. That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought
by defendant's breach of contract was forced to take a Pan American World Airways plane on his return
trip from Madrid to Manila.32

xxx xxx xxx

2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid, plaintiff suffered
inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental anguish, serious anxiety,
wounded feelings, social humiliation, and the like injury, resulting in moral damages in the amount of P30,000.00. 33

xxx xxx xxx

The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a first class
passage covering, amongst others, the Bangkok-Teheran leg; Second, That said contract was breached when
petitioner failed to furnish first class transportation at Bangkok; and Third, that there was bad faith when petitioner's
employee compelled Carrascoso to leave his first class accommodation berth "after he was already, seated" and to
take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassments and humiliations,
thereby causing him mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral
damages. It is true that there is no specific mention of the term bad faith in the complaint. But, the inference of bad
faith is there, it may be drawn from the facts and circumstances set forth therein. 34 The contract was averred to
establish the relation between the parties. But the stress of the action is put on wrongful expulsion.

Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed petitioner on guard
on what Carrascoso intended to prove: That while sitting in the plane in Bangkok, Carrascoso was ousted by
petitioner's manager who gave his seat to a white man; 35 and (b) evidence of bad faith in the fulfillment of the
contract was presented without objection on the part of the petitioner. It is, therefore, unnecessary to inquire as to
whether or not there is sufficient averment in the complaint to justify an award for moral damages. Deficiency in the
complaint, if any, was cured by the evidence. An amendment thereof to conform to the evidence is not even
required. 36 On the question of bad faith, the Court of Appeals declared:

That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the
defendant Air France while at Bangkok, and was transferred to the tourist class not only without his
consent but against his will, has been sufficiently established by plaintiff in his testimony before the court,
corroborated by the corresponding entry made by the purser of the plane in his notebook which notation
reads as follows:

"First-class passenger was forced to go to the tourist class against his will, and that the captain
refused to intervene",

and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain of the
plane who was asked by the manager of defendant company at Bangkok to intervene even refused to do so.
It is noteworthy that no one on behalf of defendant ever contradicted or denied this evidence for the
plaintiff. It could have been easy for defendant to present its manager at Bangkok to testify at the trial of
the case, or yet to secure his disposition; but defendant did neither. 37

The Court of appeals further stated —

Neither is there evidence as to whether or not a prior reservation was made by the white man. Hence, if the
employees of the defendant at Bangkok sold a first-class ticket to him when all the seats had already been
taken, surely the plaintiff should not have been picked out as the one to suffer the consequences and to be
subjected to the humiliation and indignity of being ejected from his seat in the presence of others. Instead
of explaining to the white man the improvidence committed by defendant's employees, the manager
adopted the more drastic step of ousting the plaintiff who was then safely ensconsced in his rightful seat.
We are strengthened in our belief that this probably was what happened there, by the testimony of
defendant's witness Rafael Altonaga who, when asked to explain the meaning of the letters "O.K."
appearing on the tickets of plaintiff, said "that the space is confirmed for first class. Likewise, Zenaida
Faustino, another witness for defendant, who was the chief of the Reservation Office of defendant, testified
as follows:

"Q How does the person in the ticket-issuing office know what reservation the passenger has
arranged with you?

A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19, 1959)

In this connection, we quote with approval what the trial Judge has said on this point:

Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better right" to
the seat occupied by Mr. Carrascoso? The record is silent. The defendant airline did not prove
"any better", nay, any right on the part of the "white man" to the "First class" seat that the plaintiff
was occupying and for which he paid and was issued a corresponding "first class" ticket.

If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant
could have easily proven it by having taken the testimony of the said Manager by deposition, but
defendant did not do so; the presumption is that evidence willfully suppressed would be adverse if
produced [Sec. 69, par (e), Rules of Court]; and, under the circumstances, the Court is constrained
to find, as it does find, that the Manager of the defendant airline in Bangkok not merely asked but
threatened the plaintiff to throw him out of the plane if he did not give up his "first class" seat
because the said Manager wanted to accommodate, using the words of the witness Ernesto G.
Cuento, the "white man".38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the
term "bad faith". But can it be doubted that the recital of facts therein points to bad faith? The manager not
only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will;
he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class
compartment - just to give way to another passenger whose right thereto has not been established.
Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different from what is
understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive
design or with some motive of self-interest or will or for ulterior purpose." 39

And if the foregoing were not yet sufficient, there is the express finding of bad faith in the judgment of the
Court of First Instance, thus:

The evidence shows that the defendant violated its contract of transportation with plaintiff in bad
faith, with the aggravating circumstances that defendant's Manager in Bangkok went to the extent
of threatening the plaintiff in the presence of many passengers to have him thrown out of the
airplane to give the "first class" seat that he was occupying to, again using the words of the
witness Ernesto G. Cuento, a "white man" whom he (defendant's Manager) wished to
accommodate, and the defendant has not proven that this "white man" had any "better right" to
occupy the "first class" seat that the plaintiff was occupying, duly paid for, and for which the
corresponding "first class" ticket was issued by the defendant to him.40
5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is well settled in
law. 41 For the willful malevolent act of petitioner's manager, petitioner, his employer, must answer. Article 21 of the
Civil Code says:

ART. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage.

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the provisions of Article
2219 (10), Civil Code, moral damages are recoverable. 42

6. A contract to transport passengers is quite different in kind and degree from any other contractual relation. 43 And
this, because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling
public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore,
generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could
give ground for an action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any rule or discourteous conduct on
the part of employees towards a passenger gives the latter an action for damages against the carrier. 44

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of contract and a tort,
giving a right of action for its agent in the presence of third persons to falsely notify her that the check was worthless
and demand payment under threat of ejection, though the language used was not insulting and she was not
ejected." 46 And this, because, although the relation of passenger and carrier is "contractual both in origin and
nature" nevertheless "the act that breaks the contract may be also a tort". 47 And in another case, "Where a passenger
on a railroad train, when the conductor came to collect his fare tendered him the cash fare to a point where the train
was scheduled not to stop, and told him that as soon as the train reached such point he would pay the cash fare from
that point to destination, there was nothing in the conduct of the passenger which justified the conductor in using
insulting language to him, as by calling him a lunatic," 48 and the Supreme Court of South Carolina there held the
carrier liable for the mental suffering of said passenger.1awphîl.nèt

Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action as we have
said, is placed upon his wrongful expulsion. This is a violation of public duty by the petitioner air carrier — a case
of quasi-delict. Damages are proper.

7. Petitioner draws our attention to respondent Carrascoso's testimony, thus —

Q You mentioned about an attendant. Who is that attendant and purser?

A When we left already — that was already in the trip — I could not help it. So one of the flight attendants
approached me and requested from me my ticket and I said, What for? and she said, "We will note that you
transferred to the tourist class". I said, "Nothing of that kind. That is tantamount to accepting my transfer."
And I also said, "You are not going to note anything there because I am protesting to this transfer".

Q Was she able to note it?

A No, because I did not give my ticket.

Q About that purser?

A Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I
stood up and I went to the pantry that was next to me and the purser was there. He told me, "I have
recorded the incident in my notebook." He read it and translated it to me — because it was recorded in
 French — "First class passenger was forced to go to the tourist class against his will, and that the captain
refused to intervene."

Mr. VALTE —

I move to strike out the last part of the testimony of the witness because the best evidence would be the
notes. Your Honor.

COURT —

I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook reading
"First class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene"
is predicated upon evidence [Carrascoso's testimony above] which is incompetent. We do not think so. The subject
of inquiry is not the entry, but the ouster incident. Testimony on the entry does not come within the proscription of
the best evidence rule. Such testimony is admissible. 49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the startling
occurrence was still fresh and continued to be felt. The excitement had not as yet died down. Statements then, in this
environment, are admissible as part of the res gestae. 50 For, they grow "out of the nervous excitement and mental
and physical condition of the declarant". 51 The utterance of the purser regarding his entry in the notebook was
spontaneous, and related to the circumstances of the ouster incident. Its trustworthiness has been guaranteed. 52 It
thus escapes the operation of the hearsay rule. It forms part of the res gestae.

At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have been an
easy matter for petitioner to have contradicted Carrascoso's testimony. If it were really true that no such entry was
made, the deposition of the purser could have cleared up the matter.

We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.

8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant exemplary damages
— in contracts and quasi- contracts. The only condition is that defendant should have "acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner." 53 The manner of ejectment of respondent Carrascoso from his first
class seat fits into this legal precept. And this, in addition to moral damages.54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a similar judgment for
attorneys' fees. The least that can be said is that the courts below felt that it is but just and equitable that attorneys'
fees be given. 55 We do not intend to break faith with the tradition that discretion well exercised — as it was here —
should not be disturbed.

10. Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals, thus:
P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and P3,000.00 as attorneys' fees. The
task of fixing these amounts is primarily with the trial court. 56 The Court of Appeals did not interfere with the same.
The dictates of good sense suggest that we give our imprimatur thereto. Because, the facts and circumstances point
to the reasonableness thereof.57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We accordingly
vote to affirm the same. Costs against petitioner. So ordered.
 SECOND DIVISION

G.R. No. 138060 September 1, 2004

WILLIAM TIU, doing business under the name and style of "D’ Rough Riders," and VIRGILIO TE LAS
PIÑASpetitioners,
vs.
PEDRO A. ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO and PHILIPPINE PHOENIX
SURETY AND INSURANCE, INC., respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision1 of the Court of
Appeals in CA-G.R. CV No. 54354 affirming with modification the Decision2 of the Regional Trial Court, 7th
Judicial Region, Cebu City, Branch 20, in Civil Case No. CEB-5963 for breach of contract of carriage, damages and
attorney’s fees, and the Resolution dated February 26, 1999 denying the motion for reconsideration thereof.

The following facts are undisputed:

 At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor Hollow Blocks and General
Merchandise" bearing plate number GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu
City. Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a bridge, one
of its rear tires exploded. The driver, Sergio Pedrano, then parked along the right side of the national
highway and removed the damaged tire to have it vulcanized at a nearby shop, about 700 meters
away.3 Pedrano left his helper, Jose Mitante, Jr. to keep watch over the stalled vehicle, and instructed the
latter to place a spare tire six fathoms away4 behind the stalled truck to serve as a warning for oncoming
vehicles. The truck’s tail lights were also left on. It was about 12:00 a.m., March 16, 1987.

At about 4:45 a.m., D’ Rough Riders passenger bus with plate number PBP-724 driven by Virgilio Te Laspiñas was
cruising along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger bus was also
bound for Cebu City, and had come from Maya, Daanbantayan, Cebu. Among its passengers were the Spouses
Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side of the bus, about three (3) or
four (4) places from the front seat.

As the bus was approaching the bridge, Laspiñas saw the stalled truck, which was then about 25 meters away.5 He
applied the breaks and tried to swerve to the left to avoid hitting the truck. But it was too late; the bus rammed into
the truck’s left rear. The impact damaged the right side of the bus and left several passengers injured. Pedro
Arriesgado lost consciousness and suffered a fracture in his right colles.6 His wife, Felisa, was brought to the Danao
City Hospital. She was later transferred to the Southern Island Medical Center where she died shortly thereafter.7

Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage, damages and attorney’s
fees before the Regional Trial Court of Cebu City, Branch 20, against the petitioners, D’ Rough Riders bus operator
William Tiu and his driver, Virgilio Te Laspiñas on May 27, 1987. The respondent alleged that the passenger bus in
question was cruising at a fast and high speed along the national road, and that petitioner Laspiñas did not take
precautionary measures to avoid the accident.8 Thus:

6. That the accident resulted to the death of the plaintiff’s wife, Felisa Pepito Arriesgado, as evidenced by a
Certificate of Death, a xerox copy of which is hereto attached as integral part hereof and marked as
ANNEX – "A", and physical injuries to several of its passengers, including plaintiff himself who suffered a
"COLLES FRACTURE RIGHT," per Medical Certificate, a xerox copy of which is hereto attached as
integral part hereof and marked as ANNEX – "B" hereof.

7. That due to the reckless and imprudent driving by defendant Virgilio Te Laspiñas of the said Rough
Riders passenger bus, plaintiff and his wife, Felisa Pepito Arriesgado, failed to safely reach their
destination which was Cebu City, the proximate cause of which was defendant-driver’s failure to observe
utmost diligence required of a very cautious person under all circumstances.

8. That defendant William Tiu, being the owner and operator of the said Rough Riders passenger bus which
figured in the said accident, wherein plaintiff and his wife were riding at the time of the accident, is
therefore directly liable for the breach of contract of carriage for his failure to transport plaintiff and his
wife safely to their place of destination which was Cebu City, and which failure in his obligation to
transport safely his passengers was due to and in consequence of his failure to exercise the diligence of a
good father of the family in the selection and supervision of his employees, particularly defendant-driver
Virgilio Te Laspiñas.9

The respondent prayed that judgment be rendered in his favor and that the petitioners be condemned to pay the
following damages:

1). To pay to plaintiff, jointly and severally, the amount of ₱30,000.00 for the death and untimely demise of
plaintiff’s wife, Felisa Pepito Arriesgado;

2). To pay to plaintiff, jointly and severally, the amount of ₱38,441.50, representing actual expenses
incurred by the plaintiff in connection with the death/burial of plaintiff’s wife;
 3). To pay to plaintiff, jointly and severally, the amount of ₱1,113.80, representing medical/hospitalization
expenses incurred by plaintiff for the injuries sustained by him;

4). To pay to plaintiff, jointly and severally, the amount of ₱50,000.00 for moral damages;

5). To pay to plaintiff, jointly and severally, the amount of ₱50,000.00 by way of exemplary damages;

6). To pay to plaintiff, jointly and severally, the amount of ₱20,000.00 for attorney’s fees;

7). To pay to plaintiff, jointly and severally, the amount of ₱5,000.00 for litigation expenses.

PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN LAW AND
EQUITY.10

The petitioners, for their part, filed a Third-Party Complaint11 on August 21, 1987 against the following: respondent
Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tiu’s insurer; respondent Benjamin Condor, the
registered owner of the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They alleged that
petitioner Laspiñas was negotiating the uphill climb along the national highway of Sitio Aggies, Poblacion,
Compostela, in a moderate and normal speed. It was further alleged that the truck was parked in a slanted manner,
its rear portion almost in the middle of the highway, and that no early warning device was displayed. Petitioner
Laspiñas promptly applied the brakes and swerved to the left to avoid hitting the truck head-on, but despite his
efforts to avoid damage to property and physical injuries on the passengers, the right side portion of the bus hit the
cargo truck’s left rear. The petitioners further alleged, thus:

5. That the cargo truck mentioned in the aforequoted paragraph is owned and registered in the name of the
third-party defendant Benjamin Condor and was left unattended by its driver Sergio Pedrano, one of the
third-party defendants, at the time of the incident;

6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with marked (sic) "Condor
Hollow Blocks & General Merchandise," with Plate No. GBP-675 which was recklessly and imprudently
parked along the national highway of Compostela, Cebu during the vehicular accident in question, and
third-party defendant Benjamin Condor, as the registered owner of the cargo truck who failed to exercise
due diligence in the selection and supervision of third-party defendant Sergio Pedrano, are jointly and
severally liable to the third-party plaintiffs for whatever liability that may be adjudged against said third-
party plaintiffs or are directly liable of (sic) the alleged death of plaintiff’s wife;

7. That in addition to all that are stated above and in the answer which are intended to show reckless
imprudence on the part of the third-party defendants, the third-party plaintiffs hereby declare that during
the vehicular accident in question, third-party defendant was clearly violating Section 34, par. (g) of the
Land Transportation and Traffic Code…

10. That the aforesaid passenger bus, owned and operated by third-party plaintiff William Tiu, is covered
by a common carrier liability insurance with Certificate of Cover No. 054940 issued by Philippine Phoenix
Surety and Insurance, Inc., Cebu City Branch, in favor of third-party plaintiff William Tiu which covers the
period from July 22, 1986 to July 22, 1987 and that the said insurance coverage was valid, binding and
subsisting during the time of the aforementioned incident (Annex "A" as part hereof);

11. That after the aforesaid alleged incident, third-party plaintiff notified third-party defendant Philippine
Phoenix Surety and Insurance, Inc., of the alleged incident hereto mentioned, but to no avail;

12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be adversely adjudged, they
stand to pay damages sought by the plaintiff and therefore could also look up to the Philippine Phoenix
Surety and Insurance, Inc., for contribution, indemnification and/or reimbursement of any liability or
 obligation that they might [be] adjudged per insurance coverage duly entered into by and between third-
party plaintiff William Tiu and third-party defendant Philippine Phoenix Surety and Insurance, Inc.;…12

The respondent PPSII, for its part, admitted that it had an existing contract with petitioner Tiu, but averred that it had
already attended to and settled the claims of those who were injured during the incident.13 It could not accede to the
claim of respondent Arriesgado, as such claim was way beyond the scheduled indemnity as contained in the contract
of insurance.14

After the parties presented their respective evidence, the trial court ruled in favor of respondent Arriesgado. The
dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff as against
defendant William Tiu ordering the latter to pay the plaintiff the following amounts:

1 - The sum of FIFTY THOUSAND PESOS (₱50,000.00) as moral damages;

2 - The sum of FIFTY THOUSAND PESOS (₱50,000.00) as exemplary damages;

3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE PESOS

(₱38,441.00) as actual damages;

4 - The sum of TWENTY THOUSAND PESOS (₱20,000.00) as attorney’s fees;

5 - The sum of FIVE THOUSAND PESOS (₱5,000.00) as costs of suit;

SO ORDERED.15

According to the trial court, there was no dispute that petitioner William Tiu was engaged in business as a common
carrier, in view of his admission that D’ Rough Rider passenger bus which figured in the accident was owned by
him; that he had been engaged in the transportation business for 25 years with a sole proprietorship; and that he
owned 34 buses. The trial court ruled that if petitioner Laspiñas had not been driving at a fast pace, he could have
easily swerved to the left to avoid hitting the truck, thus, averting the unfortunate incident. It then concluded that
petitioner Laspiñas was negligent.

The trial court also ruled that the absence of an early warning device near the place where the truck was parked was
not sufficient to impute negligence on the part of respondent Pedrano, since the tail lights of the truck were fully on,
and the vicinity was well lighted by street lamps.16 It also found that the testimony of petitioner Tiu, that he based
the selection of his driver Laspiñas on efficiency and in-service training, and that the latter had been so far an
efficient and good driver for the past six years of his employment, was insufficient to prove that he observed the
diligence of a good father of a family in the selection and supervision of his employees.

After the petitioner’s motion for reconsideration of the said decision was denied, the petitioners elevated the case to
the Court of Appeals on the following issues:

I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS AND

IMPRUDENT WHEN HE PARKED THE CARGO TRUCK IN AN OBLIQUE MANNER;

II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY LIABLE
DIRECTLY TO PLAINTIFF-APPELLEE OR TO DEFENDANTS-APPELLANTS FOR WHATEVER
LIABILITY THAT MAY BE ADJUDGED TO THE SAID DEFENDANTS-APPELLANTS;

III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIÑAS WAS GUILTY OF GROSS

NEGLIGENCE;
 IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE DUE
DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF
HIS DRIVERS;

V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT WILLIAM TIU

IS LIABLE TO PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL AND FACTUAL BASIS IN
AWARDING EXCESSIVE MORAL DAMAGES, EX[E]MPLARY DAMAGES, ATTORNEY’S FEES
AND LITIGATION EXPENSES TO PLAINTIFF-APPELLEE;

VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND INSURANCE,

INC. IS LIABLE TO DEFENDANT- APPELLANT WILLIAM TIU.17

The appellate court rendered judgment affirming the trial court’s decision with the modification that the awards for
moral and exemplary damages were reduced to ₱25,000. The dispositive portion reads:

WHEREFORE, the appealed Decision dated November 6, 1995 is hereby MODIFIED such that the awards
for moral and exemplary damages are each reduced to ₱25,000.00 or a total of ₱50,000.00 for both. The
judgment is AFFIRMED in all other respects.

SO ORDERED.18

According to the appellate court, the action of respondent Arriesgado was based not on quasi-delict but on breach of
contract of carriage. As a common carrier, it was incumbent upon petitioner Tiu to prove that extraordinary
diligence was observed in ensuring the safety of passengers during transportation. Since the latter failed to do so, he
should be held liable for respondent Arriesgado’s claim. The CA also ruled that no evidence was presented against
the respondent PPSII, and as such, it could not be held liable for respondent Arriesgado’s claim, nor for
contribution, indemnification and/or reimbursement in case the petitioners were adjudged liable.

The petitioners now come to this Court and ascribe the following errors committed by the appellate court:

I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING RESPONDENTS

BENJAMIN CONDOR AND SERGIO PEDRANO GUILTY OF NEGLIGENCE AND HENCE, LIABLE
TO RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONERS FOR WHATEVER LIABILITY
THAT MAY BE ADJUDGED AGAINST THEM.

II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF

NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A. ARRIESGADO.

III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER WILLIAM TIU
LIABLE FOR EXEMPLARY DAMAGES, ATTORNEY’S FEES AND LITIGATION EXPENSES.

IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT

PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO OR TO PETITIONER WILLIAM TIU.19

According to the petitioners, the appellate court erred in failing to appreciate the absence of an early warning device
and/or built-in reflectors at the front and back of the cargo truck, in clear violation of Section 34, par. (g) of the Land
Transportation and Traffic Code. They aver that such violation is only a proof of respondent Pedrano’s negligence,
as provided under Article 2185 of the New Civil Code. They also question the appellate court’s failure to take into
account that the truck was parked in an oblique manner, its rear portion almost at the center of the road. As such, the
proximate cause of the incident was the gross recklessness and imprudence of respondent Pedrano, creating the
presumption of negligence on the part of respondent Condor in supervising his employees, which presumption was
not rebutted. The petitioners then contend that respondents Condor and Pedrano should be held jointly and severally
liable to respondent Arriesgado for the payment of the latter’s claim.
The petitioners, likewise, aver that expert evidence should have been presented to prove that petitioner Laspiñas was
driving at a very fast speed, and that the CA could not reach such conclusion by merely considering the damages on
the cargo truck. It was also pointed out that petitioner Tiu presented evidence that he had exercised the diligence of a
good father of a family in the selection and supervision of his drivers.

The petitioners further allege that there is no legal and factual basis to require petitioner Tiu to pay exemplary
damages as no evidence was presented to show that the latter acted in a fraudulent, reckless and oppressive manner,
or that he had an active participation in the negligent act of petitioner Laspiñas.

Finally, the petitioners contend that respondent PPSII admitted in its answer that while it had attended to and settled
the claims of the other injured passengers, respondent Arriesgado’s claim remained unsettled as it was beyond the
scheduled indemnity under the insurance contract. The petitioners argue that said respondent PPSII should have
settled the said claim in accordance with the scheduled indemnity instead of just denying the same.

On the other hand, respondent Arriesgado argues that two of the issues raised by the petitioners involved questions
of fact, not reviewable by the Supreme Court: the finding of negligence on the part of the petitioners and their
liability to him; and the award of exemplary damages, attorney’s fees and litigation expenses in his favor. Invoking
the principle of equity and justice, respondent Arriesgado pointed out that if there was an error to be reviewed in the
CA decision, it should be geared towards the restoration of the moral and exemplary damages to ₱50,000 each, or a
total of ₱100,000 which was reduced by the Court of Appeals to ₱25,000 each, or a total of only ₱50,000.

Respondent Arriesgado also alleged that respondents Condor and Pedrano, and respondent Phoenix Surety, are
parties with whom he had no contract of carriage, and had no cause of action against. It was pointed out that only the
petitioners needed to be sued, as driver and operator of the ill-fated bus, on account of their failure to bring the
Arriesgado Spouses to their place of destination as agreed upon in the contract of carriage, using the utmost
diligence of very cautious persons with due regard for all circumstances.

Respondents Condor and Pedrano point out that, as correctly ruled by the Court of Appeals, the proximate cause of
the unfortunate incident was the fast speed at which petitioner Laspiñas was driving the bus owned by petitioner Tiu.
According to the respondents, the allegation that the truck was not equipped with an early warning device could not
in any way have prevented the incident from happening. It was also pointed out that respondent Condor had always
exercised the due diligence required in the selection and supervision of his employees, and that he was not a party to
the contract of carriage between the petitioners and respondent Arriesgado.

Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner Tiu, it settled all the claims of
those injured in accordance with the insurance contract. It further avers that it did not deny respondent Arriesgado’s
claim, and emphasizes that its liability should be within the scheduled limits of indemnity under the said contract.
The respondent concludes that while it is true that insurance contracts are contracts of indemnity, the measure of the
insurer’s liability is determined by the insured’s compliance with the terms thereof.

The Court’s Ruling

At the outset, it must be stressed that this Court is not a trier of facts.20 Factual findings of the Court of Appeals are
final and may not be reviewed on appeal by this Court, except when the lower court and the CA arrived at diverse
factual findings.21 The petitioners in this case assail the finding of both the trial and the appellate courts that
petitioner Laspiñas was driving at a very fast speed before the bus owned by petitioner Tiu collided with respondent
Condor’s stalled truck. This is clearly one of fact, not reviewable by the Court in a petition for review under Rule
45.22

On this ground alone, the petition is destined to fail.

However, considering that novel questions of law are likewise involved, the Court resolves to examine and rule on
the merits of the case.
Petitioner Laspiñas
Was negligent in driving
The Ill-fated bus

In his testimony before the trial court, petitioner Laspiñas claimed that he was traversing the two-lane road at
Compostela, Cebu at a speed of only forty (40) to fifty (50) kilometers per hour before the incident occurred.23 He
also admitted that he saw the truck which was parked in an "oblique position" at about 25 meters before
impact,24and tried to avoid hitting it by swerving to the left. However, even in the absence of expert evidence, the
damage sustained by the truck25 itself supports the finding of both the trial court and the appellate court, that the D’
Rough Rider bus driven by petitioner Laspiñas was traveling at a fast pace. Since he saw the stalled truck at a
distance of 25 meters, petitioner Laspiñas had more than enough time to swerve to his left to avoid hitting it; that is,
if the speed of the bus was only 40 to 50 kilometers per hour as he claimed. As found by the Court of Appeals, it is
easier to believe that petitioner Laspiñas was driving at a very fast speed, since at 4:45 a.m., the hour of the accident,
there were no oncoming vehicles at the opposite direction. Petitioner Laspiñas could have swerved to the left lane
with proper clearance, and, thus, could have avoided the truck.26 Instinct, at the very least, would have prompted
him to apply the breaks to avert the impending disaster which he must have foreseen when he caught sight of the
stalled truck. As we had occasion to reiterate:

A man must use common sense, and exercise due reflection in all his acts; it is his duty to be cautious,
careful and prudent, if not from instinct, then through fear of recurring punishment. He is responsible for
such results as anyone might foresee and for acts which no one would have performed except through
culpable abandon. Otherwise, his own person, rights and property, and those of his fellow beings, would
ever be exposed to all manner of danger and injury.27

We agree with the following findings of the trial court, which were affirmed by the CA on appeal:

A close study and evaluation of the testimonies and the documentary proofs submitted by the parties which
have direct bearing on the issue of negligence, this Court as shown by preponderance of evidence that
defendant Virgilio Te Laspiñas failed to observe extraordinary diligence as a driver of the common carrier
in this case. It is quite hard to accept his version of the incident that he did not see at a reasonable distance
ahead the cargo truck that was parked when the Rough Rider [Bus] just came out of the bridge which is on
an (sic) [more] elevated position than the place where the cargo truck was parked. With its headlights fully
on, defendant driver of the Rough Rider was in a vantage position to see the cargo truck ahead which was
parked and he could just easily have avoided hitting and bumping the same by maneuvering to the left
without hitting the said cargo truck. Besides, it is (sic) shown that there was still much room or space for
the Rough Rider to pass at the left lane of the said national highway even if the cargo truck had occupied
the entire right lane thereof. It is not true that if the Rough Rider would proceed to pass through the left
lane it would fall into a canal considering that there was much space for it to pass without hitting and
bumping the cargo truck at the left lane of said national highway. The records, further, showed that there
was no incoming vehicle at the opposite lane of the national highway which would have prevented the
Rough Rider from not swerving to its left in order to avoid hitting and bumping the parked cargo truck. But
the evidence showed that the Rough Rider instead of swerving to the still spacious left lane of the national
highway plowed directly into the parked cargo truck hitting the latter at its rear portion; and thus, the (sic)
causing damages not only to herein plaintiff but to the cargo truck as well.28

Indeed, petitioner Laspiñas’ negligence in driving the bus is apparent in the records. By his own admission, he had
just passed a bridge and was traversing the highway of Compostela, Cebu at a speed of 40 to 50 kilometers per hour
before the collision occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per hour.29And,
as correctly pointed out by the trial court, petitioner Laspiñas also violated Section 35 of the Land Transportation
and Traffic Code, Republic Act No. 4136, as amended:1avvphil.net

Sec. 35. Restriction as to speed. – (a) Any person driving a motor vehicle on a highway shall drive the
same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard
for the traffic, the width of the highway, and or any other condition then and there existing; and no person
shall drive any motor vehicle upon a highway at such speed as to endanger the life, limb and property of
 any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured
clear distance ahead.30

Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at the time of the mishap,
he was violating any traffic regulation.31

Petitioner Tiu failed to

Overcome the presumption
Of negligence against him as
One engaged in the business
Of common carriage

The rules which common carriers should observe as to the safety of their passengers are set forth in the Civil Code,
Articles 1733,32 175533 and 1756.34 In this case, respondent Arriesgado and his deceased wife contracted with
petitioner Tiu, as owner and operator of D’ Rough Riders bus service, for transportation from Maya, Daanbantayan,
Cebu, to Cebu City for the price of ₱18.00.35 It is undisputed that the respondent and his wife were not safely
transported to the destination agreed upon. In actions for breach of contract, only the existence of such contract, and
the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination are
the matters that need to be proved.36 This is because under the said contract of carriage, the petitioners assumed the
express obligation to transport the respondent and his wife to their destination safely and to observe extraordinary
diligence with due regard for all circumstances.37 Any injury suffered by the passengers in the course thereof is
immediately attributable to the negligence of the carrier.38 Upon the happening of the accident, the presumption of
negligence at once arises, and it becomes the duty of a common carrier to prove that he observed extraordinary
diligence in the care of his passengers.39 It must be stressed that in requiring the highest possible degree of diligence
from common carriers and in creating a presumption of negligence against them, the law compels them to curb the
recklessness of their drivers.40

While evidence may be submitted to overcome such presumption of negligence, it must be shown that the carrier
observed the required extraordinary diligence, which means that the carrier must show the utmost diligence of very
cautious persons as far as human care and foresight can provide, or that the accident was caused by fortuitous
event.41 As correctly found by the trial court, petitioner Tiu failed to conclusively rebut such presumption. The
negligence of petitioner Laspiñas as driver of the passenger bus is, thus, binding against petitioner Tiu, as the owner
of the passenger bus engaged as a common carrier.42

The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar

Contrary to the petitioner’s contention, the principle of last clear chance is inapplicable in the instant case, as it only
applies in a suit between the owners and drivers of two colliding vehicles. It does not arise where a passenger
demands responsibility from the carrier to enforce its contractual obligations, for it would be inequitable to exempt
the negligent driver and its owner on the ground that the other driver was likewise guilty of negligence.43 The
common law notion of last clear chance permitted courts to grant recovery to a plaintiff who has also been negligent
provided that the defendant had the last clear chance to avoid the casualty and failed to do so. Accordingly, it is
difficult to see what role, if any, the common law of last clear chance doctrine has to play in a jurisdiction where the
common law concept of contributory negligence as an absolute bar to recovery by the plaintiff, has itself been
rejected, as it has been in Article 2179 of the Civil Code.44

Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgado’s wife due to the negligence of
petitioner Laspiñas, his employee, on this score.

Respondents Pedrano and

Condor were likewise
Negligent
In Phoenix Construction, Inc. v. Intermediate Appellate Court,45 where therein respondent Dionisio sustained
injuries when his vehicle rammed against a dump truck parked askew, the Court ruled that the improper parking of a
dump truck without any warning lights or reflector devices created an unreasonable risk for anyone driving within
the vicinity, and for having created such risk, the truck driver must be held responsible. In ruling against the
petitioner therein, the Court elucidated, thus:

… In our view, Dionisio’s negligence, although later in point of time than the truck driver’s negligence,
and therefore closer to the accident, was not an efficient intervening or independent cause. What the
petitioners describe as an "intervening cause" was no more than a foreseeable consequence of the risk
created by the negligent manner in which the truck driver had parked the dump truck. In other words, the
petitioner truck driver owed a duty to private respondent Dionisio and others similarly situated not to
impose upon them the very risk the truck driver had created. Dionisio’s negligence was not that of an
independent and overpowering nature as to cut, as it were, the chain of causation in fact between the
improper parking of the dump truck and the accident, nor to sever the juris vinculum of liability. …

We hold that private respondent Dionisio’s negligence was "only contributory," that the "immediate and
proximate cause" of the injury remained the truck driver’s "lack of due care."…46

In this case, both the trial and the appellate courts failed to consider that respondent Pedrano was also negligent in
leaving the truck parked askew without any warning lights or reflector devices to alert oncoming vehicles, and that
such failure created the presumption of negligence on the part of his employer, respondent Condor, in supervising
his employees properly and adequately. As we ruled in Poblete v. Fabros:47

It is such a firmly established principle, as to have virtually formed part of the law itself, that the negligence
of the employee gives rise to the presumption of negligence on the part of the employer. This is the
presumed negligence in the selection and supervision of employee. The theory of presumed negligence, in
contrast with the American doctrine of respondeat superior, where the negligence of the employee is
conclusively presumed to be the negligence of the employer, is clearly deducible from the last paragraph of
Article 2180 of the Civil Code which provides that the responsibility therein mentioned shall cease if the
employers prove that they observed all the diligence of a good father of a family to prevent damages. …48

The petitioners were correct in invoking respondent Pedrano’s failure to observe Article IV, Section 34(g) of the
Rep. Act No. 4136, which provides:1avvphil.net

(g) Lights when parked or disabled. – Appropriate parking lights or flares visible one hundred meters away
shall be displayed at a corner of the vehicle whenever such vehicle is parked on highways or in places that
are not well-lighted or is placed in such manner as to endanger passing traffic.

The manner in which the truck was parked clearly endangered oncoming traffic on both sides, considering that the
tire blowout which stalled the truck in the first place occurred in the wee hours of the morning. The Court can only
now surmise that the unfortunate incident could have been averted had respondent Condor, the owner of the truck,
equipped the said vehicle with lights, flares, or, at the very least, an early warning device.49 Hence, we cannot
subscribe to respondents Condor and Pedrano’s claim that they should be absolved from liability because, as found
by the trial and appellate courts, the proximate cause of the collision was the fast speed at which petitioner Laspiñas
drove the bus. To accept this proposition would be to come too close to wiping out the fundamental principle of law
that a man must respond for the foreseeable consequences of his own negligent act or omission. Indeed, our law on
quasi-delicts seeks to reduce the risks and burdens of living in society and to allocate them among its members. To
accept this proposition would be to weaken the very bonds of society.50

The Liability of
Respondent PPSII
as Insurer
The trial court in this case did not rule on the liability of respondent PPSII, while the appellate court ruled that, as no
evidence was presented against it, the insurance company is not liable.

A perusal of the records will show that when the petitioners filed the Third-Party Complaint against respondent
PPSII, they failed to attach a copy of the terms of the insurance contract itself. Only Certificate of Cover No.
05494051 issued in favor of "Mr. William Tiu, Lahug, Cebu City" signed by Cosme H. Boniel was appended to the
third-party complaint. The date of issuance, July 22, 1986, the period of insurance, from July 22, 1986 to July 22,
1987, as well as the following items, were also indicated therein:

SCHEDULED VEHICLE

MODEL MAKE TYPE OF COLOR BLT FILE NO.

Isuzu Forward BODY blue mixed
Bus

PLATE SERIAL/CHASSIS MOTOR NO. AUTHORIZED UNLADEN

NO. NO. 677836 CAPACITY WEIGHT
PBP-724 SER450-1584124 50 6 Cyls. Kgs.

SECTION 1/11 *LIMITS OF LIABILITY PREMIUMS

₱50,000.00 PAID
A. THIRD PARTY LIABILITY ₱540.0052

B. PASSENGER LIABILITY Per Person Per Accident

₱12,000.00 ₱50,000

In its Answer53 to the Third-Party Complaint, the respondent PPSII admitted the existence of the contract of
insurance, in view of its failure to specifically deny the same as required under then Section 8(a), Rule 8 of the Rules
of Court,54 which reads:

Sec. 8. How to contest genuineness of such documents. When an action or defense is founded upon a
written instrument copied in or attached to the corresponding pleading as provided in the preceding section,
the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party,
under oath, specifically denies them, and sets forth what he claims to be the facts; but the requirement of an
oath does not apply when the adverse party does not appear to be a party to the instrument or when
compliance with an order for inspection of the original instrument is refused.

In fact, respondent PPSII did not dispute the existence of such contract, and admitted that it was liable thereon. It
claimed, however, that it had attended to and settled the claims of those injured during the incident, and set up the
following as special affirmative defenses:

Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby reiterates and incorporates by
way of reference the preceding paragraphs and further states THAT:-

8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali Palces who
sustained injuries during the incident in question. In fact, it settled financially their claims per
vouchers duly signed by them and they duly executed Affidavit[s] of Desistance to that effect,
xerox copies of which are hereto attached as Annexes 1, 2, 3, 4, 5, and 6 respectively;

9. With respect to the claim of plaintiff, herein answering third party defendant through its
authorized insurance adjuster attended to said claim. In fact, there were negotiations to that effect.
Only that it cannot accede to the demand of said claimant considering that the claim was way
beyond the scheduled indemnity as per contract entered into with third party plaintiff William Tiu
and third party defendant (Philippine Phoenix Surety and Insurance, Inc.). Third party Plaintiff
 William Tiu knew all along the limitation as earlier stated, he being an old hand in the
transportation business;55…

Considering the admissions made by respondent PPSII, the existence of the insurance contract and the salient terms
thereof cannot be dispatched. It must be noted that after filing its answer, respondent PPSII no longer objected to the
presentation of evidence by respondent Arriesgado and the insured petitioner Tiu. Even in its Memorandum56 before
the Court, respondent PPSII admitted the existence of the contract, but averred as follows:

Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification and/or
reimbursement. This has no basis under the contract. Under the contract, PPSII will pay all sums necessary
to discharge liability of the insured subject to the limits of liability but not to exceed the limits of liability as
so stated in the contract. Also, it is stated in the contract that in the event of accident involving indemnity to
more than one person, the limits of liability shall not exceed the aggregate amount so specified by law to all
persons to be indemnified.57

As can be gleaned from the Certificate of Cover, such insurance contract was issued pursuant to the Compulsory
Motor Vehicle Liability Insurance Law. It was expressly provided therein that the limit of the insurer’s liability for
each person was ₱12,000, while the limit per accident was pegged at ₱50,000. An insurer in an indemnity contract
for third party liability is directly liable to the injured party up to the extent specified in the agreement but it cannot
be held solidarily liable beyond that amount.58 The respondent PPSII could not then just deny petitioner Tiu’s claim;
it should have paid ₱12,000 for the death of Felisa Arriesgado,59 and respondent Arriesgado’s hospitalization
expenses of ₱1,113.80, which the trial court found to have been duly supported by receipts. The total amount of the
claims, even when added to that of the other injured passengers which the respondent PPSII claimed to have
settled,60 would not exceed the ₱50,000 limit under the insurance agreement.

Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily intended to provide
compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of the
negligent operation and use of motor vehicles. The victims and/or their dependents are assured of immediate
financial assistance, regardless of the financial capacity of motor vehicle owners.61 As the Court, speaking through
Associate Justice Leonardo A. Quisumbing, explained in Government Service Insurance System v. Court of
Appeals:62

However, although the victim may proceed directly against the insurer for indemnity, the third party
liability is only up to the extent of the insurance policy and those required by law. While it is true that
where the insurance contract provides for indemnity against liability to third persons, and such persons can
directly sue the insurer, the direct liability of the insurer under indemnity contracts against third party
liability does not mean that the insurer can be held liable in solidum with the insured and/or the other
parties found at fault. For the liability of the insurer is based on contract; that of the insured carrier or
vehicle owner is based on tort. …

Obviously, the insurer could be held liable only up to the extent of what was provided for by the contract of
insurance, in accordance with the CMVLI law. At the time of the incident, the schedule of indemnities for
death and bodily injuries, professional fees and other charges payable under a CMVLI coverage was
provided for under the Insurance Memorandum Circular (IMC) No. 5-78 which was approved on
November 10, 1978. As therein provided, the maximum indemnity for death was twelve thousand
(₱12,000.00) pesos per victim. The schedules for medical expenses were also provided by said IMC,
specifically in paragraphs (C) to (G).63

Damages to be
Awarded

The trial court correctly awarded moral damages in the amount of ₱50,000 in favor of respondent Arriesgado. The
award of exemplary damages by way of example or correction of the public good,64 is likewise in order. As the
Court ratiocinated in Kapalaran Bus Line v. Coronado:65
 …While the immediate beneficiaries of the standard of extraordinary diligence are, of course, the
passengers and owners of cargo carried by a common carrier, they are not the only persons that the law
seeks to benefit. For if common carriers carefully observed the statutory standard of extraordinary diligence
in respect of their own passengers, they cannot help but simultaneously benefit pedestrians and the
passengers of other vehicles who are equally entitled to the safe and convenient use of our roads and
highways. The law seeks to stop and prevent the slaughter and maiming of people (whether passengers or
not) on our highways and buses, the very size and power of which seem to inflame the minds of their
drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of exemplary damages in cases
of quasi-delicts "if the defendant acted with gross negligence."…66

The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa Arriesgado, is entitled to indemnity
in the amount of ₱50,000.00.67

The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly and severally liable for
said amount, conformably with the following pronouncement of the Court in Fabre, Jr. vs. Court of Appeals:68

The same rule of liability was applied in situations where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle,
thus causing an accident. In Anuran v. Buño, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the operator
of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured
passenger or the latter’s heirs. The basis of this allocation of liability was explained in Viluan v. Court of
Appeals, thus:

"Nor should it make difference that the liability of petitioner [bus owner] springs from contract
while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as
1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a
passenger due to the negligence of the driver of the bus on which he was riding and of the driver
of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally
liable for damages. Some members of the Court, though, are of the view that under the
circumstances they are liable on quasi-delict."69

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of
Appeals is AFFIRMED with MODIFICATIONS:

(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William Tiu are ORDERED to
pay, jointly and severally, respondent Pedro A. Arriesgado the total amount of ₱13,113.80;

(2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano are ORDERED to pay,
jointly and severally, respondent Pedro A. Arriesgado ₱50,000.00 as indemnity; ₱26,441.50 as actual
damages; ₱50,000.00 as moral damages; ₱50,000.00 as exemplary damages; and ₱20,000.00 as attorney’s
fees.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 87434 August 5, 1992

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS, INC., petitioners,
vs.
SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES, INC. and HON. COURT
OF APPEALS, respondents.

De Lara, De Lunas & Rosales for petitioners.

Carlo L. Aquino for Sweet Lines, Inc.

REGALADO, J.:

A maritime suit 1 was commenced on May 12, 1978 by herein Petitioner Philippine American General Insurance
Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) and Davao
Veterans Arrastre and Port Services, Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation of India
Limited) and F.E. Zuellig, Inc., as co-defendants in the court a quo, seeking recovery of the cost of lost or damaged
shipment plus exemplary damages, attorney's fees and costs allegedly due to defendants' negligence, with the
following factual backdrop yielded by the findings of the court below and adopted by respondent court:

It would appear that in or about March 1977, the vessel SS "VISHVA YASH" belonging to or
operated by the foreign common carrier, took on board at Baton Rouge, LA, two (2) consignments
of cargoes for shipment to Manila and later for transhipment to Davao City, consisting of 600 bags
Low Density Polyethylene 631 and another 6,400 bags Low Density Polyethylene 647, both
consigned to the order of Far East Bank and Trust Company of Manila, with arrival notice to
Tagum Plastics, Inc., Madaum, Tagum, Davao City. Said cargoes were covered, respectively, by
Bills of Lading Nos. 6 and 7 issued by the foreign common carrier (Exhs. E and F). The necessary
 packing or Weight List (Exhs. A and B), as well as the Commercial Invoices (Exhs. C and D)
accompanied the shipment. The cargoes were likewise insured by the Tagum Plastics Inc. with
plaintiff Philippine American General Insurance Co., Inc., (Exh. G).

In the course of time, the said vessel arrived at Manila and discharged its cargoes in the Port of
Manila for transhipment to Davao City. For this purpose, the foreign carrier awaited and made use
of the services of the vessel called M/V "Sweet Love" owned and operated by defendant
interisland carrier.

Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were
commingled with similar cargoes belonging to Evergreen Plantation and also Standfilco.

On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody of
the consignee. A later survey conducted on July 8, 1977, upon the instance of the plaintiff, shows
the following:

Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain 6,400 bags of Low
Density Polyethylene 647 originally inside 160 pallets, there were delivered to the consignee
5,413 bags in good order condition. The survey shows shortages, damages and losses to be as
follows:

Undelivered/Damaged bags as tallied during discharge from vessel-173 bags;

undelivered and damaged as noted and observed whilst stored at the pier-699
bags; and shortlanded-110 bags (Exhs. P and P-1).

Of the 600 bags of Low Density Polyethylene 631, the survey conducted on the same day shows
an actual delivery to the consignee of only 507 bags in good order condition. Likewise noted were
the following losses, damages and shortages, to wit:

Undelivered/damaged bags and tally sheets during discharge from vessel-17

bags.

Undelivered and damaged as noted and observed whilst stored at the pier-66
bags; Shortlanded-10 bags.

Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets, only a total of
5,820 bags were delivered to the consignee in good order condition, leaving a balance of 1,080
bags. Such loss from this particular shipment is what any or all defendants may be answerable to
(sic).

As already stated, some bags were either shortlanded or were missing, and some of the 1,080 bags
were torn, the contents thereof partly spilled or were fully/partially emptied, but, worse, the
contents thereof contaminated with foreign matters and therefore could no longer serve their
intended purpose. The position taken by the consignee was that even those bags which still had
some contents were considered as total losses as the remaining contents were contaminated with
foreign matters and therefore did not (sic) longer serve the intended purpose of the material. Each
bag was valued, taking into account the customs duties and other taxes paid as well as charges and
the conversion value then of a dollar to the peso, at P110.28 per bag (see Exhs. L and L-1 M and
O). 2

Before trial, a compromise agreement was entered into between petitioners, as plaintiffs, and defendants S.C.I. Line
and F.E. Zuellig, upon the latter's payment of P532.65 in settlement of the claim against them. Whereupon, the trial
court in its order of August 12, 1981 3 granted plaintiffs' motion to dismiss grounded on said amicable settlement
and the case as to S.C.I. Line and F.E. Zuellig was consequently "dismissed with prejudice and without
pronouncement as to costs."
The trial court thereafter rendered judgment in favor of herein petitioners on this dispositive portion:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff Philippine General American
Insurance Company Inc. and against the remaining defendants, Sweet Lines Inc. and Davao
Veterans Arrastre Inc. as follows:

Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sum of P34,902.00, with legal
interest thereon from date of extrajudicial demand on April 28, 1978 (Exh. M) until fully paid;

Defendant Sweet Lines Inc. and Davao Veterans Arrastre and (Port) Services Inc. are directed to
pay jointly and severally, the plaintiff the sum of P49,747.55, with legal interest thereon from
April 28, 1978 until fully paid;

Each of said defendants are ordered to pay the plaintiffs the additional sum of P5,000 is
reimbursable attorney's fees and other litigation expenses;

Each of said defendants shall pay one-fourth (1/4) costs. 4

Due to the reversal on appeal by respondent court of the trial court's decision on the ground of prescription, 5 in
effect dismissing the complaint of herein petitioners, and the denial of their motion for reconsideration, 6 petitioners
filed the instant petition for review on certiorari, faulting respondent appellate court with the following errors: (1) in
upholding, without proof, the existence of the so-called prescriptive period; (2) granting arguendo that the said
prescriptive period does exist, in not finding the same to be null and void; and (3) assuming arguendo that the said
prescriptive period is valid and legal, in failing to conclude that petitioners substantially complied therewith. 7

Parenthetically, we observe that herein petitioners are jointly pursuing this case, considering their common interest
in the shipment subject of the present controversy, to obviate any question as to who the real party in interest is and
to protect their respective rights as insurer and insured. In any case, there is no impediment to the legal standing of
Petitioner Philamgen, even if it alone were to sue herein private respondents in its own capacity as insurer, it having
been subrogated to all rights of recovery for loss of or damage to the shipment insured under its Marine Risk Note
No. 438734 dated March 31, 1977 8 in view of the full settlement of the claim thereunder as evidenced by the
subrogation receipt 9 issued in its favor by Far East Bank and Trust Co., Davao Branch, for the account of petitioner
TPI.

Upon payment of the loss covered by the policy, the insurer's entitlement to subrogation pro tanto, being of the
highest equity, equips it with a cause of action against a third party in case of contractual breach. 10 Further, the
insurer's subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the cargo is
jurisprudentially upheld. 11 However, if an insurer, in the exercise of its subrogatory right, may proceed against the
erring carrier and for all intents and purposes stands in the place and in substitution of the consignee, a fortiori such
insurer is presumed to know and is just as bound by the contractual terms under the bill of lading as the insured.

On the first issue, petitioners contend that it was error for the Court of Appeals to reverse the appealed decision on
the supposed ground of prescription when SLI failed to adduce any evidence in support thereof and that the bills of
lading said to contain the shortened periods for filing a claim and for instituting a court action against the carrier
were never offered in evidence. Considering that the existence and tenor of this stipulation on the aforesaid periods
have allegedly not been established, petitioners maintain that it is inconceivable how they can possibly comply
therewith. 12 In refutation, SLI avers that it is standard practice in its operations to issue bills of lading for shipments
entrusted to it for carriage and that it in fact issued bills of lading numbered MD-25 and MD-26 therefor with proof
of their existence manifest in the records of the case. 13 For its part, DVAPSI insists on the propriety of the dismissal
of the complaint as to it due to petitioners' failure to prove its direct responsibility for the loss of and/or damage to
the cargo. 14

On this point, in denying petitioner's motion for reconsideration, the Court of Appeals resolved that although the
bills of lading were not offered in evidence, the litigation obviously revolves on such bills of lading which are
practically the documents or contracts sued upon, hence, they are inevitably involved and their provisions cannot be
disregarded in the determination of the relative rights of the parties thereto. 15

Respondent court correctly passed upon the matter of prescription, since that defense was so considered and
controverted by the parties. This issue may accordingly be taken cognizance of by the court even if not inceptively
raised as a defense so long as its existence is plainly apparent on the face of relevant pleadings. 16 In the case at bar,
prescription as an affirmative defense was seasonably raised by SLI in its answer, 17 except that the bills of lading
embodying the same were not formally offered in evidence, thus reducing the bone of contention to whether or not
prescription can be maintained as such defense and, as in this case, consequently upheld on the strength of mere
references thereto.

As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills of
lading, such bills of lading can be categorized as actionable documents which under the Rules must be properly
pleaded either as causes of action or defenses, 18 and the genuineness and due execution of which are deemed
admitted unless specifically denied under oath by the adverse party. 19 The rules on actionable documents cover and
apply to both a cause of action or defense based on said documents. 20

In the present case and under the aforestated assumption that the time limit involved is a prescriptive period,
respondent carrier duly raised prescription as an affirmative defense in its answer setting forth paragraph 5 of the
pertinent bills of lading which comprised the stipulation thereon by parties, to wit:

5. Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if
container shows exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss
or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or loss,
non-delivery or misdelivery shall be instituted within 60 days from date of accrual of right of
action. Failure to file claims or institute judicial proceedings as herein provided constitutes waiver
of claim or right of action. In no case shall carrier be liable for any delay, non-delivery,
misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier. 21

In their reply thereto, herein petitioners, by their own assertions that —

2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s Answer, plaintiffs state that
such agreements are what the Supreme Court considers as contracts of adhesion (see Sweet Lines,
Inc. vs. Hon. Bernardo Teves, et al., G.R. No. L-37750, May 19, 1978) and, consequently, the
provisions therein which are contrary to law and public policy cannot be availed of by answering
defendant as valid defenses. 22

thereby failed to controvert the existence of the bills of lading and the aforequoted provisions therein, hence they
impliedly admitted the same when they merely assailed the validity of subject stipulations.

Petitioners' failure to specifically deny the existence, much less the genuineness and due execution, of the
instruments in question amounts to an admission. Judicial admissions, verbal or written, made by the parties in the
pleadings or in the course of the trial or other proceedings in the same case are conclusive, no evidence being
required to prove the same, and cannot be contradicted unless shown to have been made through palpable mistake or
that no such admission was made. 23 Moreover, when the due execution and genuineness of an instrument are
deemed admitted because of the adverse party's failure to make a specific verified denial thereof, the instrument
need not be presented formally in evidence for it may be considered an admitted fact. 24

Even granting that petitioners' averment in their reply amounts to a denial, it has the procedural earmarks of what in
the law on pleadings is called a negative pregnant, that is, a denial pregnant with the admission of the substantial
facts in the pleading responded to which are not squarely denied. It is in effect an admission of the averment it is
directed to. 25 Thus, while petitioners objected to the validity of such agreement for being contrary to public policy,
the existence of the bills of lading and said stipulations were nevertheless impliedly admitted by them.
We find merit in respondent court's comments that petitioners failed to touch on the matter of the non-presentation
of the bills of lading in their brief and earlier on in the appellate proceedings in this case, hence it is too late in the
day to now allow the litigation to be overturned on that score, for to do so would mean an over-indulgence in
technicalities. Hence, for the reasons already advanced, the non-inclusion of the controverted bills of lading in the
formal offer of evidence cannot, under the facts of this particular case, be considered a fatal procedural lapse as
would bar respondent carrier from raising the defense of prescription. Petitioners' feigned ignorance of the
provisions of the bills of lading, particularly on the time limitations for filing a claim and for commencing a suit in
court, as their excuse for non-compliance therewith does not deserve serious attention.

It is to be noted that the carriage of the cargo involved was effected pursuant to an "Application for Delivery of
Cargoes without Original Bill of Lading" issued on May 20, 1977 in Davao City 26 with the notation therein that said
application corresponds to and is subject to the terms of bills of lading MD-25 and MD-26. It would be a safe
assessment to interpret this to mean that, sight unseen, petitioners acknowledged the existence of said bills of lading.
By having the cargo shipped on respondent carrier's vessel and later making a claim for loss on the basis of the bills
of lading, petitioners for all intents and purposes accepted said bills. Having done so they are bound by all
stipulations contained therein. 27 Verily, as petitioners are suing for recovery on the contract, and in fact even went
as far as assailing its validity by categorizing it as a contract of adhesion, then they necessarily admit that there is
such a contract, their knowledge of the existence of which with its attendant stipulations they cannot now be allowed
to deny.

On the issue of the validity of the controverted paragraph 5 of the bills of lading above quoted which unequivocally
prescribes a time frame of thirty (30) days for filing a claim with the carrier in case of loss of or damage to the cargo
and sixty (60) days from accrual of the right of action for instituting an action in court, which periods must concur,
petitioners posit that the alleged shorter prescriptive period which is in the nature of a limitation on petitioners' right
of recovery is unreasonable and that SLI has the burden of proving otherwise, citing the earlier case of Southern
Lines, Inc. vs. Court of Appeals, et al. 28 They postulate this on the theory that the bills of lading containing the same
constitute contracts of adhesion and are, therefore, void for being contrary to public policy, supposedly pursuant to
the dictum in Sweet Lines, Inc. vs. Teves, et al. 29

Furthermore, they contend, since the liability of private respondents has been clearly established, to bar petitioners'
right of recovery on a mere technicality will pave the way for unjust enrichment. 30 Contrarily, SLI asserts and
defends the reasonableness of the time limitation within which claims should be filed with the carrier; the necessity
for the same, as this condition for the carrier's liability is uniformly adopted by nearly all shipping companies if they
are to survive the concomitant rigors and risks of the shipping industry; and the countervailing balance afforded by
such stipulation to the legal presumption of negligence under which the carrier labors in the event of loss of or
damage to the cargo. 31

It has long been held that Article 366 of the Code of Commerce applies not only to overland and river transportation
but also to maritime
transportation. 32 Moreover, we agree that in this jurisdiction, as viewed from another angle, it is more accurate to
state that the filing of a claim with the carrier within the time limitation therefor under Article 366 actually
constitutes a condition precedent to the accrual of a right of action against a carrier for damages caused to the
merchandise. The shipper or the consignee must allege and prove the fulfillment of the condition and if he omits
such allegations and proof, no right of action against the carrier can accrue in his favor. As the requirements in
Article 366, restated with a slight modification in the assailed paragraph 5 of the bills of lading, are reasonable
conditions precedent, they are not limitations of action. 33 Being conditions precedent, their performance must
precede a suit for enforcement 34and the vesting of the right to file spit does not take place until the happening of
these conditions. 35

Now, before an action can properly be commenced all the essential elements of the cause of action must be in
existence, that is, the cause of action must be complete. All valid conditions precedent to the institution of the
particular action, whether prescribed by statute, fixed by agreement of the parties or implied by law must be
performed or complied with before commencing the action, unless the conduct of the adverse party has been such as
to prevent or waive performance or excuse non-performance of the condition. 36
It bears restating that a right of action is the right to presently enforce a cause of action, while a cause of action
consists of the operative facts which give rise to such right of action. The right of action does not arise until the
performance of all conditions precedent to the action and may be taken away by the running of the statute of
limitations, through estoppel, or by other circumstances which do not affect the cause of action. 37 Performance or
fulfillment of all conditions precedent upon which a right of action depends must be sufficiently
alleged, 38considering that the burden of proof to show that a party has a right of action is upon the person initiating
the suit. 39

More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss of or
injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to
enforce the carrier's liability. Such requirement is not an empty formalism. The fundamental reason or purpose of
such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has
been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and
extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while
the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims. 40

Stipulations in bills of lading or other contracts of shipment which require notice of claim for loss of or damage to
goods shipped in order to impose liability on the carrier operate to prevent the enforcement of the contract when not
complied with, that is, notice is a condition precedent and the carrier is not liable if notice is not given in accordance
with the stipulation, 41 as the failure to comply with such a stipulation in a contract of carriage with respect to notice
of loss or claim for damage bars recovery for the loss or damage suffered. 42

On the other hand, the validity of a contractual limitation of time for filing the suit itself against a carrier shorter
than the statutory period therefor has generally been upheld as such stipulation merely affects the shipper's remedy
and does not affect the liability of the carrier. In the absence of any statutory limitation and subject only to the
requirement on the reasonableness of the stipulated limitation period, the parties to a contract of carriage may fix by
agreement a shorter time for the bringing of suit on a claim for the loss of or damage to the shipment than that
provided by the statute of limitations. Such limitation is not contrary to public policy for it does not in any way
defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by action at an
earlier period than would be necessary to defeat it through the operation of the ordinary statute of limitations. 43

In the case at bar, there is neither any showing of compliance by petitioners with the requirement for the filing of a
notice of claim within the prescribed period nor any allegation to that effect. It may then be said that while
petitioners may possibly have a cause of action, for failure to comply with the above condition precedent they lost
whatever right of action they may have in their favor or, token in another sense, that remedial right or right to relief
had prescribed.44

The shipment in question was discharged into the custody of the consignee on May 15, 1977, and it was from this
date that petitioners' cause of action accrued, with thirty (30) days therefrom within which to file a claim with the
carrier for any loss or damage which may have been suffered by the cargo and thereby perfect their right of action.
The findings of respondent court as supported by petitioners' formal offer of evidence in the court below show that
the claim was filed with SLI only on April 28, 1978, way beyond the period provided in the bills of lading 45 and
violative of the contractual provision, the inevitable consequence of which is the loss of petitioners' remedy or right
to sue. Even the filing of the complaint on May 12, 1978 is of no remedial or practical consequence, since the time
limits for the filing thereof, whether viewed as a condition precedent or as a prescriptive period, would in this case
be productive of the same result, that is, that petitioners had no right of action to begin with or, at any rate, their
claim was time-barred.

What the court finds rather odd is the fact that petitioner TPI filed a provisional claim with DVAPSI as early as June
14, 1977 46 and, as found by the trial court, a survey fixing the extent of loss of and/or damage to the cargo was
conducted on July 8, 1977 at the instance of petitioners. 47 If petitioners had the opportunity and awareness to file
such provisional claim and to cause a survey to be conducted soon after the discharge of the cargo, then they could
very easily have filed the necessary formal, or even a provisional, claim with SLI itself 48 within the stipulated
period therefor, instead of doing so only on April 28, 1978 despite the vessel's arrival at the port of destination on
May 15, 1977. Their failure to timely act brings us to no inference other than the fact that petitioners slept on their
rights and they must now face the consequences of such inaction.
The ratiocination of the Court of Appeals on this aspect is worth reproducing:

xxx xxx xxx

It must be noted, at this juncture, that the aforestated time limitation in the presentation of claim
for loss or damage, is but a restatement of the rule prescribed under Art. 366 of the Code of
Commerce which reads as follows:

Art. 366. Within the twenty-four hours following the receipt of the merchandise,
the claim against the carrier for damage or average which may be found therein
upon opening the packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be ascertained from the
outside part of the packages, in which case the claims shall be admitted only at
the time of the receipt.

After the periods mentioned have elapsed, or the transportation charges have
been paid, no claim shall be admitted against the carrier with regard to the
condition in which the goods transported were delivered.

Gleanable therefrom is the fact that subject stipulation even lengthened the period for presentation
of claims thereunder. Such modification has been sanctioned by the Supreme Court. In the case
of Ong Yet (M)ua Hardware Co., Inc. vs. Mitsui Steamship Co., Ltd., et al., 59 O.G. No. 17, p.
2764, it ruled that Art. 366 of the Code of Commerce can be modified by a bill of lading
prescribing the period of 90 days after arrival of the ship, for filing of written claim with the
carrier or agent, instead of the 24-hour time limit after delivery provided in the aforecited legal
provision.

Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that the commencement of
the instant suit on May 12, 1978 was indeed fatally late. In view of the express provision that
"suits arising from
. . . damage or loss shall be instituted within 60 days from date of accrual of right of action," the
present action necessarily fails on ground of prescription.

In the absence of constitutional or statutory prohibition, it is usually held or

recognized that it is competent for the parties to a contract of shipment to agree
on a limitation of time shorter than the statutory period, within which action for
breach of the contract shall be brought, and such limitation will be enforced if
reasonable . . . (13 C.J.S. 496-497)

A perusal of the pertinent provisions of law on the matter would disclose that there is no
constitutional or statutory prohibition infirming paragraph 5 of subject Bill of Lading. The
stipulated period of 60 days is reasonable enough for appellees to ascertain the facts and thereafter
to sue, if need be, and the 60-day period agreed upon by the parties which shortened the statutory
period within which to bring action for breach of contract is valid and binding. . . . (Emphasis in
the original text.) 49

As explained above, the shortened period for filing suit is not unreasonable and has in fact been generally
recognized to be a valid business practice in the shipping industry. Petitioners' advertence to the Court's holding in
the Southern Lines case, supra, is futile as what was involved was a claim for refund of excess payment. We ruled
therein that non-compliance with the requirement of filing a notice of claim under Article 366 of the Code of
Commerce does not affect the consignee's right of action against the carrier because said requirement applies only to
cases for recovery of damages on account of loss of or damage to cargo, not to an action for refund of overpayment,
and on the further consideration that neither the Code of Commerce nor the bills of lading therein provided any time
limitation for suing for refund of money paid in excess, except only that it be filed within a reasonable time.
The ruling in Sweet Lines categorizing the stipulated limitation on venue of action provided in the subject bill of
lading as a contract of adhesion and, under the circumstances therein, void for being contrary to public policy is
evidently likewise unavailing in view of the discrete environmental facts involved and the fact that the restriction
therein was unreasonable. In any case, Ong Yiu vs. Court of Appeals, et al., 50 instructs us that "contracts of adhesion
wherein one party imposes a ready-made form of contract on the other . . . are contracts not entirely prohibited. The
one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent." In the
present case, not even an allegation of ignorance of a party excuses non-compliance with the contractual stipulations
since the responsibility for ensuring full comprehension of the provisions of a contract of carriage devolves not on
the carrier but on the owner, shipper, or consignee as the case may be.

While it is true that substantial compliance with provisions on filing of claim for loss of or damage to cargo may
sometimes suffice, the invocation of such an assumption must be viewed vis-a-vis the object or purpose which such
a provision seeks to attain and that is to afford the carrier a reasonable opportunity to determine the merits and
validity of the claim and to protect itself against unfounded impositions. 51 Petitioners' would nevertheless adopt an
adamant posture hinged on the issuance by SLI of a "Report on Losses and Damages," dated May 15, 1977, 52 from
which petitioners theorize that this charges private respondents with actual knowledge of the loss and damage
involved in the present case as would obviate the need for or render superfluous the filing of a claim within the
stipulated period.

Withal, it has merely to be pointed out that the aforementioned report bears this notation at the lower part thereof:
"Damaged by Mla. labor upon unloading; B/L noted at port of origin," as an explanation for the cause of loss of
and/or damage to the cargo, together with an iterative note stating that "(t)his Copy should be submitted together
with your claim invoice or receipt within 30 days from date of issue otherwise your claim will not be honored."

Moreover, knowledge on the part of the carrier of the loss of or damage to the goods deducible from the issuance of
said report is not equivalent to nor does it approximate the legal purpose served by the filing of the requisite claim,
that is, to promptly apprise the carrier about a consignee's intention to file a claim and thus cause the prompt
investigation of the veracity and merit thereof for its protection. It would be an unfair imposition to require the
carrier, upon discovery in the process of preparing the report on losses or damages of any and all such loss or
damage, to presume the existence of a claim against it when at that time the carrier is expectedly concerned merely
with accounting for each and every shipment and assessing its condition. Unless and until a notice of claim is
therewith timely filed, the carrier cannot be expected to presume that for every loss or damage tallied, a
corresponding claim therefor has been filed or is already in existence as would alert it to the urgency for an
immediate investigation of the soundness of the claim. The report on losses and damages is not the claim referred to
and required by the bills of lading for it does not fix responsibility for the loss or damage, but merely states the
condition of the goods shipped. The claim contemplated herein, in whatever form, must be something more than a
notice that the goods have been lost or damaged; it must contain a claim for compensation or indicate an intent to
claim. 53

Thus, to put the legal effect of respondent carrier's report on losses or damages, the preparation of which is standard
procedure upon unloading of cargo at the port of destination, on the same level as that of a notice of claim by
imploring substantial compliance is definitely farfetched. Besides, the cited notation on the carrier's report itself
makes it clear that the filing of a notice of claim in any case is imperative if carrier is to be held liable at all for the
loss of or damage to cargo.

Turning now to respondent DVAPSI and considering that whatever right of action petitioners may have against
respondent carrier was lost due to their failure to seasonably file the requisite claim, it would be awkward, to say the
least, that by some convenient process of elimination DVAPSI should proverbially be left holding the bag, and it
would be pure speculation to assume that DVAPSI is probably responsible for the loss of or damage to cargo.
Unlike a common carrier, an arrastre operator does not labor under a presumption of negligence in case of loss,
destruction or deterioration of goods discharged into its custody. In other words, to hold an arrastre operator liable
for loss of and/or damage to goods entrusted to it there must be preponderant evidence that it did not exercise due
diligence in the handling and care of the goods.

Petitioners failed to pinpoint liability on any of the original defendants and in this seemingly wild goose-chase, they
cannot quite put their finger down on when, where, how and under whose responsibility the loss or damage probably
occurred, or as stated in paragraph 8 of their basic complaint filed in the court below, whether "(u)pon discharge of
the cargoes from the original carrying vessel, the SS VISHVA YASH," and/or upon discharge of the cargoes from
the interisland vessel the MV "SWEET LOVE," in Davao City and later while in the custody of defendant arrastre
operator. 54

The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and Aviation Claims Manager of petitioner
Philamgen, was definitely inconclusive and the responsibility for the loss or damage could still not be ascertained
therefrom:

Q In other words, Mr. Cabato, you only computed the loss on the basis of the
figures submitted to you and based on the documents like the survey certificate
and the certificate of the arrastre?

A Yes, sir.

Q Therefore, Mr. Cabato, you have no idea how or where these losses were
incurred?

A No, sir.

xxx xxx xxx

Q Mr. Witness, you said that you processed and investigated the claim involving
the shipment in question. Is it not a fact that in your processing and investigation
you considered how the shipment was transported? Where the losses could have
occurred and what is the extent of the respective responsibilities of the bailees
and/or carriers involved?

xxx xxx xxx

A With respect to the shipment being transported, we have of course to get into
it in order to check whether the shipment coming in to this port is in accordance
with the policy condition, like in this particular case, the shipment was
transported to Manila and transhipped through an interisland vessel in
accordance with the policy. With respect to the losses, we have a general view
where losses could have occurred. Of course we will have to consider the
different bailees wherein the shipment must have passed through, like the ocean
vessel, the interisland vessel and the arrastre, but definitely at that point and time
we cannot determine the extent of each liability. We are only interested at that
point and time in the liability as regards the underwriter in accordance with the
policy that we issued.

xxx xxx xxx

Q Mr. Witness, from the documents, namely, the survey of Manila Adjusters
and Surveyors Company, the survey of Davao Arrastre contractor and the bills
of lading issued by the defendant Sweet Lines, will you be able to tell the
respective liabilities of the bailees and/or carriers concerned?

A No, sir. (Emphasis ours.) 55

Neither did nor could the trial court, much less the Court of Appeals, precisely establish the stage in the course of
the shipment when the goods were lost, destroyed or damaged. What can only be inferred from the factual findings
of the trial court is that by the time the cargo was discharged to DVAPSI, loss or damage had already occurred and
that the same could not have possibly occurred while the same was in the custody of DVAPSI, as demonstrated by
the observations of the trial court quoted at the start of this opinion.

ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the dismissal of the complaint in
the court a quo as decreed by respondent Court of Appeals in its challenged judgment is hereby AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-61352 February 27, 1987

DOLE PHILIPPINES, INC., plaintiff-appellant,

vs.
MARITIME COMPANY OF THE PHILIPPINES, defendant-appellee.

Domingo E. de Lara & Associates for plaintiff-appellant.

Bito, Misa and Lozada Law Office for defendant-appellee.

NARVASA, J.:

This appeal, which was certified to the Court by the Court of Appeals as involving only questions of law, 1 relates to
a claim for loss and/or damage to a shipment of machine parts sought to be enforced by the consignee, appellant
Dole Philippines, Inc. (hereinafter caged Dole) against the carrier, Maritime Company of the Philippines (hereinafter
called Maritime), under the provisions of the Carriage of Goods by Sea Act. 2

The basic facts are succinctly stated in the order of the Trial Court 3 dated March 16, 1977, the relevant portion of
which reads:

xxx xxx xxx

Before the plaintiff started presenting evidence at today's trial at the instance of the Court the
lawyers entered into the following stipulation of facts:

1. The cargo subject of the instant case was discharged in Dadiangas unto the custody of the
consignee on December 18, 1971;

2. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff with
the defendant vessel on May 4, 1972;

3. On June 11, 1973 the plaintiff filed a complaint in the Court of First Instance of Manila,
docketed therein as Civil Case No. 91043, embodying three (3) causes of action involving three
(3) separate and different shipments. The third cause of action therein involved the cargo now
subject of this present litigation;
 4. On December 11, 1974, Judge Serafin Cuevas issued an Order in Civil Case No. 91043
dismissing the first two causes of action in the aforesaid case with prejudice and without
pronouncement as to costs because the parties had settled or compromised the claims involved
therein. The third cause of action which covered the cargo subject of this case now was likewise
dismissed but without prejudice as it was not covered by the settlement. The dismissal of that
complaint containing the three causes of action was upon a joint motion to dismiss filed by the
parties;

5. Because of the dismissal of the (complaint in Civil Case No. 91043 with respect to the third
cause of action without prejudice, plaintiff instituted this present complaint on January 6, 1975.

xxx xxx xxx 4

To the complaint in the subsequent action Maritime filed an answer pleading inter alia the affirmative defense of
prescription under the provisions of the Carriage of Goods by Sea Act, 5 and following pre-trial, moved for a
preliminary hearing on said defense. 6 The Trial Court granted the motion, scheduling the preliminary hearing on
April 27, 1977. 7 The record before the Court does not show whether or not that hearing was held, but under date of
May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the ground of prescription. 8 The
motion was opposed by Dole 9 and the Trial Court, after due consideration, resolved the matter in favor of Maritime
and dismissed the complaint 10 Dole sought a reconsideration, which was denied, 11 and thereafter took the present
appeal from the order of dismissal.

The pivotal issue is whether or not Article 1155 of the Civil Code providing that the prescription of actions is
interrupted by the making of an extrajudicial written demand by the creditor is applicable to actions brought under
the Carriage of Goods by Sea Act which, in its Section 3, paragraph 6, provides that:

*** the carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when the goods
should have been delivered; Provided, That, if a notice of loss or damage, either apparent or
conceded, is not given as provided for in this section, that fact shall not affect or prejudice the
right of the shipper to bring suit within one year after the delivery of the goods or the date when
the goods should have been delivered.

xxx xxx xxx

Dole concedes that its action is subject to the one-year period of limitation prescribe in the above-cited
provision. 12The substance of its argument is that since the provisions of the Civil Code are, by express mandate of
said Code, suppletory of deficiencies in the Code of Commerce and special laws in matters governed by the
latter, 13 and there being "*** a patent deficiency *** with respect to the tolling of the prescriptive period ***"
provided for in the Carriage of Goods by Sea Act, 14 prescription under said Act is subject to the provisions of
Article 1155 of the Civil Code on tolling and because Dole's claim for loss or damage made on May 4, 1972
amounted to a written extrajudicial demand which would toll or interrupt prescription under Article 1155, it operated
to toll prescription also in actions under the Carriage of Goods by Sea Act. To much the same effect is the further
argument based on Article 1176 of the Civil Code which provides that the rights and obligations of common carriers
shag be governed by the Code of Commerce and by special laws in all matters not regulated by the Civil Code.

These arguments might merit weightier consideration were it not for the fact that the question has already received a
definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs.
American President Lines, Inc. 15 There, in a parallel factual situation, where suit to recover for damage to cargo
shipped by vessel from Tokyo to Manila was filed more than two years after the consignee's receipt of the cargo,
this Court rejected the contention that an extrajudicial demand toiled the prescriptive period provided for in the
Carriage of Goods by Sea Act, viz:

In the second assignment of error plaintiff-appellant argues that it was error for the court a quo not
to have considered the action of plaintiff-appellant suspended by the extrajudicial demand which
took place, according to defendant's own motion to dismiss on August 22, 1952. We notice that
 while plaintiff avoids stating any date when the goods arrived in Manila, it relies upon the
allegation made in the motion to dismiss that a protest was filed on August 22, 1952 — which
goes to show that plaintiff-appellant's counsel has not been laying the facts squarely before the
court for the consideration of the merits of the case. We have already decided that in a case
governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil
Procedure on prescription should not be made to apply. (Chua Kuy vs. Everett Steamship Corp.,
G.R. No. L-5554, May 27, 1953.) Similarly, we now hold that in such a case the general
provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would
have the effect of extending the one-year period of prescription fixed in the law. It is desirable that
matters affecting transportation of goods by sea be decided in as short a time as possible; the
application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend
the period and permit delays in the settlement of questions affecting transportation, contrary to the
clear intent and purpose of the law. * * *

Moreover, no different result would obtain even if the Court were to accept the proposition that a written
extrajudicial demand does toll prescription under the Carriage of Goods by Sea Act. The demand in this instance
would be the claim for damage-filed by Dole with Maritime on May 4, 1972. The effect of that demand would have
been to renew the one- year prescriptive period from the date of its making. Stated otherwise, under Dole's theory,
when its claim was received by Maritime, the one-year prescriptive period was interrupted — "tolled" would be the
more precise term — and began to run anew from May 4, 1972, affording Dole another period of one (1) year
counted from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new
period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than one month
after that period has expired and its right of action had prescribed.

Dole's contention that the prescriptive period "*** remained tolled as of May 4, 1972 *** (and that) in legal
contemplation *** (the) case (Civil Case No. 96353) was filed on January 6, 1975 *** well within the one-year
prescriptive period in Sec. 3(6) of the Carriage of Goods by Sea Act." 16 equates tolling with indefinite suspension. It
is clearly fallacious and merits no consideration.

WHEREFORE, the order of dismissal appealed from is affirmed, with costs against the appellant, Dole Philippines,
Inc.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 77638 July 12, 1990

MARITIME AGENCIES & SERVICES, INC., petitioner,

vs.
COURT OF APPEALS, and UNION INSURANCE SOCIETY OF CANTON, LTD., respondents.

G.R. No. 77674 July 12, 1990

UNION INSURANCE SOCIETY OF CANTON, LTD., petitioner,

vs.
COURT OF APPEALS, HONGKONG ISLAND CO., LTD., MARITIME AGENCIES & SERVICES, INC.,
and/or VIVA CUSTOMS BROKERAGE, respondents.

Del Rosario & Del Rosario for petitioner in G.R. No. 77638.

Zapa Aguillardo & Associates for petitioner in G.R. No. 77674.

Bito, Misa & Lozada for Hongkong Island Co. Ltd. and Macondray & Co., Inc.

CRUZ, J.:

Transcontinental Fertilizer Company of London chartered from Hongkong Island Shipping Company of Hongkong
the motor vessel named "Hongkong Island" for the shipment of 8073.35 MT (gross) bagged urea from Novorossisk,
Odessa, USSR to the Philippines, the parties signing for this purpose a Uniform General Charter dated August 9,
1979. 1

Of the total shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company as consignee, 3,400.04 to be
discharged in Manila and the remaining 2,000 MT in Cebu. 2 The goods were insured by the consignee
with the Union Insurance Society of Canton, Ltd. for P6,779,214.00 against all risks. 3

Maritime Agencies & Services, Inc. was appointed as the charterer's agent and Macondray Company, Inc. as the
owner's agent.4

The vessel arrived in Manila on October 3, 1979, and unloaded part of the consignee's goods, then proceeded to
Cebu on October 19, 1979, to discharge the rest of the cargo. On October 31, 1979, the consignee filed a formal
claim against Maritime, copy furnished Macondray, for the amount of P87,163.54, representing C & F value of the
1,383 shortlanded bags. 5 On January 12, 1980, the consignee filed another formal claim, this time against Viva
Customs Brokerage, for the amount of P36,030.23, representing the value of 574 bags of net unrecovered spillage. 6

These claims having been rejected, the consignee then went to Union, which on demand paid the total indemnity of
P113,123.86 pursuant to the insurance contract. As subrogee of the consignee, Union then filed on September 19,
1980, a complaint for reimbursement of this amount, with legal interest and attorney's fees, against Hongkong Island
Company, Ltd., Maritime Agencies & Services, Inc. and/or Viva Customs Brokerage. 7 On April 20, 1981, the
complaint was amended to drop Viva and implead Macondray Company, Inc. as a new defendant. 8

On January 4, 1984, after trial, the trial court rendered judgment holding the defendants liable as follows:

(a) defendants Hongkong Island Co., Ltd., and its local agent Macondray & Co., Inc. to pay the
plaintiff the sum of P87,163.54 plus 12% interest from April 20, 1981 until the whole amount is
fully paid, P1,000.00 as attorney's fees and to pay one-half (1/2) of the costs; and

(b) defendant Maritime Agencies & Services, Inc., to pay the plaintiff the sum of P36,030.23, plus
12% interest from April 20, 1981 until the whole amount is fully paid, P600.00 as attorney's fees
and to pay one-half (1/2) of the costs.9

Petitioner appealed the decision to the Court of Appeals, which rendered a decision on November 28, 1986, the
dispositive portion of which reads:

WHEREFORE, the decision appealed from is modified, finding the charterer Transcontinental
Fertilizer Co., Ltd. represented by its agent Maritime Agencies & Services, Inc. liable for the
amount of P87,163.54 plus interest at 12% plus attorney's fees of P1,000.00. Defendant Hongkong
Island Co., Ltd. represented by Macondray Co., Inc. are accordingly exempted from any
liability. 10

Maritime and Union filed separate motions for reconsideration which were both denied. The movants are now
before us to question the decision of the respondent court.

In G.R. No. 77638, Maritime pleads non-liability on the ground that it was only the charterer's agent and should not
answer for whatever responsibility might have attached to the principal. It also argues that the respondent court erred
in applying Articles 1734 and 1735 of the Civil Code in determining the charterer's liability.

In G.R. No. 77674, Union asks for the modification of the decision of the respondent court so as to make Maritime
solidarily and solely liable, its principal not having been impleaded and so not subject to the jurisdiction of our
courts.

These two cases were consolidated and given due course, the parties being required to submit simultaneous
memoranda. All complied, including Hongkong Island Company, Ltd., and Macondray Company, Inc., although
they pointed out that they were not involved in the petitions.

There are three general categories of charters, to wit, the demise or "bareboat charter," the time charter and the
voyage charter.

A demise involves the transfer of full possession and control of the vessel for the period covered by the contract, the
charterer obtaining the right to use the vessel and carry whatever cargo it chooses, while manning and supplying the
ship as well. 11

A time charter is a contract to use a vessel for a particular period of time, the charterer obtaining the right to direct
the movements of the vessel during the chartering period, although the owner retains possession and control. 12

A voyage charter is a contract for the hire of a vessel for one or a series of voyages usually for the purpose of
transporting goods for the charterer. The voyage charter is a contract of affreightment and is considered a private
carriage. 13

Tested by those definitions, the agreement entered into in the cases at bar should be considered. This brings us to the
basic question of who, in this kind of charter, shall be liable for the cargo.
A voyage charter being a private carriage, the parties may freely contract respecting liability for damage to the
goods and other matters. The basic principle is that "the responsibility for cargo loss falls on the one who agreed to
perform the duty involved" in accordance with the terms of most voyage charters. 14

This is true in the present cases where the charterer was responsible for loading, stowage and discharging at the
ports visited, while the owner was responsible for the care of the cargo during the voyage. Thus, Par. 2 of the
Uniform General Charter read:

2. Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the
goods only in case the loss, damage or delay has been caused by the improper or negligent
stowage of the goods or by personal want of due diligence on the part of the Owners or their
Manager to make the vessel in all respects seaworthy and to secure that she is properly manned,
equipped and supplied or by the personal act or default of the Owners or their Manager.

And the Owners are responsible for no loss or damage or delay arising from any other cause
whatsoever, even from the neglect or default of the Captain or crew or some other person
employed by the Owners onboard or ashore for whose acts they would, but for this clause, be
responsible, or from unseaworthiness of the vessel on loading or commencement of the voyage or
at any time whatsoever.

Damage caused by contact with or leakage, smell or evaporation from other goods or by the
inflammable or explosive nature or insufficient package of other goods not to be considered as
caused by improper or negligent stowage, even if in fact so caused.

while Clause 17 of Additional Clauses to Charter party provided:

The cargo shall be loaded, stowed and discharged free of expense to the vessel under the Master's
supervision. However, if required at loading and discharging ports the vessel is to give free use of
winches and power to drive them gear, runners and ropes. Also slings, as on board. Shore
winchmen are to be employed and they are to be for Charterers' or Shippers' or Receivers' account
as the case may be. Vessel is also to give free use of sufficient light, as on board, if required for
night work. Time lost through breakdown of winches or derricks is not to count as laytime.

In Home Insurance Co. v. American Steamship Agencies, Inc., 15 the trial court rejected similar stipulations as
contrary to public policy and, applying the provisions of the Civil Code on common carriers and of the Code of
Commerce on the duties of the ship captain, held the vessel liable in damages for loss of part of the cargo it was
carrying. This Court reversed, declaring as follows:

The provisions of our Civil Code on common carriers were taken from Anglo-American law.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered
to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the
owner from liability for the negligence of its agent is not against public policy, and is deemed
valid.

Such doctrine we find reasonable. The Civil Code provisions on common carriers should not be
applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter
party absolving the owner from liability for loss due to the negligence of its agent would be void
only if the strict public policy governing common carriers is applied. Such policy has no force
where the public at large is not involved, as in the case of a ship totally chartered for the use of a
single party.

Nevertheless, this ruling cannot benefit Hongkong, because there was no showing in that case that the vessel was at
fault. In the cases at bar, the trial court found that 1,383 bags were shortlanded, which could only mean that they
were damaged or lost on board the vessel before unloading of the shipment. It is not denied that the entire cargo
shipped by the charterer in Odessa was covered by a clean bill of lading. 16 As the bags were in good order when
received in the vessel, the presumption is that they were damaged or lost during the voyage as a result of their
negligent improper stowage. For this the ship owner should be held liable.

But we do agree that the period for filing the claim is one year, in accordance with the Carriage of Goods by Sea
Act. This was adopted and embodied by our legislature in Com. Act No. 65 which, as a special law, prevails over
the general provisions of the Civil Code on prescription of actions. Section 3(6) of that Act provides as follows:

In any event, the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered; Provided, that if a notice of loss for damage; either apparent or
concealed, is not given as provided for in this section, that fact shall not effect or prejudice the
right of the shipper to bring suit within one year after the delivery of the goods or the date when
the goods should have been delivered.

This period was applied by the Court in the case of Union Carbide, Philippines, Inc. v. Manila Railroad
Co., 17 where it was held:

Under the facts of this case, we held that the one-year period was correctly reckoned by the trial
court from December 19, 1961, when, as agreed upon by the parties and as shown in the tally
sheets, the cargo was discharged from the carrying vessel and delivered to the Manila Port
Service. That one-year period expired on December 19, 1962. Inasmuch as the action was filed on
December 21, 1962, it was barred by the statute of limitations.

The one-year period in the cases at bar should commence on October 20, 1979, when the last item was delivered to
the consignee. 18 Union's complaint was filed against Hongkong on September 19, 1980, but tardily against
Macondray on April 20, 1981. The consequence is that the action is considered prescribed as far as Macondray is
concerned but not against its principal, which is what matters anyway.

As regards the goods damaged or lost during unloading, the charterer is liable therefor, having assumed this activity
under the charter party "free of expense to the vessel." The difficulty is that Transcontinental has not been impleaded
in these cases and so is beyond our jurisdiction. The liability imposable upon it cannot be borne by Maritime which,
as a mere agent, is not answerable for injury caused by its principal. It is a well-settled principle that the agent shall
be liable for the act or omission of the principal only if the latter is undisclosed. 19

Union seeks to hold Maritime liable as ship agent on the basis of the ruling of this Court in the case of Switzerland
General Insurance Co., Ltd. v. Ramirez. 20 However, we do not find that case is applicable.

In that case, the charterer represented itself on the face of the bill of lading as the carrier. The vessel owner and the
charterer did not stipulate in the Charter party on their separate respective liabilities for the cargo. The loss/damage
to the cargo was sustained while it was still on board or under the custody of the vessel. As the charterer was itself
the carrier, it was made liable for the acts of the ship captain who was responsible for the cargo while under the
custody of the vessel.

As for the charterer's agent, the evidence showed that it represented the vessel when it took charge of the unloading
of the cargo and issued cargo receipts (or tally sheets) in its own name. Claims against the vessel for the
losses/damages sustained by that cargo were also received and processed by it. As a result, the charterer's agent was
also considered a ship agent and so was held to be solidarily liable with its principal.

The facts in the cases at bar are different. The charterer did not represent itself as a carrier and indeed assumed
responsibility ability only for the unloading of the cargo, i.e, after the goods were already outside the custody of the
vessel. In supervising the unloading of the cargo and issuing Daily Operations Report and Statement of Facts
indicating and describing the day-to-day discharge of the cargo, Maritime acted in representation of the charterer
and not of the vessel. It thus cannot be considered a ship agent. As a mere charterer's agent, it cannot be held
solidarily liable with Transcontinental for the losses/damages to the cargo outside the custody of the vessel. Notably,
Transcontinental was disclosed as the charterer's principal and there is no question that Maritime acted within the
scope of its authority.

Hongkong and Macondray point out in their memorandum that the appealed decision is not assailed insofar as it
favors them and so has become final as to them. We do not think so. First of all, we note that they were formally
impleaded as respondents in G.R No. 77674 and submitted their comment and later their memorandum, where they
discussed at length their position vis-a-vis the claims of the other parties. Secondly, we reiterate the rule that even if
issues are not formally and specifically raised on appeal, they may nevertheless be considered in the interest of
justice for a proper decision of the case.i•t•c-aüsl Thus, we have held that:

Besides, an unassigned error closely related to the error properly assigned, or upon which the
determination of the question raised by the error properly assigned is dependent, will be
considered by the appellate court notwithstanding the failure to assign it as error.

At any rate, the Court is clothed with ample authority to review matters, even if they are not
assigned as errors in their appeal, if it finds that their consideration is necessary in arriving at a just
decision of the case. 21

xxx xxx xxx

Issues, though not specifically raised in the pleadings in the appellate court, may, in the interest of
justice, be properly considered by said court in deciding a case, if they are questions raised in the
trial court and are matters of record having some bearing on the issue submitted which the parties
failed to raise or the lower court ignore(d). 22

xxx xxx xxx

While an assignment of error which is required by law or rule of court has been held essential to
appellate review, and only those assigned will be considered, there are a number of cases which
appear to accord to the appellate court a broad discretionary power to waive this lack of proper
assignment of errors and consider errors not assigned. 23

In his decision dated January 4, 1984, Judge Artemon de Luna of the Regional Trial Court of Manila held:

The Court, on the basis of the evidence, finds nothing to disprove the finding of the marine and
cargo surveyors that of the 66,390 bags of urea fertilizer, 65,547 bags were "discharged ex-vessel"
and there were "shortlanded" "1,383 bags", valued at P87,163.54. This sum should be the principal
and primary liability and responsibility of the carrying vessel. Under the contract for the
transportation of goods, the vessel's responsibility commence upon the actual delivery to, and
receipt by the carrier or its authorized agent, until its final discharge at the port of Manila.
Defendant Hongkong Island Co., Ltd., as "shipowner" and represented by the defendant
Macondray & Co., Inc., as its local agent in the Philippines, should be responsible for the value of
the bags of urea fertilizer which were shortlanded.

The remainder of the claim in the amount of P36,030.23, representing the value of the 574 bags of
unrecovered spillages having occurred after the shipment was discharged from the vessel unto the
ex-lighters as well as during the discharge from the lighters to the truck which transported the
shipment to the consignee's warehouses should be for the account of the defendant Maritime
Agencies & Services, Inc.

We affirm the factual findings but must modify the legal conclusions. As previously discussed, the liability of
Macondray can no longer be enforced because the claim against it has prescribed; and as for Maritime, it cannot be
held liable for the acts of its known principal resulting in injury to Union. The interest must also be reduced to the
legal rate of 6%, conformably to our ruling in Reformina v. Tomol 24 and Article 2209 of the Civil Code, and should
commence, not on April 20, 1981, but on September 19, 1980, date of the filing of the original complaint.
WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court is REINSTATED as
above modified. The parties shall bear their respective costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-28589 February 29, 1972

RAFAEL ZULUETA, ET AL., plaintiffs-appellees,

vs.
PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant.

Jose W. Diokno for plaintiffs-appellees.

Ross, Salcedo, Del Rosario, Bito and Misa for defendant-appellant.

CONCEPCION, C.J.:p

Appeal, taken by defendant Pan American World Airways, Inc., from a decision of the Court of First Instance of
Rizal, sentencing said defendant to pay herein plaintiffs — Rafael Zulueta, Telly Albert Zulueta and Carolinda
Zulueta — "the sum of P5,502.85, as actual damages; plus the further sum of P1,000,000.00 as moral damages; the
further sum of P400,000.00 as exemplary damages; and attorney's fees in the sum of P100,000.00" with the costs
against said defendant, hereinafter referred to as PANAM for the sake of brevity.

It is not disputed that, on October 23, 1964, the spouse Rafael Zulueta and Telly Albert Zulueta — hereinafter
referred to as plaintiff and Mrs. Zulueta, respectively — as well as their daughter, Carolinda Zulueta — hereinafter
referred to as Miss Zulueta — were passengers aboard a PANAM plane, on Flight No. 841-23, from Honolulu to
Manila, the first leg of which was Wake Island. As the plane landed on said Island, the passengers were advised that
they could disembark for a stopover of about 30 minutes. Shortly before reaching that place, the flight was,
according to the plaintiffs, "very rough." Testifying for PANAM its purser, Miss Schmitz, asserted, however, that it
was "very calm"; but her notes, Exhibit 7 — prepared upon the request of Captain Zentner, on account of the
incident involved in this case — state that there was "unusually small amount of roughness," which His Honor, the
Trial Judge, considered properly as "an admission that there was roughness, only the degree thereof is in dispute." In
any event, plaintiff testified that, having found the need to relieve himself, he went to the men's comfort room at the
terminal building, but found it full of soldiers, in view of which he walked down the beach some 100 yards away.

Meanwhile, the flight was called and when the passengers had boarded the plane, plaintiff's absence was noticed.
The take-off was, accordingly, delayed and a search for him was conducted by Mrs. Zulueta, Miss Zulueta and other
persons. Minutes later, plaintiff was seen walking back from the beach towards the terminal. Heading towards the
ramp of the plane, plaintiff remarked, "You people almost made me miss your flight. You have a defective
announcing system and I was not paged." At this point, the decision appealed from has the following to say:

(1) Plaintiffs were on their way to the plane in order to board it, but defendant's employees —
Kenneth Sitton, defendants airport manager, according to plaintiffs; Wayne Pendleton, defendant's
airport customer service supervisor, according to defendant — stopped them at the gate. This is
what the report of Wayne Pendleton the airport customer service supervisor, says:

...I made no comment to the passenger but turned and led the group toward the ramp. Just as we
reached the boarding gate, Mr. Zulueta spoke to me for the first time saying, `You people almost
made me miss your flight. You have a defective announcing system and I was not paged."
 I was about to make some reply when I noticed the captain of the flight standing on the ramp,
midway between the gate and the aircraft, and talking with the senior maintenance supervisor and
several other persons. The captain motioned for me to join him which I did, indicating to the
Zulueta family that they should wait for a moment at the gate.

-- Exh. 5 .

(2) Thereafter, one of defendant's employees — Mr. Sitton, according to plaintiffs; Mr. Pendleton
according to defendants — asked plaintiffs to turn over their baggage claim checks. Plaintiffs did
so, handing him four (4) claim checks.

(3) However, only three (3) bags were located and segregated from the rest of the passenger's
luggage. The items hand-carried by plaintiffs, except for plaintiff's overcoat, were also brought
down. These hand-carried items, however, were not opened or inspected; later, plaintiffs Mrs.
Zulueta and Miss Zulueta were permitted to reboard the plane with their hand-carried luggage; and
when the plane took off, about two and a half hours later, it carried plaintiff's fourth bag, his
overcoat and the hand-carried luggage.

(4) Once three bags had been identified, and while the search was going on for the fourth bag, Mr.
Sitton, defendant's airport manager, demanded that plaintiffs open the bags (actually, they were
closed, but not locked) and allow defendant's employees to inspect them. Plaintiff Rafael Zulueta
refused and warned that defendant could open the bags only by force and at its peril of a law suit.

(5) Mr. Sitton, defendant's manager, then told plaintiff that he would not be allowed to proceed to
Manila on board the plane and handed Zulueta the following letters:

"'24 October 1964

Wake Island

"Mr. Zulueta:
Passenger aboard flight 84123
Honolulu/Manila .

Sir:

We are forced to off-load you from flight 84123 due to the fact that you have
refused to open your checked baggage for Inspection as requested.

During your stay on Wake Island, which will be for a minimum of one week,
you will be charged $13.30 per day for each member of your party.

K. Sitton
Airport Manager, Wake Island
Pan American World Airways, Inc."

— Exh. D

(6) All this happened in plain view and within earshot of the other passengers on the plane, many
of whom were Filipinos who knew plaintiffs;

The departure of the plane was delayed for about two hours

(7) Though originally all three plaintiffs had been off loaded, plaintiff requested that his wife and
daughter be permitted to continue with the flight. This was allowed but they were required to leave
 the three bags behind. Nevertheless, the plane did fly with the Plaintiff's fourth bag; it was found
among all other passengers' luggage flown to Manila upon the plane's arrival here.

(8) Upon arrival at Manila, Mrs. Zulueta demanded of defendant's Manila office that it re-route
plaintiff Rafael Zulueta to Manila at the earliest possible time, by the fastest route, and at its
expense; defendant refused; so plaintiffs were forced to pay for his ticket and to send him money
as he was without funds.

(9) On October 27, 1964, plaintiff Zulueta finally arrived at Manila, after spending two nights at
Wake, going back to Honolulu, and from Honolulu flying thru Tokyo to Manila.

(10) On December 21, 1964, plaintiffs demanded that defendant reimburse them in the sum of
P1,505,502.85 for damages but defendants refused to do so; hence this action.

In its brief, PANAM maintains that the trial court erred: (1) "in not granting defendant additional hearing dates (not
a postponement) for the presentation of its other witnesses"; (2) "in assuming it to be true that the reason plaintiff
Rafael Zulueta did not come aboard when the passengers were reboarded was that he had gone to the beach to
relieve himself"; (3) "in not holding that the real reason why plaintiff Rafael Zulueta did not reboard the plane, when
the announcement to do so was made, was that he had a quarrel with his wife and after he was found at the beach
and his intention to be left behind at Wake was temporarily thwarted he did everything calculated to compel Pan
American personnel to leave him behind"; (4) "in accepting as true plaintiff Rafael Zulueta's claim of what occurred
when; he arrived at the terminal after he was found at the beach"; (5) "in not holding that the captain was entitled to
an explanation for Zulueta's failure to reboard and not having received a reasonable explanation and because of
Zulueta's irrational behavior and refusal to have his bags examined, the captain had the right and duty to leave
Zulueta behind"; (6) "in condemning the defendant to pay plaintiffs P5,502.85 as actual damages plus the further
sum of P1,000,000.00 as moral damages, and the further sum of P400,000.00 as exemplary damages, and attorneys'
fees in the sum of P100,000.00"; and (7) "in not granting defendant's counterclaim of attorney's fees and expenses of
litigation." .

PANAM's first assignment of error refers to the denial of its motion, dated October 20, 1966, that it "be granted
other hearing dates about two months from today so as to be able to present defendant's other witnesses or their
depositions."

It appears that the complaint in this case was filed on September 30, 1965. It was amended on December 1, 1965,
and again on April 14, 1966. PANAM answered the second amended complaint on May 6, 1966. After a pre-trial
conference, held on May 28, 1966, the case was set for hearing on June 1, 2 and 3, 1966. By subsequent agreement
of the parties, the hearing was, on June 3, 1966, reset for August 1, 2 and 3, 1966. Plaintiffs rested their case on
August 2, 1966, whereupon it was agreed that PANAM's witnesses would be presented "at a later date," months
later, because they would "come from far-flung places like Wake Island, San Francisco, Seattle and it will take time
to arrange for their coming here." Accordingly the case was reset for October 17, 18 and 19, 1966, at 8:30 a.m. On
motion of the plaintiffs, the trial scheduled for October 17 was cancelled, without any objection on the part of
PANAM but, to offset said action, additional hearings were set for October 18 and 19, in the afternoon, apart from
those originally set in the morning of these dates. Before the presentation of PANAM's evidence, in the morning of
October 18, 1966, plaintiffs' counsel asked for the names of the former's witnesses, so that those not on the witness
stand could be excluded from the courtroom. PANAM's counsel announced that his witnesses were Marshall Stanley
Ho, Kenneth Sitton, Michael Thomas, Wayne S. Pendleton, Capt. Robert Zentner and Miss Carol Schmitz.

The defense then proceeded to introduce the testimony of said witnesses, and consumed therefor the morning and
afternoon of October 18 and the morning of October 19. Upon the conclusion, that morning, of the testimony of the
last witness for the defense, its counsel asked that it "be given an opportunity to present our other witnesses who are
not present today, at the convenience of the Court." The motion was denied, but, said counsel sought a
reconsideration and the court gave PANAM a last chance to present its "other witnesses" the next day, October 20.
Instead of doing so, PANAM filed a written motion reiterating its prayer for "other hearing dates about two months
from today so as to be able to present defendant's other witnesses or their depositions." Upon denial of this motion,
PANAM made an offer of the testimony it expected from one Edgardo Gavino, an unnamed meteorologist, either
Sue Welby and/or Helga Schley, and John C. Craig, Ida V. Pomeroy, Herman Jaffe, Gerry Cowles and Col. Nilo de
Guia.

His Honor, the Trial Judge, did not commit a reversible error in denying said motion of October 20, 1966. PANAM
knew, as early as August 2, 1966, that its turn to present evidence would take place, as agreed upon, about two (2)
months and a half later, or on October 17, 18 and 19, 1966. PANAM has not offered any valid excuse for its failure
to bring to court the witnesses mentioned in said motion, despite the assurance given by its counsel, on August 2,
1966, that the defense would "spare no effort to bring them here," or, if they could not be brought due to
circumstances beyond PANAM's control, to "submit their deposition." The records do not show that any such effort
to bring the aforementioned witnesses had been exerted. The defense has not even tried to explain why the
deposition of said witnesses was not taken. What is worse, the proffered explanation — that the six (6) persons who
testified for the defense1 were believed, by defense counsel, to be enough for the three (3) days of October set for the
reception of his evidence2 — indicates that no effort whatsoever had been made either to bring the "other
witnesses"3 or to take and submit their depositions.

Besides, the testimony allegedly expected of said other witnesses for the defense — namely: (1) that there was,
according to official records, no turbulence in the flight from San Francisco to Honolulu, on which the testimony of
Carol Schmitz had touched; (2) that Ida V. Pomeroy and John C. Craig would say that the passengers were advised
not to go beyond the terminal and that the stopover would be for about 30 minutes only, on which duration of the
stopover Miss Schmitz had, also testified, as she could have similarly testified on said advice, had it been given; (3)
that either Helga Schley or Sue Welby would narrate the sympathy with which Mrs. Zulueta was allegedly treated
during the flight from Wake Island to Manila, which is not particularly relevant or material in the case at bar; (4)
that Herman Jaffe, Gerry Cowles and Nilo de Guia were, also, expected to corroborate the testimony of Capt.
Zentner; and (5) that Edgardo Gavino was expected to corroborate Michael Thomas regarding the remarks made by
the plaintiff to Mrs. Zulueta and Miss Zulueta when they and other members of the searching party found him in the
early morning of October 23, 1964 -- were merely cumulative in nature

Then, again, PANAM did not comply with section 4 of Rule 22 of the Rules of Court, reading:

SEC. 4. Requisites of motion to postpone trial for absence of evidence. — A motion to postpone a
trial on the ground of absence can be granted only upon affidavit showing the materiality of
evidence expected to be obtained, and that due diligence has been used to procure it. But if the
adverse party admits the facts to be given in evidence, even if he objects or reserves the right to
object to their admissibility, the trial must not be postponed." .

Although this provision refers to motions "to postpone trial," it applies with equal force to motions like the one
under consideration, there being no plausible reason to distinguish between the same and a motion for postponement
owing to the "absence of evidence."

The second, third and fourth assignments of error are interrelated. They refer to the question whether the reason why
plaintiff went to the beach was to relieve himself, as testified to by him, or to remain in Wake Island because he had
quarreled with his wife, as contended by PANAM's counsel.

The latter contention however, is utterly devoid of merit. To begin with, plaintiff's testimony about what he did upon
reaching the beach is uncontradicted. Secondly, other portions of his testimony — such as, for instance, that the
flight was somewhat rough, shortly before reaching Wake Island; that there were quite a number of soldiers in the
plane and, later, in the terminal building; that he did not voluntarily remain in Wake Island, but was "off-loaded" by
PANAM's agent therein — are borne out by the very evidence for the defense. Thirdly, PANAM's efforts to show
that plaintiff had decided to remain in the Island because he had quarreled with Mrs. Zulueta — which is ridiculous
— merely underscores the artificious nature of PANAM's contention.

Fourthly, there is absolutely no direct evidence about said alleged quarrel. Nobody testified about it. Counsel for the
defense has, in effect, merely concluded that there must have been such quarrel because, when the searching party
located plaintiff, he — according to Stanley Ho — was "shouting in a loud tone of voice" — not at his wife, but —
"towards his wife and daughter," who headed said party and to which the words spoken were addressed, according
to plaintiff. Capt. Zentner said that plaintiff was "angry with them" — Mrs. Zulueta and Miss Zulueta — who
Michael Thomas affirmed — were saying "I am sorry, I am sorry"; whereas, Wayne S. Pendleton declared that
Gavino told him that this "seems to stem from a domestic issue" between Mr. and Mrs. Zulueta. Surely, this alleged
surmise, not even by Pendleton but by Gavino — who was not placed on the witness stand — cannot be taken as
competent evidence that plaintiff had quarreled with his wife, apart from the circumstance that such quarrel — if it
took place and there is absolutely no evidence or offer to prove that anything had transpired between husband and
wife before reaching Wake Island which may suggest a misunderstanding between them — does not warrant
jumping at the conclusion that plaintiff had decided to remain in the Island, for he would gain nothing thereby.

Needless to say, if plaintiff's purpose in going to the beach was to hide from Mrs. and Miss Zulueta and PANAM's
personnel, so that he may be left in the Island, he, surely, would not have walked back from the beach to the
terminal, before the plane had resumed its flight to Manila, thereby exposing his presence to the full view of those
who were looking for him.

Then, again, the words uttered by him as he saw the search party and approached the plane — "You people almost
made me miss your flight. You have a defective announcing system and I was not paged" — and the "belligerent"
manner — according to Captain Zentner — in which he said it revealed his feeling of distress at the thought that the
plane could have left without him.4

The second, third and fourth assignments of error are thus clearly untenable.

In connection with the fifth assignment of error, PANAM's witness, Captain Zentner, testified that, while he was
outside the plane, waiting for the result of the search, a "man" approached him and expressed concern over the
situation; that the "man" said he was with the State Department; that he, his wife and their children, who were on
board the aircraft, would not want to continue the flight unless the missing person was found; that the "man"
expressed fear of a "bomb," a word he used reluctantly, because he knew it is violative of a Federal law when said at
the wrong time; that when plaintiff came, Zentner asked him: "why did you not want to get on the airplane?"; that
plaintiff then became "very angry" and spoke to him "in a way I have not been spoken to in my whole adult life";
that the witness explained: "I am Captain of the aircraft and it is my duty to see to the flight's safety"; that he
(Zentner) then told Wayne Pendleton — PANAM's Customer Service Supervisor — to get plaintiff's "bags off the
plane to verify ... about the bomb"; that PANAM's airport manager (K. Sitton) "got three bags of Mr. Zulueta"; that
his fourth bag could not be located despite a thorough search; that believing that it must have been left behind, in
Honolulu, "we took off"; and that he (Zentner) would not have done so had he thought it was still aboard.

The lower court did not err in giving no credence to this testimony.

Indeed, Captain Zentner did not explain why he seemingly assumed that the alleged apprehension of his informant
was justified. He did not ask the latter whether he knew anything in particular about plaintiff herein, although some
members of the crew would appear to have a notion that plaintiff is an impresario. Plaintiff himself intimated to
them that he was well known to the U.S. State Department. Apparently, Captain Zentner did not even know the
informant's name. Neither did the captain know whether the informant was really working for or in the State
Department. In other words, there was nothing — absolutely nothing — to justify the belief that the luggage of the
missing person should be searched, in order to ascertain whether there was a bomb in it; that, otherwise, his presence
in the aircraft would be inimical to its safety; and that, consequently, he should be off-loaded.

In fact, PANAM has not given the name of that "man" of the State Department. Neither has the defense tried to
explain such omission. Surely, PANAM's records would have disclosed the identity of said "man," if he were not a
mere figment of the imagination. The list of passengers has been marked as Exh. A, and yet PANAM has not
pointed out who among them is the aforementioned "man".

The trial court did not believe the testimony of Captain Zentner and rejected the theory of the defense, for the
following reasons:

(1) The defendant had contracted to transport plaintiff from Honolulu to Manila. It was its legal
obligation to do so, and it could be excused from complying with the obligation only, if the
passenger had refused to continue with the trip or it had become legally or physically impossible
without the carrier's fault, to transport him.
(2) In this case, it is plain that Zulueta was desirous of continuing with the trip. Although
defendant's witnesses claim that Zulueta refused to board the plane, its own evidence belies this
claim. The letter, Exh. "D", shows that it was defendant who off-loaded Zulueta; not Zulueta who
resisted from continuing the trip. In his testimony before the Court, Capt. Zentner, defendant's
pilot, said that if a passenger voluntarily left the plane, the term used would be `desistance' but the
term "off-load" means that it is the decision of the Captain not to allow the passenger or luggage to
continue the flight. However, Capt. Zentner admitted on his testimony that "his drunkenness... was
of no consequence in my report; (it) ... had nothing to do with his being belligerent and unfriendly
in his attitude towards me and the rest of the members of the crew." The written report of Capt.
Zentner made in transit from Wake to Manila "intimated he might possibly continue;" but "due to
drinking, belligerent attitude, he was off-loaded along with his locked bags." (Exh. 10). In a later
report, Zentner admitted, "The decision to leave Mr. Zulueta and his locked luggage in Wake was
mine and alone." (Exh. 9). Defendant's airport customer service supervisor, W.S. Pendleton,
reported that:

"After the search for Mr. Zulueta had continued almost 20 minutes and it was apparent that he was
not be found in the terminal building or immediate vicinity, I proceeded to the parking lot and
picked up my jeep continue the search in more remote areas. Just as I was getting underway, a
small group of persons approach from the direction of the beach and a voice called out the
passenger had been found. Having parked the jeep again, I walked toward the group and was met
by PAA fleet-serviceman E. Gavino who was walking somewhere ahead of the others. Mr. Gavino
remarked to me privately that the trouble seemed to have stemmed from some domestic difference
between the Passenger and his wife who was not at his side and returning with him to the gate.

"On hearing Mr. Gavino's remark, I made no comment to the passenger but turned and led the
group toward the ramp. Just as we reached the boarding gate, Mr. Zulueta spoke to me for the first
time saying, "You people almost made me miss your flight. You have a defective announcing
system and I was not paged."

— Exh. 5

Evidently, these could not have been the words of a man who refused to board the plane.

(3) There was no legal or physical impossibility for defendant to transport plaintiff Zulueta from
Wake to Manila as it had contracted to do. Defendant claims that the safety of its craft and of the
other passengers demanded that it inspect Zulueta's luggage and when he refused to allow
inspection that it had no recourse but to leave him behind. The truth that, knowing that of
plaintiff's four pieces of luggage, one could still have been — as it was — aboard, defendant's
plane still flew on to Manila. Surely, if the defendant's pilot and employees really believed that
Zulueta had planted a bomb in one of the bags they would not have flown on until they had made
sure that the fourth bag had been left behind at Honolulu until enough time had lapsed for the
bomb to have been exploded, since presumably it had to have been set to go off before they
reached Manila.

"At any rate, it was quite evident that Zulueta had nothing to hide; for the report of defendant's
witness, Mr. Stanley E. Ho, U.S. Marshall on Wake, has this to say: "

"About twenty minutes later while an attempt was being made to locate another piece of Mr.
Zulueta's luggage his daughter, Carolinda approached her father and wanted to get some clothes
from one of the suitcases. Mr. Zulueta asked the undersigned if it was alright if he opened the
suitcases and get the necessary clothes. To this I stated he was free to open his luggage and obtain
whatever he needed. Mr. Zulueta opened a suitcase and took the dress for her then boarded the
aircraft."

— Exh. 2B .
(4) What is evident to the Court is that defendant — acted in a manner deliberately calculated to
humiliate and shame plaintiffs. Although the plane was held up to wait for plaintiff — for, as the
Captain admitted in his testimony, he did so because he knew that it would be a week before
another plane would come in for Manila (t.s.n., 18 Oct. 1966, pp. 59-62) when plaintiff did come,
he was met and treated roughly by defendant's manager Sitton. Here is what Zulueta testified to:

"Q. — When you saw your wife and daughter what happened? A. — Then I
started going towards the airplane. At the ramp, I do not know what they call it,
as soon as they arrived there, there was a man who subsequently identified
himself as Kenneth Sitton. He identified himself as the Airport Manager of
Wake Island. He did not ask me what happened, was I sick, he looked at me and
said, what in the hell do you think you are? Get on that plane. Then I said, what
right have you to talk to me that way, I am a paying passenger. Do not treat me
this way. And this started the altercation, and then he said, do you know you
held up the plane? And I answered, this is not my fault, I was sick. Did it not
occur to you to ask me how I feel; then he said get on that plane.

"Q. — What happened? A. — we started discussing kept saying, "You get on

that plane" and then I said, "I don't have to get on that plane." After a prolonged
discussion, he said, give me your baggage tags and I gave him four baggage
tickets or tags. I did not realize what he was up to until finally, I saw people
coming down the airplane and police cars arrived and people were coming down
the ramp. I gave him the four baggage tags and a few minutes late, he brought
three baggages and said, open them up. I said, to begin with, there is one
baggage missing and that missing bag is my bag. Then I said you cannot make
me open these baggages unless you are United States customs authorities and
when I arrive in the Philippines they can be opened by the Philippine Customs
authorities. But an Airport Manager cannot make me open my bags unless you
do exactly the same thing to all the passengers. Open the bags of all the other
passengers and I will open my bag.

"Q. — What did he say: A. — He just kept on saying open your bag, and I drew
up my hands and said, you want, you open yourself or give me a search warrant
I shall open this bag but give me a search warrant and then I asked, who is the
Chief of Police, and he said, "I am Chief of Police," then I said how can you be
the Chief Police and Airport Manager and then he started to talk about double
compensation and by this time we were both quarreling and he was shouting and
so with me. Then there was a man who came around and said `open the bag' and
I said, show the warrant of arrest and do all the checking and the discussion kept
on going, and finally I said look, my fourth bag is missing and he said, "I don't
give damn." People at the time were surrounding us and staring at us and also
the passengers. My wife and daughter all along had been made to sit on a railing
and this man screaming and looking at my wife and daughter. Then he said, will
you pull these three monkeys out of here? then I said, will you send my wife and
daughter up the plane which he did. However, they have come down in their
slippers and when they were allowed to return to the plane none of the
defendant's personnel who had brought down the overcoats, shoes and
handcarried items of my wife and daughter ever offered to bring back the items
to the plane, until I demanded that one of the defendants should help my wife
and daughter which he did. And then one man told me, because you refused to
open your bag, "we shall hold you here in Wake Island." then I asked, are we
under arrest? and the man answered, no. And further stated, your wife and
daughter can continue their flight but you will not go to this flight an we will
charge you $13.30 a day. Then I said, who are you to tell all these things, and he
answered, I am the manager. I said, put it in writing, then left and in few minutes
he came back and handed me this letter (witness referring to Exhibit D)." .
— t.s.n., August 1, 1966, pp. 15-21

Anyone in Zulueta's position would have reached the same way if he had had a sense of dignity.
Evidently, angered by Zulueta's reaction, irked by the delay he had caused them, defendant's
employees decided to teach him a lesson by forcing him to open his bags when there was no
justifiable reason to do so:

(a) Defendant did not make any attempt to inquire from any passenger or even the crew who knew
Mr. Zulueta what his character and reputation are, before demanding that he open the bags; if it
had done so, Miss Schmitz, the purser, and Col. Villamor would have vouched for plaintiffs; for
Miss Schmitz believed she had flown before with the Zulueta's and they had been very nice
people.

(b) Worse, defendant's manager Sitton admits that Zulueta had told him who he was and his social
position in Manila; still he insisted that the bags be opened. Moreover, some passengers had
informed the supervisor that Zulueta was "the impresario"; but they persisted in their demands.

(c) Defendant never identified the alleged State Department men who reportedly approached the
Captain and expressed fear about a bomb, nor did they confront him — if he existed with Mr.
Zulueta despite Mr. Zulueta's request.

(d) Defendant did not take any steps to put the luggage off-loaded far from its passengers and
plane, a strange procedure if it really believed the luggage contained a bomb;

(e) Defendant continued with the flight knowing one bag -- Zulueta's bag himself — had not been
located and without verifying from Honolulu if the bag had been found there, nor even advising
Honolulu that a bag possibly containing a bomb had been left there, again an inexplicable
procedure if they sincerely believed that Zulueta had planted a bomb;

(f) Defendant's manager himself took Zulueta and his off-loaded bags, in his own car, from the
terminal building to the hotel, which is also inconsistent with a serious belief that the luggages
contained a bomb;

(g) Defendant knew that while Zulueta's bags were on the ground, he had opened one of them with
the permission and in the presence of the U. S. Marshall in order to enable his daughter to get a
dress from the bag; nothing suspicious was seen; still, defendant insisted on refusing to allow
Zulueta to continue unless he opened and allowed inspection of the bags by them; .

(h) Defendant completely changed his tone and behavior towards the Zulueta's after the plane had
arrived at Manila and the Captain learned that its Manila manager, Mr. Oppenheimer, was a friend
of Zulueta;

(i) Meantime, the attitude of Pan American towards the Zulueta's caused other passengers to resent
Zulueta (See reports of Stewardesses and of Captain Zentner, Exhs. 7, 8, 9 and 10). "Many
passengers were angry towards the `missing passenger," says Miss Schmitz's report. "A few
inquisitive PA (passengers) — one woman quite rudely stared once we were airborne and left Mr.
Zulueta behind ... anyway I told the woman to sit down — so did Helga — so did the man near
her," say Miss Schmitz's personal notes. This confirms the testimony of plain plaintiffs that, all the
while the search and discussions were going on, they were the subject of stares, remarks and
whisper comments from the passengers and other persons around the plane.

(j) Defendant did not allow plaintiff Zulueta to board the plane at all, even though it was aware
that some of his personal belongings, such as his overcoat were on the plane. Plaintiffs so testified;
and though defendant's witness Mr. Sitton denied it, claiming that plaintiff was always free to
 board the plane, this denial is belied by the report of defendant's own witness, U.S. Marshall Ho,
who said that:

"Ten minutes later, Mr. Zulueta asked if he could talk to his wife who was aboard the aircraft. I
then accompanied him and as we got to the ramp, we met Mr. Sitton who stated he would summon
Mrs. Zulueta from the aircraft. Mr. Sitton summoned Mrs. Zulueta and she met her husband at the
foot of the ramp. Mr. Zulueta then asked his wife and himself to which I replied I was not
concerned what he had to say."

— Exh. 2-B

(k) Finally, to add further humiliation and heap indignity on plaintiffs, when Mrs. Zulueta arrived
at Manila and appealed to defendant's Manila manager, Mr. Oppenheimer, to see to it that her
husband got back as soon as possible and was made as comfortable as possible, at defendant's
expense, Mr. Oppenheimer refused to acknowledge any obligation to transport Mr. Zulueta back
to Manila and forcing Mrs. Zulueta to send her husband $100.00 for pocket money and pay for his
fare from Wake to Manila, thru Honolulu and Tokyo.

Upon a review of the record, We are satisfied that the foregoing findings of His Honor, the Trial Judge, are
supported by a preponderance of the evidence.

The last two (2) assignments of error are mere consequences of those already disposed of, and, hence, need no
extended discussion.

It is urged, however, that plaintiff is, at most, entitled to actual damages only, because he was the first to commit a
breach of contract, for having gone over 200 yards away from the terminal, where he could not expect to be paged.
But, PANAM has not pointed out what part of the contract has been violated thereby, apart from the fact that the
award for damages made in the decision appealed from was due, not to PANAM's failure to so page the plaintiff, but
to the former's deliberate act of leaving him at Wake Island, and the embarrassment and humiliation caused to him
and his family in the presence of many other persons. Then, also, considering the flat nature of the terrain in Wake
Island, and the absence of buildings and structures, other than the terminal and a modest "hotel," as well as plaintiff's
need of relieving himself, he had to find a place beyond the view of the people and near enough the sea to wash
himself up before going back to the plane.

It is next argued that plaintiff was, also, guilty of contributory negligence for failure to reboard the plane within the
30 minutes announced before the passengers debarked therefrom. This might have justified a reduction of the
damages, had plaintiff been unwittingly left by the plane, owing to the negligence of PANAM personnel, or even,
perhaps, wittingly, if he could not be found before the plane's departure. It does not, and cannot have such
justification in the case at bar, plaintiff having shown up before the plane had taken off, and he having been off-
loaded intentionally and with malice aforethought, for his "belligerent" attitude, according to Captain Zentner; for
having dared — despite his being one of "three monkeys," — the term used by Captain Zentner to refer to the
Zulueta family — to answer him back — when he (Captain Zentner)5 said: "what in the hell do you think you are ?"
— in a way he had "not been spoken to" in his "whole adult life," in the presence of the passengers and other
PANAM employees; for having responded to a command of either Zentner or Sitton to open his (plaintiff's) bags,
with a categorical refusal and a challenge for Zentner or Sitton to open the bags without a search warrant therefor,
thereby making manifest the lack of authority of the aforementioned representative of PANAM to issue said
command and exposing him to ridicule before said passengers and employees. Besides, PANAM's own witness and
employee, Wayne Pendleton, testified the plane could not take off at 4:30, as scheduled, because "we were still
waiting for two (2) local passengers."

Article 2201 of our Civil Code reads:

In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is
liable shall be those that are the natural and probable consequences of the breach of the obligation,
and which the parties have foreseen or could reasonably foreseen at the time the obligation was
constituted.
 In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to the non-performance of the obligation.

This responsibility applies to common carriers. Pursuant to Article 1759 of the same Code:

ART. 1759. Common carriers are liable for the death or injuries to passengers through the
negligence or wilful 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 proof that they exercised all the diligence of a
good father of a family in the selection and supervision of their employees.

Referring now to the specific amounts to damages due to plaintiffs herein, We note that the sum of P5,502.85
awarded to them as actual damages is not seriously disputed by PANAM.

As regards the moral and exemplary damages claimed by the plaintiffs, our Civil Code provides:

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage.

ART. 2217. 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 defendant's wrongful act or omission.

ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction for
the public good, in addition to the moral, temperate liquidated or compensatory damages.

ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

The records amply establish plaintiffs' right to recover both moral and exemplary damages. Indeed, the rude and
rough reception plaintiff received at the hands of Sitton or Captain Zentner when the latter met him at the ramp
("what in the hell do you think you are? Get on that plane"); the menacing attitude of Zentner or Sitton and the
supercilious manner in which he had asked plaintiff to open his bags ("open your bag," and when told that a fourth
bag was missing, "I don't give a damn"); the abusive language and highly scornful reference to plaintiffs as monkeys
by one of PANAM's employees (who turning to Mrs. Zulueta and Miss Zulueta remarked, "will you pull these three
monkeys out of here?"); the unfriendly attitude, the ugly stares and unkind remarks to which plaintiffs were
subjected, and their being cordoned by men in uniform as if they were criminals, while plaintiff was arguing with
Sitton; the airline officials' refusal to allow plaintiff to board the plane on the pretext that he was hiding a bomb in
his luggage and their arbitrary and high-handed decision to leave him in Wake; Mrs. Zulueta's having suffered a
nervous breakdown for which she was hospitalized as a result of the embarrassment, insults and humiliations to
which plaintiffs were exposed by the conduct of PANAM's employees; Miss Zulueta's having suffered shame,
humiliation and embarrassment for the treatment received by her parents at the airport6 — all these justify an award
for moral damages resulting from mental anguish, serious anxiety, wounded feelings, moral shock, and social
humiliation thereby suffered by plaintiffs.

The relation between carrier and passenger involves special and peculiar obligations and duties,
differing in kind and degree, from those of almost every other legal or contractual relation. On
account of the peculiar situation of the parties the law implies a promise and imposes upon the
carrier the corresponding duty of protection and courteous treatment. Therefore, the carrier is
under the absolute duty of protecting his passengers from assault or insult by himself or his
servants. 7
 A contract to transport passengers is quite different in kind and degree from any other contractual
relation. And this, because of the relation which an air-carrier sustains with the public. Its business
is mainly with the travelling public. It invites people to avail of the comforts and advantages it
offers. The contract of air carriage, therefore, generates a relation tended with a public duty.
Neglect or malfeasance of the carrier's employees naturally could give ground for an action for
damages.

Passengers do not contract merely for transportation. They have a right to be treated by the
carrier's employees with kindness, respect, courtesy and due consideration. They are titled to be
protected against personal misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rude or discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against the carrier. 8

A carrier of passengers is as much bound to protect them from humiliation and insult as from
physical injury .. It is held in nearly all jurisdictions, if not universally, that a carrier is liable to a
passenger for humiliation and mental suffering caused by abusive or insulting language directed at
such passenger by an employee of the carrier. 9

Where a conductor uses language to a passenger which is calculated to insult, humiliate, or wound
the feelings of a person of ordinary feelings and sensibilities, the carrier is liable, because the
contract of carriage impliedly stipulates for decent, courteous, and respectful treatment, at hands of
the carrier's employees.10

The general rule that a carrier owes to a passenger highest degree of care has been held to include
the duty to protect the passenger from abusive language by the carrier's agents, or by others if
under such circumstances that the carrier's agents should have known about it and prevented it.
Some of the courts have mentioned the implied duty of the carrier, arising out of the contract of
carriage, not to insult the passenger, or permit him to be insulted, and even where no mention is
made of this basis for liability, it is apparent that it is the ground upon which recovery is
allowed. 11

The question is whether the award of P1,000,000 as moral damages was proper and justified by the circumstances. It
has been held that the discretion in fixing moral damages lies in the trial court. 12 Among the factors courts take into
account in assessing moral damages are the professional, social, political and financial standing of the offended
parties on one hand, and the business and financial position of the offender on the other. 13

In comparatively recent cases in this jurisdiction, also involving breach of contract of air carriage, this Court
awarded the amount of P25,000, where plaintiff, a first-class passenger in an Air France plane from Manila to Rome
was, in Bangkok, forced by the manager of the airline company to leave his first class accommodation after he was
already seated because there was a white man who, the manager alleged, had a "better right" to the seat 14 ;the
amount of P200,000, where plaintiffs, upon confirmation of their reservation in defendant airline's flight from Tokyo
to San Francisco were issued first class tickets, but upon arrival in Tokyo were informed that there was no
accommodation for them in the first class compartment and told they could not go unless they took the tourist
class 15 — in both of which cases the Court found the airline companies to have acted in bad faith, or in a wanton,
reckless and oppressive manner, justifying likewise the award of exemplary damages.

None of the passengers involved in said cases was, however, off-loaded, much less in a place as barren and isolated
as Wake Island, with the prospect of being stranded there for a week. The aforementioned passengers were merely
constrained to take a tourist or third class accommodation in lieu of the first class passage they were entitled to.
Then, also, in none of said cases had the agents of the carrier acted with the degree of malice or bad faith of those of
PANAM in the case at bar, or caused to the offended passengers a mental suffering arising from injuries to feelings,
fright and shock due to abusive, rude and insulting language used by the carrier's employees in the presence and
within the hearing of others, comparable to that caused by PANAM's employees to plaintiffs herein

To some extent, however, plaintiff had contributed to the gravity of the situation because of the extreme belligerence
with which he had reacted on the occasion. We do not over-look the fact that he justly believed he should uphold
and defend his dignity and that of the people of this country that the discomfort, the difficulties, and, perhaps, the
ordeal through which he had gone to relieve himself — which were unknown to PANAM's agents — were such as
to put him in no mood to be understanding of the shortcoming of others; and that said PANAM agents should have
first inquired, with an open mind, about the cause of his delay instead of assuming that he was at fault and of taking
an arrogant and overbearing attitude, as if they were dealing with an inferior. Just the same, there is every reason to
believe that, in all probability, things would not have turned out as bad as they became had he not allowed himself,
in a way, to be dragged to the level or plane on which PANAM's personnel had placed themselves.

In view of this circumstance, We feel that the moral and exemplary damages collectible by the plaintiffs should be
reduced to one-half of the amounts awarded by the lower court, that is, to P500,000 for moral damages, and
P200,000 for exemplary damages, aside from the attorney's fees which should, likewise, be reduced to P75,000.

On April 22, 1971, Mrs. Zulueta filed a motion alleging that she had, for more than two (2) years, been actually
living separately from her husband, plaintiff Rafael Zulueta, and that she had decided to settle separately with
PANAM and had reached a full and complete settlement of all her differences with said defendant, and praying
accordingly, that this case be dismissed insofar as she is concerned, Required to comment on said motion, PANAM
expressed no objection thereto.

Upon the other hand, plaintiff prayed that the motion be denied, upon the ground that the case at bar is one for
damages for breach of a contract of carriage, owing to the off-loading of plaintiff Rafael Zulueta, the husband and
administrator of the conjugal partnership, with the funds of which the PANAM had been paid under said contract;
that the action was filed by the plaintiffs as a family and the lower court had awarded damages to them as such
family; that, although PANAM had questioned the award of damages, it had not raised the question whether the
lower court should have specified what portion of the award should go to each plaintiff; that although Mr. and Mrs.
Zulueta had, for sometime, been living separately, this has been without judicial approval; that Mrs. Zulueta may
not, therefore, bind the conjugal partnership or settle this case separately; and that the sum given by PANAM to
Mrs. Zulueta is believed to be P50,000, which is less than 3-1/2% of the award appealed from, thereby indicating the
advisability of denying her motion to dismiss, for her own protection.

Pursuant to a resolution, dated June 10, 1971, deferring action on said motion to dismiss until the case is considered
on the merits. We now hold that the motion should be, as it is hereby denied. Indeed, "(t)he wife cannot bind the
conjugal partnership without the husband's consent, except in cases provided by law," 16 and it has not been shown
that this is one of the cases so provided. Article 113 of our Civil Code, pursuant to which "(t)he husband must be
joined in all suits by or against the wife, except: ... (2) If they have in fact been separated for at least one year ..." —
relied upon by PANAM — does not warrant the conclusion drawn therefrom by the latter. Obviously the suit
contemplated in subdivision (2) of said Article 113 is one in which the wife is the real party — either plaintiff or
defendant — in interest, and, in which, without being so, the hush must be joined as a party, by reason only of his
relation of affinity with her. Said provision cannot possibly apply to a case, like the one at bar, in which the husband
is the main party in interest, both as the person principally grieved and as administrator of the conjugal partnership.
Moreover, he having acted in this capacity in entering into the contract of carriage with PANAM and paid the
amount due to the latter, under the contract, with funds of conjugal partnership, the damages recoverable for breach
of such contract belongs to said partnership.

Modified, as above stated, in the sense that plaintiffs shall recover from defendant, Pan American World Airways,
Inc., the sums of P500,000 as moral damages, P200,000 as exemplary damages, and P75,000 as attorney's fees, apart
from P5,502.85 as actual damages, and without prejudice to deducting the aforementioned sum of P50,000 already
paid Mrs. Zulueta, the decision appealed from is hereby affirmed in all other respects, with the costs against said
defendant.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-56487 October 21, 1991

REYNALDA GATCHALIAN, petitioner,

vs.
ARSENIO DELIM and the HON. COURT OF APPEALS, respondents.

Pedro G. Peralta for petitioner.

Florentino G. Libatique for private respondent.

FELICIANO, J.:

At noon time on 11 July 1973, petitioner Reynalda Gatchalian boarded, as a paying passenger, respondent's
"Thames" mini bus at a point in San Eugenio, Aringay, La Union, bound for Bauang, of the same province. On the
way, while the bus was running along the highway in Barrio Payocpoc, Bauang, Union, "a snapping sound" was
suddenly heard at one part of the bus and, shortly thereafter, the vehicle bumped a cement flower pot on the side of
the road, went off the road, turned turtle and fell into a ditch. Several passengers, including petitioner Gatchalian,
were injured. They were promptly taken to Bethany Hospital at San Fernando, La Union, for medical treatment.
Upon medical examination, petitioner was found to have sustained physical injuries on the leg, arm and forehead,
specifically described as follows: lacerated wound, forehead; abrasion, elbow, left; abrasion, knee, left; abrasion,
lateral surface, leg, left. 1

On 14 July 1973, while injured. passengers were confined in the hospital, Mrs. Adela Delim, wife of respondent, visited them and later paid for their hospitalization and medical
expenses. She also gave petitioner P12.00 with which to pay her transportation expense in going home from the hospital. However, before Mrs. Delim left, she had the injured
passengers, including petitioner, sign an already prepared Joint Affidavit which stated, among other things:

That we were passengers of Thames with Plate No. 52-222 PUJ Phil. 73 and victims after the said Thames met an accident at Barrio Payocpoc Norte, Bauang, La
Union while passing through the National Highway No. 3;

That after a thorough investigation the said Thames met the accident due to mechanical defect and went off the road and turned turtle to the east canal of the road into
a creek causing physical injuries to us;

xxx xxx xxx

That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the said Thames, because it was an accident and the said
driver and owner of the said Thames have gone to the extent of helping us to be treated upon our injuries.

xxx xxx xxx 2

 (Emphasis supplied)

Notwithstanding this document, petitioner Gathalian filed with the then Court of First Instance of La Union an action extra contractu to recover compensatory and moral damages.
She alleged in the complaint that her injuries sustained from the vehicular mishap had left her with a conspicuous white scar measuring 1 by 1/2 inches on the forehead, generating
mental suffering and an inferiority complex on her part; and that as a result, she had to retire in seclusion and stay away from her friends. She also alleged that the scar diminished
her facial beauty and deprived her of opportunities for employment. She prayed for an award of: P10,000.00 for loss of employment and other opportunities; P10,000.00 for the
cost of plastic surgery for removal of the scar on her forehead; P30,000.00 for moral damages; and P1,000.00 as attorney's fees.

In defense, respondent averred that the vehicular mishap was due to force majeure, and that petitioner had already been paid and moreover had waived any right to institute any
action against him (private respondent) and his driver, when petitioner Gatchalian signed the Joint Affidavit on 14 July 1973.

After trial, the trial court dismissed the complaint upon the ground that when petitioner Gatchalian signed the Joint Affidavit, she relinquished any right of action (whether criminal
or civil) that she may have had against respondent and the driver of the mini-bus.

On appeal by petitioner, the Court of Appeals reversed the trial court's conclusion that there had been a valid waiver, but affirmed the dismissal of the case by denying petitioner's
claim for damages:

We are not in accord, therefore, of (sic) the ground of the trial court's dismissal of the complaint, although we conform to the trial court's disposition of the case — its
dismissal.

IN VIEW OF THE FOREGOING considerations, there being no error committed by the lower court in dismissing the plaintiff-appellant's complaint, the judgment of
dismissal is hereby affirmed.

Without special pronouncement as to costs.

SO ORDERED. 3

In the present Petition for Review filed in forma pauperis, petitioner assails the decision of the Court of Appeals and ask this Court to award her actual or compensatory damages
as well as moral damages.

We agree with the majority of the Court of Appeals who held that no valid waiver of her cause of action had been made by petitioner. The relevant language of the Joint Affidavit
may be quoted again:

That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the said Thames, because it was an accident and the said
driver and owner of the said Thames have gone to the extent of helping us to be treated upon our injuries. (Emphasis supplied)

A waiver, to be valid and effective, must in the first place be couched in clear and unequivocal terms which leave no doubt as to the intention of a person to give up a right or

A waiver may not casually be attributed to a person when the terms thereof do not
benefit which legally pertains to him. 4

explicitly and clearly evidence an intent to abandon a right vested in such person.
The degree of explicitness which this Court has required in purported waivers is illustrated in Yepes and Susaya v.
Samar Express Transit (supra), where the Court in reading and rejecting a purported waiver said:

. . . It appears that before their transfer to the Leyte Provincial Hospital, appellees were asked to sign as, in
fact, they signed the document Exhibit I wherein they stated that "in consideration of the expenses which
said operator has incurred in properly giving us the proper medical treatment, we hereby manifest our
desire to waive any and all claims against the operator of the Samar Express Transit."

xxx xxx xxx

Even a cursory examination of the document mentioned above will readily show that appellees did not
actually waive their right to claim damages from appellant for the latter's failure to comply with their
contract of carriage. All that said document proves is that they expressed a "desire" to make the waiver —
which obviously is not the same as making an actual waiver of their right. A waiver of the kind invoked by
appellant must be clear and unequivocal (Decision of the Supreme Court of Spain of July 8, 1887)
— which is not the case of the one relied upon in this appeal. (Emphasis supplied)

If we apply the standard used in Yepes and Susaya, we would have to conclude that the terms of the Joint Affidavit
in the instant case cannot be regarded as a waiver cast in "clear and unequivocal" terms. Moreover, the
circumstances under which the Joint Affidavit was signed by petitioner Gatchalian need to be considered. Petitioner
testified that she was still reeling from the effects of the vehicular accident, having been in the hospital for only three
days, when the purported waiver in the form of the Joint Affidavit was presented to her for signing; that while
reading the same, she experienced dizziness but that, seeing the other passengers who had also suffered injuries sign
the document, she too signed without bothering to read the Joint Affidavit in its entirety. Considering these
circumstances there appears substantial doubt whether petitioner understood fully the import of the Joint Affidavit
(prepared by or at the instance of private respondent) she signed and whether she actually intended thereby to waive
any right of action against private respondent.

Finally, because what is involved here is the liability of a common carrier for injuries sustained by passengers in
respect of whose safety a common carrier must exercise extraordinary diligence, we must construe any such
purported waiver most strictly against the common carrier. For a waiver to be valid and effective, it must not be
contrary to law, morals, public policy or good
customs. 5 To uphold a supposed waiver of any right to claim damages by an injured passenger, under circumstances
like those exhibited in this case, would be to dilute and weaken the standard of extraordinary diligence exacted by
the law from common carriers and hence to render that standard unenforceable. 6 We believe such a purported
waiver is offensive to public policy.

Petitioner Gatchalian also argues that the Court of Appeals, having by majority vote held that there was no
enforceable waiver of her right of action, should have awarded her actual or compensatory and moral damages as a
matter of course.

We have already noted that a duty to exercise extraordinary diligence in protecting the safety of its passengers is
imposed upon a common carrier. 7 In case of death or injuries to passengers, a statutory presumption arises that the
common carrier was at fault or had acted negligently "unless it proves that it [had] observed extraordinary diligence
as prescribed in Articles 1733 and 1755." 8 In fact, because of this statutory presumption, it has been held that a
court need not even make an express finding of fault or negligence on the part of the common carrier in order to
hold it liable. 9 To overcome this presumption, the common carrier must slow to the court that it had exercised
extraordinary diligence to prevent the injuries. 10 The standard of extraordinary diligence imposed upon common
carriers is considerably more demanding than the standard of ordinary diligence, i.e., the diligence of a
good paterfamilias established in respect of the ordinary relations between members of society. A common carrier is
bound to carry its passengers safely" as far as human care and foresight can provide, using the utmost diligence of a
very cautious person, with due regard to all the circumstances". 11

Thus, the question which must be addressed is whether or not private respondent has successfully proved that he had exercised extraordinary diligence to prevent the mishap
involving his mini-bus. The records before the Court are bereft of any evidence showing that respondent had exercised the extraordinary diligence required by law. Curiously,
respondent did not even attempt, during the trial before the court a quo, to prove that he had indeed exercised the requisite extraordinary diligence. Respondent did try to exculpate
himself from liability by alleging that the mishap was the result of force majeure. But allegation is not proof and here again, respondent utterly failed to substantiate his defense
offorce majeure. To exempt a common carrier from liability for death or physical injuries to passengers upon the ground of force majeure, the carrier must clearly show not only
that the efficient cause of the casualty was entirely independent of the human will, but also that it was impossible to avoid. Any participation by the common carrier in the

the Court summed up the essential

occurrence of the injury will defeat the defense of force majeure. In Servando v. Philippine Steam Navigation Company, 12

characteristics of force majeure by quoting with approval from the Enciclopedia Juridica Española:

Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor
is exempt from liability non-performance. The Partidas, the antecedent of Article 1174 of the Civil Code,
defines "caso fortuito" as 'an event that takes place by accident and could not have been foreseen. Examples
of this are destruction of houses, unexpected fire, shipwreck, violence of robber.

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

Upon the other hand, the record yields affirmative evidence of fault or negligence on the part of respondent common
carrier. In her direct examination, petitioner Gatchalian narrated that shortly before the vehicle went off the road and
into a ditch, a "snapping sound" was suddenly heard at one part of the bus. One of the passengers, an old woman,
cried out, "What happened?" ("Apay addan samet nadadaelen?"). The driver replied, nonchalantly, "That is only
normal" ("Ugali ti makina dayta"). The driver did not stop to check if anything had gone wrong with the bus.
Moreover, the driver's reply necessarily indicated that the same "snapping sound" had been heard in the bus on
previous occasions. This could only mean that the bus had not been checked physically or mechanically to
determine what was causing the "snapping sound" which had occurred so frequently that the driver had gotten
accustomed to it. Such a sound is obviously alien to a motor vehicle in good operating condition, and even a
modicum of concern for life and limb of passengers dictated that the bus be checked and repaired. The obvious
continued failure of respondent to look after the roadworthiness and safety of the bus, coupled with the driver's
refusal or neglect to stop the mini-bus after he had heard once again the "snapping sound" and the cry of alarm from
one of the passengers, constituted wanton disregard of the physical safety of the passengers, and hence gross
negligence on the part of respondent and his driver.

We turn to petitioner's claim for damages. The first item in that claim relates to revenue which petitioner said she
failed to realize because of the effects of the vehicular mishap. Petitioner maintains that on the day that the mini-bus
went off the road, she was supposed to confer with the district supervisor of public schools for a substitute teacher's
job, a job which she had held off and on as a "casual employee." The Court of Appeals, however, found that at the
time of the accident, she was no longer employed in a public school since, being a casual employee and not a Civil
Service eligible, she had been laid off. Her employment as a substitute teacher was occasional and episodic,
contingent upon the availability of vacancies for substitute teachers. In view of her employment status as such, the
Court of Appeals held that she could not be said to have in fact lost any employment after and by reason of the
accident. 13 Such was the factual finding of the Court of Appeals, a finding entitled to due respect from this Court.
Petitioner Gatchalian has not submitted any basis for overturning this finding of fact, and she may not be awarded
damages on the basis of speculation or conjecture. 14

Petitioner's claim for the cost of plastic surgery for removal of the scar on her forehead, is another matter. A person is entitled to the physical integrity of his or her body; if that
integrity is violated or diminished, actual injury is suffered for which actual or compensatory damages are due and assessable. Petitioner Gatchalian is entitled to be placed as
nearly as possible in the condition that she was before the mishap. A scar, especially one on the face of the woman, resulting from the infliction of injury upon her, is a violation of
bodily integrity, giving raise to a legitimate claim for restoration to her conditio ante. If the scar is relatively small and does not grievously disfigure the victim, the cost of surgery
may be expected to be correspondingly modest. In Araneta, et al. vs. Areglado, et al., 15 this Court awarded actual or compensatory damages for, among other things, the surgical
removal of the scar on the face of a young boy who had been injured in a vehicular collision. The Court there held:
 We agree with the appellants that the damages awarded by the lower court for the injuries suffered by Benjamin Araneta are inadequate. In allowing not more than
P1,000.00 as compensation for the "permanent deformity and — something like an inferiority complex" as well as for the "pathological condition on the left side of
the jaw" caused to said plaintiff, the court below overlooked the clear evidence on record that to arrest the degenerative process taking place in the mandible
and restore the injured boy to a nearly normal condition, surgical intervention was needed, for which the doctor's charges would amount to P3,000.00, exclusive of
hospitalization fees, expenses and medicines. Furthermore, the operation, according to Dr. Diño, would probably have to be repeated in order to effectuate a
complete cure, while removal of the scar on the face obviously demanded plastic surgery.

xxx xxx xxx

The father's failure to submit his son to a plastic operation as soon as possible does not prove that such treatment is not called for. The damage to the jaw and
the existence of the scar in Benjamin Araneta's faceare physical facts that can not be reasoned out of existence. That the injury should be treated in order to restore
him as far as possible to his original condition is undeniable. The father's delay, or even his negligence, should not be allowed to prejudice the son who has no
control over the parent's action nor impair his right to a full indemnity.

. . . Still, taking into account the necessity and cost of corrective measures to fully repair the damage; the pain suffered by the injured party; his feelings of inferiority
due to consciousness of his present deformity, as well as the voluntary character of the injury inflicted; and further considering that a repair, however, skillfully
conducted, is never equivalent to the original state, we are of the opinion that the indemnity granted by the trial court should be increased to a total of P18,000.00.
(Emphasis supplied)

Upon the other hand, Dr. Fe

Petitioner estimated that the cost of having her scar surgically removed was somewhere between P10,000.00 to P15,000.00. 16

Tayao Lasam, a witness presented as an expert by petitioner, testified that the cost would probably be between
P5,000.00 to P10,000.00. 17 In view of this testimony, and the fact that a considerable amount of time has lapsed
since the mishap in 1973 which may be expected to increase not only the cost but also very probably the difficulty of
removing the scar, we consider that the amount of P15,000.00 to cover the cost of such plastic surgery is not
unreasonable.

Turning to petitioner's claim for moral damages, the long-established rule is that moral damages may be awarded
where gross negligence on the part of the common carrier is shown. 18 Since we have earlier concluded that
respondent common carrier and his driver had been grossly negligent in connection with the bus mishap which had
injured petitioner and other passengers, and recalling the aggressive manuevers of respondent, through his wife, to
get the victims to waive their right to recover damages even as they were still hospitalized for their injuries,
petitioner must be held entitled to such moral damages. Considering the extent of pain and anxiety which petitioner
must have suffered as a result of her physical injuries including the permanent scar on her forehead, we believe that
the amount of P30,000.00 would be a reasonable award. Petitioner's claim for P1,000.00 as atttorney's fees is in fact
even more modest. 19

WHEREFORE, the Decision of the Court of Appeals dated 24 October 1980, as well as the decision of the then Court of First Instance of La Union dated 4 December 1975 are
hereby REVERSED and SET ASIDE.Respondent is hereby ORDERED to pay petitioner Reynalda Gatchalian the following sums: 1) P15,000.00 as actual or compensatory
damages to cover the cost of plastic surgery for the removal of the scar on petitioner's forehead; 2) P30,000.00 as moral damages; and 3) P1,000.00 as attorney's fees, the aggregate
amount to bear interest at the legal rate of 6% per annum counting from the promulgation of this decision until full payment thereof. Costs against private respondent.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-24471 August 30, 1968

SILVERIO MARCHAN and PHILIPPINE RABBIT BUS CO., INC., petitioners,

vs.
ARSENIO MENDOZA, LEONARDA ILAYA, and ZENAIDA MENDOZA, respondents.

Angel A. Sison for petitioners.

Manuel M. Crudo for respondents.

FERNANDO, J.:

Petitioners, the driver of the passenger bus responsible for the injuries sustained by respondent for which he was
duly prosecuted and thereafter convicted for serious, less serious, and slight physical injuries, and the bus firm, the
Philippine Rabbit Bus Lines, seek the reversal of a Court of Appeals decision of December 14, 1964 and a resolution
of March 31, 1965, holding them liable both for compensatory and exemplary damages as well as attorney's fees. It
is the contention of petitioners that errors of law were committed when, in the aforesaid decision, it was held that
there was an implied contract of carriage between the petitioner bus firm and respondents, the breach of which was
the occasion for their liability for compensatory and exemplary damages as well as attorneys fees.

The facts as found by the Court of Appeals follow: "In the evening of February 22, 1954, between 9:00 and 9:30
o'clock, a passenger bus No. 141 of the Philippine Rabbit Bus Lines, bearing Plate No. TPU-708 which was then
driven by Silverio Marchan fell into a ditch somewhere in Barrio Malanday, Polo, Bulacan, while travelling on its
way to Manila; as a result of which plaintiffs-appellees Arsenio Mendoza, his wife and child, [respondents in this
proceeding], who were then inside the bus as passengers were thrown out to the ground resulting in their multiple
injuries. Plaintiff Arsenio Mendoza suffered the most serious injuries which damaged his vertebrae causing the
paralysis of his lower extremities which up to the time when this case was tried he continued to suffer. The
physician who attended and treated plaintiff Arsenio Mendoza opined that he may never walk again. Consequently
the driver of said bus Silverio Marchan [now petitioner] was prosecuted for serious, less serious and slight physical
injuries through reckless imprudence before the Justice of the Peace Court of Polo Bulacan, and thereafter convicted
as charged on June 29, 1956 ..., which judgment of conviction was subsequently affirmed by the Court of First
Instance of same province ... In this present action before us, plaintiffs-appellees Arsenio Mendoza, his wife and
child sought to recover damages against defendant-appellant Arsenio Marchan, then the driver of bus No. 141 of the
Philippine Rabbit Bus Lines, and from defendants-appellants Bienvenido P. Buan and Natividad Paras in their
capacity as administrator and administratix, respectively of the estate of the late Florencio P. Buan, doing business
under the style name of the Philippine Rabbit Bus Lines, predicated not only on a breach of contract of carriage for
failure of defendants operator as well as the defendant driver to safely convey them to their destination, but also on
account of a criminal negligence on the part of defendant Silverio Marchan resulting to plaintiff-appellee's multiple
physical damages."1

The Court of Appeals in the decision under review found that there was a preponderance of evidence to the effect
that while respondents Arsenio Mendoza, his wife, Leonarda Ilaya, and child, Zenaida Mendoza "were waiting for a
passenger bus on January 22, 1954 at about 9:00 in the evening at Malanday, they boarded defendants-appellants'
bus bearing No. 141 of the Philippine Rabbit Bus Lines with Plate No. TPU-708 bound for Manila. And they were
treated as passengers thereto, for they paid their corresponding fares. As they travelled along the highway bound for
Manila, said bus was traveling at a high rate of speed without due regard to the safety of the passengers. So much so
that one of the passengers had to call the attention of Silverio Marchan who was then at the steering wheel of said
bus to lessen the speed or to slow down, but then defendant Silverio Marchan did not heed the request of said
passenger; neither did he slacken his speed. On the contrary, defendant Silverio Marchan even increased his speed
while approaching a six-by-six truck which was then parked ahead, apparently for the purpose of passing the said
parked truck and to avoid collision with the incoming vehicle from the opposite direction. But, when appellant
Silverio Marchan veered his truck to resume position over the right lane, the rear tires of said truck skidded because
of his high rate of speed, thereby causing said truck to fall into a ditch. Substantially, the happening of the accident'
resulting to the multiple injuries of plaintiffs-appellees, was explained by defendant Silverio Marchan who declared
that while he was driving his bus from Barrio Malanday bound towards Manila on a road test, he suddenly noticed
an oncoming vehicle. He thus shifted his light from dim to bright. Just then, he noticed a six-by-six truck parked on
the right lane of the road where he was driving. Confronted with such situation that if he would apply his brake he
would bump his bus against the parked truck he then increased his speed with the view of passing the said parked
truck, and thereafter he veered to negotiate for the proper position on the right lane, but in so doing he swerved to
the right in order to avoid collision from the oncoming vehicle the rear portion of the bus skidded and fell into the
ditch."2

Hence the finding of negligence in the decision under review. Thus: "From the facts as established preponderantly
by the plaintiff and substantially corroborated by the defendant Silverio Marchan, it is clear that the cause of the
accident was the gross negligence of the defendant Silverio Marchan who when driving his vehicle on the night in
question was expected to have employed the highest degree of care; and should have been assiduously prudent in
handling his vehicle to insure the safety of his passengers. There is no reason why he could not have stopped his
vehicle when noticing a parked truck ahead of him if he was not driving at a high speed. His admission to the effect
that if he would apply his brake he would bump or hit the parked truck ahead of him, since there was no time for
him to stop the bus he was driving, is a patent indication that he was travelling at a high rate of speed without taking
the necessary precaution under the circumstance, considering that it was then nighttime. It is our considered view
that under the situation as pictured before us by the driver of said bus, he should not have increased his speed and
by-passed the parked truck obviously with the view of preventing a collision with the incoming vehicle. Any
prudent person placed under the situation of the appellant would not have assumed the risk as what appellant did.
The most natural reaction that could be expected from one under the circumstance was for him to have slackened
and reduced his speed. But this was not done simply because defendant-appellant could not possibly do so under the
circumstance because he was then travelling at a high rate of speed. In fact, he had increased his speed in order to
avoid ramming the parked truck without, however, taking the necessary precaution to insure the safety of his
passengers."3

On the above facts, the Court of Appeals, in its decision of December 14, 1964, affirmed the amount of P40,000.00
awarded by the court below as compensatory damages modifying the appealed lower court decision by holding
petitioners to pay the amount of P30,000.00 as exemplary damages and sustaining the award of attorney's fees in the
amount of P5,000.00. Then came the resolution of March 31, 1965 by the Court of Appeals, where the motion for
reconsideration of petitioners was denied for lack of merit.

In their brief as petitioners, the first error assigned is the alleged absence of an implied contract of carriage by the
petitioner bus firm and respondent. On this point, it was the holding of the Court of Appeals: "Since it is undisputed
by the evidence on record that appellant Silverio Marchan was then at the steering wheel of the vehicle of the
defendant transportation company at that moment, the riding public is not expected to inquire from time to time
before they board the passenger bus whether or not the driver who is at the steering wheel of said bus was authorized
to drive said vehicle or that said driver is acting within the scope of his authority and observing the existing rules
and regulations required of him by the management. To hold otherwise would in effect render the aforequoted
provision of law (Article 1759) ineffective."4 It is clear from the above Civil Code provision that common carriers
cannot escape liability "for the death of or injuries to passengers through the negligence and 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..." 5 From Vda. de Medina v. Cresencia,6 where this Court, through Justice J.B.L. Reyes, stressed the
"direct and immediate" liability of the carrier under the above legal provision, "not merely subsidiary or secondary,"
toMaranan v. Perez,7 a 1967 decision, the invariable holding has been the responsibility for breach of the contract of
carriage on the part of the carrier. According to the facts as above disclosed, which this Court cannot disturb, the
applicability of Article 1759 is indisputable. Hence, the total absence of merit of the first assignment of error.

The next two errors assigned would dispute the holding of the Court of Appeals in imposing liability in the
respective amounts of P40,000.00 for compensatory damages and P30,000.00 for exemplary damages. Again, such
assignments of error cannot be looked upon with favor. What the Court of Appeals did deserves not reprobation but
approval by this Court.
As to why the amount in compensatory damages should be fixed in the sum of P40,000.00 is explained in the
appealed decision thus: "Likewise, it is our considered view that the amount of P40,000.00 awarded by the court
below as compensatory damages is quite reasonable and fair, considering that plaintiff Arsenio Mendoza had
suffered paralysis on the lower extremities, which will incapacitate him to engage in his customary occupation
throughout the remaining years of his life, especially so if we take into account that plaintiff Arsenio Mendoza was
only 26 years old when he met an accident on January 22, 1954; and taking the average span of life of a Filipino, he
may be expected to live for 30 years more; and bearing in mind the earning capacity of Arsenio Mendoza who
before the happening of this accident derived an income of almost P100.00 a month from the business of his father-
in-law as Assistant Supervisor of the small [fairs] and his income of P100.00 a month which he derived as a
professional boxer."8 Considering that respondent Arsenio Mendoza was only in his middle twenties when, thru the
negligence of petitioners, he lost the use of his limbs, being condemned for the remainder of his life to be a
paralytic, in effect leading a maimed, well-nigh useless existence, the fixing of such liability in the amount of
P40,000.00 as compensatory damages was well within the discretion of the Court of Appeals. 1äwphï1.ñët

As to the finding of liability for exemplary damages, the Court of Appeals, in its resolution of March 31, 1965,
stated the following: "We now come to the imposition of exemplary damages upon defendants-appellants' carrier. It
is argued that this Court is without jurisdiction to adjudicate this exemplary damages since there was no allegation
nor prayer, nor proof, nor counterclaim of error for the same by the appellees. It is to be observed however, that in
the complaint, plaintiffs "prayed for such other and further relief as this Court may deem just and equitable." Now,
since the body of the complaint sought to recover damages against the defendant-carrier wherein plaintiffs prayed
for indemnification for the damages they suffered as a result of the negligence of said Silverio Marchan who is
appellant's employee; and since exemplary damages is intimately connected with general damages, plaintiffs may
not be expected to single out by express term the kind of damages they are trying to recover against the defendant's
carrier. Suffice it to state that when plaintiffs prayed in their complaint for such other relief and remedies that may
be availed of under the premises, in effect, therefore, the court is called upon the exercise and use its discretion
whether the imposition of punitive or exemplary damages even though not expressly prayed or pleaded in the
plaintiffs' complaint."9

In support of the above view, Singson v. Aragon was cited by the Court of Appeals. 10 As was there held by this
Court: "From the above legal provisions it appears that exemplary damages may be imposed by way of example or
correction only in addition, among others, to compensatory damages, but that they cannot be recovered as a matter
of right, their determination depending upon the discretion of the court. It further appears that the amount of
exemplary damages need not be proved, because its determination depends upon the amount of compensatory
damages that may be awarded to the claimant. If the amount of exemplary damages need not be proved, it need not
also be alleged, and the reason is obvious because it is merely incidental or dependent upon what the court may
award as compensatory damages. Unless and until this premise is determined and established, what may be claimed
as exemplary damages would amount to a mere surmise or speculation. It follows as a necessary consequence that
the amount of exemplary damages need not be pleaded in the complaint because the same cannot be predetermined.
One can merely ask that it be determined by the court if in the use of its discretion the same is warranted by the
evidence, and this is just what appellee has done.".

Such a principle has been repeatedly upheld. 11 In Corpuz v. Cuaderno, 12 this Court, again through Justice J.B.L.
Reyes, made clear that the amount "lies within the province of the court a quo, ..." It must be admitted, of course,
that where it could be shown that a tribunal acted "with vindictiveness or wantonness and not in the exercise of
honest judgment," then there is room for the interposition of the corrective power of this Tribunal.

No such reproach can be hurled at the decision and resolution now under review. No such indictment would be
justified. As noted earlier, both the second and the third assignments of error are devoid of merit.

Nor is there any occasion to consider further the fourth assigned error, petitioner being dissatisfied with the award of
P5,000.00 as attorney's fees to respondents. On its face, such an assignment of an alleged error is conspicuously
futile. 1äwphï1.ñët

The judgment, however, must be modified in accordance with the ruling of this Court in Soberano v. Manila
Railroad Co. 13 Respondents are entitled to interest for the amount of compensatory damages from the date of the
decision of the lower court and legal interest on the exemplary damages from the date of the decision of the Court of
Appeals.

WHEREFORE, as thus modified, the decision is affirmed, petitioners being liable for the sum of P40,000.00 in the
concept of compensatory damages with interest at the legal rate from and after January 26, 1960, and the sum of
P30,000.00 as exemplary damages with interest at the legal rate from and after December 14, 1964, as well as for
the sum of P5,000.00 as attorney's fees, likewise earning a legal rate of interest from and after January 26, 1960.
Costs against petitioners.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-63135 June 24, 1983

GLORIA DARROCHA DE CALISTON, petitioner,

vs.
THE HONORABLE COURT OF APPEALS AND GERONIMO DALMACIO, respondents.

Alexander J. Cawit for petitioner.

Rexco U. Alejano for private respondent.

RESOLUTION

PLANA, J.:

While driving a passenger bus in Bacolod City, private respondent Geronimo Dalmacio ran over Juana Sonza Vda.
de Darrocha (a USVA pensioner) who died instantly, survived by her only child, Gloria Darrocha de Caliston, the
herein petitioner.

Prosecuted for homicide thru reckless imprudence, Dalmacio was convicted by the Court of First Instance of Negros
Occidental, sentenced to imprisonment and ordered to pay the herein petitioner P15,000.00 for the death of the
victim, P5,000.00 as moral damages, P5,000.00 for burial expenses and P10,000.00 for loss of pension which the
deceased had failed to receive.

On appeal, the former Court of Appeals modified the CFI decision by absolving Dalmacio from the payment of the
P10,000.00 for loss of pension and credited him for the amount of P5,000.00 previously paid to the herein petitioner
under a vehicular insurance policy obtained by the bus owner.

The above modifications are now assailed in this petition for review on which the private respondent has filed his
comment.

The deletion of the P10,000.00 awarded for loss of pension is unjustified. Under Article 2206 of the Civil Code —

The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand
pesos, even though there may have been mitigating circumstances. In addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the
indemnity shag be paid to the heirs of the latter. . .

The pension of the decedent being a sure income that was cut short by her death for which Dalmacio was
responsible, the surviving heir of the former is entitled to the award of P 10,000.00 which is just equivalent to the
pension the decedent would have received for one year if she did not die.

On the other hand, the P5,000.00 paid to the herein petitioner by the insurer of the passenger bus which figured in
the accident may be deemed to have come from the bus owner who procured the insurance. Since the civil liability
(ex-delicto) of the latter for the death caused by his driver is subsidiary and, at bottom, arises from the same culpa,
the insurance proceeds should be credited in favor of the errant driver.
WHEREFORE, the petition is hereby granted partially in that the P10,000.00 award for loss of pension deleted in
the appealed Court of Appeals decision is hereby reinstated. Costs against private respondent.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 78656 August 30, 1988

TRANS WORLD AIRLINES, petitioner,

vs.
COURT OF APPEALS and ROGELIO A. VINLUAN, respondents.

Guerrero & Torres Law Offices for petitioner.

Angara, Abello, Concepcion, Regala & Cruz for private respondent.

The Solicitor General for public respondent.

GANCAYCO, J.:

Rogelio A. Vinluan is a practicing lawyer who had to travel in April, 1979 to several cities in Europe and the U.S. to
attend to some matters involving several clients. He entered into a contract for air carriage for valuable consideration
with Japan Airlines first class from Manila to Tokyo, Moscow, Paris, Hamburg, Zurich, New York, Los Angeles,
Honolulu and back to Manila thru the same airline and other airlines it represents for which he was issued the
corresponding first class tickets for the entire trip.

On April 18, 1979, while in Paris, he went to the office of Trans World Airlines (TWA) at the De Gaulle Airport and
secured therefrom confirmed reservation for first class accommodation on board its Flight No. 41 from New York to
San Francisco which was scheduled to depart on April 20, 1979. A validated stub was attached to the New York-Los
Angeles portion of his ticket evidencing his confirmed reservation for said flight with the mark "OK " 1 On April 20,
1979, at about 8:00 o'clock A.M., Vinluan reconfirrred his reservation for first class accommodation on board TWA
Flight No. 41 with its New York office. He was advised that his reservation was confirmed. He was even requested
to indicate his seat preference on said flight on said scheduled date of departure of TWA Flight No. 41. Vinluan
presented his ticket for check-in at the counter of TWA at JFK International Airport at about 9:45 o'clock A.M., the
scheduled time of the departure being 11:00 o'clock A.M. He was informed that there was no first class seat
available for him on the flight. He asked for an explanation but TWA employees on duty declined to give any
reason. When he began to protest, one of the TWA employees, a certain Mr. Braam, rudely threatened him with the
words "Don't argue with me, I have a very bad temper."

To be able to keep his schedule, Vinluan was compelled to take the economy seat offered to him and he was issued a
refund application" as he was downgraded from first class to economy class.

While waiting for the departure of Flight No. 41. Vinluan noticed that other passengers who were white Caucasians
and who had checked-in later than him were given preference in some first class seats which became available due
to "no show" passengers.

On February 15, 1980, Vinluan filed an action for damages against the TWA in the Court of First Instance of Rizal
alleging breach of contract and bad faith. After trial on the merits, a decision was rendered the dispositive part of
which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant
holding the latter liable to the for-mer for the amount representing the difference in fare between
 first class and economy class accommodations on board Flight No. 6041 from New York to San
Francisco, the amount of P500,000.00 as moral damages, the amount of P300,000.00 as exemplary
damages, and the amount of P100,000.00 as and for attorney's fees, all such amounts to earn
interest at the rate of twelve (12%) percent per annum from February 15, 1980 when the
complainant was filed until fully paid.

Correspondingly, defendant's counterclaim is dismissed. Costs against the defendant.

SO ORDERED.

Not satisfied therewith, the TWA appealed to the Court of Appeals wherein in due course a decision was rendered
on May 27, 1987, 2 the dispositive part of which reads as follows:

WHEREFORE, the decision dated March 8, 1984 is hereby modified by (1) fixing the interest
which appellant must pay on the awards of moral and exemplary damages at six per cent (6%) per
annum from the date of the decision a quo, March 8, 1984 until date of full payment and (2)
reducing the attorne's fees to P50,000.00 without interest, the rest of the decision is affirmed. Cost
against appellant.

SO ORDERED.

Hence, the herein petition for review.

The theory of the petitioner is that because of maintenance problems of the aircraft on the day of the flight, TWA
Flight No. 41 was cancelled and a special Flight No. 6041 was organized to operate in lieu of Flight No. 41. 3 Flight
No. 41 was to have utilized a Lockheed 1011 with 34 first class seats, but instead, a smaller Boeing 707 with only 16
first class seats was substituted for use in Flight No. 6041. Hence, passengers who had first class reservations on
Flight No. 41 had to be accommodated on Flight No. 6041 on a first-come, first-served basis. An announcement was
allegedly made to all passengers in the entire terminal of the airport advising them to get boarding cards for Flight
No. 6041 to San Francisco and that the first ones getting them would get first preference as to seats in the aircraft. It
denied declining to give any explanation for the downgrading of private respondent as well as the discourteous
attitude of Mr. Braam.

On the other hand, private respondent asserts that he did not hear such announcement at the terminal and that he was
among the early passengers to present his ticket for check-in only to be informed that there was no first class seat
available for him and that he had to be downgraded.

The petitioner contends that the respondent Court of Appeals committed a grave abuse of discretion in finding that
petitioner acted maliciously and discriminatorily, and in granting excessive moral and exemplary damages and
attorney's fees.

The contention is devoid of merit. Private respondent had a first class ticket for Flight No. 41 of petitioner from New
York to San Francisco on April 20, 1979. It was twice confirmed and yet respondent unceremoniously told him that
there was no first class seat available for him and that he had to be downgraded to the economy class. As he
protested, he was arrogantly threatened by one Mr. Braam. Worst still, while he was waiting for the flight, he saw
that several Caucasians who arrived much later were accommodated in first class seats when the other passengers
did not show up.

The discrimination is obvious and the humiliation to which private respondent was subjected is undeniable.
Consequently, the award of moral and exemplary damages by the respondent court is in order. 4

Indeed, private respondent had shown that the alleged switch of planes from a Lockheed 1011 to a smaller Boeing
707 was because there were only 138 confirmed economy class passengers who could very well be accommodated
in the smaller plane and not because of maintenance problems.
Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan for the sake of
econonmy. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost
consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to the award of
moral damages.5 More so in this case where instead of courteously informing private respondent of his being
downgraded under the circumstances, he was angrily rebuffed by an employee of petitioner.

At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law
firm in Manila. He was a director of several companies and was active in civic and social organizations in the
Philippines. Considering the circumstances of this case and the social standing of private respondent in the
community, he is entitled to the award of moral and exemplary damages. However, the moral damages should be
reduced to P300,000.00, and the exemplary damages should be reduced to P200,000.00. This award should be
reasonably sufficient to indemnify private respondent for the humiliation and embarrassment that he suffered and to
serve as an example to discourage the repetition of similar oppressive and discriminatory acts.

WHEREFORE, with the above modification reducing the moral and exemplary damages as above-stated, the
decision subject of the petition for review is AFFIRMED in all other respects, without pronouncement as to costs in
this instance.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-33836 March 16, 1987

DRA. SOFIA L. PRUDENCIADO, petitioner,

vs.
ALLIANCE TRANSPORT SYSTEM, INC. and JOSE LEYSON, et al., respondents.

PARAS, J.:

This is a petition for review on certiorari of the decision 1 of the Court of Appeals dated May 4,1971 in CA-G.R.
No. 34832R entitled Dra. Sofia L. Prudenciado v. Alliance Transport System, Inc. and Jose Leyson, which modified
the decision 2 of the Court of First Instance of Rizal, Quezon City, in Civil Case No. Q-5235 reducing the amount of
moral damages from P25,000 to P2,000 and eliminating the award of exemplary damages and attorney's fees but
granting actual damages of P2,451.27.

The decretal portion of said decision reads:

WHEREFORE, the decision appealed from is hereby modified, ordering appellants jointly and
severally to pay plaintiff the sum of P2,451.27 for actual damages representing the cost of the
repair of the car of Plaintiff; (2) the sum of P2,000.00 as moral damages. No pronouncement as to
costs.

The antecedent facts of this case as found by the trial court and by the Court of Appeals are as follows:

At about 2:05 p.m. of May 11, 1960, Dra. Sofia L. Prudenciado was driving her own Chevrolet Bel Air car along
Arroceros Street with the intention of crossing Taft Avenue in order to turn left, to go to the Philippine Normal
College Compound where she would hold classes. She claimed that she was driving her car at the rate of 10 kmph;
that before crossing Taft Ave. she stopped her car and looked to the right and to the left and not noticing any on-
coming vehicle on either side she slowly proceeded on first gear to cross the same, but when she was almost at the
center, near the island thereof, Jose Leyson who was driving People's Taxicab owned and operated by Alliance
Transport System, Inc., suddenly bumped and struck Dra. Prudenciado's car, thereby causing physical injuries in
different parts of her body, suffering more particularly brain concussion which subjected her to several physical
examinations and to an encephalograph test while her car was damaged to the extent of P2,451.27. The damage to
the taxicab amounted to P190.00 (Decision in Civil Case No. Q-5235, CFI, Rizal; Record on Appeal, pp. 63-64;
Decision, CA-G.R. No. 34832-R, Rollo, pp. 37-38).

Dra. Prudenciado filed a complaint for damages at the Court of First Instance of Rizal, Quezon City against the
Alliance Transport System and Jose Leyson docketed as aforestated, Civil Case No. Q-5232 (Record on Appeal, pp.
2-11).

After due hearing, the Court of First Instance of Rizal, Quezon City, found Jose Leyson guilty of negligence in the
performance of his duties as taxicab driver which is the proximate cause of the accident in question. On the other
hand, defendant Alliance Transport System, Inc. failed to prove to the satisfaction of the court that it had exercised
the required diligence of a good father of the family in the selection, supervision and control of its employees
including defendant Leyson. Consequently, both defendants were held jointly and severally liable for the physical
injuries suffered by the plaintiff Dra. Sofia L. Prudenciado as well as for the damage to her car, in addition to the
other consequential damages prayed for. The dispositive portion of said decision reads:
 IN VIEW OF THE FOREGOING CONSIDERATIONS judgment is rendered, one in favor of
plaintiff and against the defendants, by ordering the said defendants, jointly and severally, to pay
the plaintiff the sum of P2,451.27 for actual damages representing the cost for the repair of the car
of plaintiff; P25,000.00 as moral damages; P5,000.00 as exemplary damages; and the further sum
of P3,000.00 as attorney's fees, with costs against the defendants. (Record on Appeal, pp. 71-73).

On appeal, the Court of Appeals rendered the assailed decision on May 14, 1971 and denied petitioner's motion for
reconsideration in its resolution dated July 20, 1971.

Hence, this petition.

The petition was given due course in the resolution of this Court dated September 6, 1971 and petitioner filed her
brief on November 10, 1971 (Rollo, p. 69) while respondents filed their brief on January 24, 1972 (Rollo, p. 86).
Petitioner filed her Reply Brief on March 1, 1972 (Rollo, p. 96); after which the case was considered submitted for
decision on the same date (Rollo, p. 99).

In her brief, petitioner raised the following assignment of errors:

THE RESPONDENT COURT OF APPEALS ERRED IN REDUCING THE AWARD OF MORAL DAMAGES
TO THE PETITIONER FROM P25,000.00 AWARDED BY THE COURT OF FIRST INSTANCE OF RIZAL,
BRANCH V, QUEZON CITY, TO P2,000.00 NOTWITHSTANDING THE FACT THAT THERE WAS NO
FINDING THAT THE AWARD WAS PALPABLY AND SCANDALOUSLY EXCESSIVE AS TO INDICATE
THAT IT WAS THE RESULT OF PASSION OR CORRUPTION ON THE PART OF THE TRIAL COURT;

II

THE RESPONDENT COURT OF APPEALS ERRED IN ELIMINATING THE AWARD OF EXEMPLARY

DAMAGES OF P5,000.00 NOTWITHSTANDING THE FACT THAT THE FINDING OF THE SAID COURT
ON THE EVIDENCE AND THE LAW APPLICABLE JUSTIFIED THE AWARD OF EXEMPLARY DAMAGES
AS HELD BY THE SAID TRIAL COURT;

III

THE COURT OF APPEALS ERRED IN FINDING THAT HER DEMOTION IN RANK AS A PROFESSOR IN
THE UNITED STATES WAS NOT SUBSTANTIATED AND IN MAKING THIS FINDING A BASIS FOR THE
REDUCTION OF THE AWARD OF MORAL DAMAGES, NOTWITHSTANDING THAT IT IS ALREADY
TOO FAR FETCHED AND IT MERELY CONFIRMS THE TRUTH OF THE FACT THAT THE ACCUSED
SUFFERED LOSS OF HER USUAL LIVELINESS; VIVACITY ACTIVITY SELF-CONFIDENCE AND THAT
SHE FEELS UNCERTAIN AND INSECURE AND THAT SHE WAS SUBJECTED TO EXTREME FRIGHT
AND SERIOUS ANXIETY, SERIOUS APPREHENSION OF LOSING HER LIFE OR HER SENSES OR
REASON AND OF HER PHYSICAL MOBILITY ANYTIME AND THAT SHE SUFFERED GREAT SHOCK
AND SEVERE PAINS ON HER BACK NEAR THE LEFT SIDE OF HER SPINAL COLUMN OF THE
LUMBAR REGION;

IV

THE RESPONDENT COURT OF APPEALS ALSO ERRED IN ELIMINATING THE AWARD OF

ATTORNEY'S FEES TO THE PETITIONERS NOTWITHSTANDING THE FACT THAT SAID AWARD IS
LEGAL AND PROPER;

V
THE RESPONDENT COURT OF APPEALS ERRED IN ELIMINATING THE COSTS TAXED AGAINST THE
RESPONDENTS NOTWITHSTANDING THE FACT THAT SAID COSTS ARE LEGAL AND PROPER;

VI

THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE CLAIM OF DR. SOFIA L.
PRUDENCIADO OF HER LOSS OF HER USUAL LIVELINESS, VIVACITY ACTIVITY AND HER USUAL
SELF CONFIDENCE, SUCH THAT SHE NOW FEELS UNCERTAIN AND INSECURE... EXTREME FRIGHT
AND SERIOUS ANXIETY, SERIOUS APPREHENSION OF LOSING HER LIFE OR HER SENSES OR
REASON; OF HER PHYSICAL MOBILITY ANYTIME ... GREAT SHOCK AND SEVERE PAINS ON HER
BACK NEAR THE LEFT SIDE OF HER SPINAL COLUMN IN THE LUMBAR REGION IS
UNCORROBORATED NOTWITHSTANDING THE FACT OF THE CERTIFICATE, EXHIBIT "G" OF DR.
DOMINADOR VERGARA, OF THE VETERANS MEMORIAL HOSPITAL AND DR. CONRADO ARAMIL,
BRAIN SPECIALIST AND THE CORROBORATING TESTIMONY OF THE LATTER AFTER
EXAMINATION AND TREATMENT OF PETITIONER;

VII

THE RESPONDENT COURT OF APPEALS ERRED IN SO MODIFYING THE DECISION OF THE TRIAL
COURT NOTWITHSTANDING THE FACT THAT IT HAD NO POWER TO DO SO UNDER THE FACTS
AND CIRCUMSTANCES OF THIS CASE AS FOUND BY THE COURT OF APPEALS;

VIII

THE RESPONDENT COURT OF APPEALS ERRED IN MODIFYING THE DECISION OF THE TRIAL
COURT NOTWITHSTANDING THE FACT THAT THE DECISION OF SAID TRIAL COURT IS IN
ACCORDANCE WITH LAW.

The Court of Appeals and the trial court are in accord in the finding that the accident was caused by the negligence
of the taxi driver. The bone of contention is however in the award of damages, which crystalizes the errors assigned
into one issue, which is whether or not the Court of Appeals is justified in modifying or changing the grant of
damages by the trial court.

It is well settled that factual findings of the Court of Appeals are binding on the Supreme Court, but said findings are
subject to scrutiny if such are diametrically opposed to those of the trial court (Samson v. CA, et al. G.R. No. L-
40071, January 29, 1986).

The Court of Appeals concedes that a concussion of the brain was suffered by Dra. Prudenciado but as to how
serious was the concussion or how it had later become, and the disastrous extent of the injuries which she alleges to
have sustained as a result of the accident, are seriously doubted by said Appellate Court.

Specifically, said Court finds that Dra. Prudenciado's claim (which was sustained b the trial court) that because of
aforesaid concussion, she eventually lost her usual liveliness, vivacity activity and her usual self- confidence, to the
extent that now she feels uncertain and insecure, not to mention a sense of extreme fright and serious anxiety,
serious apprehension of losing her life, or her senses or reason or her physical mobility momentarily, plus
experiences of great shock and severe pains on her back near the left side of her spinal column in the lumbar region,
was not supported by the deposition of Dr. Conrado Aramil the list who attended to the plaintiff from May 14 to
May 26, 1960 (TSN, July 13, 1960, pp. 72-73). From said deposition, it was gathered that Dra. Prudenciado suffered
a mild abnormality, compatible with mold concussion of the brain (TSN, July 13, 1960, pp. 47-48); that the
symptoms of any brain concussion usually are headache, dizziness, voting and lack of pep or alertness; and that the
possible after effects that may be produced are persistent or irregular headaches, fluctuating dizziness. Accordingly,
Dra. Prudenciado was advised "Just to watch herself if she would develop any alarming symptoms such as
headache, dizziness or vomitings, to have her re-checked after several months for her to be sure." (Ibid, pp. 51-52).
It might also produce intellectual deterioration or lessening of intelligence, and even insanity.
Dra. Prudenciado sought to establish that she had precisely suffered are those after effects except insanity; but the
Court of Appeals ruled that her proof consisted merely in her own uncorroborated testimony. In support of her
allegation she could not show any medical certificate tending to prove that she was indeed medically treated abroad
for her brain ailment nor was there any showing in the documents presented that she was demoted to the rank of
technical assistant because the San Francisco State College does not believe in her mental capacity any more.

Finally, her statements that she is almost completely losing her voice, that she has a terrible headache when her head
is pressed, that she has lost her sense of taste, that she is nervous and temperamental and that she has lapses of
memory, are belied by the deposition of Dr. Aramil that the patient's EEG was already normal on May 26, 1960; and
on cross-examination he declared that she was clinically symtomless when she was discharged from the hospital
(TSN, July 13, 1960, pp. 75-76; 78-79).

There is no argument that 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 defendant's wrongful
act or omission (People v. Baylon, 129 SCRA 62 [1984]).

In the same manner, it is undisputed that the trial courts are given discretion to determine the amount of moral
damages Alcantara v. Surro, 93 Phil. 472) and that the Court of Appeals can only modify or change the amount
awarded when they are palpably and scandalously excessive "so as to indicate that it was the result of passion,
prejudice or corruption on the part of the trial court (Gellada v. Warner Barnes & Co., Inc., 57 O.G. (4) 7347, 7358;
Sadie v. Bachrach Motors Co., Inc., 57 O.G. (4) 636 and Adone v. Bachrach Motor Co., Inc., 57 O.G. 656). But in
more recent cases where the awards of moral and exemplary damages are far too excessive compared to the, actual
losses sustained by the aggrieved party, this Court ruled that they should be reduced to more reasonable amounts.

Thus, in the case of San Andres v. Court of Appeals (116 SCRA 85 [1982]) the Supreme Court ruled that while the
amount of moral damages is a matter left largely to the sound discretion of a court, the same when found excessive
should be reduced to more reasonable amounts, considering the attendant facts and circumstances. Moral damages,
though incapable of pecuniary estimation, are in the category of an award designed to compensate the claimant for
actual injury suffered and not to impose a penalty on the wrongdoer.

In a much later case (Siguenza v. Court of Appeals, 137 SCRA 578-579 [1985]), the Supreme court, reiterating the
above ruling, reduced the awards of moral and exemplary damages which were far too excessive compared to the
actual losses sustained by the aggrieved parties and where the records show that the injury suffered was not serious
or gross and, therefore, out of proportion to the amount of damages generously awarded by the trial court.

In any case the Court held that "moral damages are emphatically not intended to enrich a complainant at the expense
of a defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will
serve to alleviate the moral suffering he has undergone, by reason of the defendants' culpable action." The award of
moral damages must be proportionate to the suffering inflicted & B Surety & Insurance Co., Inc. v. Intermediate
Appellate Court, 129 SCRA 745 [1984] citing Grand Union Supermarket, Inc. v. Espino, Jr., 94 SCRA 966).

Coming back to the case at bar, a careful review of the records makes it readily apparent that the injuries sustained
by Dra. Prudenciado are not as serious or extensive as they were claimed to be, to warrant the damages awarded by
the trial court. In fact, a closer scrutiny of the exhibits showing a moderate damage to the car can by no stretch of the
imagination produce a logical conclusion that such disastrous effects of the accident sought to be established,
actually took place, not to mention the fact that such were not supported by the medical findings presented.
Unquestionably, therefore, the damages imposed' by the lower court should be reduced to more reasonable levels.

On the other hand, it will be observed that the reduction of the damages made by the Court of Appeals is both too
drastic and unrealistic, to pass the test of reasonableness, which appears to be the underlying basis to justify such
reduction.

While the damages sought to be recovered were not satisfactorily established to the extent desired by the petitioner,
it was nonetheless not disputed that an accident occurred due to the fault and negligence of the respondents; that
Dra. Prudenciado suffered a brain concussion which although mild can admittedly produce the effects complained of
by her and that these symptoms can develop after several years and can lead to some, serious handicaps or
predispose the patient to other sickness (TSN, July 13, 1960, pp. 52-54). Being a doctor by profession, her fears can
be more real and intense than an ordinary person. Otherwise stated, she is undeniably a proper recipient of moral
damages which are proportionate to her suffering.

As to exemplary damages, Article 2231 of the Civil Code provides:

In quasi-delicts, exemplary damages may be granted if the defendant acted with grave negligence.

The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction
for the public good (Lopez, et al. v. Pan American World Airways, 16 SCRA 431).

The findings of the trial court in the case at bar which became the basis of the award of exemplary damages are to
the effect that it is more apparent from the facts, conditions and circumstances obtaining in the record of the case
that respondent driver was running at high speed after turning to the right along Taft Ave. coming from Ayala
Boulevard, considering that the traffic was clear. Failing to notice petitioner's car, he failed to apply his brakes and
did not even swerve to the right to avoid the collision (Record on Appeal, pp. 69-70).

The Court of Appeals conforms with aforesaid findings of the trial court but is not prepared to accept that there was
gross negligence on the part of the driver to justify the imposition of exemplary damages.

However, a driver running at full speed on a rainy day, on a slippery road in complete disregard of the hazards to life
and limb of other people cannot be said to be acting in anything less than gross negligence. The frequent incidence
of accidents of this nature caused by taxi drivers indeed demands corrective measures.

PREMISES CONSIDERED, the assailed decision of the Court of Appeals is hereby MODIFIED insofar as the
award of damages is concerned; and respondents are ordered to jointly and severally pay the petitioner; (1) the sum
of P2,451.27 for actual damages representing the cost of the repair of her car; (2) the sum of P15,000.00 as moral
damages; (3) the sum of P5,000.00 as exemplary damages; and (4) the sum of P3,000.00 as attorney's fees. No
pronouncement as to costs.

SO ORDERED.