THIRD DIVISION

G.R. No. 170141             April 22, 2008

JAPAN AIRLINES, petitioner,
vs.
JESUS SIMANGAN, respondent.

DECISION

REYES R.T., J.:

WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a certain date, a
contract of carriage arises, and the passenger has every right to expect that he would fly on that
flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of
carriage.1

The power to admit or not an alien into the country is a sovereign act which cannot be interfered with
even by Japan Airlines (JAL).2

In this petition for review on certiorari,3 petitioner JAL appeals the: (1) Decision4 dated May 31, 2005
of the Court of Appeals (CA) ordering it to pay respondent Jesus Simangan moral and exemplary
damages; and (2) Resolution5 of the same court dated September 28, 2005 denying JAL's motion for
reconsideration.

The Facts

In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto
Simangan, in UCLA School of Medicine in Los Angeles, California, U.S.A. Upon request of UCLA,
respondent undertook a series of laboratory tests at the National Kidney Institute in Quezon City to
verify whether his blood and tissue type are compatible with Loreto's.6 Fortunately, said tests proved
that respondent's blood and tissue type were well-matched with Loreto's.7

Respondent needed to go to the United States to complete his preliminary work-up and donation
surgery. Hence, to facilitate respondent's travel to the United States, UCLA wrote a letter to the
American Consulate in Manila to arrange for his visa. In due time, respondent was issued an
emergency U.S. visa by the American Embassy in Manila.8

Having obtained an emergency U.S. visa, respondent purchased a round trip plane ticket from
petitioner JAL for US$1,485.00 and was issued the corresponding boarding pass.9 He was
scheduled to a particular flight bound for Los Angeles, California, U.S.A. via Narita, Japan.10

On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport in the
company of several relatives and friends.11 He was allowed to check-in at JAL's counter.12 His plane
ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration and
security routines.13 After passing through said immigration and security procedures, respondent was
allowed by JAL to enter its airplane.14

While inside the airplane, JAL's airline crew suspected respondent of carrying a falsified travel
document and imputed that he would only use the trip to the United States as a pretext to stay and
work in Japan.15 The stewardess asked respondent to show his travel documents. Shortly after, the
stewardess along with a Japanese and a Filipino haughtily ordered him to stand up and leave the
plane.16 Respondent protested, explaining that he was issued a U.S. visa. Just to allow him to board
the plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in
Narita.17 His pleas were ignored. He was then constrained to go out of the plane.18 In a nutshell,
respondent was bumped off the flight.

Respondent went to JAL's ground office and waited there for three hours. Meanwhile, the plane took
off and he was left behind.19 Afterwards, he was informed that his travel documents were, indeed, in
order.20 Respondent was refunded the cost of his plane ticket less the sum of US$500.00 which was
deducted by JAL.21 Subsequently, respondent's U.S. visa was cancelled.22

Displeased by the turn of events, respondent filed an action for damages against JAL with the
Regional Trial Court (RTC) in Valenzuela City, docketed as Civil Case No. 4195-V-93. He claimed
he was not able to donate his kidney to Loreto; and that he suffered terrible embarrassment and
mental anguish.23 He prayed that he be awarded P3 million as moral damages, P1.5 million as
exemplary damages and P500,000.00 as attorney's fees.24

JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow
respondent to fly on his scheduled departure was due to "a need for his travel documents to be
authenticated by the United States Embassy"25 because no one from JAL's airport staff had
encountered a parole visa before.26 It posited that the authentication required additional time; that
respondent was advised to take the flight the following day, July 30, 1992. JAL alleged that
respondent agreed to be rebooked on July 30, 1992.27

JAL also lodged a counterclaim anchored on respondent's alleged wrongful institution of the
complaint. It prayed for litigation expenses, exemplary damages and attorney's fees.28

On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of
respondent (plaintiff), disposing as follows:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the
amount of P1,000,000.00 as moral damages, the amount of P500,000.00 as exemplary
damages and the amount of P250,000.00 as attorney's fees, plus the cost of suit.29

The RTC explained:

In summarily and insolently ordering the plaintiff to disembark while the latter was already
settled in his assigned seat, the defendant violated the contract of carriage; that when the
plaintiff was ordered out of the plane under the pretext that the genuineness of his travel
documents would be verified it had caused him embarrassment and besmirched reputation;
and that when the plaintiff was finally not allowed to take the flight, he suffered more
wounded feelings and social humiliation for which the plaintiff was asking to be awarded
moral and exemplary damages as well as attorney's fees.

The reason given by the defendant that what prompted them to investigate the genuineness
of the travel documents of the plaintiff was that the plaintiff was not then carrying a regular
visa but just a letter does not appear satisfactory. The defendant is engaged in transporting
passengers by plane from country to country and is therefore conversant with the travel
documents. The defendant should not be allowed to pretend, to the prejudice of the plaintiff
not to know that the travel documents of the plaintiff are valid documents to allow him entry
in the United States.
 The foregoing act of the defendant in ordering the plaintiff to deplane while already settled in
his assigned seat clearly demonstrated that the defendant breached its contract of carriage
with the plaintiff as passenger in bad faith and as such the plaintiff is entitled to moral and
exemplary damages as well as to an award of attorney's fees.30

Disagreeing with the RTC judgment, JAL appealed to the CA contending that it is not guilty of breach
of contract of carriage, hence, not liable for damages.31 It posited that it is the one entitled to recover
on its counterclaim.32

CA Ruling

In a Decision33 dated May 31, 2005, the CA affirmed the decision of the RTC with modification in that
it lowered the amount of moral and exemplary damages and deleted the award of attorney's fees.
The fallo of the CA decision reads:

WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION. Appellant

JAPAN AIR LINES is ordered to pay appellee JESUS SIMANGAN the reduced sums, as
follows: Five Hundred Thousand Pesos (P500,000.00) as moral damages, and Two Hundred
Fifty Thousand Pesos (P250,000.00) as exemplary damages. The award of attorney's fees is
hereby DELETED.34

The CA elucidated that since JAL issued to respondent a round trip plane ticket for a lawful
consideration, "there arose a perfected contract between them."35 It found that respondent was
"haughtily ejected"36 by JAL and that "he was certainly embarrassed and humiliated"37 when, in the
presence of other passengers, JAL's airline staff "shouted at him to stand up and arrogantly asked
him to produce his travel papers, without the least courtesy every human being is entitled to";38 and
that "he was compelled to deplane on the grounds that his papers were fake."39

The CA ratiocinated:

While the protection of passengers must take precedence over convenience, the implementation of
security measures must be attended by basic courtesies.

In fact, breach of the contract of carriage creates against the carrier a presumption of liability,
by a simple proof of injury, relieving the injured passenger of the duty to establish the fault of
the carrier or of his employees; and placing on the carrier the burden to prove that it was due
to an unforeseen event or to force majeure.

That appellee possessed bogus travel documents and that he might stay illegally in Japan
are allegations without substantiation. Also, appellant's attempt to rebook appellee the
following day was too late and did not relieve it from liability. The damage had been
done. Besides, its belated theory of novation, i.e., that appellant's original obligation to carry
appellee to Narita and Los Angeles on July 29, 1992 was extinguished by novation when
appellant and appellant agreed that appellee will instead take appellant's flight to Narita on
the following day, July 30, 1992, deserves little attention. It is inappropriate at bar. Questions
not taken up during the trial cannot be raised for the first time on appeal.40 (Underscoring
ours and citations were omitted)

Citing Ortigas, Jr. v. Lufthansa German Airlines,41 the CA declared that "(i)n contracts of common
carriage, inattention and lack of care on the part of the carrier resulting in the failure of the
passenger to be accommodated in the class contracted for amounts to bad faith or fraud which
entitles the passengers to the award of moral damages in accordance with Article 2220 of the Civil
Code."42

Nevertheless, the CA modified the damages awarded by the RTC. It explained:

Fundamental in the law on damages is that one injured by a breach of a contract, or by a

wrongful or negligent act or omission shall have a fair and just compensation commensurate
to the loss sustained as consequence of the defendant's act. Being discretionary on the
court, the amount, however, should not be palpably and scandalously excessive.

Here, the trial court's award of P1,000,000.00 as moral damages appears to be overblown.
No other proof of appellee's social standing, profession, financial capabilities was presented
except that he was single and a businessman. To Us, the sum of 500,000.00 is just and fair.
For, moral damages are emphatically not intended to enrich a complainant at the expense of
the defendant. They are awarded only to enable the injured party to obtain means, diversion
or amusements that will serve to alleviate the moral suffering he has undergone, by reason
of the defendant's culpable action.

Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced to a

reasonable level. The award of exemplary damages is designed to permit the courts to
mould behavior that has socially deleterious consequences and its imposition is required by
public policy to suppress the wanton acts of the offender. Hence, the sum of P250,000.00 is
adequate under the circumstances.

The award of P250,000.00 as attorney's fees lacks factual basis. Appellee was definitely
compelled to litigate in protecting his rights and in seeking relief from appellant's misdeeds.
Yet, the record is devoid of evidence to show the cost of the services of his counsel and/or
the actual expenses incurred in prosecuting his action.43 (Citations were omitted)

When JAL's motion for reconsideration was denied, it resorted to the petition at bar.

Issues

JAL poses the following issues -

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT

WAS ENTITLED TO MORAL DAMAGES, CONSIDERING THAT:

A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT.

B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF CONTRACT CASES

ONLY WHEN THE BREACH IS ATTENDED BY FRAUD OR BAD FAITH.
ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT
ACT FRAUDULENTLY OR IN BAD FAITH AS TO ENTITLE RESPONDENT TO
MORAL DAMAGES.

C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH EFFECTED IN GOOD

FAITH FROM ONE ATTENDED BY BAD FAITH.
 II.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT

WAS ENTITLED TO EXEMPLARY DAMAGES CONSIDERING THAT:

A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN BREACH OF

CONTRACT OF CARRIAGE UNLESS THE CARRIER IS GUILTY OF WANTON,
FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT CONDUCT.

B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT

ACT IN A WANTON FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT
MANNER AS TO ENTITLE RESPONDENT TO EXEMPLARY DAMAGES.

III.

ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN AWARD OF

DAMAGES, WHETHER OR NOT THE COURT OF APPEALS AWARD OF P750,000 IN
DAMAGES WAS EXCESSIVE AND UNPRECEDENTED.

IV.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING FOR JAL ON
ITS COUNTERCLAIM.44 (Underscoring Ours)

Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty of contract of
carriage; (2) whether or not respondent is entitled to moral and exemplary damages; and (3) whether
or not JAL is entitled to its counterclaim for damages.

Our Ruling

This Court is not a trier of facts.

Chiefly, the issues are factual. The RTC findings of facts were affirmed by the CA. The CA also gave
its nod to the reasoning of the RTC except as to the awards of damages, which were reduced, and
that of attorney's fees, which was deleted.

We are not a trier of facts. We generally rely upon, and are bound by, the conclusions on this matter
of the lower courts, which are better equipped and have better opportunity to assess the evidence
first-hand, including the testimony of the witnesses.45

We have repeatedly held that the findings of fact of the CA are final and conclusive and cannot be
reviewed on appeal to the Supreme Court provided they are based on substantial evidence.46 We
have no jurisdiction, as a rule, to reverse their findings.47 Among the exceptions to this rule are: (a)
when the conclusion is a finding grounded entirely on speculations, surmises or conjectures; (b)
when the inference made is manifestly mistaken, absurd or impossible; (c) where there is grave
abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the
findings of facts are conflicting; (f) when the CA, in making its findings, went beyond the issues of the
case and the same is contrary to the admissions of both appellant and appellee.48

The said exceptions, which are being invoked by JAL, are not found here. There is no indication that
the findings of the CA are contrary to the evidence on record or that vital testimonies of JAL's
witnesses were disregarded. Neither did the CA commit misapprehension of facts nor did it fail to
consider relevant facts. Likewise, there was no grave abuse of discretion in the appreciation of facts
or mistaken and absurd inferences.

We thus sustain the coherent facts as established by the courts below, there being no sufficient
showing that the said courts committed reversible error in reaching their conclusions.

JAL is guilty of breach of

contract of carriage.

That respondent purchased a round trip plane ticket from JAL and was issued the corresponding
boarding pass is uncontroverted.49 His plane ticket, boarding pass, travel authority and personal
articles were subjected to rigid immigration and security procedure.50 After passing through said
immigration and security procedure, he was allowed by JAL to enter its airplane to fly to Los
Angeles, California, U.S.A. via Narita, Japan.51 Concisely, there was a contract of carriage between
JAL and respondent.

Nevertheless, JAL made respondent get off the plane on his scheduled departure on July 29, 1992.
He was not allowed by JAL to fly. JAL thus failed to comply with its obligation under the contract of
carriage.

JAL justifies its action by arguing that there was "a need to verify the authenticity of respondent's
travel document."52 It alleged that no one from its airport staff had encountered a parole visa
before.53 It further contended that respondent agreed to fly the next day so that it could first verify his
travel document, hence, there was novation.54 It maintained that it was not guilty of breach of
contract of carriage as respondent was not able to travel to the United States due to his own
voluntary desistance.55

We cannot agree. JAL did not allow respondent to fly. It informed respondent that there was a need
to first check the authenticity of his travel documents with the U.S. Embassy.56 As admitted by JAL,
"the flight could not wait for Mr. Simangan because it was ready to depart."57

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

Considering that respondent was forced to get out of the plane and left behind against his will, he
could not have freely consented to be rebooked the next day. In short, he did not agree to the
alleged novation. Since novation implies a waiver of the right the creditor had before the novation,
such waiver must be express.58 It cannot be supposed, without clear proof, that respondent had
willingly done away with his right to fly on July 29, 1992.

Moreover, the reason behind the bumping off incident, as found by the RTC and CA, was that JAL
personnel imputed that respondent would only use the trip to the United States as a pretext to stay
and work in Japan.59

Apart from the fact that respondent's plane ticket, boarding pass, travel authority and personal
articles already passed the rigid immigration and security routines,60 JAL, as a common carrier,
ought to know the kind of valid travel documents respondent carried. As provided in Article 1755 of
the New Civil Code: "A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances."61 Thus, We find untenable JAL's defense of "verification of
respondent's documents" in its breach of contract of carriage.

It bears repeating that the power to admit or not an alien into the country is a sovereign act which
cannot be interfered with even by JAL.62

In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence
of such contract and its non-performance by the carrier through the latter's failure to carry the
passenger safely to his destination.63 Respondent has complied with these twin requisites.

Respondent is entitled to moral and exemplary damages and attorney's fees plus legal
interest.

With reference to moral damages, JAL alleged that they are not recoverable in actions ex contractu
except only when the breach is attended by fraud or bad faith. It is contended that it did not act
fraudulently or in bad faith towards respondent, hence, it may not be held liable for moral damages.

As a general rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract for it is not one of the items enumerated under Article 2219 of the Civil Code.64 As
an exception, such damages are recoverable: (1) in cases in which the mishap results in the death
of a passenger, as provided in Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in
the cases in which the carrier is guilty of fraud or bad faith, as provided in Article 2220.65

The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL
breached its contract of carriage with respondent in bad faith. JAL personnel summarily and
insolently ordered respondent to disembark while the latter was already settled in his assigned seat.
He was ordered out of the plane under the alleged reason that the genuineness of his travel
documents should be verified.

These findings of facts were upheld by the CA, to wit:

x x x he was haughtily ejected by appellant. He was certainly embarrassed and humiliated

when, in the presence of other passengers, the appellant's airline staff shouted at him to
stand up and arrogantly asked him to produce his travel papers, without the least courtesy
every human being is entitled to. Then, he was compelled to deplane on the grounds that his
papers were fake. His protestation of having been issued a U.S. visa coupled with his plea to
appellant to closely monitor his movements when the aircraft stops over in Narita, were
ignored. Worse, he was made to wait for many hours at the office of appellant only to be told
later that he has valid travel documents.66 (Underscoring ours)

Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in
suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of
fraud or bad faith, as in this case. Inattention to and lack of care for the interests of its passengers
who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith
which entitles the passenger to an award of moral damages. What the law considers as bad faith
which may furnish the ground for an award of moral damages would be bad faith in securing the
contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of
deceit.67
JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive
and malevolent acts against respondent. Exemplary damages, which are awarded by way of
example or correction for the public good, may be recovered in contractual obligations, as in this
case, if defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.68

Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is
socially deleterious in its consequence by creating negative incentives or deterrents against such
behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is,
in fact, that of the highest possible degree of diligence, from common carriers and in creating a
presumption of negligence against them, the law seeks to compel them to control their employees,
to tame their reckless instincts and to force them to take adequate care of human beings and their
property.69

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

The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary damages in

respondent's favor is, in Our view, reasonable and realistic. This award is reasonably sufficient to
indemnify him for the humiliation and embarrassment he suffered. This also serves as an example to
discourage the repetition of similar oppressive acts.

With respect to attorney's fees, they may be awarded when defendant's act or omission has
compelled plaintiff to litigate with third persons or to incur expenses to protect his interest.71 The
Court, in Construction Development Corporation of the Philippines v. Estrella,72 citing Traders Royal
Bank Employees Union-Independent v. National Labor Relations Commission,73 elucidated thus:

There are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid
to a lawyer by his client for the legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his agreement with the client.

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by

the court to be paid by the losing party in a litigation. The basis of this is any of the
cases provided by law where such award can be made, such as those authorized in Article
2208, Civil Code, and is payable not to the lawyer but to the client, unless they have
agreed that the award shall pertain to the lawyer as additional compensation or as
part thereof.74

It was therefore erroneous for the CA to delete the award of attorney's fees on the ground that the
record is devoid of evidence to show the cost of the services of respondent's counsel. The amount is
actually discretionary upon the Court so long as it passes the test of reasonableness. They may be
recovered as actual or compensatory damages when exemplary damages are awarded and
whenever the court deems it just and equitable,75 as in this case.

Considering the factual backdrop of this case, attorney's fees in the amount of P200,000.00 is
reasonably modest.

The above liabilities of JAL in the total amount of P800,000.00 earn legal interest pursuant to the
Court's ruling in Construction Development Corporation of the Philippines v. Estrella,76 citing Eastern
Shipping Lines, Inc. v. Court of Appeals,77 to wit:
 Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the
complaint, we held in Eastern Shipping Lines, Inc. v. Court of Appeals, that when an
obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for payment of interest in the concept
of actual and compensatory damages, subject to the following rules, to wit -

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,

an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
so reasonably established at the time the demand is made, the interest shall begin
to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality
until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.78 (Emphasis supplied and citations omitted)

Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay respondent
legal interest. Pursuant to the above ruling of the Court, the legal interest is 6% and it shall be
reckoned from September 21, 2000 when the RTC rendered its judgment. From the time this
Decision becomes final and executory, the interest rate shall be 12% until its satisfaction.

JAL is not entitled to its counterclaim for damages.

The counterclaim of JAL in its Answer79 is a compulsory counterclaim for damages and attorney's
fees arising from the filing of the complaint. There is no mention of any other counter claims.

This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted
inasmuch as the complaint against it is obviously not malicious or unfounded. It was filed by
respondent precisely to claim his right to damages against JAL. Well-settled is the rule that the
commencement of an action does not per se make the action wrongful and subject the action to
damages, for the law could not have meant to impose a penalty on the right to litigate.80

We reiterate case law that if damages result from a party's exercise of a right, it is damnum absque
injuria.81 Lawful acts give rise to no injury. Walang perhuwisyong maaring idulot ang paggamit sa
sariling karapatan.
During the trial, however, JAL presented a witness who testified that JAL suffered further damages.
Allegedly, respondent caused the publications of his subject complaint against JAL in the newspaper
for which JAL suffered damages.82

Although these additional damages allegedly suffered by JAL were not incorporated in its Answer as
they arose subsequent to its filing, JAL's witness was able to testify on the same before the
RTC.83 Hence, although these issues were not raised by the pleadings, they shall be treated in all
respects as if they had been raised in the pleadings.

As provided in Section 5, Rule 10 of the Rules of Court, "(w)hen issues not raised by the pleadings
are tried with the express or implied consent of the parties, they shall be treated in all respects as if
they had been raised in the pleadings."

Nevertheless, JAL's counterclaim cannot be granted.

JAL is a common carrier. JAL's business is mainly with the traveling public. It invites people to avail
themselves of the comforts and advantages it offers.84 Since JAL deals with the public, its bumping
off of respondent without a valid reason naturally drew public attention and generated a public issue.

The publications involved matters about which the public has the right to be informed because they
relate to a public issue. This public issue or concern is a legitimate topic of a public comment that
may be validly published.

Assuming that respondent, indeed, caused the publication of his complaint, he may not be held
liable for damages for it. The constitutional guarantee of freedom of the speech and of the press
includes fair commentaries on matters of public interest. This is explained by the Court in Borjal v.
Court of Appeals,85 to wit:

To reiterate, fair commentaries on matters of public interest are privileged and constitute a
valid defense in an action for libel or slander. The doctrine of fair comment means that while
in general every discreditable imputation publicly made is deemed false, because every man
is presumed innocent until his guilt is judicially proved, and every false imputation is deemed
malicious, nevertheless, when the discreditable imputation is directed against a public
person in his public capacity, it is not necessarily actionable. In order that such discreditable
imputation to a public official may be actionable, it must either be a false allegation of fact or
a comment based on a false supposition. If the comment is an expression of opinion, based
on established facts, then it is immaterial that the opinion happens to be mistaken, as long
as it might reasonably be inferred from the facts.86 (Citations omitted and underscoring ours)

Even though JAL is not a public official, the rule on privileged commentaries on matters of public
interest applies to it. The privilege applies not only to public officials but extends to a great variety of
subjects, and includes matters of public concern, public men, and candidates for office.87

Hence, pursuant to the Borjal case, there must be an actual malice in order that a discreditable
imputation to a public person in his public capacity or to a public official may be actionable. To be
considered malicious, the libelous statements must be shown to have been written or published with
the knowledge that they are false or in reckless disregard of whether they are false or not.88

Considering that the published articles involve matters of public interest and that its expressed
opinion is not malicious but based on established facts, the imputations against JAL are not
actionable. Therefore, JAL may not claim damages for them.
WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Appeals
is AFFIRMED WITH MODIFICATION. As modified, petitioner Japan Airlines is ordered to pay
respondent Jesus Simangan the following: (1) P500,000.00 as moral damages; (2) P100,000.00 as
exemplary damages; and (3) P200,000.00 as attorney's fees.

The total amount adjudged shall earn legal interest at the rate of 6% per annum from the date of
judgment of the Regional Trial Court on September 21, 2000 until the finality of this Decision. From
the time this Decision becomes final and executory, the unpaid amount, if any, shall earn legal
interest at the rate of 12% per annum until its satisfaction.

SO ORDERED.

G.R. No. 150843            March 14, 2003

CATHAY PACIFIC AIRWAYS, LTD., petitioner,

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

DAVIDE, JR., C.J.:

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

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

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

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

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

For their return flight to Manila on 28 September 1996, they were booked on Cathay’s Flight CX-905,
with departure time at 9:20 p.m. Two hours before their time of departure, the Vazquezes and their
companions checked in their luggage at Cathay’s check-in counter at Kai Tak Airport and were given
their respective boarding passes, to wit, Business Class boarding passes for the Vazquezes and
their two friends, and Economy Class for their maid. They then proceeded to the Business Class
passenger lounge.

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

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

Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to Cathay’s
Country Manager, demanded that they be indemnified in the amount of P1million for the "humiliation
and embarrassment" caused by its employees. They also demanded "a written apology from the
management of Cathay, preferably a responsible person with a rank of no less than the Country
Manager, as well as the apology from Ms. Chiu" within fifteen days from receipt of the letter.

In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s Country Manager Argus
Guy Robson, informed the Vazquezes that Cathay would investigate the incident and get back to
them within a week’s time.

On 8 November 1996, after Cathay’s failure to give them any feedback within its self-imposed
deadline, the Vazquezes instituted before the Regional Trial Court of Makati City an action for
damages against Cathay, praying for the payment to each of them the amounts of P250,000 as
temperate damages; P500,000 as moral damages; P500,000 as exemplary or corrective damages;
and P250,000 as attorney’s fees.

In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that they preferred to
stay in Business Class, Ms. Chiu "obstinately, uncompromisingly and in a loud, discourteous and
harsh voice threatened" that they could not board and leave with the flight unless they go to First
Class, since the Business Class was overbooked. Ms. Chiu’s loud and stringent shouting annoyed,
embarrassed, and humiliated them because the incident was witnessed by all the other passengers
waiting for boarding. They also claimed that they were unjustifiably delayed to board the plane, and
when they were finally permitted to get into the aircraft, the forward storage compartment was
already full. A flight stewardess instructed Dr. Vazquez to put his roll-on luggage in the overhead
storage compartment. Because he was not assisted by any of the crew in putting up his luggage, his
bilateral carpal tunnel syndrome was aggravated, causing him extreme pain on his arm and wrist.
The Vazquezes also averred that they "belong to the uppermost and absolutely top elite of both
Philippine Society and the Philippine financial community, [and that] they were among the wealthiest
persons in the Philippine[s]."

In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade passengers
to the next better class of accommodation, whenever an opportunity arises, such as when a certain
section is fully booked. Priority in upgrading is given to its frequent flyers, who are considered
favored passengers like the Vazquezes. Thus, when the Business Class Section of Flight CX-905
was fully booked, Cathay’s computer sorted out the names of favored passengers for involuntary
upgrading to First Class. When Ms. Chiu informed the Vazquezes that they were upgraded to First
Class, Dr. Vazquez refused. He then stood at the entrance of the boarding apron, blocking the
queue of passengers from boarding the plane, which inconvenienced other passengers. He shouted
that it was impossible for him and his wife to be upgraded without his two friends who were traveling
with them. Because of Dr. Vazquez’s outburst, Ms. Chiu thought of upgrading the traveling
companions of the Vazquezes. But when she checked the computer, she learned that the
Vazquezes’ companions did not have priority for upgrading. She then tried to book the Vazquezes
again to their original seats. However, since the Business Class Section was already fully booked,
she politely informed Dr. Vazquez of such fact and explained that the upgrading was in recognition
of their status as Cathay’s valued passengers. Finally, after talking to their guests, the Vazquezes
eventually decided to take the First Class accommodation.

Cathay also asserted that its employees at the Hong Kong airport acted in good faith in dealing with
the Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of disrespect
against them (the Vazquezes). Assuming that there was indeed a breach of contractual obligation,
Cathay acted in good faith, which negates any basis for their claim for temperate, moral, and
exemplary damages and attorney’s fees. Hence, it prayed for the dismissal of the complaint and for
payment of P100,000 for exemplary damages and P300,000 as attorney’s fees and litigation
expenses.

During the trial, Dr. Vazquez testified to support the allegations in the complaint. His testimony was
corroborated by his two friends who were with him at the time of the incident, namely, Pacita G. Cruz
and Josefina Vergel de Dios.

For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen; Ms. Chiu;
Norma Barrientos, Comptroller of its retained counsel; and Mr. Robson. Yuen and Robson testified
on Cathay’s policy of upgrading the seat accommodation of its Marco Polo Club members when an
opportunity arises. The upgrading of the Vazquezes to First Class was done in good faith; in fact, the
First Class Section is definitely much better than the Business Class in terms of comfort, quality of
food, and service from the cabin crew. They also testified that overbooking is a widely accepted
practice in the airline industry and is in accordance with the International Air Transport Association
(IATA) regulations. Airlines overbook because a lot of passengers do not show up for their flight.
With respect to Flight CX-905, there was no overall overbooking to a degree that a passenger was
bumped off or downgraded. Yuen and Robson also stated that the demand letter of the Vazquezes
was immediately acted upon. Reports were gathered from their office in Hong Kong and immediately
forwarded to their counsel Atty. Remollo for legal advice. However, Atty. Remollo begged off
because his services were likewise retained by the Vazquezes; nonetheless, he undertook to solve
the problem in behalf of Cathay. But nothing happened until Cathay received a copy of the complaint
in this case. For her part, Ms. Chiu denied that she shouted or used foul or impolite language against
the Vazquezes. Ms. Barrientos testified on the amount of attorney’s fees and other litigation
expenses, such as those for the taking of the depositions of Yuen and Chiu.

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

WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment

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

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

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

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

 d) Attorney’s fees and expenses of litigation in the amount of P1,000,000.00 for each
plaintiff; and

e) Costs of suit.

SO ORDERED.

According to the trial court, Cathay offers various classes of seats from which passengers are
allowed to choose regardless of their reasons or motives, whether it be due to budgetary constraints
or whim. The choice imposes a clear obligation on Cathay to transport the passengers in the class
chosen by them. The carrier cannot, without exposing itself to liability, force a passenger to
involuntarily change his choice. The upgrading of the Vazquezes’ accommodation over and above
their vehement objections was due to the overbooking of the Business Class. It was a pretext to
pack as many passengers as possible into the plane to maximize Cathay’s revenues. Cathay’s
actuations in this case displayed deceit, gross negligence, and bad faith, which entitled the
Vazquezes to awards for damages.

On appeal by the petitioners, the Court of Appeals, in its decision of 24 July 2001,2 deleted the
award for exemplary damages; and it reduced the awards for moral and nominal damages for each
of the Vazquezes to P250,000 and P50,000, respectively, and the attorney’s fees and litigation
expenses to P50,000 for both of them.

The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class, Cathay novated
the contract of carriage without the former’s consent. There was a breach of contract not because
Cathay overbooked the Business Class Section of Flight CX-905 but because the latter pushed
through with the upgrading despite the objections of the Vazquezes.

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

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

Cathay seasonably filed with us this petition in this case. Cathay maintains that the award for moral
damages has no basis, since the Court of Appeals found that there was no "wanton, fraudulent,
reckless and oppressive" display of manners on the part of its personnel; and that the breach of
contract was not attended by fraud, malice, or bad faith. If any damage had been suffered by the
Vazquezes, it was damnum absque injuria, which is damage without injury, damage or injury inflicted
without injustice, loss or damage without violation of a legal right, or a wrong done to a man for
which the law provides no remedy. Cathay also invokes our decision in United Airlines, Inc. v. Court
of Appeals3 where we recognized that, in accordance with the Civil Aeronautics Board’s Economic
Regulation No. 7, as amended, an overbooking that does not exceed ten percent cannot be
considered deliberate and done in bad faith. We thus deleted in that case the awards for moral and
exemplary damages, as well as attorney’s fees, for lack of proof of overbooking exceeding ten
percent or of bad faith on the part of the airline carrier.

On the other hand, the Vazquezes assert that the Court of Appeals was correct in granting awards
for moral and nominal damages and attorney’s fees in view of the breach of contract committed by
Cathay for transferring them from the Business Class to First Class Section without prior notice or
consent and over their vigorous objection. They likewise argue that the issuance of passenger
tickets more than the seating capacity of each section of the plane is in itself fraudulent, malicious
and tainted with bad faith.

The key issues for our consideration are whether (1) by upgrading the seat accommodation of the
Vazquezes from Business Class to First Class Cathay breached its contract of carriage with the
Vazquezes; (2) the upgrading was tainted with fraud or bad faith; and (3) the Vazquezes are entitled
to damages.

We resolve the first issue in the affirmative.

A contract is a meeting of minds between two persons whereby one agrees to give something or
render some service to another for a consideration. There is no contract unless the following
requisites concur: (1) consent of the contracting parties; (2) an object certain which is the subject of
the contract; and (3) the cause of the obligation which is established.4 Undoubtedly, a contract of
carriage existed between Cathay and the Vazquezes. They voluntarily and freely gave their consent
to an agreement whose object was the transportation of the Vazquezes from Manila to Hong Kong
and back to Manila, with seats in the Business Class Section of the aircraft, and whose cause or
consideration was the fare paid by the Vazquezes to Cathay.

The only problem is the legal effect of the upgrading of the seat accommodation of the Vazquezes.
Did it constitute a breach of contract?

Breach of contract is defined as the "failure without legal reason to comply with the terms of a
contract."5 It is also defined as the "[f]ailure, without legal excuse, to perform any promise which
forms the whole or part of the contract."6

In previous cases, the breach of contract of carriage consisted in either the bumping off of a
passenger with confirmed reservation or the downgrading of a passenger’s seat accommodation
from one class to a lower class. In this case, what happened was the reverse. The contract between
the parties was for Cathay to transport the Vazquezes to Manila on a Business Class
accommodation in Flight CX-905. After checking-in their luggage at the Kai Tak Airport in Hong
Kong, the Vazquezes were given boarding cards indicating their seat assignments in the Business
Class Section. However, during the boarding time, when the Vazquezes presented their boarding
passes, they were informed that they had a seat change from Business Class to First Class. It
turned out that the Business Class was overbooked in that there were more passengers than the
number of seats. Thus, the seat assignments of the Vazquezes were given to waitlisted passengers,
and the Vazquezes, being members of the Marco Polo Club, were upgraded from Business Class to
First Class.

We note that in all their pleadings, the Vazquezes never denied that they were members of Cathay’s
Marco Polo Club. They knew that as members of the Club, they had priority for upgrading of their
seat accommodation at no extra cost when an opportunity arises. But, just like other privileges, such
priority could be waived. The Vazquezes should have been consulted first whether they wanted to
avail themselves of the privilege or would consent to a change of seat accommodation before their
seat assignments were given to other passengers. Normally, one would appreciate and accept an
upgrading, for it would mean a better accommodation. But, whatever their reason was and however
odd it might be, the Vazquezes had every right to decline the upgrade and insist on the Business
Class accommodation they had booked for and which was designated in their boarding passes.
They clearly waived their priority or preference when they asked that other passengers be given the
upgrade. It should not have been imposed on them over their vehement objection. By insisting on
the upgrade, Cathay breached its contract of carriage with the Vazquezes.

We are not, however, convinced that the upgrading or the breach of contract was attended by fraud
or bad faith. Thus, we resolve the second issue in the negative.

Bad faith and fraud are allegations of fact that demand clear and convincing proof. They are serious
accusations that can be so conveniently and casually invoked, and that is why they are never
presumed. They amount to mere slogans or mudslinging unless convincingly substantiated by
whoever is alleging them.

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

machination refers to a deceitful scheme or plot with an evil or devious purpose. Deceit exists where
the party, with intent to deceive, conceals or omits to state material facts and, by reason of such
omission or concealment, the other party was induced to give consent that would not otherwise have
been given.7

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong, a breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud.8

We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were not induced to
agree to the upgrading through insidious words or deceitful machination or through willful
concealment of material facts. Upon boarding, Ms. Chiu told the Vazquezes that their
accommodations were upgraded to First Class in view of their being Gold Card members of
Cathay’s Marco Polo Club. She was honest in telling them that their seats were already given to
other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to
consider the remedy of offering the First Class seats to other passengers. But, we find no bad faith
in her failure to do so, even if that amounted to an exercise of poor judgment.

Neither was the transfer of the Vazquezes effected for some evil or devious purpose. As testified to
by Mr. Robson, the First Class Section is better than the Business Class Section in terms of comfort,
quality of food, and service from the cabin crew; thus, the difference in fare between the First Class
and Business Class at that time was $250.9 Needless to state, an upgrading is for the better
condition and, definitely, for the benefit of the passenger.

We are not persuaded by the Vazquezes’ argument that the overbooking of the Business Class
Section constituted bad faith on the part of Cathay. Section 3 of the Economic Regulation No. 7 of
the Civil Aeronautics Board, as amended, provides:

Sec 3. Scope. – This regulation shall apply to every Philippine and foreign air carrier with
respect to its operation of flights or portions of flights originating from or terminating at, or
serving a point within the territory of the Republic of the Philippines insofar as it denies
boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines, for
which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover
only honest mistakes on the part of the carriers and excludes deliberate and willful acts of
non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating
 capacity of the aircraft shall not be considered as a deliberate and willful act of non-
accommodation.

It is clear from this section that an overbooking that does not exceed ten percent is not considered
deliberate and therefore does not amount to bad faith.10 Here, while there was admittedly an
overbooking of the Business Class, there was no evidence of overbooking of the plane beyond ten
percent, and no passenger was ever bumped off or was refused to board the aircraft.

Now we come to the third issue on damages.

The Court of Appeals awarded each of the Vazquezes moral damages in the amount of P250,000.
Article 2220 of the Civil Code provides:

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if
the court should find that, under the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. Although incapable
of pecuniary computation, moral damages may be recovered if they are the proximate result of the
defendant’s wrongful act or omission.11 Thus, case law establishes the following requisites for the
award of moral damages: (1) there must be an injury clearly sustained by the claimant, whether
physical, mental or psychological; (2) there must be a culpable act or omission factually established;
(3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by
the claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219
of the Civil Code.12

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

In this case, we have ruled that the breach of contract of carriage, which consisted in the involuntary
upgrading of the Vazquezes’ seat accommodation, was not attended by fraud or bad faith. The Court
of Appeals’ award of moral damages has, therefore, no leg to stand on.

The deletion of the award for exemplary damages by the Court of Appeals is correct. It is a requisite
in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or
done in wanton, fraudulent or malevolent manner.15 Such requisite is absent in this case. Moreover,
to be entitled thereto the claimant must first establish his right to moral, temperate, or compensatory
damages.16 Since the Vazquezes are not entitled to any of these damages, the award for exemplary
damages has no legal basis. And where the awards for moral and exemplary damages are
eliminated, so must the award for attorney’s fees.17

The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of contract is an
award for nominal damages under Article 2221 of the Civil Code, which reads as follows:

Article 2221 of the Civil Code provides:

 Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.

Worth noting is the fact that in Cathay’s Memorandum filed with this Court, it prayed only for the
deletion of the award for moral damages. It deferred to the Court of Appeals’ discretion in awarding
nominal damages; thus:

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

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

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

We are not amused but alarmed at the lower court’s unbelievable alacrity, bordering on the
scandalous, to award excessive amounts as damages. In their complaint, appellees asked for P1
million as moral damages but the lower court awarded P4 million; they asked for P500,000.00 as
exemplary damages but the lower court cavalierly awarded a whooping P10 million; they asked for
P250,000.00 as attorney’s fees but were awarded P2 million; they did not ask for nominal damages
but were awarded P200,000.00. It is as if the lower court went on a rampage, and why it acted that
way is beyond all tests of reason. In fact the excessiveness of the total award invites the suspicion
that it was the result of "prejudice or corruption on the part of the trial court."

The presiding judge of the lower court is enjoined to hearken to the Supreme Court’s
admonition in Singson vs. CA (282 SCRA 149 [1997]), where it said:

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

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

Nonetheless, we agree with the injunction expressed by the Court of Appeals that
passengers must not prey on international airlines for damage awards, like "trophies
in a safari." After all neither the social standing nor prestige of the passenger should
determine the extent to which he would suffer because of a wrong done, since the
dignity affronted in the individual is a quality inherent in him and not conferred by
these social indicators. 19
We adopt as our own this observation of the Court of Appeals.

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

No pronouncement on costs.

SO ORDERED.

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

EDGARDO CARIAGA, ET AL., plaintiffs and appellants, v. LAGUNA TAYABAS

BUS COMPANY, defendant and appellant. MANILA RAILROAD COMPANY,
defendant and appellee.

Ozaeta, Lichauco & Picazo for defendant and Appellant.

E.A. Fernandez and L.H. Fernandez for plaintiffs and appellants.

Gov’t Corp. Counsel A. Padilla and Atty. F.A. Umali for Appellee.

SYLLABUS

1. DAMAGES; MORAL DAMAGES; RECOVERABLE ONLY IN INSTANCES

ENUMERATED IN ART. 2219 OF THE CIVIL CODE. — Article 2219 of the Civil Code
enumerated the instances when moral damages may be recovered. Plaintiff’s claim
for moral damages not falling under any one of them, the same cannot be granted.

2. ID.; ID.; WHEN RECOVERABLE FOR BREACH OF CONTRACT UNDER ART. 2220
OF THE CIVIL CODE. — Neither could defendant LTB be held liable to pay moral
damages to plaintiffs under Art. 2220 of the Civil Code on account of breach of its
contract of carriage because said defendant did not act fraudulently or in bad faith
in connection therewith.

3. ID.; ACTUAL AND COMPENSATORY DAMAGES; ONLY PARTIES TO CONTRACTS

BREACHED ARE ENTITLED TO COMPENSATORY DAMAGES RESULTING THEREFROM.
— Since the present action is based upon a breach of contract of carriage and
plaintiff’s parents were not a party thereto and were not themselves injured as a
result of the collision, their claim for actual and compensatory damages is without
merit.
4. ATTORNEYS-AT-LAW; ATTORNEY’S FEES; CASE NOT FALLING UNDER ANY OF
THE INSTANCES ENUMERATED IN ART. 2208 OF THE CIVIL CODE. — The present
case not falling under any of the instances enumerated in Article 2208 of the Civil
Code, plaintiff’s are not entitled to recover attorney’s fees.

DECISION

DIZON, J.:

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

The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous
expenses incurred from June 18, 1952 to April 1953. From January 15, 1953 up to
April of the same year Edgardo stayed in a private house in Quezon City, the LTB
having agreed to give him a subsistence allowance of P10.00 daily during his
convalescence, having spent in this connection the total sum of P775.30 in addition
to the amount already referred to.

On April 24, 1953 the present action was filed to recover for Edgardo Cariaga, from
the LTB and the MRR Co., the total sum of P312,000.00 as actual, compensatory,
moral and exemplary damages, and for his parents, the sum of P18,000.00 in the
same concepts. The LTB disclaimed liability claiming that the accident was due to
the negligence of it s co-defendant, the Manila Railroad Company, for not providing
a crossing bar at the point where the national highway crossed the railway track,
and for this reason filed the corresponding cross-claim against the latter company
to recover the total sum of P18,194.75 representing the expenses paid to Edgardo
Cariaga. The Manila Railroad Company, in turn, denied liability upon the complaint
and cross-claim, alleging that it was the reckless negligence of the bus driver that
caused the accident.

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

The Cariagas claim that the trial court erred: in awarding only P10,490. as
compensatory damages to Edgardo; in not awarding them actual and moral
damages, and in not sentencing appellant LTB to pay attorney’s fees.

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

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

After considering the evidence presented by both parties the lower court expressly
found:jgc:chanrobles.com.ph

". . . While the train was approximately 300 meters from the crossing, the engineer
sounded two long and two short whistles and upon reaching a point about 100
meters from the highway, he sounded a long whistle which lasted up to the time
the train was about to cross it. The bus proceeded on its way without slackening its
speed and it bumped against the train engine, causing the first six wheels of the
latter to be derailed." cralaw virtua1aw library

x          x           x

". . . that the train whistle had been sounded several times before it reached the
crossing. All witnesses for the plaintiffs and the defendants are uniform in stating
that they heard the train whistle sometime before the impact and considering that
some of them were in the bus at the time, the driver thereof must have heard it
because he was seated on the left front part of the bus and its was his duty and
concern to observe such fact in connection with the safe operation of the vehicle.
The other L.T.B. bus which arrived ahead at the crossing, heeded the warning by
stopping and allowing the train to pass and so nothing happened to said vehicle. On
the other hand, the driver of the bus No. 133 totally ignored the whistle and noise
produced by the approaching train and instead he tried to make the bus pass the
crossing before the train by not stopping a few meters from the railway track and in
proceeding ahead." cralaw virtua1aw library

The above findings of the lower court are predicated mainly upon the testimony of
Gregorio Ilusondo, a witness for the Manila Railroad Company. Notwithstanding the
efforts exerted by the LTB to assail his credibility, we do no find in the record any
fact or circumstance sufficient to discredit his testimony. We have, therefore, no
other alternative but to accept the findings of the trial court to the effect, firstly,
that the whistle of the locomotive was sounded four times — two long and two
short — "as the train was approximately 300 meters from the crossing" ; secondly,
that another LTB bus which arrived at the crossing ahead of the one where Edgardo
Cariaga was a passenger, paid heed to the warning and stopped before the
"crossing", while — as the LTB itself now admits (Brief p. 5) — the driver of the bus
in question totally disregarded the warning.

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

The Cariagas, as appellants, claim that the award of P10,000.00 compensatory

damages to Edgardo is inadequate considering the nature and the after effects of
the physical injuries suffered by him. After a careful consideration of the evidence
on this point we find their contention to be well founded.

From the deposition of Dr. Romeo Gustilo, a neurosurgeon, it appears that, as a

result of the injuries suffered by Edgardo, his right forehead was fractured
necessitating the removal of practically all of the right frontal lobe of his brain.
From the testimony of Dr. Jose A. Fernandez, a psychiatrist, it may be gathered
that, because of the physical injuries suffered by Edgardo, his mentality has been
so reduced that he can no longer finish his studies as a medical student; that he
has become completely misfit for any kind of work; that he can hardly walk around
without someone helping him, and has to use a brace on his left leg and feet.
Upon the whole evidence on the matter, the lower court found that the removal of
the right frontal lobe of the brain of Edgardo reduced his intelligence by about 50%;
that due to the replacement of the right frontal bone of his head with a tantalum
plate Edgardo has to lead a quite and retired life because "if the tantalum plate is
pressed in or dented it would cause his death." cralaw virtua1aw library

The impression one gathers from this evidence is that, as a result of the physical
injuries suffered by Edgardo Cariaga, he is now in a helpless condition, virtually an
invalid, both physically and mentally.

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

Upon consideration of all the facts mentioned heretofore, this Court is of the
opinion, and so holds, that the compensatory damages awarded to Edgardo Cariaga
should be increased to P25,000.00.

Edgardo Cariaga’s claim for moral damages and attorney’s fees was denied by the
trial court, the pertinent portion of its decision reading as follows: jgc:chanrobles.com.ph

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

"The plaintiff Edgardo Cariaga is also not entitled to recover for attorney’s fees,
because this case does not fall under any of the instances enumerated in Article
2208 of the Civil Code." cralaw virtua1aw library

We agree with the trial court and, to the reasons given above, we add those given
by this Court in Cachero v. Manila Yellow Taxicab Co., Inc. (101 Phil., 523, 530,
533):jgc:chanrobles.com.ph

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

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

compensation for moral damages? Article 2219 of the Civil Code says the
following: chanrob1es virtual 1aw library

‘Art. 2219. Moral damages may be recovered in the following and analogous
cases: chanrob1es virtual 1aw library

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

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

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

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

(8) Malicious prosecution;

(9) Acts mentioned in Article 309;

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

x          x           x

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

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

injuries’ (Art. 2219, par. 2, of the Civil Code). From the report of the Code
Commission on the new Civil Code. We copy the following: chanrob1es virtual 1aw library

‘A question of nomenclature confronted the Commission. After a careful

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

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

"In the case of Cangco, v. Manila Railroad, 38 Phil. 768, We established the
distinction between obligation derived from negligence and obligation as a result of
a breach of contract. Thus, we said: chanrob1es virtual 1aw library

‘It is important to note that the foundation of the legal liability of the defendant is
the contract of carriage, and that the obligation to respond for the damage which
plaintiff has suffered arises, if at all, from the breach of that contract by reason of
the failure of defendant to exercise due case in its performance. That is to say, its
liability is direct and immediate, differing essentially in the legal viewpoint from that
presumptive responsibility for the negligence of its servants, imposed by Article
1903 of the Civil Code (Art. 2180 of the new), which can be rebutted by proof of
the exercise of due care in their selection of supervision. Article 1903 is not
applicable to obligations arising EX CONTRACTU, but only to extra- contractual
obligations — or to use the technical form of expression, that article relates only to
CULPA AQUILIANA.’ and not to CULPA CONTRACTURAL.’

"The decisions in the cases of Castro v. Acro Taxicab Co., (82 Phil., 359; 46 Off.
Gaz., No. 5, p. 2023); Lilius Et. Al. v. Manila Railroad, 59 Phil., 758) and others,
wherein moral damages were awarded to the plaintiffs, are not applicable to the
case at bar because said decisions were rendered before the effectivity of the new
Civil Code (August 30, 1950) and for the further reason that the complaints filed
therein were based on different causes of action.

"In view of the foregoing the sum of P2,000 awarded as moral damages by the trial
court has to be eliminated, for under the law it is not a compensation awardable in
a case like the one at bar."cralaw virtua1aw library

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

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

G.R. No. 179117               February 3, 2010

NORTHWEST AIRLINES, INC., Petitioner,

vs.
SPOUSES EDWARD J. HESHAN AND NELIA L. HESHAN AND DARA GANESSA L. HESHAN,
REPRESENTED BY HER PARENTS EDWARD AND NELIA HESHAN, Respondents.

DECISION

CARPIO MORALES, J.:

In July 1998, Edward Heshan (Edward) purchased three (3) roundtrip tickets from Northwest
Airlines, Inc. (petitioner) for him, his wife Nelia Heshan (Nelia) and daughter Dara Ganessa Heshan
(Dara) for their trip from Manila to St. Louis, Missouri, USA and back to attend an ice skating
competition where then seven yearold Dara was to participate.1

When Dara’s participation in the ice skating event ended on August 7, 1998, the Heshans proceeded
to the airport to take the connecting flight from St. Louis to Memphis on their way to Los Angeles. At
the airport, the Heshans first checked-in their luggage at the airport’s "curbside check-in" near the
entrance.2 Since they arrived three hours early for their 6:05 p.m. flight (Flight No. 972M), the
Heshans whiled away the time at a nearby coffee shop. At 5:15 p.m. when the check-in counter
opened, Edward took to the line where he was second in the queue. When his turn came and
presented the tickets to petitioner’s customer service agent Ken Carns (Carns) to get the boarding
passes, he was asked to step aside and wait to be called again.3

After all the other departing passengers were given their boarding passes, the Heshans were told to
board the plane without any boarding pass given to them and to just occupy open seats therein.
Inside the plane, the Heshans noticed that only one vacant passenger seat was available, which was
offered to Dara, while Edward and Nelia were directed to occupy two "folding seats" located at the
rear portion of the plane. To respondents, the two folding seats were crew seats intended for the
stewardesses.4

Upset that there were not enough passenger seats for them, the Heshans complained to the cabin
crew about the matter but were told that if they did not like to occupy the seats, they were free to
disembark from the plane. And disembark they did, complaining thereafter to Carns about their
situation. Petitioner’s plane then departed for Memphis without respondents onboard.5

The Heshans were later endorsed to and carried by Trans World Airways to Los Angeles.
Respondents arrived in Los Angeles at 10:30 p.m. of the same day but had to wait for three hours at
the airport to retrieve their luggage from petitioner’s Flight No. 972M.6 Respondents stayed for five
days more in the U.S. before going back home to Manila.7

On September 24, 1998, respondents sent a letter to petitioner to demand indemnification for the
breach of contract of carriage.8 Via letter of December 4, 1998, petitioner replied that respondents
were prohibited to board Flight No. 972M for "verbally abus[ing] [the] flight crew."9

As their demand remained unheeded, respondents filed a complaint for breach of contract with
damages at the Regional Trial Court (RTC) of Quezon City.10
From the depositions of petitioner’s employees Carns, Mylan Brown (Brown) and Melissa Seipel
(Seipel), the following version is gathered:

The Heshans did not have reservations for particular seats on the flight. When they requested that
they be seated together, Carns denied the request and explained that other passengers had pre-
selected seats and that the computerized seating system did not reflect that the request could be
accommodated at the time. Carns nonetheless assured the Heshans that they would be able to
board the plane and be seated accordingly, as he in fact instructed them ten minutes before the
plane’s departure, to board the plane even without boarding passes and to occupy "open seats"
therein.11

By Seipel’s claim, as the Heshans were upset upon learning that they were not seated together on
the plane, she told them that she would request other passengers to switch places to accommodate
their demand; that she never had a chance to try to carry out their demand, however, as she first
had to find space for their bags in the overhead compartment; and that the Heshans cursed her
which compelled her to seek assistance from Brown in dealing with them.12

Brown averred that she went to the back portion of the plane to help out but she was brushed aside
by Nelia who was cursing them as she stormed out of the plane followed by Edward and Dara.13

Petitioner denied that the Heshans (hereafter respondents) were told to occupy "folding seats" or
crew seats since "[Federal Aviation Authority] regulations say no passengers are to sit there."14 As
for respondents not having been given boarding passes, petitioner asserted that that does not in
itself mean that the flight was overbooked, for

[t]his is done on last minute boarding when flights are full and in order to get passengers on their
way and to get the plane out on time. This is acceptable procedure.15

Branch 96 of the RTC, by Decision16 of August 20, 2002, rendered judgment in favor of respondents,
disposing as follows:

WHEREFORE, judgment is rendered ordering [petitioner] Northwest Airlines, Inc. to pay

[respondents] Edward J. Heshan, Nelia L. Heshan and Dara Ganessa L. Heshan the following:

1. P3,000,000.00, as moral damages;

2. P500,000.00, as exemplary damages;

3. A sum equivalent of 20% of the foregoing amounts, as attorney’s fees; and,

4. Costs of suit.

SO ORDERED.17

In finding for respondents, the trial court noted:

[T]hat the [respondents] held confirmed reservations for the St Louis-Memphis leg of their return trip
to the Philippines is not disputed. As such, they were entitled as of right under their contract to be
accommodated in the flight, regardless of whether they had selected their seats in advance or not.
They had arrived at the airport early to make sure of their seating together, and, in fact, Edward was
second in the queue for boarding passes. Yet, Edward was unceremoniously sidelined and curtly
told to wait without any explanations why. His concerned seeking for explanations was
repeatedly rebuffed by the airline employees. When, at last, they were told to board the aircraft
although they had not yet been issued boarding passes, which they thought to be highly
unusual, they soon discovered, to their dismay, that the plane was fully booked, with only
one seat left for the 3 of them. Edward and Nelia rejected the offer [to take] the crew seats.
[Respondents] were thus forced to disembark. (italics in the original; emphasis and underscoring
supplied)

On appeal, the Court of Appeals, by Decision18 of June 22, 2007, sustained the trial court’s findings
but reduced the award of moral and exemplary damages to ₱2 million and ₱300,000,
respectively.19 In affirming the findings of the trial court, the appellate court held:

… [I]t is clear that the only instances [sic] when the [petitioner] and its agents allow its passengers to
board the plane without any boarding pass is when the flights are full and the plane is running late.
Taking into account the fact that the [respondents] arrived at the airport early, checked-in their
baggage before hand and were in fact at the gates of the boarding area on time, thus, it could not be
said that they can fall under the exceptional circumstance [sic]. It bears stressing at this juncture that
it becomes a highly irregular situation that despite the fact that the [respondents] showed up on
time at the boarding area[,] they were made to go in last and sans any boarding passes. Thus,
We hold that it can be logically inferred that the reason why no boarding passes were
immediately issued to the [respondents] is because Flight 972 from St. Louis to Memphis is
full and the [respondents] were "bumped off" from their flight. (emphasis, italics and
underscoring supplied)

Reconsideration having been denied by the appellate court,20 petitioner filed the present petition for
review upon the issues of whether the appellate court

. . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO MORAL DAMAGES…

II

. . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO EXEMPLARY DAMAGES…

III

. . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO ATTORNEY’S FEES…

IV

. . .ASSUMING ARGUENDO THAT RESPONDENTS WERE ENTITLED TO AN AWARD OF

DAMAGES, [ERRED IN AWARDING EXCESSIVE DAMAGES TO RESPONDENTS] .

. . . ERRED IN NOT FINDING FOR [IT] ON ITS COUNTERCLAIM.21

To petitioner, the present petition offers compelling reasons to again review the congruent factual
findings of the lower courts which, to it, are contrary to the evidence on record; that the lower courts
disregarded vital testimonies of its witnesses; that the appellate court premised its decision on a
misapprehension of facts and failed to consider certain relevant facts which, if properly taken into
account, will justify a different conclusion; that the appellate court made several inferences which
were manifestly mistaken and absurd; and that the appellate court exercised grave abuse of
discretion in the appreciation of facts.22

Petitioner maintains that it did not violate the contract of carriage since respondents were eventually
transported from Memphis to Los Angeles, albeit via another airline, and that respondents made no
claim of having sustained injury during the carriage.23

Petitioner goes on to posit that if indeed crew seats were offered to respondents, its crew would
have had nowhere to sit and the plane would not have been able to depart,24 and that in reality,
respondents voluntarily disembarked from the aircraft because they were not willing to wait to be
seated together.25

At all events, petitioner finds the amount of damages imposed by the appellate court "excessive and
unprecedented" and needing substantial reduction.26

In their Comment, respondents counter that since the petition is predicated on questions of facts and
the appellate court affirmed the trial court’s factual findings, these are entitled to great weight and
respect.27

Respondents thus maintain that petitioner was guilty of breach of contract. They cite Singapore
Airlines v. Fernandez,28 which ruled:

[W]hen an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger then has every right to expect that he be transported on
that flight and on that date. If he does not, then the carrier opens itself to a suit for a breach of
contract of carriage.

The petition fails.

As has repeatedly been underscored, in petitions for review on certiorari, the general rule is that only
questions of law may be raised by the parties and passed upon by the Court.29 Factual findings of
the appellate court are generally binding on the Court, especially when in complete accord with the
findings of the trial court, as in the present case, save for some recognized exceptions.30

The issues raised by petitioner are predicated on the appreciation of factual issues. In weighing the
evidence of the parties, the trial court found respondents’ more credible.

An examination of the evidence presented by petitioner shows that it consisted only of depositions of
its witnesses. It had in its possession and disposition pertinent documents such as the flight manifest
and the plane’s actual seating capacity and layout which could have clearly refuted respondents’
claims that there were not enough passenger seats available for them. It inexplicably failed to offer
even a single piece of documentary evidence. The Court thus believes that if at least the cited
documentary evidence had been produced, it would have been adverse to petitioner’s case.31

More. Petitioner failed to satisfactorily explain why it did not issue boarding passes to respondents
who were confirmed passengers, even after they had checked-in their luggage three hours earlier.
That respondents did not reserve seats prior to checking-in did not excuse the non-issuance of
boarding passes.
From Carns’ following testimony, viz:

Q. Now you mentioned open seats, Mr. Carns, can you tell us what the phrase or term open
seats mean?

A. Well, about 10 minutes before boarding time when we cancel those who do not take
reserve seats, we know how many passengers are on the plane and we just tell the other
passengers to take whatever seat is available at that time,32 it is gathered that respondents
were made to wait for last-minute cancellations before they were accommodated onto the
plane. This, coupled with petitioner’s failure to issue respondents their boarding passes and
the eleventh-hour directive for them to embark, reinforces the impression that the flight was
overbooked.

Petitioner’s assertion that respondents disembarked from the plane when their request to be seated
together was ignored does not impress. The observation of the appellate court, viz:

x x x x [T]he fact that the Appellees still boarded the plane ten (10) minutes prior to the departure
time, despite knowing that they would be seated apart, is a clear manifestation of the Appellees’
willingness to abandon their request and just board the plane in order to catch their flight. But as it
turns out, there were not enough seats for the three of them as aptly found by the Court a quo, to
which We subscribed [sic]. x x x x,33 merits the Court’s concurrence. 1avvphi1

Nonetheless, the petition is in part meritorious. There is a need to substantially reduce the moral
damages awarded by the appellate court. While courts are given discretion to determine the amount
of damages to be awarded, it is limited by the principle that the amount awarded should not be
palpably and scandalously excessive.34

Moral damages are neither intended to impose a penalty to the wrongdoer, nor to enrich the
claimant. Taking into consideration the facts and circumstances attendant to the case, an award to
respondents of ₱500,000, instead of ₱2,000,000, as moral damages is to the Court reasonable.35

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with
MODIFICATION. The award of moral damages is reduced to ₱500,000. In all other respects, the
Decision is AFFIRMED.

Costs against petitioner.

SO ORDERED.

G.R. No. 157009               March 17, 2010

SULPICIO LINES, INC., Petitioner,

vs.
DOMINGO E. CURSO, LUCIA E. CURSO, MELECIO E. CURSO, SEGUNDO E. CURSO,
VIRGILIO E. CURSO, DIOSDADA E. CURSO, and CECILIA E. CURSO, Respondents.

DECISION

BERSAMIN, J.:
Are the surviving brothers and sisters of a passenger of a vessel that sinks during a voyage entitled
to recover moral damages from the vessel owner as common carrier?

This is the question presented in the appeal taken by the common carrier from the reversal by the
Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) dismissing the complaint for
various damages filed by the surviving brothers and sisters of the late Dr. Cenon E. Curso upon a
finding that force majeure had caused the sinking. The CA awarded moral and other damages to the
surviving brothers and sisters.

Antecedents

On October 23, 1988, Dr. Curso boarded at the port of Manila the MV Doña Marilyn, an inter-island
vessel owned and operated by petitioner Sulpicio Lines, Inc., bound for Tacloban City. Unfortunately,
the MV Doña Marilyn sank in the afternoon of October 24, 1988 while at sea due to the inclement
sea and weather conditions brought about by Typhoon Unsang. The body of Dr. Curso was not
recovered, along with hundreds of other passengers of the ill-fated vessel. At the time of his death,
Dr. Curso was 48 years old, and employed as a resident physician at the Naval District Hospital in
Naval, Biliran. He had a basic monthly salary of ₱3,940.00, and would have retired from government
service by December 20, 2004 at the age of 65.

On January 21, 1993, the respondents, allegedly the surviving brothers and sisters of Dr. Curso,
sued the petitioner in the RTC in Naval, Biliran to claim damages based on breach of contract of
carriage by sea, averring that the petitioner had acted negligently in transporting Dr. Curso and the
other passengers. They stated, among others, that their parents had predeceased Dr. Curso, who
died single and without issue; and that, as such, they were Dr. Curso’s surviving heirs and
successors in interest entitled to recover moral and other damages.1 They prayed for judgment, as
follows: (a) compensatory damages of ₱1,924,809.00; (b) moral damages of ₱100,000.00; (c)
exemplary or corrective damages in the amount deemed proper and just; (d) expenses of litigation of
at least ₱50,000.00; (e) attorney’s fees of ₱50,000.00; and (f) costs of suit.

The petitioner denied liability, insisting that the sinking of the vessel was due to force majeure (i.e.,
Typhoon Unsang), which exempted a common carrier from liability. It averred that the MV Doña
Marilyn was seaworthy in all respects, and was in fact cleared by the Philippine Coast Guard for the
voyage; and that after the accident it conducted intensive search and rescue operations and
extended assistance and aid to the victims and their families.

Ruling of the RTC

On July 28, 1995, the RTC dismissed the complaint upon its finding that the sinking of the vessel
was due to force majeure. The RTC concluded that the officers of the MV Doña Marilyn had acted
with the diligence required of a common carrier; that the sinking of the vessel and the death of its
passengers, including Dr. Curso, could not have been avoided; that there was no basis to consider
the MV Doña Marilyn not seaworthy at the time of the voyage; that the findings of the Special Board
of Marine Inquiry (SBMI) constituted to investigate the disaster absolved the petitioner, its officers,
and crew of any negligence and administrative liability; and that the respondents failed to prove their
claim for damages.

Ruling of the CA

The respondents appealed to the CA, contending that the RTC erred: (a) in considering itself barred
from entertaining the case by the findings of fact of the SBMI in SBMI-ADM Case No. 08-88; (b) in
not holding that the petitioner was negligent and did not exercise the required diligence and care in
conducting Dr. Curso to his destination; (c) in not finding that the MV Doña Marilyn was unseaworthy
at the time of its sinking; and (d) in not awarding damages to them.2

In its decision dated September 16, 2002,3 the CA held and disposed:

Based on the events described by the appellee’s witness, the Court found inadequate proof to show
that Sulpicio Lines, Inc., or its officers and crew, had exercised the required degree of diligence to
acquit the appellee of liability.

In the first place, the court finds inadequate explanation why the officers of the M.V. Doña Marilyn
had not apprised themselves of the weather reports on the approach of typhoon "Unsang" which had
the power of a signal no. 3 cyclone, bearing upon the general direction of the path of the M.V. Doña
Marilyn. If the officers and crew of the Doña Marilyn had indeed been adequately monitoring the
strength and direction of the typhoon, and had acted promptly and competently to avoid the same,
then such a mishap would not have occurred.

Furthermore, there was no account of the acts and decision of the crew of the ill-fated ship from 8:00
PM on October 23, 1988 when the Chief Mate left his post until 4:00 AM the next day when he
resumed duty. It does not appear what occurred during that time, or what weather reports were
received and acted upon by the ship captain. What happened during such time is important in
determining what information about the typhoon was gathered and how the ship officers reached
their decision to just change course, and not take shelter while a strong typhoon was approaching.

Furthermore, the Court doubts the fitness of the ship for the voyage, since at the first sign of bad
weather, the ship’s hydraulic system failed and had to be repaired mid-voyage, making the vessel a
virtual derelict amidst a raging storm at sea. It is part of the appellee’s extraordinary diligence as a
common carrier to make sure that its ships can withstand the forces that bear upon them during a
voyage, whether they be the ordinary stress of the sea during a calm voyage or the rage of a storm.
The fact that the stud bolts in the ships hydraulic system gave way while the ship was at sea
discredits the theory that the appellee exercised due diligence in maintaining the seaworthy
condition of the M.V. Doña Marilyn. xxx.4

xxx

Aside from these, the defendant must compensate the plaintiffs for moral damages that they
suffered as a result of the negligence attending the loss of the M.V. Doña Marilyn. Plaintiffs, have
established that they took great pains to recover, in vain, the body of their brother, at their own cost,
while suffering great grief due to the loss of a loved one. Furthermore, Plaintiffs were unable to
recover the body of their brother. Moral damages worth ₱100,000.00 is proper.

WHEREFORE, premises considered, the appealed decision of the RTC of Naval, Biliran, Branch 16,
rendered in Civil Case No. B-0851, is hereby SET ASIDE. In lieu thereof, judgment is hereby
rendered, finding the defendant-appellee Sulpicio Lines, Inc, to have been negligent in transporting
the deceased Cenon E. Curso who was on board the ill-fated M.V. Doña Marilyn, resulting in his
untimely death. Defendant-appellee is hereby ordered to pay the plaintiffs heirs of Cenon E. Curso
the following:

(1) Death indemnity in the amount of ₱50,000.00;

(2) Loss of Earning Capacity in the amount of ₱504,241.20;

 (3) Moral Damages in the amount of ₱100,000.00.

(4) Costs of the suit.5

Hence, this appeal, in which the petitioner insists that the CA committed grievous errors in holding
that the respondents were entitled to moral damages as the brothers and sisters of the late Dr.
Curso; that the CA thereby disregarded Article 1764 and Article 2206 of the Civil Code, and the
ruling in Receiver for North Negros Sugar Co., Inc. v. Ybañez,6 whereby the Supreme Court
disallowed the award of moral damages in favor of the brothers and sisters of a deceased passenger
in an action upon breach of a contract of carriage.7

Issues

The petitioner raises the following issues:

ARE THE BROTHERS AND SISTERS OF A DECEASED PASSENGER IN A CASE OF BREACH

OF CONTRACT OF CARRIAGE ENTITLED TO AN AWARD OF MORAL DAMAGES AGAINST THE
CARRIER?

ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL DAMAGES, SHOULD THE AWARD
BE GRANTED OR GIVEN TO THE BROTHER OR SISTER NOTWITHSTANDING (THE) LACK OF
EVIDENCE AS REGARDS HIS OR HER PERSONAL SUFFERING?

Ruling

The petition is meritorious.

As a general rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract, unless there is fraud or bad faith.8 As an exception, moral damages may be
awarded in case of breach of contract of carriage that results in the death of a passenger,9 in
accordance with Article 1764, in relation to Article 2206 (3), of the Civil Code, which provide:

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.

Article 2206. 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 shall be paid to the heirs of the latter; such indemnity shall in every case be
assessed and awarded by the court, unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his death;

(2) If the deceased was obliged to give support according to the provisions of article 291, the
recipient who is not an heir called to the decedent's inheritance by the law of testate or
intestate succession, may demand support from the person causing the death, for a period
not exceeding five years, the exact duration to be fixed by the court;

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased
may demand moral damages for mental anguish by reason of the death of the deceased.
The foregoing legal provisions set forth the persons entitled to moral damages. The omission from
Article 2206 (3) of the brothers and sisters of the deceased passenger reveals the legislative intent
to exclude them from the recovery of moral damages for mental anguish by reason of the death of
the deceased. Inclusio unius est exclusio alterius.10 The solemn power and duty of the courts to
interpret and apply the law do not include the power to correct the law by reading into it what is not
written therein.11 Thus, the CA erred in awarding moral damages to the respondents.

The petitioner has correctly relied on the holding in Receiver for North Negros Sugar Company, Inc.
v. Ybañez,12 to the effect that in case of death caused by quasi-delict, the brother of the deceased
was not entitled to the award of moral damages based on Article 2206 of the Civil Code.

Essentially, the purpose of moral damages is indemnity or reparation, that is, to enable the injured
party to obtain the means, diversions, or amusements that will serve to alleviate the moral suffering
he has undergone by reason of the tragic event. According to Villanueva v. Salvador,13 the conditions
for awarding moral damages are: (a) there must be an injury, whether physical, mental, or
psychological, clearly substantiated by the claimant; (b) there must be a culpable act or omission
factually established; (c) the wrongful act or omission of the defendant must be the proximate cause
of the injury sustained by the claimant; and (d) the award of damages is predicated on any of the
cases stated in Article 2219 of the Civil Code.

To be entitled to moral damages, the respondents must have a right based upon law. It is true that
under Article 100314 of the Civil Code they succeeded to the entire estate of the late Dr. Curso in the
absence of the latter’s descendants, ascendants, illegitimate children, and surviving spouse.
However, they were not included among the persons entitled to recover moral damages, as
enumerated in Article 2219 of the Civil Code, viz:

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

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

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

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

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

(8) Malicious prosecution;

(9) Acts mentioned in article 309;

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

The parents of the female seduced, abducted, raped or abused referred to in No. 3 of this article,
may also recover moral damages.
The spouse, descendants, ascendants and brothers and sisters may bring the action mentioned in
No. 9 of this article, in the order named.1avvphi1

Article 2219 circumscribes the instances in which moral damages may be awarded. The provision
does not include succession in the collateral line as a source of the right to recover moral damages.
The usage of the phrase analogous cases in the provision means simply that the situation must be
held similar to those expressly enumerated in the law in question15 following the ejusdem
generis rule. Hence, Article 1003 of the Civil Code is not concerned with recovery of moral damages.

In fine, moral damages may be recovered in an action upon breach of contract of carriage only
when: (a) where death of a passenger results, or (b) it is proved that the carrier was guilty of fraud
and bad faith, even if death does not result.16 Article 2206 of the Civil Code entitles the descendants,
ascendants, illegitimate children, and surviving spouse of the deceased passenger to demand moral
damages for mental anguish by reason of the death of the deceased.17

WHEREFORE, the petition for review on certiorari is granted, and the award made to the
respondents in the decision dated September 16, 2002 of the Court of Appeals of moral damages
amounting to ₱100,000.00 is deleted and set aside.

SO ORDERED

G.R. No. 161909               April 25, 2012

PHILTRANCO SERVICE ENTERPRISES, INC., Petitioner,

vs.
FELIX PARAS AND INLAND TRAILWAYS, INC., AND HON. COURT OF
APPEALS, Respondents.

DECISION

BERSAMIN, J.:

In an action for breach of contract of carriage commenced by a passenger against his common
carrier, the plaintiff can recover damages from a third-party defendant brought into the suit by the
common carrier upon a claim based on tort or quasi-delict. The liability of the third-party defendant is
independent from the liability of the common carrier to the passenger.

Philtranco Service Enterprises, Inc. (Philtranco) appeals the affirmance with modifications by the
Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) awarding moral, actual and
temperate damages, as well as attorney’s fees and costs of suit, to respondent Felix Paras (Paras),
and temperate damages to respondent Inland Trailways, Inc. (Inland), respectively the plaintiff and
the defendant/third-party plaintiff in this action for breach of contract of carriage, upon a finding that
the negligence of the petitioner and its driver had caused the serious physical injuries Paras
sustained and the material damage Inland’s bus suffered in a vehicular accident.

Antecedents

The antecedent facts, as summarized by the CA, are as follows:

Plaintiff-appellant [respondent] Felix Paras (Paras for brevity), who hails from Cainta, Rizal is
engaged in the buy and sell of fish products. Sometime on 08 February 1987, on his way home to
Manila from Bicol Region, he boarded a bus with Body No. 101 and Plate No. EVE 508, owned and
operated by Inland Trailways, Inc. (Inland for brevity) and driven by its driver Calvin Coner (Coner for
brevity).

At approximately 3:50 o’clock in the morning of 09 February 1987, while the said bus was travelling
along Maharlika Highway, Tiaong, Quezon, it was bumped at the rear by another bus with Plate No.
EVB 259, owned and operated by Philtranco Service Enterprises, Inc. (Philtranco for brevity). As a
result of the strong and violent impact, the Inland bus was pushed forward and smashed into a cargo
truck parked along the outer right portion of the highway and the shoulder thereof. Consequently, the
said accident bought considerable damage to the vehicles involved and caused physical injuries to
the passengers and crew of the two buses, including the death of Coner who was the driver of the
Inland Bus at the time of the incident.

Paras was not spared from the pernicious effects of the accident. After an emergency treatment at
the San Pablo Medical Center, San Pablo City, Laguna, Paras was taken to the National Orthopedic
Hospital. At the latter hospital, he was found and diagnosed by Dr. Antonio Tanchuling, Jr. to be
affected with the following injuries: a) contusion/hematoma; b) dislocation of hip upon fracture of the
fibula on the right leg; c) fractured small bone on the right leg; and d) close fracture on the tibial
plateau of the left leg. (Exh. "A", p. 157, record)

On 04 March 1987 and 15 April 1987, Paras underwent two (2) operations affecting the fractured
portions of his body. (Exhs. "A-2" and "A-3", pp. 159 and 160 respectively, record)

Unable to obtain sufficient financial assistance from Inland for the costs of his operations,
hospitalization, doctors’ fees and other miscellaneous expenses, on 31 July 1989, Paras filed a
complaint for damages based on breach of contract of carriage against Inland.

In its answer, defendant Inland denied responsibility, by alleging, among others, that its driver Coner
had observed an utmost and extraordinary care and diligence to ensure the safety of its passengers.
In support of its disclaimer of responsibility, Inland invoked the Police Investigation Report which
established the fact that the Philtranco bus driver of [sic] Apolinar Miralles was the one which
violently bumped the rear portion of the Inland bus, and therefore, the direct and proximate cause of
Paras’ injuries.

On 02 March 1990, upon leave of court, Inland filed a third-party complaint against Philtranco and
Apolinar Miralles (Third Party defendants). In this third-party complaint, Inland, sought for
exoneration of its liabilities to Paras, asserting that the latter’s cause of action should be directed
against Philtranco considering that the accident was caused by Miralles’ lack of care, negligence and
reckless imprudence. (pp. 50 to 56, records).

After trial, the RTC (Branch 71) in Antipolo, Rizal rendered its judgment on July 18, 1997, viz:
1 

WHEREFORE, third-party defendant Philtranco and Apolinar Miralles are hereby ordered to pay
plaintiff jointly and severally, the following amounts:

1.₱54,000.00 as actual damages;

2.₱50,000.00 as moral damages;

3.₱20,000.00 as attorney’s fees and costs.

SO ORDERED.

All the parties appealed to the CA on different grounds.

On his part, Paras ascribed the following errors to the RTC, to wit:

I. THE TRIAL COURT ERRED IN HOLDING THAT ONLY THIRD-PARTY DEFENDANT-

APPELLANT PHILTRANCO IS LIABLE FOR THE DAMAGES SUFFERED BY APPELLANT
PARAS.

II. THE TRIAL COURT ERRED IN NOT HOLDING APPELLANT INLAND TRAILWAYS INC.
TO BE JOINTLY AND SEVERALLY LIABLE FOR THE DAMAGES SUFFERED BY PARAS.

III. THE TRIAL COURT ERRED IN NOT AWARDING UNEARNED INCOME AS

ADDITIONAL ACTUAL DAMAGES SUFFERED BY APPELLANT PARAS AS HIS
PHYSICAL DISABILITY IS PERMANENT IN NATURE.

IV. THE TRIAL COURT ERRED IN NOT AWARDING EXEMPLARY DAMAGES IN FAVOR
OF APPELLANT PARAS.

On the other hand, Inland assigned the following errors to the RTC, namely:

THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD DAMAGES UNTO THE THIRD PARTY
PLAINTIFF NOTWITHSTANDING CLEAR FINDING THAT:

‘It is clear from the evidence that the plaintiff sustained injuries because of the reckless, negligence,
and lack of precaution of third party defendant Apolinar Miralles, an employee of Philtranco.’

AND, COMPLETELY DISREGARDED THE UNCONTROVERTED ORAL AND DOCUMENTARY

EVIDENCES ESTABLISHING THE EXTENT AND DEGREE OF DAMAGES SUSTAINED BY THE
THIRD PARTY PLAINTIFF.

Lastly, Philtranco stated that the RTC erred thuswise:

THE COURT A QUO MISERABLY ERRED IN AWARDING ACTUAL DAMAGES GREATER

THAN WHAT WAS ALLEGED IN THE COMPLAINT ITSELF, AND EVEN MUCH MORE
GREATER THAN WHAT WERE PROVED DURING THE TRIAL, HENCE, PERPETUATING
UNJUST ENRICHMENT.

II

THE COURT A QUO SERIOUSLY ERRED IN AWARDING MORAL DAMAGES TO A

CAUSE OF ACTION OF CULPA-CONTRACTUAL EVEN WITHOUT ANY EVIDENCE OF
GROSS BAD FAITH; HENCE, CONTRARY TO THE ESTABLISHED DOCTRINE IN THE
CASES OF PHIL. RABBIT BUS LINES VS. ESGUERRA; SOBERANO VS. BENGUET
AUTO LINE AND FLORES VS. MIRANDA.

III
 THE COURT A QUO MISERABLY ERRED IN HOLDING THAT MIRALLES WAS THE ONE
AT FAULT MERELY ON THE STRENGHT OF THE TESTIMONY OF THE POLICE
INVESTIGATOR WHICH IS IN TURN BASED ON THE STATEMENTS OF ALLEGED
WITNESSES WHO WERE NEVER PRESENTED ON THE WITNESS STAND.

IV

THE COURT A QUO COMMITTED A GRIEVOUS ERROR IN DISREGARDING THE

TESTIMONY OF APPELLANTS’ WITNESSES WHO TESTIFIED AS TO THE DEFENSE OF
EXERCISE OF DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF
EMPLOYEES PURSUANT TO ART. 2180, LAST PARAGRAPH, NEW CIVIL CODE.

On September 25, 2002, the CA promulgated its decision, disposing:

2 

WHEREFORE, in consideration of the foregoing premises, the assailed decision dated 18 July
19(9)7 is perforce affirmed with the following modifications:

1. Third party defendants-appellants Philtranco and Apolinar Miralles are ordered to pay
plaintiff-appellant Felix Paras jointly and severally the following amounts:

a) ₱1,397.95 as actual damages;

b) ₱50,000.00 as temperate damages;

c) ₱50,000.00 as moral damages; and

d) ₱20,000.00 as attorney’s fees and costs of suit.

2. On the third party plaintiff-appellant Inland’s claims, the third party defendant-appellants
Philtranco and Apolinar Miralles are hereby ordered to pay the former (Inland) jointly and
severally the amount of ₱250,000.00 as and by way of temperate damages.

SO ORDERED.

The CA agreed with the RTC’s finding that no trace of negligence at the time of the accident was
attributable to Inland’s driver, rendering Inland not guilty of breach of contract of carriage; that faulty
brakes had caused Philtranco’s bus to forcefully bump Inland’s bus from behind, making it hit the
rear portion of a parked cargo truck; that the impact had resulted in considerable material damage to
the three vehicles; and that Paras and others had sustained various physical injuries.

Accordingly, the CA:– (a) sustained the award of moral damages of ₱50,000.00 in favor of Paras
pursuant to Article 2219 of the Civil Code based on quasi-delict committed by Philtranco and its
driver; (b) reduced the actual damages to be paid by Philtranco to Paras from ₱54,000.00 to
₱1,397.95 because only the latter amount had been duly supported by receipts; (c) granted
temperate damages of ₱50,000.00 (in lieu of actual damages in view of the absence of competent
proof of actual damages for his hospitalization and therapy) to be paid by Philtranco to Paras; and
(d) awarded temperate damages of ₱250,000.00 under the same premise to be paid by Philtranco to
Inland for the material damage caused to Inland’s bus.

Philtranco moved for reconsideration, but the CA denied its motion for reconsideration on January
3 

21, 2004. 4
 Issues

Hence, this appeal, in which the petitioner submits that the CA committed grave abuse of discretion
amounting to lack of jurisdiction in awarding moral damages to Paras despite the fact that the
complaint had been anchored on breach of contract of carriage; and that the CA committed a
reversible error in substituting its own judgment by motu proprio awarding temperate damages of
₱250,000.00 to Inland and ₱50,000.00 to Paras despite the clear fact that temperate damages were
not raised on appeal by Paras and Inland.

Ruling

The appeal lacks merit.

The Court does not disturb the unanimous findings by the CA and the RTC on the negligence of
Philtranco and its driver being the direct cause of the physical injuries of Paras and the material
damage of Inland.

Nonetheless, we feel bound to pass upon the disparate results the CA and the RTC reached on the
liabilities of Philtranco and its driver.

1.

Paras can recover moral damages

in this suit based on quasi-delict

Philtranco contends that Paras could not recover moral damages because his suit was based on
breach of contract of carriage, pursuant to which moral damages could be recovered only if he had
died, or if the common carrier had been guilty of fraud or bad faith. It argues that Paras had suffered
only physical injuries; that he had not adduced evidence of fraud or bad faith on the part of the
common carrier; and that, consequently, Paras could not recover moral damages directly from it
(Philtranco), considering that it was only being subrogated for Inland.

The Court cannot uphold the petitioner’s contention.

As a general rule, indeed, moral damages are not recoverable in an action predicated on a breach of
contract. This is because such action is not included in Article 2219 of the Civil Code as one of the
5 

actions in which moral damages may be recovered. By way of exception, moral damages are
recoverable in an action predicated on a breach of contract: (a) where the mishap results in the
death of a passenger, as provided in Article 1764, in relation to Article 2206, (3), of the Civil Code;
6  7 

and (b) where the common carrier has been guilty of fraud or bad faith, as provided in Article
8 

2220 of the Civil Code.

9 

Although this action does not fall under either of the exceptions, the award of moral damages to
Paras was nonetheless proper and valid. There is no question that Inland filed its third-party
complaint against Philtranco and its driver in order to establish in this action that they, instead of
Inland, should be directly liable to Paras for the physical injuries he had sustained because of their
negligence. To be precise, Philtranco and its driver were brought into the action on the theory of
liability that the proximate cause of the collision between Inland’s bus and Philtranco’s bus had been
"the negligent, reckless and imprudent manner defendant Apolinar Miralles drove and operated his
driven unit, the Philtranco Bus with Plate No. 259, owned and operated by third-party defendant
Philtranco Service Enterprises, Inc." The apparent objective of Inland was not to merely subrogate
10 
the third-party defendants for itself, as Philtranco appears to suggest, but, rather, to obtain a
11 

different relief whereby the third-party defendants would be held directly, fully and solely liable to
Paras and Inland for whatever damages each had suffered from the negligence committed by
Philtranco and its driver. In other words, Philtranco and its driver were charged here as joint
tortfeasors who would be jointly and severally be liable to Paras and Inland.

Impleading Philtranco and its driver through the third-party complaint filed on March 2, 1990 was
correct. The device of the third-party action, also known as impleader, was in accord with Section
12, Rule 6 of the Revised Rules of Court, the rule then applicable, viz:

Section 12. Third-party complaint. – A third-party complaint is a claim that a defending party may,
with leave of court, file against a person not a party to the action, called the third-party defendant, for
contribution, indemnity, subrogation or any other relief, in respect of his opponent’s claim. 12

Explaining the application of Section 12, Rule 6, supra, the Court said in Balbastro v. Court of
Appeals, to wit:
13 

Section 12 of Rule 6 of the Revised Rules of Court authorizes a defendant to bring into a lawsuit any
person "not a party to the action . . . for contribution, indemnity, subrogation or any other relief in
respect of his opponent's claim." From its explicit language it does not compel the defendant to bring
the third-parties into the litigation, rather it simply permits the inclusion of anyone who meets the
standard set forth in the rule. The secondary or derivative liability of the third-party is central —
whether the basis is indemnity, subrogation, contribution, express or implied warranty or some other
theory. The impleader of new parties under this rule is proper only when a right to relief exists under
the applicable substantive law. This rule is merely a procedural mechanism, and cannot be utilized
unless there is some substantive basis under applicable law.

Apart from the requirement that the third-party complainant should assert a derivative or secondary
claim for relief from the third-party defendant there are other limitations on said party’s ability to
implead. The rule requires that the third-party defendant is "not a party to the action" for otherwise
the proper procedure for asserting a claim against one who is already a party to the suit is by means
of counterclaim or cross-claim under sections 6 and 7 of Rule 6. In addition to the aforecited
requirement, the claim against the third-party defendant must be based upon plaintiff's claim against
the original defendant (third-party claimant). The crucial characteristic of a claim under section 12 of
Rule 6, is that the original "defendant is attempting to transfer to the third-party defendant the liability
asserted against him by the original plaintiff."

Accordingly, the requisites for a third-party action are, firstly, that the party to be impleaded must not
yet be a party to the action; secondly, that the claim against the third-party defendant must belong to
the original defendant; thirdly, the claim of the original defendant against the third-party defendant
must be based upon the plaintiff’s claim against the original defendant; and, fourthly, the defendant
is attempting to transfer to the third-party defendant the liability asserted against him by the original
plaintiff.
14

As the foregoing indicates, the claim that the third-party complaint asserts against the third-party
defendant must be predicated on substantive law. Here, the substantive law on which the right of
Inland to seek such other relief through its third-party complaint rested were Article 2176 and Article
2180 of the Civil Code, which read:

Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this chapter. (1902a)

Article 2180. The obligation imposed by article 2176 is demandable not only for one’s own acts or
omissions, but also for those of persons for whom one is responsible.

xxx

Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.

xxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage. (1903a)

Paras’ cause of action against Inland (breach of contract of carriage) did not need to be the same as
the cause of action of Inland against Philtranco and its driver (tort or quasi-delict) in the impleader. It
is settled that a defendant in a contract action may join as third-party defendants those who may be
liable to him in tort for the plaintiff’s claim against him, or even directly to the plaintiff. Indeed, Prof.
15 

Wright, et al., commenting on the provision of the Federal Rules of Procedure of the United States
from which Section 12, supra, was derived, observed so, to wit: 16

The third-party claim need not be based on the same theory as the main claim. For example, there
are cases in which the third-party claim is based on an express indemnity contract and the original
complaint is framed in terms of negligence. Similarly, there need not be any legal relationship
between the third-party defendant and any of the other parties to the action. Impleader also is proper
even though the third party’s liability is contingent, and technically does not come into existence until
the original defendant’s liability has been established. In addition, the words ‘is or may be liable’ in
Rule 14(a) make it clear that impleader is proper even though the third-party defendant’s liability is
not automatically established once the third-party plaintiff’s liability to the original plaintiff has been
determined.

Nor was it a pre-requisite for attachment of the liability to Philtranco and its driver that Inland be first
declared and found liable to Paras for the breach of its contract of carriage with him. As the Court
17 

has cogently discoursed in Samala v. Judge Victor: 18

Appellants argue that since plaintiffs filed a complaint for damages against the defendants on a
breach of contract of carriage, they cannot recover from the third-party defendants on a cause of
action based on quasi-delict. The third party defendants, they allege, are never parties liable with
respect to plaintiff s claim although they are with respect to the defendants for indemnification,
subrogation, contribution or other reliefs. Consequently, they are not directly liable to the plaintiffs.
Their liability commences only when the defendants are adjudged liable and not when they are
absolved from liability as in the case at bar.

Quite apparent from these arguments is the misconception entertained by appellants with respect to
the nature and office of a third party complaint.

Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a "claim that a
defending party may, with leave of court, file against a person not a party to the action, called the
third-party defendant, for contribution, indemnification, subrogation, or any other relief, in respect of
his opponent’s claim." In the case of Viluan vs. Court of Appeals, et al., 16 SCRA 742 [1966], this
Court had occasion to elucidate on the subjects covered by this Rule, thus:

... As explained in the Atlantic Coast Line R. Co. vs. U.S. Fidelity & Guaranty Co., 52 F. Supp. 177
(1943:)

‘From the sources of Rule 14 and the decisions herein cited, it is clear that this rule, like the
admiralty rule, ‘covers two distinct subjects, the addition of parties defendant to the main cause of
action, and the bringing in of a third party for a defendant’s remedy over’. xxx

‘If the third party complaint alleges facts showing a third party’s direct liability to plaintiff on the claim
set out in plaintiff’s petition, then third party ‘shall’ make his defenses as provided in Rule 12 and his
counterclaims against plaintiff as provided in Rule 13. In the case of alleged direct liability, no
amendment (to the complaint) is necessary or required. The subject-matter of the claim is contained
in plaintiff's complaint, the ground of third party’s liability on that claim is alleged in third party
complaint, and third party’s defense to set up in his answer to plaintiff's complaint. At that point and
without amendment, the plaintiff and third party are at issue as to their rights respecting the claim.

The provision in the rule that, ‘The third-party defendant may assert any defense which the third-
party plaintiff may assert to the plaintiffs claim,’ applies to the other subject, namely, the alleged
liability of third party defendant. The next sentence in the rule, ‘The third-party defendant is bound by
the adjudication of the third party plaintiffs liability to the plaintiff, as well as of his own to the plaintiff
or to the third-party plaintiff applies to both subjects. If third party is brought in as liable only to
defendant and judgment is rendered adjudicating plaintiff's right to recover against defendant and
defendant’s rights to recover against third party, he is bound by both adjudications.That part of the
sentence refers to the second subject. If third party is brought in as liable to plaintiff, then third party
is bound by the adjudication as between him and plaintiff. That refers to the first subject. If third party
is brought in as liable to plaintiff and also over to defendant, then third party is bound by both
adjudications. xxx

Under this Rule, a person not a party to an action may be impleaded by the defendant either (a) on
an allegation of liability to the latter; (b) on the ground of direct liability to the plaintiff-; or, (c) both (a)
and (b). The situation in (a) is covered by the phrase "for contribution, indemnity or subrogation;"
while (b) and (c) are subsumed under the catch all "or any other relief, in respect of his opponent’s
claim."

The case at bar is one in which the third party defendants are brought into the action as directly
liable to the plaintiffs upon the allegation that "the primary and immediate cause as shown by the
police investigation of said vehicular collision between (sic) the above-mentioned three vehicles was
the recklessness and negligence and lack of imprudence (sic) of the third-party defendant Virgilio
(should be Leonardo) Esguerra y Ledesma then driver of the passenger bus." The effects are that
"plaintiff and third party are at issue as to their rights respecting the claim" and "the third party is
bound by the adjudication as between him and plaintiff." It is not indispensable in the premises that
the defendant be first adjudged liable to plaintiff before the third-party defendant may be held liable
to the plaintiff, as precisely, the theory of defendant is that it is the third party defendant, and not he,
who is directly liable to plaintiff. The situation contemplated by appellants would properly pertain to
situation (a) above wherein the third party defendant is being sued for contribution, indemnity or
subrogation, or simply stated, for a defendant's "remedy over". 19
It is worth adding that allowing the recovery of damages by Paras based on quasi-delict, despite his
complaint being upon contractual breach, served the judicial policy of avoiding multiplicity of suits
and circuity of actions by disposing of the entire subject matter in a single litigation.
20

2.

Award of temperate damages was in order

Philtranco assails the award of temperate damages by the CA considering that, firstly, Paras and
Inland had not raised the matter in the trial court and in their respective appeals; secondly, the CA
could not substitute the temperate damages granted to Paras if Paras could not properly establish
his actual damages despite evidence of his actual expenses being easily available to him; and,
thirdly, the CA gravely abused its discretion in granting motu proprio the temperate damages of
₱250,000.00 to Inland although Inland had not claimed temperate damages in its pleading or during
trial and even on appeal.

The Court cannot side with Philtranco.

Actual damages, to be recoverable, must not only be capable of proof, but must actually be proved
with a reasonable degree of certainty. The reason is that the court "cannot simply rely on
speculation, conjecture or guesswork in determining the fact and amount of damages," but "there
must be competent proof of the actual amount of loss, credence can be given only to claims which
are duly supported by receipts."21

The receipts formally submitted and offered by Paras were limited to the costs of medicines
purchased on various times in the period from February 1987 to July 1989 (Exhibits E to E-35,
inclusive) totaling only ₱1,397.95. The receipts by no means included hospital and medical
22 

expenses, or the costs of at least two surgeries as well as rehabilitative therapy. Consequently, the
CA fixed actual damages only at that small sum of ₱1,397.95. On its part, Inland offered no definite
proof on the repairs done on its vehicle, or the extent of the material damage except the testimony of
its witness, Emerlinda Maravilla, to the effect that the bus had been damaged beyond economic
repair. The CA rejected Inland’s showing of unrealized income worth ₱3,945,858.50 for 30 months
23 

(based on alleged average weekly income of ₱239,143.02 multiplied by its guaranteed revenue
amounting to 55% thereof, then spread over a period of 30 months, the equivalent to the remaining
40% of the vehicle’s un-depreciated or net book value), finding such showing arbitrary, uncertain and
speculative. As a result, the CA allowed no compensation to Inland for unrealized income.
24 

Nonetheless, the CA was convinced that Paras should not suffer from the lack of definite proof of his
actual expenses for the surgeries and rehabilitative therapy; and that Inland should not be deprived
of recourse to recover its loss of the economic value of its damaged vehicle. As the records
indicated, Paras was first rushed for emergency treatment to the San Pablo Medical Center in San
Pablo City, Laguna, and was later brought to the National Orthopedic Hospital in Quezon City where
he was diagnosed to have suffered a dislocated hip, fracture of the fibula on the right leg, fracture of
the small bone of the right leg, and closed fracture on the tibial plateau of the left leg. He underwent
surgeries on March 4, 1987 and April 15, 1987 to repair the fractures. Thus, the CA awarded to him
25 

temperate damages of ₱50,000.00 in the absence of definite proof of his actual expenses towards
that end. As to Inland, Maravilla’s testimony of the bus having been damaged beyond economic
repair showed a definitely substantial pecuniary loss, for which the CA fixed temperate damages of
₱250,000.00. We cannot disturb the CA’s determination, for we are in no position today to judge its
reasonableness on account of the lapse of a long time from when the accident occurred. 26
In awarding temperate damages in lieu of actual damages, the CA did not err, because Paras and
Inland were definitely shown to have sustained substantial pecuniary losses. It would really be a
travesty of justice were the CA now to be held bereft of the discretion to calculate moderate or
temperate damages, and thereby leave Paras and Inland without redress from the wrongful act of
Philtranco and its driver. We are satisfied that the CA exerted effort and practiced great care to
27 

ensure that the causal link between the physical injuries of Paras and the material loss of Inland, on
the one hand, and the negligence of Philtranco and its driver, on the other hand, existed in fact. It
also rejected arbitrary or speculative proof of loss. Clearly, the costs of Paras’ surgeries and
consequential rehabilitation, as well as the fact that repairing Inland’s vehicle would no longer be
economical justly warranted the CA to calculate temperate damages of ₱50,000.00 and
₱250,000.00 respectively for Paras and Inland.

There is no question that Article 2224 of the Civil Code expressly authorizes the courts to award
temperate damages despite the lack of certain proof of actual damages, to wit:

Article 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty.

The rationale for Article 2224 has been stated in Premiere Development Bank v. Court of Appeals in 28 

the following manner:

Even if not recoverable as compensatory damages, Panacor may still be awarded damages in the
concept of temperate or moderate damages. When the court finds that some pecuniary loss has
been suffered but the amount cannot, from the nature of the case, be proved with certainty,
temperate damages may be recovered. Temperate damages may be allowed in cases where from
the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is
convinced that the aggrieved party suffered some pecuniary loss.

The Code Commission, in explaining the concept of temperate damages under Article 2224, makes
the following comment:

In some States of the American Union, temperate damages are allowed. There are cases where
from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is
convinced that there has been such loss. For instance, injury to one’s commercial credit or to the
goodwill of a business firm is often hard to show with certainty in terms of money. Should damages
be denied for that reason? The judge should be empowered to calculate moderate damages in such
cases, rather than that the plaintiff should suffer, without redress from the defendant’s wrongful act.

3.

Paras’ loss of earning capacity

must be compensated

In the body of its decision, the CA concluded that considering that Paras had a minimum monthly
income of ₱8,000.00 as a trader he was entitled to recover compensation for unearned income
during the 3-month period of his hospital confinement and the 6-month period of his recovery and
rehabilitation; and aggregated his unearned income for those periods to ₱72,000.00. Yet, the CA
29 

omitted the unearned income from the dispositive portion.

The omission should be rectified, for there was credible proof of Paras’ loss of income during his
disability. According to Article 2205, (1), of the Civil Code, damages may be recovered for loss or
impairment of earning capacity in cases of temporary or permanent personal injury. Indeed,
indemnification for damages comprehends not only the loss suffered (actual damages or damnum
emergens) but also the claimant’s lost profits (compensatory damages or lucrum cessans). Even so,30 

the formula that has gained acceptance over time has limited recovery to net earning capacity;
hence, the entire amount of ₱72,000.00 is not allowable. The premise is obviously that net earning
capacity is the person’s capacity to acquire money, less the necessary expense for his own
living. To simplify the determination, therefore, the net earning capacity of Paras during the 9-month
31 

period of his confinement, surgeries and consequential therapy is pegged at only half of his
unearned monthly gross income of ₱8,000.00 as a trader, or a total of ₱36,000.00 for the 9-month
period, the other half being treated as the necessary expense for his own living in that period.

It is relevant to clarify that awarding the temperate damages (for the substantial pecuniary losses
corresponding to Paras’s surgeries and rehabilitation and for the irreparability of Inland’s damaged
bus) and the actual damages to compensate lost earnings and costs of medicines give rise to no
incompatibility. These damages cover distinct pecuniary losses suffered by Paras and Inland, and 32 

do not infringe the statutory prohibition against recovering damages twice for the same act or
omission. 33

4.

Increase in award of attorney’s fees

Although it is a sound policy not to set a premium on the right to litigate, we consider the grant to
34 

Paras and Inland of reasonable attorney’s fees warranted. Their entitlement to attorney’s fees was
by virtue of their having been compelled to litigate or to incur expenses to protect their interests, as 35 

well as by virtue of the Court now further deeming attorney’s fees to be just and equitable. 36

In view of the lapse of a long time in the prosecution of the claim, the Court considers it reasonable
37 

and proper to grant attorney’s fees to each of Paras and Inland equivalent to 10% of the total
amounts hereby awarded to them, in lieu of only ₱20,000.00 for that purpose granted to Paras.

5.

Legal interest on the amounts awarded

Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals, legal interest at the rate of 6% per
38 

annum accrues on the amounts adjudged reckoned from July 18, 1997, the date when the RTC
rendered its judgment; and legal interest at the rate of 12% per annum shall be imposed from the
finality of the judgment until its full satisfaction, the interim period being regarded as the equivalent of
a forbearance of credit.

WHEREFORE, the Court AFFIRMS WITH MODIFICATION the decision of the Court of Appeals
promulgated on September 25, 2002, by ordering PHILTRANCO SERVICE ENTERPRISES, INC.
and APOLINAR MIRALLES to pay, jointly and severally, as follows:

1. To Felix Paras:

(a) ₱1,397.95, as reimbursement for the costs of medicines purchased between

February 1987 and July 1989;
 (b) ₱50,000.00 as temperate damages;

(c) ₱50,000.00 as moral damages;

(d) ₱36,000.00 for lost earnings;

(e) 10% of the total of items (a) to (d) hereof as attorney’s fees; and

(f) Interest of 6% per annum from July 18, 1997 on the total of items (a) to (d) hereof
until finality of this decision, and 12% per annum thereafter until full payment.

2. To Inland Trailways, Inc.:

(a) ₱250,000.00 as temperate damages;

(b) 10% of item (a) hereof; and

(c) Interest of 6% per annum on item (a) hereof from July 18, 1997 until finality of this
decision, and 12% per annum thereafter until full payment.

3. The petitioner shall pay the costs of suit.

SO ORDERED.