Damages recoverable (subject to limitation of liability clause)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 168433 February 10, 2009

UCPB GENERAL INSURANCE CO., INC., Petitioner,

vs.
ABOITIZ SHIPPING CORP. EAGLE EXPRESS LINES, DAMCO INTERMODAL SERVICES, INC., and PIMENTEL
CUSTOMS BROKERAGE CO., Respondents.

DECISION

TINGA, J.:

UCPB General Insurance Co., Inc. (UCPB) assails the Decision 1 of the Court of Appeals dated October 29, 2004, which
reversed the Decision2 dated November 29, 1999 of the Regional Trial Court of Makati City, Branch 146, and its
Resolution3 dated June 14, 2005, which denied UCPB’s motion for reconsideration.

The undisputed facts, culled from the assailed Decision, are as follows:

On June 18, 1991, three (3) units of waste water treatment plant with accessories were purchased by San Miguel
Corporation (SMC for brevity) from Super Max Engineering Enterprises, Co., Ltd. of Taipei, Taiwan. The goods came from
Charleston, U.S.A. and arrived at the port of Manila on board MV "SCANDUTCH STAR". The same were then transported
to Cebu on board MV "ABOITIZ SUPERCON II". After its arrival at the port of Cebu and clearance from the Bureau of
Customs, the goods were delivered to and received by SMC at its plant site on August 2, 1991. It was then discovered that
one electrical motor of DBS Drive Unit Model DE-30-7 was damaged.

Pursuant to an insurance agreement, plaintiff-appellee paid SMC the amount of ₱1,703,381.40 representing the value of
the damaged unit. In turn, SMC executed a Subrogation Form dated March 31, 1992 in favor of plaintiff-appellee.

Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of SMC seeking to recover from defendants
the amount it had paid SMC.

On September 20, 1994, plaintiff-appellee moved to admit its Amended Complaint whereby it impleaded East Asiatic Co.
Ltd. (EAST for brevity) as among the defendants for being the "general agent" of DAMCO. In its Order dated September
23, 1994, the lower court admitted the said amended complaint.

Upon plaintiff-appellee’s motion, defendant DAMCO was declared in default by the lower court in its Order dated January
6, 1995.

In the meantime, on January 25, 1995, defendant EAST filed a Motion for Preliminary Hearing on its affirmative defenses
seeking the dismissal of the complaint against it on the ground of prescription, which motion was however denied by the
court a quo in its Order dated September 1, 1995. Such denial was elevated by defendant EAST to this Court through a
Petition for Certiorari on October 30, 1995 in CA G.R. SP No. 38840. Eventually, this Court issued its Decision dated
February 14, 1996 setting aside the lower court’s assailed order of denial and further ordering the dismissal of the complaint
against defendant EAST. Plaintiff-appellee moved for reconsideration thereof but the same was denied by this Court in its
Resolution dated November 8, 1996. As per Entry of Judgment, this Court’s decision ordering the dismissal of the complaint
against defendant EAST became final and executory on December 5, 1996.

Accordingly, the court a quo noted the dismissal of the complaint against defendant EAST in its Order dated December 5,
1997. Thus, trial ensued with respect to the remaining defendants.

On November 29, 1999, the lower court rendered its assailed Decision, the dispositive portion of which reads:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered declaring DAMCO Intermodal Systems,
Inc., Eagle Express Lines, Inc. and defendant Aboitiz Shipping solidarily liable to plaintiff-subrogee for the damaged
shipment and orders them to pay plaintiff jointly and severally the sum of ₱1,703,381.40.

No costs.

SO ORDERED.

Not convinced, defendants-appellants EAGLE and ABOITIZ now come to this Court through their respective appeals x x x4

The appellate court, as previously mentioned, reversed the decision of the trial court and ruled that UCPB’s right of action
against respondents did not accrue because UCPB failed to file a formal notice of claim within 24 hours from (SMC’s) receipt
of the damaged merchandise as required under Art. 366 of the Code of Commerce. According to the Court of Appeals, the
filing of a claim within the time limitation in Art. 366 is a condition precedent to the accrual of a right of action against the
carrier for the damages caused to the merchandise.

In its Memorandum5 dated February 8, 2007, UCPB asserts that the claim requirement under Art. 366 of the Code of
Commerce does not apply to this case because the damage to the merchandise had already been known to the carrier.
Interestingly, UCPB makes this revelation: "x x x damage to the cargo was found upon discharge from the foreign carrier
onto the International Container Terminal Services, Inc. (ICTSI) in the presence of the carrier’s representative who signed
the Request for Bad Order Survey6 and the Turn Over of Bad Order Cargoes. 7 On transshipment, the cargo was already
damaged when loaded on board the inter-island carrier."8 This knowledge, UCPB argues, dispenses with the need to give
the carrier a formal notice of claim. Incidentally, the carrier’s representative mentioned by UCPB as present at the time the
merchandise was unloaded was in fact a representative of respondent Eagle Express Lines (Eagle Express).

UCPB claims that under the Carriage of Goods by Sea Act (COGSA), notice of loss need not be given if the condition of
the cargo has been the subject of joint inspection such as, in this case, the inspection in the presence of the Eagle Express
representative at the time the cargo was opened at the ICTSI.

UCPB further claims that the issue of the applicability of Art. 366 of the Code of Commerce was never raised before the trial
court and should, therefore, not have been considered by the Court of Appeals.

Eagle Express, in its Memorandum9 dated February 7, 2007, asserts that it cannot be held liable for the damage to the
merchandise as it acted merely as a freight forwarder’s agent in the transaction. It allegedly facilitated the transshipment of
the cargo from Manila to Cebu but represented the interest of the cargo owner, and not the carrier’s. The only reason why
the name of the Eagle Express representative appeared on the Permit to Deliver Imported Goods was that the form did not
have a space for the freight forwarder’s agent, but only for the agent of the shipping line. Moreover, UCPB had previously
judicially admitted that upon verification from the Bureau of Customs, it was East Asiatic Co., Ltd. (East Asiatic), regarding
whom the original complaint was dismissed on the ground of prescription, which was the real agent of DAMCO Intermodal
Services, Inc. (DAMCO), the ship owner.

Eagle Express argues that the applicability of Art. 366 of the Code of Commerce was properly raised as an issue before the
trial court as it mentioned this issue as a defense in its Answer to UCPB’s Amended Complaint. Hence, UCPB’s contention
that the question was raised for the first time on appeal is incorrect.

Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, in its Memorandum10 dated March 29, 2007, that it
obviously cannot be held liable for the damage to the cargo which, by UCPB’s admission, was incurred not during
transshipment to Cebu on

board one of Aboitiz’s vessels, but was already existent at the time of unloading in Manila. Aboitiz also argues that Art. 366
of the Code of Commerce is applicable and serves as a condition precedent to the accrual of UCPB’s cause of action
against it.lawphil.net

The Memorandum11 dated June 3, 2008, filed by Pimentel Customs Brokerage Co. (Pimentel Customs), is also a reiteration
of the applicability of Art. 366 of the Code of Commerce.

It should be stated at the outset that the issue of whether a claim should have been made by SMC, or UCPB as SMC’s
subrogee, within the 24-hour period prescribed by Art. 366 of the Code of Commerce was squarely raised before the trial
court.
In its Answer to Amended Complaint12 dated May 10, 1993, Eagle Express averred, thus:

The amended complaint states no cause of action under the provisions of the Code of Commerce and the terms of the bill
of lading; consignee made no claim against herein defendant within twenty four (24) hours following the receipt of the alleged
cargo regarding the condition in which said cargo was delivered; however, assuming arguendo that the damage or loss, if
any, could not be ascertained from the outside part of the shipment, consignee never made any claim against herein
defendant at the time of receipt of said cargo; herein defendant learned of the alleged claim only upon receipt of the
complaint.13

Likewise, in its Answer14 dated September 21, 1992, Aboitiz raised the defense that UCPB did not file a claim with it and
that the complaint states no cause of action.

UCPB obviously made a gross misrepresentation to the Court when it claimed that the issue regarding the applicability of
the Code of Commerce, particularly the 24-hour formal claim rule, was not raised as an issue before the trial court. The
appellate court, therefore, correctly looked into the validity of the arguments raised by Eagle Express, Aboitiz and Pimentel
Customs on this point after the trial court had so ill-advisedly centered its decision merely on the matter of extraordinary
diligence.

Interestingly enough, UCPB itself has revealed that when the shipment was discharged and opened at the ICTSI in Manila
in the presence of an Eagle Express representative, the cargo had already been found damaged. In fact, a request for bad
order survey was then made and a turnover survey of bad order cargoes was issued, pursuant to the procedure in the
discharge of bad order cargo. The shipment was then repacked and transshipped from Manila to Cebu on board MV Aboitiz
Supercon II. When the cargo was finally received by SMC at its Mandaue City warehouse, it was found in bad order, thereby
confirming the damage already uncovered in Manila. 15

In charging Aboitiz with liability for the damaged cargo, the trial court condoned UCPB’s wrongful suit against Aboitiz to
whom the damage could not have been attributable since there was no evidence presented that the cargo was further
damaged during its transshipment to Cebu. Even by the exercise of extraordinary diligence, Aboitiz could not have undone
the damage to the cargo that had already been there when the same was shipped on board its vessel.

That said, it is nonetheless necessary to ascertain whether any of the remaining parties may still be held liable by UCPB.
The provisions of the Code of Commerce, which apply to overland, river and maritime transportation, come into play.

Art. 366 of the Code of Commerce states:

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

After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against
the carrier with regard to the condition in which the goods transported were delivered.1avvphi1

The law clearly requires that the claim for damage or average must be made within 24 hours from receipt of the merchandise
if, as in this case, damage cannot be ascertained merely from the outside packaging of the cargo.

In Philippine Charter Insurance Corporation v. Chemoil Lighterage Corporation, 16 petitioner, as subrogee of Plastic Group
Phil., Inc. (PGP), filed suit against respondent therein for the damage found on a shipment of chemicals loaded on board
respondent’s barge. Respondent claimed that no timely notice in accordance with Art. 366 of the Code of Commerce was
made by petitioner because an employee of PGP merely made a phone call to respondent’s Vice President, informing the
latter of the contamination of the cargo. The Court ruled that the notice of claim was not timely made or relayed to respondent
in accordance with Art. 366 of the Code of Commerce.

The requirement to give notice of loss or damage to the goods is not an empty formalism. The fundamental reason or
purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has
been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of
the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is still
fresh and easily investigated so as to safeguard itself from false and fraudulent claims. 17
We have construed the 24-hour claim requirement as a condition precedent to the accrual of a right of action against a
carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition.
Otherwise, no right of action against the carrier can accrue in favor of the former. 18

The shipment in this case was received by SMC on August 2, 1991. However, as found by the Court of Appeals, the claims
were dated October 30, 1991, more than three (3) months from receipt of the shipment and, at that, even after the extent of
the loss had already been determined by SMC’s surveyor. The claim was, therefore, clearly filed beyond the 24-hour time
frame prescribed by Art. 366 of the Code of Commerce.

But what of the damage already discovered in the presence of Eagle Express’s representative at the time the shipment was
discharged in Manila? The Request for Bad Order Survey and Turn Over Survey of Bad Order Cargoes, respectively dated
June 17, 1999 and June 28, 1991, evince the fact that the damage to the cargo was already made known to Eagle Express
and, possibly, SMC, as of those dates.

Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce but prescribes a period of three (3)
days within which notice of claim must be given if the loss or damage is not apparent. It states:

Sec. 3(6). Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier
or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to
delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of
the goods as descibed in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days
of the delivery.

Said notice of loss or damage may be endorsed upon the receipt of the goods given by the person taking delivery thereof.

The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint
survey or inspection.

UCPB seizes upon the last paragraph which dispenses with the written notice if the state of the goods has been the subject
of a joint survey which, in this case, was the opening of the shipment in the presence of an Eagle Express representative.
It should be noted at this point that the applicability of the above-quoted provision of the COGSA was not raised as an issue
by UCPB before the trial court and was only cited by UCPB in its Memorandum in this case.

UCPB, however, is ambivalent as to which party Eagle Express represented in the transaction. By its own manifestation,
East Asiatic, and not Eagle Express, acted as the agent through which summons

and court notices may be served on DAMCO. It would be unjust to hold that Eagle Express’s knowledge of the damage to
the cargo is such that it served to preclude or dispense with the 24-hour notice to the carrier required by Art. 366 of the
Code of Commerce. Neither did the inspection of the cargo in which Eagle Express’s representative had participated lead
to the waiver of the written notice under the Sec. 3(6) of the COGSA. Eagle Express, after all, had acted as the agent of the
freight consolidator, not that of the carrier to whom the notice should have been made.

At any rate, the notion that the request for bad order survey and turn over survey of bad cargoes signed by Eagle Express’s
representative is construable as compliant with the notice requirement under Art. 366 of the Code of Commerce was
foreclosed by the dismissal of the complaint against DAMCO’s representative, East Asiatic.

As regards respondent Pimentel Customs, it is sufficient to acknowledge that it had no participation in the physical handling,
loading and delivery of the damaged cargo and should, therefore, be absolved of liability.

Finally, UCPB’s misrepresentation that the applicability of the Code of Commerce was not raised as an issue before the
trial court warrants the assessment of double costs of suit against it.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 68168, dated October 29,
2004 and its Resolution dated June 14, 2005 are AFFIRMED. Double costs against petitioner.

SO ORDERED.
G.R. No. 168433 Case Digest
G.R. No. 168433, February 10, 2009
UCPB General Insurance Co., Inc.
vs Aboitiz Shipping Corp.
Ponente: Tinga

Facts:
On June 1991, 3 units of waste water treatment plant with accessories were purchased by San Miguel Corp from Super
Max Engineering. The goods came from Charleston, USA and arrived in port of Manila on board MV Scandutch Star. From
Manila it was transported to Cebu on board of Aboitiz Supercon II. In Cebu, with clearance from the Bureau of Customs,
the goods were delivered and received by San Miguel at its plant site. It was then discovered that the motor of the unit was
damaged.

Pursuant to the insurance agreement, UCPB General Insurance paid San Miguel P1,703,381.40 representing the value of
the damaged unit. In turn, San Miguel executed a subrogation form in favor of UCPB. Then, UCPB filed a complaint on Kuly
1992 as subrogee of San Miguel seeking to recover from Aboitiz. Aboitiz moved to admit East Asiatic Co. as general agent
of DAMCO Intermodal System. RTC held Aboitiz, East Asiatic and DAMCO solidarily liable.

CA reversed the decision of the RTC and ruled that UCPBs right of action did not accrue because UCPB failed to file a
formal notice within 24 hours from the damaged. In a memorandum, UCPB asserts that the claim requirement does not
apply to cases concerning damages to the merchandise had already been known to the carrier. UCPB revealed that the
damage to the cargo was found upon discharge from the foreign carrier witnessed by the carrier’s representative who signed
the request for bad order survey and the turnover of bad order cargoes. This knowledge, UCPB argues, dispenses with the
need to give the carrier a formal notice of claim. Incidentally, the carrier’s representative mentioned by UCPB as present at
the time the merchandise was unloaded was in fact a representative of respondent Eagle Express Lines (Eagle Express).
UCPB further claims that the issue of the applicability of Art. 366 of the Code of Commerce was never raised before the trial
court and should, therefore, not have been considered by the CA.

Eagle Express, in its Memorandum dated February 7, 2007, asserts that it cannot be held liable for the damage to the
merchandise as it acted merely as a freight forwarders agent in the transaction. It allegedly facilitated the transhipment of
the cargo from Manila to Cebu but represented the interest of the cargo owner, and not the carriers.

Aboitiz, on the other hand, points out, in its Memorandum dated March 29, 2007, that it obviously cannot be held liable for
the damage to the cargo which, by UCPBs admission, was incurred not during transhipment to Cebu on board one of
Aboitizs vessels, but was already existent at the time of unloading in Manila. Aboitiz also argues that Art. 366 of the Code
of Commerce is applicable and serves as a condition precedent to the accrual of UCPBs cause of action against it.

Issue: Whether any of the remaining parties may still be held liable by UCPB.

Ruling:
UCPB obviously made a gross misrepresentation to the Court when it claimed that the issue regarding the applicability of
the Code of Commerce, particularly the 24-hour formal claim rule, was not raised as an issue before the trial court. The
appellate court, therefore, correctly looked into the validity of the arguments raised by Eagle Express, Aboitiz and Pimentel
Customs on this point after the trial court had so ill-advisedly centered its decision merely on the matter of extraordinary
diligence.

Interestingly enough, UCPB itself has revealed that when the shipment was discharged and opened at the ICTSI in Manila
in the presence of an Eagle Express representative, the cargo had already been found damaged. In fact, a request for bad
order survey was then made and a turnover survey of bad order cargoes was issued, pursuant to the procedure in the
discharge of bad order cargo. The shipment was then repacked and transhipped from Manila to Cebu on board MV Aboitiz
Supercon II. When the cargo was finally received by SMC at its Mandaue City warehouse, it was found in bad order, thereby
confirming the damage already uncovered in Manila.

We have construed the 24-hour claim requirement as a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to,
the goods. The shipper or consignee must allege and prove the fulfilment of the condition. Otherwise, no right of action against the carrier can accrue in
favor of the former.

The shipment in this case was received by SMC on August 2, 1991. However, as found by the Court of Appeals, the claims were dated October 30, 1991,
more than three (3) months from receipt of the shipment and, at that, even after the extent of the loss had already been determined by SMCs surveyor.
The claim was, therefore, clearly filed beyond the 24-hour time frame prescribed by Art. 366 of the Code of Commerce.

Petition was denied. CA's decision was affirmed.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-23882 February 17, 1968

M. D. TRANSIT & TAXI CO., INC., petitioner,

vs.
COURT OF APPEALS and DAVID EPSTEIN, respondents.

M. E. Vergara and L. A. Dayot for petitioner.

Honorato S. Reyes for respondents.

CONCEPCION, C.J.:

Appeal by certiorari from a decision of the Court of Appeals.

While crossing Taft Avenue extension, near its intersection with Castro Street, Manila, passing by the pedestrian
lane on August 18, 1958, about 8:30 a.m., and as he was about to reach the island in the middle of the road, David
Epstein — hereinafter referred to as plaintiff — was hit by a Pasay bound bus of the MD Transit & Taxi Co., Inc. —
hereinafter referred to as appellant — driven by Dominador Sembrano, in consequence of which plaintiff's left femur and
right fibula were fractured, apart from sustaining lacerations in the scalp, occipital region. Prosecuted for serious physical
injuries through reckless imprudence, the Court of First Instance of Manila found Sembrano guilty thereof beyond
reasonable doubt and sentenced him to suffer the corresponding penalty of imprisonment, 1 but, refrained from making
any pronouncement on his civil liability, plaintiff having reserved the right to file a separate civil action for damages.
Although, from the decision of said court, Sembrano appealed to the Court of Appeals, he, later, withdrew the appeal. As
a consequence, said decision became final and executory on May 5, 1961.

Meanwhile, or on January 23, 1959, plaintiff had commenced the present action for damages against Sembrano
and appellant herein. Sembrano was declared in default, whereas appellant filed its answer alleging that it had exercised
due diligence in the selection of its employees and in supervising them in the performance of their duties, and that the
accident was due to plaintiff's recklessness or negligence. After appropriate proceedings, the Court of First Instance of
Manila rendered a decision, the dispositive part of which reads:

WHEREFORE, judgment is hereby rendered finding defendant, Dominador Sembrano, primarily liable to
plaintiff, David Epstein, for the damages sustained by the latter, and hereby orders the former to pay the latter the
following:

(1) Actual damages in the amount of P3,161.10;

(2) Compensatory damages in the amount of P12,000.00;

(3) Moral damages in the amount of P5,000.00; and

(4) Counsel fees in the amount of P1,000.00; and

Finding defendant MD Transit and Taxi Co., Inc., subsidiarily liable to plaintiff, David Epstein, in the
amounts above-indicated, in the event that defendant, Dominador Sembrano, fails to pay the same or is insolvent.
Costs against defendants.

On appeal, said decision was affirmed by the Court of Appeals. Hence, this petition for review by certiorari, filed by
appellant.

The main issue raised by the latter refers to the nature of the present action, namely, whether the liability sought to
be enforced therein arises from a crime, as contended by the plaintiff, or from a quasi-delict, as urged by appellant. The
importance of this issue is due to the fact that appellant's alleged diligence in the selection of its employees and in
exercising supervision over them would be a good defense should the action be based upon a quasi-delict, but not if
predicated upon a liability springing from a crime. The trial court and the appellate court rejected appellant's pretense and
sustained that of the plaintiff, and, we think, correctly.

Indeed, in his complaint, plaintiff premised his action against herein appellant upon the allegation that the latter is
"subsidiary liable for all damages caused by the negligence of its employee in the performance of his duties," and,
accordingly, prayed that Sembrano be ordered and, "upon his inability," appellant herein, to pay the damages claimed in
said pleading. In other words, plaintiff maintained that Sembrano is primarily liable for said damages, and that appellant's
liability therefor is purely secondary, which is typical of the civil liability arising from crimes, pursuant to articles 102 and
103 of the Revised Penal Code. The effect of said allegation and subsequent prayer upon the nature of the present action
is illustrated by the case of De Leon Brokerage v. Court of Appeals 2 in which the allegations of the complaint were not
clear on whether or not the damages sued for resulted from a crime or from a quasi-delict. The issue was resolved in
favor of the latter alternative, in view of the prayer in said pleading to the effect that the employer be hold "solidarily" liable
with his employee. In fact, solidarity is one of the main characteristics of obligations arising from quasi-delicts. 3

Another circumstance militating in favor of plaintiff's contention is the fact that, in the criminal action, he had
reserved the right to seek indemnity in a separate civil action. There can be no doubt that the present action was filed in
pursuance of said reservation, which would have been unnecessary had plaintiff not based his right of action upon
Sembrano's criminal liability. Further corroboration is supplied by the fact that the first piece of evidence offered by plaintiff
herein, at trial of this case in the court of origin, was the decision of conviction rendered in the criminal case against
Sembrano.

Contrary to appellant's pretense, the absence of allegations, in plaintiff's complaint, about Sembrano's conviction in
the criminal case, and about his insolvency, does not impair the theory of the plaintiff, for such allegations are not
indispensable in an action for damages sustained on account of a crime committed by the employee. Indeed, the law
authorizing the commencement of a civil action based upon a liability arising from a crime, even before the institution of
the criminal action, 4 necessarily implies that the rendition of a judgment of conviction in the latter need not be alleged in
the civil complaint.

Neither is an allegation of insolvency of the employee essential to an action to enforce the subsidiary liability of the
employer, particularly when both are sued in the same action — as in the case at bar — to exact the primary liability of the
employee, and the subsidiary liability of the employer. To be sure, the secondary nature of the latter's obligation
necessarily connotes that his properties may not be levied upon, in pursuance of a writ of execution of the judgment
declaring the existence of both liabilities, as long and so long as the employer can point out properties of the employee
which may be levied upon in satisfaction of said judgment. 5 Thus, the employee's solvency is merely a matter
of defense which may be availed of by the employer.

It is next urged that the lower courts erred in considering in this case the judgment of conviction in the criminal case,
in which appellant was not a party, and in disregarding appellant's evidence on the alleged diligence exercised in
selecting its employees and in supervising them in the discharge of their duties. Though relevant in an action based upon
a quasi-delict, said diligence is, however, immaterial in the case at bar, the same being predicated upon a liability arising
from a crime. Moreover, it is already settled that the judgment of conviction in the criminal case against an employee
is, not only admissible in evidence in the civil case against the employer, but, also, conclusive upon his subsidiary
liability arising from the employee's criminal liability. Thus in Miranda v. Malate Garage & Taxicab, Inc. 6 we held:

It is true that an employer, strictly speaking is not a party to the criminal case instituted against his
employee but in substance and in effect he is, considering the subsidiary liability imposed upon him by law. It is
his concern, as well as of his employee, to see to it that his interest be protected in the criminal case by taking
virtual participation in the defense of his employee. He cannot leave him to his own fate because his failure is also
his. And if because of his indifference or inaction the employee is convicted and damages are awarded against
him he cannot later be heard to complain if brought to court for the enforcement of his subsidiary liability that he
was not given his day in court. (Emphasis supplied.)1äwphï1.ñët

The language used in Martinez v. Barredo 7 was:

The important question is whether a judgment of conviction sentencing the defendant to pay an indemnity is
conclusive in an action against his employer for the enforcement of the latter's subsidiary liability under Articles
102 and 103 of the Revised Penal Code. The appealed decision makes reference to two earlier decisions of this
Court, namely, City of Manila vs. Manila Electric Co., 52 Phil., 586, holding that such judgment of conviction is not
admissible, and Arambulo vs. Manila Electric Co., 55 Phil., 75, in effect holding that it is merely prima
facie evidence, and to the prevailing view in the United States to the effect that the person subsidiarily liable is
 bound by the judgment if the former had notice of the criminal case and could have defended it had he seen fit to
do so, and that otherwise such judgment is only prima facie evidence.

After very careful reflection, we have arrived at the opinion that the judgment of conviction, in the absence
of any collusion between the defendant and the offended party, should bind the person subsidiarily liable. The
stigma of a criminal conviction surpasses in effect and implications mere civil liability. Common sense dictates
that a finding of guilt in a criminal case in which proof beyond reasonable doubt is necessary, should not be
nullified in a subsequent civil action requiring only preponderance of evidence to support a judgment, unless
those who support the contrary rule should also hold that an absolution in a civil case will operate to automatically
set aside the verdict against the defendant in the criminal case. It is anomalous, to say the least, to suppose that
the driver, excelling "Dr. Jekyl and Mr. Hyde", could be guilty of reckless negligence in so far as his obligation to
pay indemnity is concerned, and at the same time could be free from blame when said indemnity is sought to be
collected from his employer, although the right to the indemnity arose from and was based on one and the same
act of the driver.

The employer cannot be said to have been deprived of his day in court, because the situation before us
is not one wherein the employer is sued for a primary liability under article 1903 of the Civil Code, but one in
which enforcement is sought of a subsidiary civil liability incident to and dependent upon his
driver's criminal negligence which is a proper issue to be tried and decided only in a criminal action. In other
words, the employer becomes ipso facto subsidiarily liable upon his driver's conviction and upon proof of the
latter's insolvency, in the same way that acquittal wipes out not only the employee's primary civil liability but also
his employer's subsidiary liability for such criminal negligence. . . . (Emphasis supplied.)

These views were reiterated in Nagrampa v. Mulvaney 8 and Orsal v. Alisbo. 9

Although conceding that the sum of P3,161 awarded as actual damages "is not too excessive," appellant maintains
that it is "unreasonable and ought to be reduced." Actual damages is, however, a question of fact, and the findings
thereon of the Court of Appeals, adopting those of the trial court, are conclusive upon us.

Appellant likewise impugns the awards to plaintiff of P5,000 as moral damages, P12,000 as compensatory
damages and P1,000 as attorney's fees. In connection therewith, the Court of Appeals, after quoting the findings of the
court of origin on the facts and circumstances justifying said awards, had the following to say:

Bearing in mind that in crimes, the defendant is liable for all damages which are the natural and probable
consequences of the act or omission complained of, including loss or impairment of earning capacity of the
offended party and injury to his business standing or commercial credit as well as compensation for physical pain
and suffering and mental anguish, which was a gap in our legal system, filled in by the new Civil Code, and that
attorney's fees are recoverable in a separate action to recover civil liability arising from crime, and considering
that appellant has not adduced compelling reasons to justify us in disturbing the abovementioned findings of the
lower court, by substituting ours for its sound discretion, exercised in the light of the facts and circumstances
obtaining in this case as observed by it, the said last three assigned errors of appellant are likewise declared
without sufficient merit.

Upon a review of the record, we do not feel justified in disturbing the conclusions reached by the appellate court
and the court of origin.

It may not be amiss to note that "actual" damages and "consequential damages" are dealt with in the Civil Code of
the Philippines under the same Chapter; 10 thereof that the two (2) terms are thus used therein as equivalent to one
another; and that the decision appealed had characterized as "actual damages" the expenses incurred by the plaintiff for
his medical treatment and as "compensatory damages" the earnings he failed to make due to his consequent "inability to
pursue his normal work or occupation." Considering, however, that — in the language of Article 2200 of said Code, which
is part of the aforementioned Chapter 2 — "indemnification for damages shall comprehend not only the value of the loss
suffered" — otherwise known as "damnum emergens," and alluded to in said decision as "actual damages" — "but also
that of the profits which the obligee failed to obtain" — or "lucrum cessans" or "compensatory damages," pursuant to the
same decision the distinction therein made appears to be inconsequential, insofar as the law and this case is concerned.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against appellant, MD Transit & Taxi Co.,
Inc. It is so ordered.
MD TRANSIT, INC. vs. THE HONORABLE COURT OF APPEALS and SERGIO MARIANO
G.R. No. L-49496 May 31, 1979
TEEHANKEE, J.:

Facts:

Carmen G. Mariano, wife of the defendant was recklessly hit, while crossing the street on a pedestrian lane on
Ayala Avenue in Makati, by petitioner's bus, thrown six meters away and instantly killed.
Respondent Court of Appeals, affirmed in toto the judgment of the Court of First Instance of Bataan in favor of
respondent Sergio Mariano (for himself and in representation of two minor children) as plaintiffs-appellees against herein
petitioner MD Transit, Inc. as defendant-appellant, awarding him damages as follows: a) P50,000.00 as moral damages; b)
P309,920.00 as compensatory damages for lost earnings; c) P20,160.00 as actual damages; d)P10,000.00 as attorney's
fees; and e) Costs of suit.
Petitioner filed on January 8, 1979 with this Court the present petition for review on certiorari of respondent appellate
court's judgment.
Issue:
Whether or not the amount awarded for compensatory damages is reasonable.
Ruling:
The amount recoverable is not loss of the entire earning, but rather the loss of that portion of the earnings which
the beneficiary would have received. In other words, only net earnings, not gross earning, are to be considered, that is, the
total of the earnings less expenses necessary in the creation of such earnings or income and less living and other incidental
expenses."
Petitioner, citing the Villa Rey doctrine, contends in its petition that the maximum damages that should be awarded
would amount to only P103,680.00 based on its contention that the victim's life expectancy should be 24 years (not 26
years) and net earnings only at P4,320.00 a year, thus:
In its memorandum, petitioner would further reduce the life expectancy of the deceased Carmen G. Mariano to 20
years instead of 24 years, arguing that "while it may be said that at the time of her death, Carmen G. Mariano was in
relatively good health, yet undergoing a major surgery such as caesarian operation is a circumstance that would have
affected her normal life expectancy and this fact should be considered as further allowance and hence, for purposes of this
e her life expectancy may be reduced further to 20 years,"
Respondents, on the other hand, contend that in the absence of a clear showing that the determination of the
amount of compensatory damages based on life expectancy and the net earning capacity of the deceased is manifestly
arbitrary or excessive, such award should be sustained.
All factors considered, the Court believes that it is fair and reasonable to fix the deductible living and other expenses
of the deceased at the sum of P4,800.00 a year or P400.00 a month (one half of the amount of P9,600.00 a year or P800.00
a month urged by petitioner), since the deceased's husband had also his own earnings and this sum would be her fair share
of the family's expenses. Petitioner has expressly conceded the deceased's life expectancy to be at 20 to 24 years, supra.
All in all, the Court believes that an award of P200,000.00 as compensatory damages by way of the deceased's lost earnings
is completely justified, under the facts of the case at bar. Ts would be roughly based on an annual net earning of P9,120.00
[P13,920.00 gross earnings less P4,800.00 annual expenses] x 22 years of life expectancy P200,640.00). Such award of
P200,000.00 for compensatory damages incidentally coincides with the exact amount prayed for as compensatory damages
for loss of earning capacity in respondent's complaint.
 FIRST DIVISION

[G.R. No. 104685. March 14, 1996.]

SABENA BELGIAN WORLD AIRLINES, Petitioner, v. HON. COURT OF APPEALS and MA. PAULA SAN
AGUSTIN, Respondents.

Saturnino M . Basconcillo for Petitioner.

F .S. De Guzman and Associates for Private Respondent.

SYLLABUS

1. CIVIL LAW, OBLIGATIONS AND CONTRACTS; FAULT OR NEGLIGENCE CONSISTS IN THE OMISSION OF
DILIGENCE DEMANDED BY THE NATURE OF AN OBLIGATION. — Fault or negligence consists in the omission of that
diligence which is demanded by the nature of an obligation and corresponds with the circumstances of the person, of the
time, and of the place.

2. ID.; ID.; ID.; PRESUMPTION OF FAULT ARISES UPON BREACH OR NON-FULFILLMENT OF THE PRESTATION.
— When the source of an obligation is derived from a contract, the mere breach or non-fulfillment of the prestation gives
rise to the presumption of fault on the part of the obligor.

3. ID.; ID.; COMMON CARRIERS; BOUND TO OBSERVE EXTRAORDINARY CARE IN THE VIGILANCE OVER THE
GOODS. — This rule is no different in the case of common carriers in the carriage of goods which, indeed are bound to
observe not just the due diligence of a good father of a family but that of "extraordinary" care in the vigilance over the
goods.

4. ID.; ID.; TORT; PROXIMATE CAUSE, CONSTRUED. — Proximate cause is that which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have
occurred. The exemplification by the Court in one case is simple and explicit; viz:" (T)he proximate legal cause is that
acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and
continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in the
chain immediately affecting the injury as a natural and probable result of the cause which first acted under such
circumstances that the person responsible for the first event should, as an ordinarily prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default that an injury to some person might probably result
therefrom."cralaw virtua1aw library

5. ID.; ID.; COMMON CARRIERS; LOSS OF PASSENGER’S BAGGAGE NOT ONLY ONCE BUT TWICE
CONSTITUTES GROSS NEGLIGENCE; CASE AT BAR. — It remained undisputed that private respondent’s luggage
was lost while it was in the custody of petitioner. It was supposed to arrive on the same flight that private respondent took
in returning to Manila on 02 September 1987. When she discovered that the luggage was missing, she promptly
accomplished and filed a Property Irregularity Report. She followed up her claim on 14 September 1987, and filed, on the
following day, a formal letter-complaint with petitioner. She felt relieved when, on 23 October 1987, she was advised that
her luggage had finally been found, with its contents intact when examined, and that she could expect it to arrive on 27
October 1987. She then waited anxiously only to be told later that her luggage had been lost for the second time. Thus,
the appellate court, given all the facts before it, sustained the trial court in finding petitioner ultimately guilty of "gross
negligence" in the handling of private respondent’s luggage. The "loss of said baggage not only once but twice," said the
appellate court, "underscores the wanton negligence and lack of care" on the part of the carrier. The above findings,
which certainly cannot be said to be without basis, foreclose whatever rights petitioner might have had to the possible
limitation of liabilities enjoyed by international air carriers under the Warsaw Convention (Convention for the Unification of
Certain Rules Relating to International Carriage by Air, as amended by the Hague Protocol of 1955, the Montreal
Agreement of 1966, the Guatemala Protocol of 1971 and the Montreal Protocols of 1975). The Court thus sees no error in
the preponderant application to the instant case by the appellate court, as well as by the trial court, of the usual rules on
the extent of recoverable damages beyond the Warsaw limitations. Under domestic law and jurisprudence (the Philippines
being the country of destination), the attendance of gross negligence (given the equivalent of fraud or bad faith) holds the
common carrier liable for all damages which can be reasonably attributed, although unforeseen, to the non-performance
of the obligation, including moral and exemplary damages.
 DECISION

VITUG, J.:

The appeal before the Court involves the issue of an airline’s liability for lost luggage. The petition for review assails the
decision of the Court Appeals, 1 dated 27 February 1992, affirming an award of damages made by the trial court in a
complaint filed by private respondent against petitioner.

The factual background of the case, narrated by the trial court and reproduce at length by the appellate court, is
hereunder quoted:jgc:chanrobles.com.ph

"On August 21, 1987, plaintiff was a passenger on board flight SN 284 of defendant airline originating from Casablanca to
Brussels, Belgium on her valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00 shoes/bag $150;
accessories $75; luggage itself $10.00; or a total of $4,265.00, for which she was issued Tag No. 77143. She stayed
overnight in Brussels and her luggage was left on board Flight SN 284.

"Plaintiff arrived at Manila International Airport on September 2, 1987 and immediately submitted her Tag No 71423 to
facilitate the release of her luggage but the luggage was missing. She was advised to accomplish and submitted and filed
on the same day.

"She followed up her claim on Septembers 14, 1987 but the luggage remained to be missing.

"On September 15, 1987, she filed her formal complaint with the office of Ferge Massed, defendant’s Local Manager,
demanding immediate attention (Exh.’A’).

"On September 30, 1987, on the Occasion of plaintiff’s following up her luggage claim, she was furnished copies of
defendant’s telexes with and information that the Brussel’s Office of defendant found the luggage and that they have
assured by the defendant that it has notified its Manila Office 1987. But unfortunately plaintiff was informed that the
luggage was lost for the second time (Exhibits ‘C’ and ‘C-1’).

"At the time of the filling of the complaint, the luggage was its content has not been found.

"Plaintiff demanded from the defendant the money value of the luggage and its contents amounting to $4,265.00 or its
exchange value, but defendant refused to settle the claim.

"Defendant asserts in its Answer about evidence tend to show that while it admits that the plaintiff was a passenger on
board Flight No. SN 284 with a piece of checked in luggage bearing Tag No. 71423, the loss of the luggage was due to
plaintiffs sole if not contributory negligence; that the did not declare the valuable items in her checked in luggage at the
flight counter when she checked in for her flight from Casablanca to Brussels so that either the representative of the
defendant at the alleged valuable items and required her to secure an insurance on the alleged valuable items and
required her to pay additional charges, or would have refused acceptance of her baggage as required by the generally
accepted practices of international carriers; that Section 9(a), Article 1X of General Conditions of carriage at the Brussels
Airport that plaintiff should have retrieved her undeclared valuables from her baggage at the Brussels Airport; that plaintiff
should have retrieved her undeclared valuables from her baggage at the Brussels Airport since her flight from Brussels to
Manila will still have to visit for confirmation inasmuch as only her flight from Casablaca to Brussels was confirmed; that
defendant incorporated in all Sabena Plane Tickets, including Sabena Ticket No. 0824222-72502241 issued to plaintiff in
Manila on August 21, 1987, a warning that ‘Items of value should be carried on your person and that some carrier assume
no liability for fragile, valuable or perishable articles for guidance; that granting without conceding that defendant it liable,
its liability is limited only to US $20.00 per kilo due to plaintiff’s failure to declare a higher value on the contents of her
checked in luggage and pay additional charges thereon." 2

The trial court rendered judgment ordering petitioner Sabena Belgian World Airlines to pay private respondent Ma. Paula
San Agustin

"(a) . . . US$4,265.00 or its legal exchange in Philippine pesos;

"(b) . . . P30,000.00 as moral damages;

"(c) . . . P10,000.00 as exemplary damages;

"(d) . . . P10,000.00. attorney’s fees; and

"(e) (t)he cost of the suit." 3

Sabena appealed the decision of the Regional Trial Court to the Court of Appeals. The appellate court, in its decision of
27 February 1992, affirmed in toto the trial court’s judgment.

Petitioner airline company, in contending that the alleged negligence of private respondent should be considered the
primary cause for the loss of her luggage, avers that, despite her awareness that the flight ticket had been confirmed only
for Casablanca and Brussel, and that her flight from Brussels to Manila had yet to be confirmed, she did not retrieve the
luggage upon arrival in Brussels. Petitioner insist that private respondent, being a seasoned international traveler, must
have likewise been familiar with the standard provisions contained in her flight ticket that items of value are required to be
hand-carried by the passenger and that the liability of the airlines for loss, delay or damage to baggage would be limited,
in any event, to only US$20.00 per kilo unless a higher value is declared in advance and corresponding additional charge
are paid thereon, At the Casablanca International Airport, private respondent, in checking in her luggage evidently did not
declare its contents or value . Petitioner cites Section 5(c), Article IX, of the General Conditions of Carriage, signed at
Warsaw, Poland, on 02 October 1929, as amended by the Hague Protocol of 1955, generally observed by International
carriers, stating among other things, that:jgc:chanrobles.com.ph

"Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked baggage, Fragiles
or perishable articles, money, jewelry, precious metals, negotiable papers, securities or other valuable." 4

Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation and
corresponds with the circumstances of the person, of the time, and of the place. When the source of an obligation is
derived from a contract, the mere. breach or non-fulfillment of the prestation gives rise to the presumption of fault on the
part of the obligor. This rule is not different in the case of common carriers in the carriage of good father of a family but
that of "extraordinary" care in the vigilance over the goods. The appellate court has aptly observe:jgc:chanrobles.com.ph

". . . Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reason of public policy,
common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. This
extraordinary responsibility, according to Art. 1736, lasts from the time the goods are unconditionally placed in the
possession of and received by the consignee or person who has the right to receive them. Art 1737 states that the
common carrier’s duty to observe extraordinary diligence in the vigilance over the goods transported by them remains in
full force and effect even when they are temporarily unloaded or stored in transits.’ And Art. 1735 establishes the
presumption that if the goods are lost, destroyed or deteriorate, common carrier are presumed to have En at fault or to
have acted negligently, unless they prove that they had observed extraordinary diligence as required in Article 1733.

"The only exceptions to the foregoing extraordinary responsibility of the common carrier is when the loss, destruction, or
deterioration of the goods is due to any of the following causes:jgc:chanrobles.com.ph

"(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

"(2) Act of the public enemy in war, whether international or civil;

"(3) Act or omission of the shipper or owner of the goods;

"(4) The character of the goods or defects in the packing or in the containers;

"(5) Order or act of excepted causes obtains in the case." 5

The above rules remain basically unchanged even when the contract is breached by tort 6 although noncontradictory
principles on quasi-delict may then be assimilated as also forming part of the governing law. Petitioner is not thus entirely
off track when it has likewise raised in its defense the tort doctrine cannot, in this particular instance, support its case.
Proximate cause is that which, in natural and continues sequence, unbroken by any efficient intervening cause, produces
injury and without which the result would not have occurred. The exemplication by the Court in one case 7 is simple and
explicit; viz:jgc:chanrobles.com.ph

"(T)he proximate legal cause is that acting first and producing the injury, either immediately or by setting other events in
motion, all constituting a natural and continuous chain of events, each having a close causal connection with its
immediate predecessors, the final event in the chain immediately affecting the injury as a natural and probable result of
the cause which first acted, under such circumstances that the person responsible for the event should, as an ordinarily
prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to
some person might probably result therefrom."cralaw virtua1aw library

It remained undisputed that private respondent’s luggage was lost while it was in the custody of petitioner. It was
supposed to arrive on the same flight that private respondent took in returning to Manila on 02 September 1987. When
she discovered that the luggage was missing, she promptly accomplished and filed a Property Irregularity Report. She
followed up her claim on 14 September 1987, and filed, on the following day, a formal letter-complaint with petitioner. She
felt relieved when, on 23 October 1987, she was advised that her luggage had finally been found, with its contents intact
when waited anxiously only to be told later that her luggage had been lost for the second time. Thus, the appellate court,
given all the facts before it, sustained the trial court in finding petitioner ultimately guilty of "gross negligence" in the
handling of private respondent’s luggage. The "loss of said baggage not only once by twice," said the appellate court,
"underscore the wanton negligence and lack of care" on the part of the carrier.

The above findings, which certainly cannot be said to be without basis, foreclose whatever right s petitioner might have
had to the possible limitation of liabilities enjoyed by international air carriers under the Warsaw Convention (Convention
for the Unification of Certain Rules Relating to International Carriage by Air, as amended by the Hague Protocol of 1955,
the Montreal Agreement of 1966, the Guatemala Protocol of 1971 and the Montreal Protocols of 1975). In Alitalia v.
Intermediate Appellate Court, 8 now Chief Justice Andres R. Narvasa, speaking for the Court, has explained it well; he
said:jgc:chanrobles.com.ph

"The Warsaw Convention however denies to the carrier availment ‘of the provisions which exclude or limit his liability if the
damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court
seized of the case, is considered to be equivalent to willful misconduct,’ or ‘if the damage is (similarly) caused . . . by any
agent of the carrier acting within the scope of his employment.’ The Hague Protocol amended the Warsaw Convention by
removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely,
and declaring the stated limits of liability not applicable ‘if it is proved that the damage resulted from an act or omission of
the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would
probably result.’ The same deletion was effected by the Montreal Agreement of 1966, with the result that a passenger
could recover unlimited damages upon proof of wilful misconduct.

"The Convention does not thus operate as an exclusive enumeration of the instances of an airline’s liability, or as an
absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the Convention, as this
Court has now, and at an earlier time, pointed out. Moreover, slight reflection readily leads to the conclusion that it shoul d
be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or
damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith,
recklessness or otherwise improper conduct on the part of any official or employee for which the carrier is responsible,
and the carrier’ or misconduct of its employees, or for some Particular or exceptional type of damage. Otherwise, an air
carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a
contract of carriage, which is absurd. No may it for a moment be supposed that if a member of the aircraft complement
should inflict some physical injury on a passenger, or maliciously destroy or damage the latter’s property, the Convention
might successfully be pleaded as the sole gauge to determine the carrier’s liability to the passenger, Neither may the
Convention be invoke justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude
recovery therefore beyond the limits set by said Convention. It is in this sense that the Convention has been applied, or
ignored, depending on the peculiar facts presented by each case."cralaw virtua1aw library

The Court thus sees no error in the preponderant application to the instant case by the appellate court, as well as by the
trial court, of the usual rules on the extent of recoverable damages beyond the Warsaw limitations. Under domestic law
and jurisprudence (the Philippines being the country of destination), the attendance of gross negligence (given the
equivalent of fraud or bad faith) holds the common carrier liable for all damages which can be reasonably attribute,
although unforeseen, to the non-performance of the obligation, 9 including moral and exemplary damages. 10

WHEREFORE, the decision appealed from is AFFIRM. Costs against petitioner.

SO ORDERED.
 Sabena Belgian World Airlines vs. CA
(GR 104685, 14 March 1996)

FACTS:

Private respondent MA. PAULA SAN AGUSTIN was a passenger on board Flight SN 284 of defendant airline originating
from Casablanca to Brussels, Belgium on her way back to Manila. She checked in her luggage which contained her
valuables all amounting to $4,265.00, for which she was issued Tag No. 71423. She stayed overnight in Brussels and her
luggage was left on board Flight SN 284. Upon Arrival in Manila, she learned that her luggage was missing and was advised
to accomplish and submit a property Irregularity Report which she submitted and filed on the same day.

Upon follow up, it remained missing; thus, she filed her formal complaint with the office of Ferge Massed, petitioner’s Local
Manager, demanding immediate attention.

Two weeks later she was notified that her luggage was found. But unfortunately plaintiff was informed that the luggage was
lost for the second time. She demanded payment but the airline refused to settle the claim.

The trial court ruled in favor of Ma. Paula San Agustin. The appellate court affirmed in toto the trial court’s judgment.

Petitioner airline company, in contending that the alleged negligence of private respondent should be considered the primary
cause for the loss of her luggage, avers that, despite her awareness that the flight ticket had been confirmed only for
Casablanca and Brussels, and that her flight from Brussels to Manila had yet to be confirmed, she did not retrieve the
luggage upon arrival in Brussels. Petitioner insists that private respondent, being a seasoned international traveler, must
have likewise been familiar with the standard provisions contained in her flight ticket that items of value are required to be
hand-carried by the passenger and that the liability of the airline or loss, delay or damage to baggage would be limited, in
any event, to only US$20.00 per kilo unless a higher value is declared in advance and corresponding additional charges
are paid thereon. At the Casablanca International Airport, private respondent, in checking in her luggage, evidently did not
declare its contents or value. Petitioner cites Section 5(c), Article IX, of the General Conditions of Carriage, signed at
Warsaw, Poland, on 02 October 1929, as amended by the Hague Protocol of 1955, generally observed by International
carriers, stating, among other things, that:

“Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked baggage, fragile or
perishable articles, money, jewelry, precious metals, negotiable papers, securities or other valuables.”

ISSUE:

Whether or not the airline is negligent? Whether respondent’s negligence is the sole and proximate of the loss?

HELD:

Yes.

Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation and
corresponds with the circumstances of the person, of the time, and of the place. When the source of an obligation is derived
from a contract, the mere breach or non-fulfillment of the prestation gives rise to the presumption of fault on the part of the
obligor. This rule is not different in the case of common carriers in the carriage of goods which, indeed, are bound to observe
not just the due diligence of a good father of a family but that of “extraordinary” care in the vigilance over the goods. The
appellate court has aptly observed:

“x x x Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reasons of public policy,
common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. This
extraordinary responsibility, according to Art. 1736, lasts from the time the goods are unconditionally placed in the
possession of and received by the carrier until they are delivered actually or constructively to the consignee or person who
has the right to receive them. Art. 1737 states that the common carrier’s duty to observe extraordinary diligence in the
vigilance over the goods transported by them ‘remains in full force and effect even when they are temporarily unloaded or
stored in transit.’ And Art. 1735 establishes the presumption that if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless they prove that they had observed
extraordinary diligence as required in Article 1733.
The above rules remain basically unchanged even when the contract is breached by tort although noncontradictory
principles on quasi-delict may then be assimilated as also forming part of the governing law. Petitioner is not thus entirely
off track when it has likewise raised in its defense the tort doctrine of proximate cause. Unfortunately for petitioner, however,
the doctrine cannot, in this particular instance, support its case. Proximate cause is that which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have
occurred.

The above findings, which certainly cannot be said to be without basis, foreclose whatever rights petitioner might have had
to the possible limitation of liabilities enjoyed by international air carriers under the Warsaw Convention .

The Warsaw Convention however denies to the carrier availment ‘of the provisions which exclude or limit his liability, if the
damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court seized
of the case, is considered to be equivalent to wilful misconduct,’ or ‘if the damage is (similarly) caused x x x by any agent of
the carrier acting within the scope of his employment.’

The Convention does not thus operate as an exclusive enumeration of the instances of an airline’s liability, or as an absolute
limit of the extent of that liability.

( Loss of baggage twice shows gross negligence)

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-22415 March 30, 1966

FERNANDO LOPEZ, ET AL., plaintiffs-appellants,

vs.
PAN AMERICAN WORLD AIRWAYS, defendant-appellant.

Ross, Selph and Carrascoso for the defendant-appellant.

Vicente J. Francisco for the plaintiffs-appellants.

BENGZON, J.P., J.:

Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal. Since the value in controversy
exceeds P200,000 the appeals were taken directly to this Court upon all questions involved (Sec. 17, par. 3[5], Judiciary
Act).

Stated briefly the facts not in dispute are as follows: Reservations for first class accommodations in Flight No. 2 of Pan
American World Airways — hereinafter otherwise called PAN-AM — from Tokyo to San Francisco on May 24, 1960 were
made with
PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for then Senator Fernando
Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano, Jr.,
(Milagros Lopez Montelibano). PAN-AM's San Francisco head office confirmed the reservations on March 31, 1960.

First class tickets for the abovementioned flight were subsequently issued by
PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444 for all of them was
fully paid before the tickets were issued.

As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in Tokyo at 5:30 P.M.
of that day. As soon as they arrived Senator Lopez requested Minister Busuego of the Philippine Embassy to contact
PAN-AM's Tokyo office regarding their first class accommodations for that evening's flight. For the given reason that the
first class seats therein were all booked up, however, PAN-AM's Tokyo office informed Minister Busuego that PAN-AM
could not accommodate Senator Lopez and party in that trip as first class passengers. Senator Lopez thereupon gave
their first class tickets to Minister Busuego for him to show the same to PAN-AM's Tokyo office, but the latter firmly
reiterated that there was no accommodation for them in the first class, stating that they could not go in that flight unless
they took the tourist class therein.

Due to pressing engagements awaiting Senator Lopez and his wife, in the United States — he had to attend a business
conference in San Francisco the next day and she had to undergo a medical check-up in Mayo Clinic, Rochester,
Minnesota, on May 28, 1960 and needed three days rest before that in San Francisco — Senator Lopez and party were
constrained to take PAN-AM's flight from Tokyo to San Francisco as tourist passengers. Senator Lopez however made it
clear, as indicated in his letter to PAN-AM's Tokyo office on that date (Exh. A), that they did so "under protest" and without
prejudice to further action against the airline.1äwphï1.ñët

Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM on June 2, 1960 in the Court of First
Instance of Rizal. Alleging breach of contracts in bad faith by defendant, plaintiffs asked for P500,000 actual and moral
damages, P100,000 exemplary damages, P25,000 attorney's fees plus costs. PAN-AM filed its answer on June 22, 1960,
asserting that its failure to provide first class accommodations to plaintiffs was due to honest error of its employees. It also
interposed a counterclaim for attorney's fees of P25,000.

Subsequently, further pleadings were filed, thus: plaintiffs' answer to the counterclaim, on July 25, 1960; plaintiffs' reply
attached to motion for its admittance, on December 2, 1961; defendant's supplemental answer, on March 8, 1962;
plaintiffs' reply to supplemental answer, on March 10, 1962; and defendant's amended supplemental answer, on July 10,
1962.
After trial — which took twenty-two (22) days ranging from November 25, 1960 to January 5, 1963 — the Court of First
Instance rendered its decision on November 13, 1963, the dispositive portion stating:

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the
defendant, which is accordingly ordered to pay the plaintiffs the following: (a) P100,000.00 as moral damages; (b)
P20,000.00 as exemplary damages; (c) P25,000.00 as attorney's fees, and the costs of this action.

So ordered.

Plaintiffs, however, on November 21, 1963, moved for reconsideration of said judgment, asking that moral damages be
increased to P400,000 and that six per cent (6%) interest per annum on the amount of the award be granted. And
defendant opposed the same. Acting thereon the trial court issued an order on December 14, 1963, reconsidering the
dispositive part of its decision to read as follows:

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the
defendant, which is accordingly ordered to pay the plaintiffs the following: (a) P150,000.00 as moral damages; (b)
P25,000.00 as exemplary damages; with legal interest on both from the date of the filing of the complaint until
paid; and (c) P25,000.00 as attorney's fees; and the costs of this action.

So ordered.

It is from said judgment, as thus reconsidered, that both parties have appealed.

Defendant, as stated, has from the start admitted that it breached its contracts with plaintiffs to provide them with first
class accommodations in its Tokyo-San Francisco flight of May 24, 1960. In its appeal, however, it takes issue with the
finding of the court a quo that it acted in bad faith in the branch of said contracts. Plaintiffs, on the other hand, raise
questions on the amount of damages awarded in their favor, seeking that the same be increased to a total of P650,000.

Anent the issue of bad faith the records show the respective contentions of the parties as follows.

According to plaintiffs, defendant acted in bad faith because it deliberately refused to comply with its contract to provide
first class accommodations to plaintiffs, out of racial prejudice against Orientals. And in support of its contention that what
was done to plaintiffs is an oftrepeated practice of defendant, evidence was adduced relating to two previous instances of
alleged racial discrimination by defendant against Filipinos in favor of "white" passengers. Said previous occasions are
what allegedly happened to (1) Benito Jalbuena and (2) Cenon S. Cervantes and his wife.

And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first class ticket from PAN-AM on April
13, 1960; he confirmed it on April 15, 1960 as to the Tokyo-Hongkong flight of April 20, 1960; PAN-AM similarly confirmed
it on April 20, 1960. At the airport he and another Oriental — Mr. Tung — were asked to step aside while other
passengers - including "white" passengers — boarded PAN-AM's plane. Then PAN-AM officials told them that one of
them had to stay behind. Since Mr. Tung was going all the way to London, Jalbuena was chosen to be left behind. PAN-
AM's officials could only explain by saying there was "some mistake". Jalbuena thereafter wrote PAN-AM to protest the
incident (Exh. B).

As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on September 29, 1958 from Bangkok to
Hongkong, he and his wife had to take tourist class, although they had first class tickets, which they had previously
confirmed, because their seats in first class were given to "passengers from London."

Against the foregoing, however, defendant's evidence would seek to establish its theory of honest mistake, thus:

The first class reservations of Senator Lopez and party were made on March 29, 1960 together with those of four
members of the Rufino family, for a total of eight (8) seats, as shown in their joint reservation card (Exh. 1). Subsequently
on March 30, 1960, two other Rufinos secured reservations and were given a separate reservation card (Exh. 2). A new
reservation card consisting of two pages (Exhs. 3 and 4) was then made for the original of eight passengers, namely,
Senator Lopez and party and four members of the Rufino family, the first page (Exh. 3) referring to 2 Lopezes, 2
Montelibanos and 1 Rufino and the second page (Exh. 4) referring to 3 Rufinos. On April 18, 1960 "Your Travel Guide"
agency cancelled the reservations of the Rufinos. A telex message was thereupon sent on that date to PAN-AM's head
office at San Francisco by Mariano Herranz, PAN-AM's reservations employee at its office in Escolta, Manila. (Annex A-
Acker's to Exh. 6.) In said message, however, Herranz mistakenly cancelled all the seats that had been reserved, that is,
including those of Senator Lopez and party.

The next day — April 1960 — Herranz discovered his mistake, upon seeing the reservation card newly prepared by his
co-employee Pedro Asensi for Sen. Lopez and party to the exclusion of the Rufinos (Exh. 5). It was then that Herranz sent
another telex wire to the San Francisco head office, stating his error and asking for the reinstatement of the four (4) first
class seats reserved for Senator Lopez and party (Annex A-Velasco's to Exh. 6). San Francisco head office replied on
April 22, 1960 that Senator Lopez and party are waitlisted and that said office is unable to reinstate them (Annex B-
Velasco's to Exh. 6).

Since the flight involved was still more than a month away and confident that reinstatement would be made, Herranz
forgot the matter and told no one about it except his co-employee, either Armando Davila or Pedro Asensi or both of them
(Tsn., 123-124, 127, Nov. 17, 1961).

Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations employee working in the same Escolta office
as Herranz, phoned PAN-AM's ticket sellers at its other office in the Manila Hotel, and confirmed the reservations of
Senator Lopez and party.

PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's mistake after "Your Travel Guide" phone on May
18, 1960 to state that Senator Lopez and party were going to depart as scheduled. Accordingly, Jose sent a telex wire on
that date to PAN-AM's head office at San Francisco to report the error and asked said office to continue holding the
reservations of Senator Lopez and party (Annex B-Acker's to Exh. 6). Said message was reiterated by Jose in his telex
wire of May 19, 1960 (Annex C-Acker's to Exh. 6). San Francisco head office replied on May 19, 1960 that it regrets being
unable to confirm Senator Lopez and party for the reason that the flight was solidly booked (Exh. 7). Jose sent a third
telex wire on May 20, 1960 addressed to PAN-AM's offices at San Francisco, New York (Idlewild Airport), Tokyo and
Hongkong, asking all-out assistance towards restoring the cancelled spaces and for report of cancellations at their end
(Annex D-Acker's to Exh. 6). San Francisco head office reiterated on May 20, 1960 that it could not reinstate the spaces
and referred Jose to the Tokyo and Hongkong offices (Exh. 8). Also on May 20, the Tokyo office of PAN-AM wired Jose
stating it will do everything possible (Exh. 9).

Expecting that some cancellations of bookings would be made before the flight time, Jose decided to withhold from
Senator Lopez and party, or their agent, the information that their reservations had been cancelled.

Armando Davila having previously confirmed Senator Lopez and party's first class reservations to PAN-AM's ticket sellers
at its Manila Hotel office, the latter sold and issued in their favor the corresponding first class tickets on the 21st and 23rd
of May, 1960.

From the foregoing evidence of defendant it is in effect admitted that defendant — through its agents — first cancelled
plaintiffs, reservations by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel agent
the fact of said cancellation, letting them go on believing that their first class reservations stood valid and confirmed. In so
misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed reservations for the same,
when in fact they had none, defendant wilfully and knowingly placed itself into the position of having to breach its a
foresaid contracts with plaintiffs should there be no last-minute cancellation by other passengers before flight time, as it
turned out in this case. Such actuation of defendant may indeed have been prompted by nothing more than the promotion
of its self-interest in holding on to Senator Lopez and party as passengers in its flight and foreclosing on their chances to
seek the services of other airlines that may have been able to afford them first class accommodations. All the time, in
legal contemplation such conduct already amounts to action in bad faith. For bad faith means a breach of a known duty
through some motive of interest or ill-will (Spiegel vs. Beacon Participations, 8 NE 2d 895, 907). As stated in Kamm v.
Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: "Self-enrichment or fraternal interest, and not personal ill-will, may well
have been the motive; but it is malice nevertheless."

As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew that plaintiffs' reservations had been
cancelled. As of May 20 he knew that the San Francisco head office stated with finality that it could not reinstate plaintiffs'
cancelled reservations. And yet said reservations supervisor made the "decision" — to use his own, word — to withhold
the information from the plaintiffs. Said Alberto Jose in his testimony:

Q Why did you not notify them?

A Well, you see, sir, in my fifteen (15) years of service with the air lines business my experience is that even if the
flights are solidly booked months in advance, usually the flight departs with plenty of empty seats both on the first
 class and tourist class. This is due to late cancellation of passengers, or because passengers do not show up in
the airport, and it was our hope others come in from another flight and, therefore, are delayed and, therefore,
missed their connections. This experience of mine, coupled with that wire from Tokyo that they would do
everything possible prompted me to withhold the information, but unfortunately, instead of the first class seat that I
was hoping for and which I anticipated only the tourists class was open on which Senator and Mrs. Lopez, Mr.
and Mrs. Montelibano were accommodated. Well, I fully realize now the gravity of my decision in not advising
Senator and Mrs. Lopez, Mr. and Mrs. Montelibano nor their agents about the erroneous cancellation and for
which I would like them to know that I am very sorry.

xxx xxx xxx

Q So it was not your duty to notify Sen. Lopez and parties that their reservations had been cancelled since May
18, 1960?

A As I said before it was my duty. It was my duty but as I said again with respect to that duty I have the power to
make a decision or use my discretion and judgment whether I should go ahead and tell the passenger about the
cancellation. (Tsn., pp. 17-19, 28-29, March 15, 1962.)

At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that their
reservation had not been cancelled. An additional indication of this is the fact that upon the face of the two tickets of
record, namely, the ticket issued to Alfredo Montelibano, Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs. Alfredo
Montelibano, Jr., on May 23, 1960 (Exh. 23), the reservation status is stated as "OK". Such willful-non-disclosure of the
cancellation or pretense that the reservations for plaintiffs stood — and not simply the erroneous cancellation itself — is
the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in this respect defendant
clearly acted in bad faith.

As if to further emphasize its bad faith on the matter, defendant subsequently promoted the employee who cancelled
plaintiffs' reservations and told them nothing about it. The record shows that said employee — Mariano Herranz — was
not subjected to investigation and suspension by defendant but instead was given a reward in the form of an increase of
salary in June of the following year (Tsn., 86-88, Nov. 20, 1961).

At any rate, granting all the mistakes advanced by the defendant, there would at least be negligence so gross and
reckless as to amount to malice or bad faith (Fores vs. Miranda, L-12163, March 4, 1959; Necesito v. Paras, L-10605-06,
June 30, 1958). Firstly, notwithstanding the entries in the reservation cards (Exhs. 1 & 3) that the reservations cancelled
are those of the Rufinos only, Herranz made the mistake, after reading said entries, of sending a wire cancelling all the
reservations, including those of Senator Lopez and party (Tsn., pp. 108-109, Nov. 17, 1961). Secondly, after sending a
wire to San Francisco head office on April 19, 1960 stating his error and asking for reinstatement, Herranz simply forgot
about the matter. Notwithstanding the reply of San Francisco head Office on April 22, 1960 that it cannot reinstate Senator
Lopez and party (Annex B-Velasco's to Exh. 6), it was assumed and taken for granted that reinstatement would be made.
Thirdly, Armando Davila confirmed plaintiff's reservations in a phone call on April 27, 1960 to defendant's ticket sellers,
when at the time it appeared in plaintiffs' reservation card (Exh. 5) that they were only waitlisted passengers. Fourthly,
defendant's ticket sellers issued plaintiffs' tickets on May 21 and 23, 1960, without first checking their reservations just
before issuing said tickets. And, finally, no one among defendant's agents notified Senator Lopez and party that their
reservations had been cancelled, a precaution that could have averted their entering with defendant into contracts that the
latter had already placed beyond its power to perform.

Accordingly, there being a clear admission in defendant's evidence of facts amounting to a bad faith on its part in regard
to the breach of its contracts with plaintiffs, it becomes unnecessary to further discuss the evidence adduced by plaintiffs
to establish defendant's bad faith. For what is admitted in the course of the trial does not need to be proved (Sec. 2, Rule
129, Rules of Court).

Addressing ourselves now to the question of damages, it is well to state at the outset those rules and principles. First,
moral damages are recoverable in breach of contracts where the defendant acted fraudulently or in bad faith (Art. 2220,
New Civil Code). Second, in addition to moral damages, exemplary or corrective damages may be imposed by way of
example or correction for the public good, in breach of contract where the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner (Articles 2229, 2232, New Civil Code). And, third, a written contract for an
attorney's services shall control the amount to be paid therefor unless found by the court to be unconscionable or
unreasonable (Sec. 24, Rule 138, Rules of Court).
First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the
latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with
first class tickets issued by defendant and yet they were given only the tourist class. At stop-overs, they were expected to
be among the first-class passengers by those awaiting to welcome them, only to be found among the tourist passengers.
It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to
what is rightfully to be expected from the contractual undertaking.

Senator Lopez was then Senate President Pro Tempore. International carriers like defendant know the prestige of such
an office. For the Senate is not only the Upper Chamber of the Philippine Congress, but the nation's treaty-ratifying body.
It may also be mentioned that in his aforesaid office Senator Lopez was in a position to preside in impeachment cases
should the Senate sit as Impeachment Tribunal. And he was former Vice-President of the Philippines. Senator Lopez was
going to the United States to attend a private business conference of the Binalbagan-Isabela Sugar Company; but his
aforesaid rank and position were by no means left behind, and in fact he had a second engagement awaiting him in the
United States: a banquet tendered by Filipino friends in his honor as Senate President Pro Tempore (Tsn., pp. 14-15,
Nov. 25, 1960). For the moral damages sustained by him, therefore, an award of P100,000.00 is appropriate.

Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and therefore his humiliation. In addition she suffered
physical discomfort during the 13-hour trip,(5 hours from Tokyo to Honolulu and 8 hours from Honolulu to San Francisco).
Although Senator Lopez stated that "she was quite well" (Tsn., p. 22, Nov. 25, 1960) — he obviously meant relatively well,
since the rest of his statement is that two months before, she was attackedby severe flu and lost 10 pounds of weight and
that she was advised by Dr. Sison to go to the United States as soon as possible for medical check-up and relaxation,
(Ibid). In fact, Senator Lopez stated, as shown a few pages after in the transcript of his testimony, that Mrs. Lopez was
sick when she left the Philippines:

A. Well, my wife really felt very bad during the entire trip from Tokyo to San Francisco. In the first place, she was
sick when we left the Philippines, and then with that discomfort which she [experienced] or suffered during that
evening, it was her worst experience. I myself, who was not sick, could not sleep because of the discomfort.
(Tsn., pp. 27-28, Nov. 25, 1960).

It is not hard to see that in her condition then a physical discomfort sustained for thirteen hours may well be considered a
physical suffering. And even without regard to the noise and trepidation inside the plane — which defendant contends,
upon the strengh of expert testimony, to be practically the same in first class and tourist class — the fact that the seating
spaces in the tourist class are quite narrower than in first class, there beingsix seats to a row in the former as against four
to a row in the latter, and that in tourist class there is very little space for reclining in view of the closer distance between
rows (Tsn., p. 24, Nov. 25, 1960), will suffice to show that the aforesaid passenger indeed experienced physical suffering
during the trip. Added to this, of course, was the painfull thought that she was deprived by defendant — after having paid
for and expected the same — of the most suitable, place for her, the first class, where evidently the best of everything
would have been given her, the best seat, service, food and treatment. Such difference in comfort between first class and
tourist class is too obvious to be recounted, is in fact the reason for the former's existence, and is recognized by the airline
in charging a higher fare for it and by the passengers in paying said higher rate Accordingly, considering the totality of her
suffering and humiliation, an award to Mrs. Maria J. Lopez of P50,000.00 for moral damages will be reasonable.

Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate members of the family of Senator Lopez. They formed
part of the Senator's party as shown also by the reservation cards of PAN-AM. As such they likewise shared his prestige
and humiliation. Although defendant contends that a few weeks before the flight they had asked their reservations to be
charged from first class to tourist class — which did not materialize due to alleged full booking in the tourist class — the
same does not mean they suffered no shared in having to take tourist class during the flight. For by that time they had
already been made to pay for first class seats and therefore to expect first class accommodations. As stated, it is one
thing to take the tourist class by free choice; a far different thing to be compelled to take it notwithstanding having paid for
first class seats. Plaintiffs-appellants now ask P37,500.00 each for the two but we note that in their motion for
reconsideration filed in the court a quo, they were satisfied with P25,000.00 each for said persons. (Record on Appeal, p.
102). For their social humiliation, therefore, the award to them of P25,000.00 each is reasonable.

The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for
public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary
damages in addition to moral damages (Articles 2229, 2232, New Civil Code).

In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of
contracts in the future by defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or
corrective damages.
Now, as to attorney's fees, the record shows a written contract of services executed on June 1, 1960 (Exh. F) whereunder
plaintiffs-appellants engaged the services of their counsel — Atty. Vicente J. Francisco — and agreedto pay the sum of
P25,000.00 as attorney's fees upon the termination of the case in the Court of First Instance, and an additional sum of
P25,000.00 in the event the case is appealed to the Supreme Court. As said earlier, a written contract for attorney's
services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable. A
consideration of the subject matter of the present controversy, of the professional standing of the attorney for plaintiffs-
appellants, and of the extent of the service rendered by him, shows that said amount provided for in the written agreement
is reasonable. Said lawyer — whose prominence in the legal profession is well known — studied the case, prepared and
filed the complaint, conferred with witnesses, analyzed documentary evidence, personally appeared at the trial of the case
in twenty-two days, during a period of three years, prepared four sets of cross-interrogatories for deposition taking,
prepared several memoranda and the motion for reconsideration, filed a joint record on appeal with defendant, filed a brief
for plaintiffs as appellants consisting of 45 printed pages and a brief for plaintiffs as appellees consisting of 265 printed
pages. And we are further convinced of its reasonableness because defendant's counsel likewise valued at P50,000.00
the proper compensation for his services rendered to defendant in the trial court and on appeal.

In concluding, let it be stressed that the amount of damages awarded in this appeal has been determined by adequately
considering the official, political, social, and financial standing of the offended parties on one hand, and the business and
financial position of the offender on the other (Domingding v. Ng, 55 O.G. 10). And further considering the present rate of
exchange and the terms at which the amount of damages awarded would approximately be in U.S. dollars, this Court is all
the more of the view that said award is proper and reasonable.

Wherefore, the judgment appealed from is hereby modified so as to award in favor of plaintiffs and against defendant, the
following: (1) P200,000.00 as moral damages, divided among plaintiffs, thus: P100,000.00 for Senate President Pro
Tempore Fernando Lopez; P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his son-in-law Alfredo Montelibano, Jr.;
and P25,000.00 for his daughter Mrs. Alfredo Montelibano, Jr.; (2) P75,000.00 as exemplary or corrective damages; (3)
interest at the legal rate of 6% per annum on the moral and exemplary damages aforestated, from December 14, 1963,
the date of the amended decision of the court a quo, until said damages are fully paid; (4) P50,000.00 as attorney's fees;
and (5) the costs. Counterclaim dismissed.So ordered
Lopez V. Pan American (1966)

G.R. No. L-20434 July 30, 1966

Lessons Applicable: Factors in determining amount (Torts and Damages)

Laws Applicable:

FACTS:

 August 1, 1960: Pan American Employees Association staged a strike so Pan Am forced them to take
a leave of absence without pay on February 22, 1961 to February 23, 1961
 court a quo: affected them financially and economically, it ordered Pan America to pay them their two
days salaries
 CA: affirmed.
ISSUE: W/N the employees should be awarded back wages.

HELD: NO. AFFIRMED in so far as it declares petitioner Pan American World Airways, Inc. not guilty of
unfair labor practice, but IS REVERSED in so far as it orders said petitioner to pay the members of the
respondent labor union, Pan American Employees Association, their wages or salaries for February 22 and
23, 1961 when they were made by the petitioner to go on furlough. The petitioner is absolved from paying
the said back wages. No pronouncement as to costs. It is so ordered.

 The dismiss employee is not entirely without remedy if his charge of unfair labor practice fails and his complaint dismissed,
because the breach by the employer of the obligation to him may be redressed like an ordinary contract or obligation
 in placing its employees on furlough for two days, petitioner acted in good faith. The record shows that before laying them off it
asked permission from the industrial court and only effected the furlough after said court authorized it to do so.
 the step taken by respondent was necessary to protect its interest whose business is mainly dependent on the flight of its planes,"
giving as additional reason that "lack of work as a cause of lay-off is justified.
 Inasmuch as petitioner acted in good faith, it should not be ordered to pay back wages to its laid off employees.
 not paid their wages for only two days, We do not believe that the same would place them in such a financial and economic
distress as to warrant the award of their back wages
 SECOND DIVISION

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

RAFAEL ZULUETA, ET AL., Plaintiffs-Appellees, v. PAN AMERICAN WORLD AIRWAYS, INC., Defendant-
Appellant.

Jose W. Diokno for Plaintiffs-Appellees.

Ross, Salcedo, Del Rosario, Bito & Misa, for Defendant-Appellant.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; MOTIONS, RULE 22, SEC. 4 REVISED RULES OF COURT APPLICABLE TO
MOTION FOR OTHER HEARING DATES. — Rule 22, Sec. 4, referring to motions "to postpone trial" applies with equal
force to motions like the one under consideration wherein defendant PANAM moves that it be granted additional hearing
dates about two months from Oct. 20, 1966 to present its other witnesses or their depositions. Hence, the latter can be
granted only upon showing of the materiality of the evidence expected to be obtained and that due diligence has been
used to procure it.

2. ID.; ID.; ID.; ID.; DENIAL OF MOTION, JUSTIFIED. — That defendant PANAM knew, as early as August 2, 1966 that
its turn to present evidence would take place as agreed upon about two and a half months later; that it has not offered any
valid excuse for its failure to bring to court the witnesses mentioned in said motion nor exerted efforts to bring the "other
witnesses" or to take or submit their depositions, justify the denial by the trial judge of said motion.

3. CIVIL. LAW; CONTRACTS; COMMON CARRIERS, BREACH OF CONTRACT; RIGHT OF PASSENGER TO

DAMAGES; DELIBERATE ACT OF CARRIER IN LEAVING PASSENGER. — It is urged that plaintiff is, at most, entitled
to actual damages only, because he was the first to commit a breach of contract, for having gone over 200 yards away
from the terminal where he could not expect to be paged. But PANAM has not pointed out what part of the contract has
been violated thereby, apart from the fact that the award for damages made in the decision appealed from was due, not to
PANAM’s failure to so page the plaintiff, but to the former’s deliberate act of leaving at Wake Island, and the
embarrassment and humiliation caused to him and his family in the presence of many other person.

4. ID.; ID.; ID.; ID.; ID.; NO CONTRIBUTORY NEGLIGENCE IN INSTANT CASE. — The failure of the plaintiff to reboard
the plane within the time announced before the passengers debarked therefrom did not constitute contributory negligence
for he had actually shown up before the plane had taken off. Despite this appearance, he was nevertheless off-loaded
intentionally and with malice aforethought, for his "belligerent" attitude; for his having dared to answer the captain after
being referred to as one of "three monkeys" ; and for his categorical refusal to have his bags opened without a search
warrant.

5. ID.; ID.; ID.; ID.; RIGHT TO MORAL AND EXEMPLARY DAMAGES. — The rude and rough reception plaintiff’s receive
at the hands of the airline officers; the abusive language and highly scornful reference to them as "monkeys" by one of
PANAM’s employees; the unfriendly attitude; the ugly stares and unkind remarks to which they were subjected; their being
cordoned by men in uniform as if they were subjected; their being cordoned by men in uniform as if they were criminals;
the airline officials’ refusal to allow Mr. Zulueta to board the plane on the pretext that he was hiding a bomb in his luggage
and their arbitrary and high-handed decision, to leave him in Wake; Mrs. Zulueta’s having suffered a nervous breakdown
for which she was hospitalized as a result of the insults and humiliations to which they were exposed by the conduct of
PANAM’s employees; Miss Zulueta’s having suffered shame and embarrassment for the treatment received by her
parents at the airport — all justify an award for moral damages.

6. ID.; ID.; ID.; ID.; ID.; REDUCTIONS IN INSTANT CASE. — To some extent, plaintiff had contributed to the gravity of
the situation because of the extreme belligerance with which he had reacted on the occasion. Although PANAM agents
had taken an arrogant and over-bearing attitude towards him, just the same, there is every reason to believe that, in all
probability, things would not have turned out as bad as they became had plaintiff not allowed himself, in a way, to be
dragged to the level or plane on which PANAM’s personnel had placed themselves. In view of this circumstance the Court
deems it proper that the moral and exemplary damages aside from the attorney’s fees awarded by the lower court, should
be reduced.

7. ID.; ID.; ID.; ID.; RIGHT TO MORAL DAMAGES; FACTORS CONSIDERED. — It has been held that the discretion in
fixing moral damages lies in the trial court. Among the factors courts take into account in assessing moral damages are
the professional, social, political and financial standing of the offended parties on one hand, and the business and
financial position of the offender on the other.

8. ID.; PERSONS AND FAMILY RELATIONS; SUITS AGAINST HUSBAND AND WIFE; REAL PARTY IN INTEREST;
ART. 113, (2) CIVIL CODE OF THE PHILIPPINES, NOT APPLICABLE IN INSTANT CASE. — Relying on Art. 113(2) of
the Civil Code of the Philippines which permits the filing of a suit by the wife without being joined by her husband, as a
result of a separation de facto between them, Mrs. Zulueta filed a motion to dismiss the case insofar as she is concerned,
after a settlement of all her differences with PANAM. Said provision cannot possibly apply to a case, like the one at bar, in
which the husband is the main party in interest, both as the person aggrieved and as the administrator of the original
partnership.

9. ID.; ID.; ID.; ART. 113 (2) CIVIL CODE OF THE PHILIPPINES. — The suit contemplated in Art. 113 of the Civil Code of
the Philippines, pursuant to which "the husband must be joined in all suits by or against the wife except . . . (2) if they have
in fact been separated for at least one year", is one in which the wife is the real party — either plaintiff or defendant — in
interest, and, in which, without being so, the husband must be joined as a party, by reason only of his relations of affinity
with her.

DECISION

CONCEPCION, J.:

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

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

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

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

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

"‘I was about to make some reply when I noticed the captain of the flight standing on the ramp, midway between the gate
and the aircraft, and talking with the senior maintenance supervisor and several other persons. The captain motioned for
me to join him which I did, indicating to the Zulueta family that they should wait for a moment at the gate.’
— Exh. 5

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

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

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

"(5) Mr. Sitton, defendant’s manager, then told plaintiff that he would not be allowed to proceed to Manila or board the
plane and handed Zulueta the following letters:jgc:chanrobles.com.ph

"‘24 October 1964

Wake Island

"‘Mr. Zulueta:chanrob1es virtual 1aw library

Passenger aboard flight 84123

Honolulu/Manila

Sir:chanrob1es virtual 1aw library

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

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

K. Sitton

Airport Manager, Wake Island

Pan American World Airways, Inc.’

— Exh. D.

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

"The departure of the plane was delayed for about two hours.

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

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

"(9) On October 27, 1964, plaintiff Zulueta finally arrived at Manila, after spending two nights at Wake, going back to
Honolulu, and from Honolulu flying thru Tokyo to Manila.
"(10) On December 21, 1964, plaintiffs demanded that defendant reimburse them in the sum of P1,505,502.85 for
damages; but defendants refused to do so; hence this action."cralaw virtua1aw library

In its brief, PANAM maintains that the trial court erred: (1) "in not granting defendant additional hearing dates (not a
postponement) for the presentation of its other witnesses" ; (2) "in assuming it to be true that the reason plaintiff Rafael
Zulueta did not come aboard when the passengers were reboarded was that he had gone to the beach to relieve himself"
; (3) "in not holding that the real reason why plaintiff Rafael Zulueta did not reboard the plane, when the announcement to
do so was made, was that he had a quarrel with his wife and after he was found at the beach and his intention to be left
behind at Wake was temporarily thwarted he did everything calculated to compel Pan American personnel to leave him
behind" ; (4) "in accepting as true plaintiff Rafael Zulueta’s claim of what occurred when he arrived at the terminal after he
was found at the beach" ; (5) "in not holding that the captain was entitled to an explanation for Zulueta’s failure to reboard
and not having received a reasonable explanation and because of Zulueta’s irrational behavior and refusal to have his
bags examined, the captain had the right and duty to leave Zulueta behind" ; (6) "in condemning the defendant to pay
plaintiffs P5,502.85 as actual damages plus the further sum of P1,000,000.00 as moral damages, and the further sum of
P400,000.00 as exemplary damages, and attorneys’ fees in the sum of P100,000.00" ; and (7) "in not granting
defendant’s counterclaim of attorney’s fees and expenses of litigation."cralaw virtua1aw library

PANAM’s first assignment of error refers to the denial of its motion, dated October 20, 1966, that it "be granted other
hearing dates about two months from today so as to be able to present defendant’s other witnesses or their
depositions."cralaw virtua1aw library

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

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

His Honor, the Trial Judge, did not commit a reversible error in denying said motion of October 20, 1966. PANAM knew,
as early as August 2, 1966, that its turn to present evidence would take place, as agreed upon, about two (2) months and
a half later, or on October 17, 18 and 19, 1966. PANAM has not offered any valid excuse for its failure to bring to court the
witnesses mentioned in said motion, despite the assurance given by its counsel, on August 2, 1966, that the defense
would "spare no effort to bring them here," or, if they could not be brought due to circumstances beyond PANAM’s control,
to "submit their deposition." The records do not show that any such effort to bring the aforementioned witnesses had been
exerted. The defense has not even tried to explain why the deposition of said witnesses was not taken. What is worse, the
proffered explanation — that the six (6) persons who testified for the defense 1 were believed, by defense counsel, to be
enough for the three (3) days of October set for the reception of his evidence 2 — indicates that no effort whatsoever had
been made either to bring the "other witnesses" 3 or to take and submit their depositions.

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

Then, again, PANAM did not comply with section 4 of Rule 22 of the Rules of Court, reading:jgc:chanrobles.com.ph

"SEC. 4. Requisites of motion to postpone trial for absence of evidence. — A motion to postpone a trial on the ground of
absence can be granted only upon affidavit showing the materiality of evidence expected to be obtained, and that due
diligence has been used to procure it. But if the adverse party admits the facts to be given in evidence, even if he objects
or reserves the right to object to their admissibility, the trial must not be postponed."cralaw virtua1aw library

Although this provision refers to motions "to postpone trial," it applies with equal force to motions like the one under
consideration, there being no plausible reason to distinguish between the same and a motion for postponement owing to
the "absence of evidence."cralaw virtua1aw library

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

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

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

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

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

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

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

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

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

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

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

"(1) The defendant had contracted to transport plaintiff from Honolulu to Manila. It was its legal obligation to do so, and i t
could be excused from complying with the obligation only, if the passenger had refused to continue with the trip or it had
become legally or physically impossible, without the carrier’s fault, to transport him.

"(2) In this case, it is plain that Zulueta was desirous of continuing with the trip. Although defendant’s witnesses claim that
Zulueta refused to board the plane, its own evidence belies this claim. The letter, Exh.’D’, shows that it was defendant
who off-loaded Zulueta; not Zulueta who resisted from continuing the trip. In his testimony before the Court, Capt.
Zentner, defendant’s pilot, said that if a passenger voluntarily left the plane, the term used would be ‘desistance,’ but the
term ‘off-load’ means that it is the decision of the Captain not to allow the passenger or luggage to continue the flight.
However, Capt. Zentner admitted on his testimony that ‘his drunkenness . . . was of no consequence in my report; (it) . . .
had nothing to do with his being belligerent and unfriendly in his attitude towards me and the rest of the members of the
crew.’ The written report of Capt. Zentner made in transit from Wake to Manila ‘intimated he might possibly continue;’ but
‘due to drinking, belligerent attitude, he was off-loaded along with his locked bags.’ (Exh. 10). In a later report, Zentner
admitted, ‘The decision to leave Mr. Zulueta and his locked luggage in Wake was mine and mine alone.’ (Exh. 9).
Defendant’s airport customer service supervisor, W.S. Pendleton, reported that:jgc:chanrobles.com.ph

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

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

— Exh. 5.

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

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

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

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

— Exh. 2B.

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

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

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

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

— t.s.n., August 1, 1966, pp. 15-21.

"Anyone in Zulueta’s position would have reached the same way if he had had a sense of dignity. Evidently, angered by
Zulueta’s reaction, irked by the delay he had caused them, defendant’s employees decided to teach him a lesson by
forcing him to open his bags when there was no justifiable reason to do so:jgc:chanrobles.com.ph
"(a) Defendant did not make any attempt to inquire from any passenger or even the crew who knew Mr. Zulueta what his
character and reputation are, before demanding that he open the bags; if it had done so, Miss Schmitz, the purser, and
Col. Villamor would have vouched for plaintiffs; for Miss Schmitz believed she had flown before with the Zuluetas and they
had been very nice people.

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

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

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

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

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

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

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

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

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

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

— Exh. 2-B.

"(k) Finally, to add further humiliation and heap indignity on plaintiffs, when Mrs. Zulueta arrived at Manila and appealed to
defendant’s Manila manager, Mr. Oppenheimer, to see to it that her husband got back as soon as possible and was made
as comfortable as possible, at defendant’s expense, Mr. Oppenheimer refused to acknowledge any obligation to transport
Mr. Zulueta back to Manila and forcing Mrs. Zulueta to send her husband $100.00 for pocket money and pay for his fare
from Wake to Manila, thru Honolulu and Tokyo."cralaw virtua1aw library

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

The last two (2) assignments of error are mere consequences of those already disposed of, and, hence, need no
extended discussion.
It is urged, however, that plaintiff is, at most, entitled to actual damages only, because he was the first to commit a breach
of contract, for having gone over 200 yards away from the terminal, where he could not expect to be paged. But, PANAM
has not pointed out what part of the contract has been violated thereby, apart from the fact that the award for damages
made in the decision appealed from was due, not to PANAM’s failure to so page the plaintiff, but to the former’s deliberate
act of leaving him at Wake Island, and the embarrassment and humiliation caused to him and his family in the presence of
many other persons. Then, also, considering the flat nature of the terrain in Wake Island, and the absence of buildings
and structures, other than the terminal and a modest "hotel," as well as plaintiff’s need of relieving himself, he had to find
a place beyond the view of the people and near enough the sea to wash himself up before going back to the plane.

It is next argued that plaintiff was, also, guilty of contributory negligence for failure to reboard the plane within the 30
minutes announced before the passengers debarked therefrom. This might have justified a reduction of the damages, had
plaintiff been unwittingly left by the plane, owing to the negligence of PANAM personnel, or even, perhaps, wittingly, if he
could not be found before the plane’s departure. It does not, and can not have such justification in the case at bar, plaintiff
having shown up before the plane had taken off, and he having been off-loaded intentionally and with malice
aforethought, for his "belligerent" attitude, according to Captain Zentner; for having dared — despite his being one of
"three monkeys," — the term used by Captain Zentner to refer to the Zulueta family — to answer him back — when he
(Captain Zentner) 5 said: "what in the hell do you think you are?" — in a way he had "not been spoken to" in his "whole
adult life," in the presence of the passengers and other PANAM employees; for having responded to a command of either
Zentner or Sitton to open his (plaintiff’s) bags, with a categorical refusal and a challenge for Zentner or Sitton to open the
bags without a search warrant therefor, thereby making manifest the lack of authority of the aforementioned
representative of PANAM to issue said command and exposing him to ridicule before said passengers and employees.
Besides, PANAM’s own witness and employee, Wayne Pendleton, testified that the plane could not take off at 4:30, as
scheduled, because "we were still waiting for two (2) local passengers."cralaw virtua1aw library

Article 2201 of our Civil Code reads:jgc:chanrobles.com.ph

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

"In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation."cralaw virtua1aw library

This responsibility applies to common carriers. Pursuant to Article 1759 of the same Code:jgc:chanrobles.com.ph

"ART. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of
the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.

"This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a
family in the selection and supervision of their employees."cralaw virtua1aw library

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

As regards the moral and exemplary damages claimed by the plaintiffs, our Civil Code provides:jgc:chanrobles.com.ph

"ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage."cralaw virtua1aw library

"ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of the defendant’s wrongful act or omission."cralaw virtua1aw
library

"ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in
addition to the moral, temperate liquidated or compensatory damages."cralaw virtua1aw library

"ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner."cralaw virtua1aw library

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

"The relation between carrier and passenger involves special and peculiar obligations and duties, differing in kind and
degree, from those of almost every other legal or contractual relation. On account of the peculiar situation of the parties
the law implies a promise and imposes upon the carrier the corresponding duty of protection and courteous treatment.
Therefore, the carrier is under the absolute duty of protecting his passengers from assault or insult by himself or his
servants." 7

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Barredo, Villamor and Makasiar, JJ., concur.

Castro and Teehankee, JJ., did not take part.

Zulueta v. Pan American World Airways, Inc.
G.R. No. L-28589, February 29, 1972
Concepcion, C.J.
FACTS:
Spouses Rafael Zulueta and Telly Albert Zulueta, with their daughter, boarded a Pan American plane from Honolulu to
Manila, the first leg of which was Wake Island. While on the stopover, Mr. Zulueta found the need to relieve himself and
after finding the terminal’s comfort rooms full, he walked down the beach to do his business. Meanwhile, the flight was
called and Mr. Zulueta’s absence was noticed. Heading towards the ram, plaintiff remarked, “You people almost made me
miss your flight. You have a defective announcing system and I was not paged.”Instead of allowing plaintiff to board the
plane, however, the airport manager stopped plaintiff and asked him to surrender his baggage for inspection. Refusing to
comply with the order, plaintiff was not allowed to board the plane. His wife and daughter were able to proceed but were
instructed to leave their baggage behind.

Plaintiff instituted the present petition for recovery of damages against respondents for breach of contract. The
defendants, however, maintain that plaintiff’s reason for going to the beach was not to relieve himself but because he had
a quarrel with his wife.

ISSUE:
Whether or not the plaintiff is entitled to damages for breach of contract.

HELD:
YES, the plaintiff is entitled to damages. Firstly, plaintiff’s testimony about what he did upon reaching the beach is
uncontradicted. Furthermore, there is absolutely no direct evidence about said alleged quarrel. If such was true, surely,
plaintiff would not have walked back from the beach to the terminal before the plane had resumed its flight to Manila,
thereby exposing his presence to the full view of those who were looking for him.

Anent the request of the common carrier to inspect the bags of plaintiff, it appears that Captain Zentner received
information that one of the passengers expressed a fear of a bomb on board the plane. As a result, he asked for the
plaintiff’s bags to verify the bomb. Nevertheless, this claim is unfounded. The Captain failed to explain why he seemingly
assumed that the alleged apprehension of his information was justified. Plaintiff himself intimated to them that he was well
known to the US State Department and that the Captain was not even aware of the informant’s name or any
circumstances which may substantiate the latter’s fear of a certain bomb.

Defendants further argue that plaintiff was also guilty of contributory negligence for failure to reboard the plane within the
30 minutes announced before the passengers debarked therefrom. This may have justified a reduction of the damages
had plaintiff been unwittingly left by the plane, owing to the negligence of PANAM personnel, or even, wittingly, if he could
not be found before the plane’s departure. It does not, and cannot have such justification in the case at bar, plaintiff
having shown up before the plane had taken off and he having been off-loaded intentionally and with malice.

With all the foregoing, it is clear that plaintiff is entitled to damages from the respondent company.
PAL vs. Miano
Philippine Airlines vs. Florante Miano
G.R. No. 106664 March 8, 1995.
Petition to review the decision of the RTC Makati
Puno, J.:
Facts: On August 31, 1988, private respondent took petitioner's flight bound for Germany. He had an immediate onward
connecting flight via Lufthansa flight to Vienna, Austria. At the NAIA, he checked-in one brown suitcase but did not declare
a higher valuation. He claimed that his suitcase contained money, documents, one Nikkon camera with zoom lens, etc.
Upon private respondent's arrival at Vienna, his checked-in baggage was missing. He reported the matter to the
authorities and after three (3) hours of waiting, he proceeded to Piestany, Czechoslovakia. Eleven (11) days after, his
suitcase was delivered to him in Piestany. Private respondent instituted an action for damages before the RTC Makati
which rendered a decision awarding private respondent moral and exemplary damages and atty’s fees.

Issue: WON the RTC erred in awarding moral and exemplary damages to private respondent.

Ruling: Assailed Decision MODIFIED deleting the award of moral and exemplary damages and attorney's fees.
In breach of contract of carriage by air, moral damages are awarded only if the defendant acted fraudulently or in bad
faith. The trial court erred in awarding moral damages to private respondent. The established facts evince that petitioner's
late delivery of the baggage for eleven (11) days was not motivated by ill will or bad faith. The SC neither sustained the
award of exemplary damages. The prerequisite for the award of exemplary damages in cases of contract or quasi -
contract is that the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. The undisputed
facts do not so warrant the characterization of the action of petitioner.
The award of attorney's fees must also be disallowed for lack of legal leg to stand on. Needless to say, award of attorney’s
fees must be deleted where the award of moral and exemplary damages are eliminated.
Sulpicio V. CA (1995)

G.R. No. 113578 July 14, 1995

Lessons Applicable: Exceptions to Contracting Parties (Transportation)

FACTS:

 October 23, 1988: Tito Duran Tabuquilde (Tito) and his 3-year old daughter Jennifer Anne (Anne) boarded the M/V
Dona Marilyn at North Harbor, Manila, bringing with them several pieces of luggage.
 Storm Signal No. 2 had been raised by the PAG-ASA authorities over Leyte as early as 5:30 P.M. of October 23,
1988 and which signal was raised to Signal No. 3 by 10 P.M
 ship captain ordered the vessel to proceed to Tacloban when prudence dictated that he should have taken it to the
nearest port for shelter, thus violating his duty to exercise extraordinary diligence in the carrying of passengers safely
to their destination
 October 24, 1988 morning: M/V Dona Marilyn, while in transit, encountered inclement weather which caused huge
waves due to Typhoon Unsang.
 Angelina Tabuquilde contacted the Sulpicio Office to verify radio reports that the vessel M/V Dona Marilyn was
missing
 Sulpicio Lines assured her that the ship was merely "hiding" thereby assuaging her anxiety
 October 24, 1988 2:00 P.M.: vessel capsized, throwing Tito and Anne, along with hundreds of passengers, into the
sea.
 Tito tried to keep himself and his daughter afloat but to no avail as the waves got stronger and he was subsequently
separated from his daughter despite his efforts.
 October 25, 1988 11:00 A.M.: He found himself on Almagro Island in Samar
 He immediately searched for his daughter among the survivors in the island, but failed
 Angelina tried to seek the assistance of the Sulpicio Lines in Manila to no avail
 Angelina spent sleepless nights worrying about her husband and daughter in view of the refusal of Sulpicio Lines to
release a verification of the sinking of the ship
 October 26, 1988: Tito and other survivors in the Almagro Island were fetched and were brought to Tacloban Medical
Center for treatment
 October 31, 1988: Tito reported the loss of his daughter and was informed that the corpse of a child with his
daughter's description had been found
 Tito wrote a letter to his wife, reporting the sad fact that Jennifer Anne was dead
 Angelina suffered from shock and severe grief upon receipt of the news
 November 3, 1988: coffin bearing the corpse of Anne was buried
 November 24, 1988: Tito filed a claim for damages against Sulpicio Lines for the death of Anne and the loss of his
belongings worth P27,580
 Trial Court: in favor of Tito
 actual damages, P30,000.00 for the death of Anne
 P100,000.00 as moral damages
 P50,000.00 as exemplary damages
 P50,000.00 as attorney's fees, and costs
ISSUE: W/N Tito has a right to recover damage for his lost belongings
HELD: NO. Court of Appeals is AFFIRMED with the MODIFICATION that the award of P27,580.00 as actual damages for
the loss of the contents of the pieces of baggage is deleted and that the award of P30,000.00 under Article 2206 in
relation Article 1764 is increased to P50,000.00.

 There is no showing that the value of the contents of the lost pieces of baggage was based on the bill of lading or was
previously declared by Tito before he boarded the ship
 Article 2206 of the Civil Code of the Philippines:
only deaths caused by a crime as quasi delict are entitled to actual and compensatory damages without the need of proof
of the said damages
The amount of damages for death caused by a crime or quasi delict shall be at least Three Thousand Pesos, even though
there may have been mitigating circumstances. . . .

 Deducing alone from said provision, one can conclude that damages arising from culpa contractual are not
compensable without proof of special damages sustained by the heirs of the victim.
 With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa
contractual except when the presence of bad faith was proven
 in breach of contract of carriage, moral damages may be recovered when it results in the death of a passenger
 With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the Court the
discretion to grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless
manner
 The crew assumed a greater risk when, instead of dropping anchor in or at the periphery of the Port of Calapan, or
returning to the port of Manila which is nearer, proceeded on its voyage on the assumption that it will be able to beat
and race with the typhoon and reach its destination before it (Unsang) passes
Trans World Airlines (TWA) vs. CA
Facts:
Vinluan, a practicing lawyer in Manila had to travel to several cities in Europe and US. While in Paris, he went to the office
of TWA to confirm his reservation for first class accommodation. It was confirmed twice. During the time of the flight, he
was told that there was no 1st class seat available. Hence, he was downgraded to economy. He protested but he was
arrogantly treated by a TWA employee. And while waiting for his flight, he saw white Caucasians who arrived much later
than him, in first class seats.
Issue: WON Vinluan is entitled to damages.
Held:
Yes.
1 The discrimination is obvious and the humiliation to which private respondent was subjected is undeniable.
Consequently, the award of moral and exemplary damages by the respondent court is in order.
2 Inattention and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as
to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. More so in this
case where instead of courteously informing private respondent of his being downgraded under the circumstances, he
was angrily rebuffed by an employee of petitioner.

Phil Rabbit Bus Lines vs. Esguerra

Facts:
Esguerra boarded abus owned by Phil Rabbit Bus Lines from Manila to Pampanga. While in Bulacan, the bus and a truck
sideswiped each other. The left forearm of Esguerra was hit. The left arm was amputated. The trial court awarded
Esguerra moral damages, among others.
Issue: WON the award of moral damages is proper.
Held:
No.
Moral damages are not recoverable in actions for damages predicated on a breach of the contract of transportation, as in
the instant case. The exceptions are (1) where the mishap results in the death of a passenger, and (2) where it is proved
that the carrier was guilty of fraud or bad faith, even if death does not result.
The Court of Appeals found that the two vehicles sideswiped each other at the middle of the road. In other words. both
vehicles were in their respective lanes and that they did not invade the lane of the other. It cannot be said therefore that
there was fraud or bad faith on the part of the carrier’s driver. This being the case, no moral damages are recoverable.

People of the Phil vs. More

Facts:
The More brothers were found guilty of murder for the killing of Valentino who sustained 18 stab wounds. They were
ordered to pay by the trial court damages for funeral services and other expenses, loss of income for 5 years, and moral
damages.
Issue: WON the award of damages is proper.
Held:
The award of moral damages should be reduced. The award is not meant to enrich the heirs of the victim but only to
compensate them for injuries sustained to their feelings.
The award of actual damages must be reduced as well. Only the costs of the tomb, coffin, embalming and funeral
services were properly receipted. Thus, the alleged expenses for food and drinks consumed during the wake must be
disallowed for not having been competently proved. The Court can only give credit to expenses which have been duly
substantiated.
The award of lost earning capacity must be increased. The victim’s lost earnings are to be computed according to the
formula adopted by the Court in several decided cases, to wit: net earning capacity (“X”) equals life expectancy multiplied
by gross annual income less living expenses.
There must also be an award for civil indemnity for death without need of evidence or proof of damages.

United Airlines vs. CA

Facts:
Respondent Aniceto Fontanilla purchased from petitioner United Airlines, through the Philippine Travel Bureau in Manila
three (3) “Visit the U.S.A.” tickets for himself, his wife and his minor son. The Fontanillas proceeded to the US as planned;
they used the 1st coupon. Fontanilla then bought two (2) additional coupons each for himself, his wife and his son from
petitioner at its office in Washington Dulles Airport. After paying the penalty for rewriting their tickets, the Fontanillas were
issued tickets with corresponding boarding passes with the words “CHECK-IN REQUIRED,” for a United Airlines flight.
However, the Fontanillas were not able to board said flight because allegedly, they did not have assigned seat numbers.
Issue:
Whether or not the Fontanillas were able to prove with adequate evidence his allegations of breach of contract in bad
faith.
Held: No.
Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling passengers concerned to an award
of moral damages. 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 except that he would fly on that flight and on that date. If
he does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had deliberately
overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for
check in. For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is
entitled to moral damages.
However, the Court’s ruling in said case should be read in consonance with existing laws, particularly, Economic
Regulations No. 7, as amended, of the Civil Aeronautics Board which provides that overbooking not exceeding 10% of the
seating capacity of the aircraft shall not be considered as a deliberate and willful act of non-accommodation.
———————————————————————
What law is applicable, the Philippine Law or the US Law?
he Philippine Law. The appellate court, however, erred in applying the laws of the United States as, in the case at bar,
Philippine law is the applicable law. Although, the contract of carriage was to be performed in the United States, the
tickets were purchased through petitioner’s agent in Manila. It is true that the tickets were “rewritten” in Washington, D.C.
however, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila.

Sps Zalamea vs. CA & TWA

Facts:
Sps Zalamea and their daughter purchased 3 airline tickets from TWA from its Manila agent for a flight to New York to LA.
Two tickets were purchased at a discounted rate of 75% while one was purchased in its full value. All three tickets were
confirmed and reconfirmed. However, of the appointed date, they were placed on the wait-list because the number of
passengers who had checked in before them had already taken all of the seats. Those having full fare tickets were given
priority among those in the wait-list. Thus, Cesar Zalamea was able to board such flight because he was holding the full
fare ticket. Trial court awarded the Zalameas moral damages, among others, based on breach of contract of carriage. The
CA, however, reversed this, holding that moral damages are recoverable in a damage suit predicated upon a breach of
contract of carriage only where there is fraud or bad faith. Since it is a matter of record that overbooking of flights is a
common and accepted practice of airlines in the United States, no fraud nor bad faith could be imputed on respondent
TransWorld Airlines.

Issue: Whether or not said policies (that overbooking of flights is a common and accepted practice in the US, thus does
not amount to bad faith) were incorporated or deemed written on petitioners’ contracts of carriage.

Held:
No.
TWA failed to show that there are provisions to that effect. The failure of respondent TWA to so inform them when it could
easily have done so thereby enabling respondent to hold on to them as passengers up to the last minute amounts to bad
faith. Evidently, respondent TWA placed its self-interest over the rights of petitioners under their contracts of carriage.
Such conscious disregard of petitioners’ rights makes respondent TWA liable for moral damages