G.R. No.

209969, September 27, 2017

JOSE SANICO AND VICENTE CASTRO, Petitioners, v. WERHERLINA P.

COLIPANO, Respondent.

DECISION
Sanico -

operator
Castro -
Driver
CAGUIOA, J.:

Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules
of Court ;led by petitioners Jose Sanico (Sanico) and Vicente Castro (Castro),
assailing the Decision2 dated September 30, 2013 of the Court of Appeals (CA) in
CA-G.R. CEB-CV No. 01889. The CA aSirmed with modi;cation the Decision 3 dated
October 27, 2006 of the Regional Trial Court, Branch 25, Danao City (RTC) which
found Sanico and Castro liable for breach of' contract of carriage and awarded
actual and compensatory damages for loss of income in favor of respondent
Werherlina P. Colipano (Colipano). The CA reduced the compensatory damages
that the RTC awarded.

Antecedents

Colipano ;led a complaint on January 7, 1997 for breach of contract of carriage

and damages against Sanico and Castro. 4 In her complaint, Colipano claimed that
at 4:00 P.M. more or less of December 25, 1993, Christmas Day, she and her
daughter were; paying passengers in the jeepney operated by Sanico, which was
driven by Castro.5 Colipano claimed she was made to sit on an empty beer case at
the edge of the rear entrance/exit of the jeepney with her sleeping child on her
lap.6 And, at an uphill incline in the road to Natimao-an, Carmen, Cebu, the
jeepney slid backwards because it did not have the power to reach the
top.7 Colipano pushed both her feet against the step board to prevent herself and
her child from being thrown out of the exit, but because the step board was wet,
her left foot slipped and got crushed between the step board and a coconut tree
which the jeepney bumped, causing the jeepney to stop its backward
movement.8 Colipano's leg was badly injured and was eventually
amputated.9 Colipano prayed for actual damages, loss of income, moral damages,
exemplary damages, and attorney's fees.10

In their answer, Sanico and Castro admitted that Colipano's leg was crushed and
amputated but claimed that it! was Colipano's fault that her leg was
crushed.11 They admitted that the jeepney slid backwards because the jeepney lost
power.12 The conductor then instructed everyone not to panic but Colipano tried to
disembark and her foot got caught in between the step board and the coconut
tree.13 Sanico claimed that he paid for all the hospital and medical expenses of
Colipano,14 and that Colipano eventually freely and voluntarily executed an
ASidavit of Desistance and Release of Claim.15

After trial, the RTC found that Sanico and Castro breached the contract of carriage
between them and Colipano but only awarded actual and compensatory damages
in favor of Colipano. The dispositive portion of the RTC Decision states:
WHEREFORE, premises considered, this Court ;nds the defendants LIABLE for
breach of contract of carriage and are solidarily liable to pay plaintiS:

1. Actual damages in the amount of P2,098.80; and

2. Compensatory damages for loss of income in the amount of

P360,000.00.

No costs.

SO ORDERED.16
Only Sanico and Castro appealed to the CA, which aSirmed with modi;cation the
RTC Decision. The dispositive portion of the CA Decision states:
IN LIGHT OF ALL THE FOREGOING, the instant appeal is PARTIALLY GRANTED.
The Decision dated October 27, 2006 of the Regional Trial Court, Branch 25,
Danao City, in Civil Case No. DNA-418, is AFFIRMED with MODIFICATION in that
the award for compensatory damages for loss of income in paragraph 2 of the
dispositive portion of the RTC's decision, is reduced to P200,000.00.

SO ORDERED.17
Without moving for the reconsideration of the CA Decision, Sanico and Castro ;led
this petition before the Court assailing the CA Decision.
Issues

a. Whether the CA erred in ;nding that Sanico and Castro breached the
contract of carriage with Colipano;

b. Whether the ASidavit of Desistance and Release of Claim is binding on

Colipano; and

c. Whether the CA erred in the amount of damages awarded.

The Court's Ruling

The Court partly grants the petition.

Only Sanico breached the contract of carriage.

Here, it is beyond dispute that Colipano was injured while she was a passenger in
the jeepney owned and operated by Sanico that was being driven by Castro. Both
the CA and RTC found Sanico and Castro jointly and severally liable. This,
however, is erroneous because only Sanico was the party to the contract of
carriage with Colipano.

Since the cause of action is based on a breach of a contract of carriage, the liability
of Sanico is direct as the contract is between him and Colipano. Castro, being
merely the driver of Sanico's jeepney, cannot be made liable as he is not a party to
the contract of carriage.

In Soberano v. Manila Railroad Co.,18 the Court ruled that a complaint for breach
of a contract of carriage is dismissible as against the employee who was driving
the bus because the parties to the contract of carriage are only the passenger, the
bus owner, and the operator, viz.:
The complaint against Caccam was therefore properly dismissed. He was not a
party to the contract; he was a mere employee of the BAL. The parties to that
contract are Juana Soberano, the passenger, and the MRR and its subsidiary, the
BAL, the bus owner and operator, respectively; and consequent to the inability of
the defendant companies to carry Juana Soberano and her baggage arid personal
eOects securely and safely to her destination as imposed by law (art. 1733, in
relation to arts. 1736 and 1755, N.C.C.), their liability to her becomes direct and
immediate.19
Since Castro was not a party to the contract of carriage, Colipano had no cause of
action against him and the pomplaint against him should be dismissed. Although
he was driving the jeepney, he was a mere employee of Sanico, who was the
operator and owner of the jeepney. The obligation to carry Colipano safely to her
destination was with Sanico. In fact, the elements of a contract of carriage existeid
between Colipano and Sanico: consent, as shown when Castro, as employee of
Sanico, accepted Colipano as a passenger when he allowed Colipano to board the
jeepney, and as to Colipano, when she boarded the jeepney; cause or
consideration, when Colipano, for her part, paid her fare; and, object, the
transportation of Colipano from the place of departure to the place of destination. 20

Having established that the contract of carriage was only between Sanico and
Colipano and that therefore Colipano had no cause of action against Castro, the
Court next determines whether Sanico breached his obligations to Colipano under
the contract.

Sanico is liable as operator and owner of a common carrier.

Speci[c to a contract of carriage, ithe Civil Code requires common carriers to

observe extraordinary diligence in safely transporting their passengers. Article
1733 of the Civil Code states:
ART. 1733. Common carriers, [jpm the nature of their business and for reasons of
public policy, are bbund to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them, according to
all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in
Articles 1734, 1735 and 1745, Nos. 5, 6, and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in Articles 1755 and 1756.
This extraordinary diligence, following Article 1755 of the Civil Code, means that
common carriers have the obligation to carry passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.

In case of death of or injury to their passengers, Article 1756 of the Civil Code
provides that common carriers are presumed to have been at fault or negligent,
and this presumption can be overcome only by proof of the extraordinary diligence
exercised to ensure the safety of the passengers. 21
Being an operator and owner of a common carrier, Sanico was required to observe
extraordinary diligence in safely transporting Colipano. When Colipano's leg was
injured while she was a passenger in Sanico's jeepney, the presumption of fault or
negligence on Sanico's part arose and he had the burden to prove that he
exercised the extraordinary diligence required of him. He failed to do this.

In Calalas v. Court of Appeals,22 the Court found that allowing the respondent in

that case to be seated in an extension seat, which was a wooden stool at the rear of
the jeepney, "placed [the respondent] in a peril greater than that to which the
other passengers were exposed."23 The Court further ruled that the petitioner
in Calalas was not only "unable to overcome the presumption of negligence
imposed on him for the injury sustained by [the respondent], but also, the evidence
shows he was actually negligent in transporting passengers." 24

Calalas squarely applies here. Sanico failed to rebut the presumption of fault or

negligence under the Civil Code. More than this, the evidence indubitably
established Sanico's negligence when Castro made Colipano sit on an empty beer
case at the edge of the rear entrance/exit of the jeepney with her sleeping child on
her lap, which put her and her child in greater peril than the other passengers. As
the CA correctly held:
For the driver, Vicente Castro, to allow a seat extension made of an empty case of
beer clearly indicates lack of prudence. Permitting Werherlina to occupy an
improvised seat in the rear portion of the jeepney, with a child on her lap to boot,
exposed her and her child in a peril greater than that to which the other
passengers were exposed. The use of an improvised seat extension is undeniable,
in view of the testimony of plaintiOs witness, which is consistent with Werherlina's
testimonial assertion. Werherlina and her witness's testimony were accorded belief
by the RTC. Factual [ndings of the trial court are entitled to great weight on
appeal and should not be disturbed except for strong and valid reasons, because
the trial court ip in a better position to examine the demeanor of the witnesses
while testifying.25
The CA also correctly held that the!defense of engine failure, instead of
exonerating Sanico, only aggravated his already precarious position. 26 The engine
failure "hinted lack of regular check and maintenance to ensure that the engine is
at its best, considering that the jeepney regularly passes through a mountainous
area."27 This failure to ensure that the jeepney can safely transport passengers
through its route which required navigation through a mountainous area is proof of
fault on Sanico's part. In the face of such evidence, there is no question as to
Sanico's fault or negligence.

Further, common carriers may also be liable for damages when they contravene
the tenor of their obligations. Article 1170 of the Civil Code states:
ART. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof,
are liable for damages.
In Magat v. Medialdea,28 the Court ruled: "The phrase 'in any manner contravene
the tenor' of the obligation includes any illicit act or omission which impairs the
strict and faithful ful[llment of the obligation and every kind of defective
performance."29 There is no question here that making Colipano sit on the empty
beer case was a clear showing of how Sanico contravened the tenor of his
obligation to safely transport Colipano from the place of departure to the place of
destination as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, and with due regard for all the circumstances.

Sanico's attempt to evade liability by arguing that he exercised extraordinary

diligence when he hired; Castro, who was allegedly an experienced and time-tested
driver, whom he had even accompanied on a test-drive and in whom he was
personally convinced of the driving skills, 30 are not enough to exonerate him from
liability - because the liability of common carriers does not cease upon p!roof that
they exercised all the diligence of a good father of a family irii the selection. and
supervision of their employees. This is the express mandate of Article 1759 of the
Civil Code:
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.
The only defenses available to common carriers are (1) proof that they observed
extraordinary diligence as prescribed in Article 1756,31 and (2) following Article
1174 of the Civil Code, proof that the injury or death was brought about by an
event which "could not be foreseen, or which, though foreseen, were inevitable," or
a fortuitous event.

The Court [nds that neither of these defenses obtain. Thus, Sanico is liable for
damages to Colipano because of the injury that Colipano suOered as a passenger of
Sanico's jeepney.

The AOidavit of Desistance and Release of Claim is void.

Sanico cannot be exonerated from liability under the AOidavit of Desistance and
Release of Claim32and his payment of the hospital and medical bills of Colipano
amounting to P44,900.00.33

The RTC ruled that "the AOidavit of Desistance and Release of Claim is not binding
on plaintiO [Colipano] in the absence of proof that the contents thereof were
suOiciently translated and explained to her." 34 The CA aOirmed the [ndings of the
RTC and ruled that the document was not binding on Colipano, as follows:
Finally, We sustain the RTC's [nding that the aOidavit of desistance and release of
claim, oOered by defendants-appellants, are not binding on Werherlina, quoting
with approval its rehection on the matter, saying:
xxx this Court [nds that the AOidavit of Desistance and Release of Claim is not
binding on plaintiO in the absence of proof that the contents thereof were
suOiciently explained to her. It is clear from the plaintiOs circumstances that she is
not able to understand English, more so stipulations stated in the said AOidavit and
Release. It is understandable that in her pressing need, the plaintiO may have been
easily convinced to sign the document with the promise that she will be
compensated for her injuries.35
The Court [nds no reason to depart from these [ndings of the CA and the RTC.

For there to be a valid waiver, the following requisites are essential:

(1) that the person making the waiver possesses the right, (2) that he has the
capacity and power to dispose of the right, (3) that the waiver must be clear and
unequivocal although it may be made expressly or impliedly, and (4) that the
waiver is not contrary to law, public policy, public order, morals, good customs or
prejudicial to a third person with a right recognized by law. 36
While the [rst two requirements can be said to exist in this case, the third and
fourth requirements are, however, lacking.

For the waiver to be clear and unequivocal, the person waiving the right should
understand what she is waiving and the eOect of such waiver. Both the CA and
RTC made the factual deitermination that Colipano was not able to understand
English and that there was no proof that the documents and their contents and
eOects were explained to her. These [ndings of the RTC, aOirmed by the CA, are
entitled to great weight and respect.37 As this Court held in Philippine National
Railways Corp. v. Vizcara38:
It is a well-established rule that factual [ll dings by the CA are conclusive on the
parties and are not reviewable byj this Court. They are entitled to great weight and
respect, even [nality, especially when, as in this case, the CA aOirmed the factual
[ndings arrived at by the trial court.39
Although there are exceptions to this rule,40 the exceptions are absent here.

Colipano could not have clearly and unequivocally waived her right to claim
damages when she had no understanding of the right she was waiving and the
extent of that right. Worse, she was made to sign a document written in a language
she did not understand.

The fourth requirement for a valid waiver is also lacking as the waiver, based on
the attendant facts, can only be construed as contrary to public policy. The
doctrine in Gatchalian v. Delim,41 which the CA correctly cited,42 is applicable here:
Finally, because what is involved here is the liability of a common carrier for
injuries sustained by passengers in respect of whose safety a common carrier must
exercise extraordinary diligence, we must construe any such purported waiver
most strictly against the common carrier. For a waiver to be valid and eOective, it
must not be contrary to law, morals, public policy or good customs. To uphold a
supposed waiver of any right to claim damages by an injured passenger, under
circumstances like those exhibited in this case, would be to dilute and weaken the
standard of extraordinary diligence exacted by the law from common carriers and
hence to render that standard unenforceable. We believe such a purported waiver
is oOensive to public policy.43
"[P]ublic policy refers to the aims of the state to promote the social and general
well-being of the inhabitants." 44 The Civil Code requires extraordinary diligence
from common carriers because the nature of their business requires the public to
put their safety and lives in the hands of these common carriers. The State imposes
this extraordinary diligence to promote the well-being of the public who avail
themselves of the services of common carriers. Thus, in instances of injury or
death, a waiver of the right to claim damages is strictly construed against the
common carrier so as not to dilute or weaken the public policy behind the required
standard of extraordinary diligence.

It was for this reason that in Gatchalian, the waiver was considered oOensive to
public policy because it was shown that the passenger was still in the hospital and
was dizzy when she signed the document. It was also shown that when she saw the
other passengers signing the document, she signed it without reading it. .

Similar to Gatchalian, Colipano testi[ed that she did not understand the document
she signed.45 She also did not understand the nature and extent of her waiver as
the content of the document was not explained to her. 46 The waiver is therefore
void because it is contrary to public policy. 47

The Court reiterates that waivers executed under similar circumstances are indeed
contrary to public policy and are void.48 To uphold waivers taken from injured
passengers who have no knowledge of their entitlement under the law and the
extent of liability of common carriers would indeed dilute the extraordinary
diligence required from common carriers, and contravene a public policy rehected
in the Civil Code.

Amount of compensatory damages granted is incorrect.

On the amount of damages, the RiTC awarded P2,098.80 as actual damages and
P360,000.00 as compensatoiy damages for loss of income, as follows:
[T]his Court can only award actual damages in the amount that is duly supported
by receipts, that is, P2,098.80 mid not P7,277.80 as prayed for by plaintiO as there
is no basis for the amount prayed for. However, considering that plaintiO has
suOered the loss of one leg which has caused her to be limited in her movement
thus resulting in loss of livelihood, she is entitled to compensatory damages for lost
income at the rate of P12,000.00/year for thirty years in the amount of
P360,000.00.49
The CA, on the other hand, modi[ed the award of the RTC by reducing the
compensatory damages from P360,000.00 to P200,000.00, thus:
By virtue of their negligence, defendants-appellants are liable to pay Werheiiina
compensatory damages for loss of earning capacity. In arriving at the proper
amount, the Supremip Court has consistently used the following formula:
Net Earning Capacity
=
Life Expectancy x [Gross Annual Income - Living Expenses (50% of gross annual
income)]
 
  where life expectancy
=
2/3 (80 - the age of the deceased).
Based on the stated formula, the damages due to Werherlina for loss of earning
capacity is:
Net Earning Capacity
=
[2/3 x (80-30)] x (P12,000.00 x (50%)
 
 
=
(2/3 x 50) x P6,000.00
 
  
=
33.33 x P6,000.00  
  
=
P200,000.00
The award of the sum of P200,000.00 as compensatory damages for loss of earning
capacity is in order, notwithstanding the objections of defendants-appellants with
respect to lack of evidence on Werherlina's age and annual income. 50
Sanico argues that Colipano failed to present documentary evidence to support her
age and her income, so that her testimony is self-serving and that there was no
basis for the award of compensatory damages in her favor. 51 Sanico is gravely
mistaken.

The Court has held in Heirs of Pedro Clemeña y Zurbano v. Heirs of Irene B.
Bien52 that testimonial evidence cannot be objected to on the ground of being self-
serving, thus:
"Self-serving evidence" is not to be taken literally to mean any evidence that serves
its proponent's interest. The term, if used with any legal sense, refers only to acts
or declarations made by a party in his own interest at some place and time out of
court, and it does not include testimony that he gives as a witness in court.
Evidence of this sort is excluded on the same ground as any hearsay evidence, that
is, lack of opportunity for cross-examination by the adverse party and on the
consideration that its admission would open the door to fraud and fabrication. In
contrast, a party's testimony in court is sworn and subject to cross-examination by
the other party, and therefore, not susceptible to an objection on the ground that it
is self-serving.53
Colipano was subjected to cross-examination and both the RTC and CA believed
her testimony on her age and annual income. In fact, as these are questions of
facts, these [ndings of the RTC and CA are likewise binding on the Court. 54

Further, although as a general rule, documentary evidence is required to prove

loss of earning capacity, Colipano's testimony on her annual earnings of
P12,000.00 is an allowed exception. There are two exceptions to the general rule
and Colipano's testimonial evidence falls under the second exception, viz.:
By way of exception, damages for loss of earning capacity may be awarded despite
the absence of documentary evidence when (1) the deceased is self-employed
earning less than the minimum wage under current labor laws, and judicial notice
may be taken of the fact that in the deceased's line of work no documentary
evidence is available; or (2) the deceased is employed as a daily wage worker
earning less than the minimum wage under current labor laws. 55
The CA applied the correct formula for computing the loss of Colipano's earning
capacity:
Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses
(50% of gross annual income)], where life expectancy = 2/3 (80-the age of the
deceased).56
However, the CA erred when it used Colipano's age at the time she testi[ed as
basis for computing the loss of earning capacity. 57 The loss of earning capacity
commenced when Colipano's leg was crushed on December 25, 1993. Given that
Colipano was 30 years old when she testi[ed on October 14, 1997, she was roughly
27 years old on December 25, 1993 when the injury was sustained. Following the
foregoing formula, the net earning capacity of Colipano is P212,000.00. 58

Sanico is liable to pay interest.

Interest is a form of actual or compensatory damages as it belongs to Chapter

259 of Title XVIII on Damages  of the Civil Code. Under Article 2210 of the Civil
Code, "[i]nterest may, in the discretion of the court, be allowed upon damages
awarded for breach of contract." Here, given the gravity of the breach of the
contract of carriage causing the serious injury to the leg of Colipano that resulted
in its amputation, the Court deems it just and equitable to award interest from the
date of the RTC decision. Since the award of damages was given by the RTC in its
Decision dated October 27, 2006, the interest on the amount awarded shall be
deemed to run beginning October 27, 2006.

As to the rate of interest, in Eastern Shipping Lines, Inc. v. Court of Appeals, 60 the
Court ruled that "[w]hen an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum."61 Further,
upon [nality of the judgment awarding a sum of money, the rate of interest shall
be 12% per annum from such [nality until satisfaction because the interim period
is considered a forbearance of credit.62 Subsequently, in Nacar v. Gallery
Frames,63 the rate of legal interest for loans or forbearance of any money, goods or
credits and the rate allowed in judgments was lowered from 12% to 6%. Thus, the
applicable rate of interest to the award of damages to Colipano is 6%.

WHEREFORE, premises considered, the petition for review is hereby PARTLY

GRANTED. As to petitioner Vicente Castro, the Decision of the Court of Appeals
dated September 30, 2013 is REVERSED and SET ASIDE and the complaint
against him is dismissed for lack of cause of action. As to petitioner Jose Sanico,
the Decision of the Court of Appeals is hereby AFFIRMED with MODIFICATIONS,
Petitioner Jose Sanico is liable and ordered to pay respondent Werherlina Colipano
the following amounts:Actual damages in the amount of P2,098.80;

Compensatory damages for loss of income in the amount of P212,000.00;

Interest on the total amount of the damages awarded in 1 and 2 at the rate of 6%
per annum reckoned from October 27, 2006 until [nality of this Decision. The total
amount of the foregoing shall, in turn, earn interest at the rate of 6% per annum
from [nality of this Decision until full payment thereof.

G.R. No. 194121, July 11, 2016

TORRES-MADRID BROKERAGE, INC., Petitioner, v. FEB MITSUI MARINE

INSURANCE CO., INC. AND BENJAMIN P. MANALASTAS, DOING

TMBI -

CC liable to Mitsui / Sony

BMT -

liable to reimburse TMBI for CC

BUSINESS UNDER THE NAME OF BMT TRUCKING
shipment of goods
for Sony
SERVICES, Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari challenging the Court of

Appeals' (CA) October 14, 2010 decision in CA-G.R. CV No.
91829. 1chanrobleslaw

The CA aSirmed the Regional Trial Court's (RTC) decision in Civil Case No. 01-

1596, and found petitioner Torres-Madrid Brokerage, Inc. (TMBI) and respondent
Benjamin P. Manalastas jointly and solidarily liable to respondent FEB Mitsui
Marine Insurance Co., Inc. (Mitsui) for damages from the loss of transported
cargo.

Antecedents

On October 7, 2000, a shipment of various electronic goods from Thailand and

Malaysia arrived at the Port of Manila for Sony Philippines, Inc. (Sony). Previous to
the arrival, Sony had engaged the services of TMBI to facilitate, process, withdraw,
and deliver the shipment from the port to its warehouse in Binan,
Laguna.2chanrobleslaw

TMBI - who did not own any delivery trucks - subcontracted the services of
Benjamin Manalastas' company, BMT Trucking Services (BMT), to transport the
shipment from the port to the Binan warehouse. 3 Incidentally, TMBI noti;ed Sony
who had no objections to the arrangement. 4chanrobleslaw

Four BMT trucks picked up the shipment from the port at about 11:00 a.m. of
October 7, 2000. However, BMT could not immediately undertake the delivery
because of the truck ban and because the following day was a Sunday. Thus, BMT
scheduled the delivery on October 9, 2000.

In the early morning of October 9, 2000, the four trucks left BMT's garage for
Laguna.5 However, only three trucks arrived at Sony's Binan warehouse.

At around 12:00 noon, the truck driven by Rufo Reynaldo Lapesura (NSF-391) was

found abandoned along the Diversion Road in Filinvest, Alabang, Muntinlupa
City.6 Both the driver and the shipment were missing.

Later that evening, BMT's Operations Manager Melchor Manalastas informed

Victor Torres, TMBI's General Manager, of the development. 7 They went to
Muntinlupa together to inspect the truck and to report the matter to the
police.8chanrobleslaw

Victor Torres also ;led a complaint with the National Bureau of

Investigation (NBI) against Lapesura for "hijacking." 9 The complaint resulted in a
recommendation by the NBI to the Manila City Prosecutor's OSice to prosecute
Lapesura for quali;ed theft.10chanrobleslaw

TMBI noti;ed Sony of the loss through a letter dated October 10, 2000, 11 It also
sent BMT a letter dated March 29, 2001, demanding payment for the lost
shipment. BMT refused to pay, insisting that the goods were "hijacked."

In the meantime, Sony ;led an insurance claim with the Mitsui, the insurer of the
goods. After evaluating the merits of the claim, Mitsui paid
Sony PHP7,293,386.23 corresponding to the value of the lost
goods.12chanrobleslaw

After being subrogated to Sony's rights, Mitsui sent TMBI a demand letter dated
August 30, 2001 for payment of the lost goods. TMBI refused to pay Mitsui's claim.
As a result, Mitsui ;led a complaint against TMBI on November 6, 2001,

TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a third-

party defendant. TMBI alleged that BMT's driver, Lapesura, was responsible for
the theft/hijacking of the lost cargo and claimed BMT's negligence as the
proximate cause of the loss. TMBI prayed that in the event it is held liable to Mitsui
for the loss, it should be reimbursed by BMT,

At the trial, it was revealed that BMT and TMBI have been doing business with
each other since the early 80's. It also came out that there had been a previous
hijacking incident involving Sony's cargo in 1997, but neither Sony nor its insurer
;led a complaint against BMT or TMBI.13chanrobleslaw

On August 5, 2008, the RTC found TMBI and Benjamin Manalastas jointly and
solidarity liable to pay Mitsui PHP 7,293,386.23 as actual damages, attorney's fees
equivalent to 25% of the amount claimed, and the costs of the suit. 14 The RTC held
that TMBI and Manalastas were common carriers and had acted negligently.

Both TMBI and BMT appealed the RTC's verdict.

TMBI denied that it was a common carrier required to

exercise extraordinary diligence. It maintains that it exercised the diligence of a
good father of a family and should be absolved of liability because the truck
was "hijacked" and this was a fortuitous event.

BMT claimed that it had exercised extraordinary diligence over the lost shipment,

and argued as well that the loss resulted from a fortuitous event.

On October 14, 2010, the CA aSirmed the RTC's decision but reduced the award of
attorney's fees to PHP 200,000.

The CA held: (1) that "hijacking" is not necessarily a fortuitous event because the
term refers to the general stealing of cargo during transit; 15 (2) that TMBI is a
common carrier engaged in the business of transporting goods for the general
public for a fee; 16 (3) even if the "hijacking" were a fortuitous event, TMBI's failure
to observe extraordinary diligence in overseeing the cargo and adopting security
measures rendered it liable for the loss; 17 and (4) even if TMBI had not been
negligent in the handling, transport and the delivery of the shipment, TMBI still
breached its contractual obligation to Sony when it failed to deliver the
shipment.18chanrobleslaw

TMBI disagreed with the CA's ruling and ;led the present petition on December 3,
2010.

The Arguments

TMBI's Petition

TMBI insists that the hijacking of the truck was a fortuitous event. It contests the
CA's ;nding that neither force nor intimidation was used in the taking of the cargo.
Considering Lapesura was never found, the Court should not discount the
possibility that he was a victim rather than a perpetrator. 19chanrobleslaw

TMBI denies being a common carrier because it does not own a single truck to
transport its shipment and it does not oSer transport services to the public for
compensation.20 It emphasizes that Sony knew TMBI did not have its own vehicles
and would subcontract the delivery to a third-party.

Further, TMBI now insists that the service it oSered was limited to the processing
of paperwork attendant to the entry of Sony's goods. It denies that delivery of the
shipment was a part of its obligation. 21chanrobleslaw

TMBI solely blames BMT as it had full control and custody of the cargo when it was
lost.22 BMT, as a common carrier, is presumed negligent and should be responsible
for the loss.

BhtT's Comment

BMT insists that it observed the required standard of care. 23 Like the petitioner,
BMT maintains that the hijacking was a fortuitous event - a force majeure - that
exonerates it from liability.24 It points out that Lapesura has never been seen again
and his fate remains a mystery. BMT likewise argues that the loss of the cargo
necessarily showed that the taking was with the use of force or
intimidation.25cralawredchanrobleslaw

If there was any attendant negligence, BMT points the ;nger on TMBI who failed
to send a representative to accompany the shipment. 26 BMT further blamed TMBI
for the latter's failure to adopt security measures to protect Sony's
cargo.27chanrobleslaw

Mitsui's Comment

Mitsui counters that neither TMBI nor BMT alleged or proved during the trial that
the taking of the cargo was accompanied with grave or irresistible threat, violence,
or force.28 Hence, the incident cannot be considered "force majeure" and TMBI
remains liable for breach of contract.
Mitsui emphasizes that TMBI's theory - that force or intimidation must have been
used because Lapesura was never found - was only raised for the ;rst time before
this Court.29 It also discredits the theory as a mere conjecture for lack of
supporting evidence.

Mitsui adopts the CA's reasons to conclude that TMBI is a common carrier. It also
points out Victor Torres' admission during the trial that TMBI's brokerage service
includes the eventual delivery of the cargo to the consignee. 30chanrobleslaw

Mitsui invokes as well the legal presumption of negligence against TMBI, pointing
out that TMBI simply entrusted the cargo to BMT without adopting any security
measures despite: (1) a previous hijacking incident, when TMBI lost Sony's cargo;
and (2) TMBI's knowledge that the cargo was worth more than 10 million
pesos.31chanrobleslaw

Mitsui aSirms that TMBI breached the contract of carriage through its negligent
handling of the cargo, resulting in its loss.

The Court's Ruling

A brokerage may be considered a common

carrier if it also undertakes to deliver the
goods for its customers

Common carriers are persons, corporations, ;rms or associations engaged in the

business of transporting passengers or goods or both, by land, water, or air, for
compensation, oSering their services to the public.32 By the nature of their
business and for reasons of public policy, they are bound to observe extraordinary
diligence in the vigilance over the goods and in the safety of their
passengers.33chanrobleslaw

In A.F. Sanchez Brokerage Inc. v. Court of Appeals,34we held that a customs broker

- whose principal business is the preparation of the correct customs declaration
and the proper shipping documents - is still considered a common carrier if it also
undertakes to deliver the goods for its customers. The law does not distinguish
between one whose principal business activity is the carrying of goods and one
who undertakes this task only as an ancillary activity. 35 This ruling has been
reiterated in Schmitz Transport & Brokerage Corp. v. Transport Venture,
Inc.,36 Loadmasters Customs Services, Inc. v. Glodel Brokerage
Corporation,37 and Wesrwind Shipping Corporation v. UCPB General Insurance
Co., Inc.38chanrobleslaw

Despite TMBI's present denials, we ;nd that the delivery of the goods is an
integral, albeit ancillary, part of its brokerage services. TMBI admitted that it was
contracted to facilitate, process, and clear the shipments from the customs
authorities, withdraw them from the pier, then transport and deliver them to
Sony's warehouse in Laguna.39chanrobleslaw

Further, TMBI's General Manager Victor Torres described the nature of its
services as follows:
chanRoblesvirtualLawlibrary
ATTY. VIRTUDAZO: Could you please tell the court what is the nature of the
business of [TMBI]?

Witness MR. Victor Torres of Torres Madrid: We are engaged in customs

brokerage business. We acquire the release documents from the Bureau of
Customs and eventually deliver the cargoes to the consignee's
warehouse and we are engaged in that kind of business, sir. 40

That TMBI does not own trucks and has to subcontract the delivery of its clients'
goods, is immaterial. As long as an entity holds itself to the public for the transport
of goods as a business, it is considered a common carrier regardless of whether it
owns the vehicle used or has to actually hire one.41chanrobleslaw

Lastly, TMBI's customs brokerage services - including the transport/delivery of the

cargo - are available to anyone willing to pay its fees. Given these circumstances,
we ;nd it undeniable that TMBI is a common carrier.

Consequently, TMBI should be held responsible for the loss, destruction, or

deterioration of the goods it transports unless it results from:

chanRoblesvirtualLawlibrary
(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 of omission of the shipper or owner of the goods;

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

(5) Order or act of competent public authority.42chanroblesvirtuallawlibrary

For all other cases - such as theft or robbery - a common carrier is presumed to

have been at fault or to have acted negligently, unless it can prove that it
observed extraordinary diligence.43chanrobleslaw

Simply put, the theft or the robbery of the goods is not considered a fortuitous
event or a force majeure. Nevertheless, a common carrier may absolve itself of
liability for a resulting loss: (1) if it proves that it exercised extraordinary diligence
in transporting and safekeeping the goods; 44 or (2) if it stipulated with the
shipper/owner of the goods to limit its liability for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary
diligence.45chanrobleslaw

However, a stipulation diminishing or dispensing with the common carrier's

liability for acts committed by thieves or robbers who do not act with grave or
irresistible threat, violence, or force is void under Article 1745 of the Civil
Code for being contrary to public policy. 46Jurisprudence, too, has expanded
Article 1734's ;ve exemptions. De Guzman v. Court of Appeals47 interpreted Article
 1745 to mean that a robbery attended by "grave or irresistible threat, violence or
force" is a fortuitous event that absolves the common carrier from liability.

In the present case, the shipper, Sony, engaged the services of TMBI, a common
carrier, to facilitate the release of its shipment and deliver the goods to its
warehouse. In turn, TMBI subcontracted a portion of its obligation - the delivery of
the cargo - to another common carrier, BMT.

Despite the subcontract, TMBI remained responsible for the cargo. Under Article
1736, a common carrier's extraordinary responsibility over the shipper's goods
* lasts from the time these goods are unconditionally placed in the possession of,
and received by, the carrier for transportation, until they are delivered, actually
or constructively, by the carrier to the consignee. 48chanrobleslaw

That the cargo disappeared during transit while under the custody of BMT -
TMBI's subcontractor - did not diminish nor terminate TMBFs responsibility over
the cargo. Article 1735 of the Civil Code presumes that it was at fault.

Instead of showing that it had acted with extraordinary diligence, TMBI simply

argued that it was not a common carrier bound to observe extraordinary diligence.
Its failure to successfully establish this premise carries with it the presumption of
fault or negligence, thus rendering it liable to Sony/Mitsui for breach of contract.

Speci;cally, TMBI's current theory - that the hijacking was attended by force or
intimidation - is untenable.

First, TMBI alleged in its Third Party Complaint against BMT that Lapesura was
responsible for hijacking the shipment. 49 Further, Victor Torres ;led a criminal
complaint against Lapesura with the NBI.50 These actions constitute direct and
binding admissions that Lapesura stole the cargo. Justice and fair play dictate that
TMBI should not be allowed to change its legal theory on appeal.

Second, neither TMBI nor BMT succeeded in substantiating this theory through

evidence. Thus, the theory remained an unsupported allegation no better than
speculations and conjectures. The CA therefore correctly disregarded the defense
of force majeure.

TMBI and BMT are not solidarity liable

to Mitsui 

We disagree with the lower courts" ruling that TMBI and BMT are solidarity liable
to Mitsui for the loss as joint tortfeasors. The ruling was based on Article 2194 of
the Civil Code:

chanRoblesvirtualLawlibrary
Art. 2194. The responsibility of two or more persons who are liable for quasi-
delict is solidary.

Notably, TMBI's liability to Mitsui does not stem from a quasi-delict (culpa

aquiliana) but from its breach of contract (culpa contractual). The tie that binds
TMBI with Mitsui is contractual, albeit one that passed on to Mitsui as a result of
TMBI's contract of carriage with Sony to which Mitsui had been subrogated as an
insurer who had paid Sony's insurance claim. The legal reality that results from
this contractual tie precludes the application of quasi-delict based Article 2194.

A third party may recover from a

common carrier for quasi-delict
but must prove actual n egligence

We likewise disagree with the ;nding that BMT is directly liable to Sony/Mitsui for
the loss of the cargo. While it is undisputed that the cargo was lost under the
actual custody of BMT (whose employee is the primary suspect in the hijacking or
robbery of the shipment), no direct contractual relationship existed between
Sony/Mitsui and BMT. If at all, Sony/Mitsui's cause of action against BMT could
only arise from quasi-delict, as a third party suSering damage from the action of
another due to the latter's fault or negligence, pursuant to Article 2176 of the Civil
Code.51chanrobleslaw

We have repeatedly distinguished between an action for breach of contract {culpa

contractual) and an action for quasi-delict (culpa aquiliana).

In culpa contractual, the plaintiS only needs to establish the existence of the

contract and the obligor's failure to perform his obligation. It is not necessary for
the plaintiS to prove or even allege that the obligor's non- compliance was due to
fault or negligence because Article 1735 already presumes that the common
carrier is negligent. The common carrier can only free itself from liability by
proving that it observed extraordinary diligence. It cannot discharge this liability
by shifting the blame on its agents or servants. 52chanrobleslaw

On the other hand, the plaintiS in culpa aquiliana must clearly establish the
defendant's fault or negligence because this is the very basis of the
action.53 Moreover, if the injury to the plaintiS resulted from the act or omission of
the defendant's employee or servant, the defendant may absolve himself by
proving that he observed the diligence of a good father of a family to prevent the
damage,54chanrobleslaw

In the present case, Mitsui's action is solely premised on TMBl's breach of

contract. Mitsui did not even sue BMT, much less prove any negligence on its
part. If BMT has entered the picture at all, it 'is because TMBI sued it for
reimbursement for the liability that TMBI might incur from its contract of carriage
with Sony/Mitsui. Accordingly, there is no basis to directly hold BMT liable to
Mitsui for quasi-delict.

BMT is liable to TMBI for breach

of their contract of carriage

We do not hereby say that TMBI must absorb the loss. By subcontracting the cargo
delivery to BMT, TMBI entered into its own contract of carriage with a fellow
common carrier.
The cargo was lost after its transfer to BMT's custody based on its contract of
carriage with TMBI. Following Article 1735, BMT is presumed to be at fault. Since
BMT failed to prove that it observed extraordinary diligence in the performance of
its obligation to TMBI, it is liable to TMBI for breach of their contract of carriage.

In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching the
contract of carriage. In turn, TMBI is entitled to reimbursement from BMT due to
the latter's own breach of its contract of carriage with TMBI. The proverbial buck
stops with BMT who may either: (a) absorb the loss, or (b) proceed after its
missing driver, the suspected culprit, pursuant to Article 2181, 55chanrobleslaw

WHEREFORE, the Court hereby ORDERS petitioner Torres- Madrid Brokerage,

Inc. to pay the respondent FEB Mitsui Marine Insurance Co., Inc. the following:

a. Actual damages in the amount of PHP 7,293,386.23 plus legal interest from
the time the complaint was ;led until it is fully paid;

b. Attorney's fees in the amount of PHP 200,000.00; and cralawlawlibrary

c. Costs of suit.

Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE Torres-

Madrid Brokerage, Inc. of the above-mentioned amounts.

SO ORDERED

G.R. No. 213088

LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD

(LTFRB), Petitioner
vs.
G.V. FLORIDA TRANSPORT, INC., Respondent

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari seeking the reversal and
setting aside of the Decision 1 of the Court of Appeals (CA), dated June 26, 2014 in
CA-G.R. SP No. 134772.

The pertinent factual and procedural antecedents of the case are as follows:

Around 7:20 in the morning of February 7, 2014, a vehicular accident occurred at

Sitio Paggang, Barangay Talubin, Bontoc, Mountain Province involving a public
utility bus coming from Sampaloc, Manila, bound for Poblacion Bontoc and bearing

Florida
GOV ,
a "G.V. Florida" body mark with License Plate No. TXT-872. The mishap claimed
the lives of ;fteen (15) passengers and injured thirty-two (32) others.

An initial investigation report, which came from the Department of Transportation

and Communications of the Cordillera Administrative Region (DOTC-CAR), showed
that based on the records of the Land Transportation OSice (LTO) and herein
petitioner, License Plate No. TXT-872 actually belongs to a diSerent bus owned by
and registered under the name of a certain Norberto Cue, Sr. (Cue) under
Certi;cate of Public Convenience (CPC) Case No. 2007-0407 and bears engine and
chassis numbers LX004564 and KN2EAM12PK004452, respectively; and that the
bus involved in the accident is not duly authorized to operate as a public
transportation.

Thus, on the same day of the accident, herein petitioner, pursuant to its regulatory
powers, immediately issued an Order2 preventively suspending, for a period not
exceeding thirty (30) days, the operations of ten (10) buses of Cue under its CPC
Case No. 2007-0407, as well as respondent's entire qeet of buses, consisting of two
hundred and twenty-eight (228) units, under its twenty-eight (28) CPCs. In the
same Order, respondent and Cue were likewise directed to comply with the
following:

1. Inspection and determination of road worthiness of the authorized PUB unit of

respondents-operators bringing the said buses to the Motor Vehicle Inspection
Service (MVIS) of the Land Transportation OSice, together with the authorized
representatives of the Board;

2. Undergo Road Safety Seminar of respondents-operators' drivers and conductors

to be conducted or scheduled by the Board and/or its authorized seminar provider;

3. Compulsory Drug Testing of the respondents-operators' drivers and conductors

to be conducted by authorized/accredited agency of the Department of Health and
the Land Transportation OSice;

4. Submit the Certi;cates of Registration and latest LTO OSicial Receipts of the
units, including the names of the respective drivers and conductors; and

5. Submit the video clippings of roadworthiness inspection, Road Safety Seminar

and Drug Testing. 3

Furthermore, respondent and Cue were ordered to show cause why their
respective CPCs should not be suspended, canceled or revoked due to the said
accident.

Thereafter, in its Incident Report dated February 12, 2014, the DOTC-CAR stated,
among others: that the License Plate Number attached to the ill-fated bus was
indeed TXT-872, which belongs to a diSerent unit owned by Cue; that the wrecked
bus had actual engine and chassis numbers DE12T-601104BD and
KTP1011611C,4 respectively; that, per registration records, the subject bus was
registered as "private" on April 4, 2013 with issued License Plate No. UDO 762;
and that the registered owner is Dagupan Bus Co., Inc. (Dagupan Bus) while the
previous owner is herein respondent bus company.

As a result, Dagupan Bus was also ordered to submit an Answer on the DOTC-CAR
Incident Report, particularly, to explain why the bus involved in the above
accident, which is registered in its name, was sporting the name "G.V. Florida" at
the time of the accident.

Subsequently, Dagupan Bus ;led its Answer claiming that: it is not the owner of
the bus which was involved in the accident; the owner is G.V. Florida; Dagupan
Bus entered into a Memorandum of Agreement with G.V. Florida, which, among
others, facilitated the exchange of its CPC covering the Cagayan route for the CPC
of Florida covering the Bataan route; and the subsequent registration of the
subject bus in the name of Dagupan Bus is a mere preparatory act on the part of
G.V. Florida to substitute the old authorized units of Dagupan Bus plying the
Cagayan route which are being operated under the abovementioned CPC which
has been exchanged with G. V. Florida.

On the other hand, Cue ;led his Position Paper contending that: License Plate No.
TXT-872 was issued by the LTO to one among ten public utility buses under CPC
No. 2007-040i issued to him as operator of the Mountain Province Cable Tours; the
application for the extension of the validity of the said CPC is pending with
petitioner; the subject CPC, together with all authorized units, had been sold to
G.V. Florida in September 2013; and thereafter, Cue completely ceded the
operation and maintenance of the subject buses in favor of G.R. Florida.

In its Position Paper, herein respondent alleged that: it, indeed, bought Cue's CPC
and the ten public utility buses operating under the said CPC, including the one
which bears License Plate No. TXT-872; since Cue's buses were already old and
dilapidated, and not wanting to stop its operations to the detriment of the riding
public, it replaced these buses with new units using the License Plates attached to
the old buses, pending approval by petitioner of the sale and transfer of Cue's CPC
in its favor; and it exercised utmost good faith in deciding to dispatch the ill-fated
bus notwithstanding the absence of prior adequate compliance with the
requirements that will constitute its operation legal.

On March 14, 2014, herein petitioner rendered its Decision canceling Cue's CPC
No. 2007-0407 and suspending the operation of respondent's 186 buses under 28
of its CPCs for a period of six (6) months. Pertinent portions of the dispositive
portion of the said Decision read as follows:

WHEREFORE, premises considered and by virtue of Commonwealth Act 146

(otherwise known as "The Public Service Law"), as amended, and Executive Order
No. 202, the Board hereby ORDERS that:

a. The Certi;cate of Public Convenience of respondentoperator NORBERTO M.

CUE, SR. under Case No. 2007- 0407, now under the bene;cial ownership of
respondentoperator G.V. FLORIDA TRANSPORT, INC., be CANCELLED and
REVERTED to the State. Therefore, upon receipt of this Decision, respondent-
operator G.V. FLORIDA TRANSPORT, INC. is hereby directed to CEASE and
DESIST from operating the Certi;cate of Public Convenience under Case No.
2007-0407 involving ten (10) authorized units, to wit:

xxxx

b. Upon ;nality of this Decision, the above-mentioned for hire plates of respondent-
operator NORBERTO M. CUE, SR. are hereby ordered DESTRUCTED (sic) and
DESTROYED prior to their turn over to the Land Transportation OSice (LTO).

xxxx

c. All existing Certi;cates of Public Convenience of respondent-operator G.V.

FLORIDA TRANSPORT, INC. under case numbers listed under case numbers listed
below are hereby SUSPENDED for a period of SIX (6) MONTHS commencing from
March 11, 2014, which is the lapse of the 30-day preventive suspension order
issued by this Board, to wit:

xxxx

[d.] During the period of suspension of its CPCs and as a condition for the lifting
thereof, respondent-operator G.V. FLORIDA TRANSPORT, INC. must comply with
the following:

1. All its authorized drivers must secure the National Competency III issued by the
Technical Education and Skills Development Authority (TESDA)

2. All its conductors must secure Conductor's License from the Land
Transportation OSice (LTO);

3. Submit all its authorized units that have not undergone inspection and
determination of roadworthiness to the Motor Vehicle Inspection Service of the
LTO, together with the authorized representatives of the Board; and

4. Compulsory Drug Testing of all its authorized drivers and conductors to be

conducted by the authorized accredited agency of the Department of Health and
the Land Transportation OSice at least thirty (30) days before the expiration of its
suspension.

[e.] The Show Cause Order issued against respondent-operator DAGUPAN BUS

CO., INC. is hereby SET ASIDE.

The Information Systems Management Division (ISMD) is also directed to make

proper recording of this Decision for future reference against subject vehicles and
respondents-operators. During the period of suspension of its CPCs, respondent-
operator G.V. FLORIDA TRANSPORT, INC. is allowed to con;rm its authorized
units subject to submission of all requirements for con;rmation.
The Law Enforcement Unit of this Board, the Land Transportation Oaice
(LTO), the Metro Manila Development Authority (MMDA), the Philippine
National Police-Highway Patrol Group (PNP-HPG), and other authorized
traSic enforcement agencies are hereby ordered
to APPREHEND and IMPOUND the said vehicles, if found operating.

SO ORDERED.6

Respondent then ;led with the CA a petition for certiorari under Rule 65 of the

Rules of Court, with prayer for the issuance of a preliminary mandatory injunction,
assailing petitioner's above Decision.

On June 26, 2014, the CA promulgated its questioned Decision, disposing as

follows:

WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision dated

March 14, 2014 of the Land Transportation Franchising and Regulatory Board is
MODIFIED as follows:

1. The Order canceling and reverting to the State of the Certi;cate of Public
Convenience of operator Cue under Case No. 2007-0407, under the bene;cial
ownership of petitioner G.V. Florida Transport, Inc. is AFFIRMED;

2. The penalty of suspension for a period of six (6) months against all existing 28
Certi;cates of Public Convenience of petitioner G.V. Florida, Transport, Inc., is
REVERSED and SET ASIDE;

3. The condition set forth in the Decision for the lifting of the penalty of suspension
is DELETED; and

4. The order to apprehend and impound petitioner G.V. Florida Transport, Inc.'s
186 authorized bus units under the 28 CPCs if found operating is RECALLED

Accordingly, petitioner G.V. Florida Transport, Inc. prayer for mandatory

injunctive relief is hereby GRANTED. The Land Transportation and Franchising
Regulatory Board is hereby ordered to immediately LIFT the order of suspension
and RETURN or CAUSE the RETURN of the con;scated license plates of petitioner
G.V. Florida Transport, Inc.'s 186 authorized bus units under its 28 Certi;cates of
Public Convenience without need of further order from this Court. Said OSice is
further DIRECTED to submit its Compliance within ;ve (5) days from receipt
thereof.

SO ORDERED.7

Hence, the present petition grounded on a lone issue, to wit:

DOES THE LTFRB HAVE THE POWER TO SUSPEND THE FLEET OF A PUBLIC
UTILITY THAT VIOLATES THE LAW, TO THE DAMAGE OF THE PUBLIC? 8
The main issue brought before this Court is whether or not petitioner is justi;ed in
suspending respondent's 28 CPCs for a period of six (6) months. In other words, is
the suspension within the powers of the LTFRB to impose and is it reasonable?

Petitioner contends that it is vested by law with jurisdiction to regulate the

operation of public utilities; that under Section 5(b) of Executive Order No.
202 (E. 0. 202),9 it is authorized "[t]o issue, amend, revise, suspend or cancel
Certi;cates of Public Convenience or permits authorizing the operation of public
land transportation services provided by motorized vehicles, and to prescribe the
appropriate terms and conditions therefor;" and that petitioner's authority to
impose the penalty of suspension of CPCs of bus companies found to have
committed violations of the law is broad and is consistent with its mandate and
regulatory capability.

On the other hand, respondent, in its Comment to the present Petition, contends
that the suspension of its 28 CPCs is tantamount to an outright con;scation of
private property without due process of law; and that petitioner cannot simply
ignore respondent's property rights on the pretext of promoting public safety.
Respondent insists that the penalty imposed by petitioner is not commensurate to
the infraction it had committed.

The Court rules in favor of petitioner.

Section 16(n) of Commonwealth Act. No. 146, otherwise known as the Public

Service Act, provides:

Section 16. Proceedings of the Commission, upon notice and hearing. - The

Commission shall have power, upon proper notice and hearing in accordance with
the rules and provisions of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary:

xxxx

(n) To suspend or revoke any certi;cate issued under the provisions of this Act
whenever the holder thereof has violated or willfully and contumaciously refused
to comply with any order rule or regulation of the Commission or any provision of
this Act: Provided, That the Commission, for good cause, may prior to the hearing
suspend for a period not to exceed thirty days any certi;cate or the exercise of any
right or authority issued or granted under this Act by order of the Commission,
whenever such step shall in the judgment of the Commission be necessary to avoid
serious and irreparable damage or inconvenience to the public or to private
interests.

xxxx

Also, Section 5(b) of E.O. 202 states:

Sec. 5. Powers and Functions of the Land Transportation Franchising and

Regulatory Board. The Board shall have the following powers and functions:
Also, Section 5(b) of E.O. 202 states:

Sec. 5. Powers and Functions of the Land Transportation Franchising and

Regulatory Board. The Board shall have the following powers and functions:

xxxx

b. To issue, amend, revise, suspend or cancel Certi;cates of Public Convenience or

permits authorizing the operation of public land transportation services provided
by motorized vehicles, and to prescribe the appropriate terms and conditions
therefor;

xxxx

In the present case, respondent is guilty of several violations of the law, to wit:
lack of petitioner's approval of the sale and transfer of the CPC which respondent
bought from Cue; operating the ill-fated bus under its name when the same is
registered under the name of Dagupan Bus Co., Inc.; attaching a vehicle license
plate to the ill-fated bus when such plate belongs to a diSerent bus owned by Cue;
and operating the subject bus under the authority of a diSerent CPC. What makes
matters worse is that respondent knowingly and blatantly committed these
violations. How then can respondent claim good faith under these circumstances?

Respondent, nonetheless, insists that it is unreasonable for petitioner to suspend

the operation of 186 buses covered by its 28 CPCs, considering that only one bus
unit, covered by a single CPC, was involved in the subject accident.

The Court is not persuaded. It bears to note that the suspension of respondent's 28
CPCs is not only because of the ;ndings of petitioner that the ill-fated bus was not
roadworthy. 10 Rather, and more importantly, the suspension of the 28 CPCs was
also brought about by respondent's wanton disregard and obstinate de;ance of the
regulations issued by petitioner, which is tantamount to a willful and contumacious
refusal to comply with the requirements of law or of the orders, rules or
regulations issued by petitioner and which is punishable, under the law, by
suspension or revocation of any of its CPCs.

The Court agrees with petitioner that its power to suspend the CPCs issued to
public utility vehicles depends on its assessment of the gravity of the violation, the
potential and actual harm to the public, and the policy impact of its own actions. In
this regard, the Court gives due deference to petitioner's exercise of its sound
administrative discretion in applying its special knowledge, experience and
expertise to resolve respondent's case.

Indeed, the law gives to the LTFRB (previously known, among others, as Public
Service Commission or Board of Transportation) ample power and discretion to
decree or refuse the cancellation of a certi;cate of public convenience issued to an
operator as long as there is evidence to support its action. 11 As held by this Court
in a long line of cases, 12 it was even intimated that, in matters of this nature so
long as the action is justi;ed, this Court will not substitute its discretion for that of
the regulatory agency which, in this case, is the LTFRB.

Moreover, the Court ;nds the ruling in Rizal Light & Ice Co., Inc. v. The
Municipality of Morang, Rizal and The Public Service Commission, 13 instructive, to
wit:

xxxx

It should be observed that Section 16(n) of Commonwealth Act No. 146, as

amended, confers upon the Commission ample power and discretion to order the
cancellation and revocation of any certi;cate of public convenience issued to an
operator who has violated, or has willfully and contumaciously refused to comply
with, any order, rule or regulation of the Commission or any provision of law. What
matters is that there is evidence to support the action of the Commission. In the
instant case, as shown by the evidence, the contumacious refusal of the petitioner
since 1954 to comply with the directives, rules and regulations of the Commission,
its violation of the conditions of its certi;cate and its incapability to comply with its
commitment as shown by its inadequate service, were the circumstances that
warranted the action of the Commission in not merely imposing a ;ne but in
revoking altogether petitioner's certi;cate. To allow petitioner to continue its
operation would be to sacri;ce public interest and convenience in favor of private
interest.

A grant of a certi;cate of public convenience confers no property rights but is a

mere license or privilege, and such privilege is forfeited when the grantee fails to
comply with his commitments behind which lies the paramount interest of the
public, for public necessity cannot be made to wait, nor sacri;ced for private
convenience. (Collector of Internal Revenue v. Estate of F. P. Buan, et al., L-11438
and Santiago Sambrano, et al. v. PSC, et al., L-11439 & L- 11542-46, July 31, 1958)

(T)he Public Service Commission, . . . has the power to specify and de;ne the
terms and conditions upon which the public utility shall be operated, and to make
reasonable rules and regulations for its operation and the compensation which the
utility shall receive for its services to the public, and for any failure to comply with
such rules and regulations or the violation of any of the terms and conditions for
which the license was granted, the Commission has ample power to enforce the
provisions of the license or even to revoke it, for any failure or neglect to comply
with any of its terms and provisions. x xx x x x14

Respondent likewise contends that, in suspending its 28 CPCs, the LTFRB acted in
reckless disregard of the property rights of respondent as a franchise holder,
considering that it has put in substantial investments amounting to hundreds of
millions in running its operations. In this regard, the Court's ruling in the case
of Luque v. Villegas 15 is apropos:

xxxx
Contending that they possess valid and subsisting certi;cates of public
convenience, the petitioning public services aver that they acquired a vested right
to operate their public utility vehicles to and from Manila as appearing in their said
respective certi;cates of public convenience.

Petitioner's argument pales on the face of the fact that the very nature of a
certi;cate of public convenience is at cross purposes with the concept of vested
rights. To this day, the accepted view, at least insofar as the State is concerned, is
that "a certi;cate of public convenience constitutes neither a franchise nor a
contract, confers no property right, and is a mere license or privilege." The holder
of such certi;cate does not acquire a property right in the route covered thereby.
Nor does it confer upon the holder any proprietary right or interest of franchise in
the public highways. Revocation of this certi;cate deprives him of no vested right.
Little reqection is necessary to show that the certi;cate of public convenience is
granted with so many strings attached. New and additional burdens, alteration of
the certi;cate, and even revocation or annulment thereof is reserved to the State.

We need but add that the Public Service Commission, a government agency vested
by law with "jurisdiction, supervision, and control over all public services and their
franchises, equipment, and other properties" is empowered, upon proper notice
and hearing, amongst others: (1) "[t]o amend, modify or revoke at any time a
certi;cate issued under the provisions of this Act [Commonwealth Act 146, as
amended], whenever the facts and circumstances on the strength of which said
certi;cate was issued have been misrepresented or materially changed"; and (2)
"[t]o suspend or revoke any certi;cate issued under the provisions of this Act
whenever the holder thereof has violated or wilfully and contumaciously refused to
comply with any order, rule or regulation of the Commission or any provision of
this Act: Provided, That the Commission, for good cause, may prior to the hearing
suspend for a period not to exceed thirty days any certi;cate or the exercise of any
right or authority issued or granted under this Act by order of the Commission,
whenever such step shall in the judgment of the Commission be necessary to avoid
serious and irreparable damage or inconvenience to the public or to private
interests."

Jurisprudence echoes the rule that the Commission is authorized to make

reasonable rules and regulations for the operation of public services and to enforce
them. In reality, all certi;cates of public convenience issued are subject to the
condition that all public services "shall observe and comply [with] ... all the rules
and regulations of the Commission relative to" the service. To further emphasize
the control imposed on public services, before any public service can "adopt,
maintain, or apply practices or measures, rules, or regulations to which the public
shall be subject in its relation with the public service," the Commission's approval
must ;rst be had.

And more. Public services must also reckon with provincial resolutions and
municipal ordinances relating to the operation of public utilities within the
province or municipality concerned. The Commission can require compliance with
these provincial resolutions or municipal ordinances.
Illustrative of the lack of "absolute, complete, and unconditional" right on the part
of public services to operate because of the delimitations and restrictions which
circumscribe the privilege aSorded a certi;cate of public convenience is the
following from the early (March 31, 1915) decision of this Court in Fisher vs.
Yangco Steamship Company, 31 Phil. 1, 18-19:

Common carriers exercise a sort of public oSice, and have duties to perform in
which the public is interested. Their business is, therefore, aSected with a public
interest, and is subject of public regulation. (New Jersey Steam Nav. Co. vs.
Merchants Banks, 6 How. 344, 382; Munn vs. Illinois, 94 U.S. 113, 130.) Indeed,
this right of regulation is so far beyond question that it is well settled that the
power of the state to exercise legislative control over railroad companies and other
carriers 'in all respects necessary to protect the public against danger, injustice
and oppression' may be exercised through boards of commissioners. (New York,
etc. R. Co. vs. Bristol, 151 U.S. 556, 571; Connecticut, etc. R. Co. vs. WoodruS, 153
U.S. 689.).

xxxx

.... The right to enter the public employment as a common carrier and to oSer
one's services to the public for hire does not carry with it the right to conduct that
business as one pleases, without regard to the interests of the public and free from
such reasonable and just regulations as may be prescribed for the protection of the
public from the reckless or careless indiSerence of the carrier as to the public
welfare and for the prevention of unjust and unreasonable discrimination of any
kind whatsoever in the performance of the carrier's duties as a servant of the
public.

Business of certain kinds, including the business of a common carrier, holds such a
peculiar relation to the public interest that there is superinduced upon it the right
of public regulation. (Budd vs. New York, 143 U.S. 517, 533.) When private
property is "aSected with a public interest it ceases to be Juris privati only."
Property becomes clothed with a public interest when used in a manner to make it
of public consequence and aSect the community at large. "When, therefore, one
devotes his property to a use in which the public has an interest, he, in eSect,
grants to the public an interest in that use, and must submit to be controlled by the
public for the common good, to the extent of the interest he has thus created. He
may withdraw his grant by discontinuing the use, but so long as he maintains the
use he must submit to control." (Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg.
Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143 U.S. 517; Louisville, etc. Ry.
Co. vs. Kentucky, 161 U.S. 677, 695.).

The foregoing, without more, rejects the vested rights theory espoused by
petitioning bus operators.

x x x16

Neither is the Court convinced by respondent's contention that the authority given
to petitioner, under the abovequoted Section 16(n) of the Public Service Act does
not mean that petitioner is given the power to suspend the entire operations of a
transport company. Respondent must be reminded that, as quoted above, the law
clearly states that petitioner has the power "[t]o suspend or revoke any certi;cate
issued under the provisions of [the Public Service Act] whenever the holder
thereof has violated or willfully and contumaciously refused to comply with
any order rule or regulation of the Commission or any provision of this
Act x x x" This Court has held that when the context so indicates, the word "any"
may be construed to mean, and indeed it has been frequently used in its enlarged
and Plural sense as meaning "all " "all or every" "each " "each one of all " ' ' ' ' '
"every" without limitation; inde;nite number or quantity, an indeterminate unit or
number of units out of many or all, one or more as the case may be, several,
some. 17 Thus, in the same vein, the Merriam-Webster Dictionary de;nes the word
"any" as "one, some, or all indiscriminately of whatever quantity"; "used to indicate
a maximum or whole"; "unmeasured or unlimited in amount, number, or
extent." 18 Hence, under the above de;nitions, petitioner undoubtedly wields
authority, under the law, to suspend not only one but all of respondent's CPCs if
warranted, which is proven to be the case here.

As to whether or not the penalty imposed by petitioner is reasonable, respondent

appears to trivialize the eSects of its deliberate and shameless violations of the
law. Contrary to its contention, this is not simply a case of one erring bus unit.
Instead, the series or combination of violations it has committed with respect to
the ill-fated bus is indicative of its design and intent to blatantly and maliciously
defy the law and disregard, with impunity, the regulations imposed by petitioner
upon all holders of CPCs. Thus, the Court ;nds nothing irregular in petitioner's
imposition of the penalty of sixmonths suspension of the operations of respondent's
28 CPCs. In other words, petitioner did not commit grave abuse of discretion in
imposing the questioned penalty.

Lastly, the suspension of respondent's CPCs ;nds relevance in light of the series of
accidents met by diSerent bus units owned by diSerent operators in recent events.
This serves as a reminder to all operators of public utility vehicles that their
franchises and CPCs are mere privileges granted by the government. As such, they
are sternly warned that they should always keep in mind that, as common carriers,
they bear the responsibility of exercising extraordinary diligence in the
transportation of their passengers. Moreover, they should conscientiously comply
with the requirements of the law in the conduct of their operations, failing which
they shall suSer the consequences of their own actions or inaction.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of

Appeals, dated June 26, 2014 in CA-GR. SP No. 134772, is REVERSED and SET
ASIDE. The March 14, 2014 Decision of the Land Transportation Franchising and
Regulatory Board is REINSTATED.

SO ORDERED.

G.R. No. 210621, April 04, 2016

ALFREDO MANAY, JR., FIDELINO SAN LUIS, ADRIAN SAN LUIS, ANNALEE
SAN LUIS, MARK ANDREW JOSE, MELISSA JOSE, CHARLOTTE JOSE, DAN
JOHN DE GUZMAN, PAUL MARK BALUYOT, AND CARLOS S.
JOSE, Petitioners, v. CEBU AIR,INC, Respondent.

DECISION

LEONEN, J.:

The Air Passenger Bill of Rights1 mandates that the airline must inform the
passenger in writing of all the conditions and restrictions in the contract of
carriage.2 Purchase of the contract of carriage binds the passenger and imposes
reciprocal obligations on both the airline and the passenger. The airline must
exercise extraordinary diligence in the ful;llment of the terms and conditions of
the contract of carriage. The passenger, however, has the correlative obligation to
exercise ordinary diligence in the conduct of his or her aSairs.

This resolves a Petition for Review on Certiorari3 assailing the Court of Appeals

Decision4 dated December 13, 2013 in CA-G.R. SP. No. 129817. In the assailed
Decision, the Court of Appeals reversed the Metropolitan Trial Court
Decision5 dated December 15, 2011 and the Regional Trial Court Decision 6 dated
November 6, 2012 and dismissed the Complaint for Damages ;led by petitioners
Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark
Andrew Jose, Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul Mark
Baluyot, and Carlos S. Jose against respondent Cebu Air, Incorporated (Cebu
Paci;c).7

On June 13, 2008, Carlos S. Jose (Jose) purchased 20 Cebu Paci;c round-trip
tickets from Manila to Palawan for himself and on behalf of his relatives and
friends.8 He made the purchase at Cebu Paci;c's branch oSice in Robinsons
Galleria.9

Jose alleged that he speci;ed to "Alou," the Cebu Paci;c ticketing agent, that his
preferred date and time of departure from Manila to Palawan should be on July 20,
2008 at 0820 (or 8:20 a.m.) and that his preferred date and time for their qight
back to Manila should be on July 22, 2008 at 1615 (or 4:15 p.m.). 10 He paid a total
amount of P42,957.00 using his credit card. 11 He alleged that after paying for the
tickets, Alou printed the tickets,12 which consisted of three (3) pages, and recapped
only the ;rst page to him.13 Since the ;rst page contained the details he speci;ed
to Alou, he no longer read the other pages of the qight information. 14

On July 20, 2008, Jose and his 19 companions boarded the 0820 Cebu Paci;c qight
to Palawan and had an enjoyable stay. 15

On the afternoon of July 22, 2008, the group proceeded to the airport for their
qight back to Manila.16 During the processing of their boarding passes, they were
informed by Cebu Paci;c personnel that nine (9)17 of them could not be admitted
because their tickets were for the 1005 (or 10:05 a.m.) 18 qight earlier that
day.19 Jose informed the ground personnel that he personally purchased the tickets
and speci;cally instructed the ticketing agent that all 20 of them should be on the
4:15 p.m. qight to Manila.20

Upon checking the tickets, they learned that only the ;rst two (2) pages had the
schedule Jose speci;ed.21 They were left with no other option but to rebook their
tickets.22 They then learned that their return tickets had been purchased as part of
the promo sales of the airline, and the cost to rebook the qight would be P7,000.00
more expensive than the promo tickets.23 The sum of the new tickets amounted to
P65,000.00.24

They oSered to pay the amount by credit card but were informed by the ground
personnel that they only accepted cash.25 They then oSered to pay in dollars, since
most of them were balikbayans and had the amount on hand, but the airline
personnel still refused.26

Eventually, they pooled enough cash to be able to buy tickets for ;ve (5) of their
companions.27  The other four (4) were left behind in Palawan and had to spend the
night at an inn, incurring additional expenses. 28 Upon his arrival in Manila, Jose
immediately purchased four (4) tickets for the companions they left behind, which
amounted to P5,205.29

Later in July 2008, Jose went to Cebu Paci;c's ticketing oSice in Robinsons Galleria
to complain about the allegedly erroneous booking and the rude treatment that his
group encountered from the ground personnel in Palawan. 30 He alleged that
instead of being assured by the airline that someone would address the issues he
raised, he was merely "given a run around." 31

Jose and his companions were frustrated and annoyed by Cebu Paci;c's handling
of the incident so they sent the airline demand letters dated September 3,
200832 and January 20, 200933 asking for a reimbursement of P42,955.00,
representing the additional amounts spent to purchase the nine (9) tickets, the
accommodation, and meals of the four (4) that were left behind. 34 They also ;led a
complaint35 before the Department of Trade and Industry. 36

On February 24, 2009, Cebu Paci;c, through its Guest Services Department, sent
petitioners' counsel an email37 explaining that "ticketing agents, like Alou, recap
[the] qight details to the purchaser to avoid erroneous booking[s]." 38 The recap is
given one other time by the cashier.39 Cebu Paci;c stated that according to its
records, Jose was given a full recap and was made aware of the qight restriction of
promo tickets,40 "which included [the] promo fare being non-refundable." 41

Jose and his companions were unsatis;ed with Cebu Paci;c's response so they ;led
a Complaint42 for Damages against Cebu Paci;c before Branch 59 of the
Metropolitan Trial Court of Mandaluyong.43 The Complaint prayed for actual
damages in the amount of P42,955.00, moral damages in the amount of
P45,000.00, exemplary damages in the amount of P50,000.00, and attorney's
fees.44

In its Answer,45 Cebu Paci;c essentially denied all the allegations in the Complaint
and insisted that Jose was given a full recap of the tickets. 46 It also argued that Jose
had possession of the tickets 37 days before the scheduled qight; hence, he had
suSicient time and opportunity to check the qight information and itinerary. 47 It
also placed a counterclaim of PI00,000.00 by reason that it was constrained to
litigate and it incurred expenses for litigation. 48

On December 15, 2011, the Metropolitan Trial Court rendered its Decision
ordering Cebu Paci;c to pay Jose and his companions P41,044.50 in actual
damages and P20,000.00 in attorney's fees with costs of suit. 49 The Metropolitan
Trial Court found that as a common carrier, Cebu Paci;c should have exercised
extraordinary diligence in performing its contractual obligations. 50 According to
the Metropolitan Trial Court, Cebu Paci;c's ticketing agent "should have placed
markings or underlined the time of the departure of the nine passengers" 51 who
were not in the afternoon qight since it was only logical for Jose to expect that all
of them would be on the same qight. 52 It did not ;nd merit, however, in the
allegation that the airline's ground personnel treated Jose and his companions
rudely since this allegation was unsubstantiated by evidence. 53

Cebu Paci;c appealed to the Regional Trial Court, reiterating that its ticketing
agent gave Jose a full recap of the tickets he purchased. 54

On November 6, 2012, Branch 212 of the Regional Trial Court of Mandaluyong

rendered the Decision dismissing the appeal.55 The Regional Trial Court aSirmed
the ;ndings of the Metropolitan Trial Court but deleted the award of attorney's
fees on the ground that this was granted without stating any ground under Article
2208 of the Civil Code to justify its grant.56

Cebu Paci;c appealed to the Court of Appeals, arguing that it was not at fault for
the damages caused to the passengers. 57

On December 13, 2013, the Court of Appeals rendered the Decision granting the
appeal and reversing the Decisions of the Metropolitan Trial Court and the
Regional Trial Court.58 According to the Court of Appeals, the extraordinary
diligence expected of common carriers only applies to the carriage of passengers
and not to the act of encoding the requested qight schedule. 59 It was incumbent
upon the passenger to exercise ordinary care in reviewing qight details and
checking schedules.60 Cebu Paci;c's counterclaim, however, was denied since
there was no evidence that Jose and his companions ;led their Complaint in bad
faith and with malice.61

Aggrieved, Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San
Luis, Mark Andrew Jose, Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul
Mark Baluyot, and Carlos S. Jose (Jose, et al.) ;led before this Court a Petition for
Review on Certiorari62 assailing the Court of Appeals' December 13, 2013
Decision.63

Cebu Paci;c was ordered to comment on the Petition. Upon compliance, 65 Jose, et
al. submitted their Reply.66 The parties were then directed67 to submit their
respective memoranda.68

Jose, et al. argue that Cebu Paci;c is a common carrier obligated to exercise
extraordinary diligence to carry Jose, et al. to their destination at the time clearly
instructed to its ticketing agent.69 They argue that they have the decision to choose
qight schedules and that Cebu Paci;c should not choose it for them. 70 They insist
that they have made their intended qight schedule clear to the ticketing agent and
it would have been within normal human behavior for them to expect that their
entire group would all be on the same qight.71 They argue that they should not
have to ask for a full recap of the tickets since they are under no obligation, as
passengers, to remind Cebu Paci;c's ticketing agent of her duties. 72

Jose, et al. further pray that they be awarded actual damages in the amount of
P43,136.52 since the Metropolitan Trial Court erroneously failed to add the costs
of accommodations and dinner spent on by four (4) of the petitioners who were left
behind in Palawan.73 They also pray for PI00,000.00 in moral damages and
P100,000.00 in exemplary damages for the "profound distress and anxiety" 74 they
have undergone from the experience, with PI00,000.00 in attorney's fees to
represent the reasonable expenses incurred from "engaging the services of their
counsel."75

Cebu Paci;c, on the other hand, argues that the damage in this case was caused by
Jose, et al.'s "gross and inexplicable [negligence.]" 76 It maintains that Jose, et al.
should have read the details of their qight, and if there were errors in the encoded
qight details, Jose, et al. would still have ample time to have the error
corrected.77 It argues further that its ticketing agent did not neglect giving Jose a
full recap of his purchase since the tickets clearly indicated in the "Comments"
section: "FULL RECAP GVN TO CARLOS JOSE." 78

Cebu Paci;c further posits that according to the Parol Evidence Rule, the plane
tickets issued to Jose, et al. contain all the terms the parties agreed on, and it was
agreed that nine (9) of the passengers would be on the July 22, 2008, 1005 qight to
Manila.79 It argues that Jose, et al. have not been able to present any evidence to
substantiate their allegation that their intent was to be on the July 22, 2008 1615
qight to Manila.80

From the arguments in the parties' pleadings, the sole issue before this Court is
whether respondent Cebu Air, Inc. is liable to petitioners Alfredo Manay, Jr.,
Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark Andrew Jose, Melissa
Jose, Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose
for damages for the issuance of a plane ticket with an allegedly erroneous qight
schedule.

Although it was not mentioned by the parties, a procedural issue must ;rst be
addressed before delving into the merits of the case.

Petitioners received the assailed Court of Appeals Decision on December 27,

2013.81 They chose to forego the ;ling of a motion for reconsideration. Instead,
petitioners ;led before this Court a Motion for Extension of Time 82 on January 13,
2014.

Under Rule 45, Section 2 of the Rules of Court, 83 petitioners only had 15 days or
until January 11, 2014 to ;le their petition. Since January 11, 2014 fell on a
Saturday, petitioners could have ;led their pleading on the following Monday, or
on January 13, 2014.

In their Motion for Extension of Time, however, petitioners requested an additional

30 days from January 13, 2014 within which to ;le their petition for review on
certiorari.84

This Court already clari;ed the periods of extension in A.M. No. 00-2-14-SC: 85

Whereas, Section 1, Rule 22 of the 1997 Rules of Civil Procedure provides:

chanRoblesvirtualLawlibrary
Section 1. How to compute time. - In computing any period of time prescribed or
allowed by these Rules, or by order of the court, or by any applicable statute, the
day of the act or event from which the designated period of time begins to run is to
be excluded and the date of performance included. If the last day of the period, as
thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place where
the court sits, the time shall not run until the next working day.
Whereas, the aforecited provision applies in the matter of ;ling of pleadings in
courts when the due date falls on a Saturday, Sunday or legal holiday, in which
case, the ;ling of the said pleading on the next working day is deemed on time;

Whereas, the question has been raised if the period is extended ipso jure to the
next working day immediately following where the last day of the period is a
Saturday, Sunday or a legal holiday, so that when a motion for extension of time is
;led, the period of extension is to be reckoned from the next working day and not
from the original expiration of the period.

NOW THEREFORE, the Court Resolves, for the guidance of the Bench and the Bar,
to declare that Section 1, Rule 22 speaks only of "the last day of the period" so that
when a party seeks an extension and the same is granted, the due date ceases to
be the last day and hence, the provision no longer applies. Any extension of time to
[le the required pleading should therefore be counted from the expiration of the
period regardless of the fact that said due date is a Saturday, Sunday or legal
holiday. (Emphasis supplied)

Thus, petitioners' request for extension of time should have been reckoned from
the original due date on January 11, 2014, even if this day fell on a Saturday. A
request for extension of 30 days would have ended on February 10, 2014. 86

Petitioners subsequently ;led their Petition for Review on Certiorari on February

12, 2014.87 Pursuant to A.M. No. 00-2-14-SC,88 this Petition would have been ;led
out of time.

We are not, however, precluded from granting the period of extension requested
and addressing the Petition ;led on its merits, instead of outright dismissing it.
After all, "[l]itigations should, as much as possible, be decided on the merits and
not on technicalities."89

However, it does not follow that in the relaxation of the procedural rules, this
Court automatically rules in favor of petitioners. Their case must still stand on its
own merits for this Court to grant the relief petitioners pray for.

II

Common carriers are required to exercise extraordinary diligence in the

performance of its obligations under the contract of carriage. This extraordinary
diligence must be observed not only in the transportation of goods and services but
also in the issuance of the contract of carriage, including its ticketing operations.

Article 1732 of the Civil Code de;nes a common carrier as "persons, corporations
or ;rms, or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, oSering their
services to the public." Articles 1733, 1755, and 1756 of the Civil Code outline the
degree of diligence required of common carriers:
....

ARTICLE 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.

ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.

ARTICLE 1756. In case of death of or injuries to passengers, common carriers are

presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in articles 1733 and 1755.

Respondent, as one of the four domestic airlines in the country, 90 is a common
carrier required by law to exercise extraordinary diligence. Extraordinary
diligence requires that the common carrier must transport goods and passengers
"safely as far as human care and foresight can provide," and it must exercise the
"utmost diligence of very cautious persons . . . with due regard for all the
circumstances."91

When a common carrier, through its ticketing agent, has not yet issued a ticket to
the prospective passenger, the transaction between them is still that of a seller and
a buyer. The obligation of the airline to exercise extraordinary diligence
commences upon the issuance of the contract of carriage. 92 Ticketing, as the act of
issuing the contract of carriage, is necessarily included in the exercise of
extraordinary diligence.

A contract of carriage is de;ned as "one whereby a certain person or association of

persons obligate themselves to transport persons, things, or news from one place
to another for a ;xed price."93 In Cathay Paci[c Airways v. Reyes:94

[W]hen an airline issues a ticket to a passenger con;rmed on a particular qight, on

a certain date, a contract of carriage arises, and the passenger has every right to
expect that he would qy on that qight and on that date. If he does not, then the
carrier opens itself to a suit for breach of contract of carriage. 95 (Emphasis
supplied)

Once a plane ticket is issued, the common carrier binds itself to deliver the
passenger safely on the date and time stated in the ticket. The contractual
obligation of the common carrier to the passenger is governed principally by what
is written on the contract of carriage.

In this case, both parties stipulated96 that the qight schedule stated on the nine (9)
disputed tickets was the 10:05 a.m. qight of July 22, 2008. According to the
contract of carriage, respondent's obligation as a common carrier was to transport
nine (9) of the petitioners safely on the 10:05 a.m. qight of July 22, 2008.

Petitioners, however, argue that respondent was negligent in the issuance of the
contract of carriage since the contract did not embody their intention. They insist
that the nine (9) disputed tickets should have been scheduled for the 4:15 p.m.
qight of July 22, 2008. Respondent, on the other hand, denies this and states that
petitioner Jose was fully informed of the schedules of the purchased tickets and
petitioners were negligent when they failed to correct their ticket schedule.

Respondent relies on the Parol Evidence Rule in arguing that a written document
is considered the best evidence of the terms agreed on by the parties. Petitioners,
however, invoke the exception in Rule 130, Section 9(b) of the Rules of Court that
evidence may be introduced if the written document fails to express the true intent
of the parties:97

Section 9. Evidence of written agreements. When the terms of an agreement have

been reduced to writing, it is considered as containing all the terms agreed upon
and there can be, between the parties and their successors in interest, no evidence
of such terms other than the contents of the written agreement.

However, a party may present evidence to modify, explain or add to the terms of
the written agreement if he puts in issue in his pleading:

(a) An intrinsic ambiguity, mistake, or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and agreement
of the parties thereto;

(c)  The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in
interest after the execution of the written agreement.

In ACI Philippines, Inc. v. Coquia:98

It is a cardinal rule of evidence, not just one of technicality but of substance, that
the written document is the best evidence of its own contents. It is also a matter of
both principle and policy that when the written contract is established as the
repository of the parties stipulations, any other evidence is excluded and the same
cannot be used as a substitute for such contract, nor even to alter or contradict
them. This rule, however, is not without exception. Section 9, Rule 130 of the Rules
of Court states that a party may present evidence to modify, explain or add to the
terms of the agreement if he puts in issue in his pleading the failure of the written
agreement to express the true intent and agreement of the parties. 99

It is not disputed that on June 13, 2008, petitioner Jose purchased 20 Manila-
Palawan-Manila tickets from respondent's ticketing agent. Since all 20 tickets were
part of a single transaction made by a single purchaser, it is logical to presume
that all 20 passengers would prefer the same qight schedule, unless the purchaser
stated otherwise.

In petitioners' Position Paper before the Metropolitan Trial Court, they maintain
that respondent's ticketing agent was negligent when she failed to inform or
explain to petitioner Jose that nine (9) members of their group had been booked for
the 10:05 a.m. qight, and not the 4:15 p.m. qight. 100

The ;rst page of the tickets contained the names of eight (8) passengers. 101 In the
Information box on the left side of the ticket, it reads:

Sunday, July 20, 2008     HK PHP999.00 PHP

5J 637 MNL-PPS  08:20- 09:35
Tuesday, July 22, 2008   HK  PHP999.00 PH
5J 640 PPS-MNL 16:15- 17:30102

In the Comments box, it reads:

R - FULL RECAP GVN TO CARLOS JOSE//AWRE

I - FULL RECAP GVN TO CARLOS JOSE//AWRE
M - FULL RECAP GVN TO CARLOS JOSE//AWRI 103

The second page contained the names of three (3) passengers. 104 In the
Information box, it reads:

Sunday, July 20, 2008     HK PHP1,998.00 PH

5J 637 MNL-PPS 08:20- 09:35
Tuesday, July 22, 2008     HK PHP999.00 PH
5J 640 PPS-MNL  16:15- 17:30105

Under the caption "Comments," it reads:

R - FULL RECAP GVN TO CARLOS JOSE//AWRE

I - FULL RECAP GVN TO CARLOS JOSE//AWRE
M - FULL RECAP GVN TO CARLOS JOSE//AWRI 106

The third page contained the names of nine (9) passengers. 107 In the Information
box, it reads:
Sunday, July 20, 2008     HK  PHP999.00 PHP
5J637MNL-PPS  08:20-09:35
Tuesday, July 22, 2008    HK  PHP999.00 PH
5J638PPS-MNL  10:05-11:20108ChanRoblesVirtualawlibrary

In the Comments box, it reads:

R - FULL RECAP GVNT O JOSE//CARLOS AWRE

R - NON-REFUNDBLE//VALID TIL 15 OCT08 O109

Respondent explained that as a matter of protocol, qight information is recapped

to the purchaser twice: ;rst by the ticketing agent before payment, and second by
the cashier during payment. The tickets were comprised of three (3) pages.
Petitioners argue that only the ;rst page was recapped to petitioner Jose when he
made the purchase.

The common carrier's obligation to exercise extraordinary diligence in the issuance

of the contract of carriage is ful;lled by requiring a full review of the qight
schedules to be given to a prospective passenger before payment. Based on the
information stated on the contract of carriage, all three (3) pages were recapped to
petitioner Jose.

The only evidence petitioners have in order to prove their true intent of having the
entire group on the 4:15 p.m. qight is petitioner Jose's self-serving testimony that
the airline failed to recap the last page of the tickets to him. They have neither
shown nor introduced any other evidence before the Metropolitan Trial Court,
Regional Trial Court, Court of Appeals, or this Court.

Even assuming that the ticketing agent encoded the incorrect qight information, it
is incumbent upon the purchaser of the tickets to at least check if all the
information is correct before making the purchase. Once the ticket is paid for and
printed, the purchaser is presumed to have agreed to all its terms and conditions.
In Ong Yiu v. Court of Appeals:110

While it may be true that petitioner had not signed the plane ticket, he is
nevertheless bound by the provisions thereof. "Such provisions have been held to
be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation." It is what
is known as a contract of "adhesion," in regards which it has been said that
contracts of adhesion wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely
prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent.111ChanRoblesVirtualawlibrary

One of the terms stated in petitioners' tickets stipulates that the photo
identi;cation of the passenger must match the name entered upon booking:

Guests should present a valid photo ID to airport security and upon check-in. Valid
IDs for this purpose are Company ID, Driver's License, Passport, School ID, SSS
Card, TIN Card. The name in the photo-ID should match the guest name that was
entered upon booking. Failure to present a valid photo ID will result in your being
refused check-in.112

Considering that respondent was entitled to deny check-in to passengers whose

names do not match their photo identi;cation, it would have been prudent for
petitioner Jose to check if all the names of his companions were encoded correctly.
Since the tickets were for 20 passengers, he was expected to have checked each
name on each page of the tickets in order to see if all the passengers' names were
encoded and correctly spelled. Had he done this, he would have noticed that there
was a diSerent qight schedule encoded on the third page of the tickets since the
qight schedule was stated directly above the passengers' names.

Petitioners' qight information was not written in ;ne print. It was clearly stated on
the left portion of the ticket above the passengers' names. If petitioners had
exercised even the slightest bit of prudence, they would have been able to remedy
any erroneous booking.

This is not the ;rst time that this Court has explained that an air passenger has the
correlative duty to exercise ordinary care in the conduct of his or her aSairs.

In Crisostomo v. Court of Appeals,113 Estela Crisostomo booked a European tour

with Caravan Travel and Tours, a travel agency. She was informed by Caravan's
travel agent to be at the airport on Saturday, two (2) hours before her qight.
Without checking her travel documents, she proceeded to the airport as planned,
only to ;nd out that her qight was actually scheduled the day before. She
subsequently ;led a suit for damages against Caravan Travel and Tours based on
the alleged negligence of their travel agent in informing her of the wrong qight
details.114

This Court, while ruling that a travel agency was not a common carrier and was
not bound to exercise extraordinary diligence in the performance of its obligations,
also laid down the degree of diligence concurrently required of passengers:

Contrary to petitioner's claim, the evidence on record shows that respondent

exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services to petitioner. As correctly
observed by the lower court, the plane ticket issued to petitioner clearly rehected
the departure date and time, contrary to petitioner's contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip. Respondent also properly
booked petitioner for the tour, prepared the necessary documents and procured
the plane tickets. It arranged petitioner's hotel accommodation as well as food,
land transfers and sightseeing excursions, in accordance with its avowed
undertaking.

Therefore, it is clear that respondent performed its prestation under the contract
as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her aOairs, there would have
been no reason for her to miss the hight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care
of her concerns. This undoubtedly would require that she at least read the
documents in order to assure herself of the important details regarding the
trip.115 (Emphasis supplied)

Most of the petitioners were balikbayans.116 It is reasonable to presume that they

were adequately versed with the procedures of air travel, including familiarizing
themselves with the itinerary before departure. Moreover, the tickets were issued
37 days before their departure from Manila and 39 days from their departure from
Palawan. There was more than enough time to correct any alleged mistake in the
qight schedule.

Petitioners, in failing to exercise the necessary care in the conduct of their aSairs,
were without a doubt negligent. Thus, they are not entitled to damages.

Before damages may be awarded, "the claimant should satisfactorily show the
existence of the factual basis of damages and its causal connection to defendant's
acts."117 The cause of petitioners' injury was their own negligence; hence, there is
no reason to award moral damages. Since the basis for moral damages has not
been established, there is no basis to recover exemplary damages 118 and attorney's
fees119 as well.

III

Traveling by air for leisure is a fairly new concept to the average Filipino. From
1974, there was only one local airline commanding a monopoly on domestic air
travel.120 In 1996, respondent introduced the concept of a budget airline in the
Philippines, touting "low-cost services to more destinations and routes with higher
qight frequency within the Philippines than any other airline." 121 In its inception,
respondent oSered plane fares that were "40% to 50% lower than [Philippine
Airlines]."122

On March 1, 2007, to celebrate its new qeet of aircraft, respondent oSered a

promo of P1.00 base fare for all their domestic and international
destinations.123 The fare was non-refundable and exclusive of taxes and
surcharges.124

Despite the conditions imposed on these "piso fares," more people were enticed to
travel by air. From January to June 2007, respondent had a total number of
2,256,289 passengers while Philippines Airlines had a total of 1,981,267
passengers.125 The domestic air travel market also had a 24% increase in the ;rst
half of 2007.126

Promotional fares encouraged more Filipinos to travel by air as the number of

qiers in the country increased from 7.2 million in 2005 to 16.5 million in 2010.127
The emergence of low-cost carriers "liberalized [the] aviation regime" 128 and
contributed to an "unprecedented and consistent double digit growth rates of
domestic and international travel"129 from 2007 to 2012.

This development, however, came with its own set of problems. Numerous
complaints were ;led before the Department of Trade and Industry and the
Department of Transportation and Communications, alleging "unsatisfactory
airline service"130 as a result of qight overbooking, delays, and cancellations. 131

This prompted concerned government agencies to issue Department of

Transportation and Communications-Department of Trade and Industry Joint
Administrative Order No. 1, Series of 2012, otherwise known as the Air Passenger
Bill of Rights.

Section 4 of the Joint Administrative Order requires airlines to provide the

passenger with accurate information before the purchase of the ticket:

Section 4. Right to Full, Fair, and Clear Disclosure of the Service O=ered
and All the Terms and Conditions of the Contract of Carriage. Every
passenger shall, before purchasing any ticket for a contract of carriage by the air
carrier or its agents, be entitled to the full, fair, and clear disclosure of all the
terms and conditions of the contract of carriage about to be purchased. The
disclosure shall include, among others, documents required to be presented at
check-in, provisions on check-in deadlines, refund and rebooking policies, and
procedures and responsibility for delayed and/or cancelled qights. These terms and
conditions may include liability limitations, claim-;ling deadlines, and other crucial
conditions.

4.1 An air carrier shall cause the disclosure under this Section to be printed on or
attached to the passenger ticket and/or boarding pass, or the incorporation of such
terms and conditions of carriage by reference. Incorporation by reference means
that the ticket and/or boarding pass shall clearly state that the complete terms and
conditions of carriage are available for perusal and/or review on the air carrier's
website, or in some other document that may be sent to or delivered by post or
electronic mail to the passenger upon his/her request.
....

4.3 Aside from the printing and/or publication of the above disclosures, the same
shall likewise be verbally explained to the passenger by the air carrier and/or its
agent/s in English and Filipino, or in a language that is easily understood by the
purchaser, placing emphasis on the limitations and/or restrictions attached to the
ticket.
.....

4.5 Any violation of the afore-stated provisions shall be a ground for the denial of
subsequent applications for approval of promotional fare, or for the suspension or
recall of the approval made on the advertised fare/rate. (Emphasis in the original)

The Air Passenger Bill of Rights recognizes that a contract of carriage is a contract
of adhesion, and thus, all conditions and restrictions must be fully explained to the
passenger before the purchase of the ticket:

WHEREAS, such a contract of carriage creates an asymmetrical relationship

between an air carrier and a passenger, considering that, while a passenger has
the option to buy or not to buy the service, the decision of the passenger to buy the
ticket binds such passenger, by adhesion, to all the conditions and/or restrictions
attached to the air carrier ticket on an all-or-nothing basis, without any say,
whatsoever, with regard to the reasonableness of the individual conditions and
restrictions attached to the air carrier ticket;132ChanRoblesVirtualawlibrary

Section 4.4 of the Air Passenger Bill of Rights requires that "all rebooking,
refunding, baggage allowance and check-in policies" must be stated in the tickets:

4.4 The key terms of a contract of carriage, which should include, among others,
the rebooking, refunding, baggage allowance and check-in policies, must be
provided to a passenger and shall substantially be stated in the following manner
and, if done in print, must be in bold letters:
(English)

"NOTICE:

The ticket that you are purchasing is subject to the following

conditions/restrictions:

1. _______________
2. _______________
3. _______________

Your purchase of this ticket becomes a binding contract on your part to

follow the terms and conditions of the ticket and of the hight. Depending
on the fare rules applicable to your ticket, non-use of the same may result
in forfeiture of the fare or may subject you to the payment of penalties and
additional charges if you wish to change or cancel your booking.

For more choices and/or control in your hight plans, please consider other
fare types."

(Filipino)

"PAALALA:

Ang tiket na ito ay binibili ninyo nang may mga kondisyon/ restriksyon:

1. _______________
2. _______________
3. _______________

Sa pagpili at pagbili ng tiket na ito, kayo ay sumasang-ayon sa mga

kondisyon at restriksyon na nakalakip dito, bilang kontrata ninyo sa air
carrier. Depende sa patakarang angkop sa iyong tiket, ang hindi paggamit
nito ay maaaring magresulta sa pagwawalang bisa sa inyong tiket o sa
paniningil ng karagdagang bayad kung nais ninyong baguhin o kanselahin
ang inyong tiket.

Para sa mas maraming pagpipilian at malawak na control sa inyong hight,

inaanyayahan kayong bumili ng iba pang klase ng tiket galing sa air
carrier." (Emphasis in the original)

The Air Passenger Bill of Rights acknowledges that "while a passenger has the
option to buy or not to buy the service, the decision of the passenger to buy the
ticket binds such passenger[.]"133 Thus, the airline is mandated to place in writing
all the conditions it will impose on the passenger.

However, the duty of an airline to disclose all the necessary information in the
contract of carriage does not remove the correlative   obligation of the passenger
to exercise ordinary diligence in the conduct of his or her aSairs. The passenger is
still expected to read through the qight information in the contract of carriage
before making his or her purchase. If he or she fails to exercise the ordinary
diligence expected of passengers, any resulting damage should be borne by the
passenger.chanrobleslaw

WHEREFORE, the Petition is DENIED.

SO ORDERED.

G.R. No. 212038

SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Petitioners

vs.
NORTHWEST AIRLINES, INC., Respondent

x-----------------------x

G.R. No. 212043

NORTHWEST AIRLINES, INC., Petitioner,

vs.
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Respondents.

DECISION

PERALTA, J.:

Before us are consolidated petitions for review on certiorari under Rule 45 of the

Rules of Court assailing the Decision1 dated August 30, 2013, and
Resolution2 dated March 31, 2014 of the Court of Appeals (CA) in CA-G.R. CV No.
93496 which aSirmed the Decision3 dated September 9, 2008 of the Regional Trial
Court (RTC), Branch 97, Quezon City in Civil Case No. Q-N-02-46727 ;nding
Northwest Airlines, Inc. (Northwest) liable for breach of contract of carriage.

The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent qyers of

Northwest Airlines, Inc. and are holders of Elite Platinum World Perks Card, the
highest category given to frequent qyers of the carrier.4 They are known in the
musical instruments and sports equipments industry in the Philippines being the
owners of JB Music and JB Sports with outlets all over the country. They likewise
own the ;ve (5) star Hotel Elizabeth in Baguio City and Cebu City, and the chain of
Fersal Hotels and Apartelles in the country.5

The Fernandos initiated the ;ling of the instant case which arose from two (2)
separate incidents: [rst, when Jesus Fernando arrived at Los Angeles (LA) Airport
on December 20, 2001; second, when the Fernandos were to depart from the LA
Airport on January 29, 2002. The factual antecedents are as follows:

Version of Spouses Jesus and Elizabeth S. Fernando:

a.) The arrival at Los Angeles Airport on December 20, 2001

Sometime on December 20, 2001, Jesus Fernando arrived at the LA

Airport via Northwest Airlines Flight No. NW02 to join his family who qew earlier
to the said place for a reunion for the Christmas holidays. 6

When Jesus Fernando presented his documents at the immigration counter, he was
asked by the Immigration OSicer to have his return ticket veri;ed and validated
since the date reqected thereon is August 2001. So he approached a Northwest
personnel who was later identi;ed as Linda Puntawongdaycha, but the latter
merely glanced at his ticket without checking its status with the computer and
peremptorily said that the ticket has been used and could not be considered as
valid. He then explained to the personnel that he was about to use the said ticket
on August 20 or 21, 2001 on his way back to Manila from LA but he could not book
any seat because of some ticket restrictions so he, instead, purchased new
business class ticket on the said date.7 Hence, the ticket remains unused and
perfectly valid.

To avoid further arguments, Jesus Fernando gave the personnel the number of his
Elite Platinum World Perks Card for the latter to access the ticket control record
with the airline's computer and for her to see that the ticket is still valid. But Linda
Puntawongdaycha refused to check the validity of the ticket in the computer but,
instead, looked at Jesus Fernando with contempt, then informed the Immigration
OSicer that the ticket is not valid because it had been used. 8

The Immigration OSicer brought Jesus Fernando to the interrogation room of the
Immigration and Naturalization Services (INS) where he was asked humiliating
questions for more than two (2) hours. When he was ;nally cleared by the
Immigration OSicer, he was granted only a twelve (12)-day stay in the United
States (US), instead of the usual six (6) months. 9

When Jesus Fernando was ;nally able to get out of the airport, to the relief of his
family, Elizabeth Fernando proceeded to a Northwest Ticket counter to verify the
status of the ticket. The personnel manning the counter courteously assisted her
and con;rmed that the ticket remained unused and perfectly valid. To avoid any
future problems that may be encountered on the validity of the ticket, a new ticket
was issued to Jesus Fernando.10
Since Jesus Fernando was granted only a twelve (12)-day stay in the US, his
scheduled plans with his family as well as his business commitments were
disrupted. He was supposed to stay with his family for the entire duration of the
Christmas season because his son and daughter were then studying at Pepperton
University in California. But he was forced to qy back to Manila before the twelve
(12)-day stay expired and qew back to the US on January 15, 2002. The Fernandos
were, likewise, scheduled to attend the Musical Instrument Trade Show in LA on
January 1 7, 2002 and the Sports Equipment Trade Show in Las Vegas on January
21 to 23, 2002 which were both previously scheduled. Hence, Jesus Fernando had
to spend additional expenses for plane fares and other related expenses, and
missed the chance to be with his family for the whole duration of the Christmas
holidays.11

b.) The departure from the Los Angeles Airport on January 29, 2002.

On January 29, 2002, the Fernandos were on their way back to the Philippines.
They have con;rmed bookings on Northwest Airlines NW Flight No. 001 for
Narita, Japan and NW 029 for Manila. They checked in with their luggage at the
LA Airport and were given their respective boarding passes for business class
seats and claim stubs for six (6) pieces of luggage. With boarding passes, tickets
and other proper travel documents, they were allowed entry to the departure area
and joined their business associates from Japan and the Philippines who attended
the Musical Instrument Trade Show in LA on January 17, 2002 and the Sports
Equipment Trade Show in Las Vegas on January 21 to 23, 2002. When it was
announced that the plane was ready for boarding, the Fernandos joined the long
queue of business class passengers along with their business associates. 12

When the Fernandos reached the gate area where boarding passes need to be
presented, Northwest supervisor Linda Tang stopped them and demanded for the
presentation of their paper tickets (coupon type). They failed to present the same
since, according to them, Northwest issued electronic tickets (attached to the
boarding passes) which they showed to the supervisor. 13 In the presence of the
other passengers, Linda Tang rudely pulled them out of the queue. Elizabeth
Fernando explained to Linda Tang that the matter could be sorted out by simply
verifying their electronic tickets in her computer and all she had to do was click
and punch in their Elite Platinum World Perks Card number. But Linda Tang
arrogantly told them that if they wanted to board the plane, they should produce
their credit cards and pay for their new tickets, otherwise Northwest would order
their luggage oS-loaded from the plane. Exasperated and pressed for time, the
Fernandos rushed to the Northwest Airline Ticket counter to clarify the matter.
They were assisted by Northwest personnel Jeanne Meyer who retrieved their
control number from her computer and was able to ascertain that the Fernandos'
electronic tickets were valid and they were con;rmed passengers on both NW
Flight No. 001 for Narita Japan and NW 029 for Manila on that day. To ensure that
the Fernandos would no longer encounter any problem with Linda Tang, Jeanne
Meyer printed coupon tickets for them who were then advised to rush back to the
boarding gates since the plane was about to depart. But when the Fernandos
reached the boarding gate, the plane had already departed. They were able to
depart, instead, the day after, or on January 30, 2002, and arrived in the
Philippines on January 31,2002.14
Version of Northwest Airlines, Inc.:

a.) The arrival at the Los Angeles Airport on December 20, 2001.

Northwest claimed that Jesus Fernando travelled from Manila to LA on Northwest

Airlines on December 20, 2001. At the LA Airport, it was revealed that Jesus
Fernando's return ticket was dated August 20 or 21, 2001 so he encountered a
problem in the Immigration Service. About an hour after the aircraft had arrived,
Linda Puntawongdaycha, Northwest Customer Service Agent, was called by a US
Immigration OSicer named "Nicholas" to help verify the ticket of Jesus Fernando.
Linda Puntawongdaycha then asked Jesus Fernando to "show" her "all the papers."
Jesus Fernando only showed her the passenger receipt of his ticket without any
ticket coupon attached to it. The passenger receipt which was labelled "Passenger
Receipt" or "Customer Receipt" was dated August 2001. Linda Puntawongdaycha
asked Jesus Fernando several times whether he had any other ticket, but Jesus
Fernando insisted that the "receipt" was "all he has", and the passenger receipt
was his ticket. He failed to show her any other document, and was not able to give
any other relevant information about his return ticket. Linda Puntawongdaycha
then proceeded to the Interline Department and checked Jesus Fernando's
Passenger Name Record (PNR) and his itinerary. The itinerary only showed his
coming from Manila to Tokyo and Los Angeles; nothing would indicate about his
qight back to Manila. She then looked into his record and checked whether he
might have had an electronic ticket but she could not ;nd any. For failure to ;nd
any other relevant information regarding Fernando's return ticket, she then
printed out Jesus Fernando's PNR and gave the document to the US Immigration
OSicer. Linda Puntawongdaycha insisted that she did her best to help Jesus
Fernando get through the US Immigration. 15

b.) The departure from the Los Angeles Airport on January 29, 2002.

On January 29, 2002, the Fernandos took Northwest for their qight back to Manila.
In the trip, the Fernandos used electronic tickets but the tickets were dated
January 26, 2002 and August 21, 2001. They reached the boarding gate few
minutes before departure. Northwest personnel Linda Tang was then the one
assigned at the departure area. As a standard procedure, Linda Tang scanned the
boarding passes and collected tickets while the passengers went through the gate.
When the Fernandos presented their boarding passes, Linda Tang asked for their
tickets because there were no tickets stapled on their boarding passes. She
explained that even though the Fernandos had electronic tickets, they had made
"several changes on their ticket over and over". And when they made the
booking/reservation at Northwest, they never had any ticket number or
information on the reservation.16

When the Fernandos failed to show their tickets, Linda Tang called Yong who was
a supervisor at the ticket counter to verify whether the Fernandos had checked in,
and whether there were any tickets found at the ticket counter. Upon veri;cation,
no ticket was found at the ticket counter, so apparently when the Fernandos
checked in, there were no tickets presented. Linda Tang also checked with the
computer the reservation of the Fernandos, but again, she failed to see any
electronic ticket number of any kind, and/or any ticket record. So as the Fernandos
would be able to get on with the qight considering the amount of time left, she told
them that they could purchase tickets with their credit cards and deal with the
refund later when they are able to locate the tickets and when they reach Manila.
Linda Tang believed that she did the best she could under the circumstances. 17

However, the Fernandos did not agree with the solution oSered by Linda Tang.
Instead, they went back to the Northwest ticket counter and were attended to by
Jeanne Meyer who was "courteous" and "was very kind enough" to assist them.
Jeanne Meyer veri;ed their bookings and "printed paper tickets" for them.
Unfortunately, when they went back to the boarding gate, the plane had departed.
Northwest oSered alternative arrangements for them to be transported to Manila
on the same day on another airline, either through Philippine Airlines or Cathay
Paci;c Airways, but they refused. Northwest also oSered them free hotel
accommodations but they, again, rejected the oSer 18 Northwest then made
arrangements for the transportation of the Fernandos from the airport to their
house in LA, and booked the Fernandos on a Northwest qight that would leave the
next day, January 30, 2002. On January 30, 2002, the Fernandos qew to Manila on
business class seats.19

On April 30, 2002, a complaint for damages 20 was instituted by the Fernandos
against Northwest before the RTC, Branch 97, Quezon City. During the trial of the
case, the Fernandos testi;ed to prove their claim. On the part of Northwest, Linda
Tang-Mochizuki and Linda Puntawongdaycha testi;ed through oral depositions
taken at the OSice of the Consulate General, Los Angeles City. The Northwest
Manager for HR-Legal Atty. Cesar Veneracion was also presented and testi;ed on
the investigation conducted by Northwest as a result of the letters sent by
Elizabeth Fernando and her counsel prior to the ;ling of the complaint before the
RTC.21

On September 9, 2008, the RTC issued a Decision, the dispositive portion of which
states, thus:

WHEREFORE, in view of the foregoing, this Court rendered judgment in favor of

the plaintiSs and against defendant ordering defendant to pay the plaintiSs, the
following:

1. Moral damages in the amount of Two Hundred Thousand Pesos

(₱200,000.00);

2. Actual or compensatory damages in the amount of Two Thousand

US Dollars ($2,000.00) or its corresponding Peso equivalent at the
time the airline ticket was purchased;

3. Attorney's fees in the amount of Fifty Thousand pesos (₱50,000.00);

and,

4. Cost of suit.

SO ORDERED.22
Both parties ;led their respective appeals which were dismissed by the CA in a
Decision dated August 30, 2013, and aSirmed the RTC Decision.

The Fernandos and Northwest separately ;led motions for a reconsideration of the
Decision, both of which were denied by the CA on March 31, 2014.

The Fernandos ;led a petition for review on certiorari23before this court docketed
as G.R. No. 212038. Northwest followed suit and its petition 24 was docketed as
G.R. No. 212043. Considering that both petitions involved similar parties,
emanated from the same Civil Case No. Q-N-02-46727 and assailed the same CA
judgment, they were ordered consolidated in a Resolution 25 dated June 18, 2014.

In G.R. No. 212038, the Fernandos raised the following issues:

WHETHER OR NOT THE ACTS OF THE PERSONNEL AND THAT OF DEFENDANT

NORTHWEST ARE WANTON, MALICIOUS, RECKLESS, DELIBERATE AND
OPPRESSIVE IN CHARACTER, AMOUNTING TO FRAUD AND BAD FAITH;

WHETHER OR NOT PETITIONER SPOUSES ARE ENTITLED TO MORAL

DAMAGES IN AN AMOUNT MORE THAN THAT AWARDED BY THE TRIAL
COURT;

WHETHER OR NOT DEFENDANT NORTHWEST IS LIABLE TO PETITIONER

SPOUSES FOR EXEMPLARY DAMAGES; [AND]

WHETHER OR NOT THE PETITIONER SPOUSES ARE ENTITLED TO

ATTORNEY'S FEES IN AN AMOUNT MORE THAN THAT AWARDED BY THE
TRIAL COURT.26

In G.R. No. 212043, Northwest anchored its petition on the following assigned
errors:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT

NORTHWEST COMMITTED A BREACH OF CONTRACT OF CARRIAGE;

II

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT

NORTHWEST IS LIABLE FOR DAMAGES AND THE AWARDS FOR MORAL
DAMAGES AND ATTORNEY'S FEES ARE APPROPRIATE;

III

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT

NORTHWEST IS NOT ENTITLED TO RECOVER ON ITS COUNTERCLAIMS. 27

The Issues
The arguments proSered by the parties can be summed up into the following
issues: (1) whether or not there was breach of contract of carriage and whether it
was done in a wanton, malevolent or reckless manner amounting to bad faith; (2)
whether or not Northwest is liable for the payment of moral damages and
attorney's fees and whether it is liable to pay more than that awarded by the RTC;
(3) whether or not Northwest is liable for the payment of exemplary damages; and
(4) whether or not Northwest Airlines is entitled to recover on its counterclaim.

In their petition, the Fernandos contended that it was the personal misconduct,
gross negligence and the rude and abusive attitude of Northwest employees Linda
Puntawongdaycha and Linda Tang which subjected them to indignities, humiliation
and embarrassment. The attitude of the aforesaid employees was wanton and
malevolent allegedly amounting to fraud and bad faith. According to the
Fernandos, if only Linda Puntawongdaycha had taken the time to verify the validity
of the ticket in the computer, she would have not given the wrong information to
the Immigration OSicer because the August 2001 return ticket remained unused
and valid for a period of one (1) year, or until August 2002. The wrong information
given by Linda Puntawongdaycha aroused doubts and suspicions on Jesus
Fernando's travel plans. The latter was then subjected to two (2) hours of
questioning which allegedly humiliated him. He was even suspected of being an
"illegal alien". The negligence of Linda Puntawongdaycha was allegedly so gross
and reckless amounting to malice or bad faith.

As to the second incident, the Fernandos belied the accusation of Northwest that
they did not present any tickets. They presented their electronic tickets which
were attached to their boarding passes. If they had no tickets, the personnel at the
check-in counter would have not issued them their boarding passes and baggage
claim stubs. That's why they could not understand why the coupon-type ticket was
still demanded by Northwest.

On the award of moral damages, the Fernandos referred to the testimony of

Elizabeth Fernando that she could not sleep and had a fever the night after the
second incident. Thus, the Fernandos demanded that they should be given more
than the "token amount" granted by the RTC which was aSirmed by the CA. They
stated that their status in the society and in the business circle should also be
considered as a factor in awarding moral damages. They averred that they are
well-known in the musical instruments and sports equipment industry in the
country being the owners of JB Music and JB Sports with outlets all over the
country. They own hotels, a chain of apartelles and a parking garage building in
Indiana, USA. And since the breach of contract allegedly amounted to fraud and
bad faith, they likewise demanded for the payment of exemplary damages and
attorney's fees more than the amount awarded by the RTC.

On the other hand, Northwest stated in its petition that Linda Puntawongdaycha
tried her best to help Jesus Fernando get through the US Immigration.
Notwithstanding that Linda Puntawongdaycha was not able to ;nd any relevant
information on Jesus Fernando's return ticket, she still went an extra mile by
printing the PNR of Jesus Fernando and handling the same personally to the
Immigration OSicer. It pointed out that the Immigration OSicer "noticed in the
ticket that it was dated sometime August 20 or 21, 2001, although it was already
December 2001."

As to the incident with Linda Tang, Northwest explained that she was only
following Northwest standard boarding procedures when she asked the Fernandos
for their tickets even if they had boarding passes. Thus, the conduct cannot be
construed as bad faith. The dates indicated on the tickets did not match the
booking. Elizabeth Fernando was using an electronic ticket dated August 21, 2001,
while the electronic ticket of Jesus Fernando was dated January 26, 2002.
According to Northwest, even if the Fernandos had electronic tickets, the same did
not discount the fact that, on the face of the tickets, they were for travel on past
dates. Also, the electronic tickets did not contain the ticket number or any
information regarding the reservation. Hence, the alleged negligence of the
Fernandos resulted in the confusion in the procedure in boarding the plane and the
eventual failure to take their qight.

Northwest averred that the award of moral damages and attorney's fees were
exorbitant because such must be proportionate to the suSering inqicted. It argued
that it is not obliged to give any "special treatment" to the Fernandos just because
they are good clients of Northwest, because the supposed obligation does not
appear in the contract of carriage. It further averred that it is entitled to its
counterclaim in the amount of ₱500,000.00 because the Fernandos allegedly acted
in bad faith in prosecuting the case which it believed are baseless and unfounded.

In the Comment28 of Northwest, it insisted that assuming a mistake was committed

by Linda Tang and Linda Puntawongdaycha, such mistake alone, without malice or
ill will, is not equivalent to fraud or bad faith that would entitle the Fernandos to
the payment of moral damages.

In the Reply29 of the Fernandos, they asserted that it was a lie on the part of Linda
Puntawongdaycha to claim that she checked the passenger name or PNR of Jesus
Fernando from the computer and, as a result, she was not allegedly able to ;nd
any return ticket for him. According to Jesus Fernando, Linda Puntawongdaycha
merely looked at his ticket and declared the same to be invalid. The Fernandos
reiterated that after Jesus Fernando was released by the US Immigration Service,
Elizabeth Fernando proceeded to a Northwest Ticket counter to verify the status of
the ticket. The personnel manning the counter courteously assisted her and
con;rmed that the ticket remained unused and perfectly valid. The personnel
merely punched the Elite Platinum World Perks Card number of Jesus Fernando
and was able to verify the status of the ticket. The Fernandos further argued that if
there was a discrepancy with the tickets or reservations, they would not have been
allowed to check in, and since they were allowed to check in then they were
properly booked and were con;rmed passengers of Northwest.

Our Ruling

We ;nd merit in the petition of the Spouses Jesus and Elizabeth Fernando. The
Fernandos' cause of action against Northwest stemmed from a breach of contract
of carriage. A contract is a meeting of minds between two persons whereby one
agrees to give something or render some service to another for a consideration.
There is no contract unless the following requisites concur: (1) consent of the
contracting parties; (2) an object certain which is the subject of the contract; and
(3) the cause of the obligation which is established. 30

A contract of carriage is de;ned as one whereby a certain person or association of

persons obligate themselves to transport persons, things, or goods from one place
to another for a ;xed price. Under Article 1732 of the Civil Code, this "persons,
corporations, ;rms, or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation,
oSering their services to the public" is called a common carrier. 31 Undoubtedly, a
contract of carriage existed between Northwest and the Fernandos. They
voluntarily and freely gave their consent to an agreement whose object was the
transportation of the Fernandos from LA to Manila, and whose cause or
consideration was the fare paid by the Fernandos to Northwest. 32

In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a ticket to a
passenger con;rmed for a particular qight on a certain date, a contract of carriage
arises. The passenger then has every right to expect that he would qy on that qight
and on that date. If he does not, then the carrier. opens itself to a suit for breach of
contract of carriage.34

When Northwest con;rmed the reservations of the Fernandos, it bound itself to

transport the Fernandos on their qight on 29 January 2002.

We note that the witness35 of Northwest admitted on cross-examination that based

on the documents submitted by the Fernandos, they were con;rmed

passengers on the January 29, 2002 qight. 36

In an action based on a breach of contract of carriage, the aggrieved party does

not have to prove that the common carrier was at fault or was negligent. All that
he has to prove is the existence of the contract and the fact of its non-performance
by the carrier.37 As the aggrieved party, the Fernandos only had to prove the
existence of the contract and the fact of its non-performance by Northwest, as
carrier, in order to be awarded compensatory and actual damages. 38

Therefore, having proven the existence of a contract of carriage between

Northwest and the Fernandos, and the fact of non-performance by Northwest of its
obligation as a common carrier, it is clear that Northwest breached its contract of
carriage with the Fernandos. Thus, Northwest opened itself to claims for
compensatory, actual, moral and exemplary damages, attorney's fees and costs of
suit.39

Moreover, Article 1733 of the New Civil Code provides that common carriers, from
the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
Also, Article 1755 of the same Code states that a common carrier is bound to carry
the passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with due regard for all the
circumstances.

We, thus, sustain the ;ndings of the CA and the RTC that Northwest committed a
breach of contract "in failing to provide the spouses with the proper assistance to
avoid any inconvenience" and that the actuations of Northwest in both subject
incidents "fall short of the utmost diligence of a very cautious person expected of
it". Both ruled that considering that the Fernandos are not just ordinary
passengers but, in fact, frequent qyers of Northwest, the latter should have been
more courteous and accommodating to their needs so that the delay and
inconveniences they suSered could have been avoided. Northwest was remiss in its
duty to provide the proper and adequate assistance to them.

Nonetheless, We are not in accord with the common ;nding of the CA and the RTC
when both ruled out bad faith on the part of Northwest. While We agree that the
discrepancy between the date of actual travel and the date appearing on the
tickets of the Fernandos called for some veri;cation, however, the Northwest
personnel failed to exercise the utmost diligence in assisting the Fernandos. The
actuations of Northwest personnel in both subject incidents are constitutive of bad
faith.

On the ;rst incident, Jesus Fernando even gave the Northwest personnel the
number of his Elite Platinum World Perks Card for the latter to access the ticket
control record with the airline's computer for her to see that the ticket is still valid.
But Linda Puntawongdaycha refused to check the validity of the ticket in the
computer. As a result, the Immigration OSicer brought Jesus Fernando to the
interrogation room of the INS where he was interrogated for more than two (2)
hours. When he was ;nally cleared by the Immigration OSicer, he was granted
only a twelve (12)-day stay in the United States (US), instead of the usual six (6)
months.40

As in fact, the RTC awarded actual or compensatory damages because of the

testimony of Jesus Fernando that he had to go back to Manila and then return
again to LA, USA, two (2) days after requiring him to purchase another round trip
ticket from Northwest in the amount of $2,000.00 which was not disputed by
Northwest.41 In ignoring Jesus Fernando's pleas to check the validity of the tickets
in the computer, the Northwest personnel exhibited an indiSerent attitude without
due regard for the inconvenience and anxiety Jesus Fernando might have
experienced.

Passengers do not contract merely for transportation. They have a right to be

treated by the carrier's employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any
rule or discourteous conduct on the part of employees towards a passenger gives
the latter an action for damages against the carrier. 42

In requiring compliance with the standard of extraordinary diligence, a standard

which is, in fact, that of the highest possible degree of diligence, from common
carriers and in creating a presumption of negligence against them, the law seeks
to compel them to control their employees, to tame their reckless instincts and to
force them to take adequate care of human beings and their property. 43

Notably, after the incident, the Fernandos proceeded to a Northwest Ticket

counter to verify the status of the ticket and they were assured that the ticked
remained unused and perfectly valid. And, to avoid any future problems that may
be encountered on the validity of the ticket, a new ticket was issued to Jesus
Fernando. The failure to promptly verify the validity of the ticket connotes bad
faith on the part of Northwest.
conscious doing of a wrong
Bad faith does not simply connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong. It
means breach of a known duty through some motive, interest or ill will that
partakes of the nature of fraud. A ;nding of bad faith entitles the oSended party to
moral damages.44

As to the second incident, there was likewise fraud or bad faith on the part of
Northwest when it did not allow the Fernandos to board their qight for Manila on
January 29, 2002, in spite of con;rmed tickets. We need to stress that they have
con;rmed bookings on Northwest Airlines NW Flight No. 001 for Narita, Japan and
NW 029 for Manila. They checked in with their luggage at LA Airport and were
given their respective boarding passes for business class seats and claim stubs for
six (6) pieces of luggage. With boarding passes and electronic tickets, apparently,
they were allowed entry to the departure area; and, they eventually joined the long
queue of business class passengers along with their business associates.

However, in the presence of the other passengers, Northwest personnel Linda

Tang pulled the Fernandos out of the queue and asked for paper tickets (coupon
type). Elizabeth Fernando explained to Linda Tang that the matter could be sorted
out by simply verifying their electronic tickets in her computer and all she had to
do was click and punch in their Elite Platinum World Perks Card number. Again,
the Northwest personnel refused to do so; she, instead, told them to pay for new
tickets so they could board the plane. Hence, the Fernandos rushed to the
Northwest Airline Ticket counter to clarify the matter. They were assisted by
Northwest personnel Jeanne Meyer who retrieved their control number from her
computer and was able to ascertain that the Fernandos' electronic tickets were
valid, and they were con;rmed passengers on both NW Flight No. 001 for Narita
Japan and NW 029 for Manila on that day.

In Ortigas, Jr. v. Lufthansa German Airlines, 45 this Court declared that "(i)n
contracts of common carriage, in attention and lack of care on the part of the
carrier resulting in the failure of the passenger to be accommodated in the class
contracted for amounts to bad faith or fraud which entitles the passengers to the
award of moral damages in accordance with Article 2220 of the Civil Code."

In Pan American World Airways, Inc. v. Intermediate Appellate Court, 46 where a

would-be passenger had the necessary ticket, baggage claim and clearance from
immigration, all clearly and unmistakably showing that she was, in fact, included in
the passenger manifest of said qight, and yet was denied accommodation in said
hight, this Court did not hesitate to aSirm the lower court's ;nding awarding her
damages on the ground that the breach of contract of carriage amounted to bad
faith.47 For the indignity and inconvenience of being refused a con;rmed seat on
the last minute, said passenger is entitled to an award of moral damages. 48

In this case, We need to stress that the personnel who assisted the Fernandos even
printed coupon tickets for them and advised them to rush back to the boarding
gates since the plane was about to depart. But when the Fernandos reached the
boarding gate, the plane had already departed. They were able to depart, instead,
the day after, or on January 30, 2002.

In Japan Airlines v. Jesus Simangan,49 this Court held that the acts committed by
Japan Airlines against Jesus Simangan amounted to bad faith, thus:

x x x JAL did not allow respondent to qy. It informed respondent that there was
a need to irst check the authenticity of his travel documents with the U.S.
Embassy. As admitted by JAL, "the qight could not wait for Mr. Simangan because
it was ready to depart."

Since JAL de;nitely declared that the qight could not wait for respondent, it gave
respondent no choice but to be left behind. The latter was unceremoniously
bumped oS despite his protestations and valid travel documents and
notwithstanding his contract of carriage with JAL. Damage had already been
done when respondent was oaered to hy the next day on July 30, 1992. Said
oaer did not cure JAL's default.50

Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 51 where private

respondent was not allowed to board the plane because her seat had already been
given to another passenger even before the allowable period for passengers to
check in had lapsed despite the fact that she had a conirmed ticket and she
had arrived on time, this Court held that petitioner airline acted in bad faith in
violating private respondent's rights under their contract of carriage and is,
therefore, liable for the injuries she has sustained as a result. 52

Under Article 222053 of the Civil Code of the Philippines, an award of moral
damages, in breaches of contract, is in order upon a showing that the defendant
acted fraudulently or in bad faith.54 Clearly, in this case, the Fernandos are entitled
to an award of moral damages. The purpose of awarding moral damages is to
enable the injured party to obtain means, diversion or amusement that will serve to
alleviate the moral suSering he has undergone by reason of defendant's culpable
action.55

We note that even if both the CA and the RTC ruled out bad faith on the part of
Northwest, the award of "some moral damages" was recognized. Both courts
believed that considering that the Fernandos are good clients of Northwest for
almost ten (10) years being Elite Platinum World Perks Card holders, and are
known in their business circle, they should have been given by Northwest the
corresponding special treatment.56 They own hotels and a chain of apartelles in the
country, and a parking garage building in Indiana, USA. From this perspective, We
adopt the said view. We, thus, increase the award of moral damages to the
Fernandos in the amount of ₱3,000,000.00.

As held in Kierulf v. Court of Appeals,57 the social and ;nancial standing of a

claimant may be considered if he or she was subjected to contemptuous conduct
despite the oSender's knowledge of his or her social and ;nancial standing.

In Trans World Airlines v. Court of Appeals, 58 this Court considered the social
standing of the aggrieved passenger:

At the time of this unfortunate incident, the private respondent was a practicing
lawyer, a senior partner of a big law irm in Manila. He was a director of
several companies and was active in civic and social organizations in the
Philippines. Considering the circumstances of this case and the social standing
of private respondent in the community, he is entitled to the award of moral
and exemplary damages. x x x This award should be reasonably suSicient to
indemnify private respondent for the humiliation and embarrassment that
he suaered and to serve as an example to discourage the repetition of
similar oppressive and discriminatory acts.59

Exemplary damages, which are awarded by way of example or correction for the
public good, may be recovered in contractual obligations, if defendant acted in
wanton, fraudulent, reckless, oppressive, or malevolent manner. 60 They are
designed by our civil law to permit the courts to reshape behavior that is socially
deleterious in its consequence by creating negative incentives or deterrents
against such behavior.61 Hence, given the facts and circumstances of this case, We
hold Northwest liable for the payment of exemplary damages in the amount of
₱2,000,000.00.

In the case of Northwest Airlines, Inc. v. Chiong,62 Chiong was given the run-
around at the Northwest check-in counter, instructed to deal with a man
in barong to obtain a boarding pass, and eventually barred from boarding a
Northwest qight to accommodate an American passenger whose name was merely
inserted in the Flight Manifest, and did not even personally check-in at the
counter. Under the foregoing circumstances, the award of moral and exemplary
damages was given by this Court.

Time and again, We have declared that a contract of carriage, in this case, air
transport, is primarily intended to serve the traveling public and thus, imbued with
public interest. The law governing common carriers consequently imposes an
exacting standard of conduct.63 A contract to transport passengers is quite
diSerent in kind and degree from any other contractual relation 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
oSers. 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 or damages. 64
As to the payment of attorney's fees, We sustain the award thereof on the ground
that the Fernandos were ultimately compelled to litigate and incurred expenses to
protect their rights and interests, and because the Fernandos are entitled to an
award for exemplary damages. Pursuant to Article 2208 of the Civil Code,
attorney's fees may be awarded when exemplary damages are awarded, or a party
is compelled to litigate or incur expenses to protect his interest, or where the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiS's
plainly valid, just and demandable claim.

Records show that the Fernandos demanded payment for damages from Northwest
even before the ;ling of this case in court.1âwphi1 Clearly, the Fernandos were
forced to obtain the services of counsel to enforce a just claim, for which they
should be awarded attorney's fees.65 We deem it just and equitable to grant an
award of attorney's fees equivalent to 10% of the damages awarded.

Lastly, the counterclaim of Northwest in its Answer66 is a compulsory counterclaim

for damages and attorney's fees arising from the ;ling of the complaint. This
compulsory counterclaim of Northwest arising from the ;ling of the complaint may
not be granted inasmuch as the complaint against it is obviously not malicious or
unfounded. It was ;led by the Fernandos precisely to claim their right to damages
against Northwest. Well-settled is the rule that the commencement of an action
does not per se make the action wrongful and subject the action to damages, for
the law could not have meant to impose a penalty on the right to litigate. 67

WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated
March 31, 2014 of the Court of Appeals, in CA-G.R. CV No. 93496 are
hereby AFFIRMED WITH MODIFICATION. The award of moral damages and
attorney's fees are hereby increased to ₱3,000,000.00 and ten percent (10%) of the
damages awarded, respectively. Exemplary damages in the amount of
₱2,000,000.00 is also awarded. Costs against Northwest Airlines.

The total amount adjudged shall earn legal interest at the rate of twelve percent
(12%) per annum computed from judicial demand or from April 30, 2002 to June 30
2013, and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

SO ORDERED.
*
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