G.R. No. 170141. April 22, 2008.
* RTC and CA, was that JAL personnel imputed that respondent would only use the
JAPAN AIRLINES, petitioner, vs. JESUS SIMANGAN, respondent.
Appeals; The findings of fact of the Court of Appeals are final and conclusive
and cannot be reviewed on appeal to the Supreme Court provided they are based on
substantial evidence; Exceptions.—We are not a trier of facts. We generally rely
upon, and are bound by, the conclusions on this matter of the lower courts, which are
better equipped and have better opportunity to assess the evidence first-hand,
including the testimony of the witnesses. We have repeatedly held that the findings
of fact of the CA are final and conclusive and cannot be reviewed on appeal to the
Supreme Court provided they are based on substantial evidence. We have no
jurisdiction, as a rule, to reverse their findings. Among the exceptions to this rule are:
(a) when the conclusion is a finding grounded entirely on speculations, surmises or
conjectures; (b) when the inference made is manifestly mistaken, absurd or
impossible; (c) where there is grave abuse of discretion; (d) when the judgment is
based on a misapprehension of facts; (e) when the findings of facts are conflicting;
(f) when the CA, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee.
_______________
* THIRD DIVISION.
342
342 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
Common Carriers; Air Transportation; Where a passenger, despite his
protestations and valid travel documents, was unceremoniously bumped off by the
airlines, damage was already done when he was offered to fly the next day, which
offer did not cure the airline’s default.—JAL did not allow respondent to fly. It
informed respondent that there was a need to first check the authenticity of his travel
documents with the U.S. Embassy. As admitted by JAL, “the flight could not wait
for Mr. Simangan because it was ready to depart.” Since JAL definitely declared that
the flight could not wait for respondent, it gave respondent no choice but to be left
behind. The latter was unceremoniously bumped off despite his protestations and
valid travel documents and notwithstanding his contract of carriage with JAL.
Damage had already been done when respondent was offered to fly the next day on
July 30, 1992. Said offer did not cure JAL’s default.
Same; Same; Novation; Since novation implies a waiver of the right the
creditor had before the novation, such waiver must be express.—Considering that
respondent was forced to get out of the plane and left behind against his will, he
could not have freely consented to be rebooked the next day. In short, he did not
agree to the alleged novation. Since novation implies a waiver of the right the
creditor had before the novation, such waiver must be express. It cannot be supposed,
without clear proof, that respondent had willingly done away with his right to fly on
July 29, 1992. Moreover, the reason behind the bumping off incident, as found by the
trip to the United States as a pretext to stay and work in Japan.
Same; Same; A common carrier ought to know the kind of valid documents a
passenger carries.—Apart from the fact that respondent’s plane ticket, boarding
pass, travel authority and personal articles already passed the rigid immigration and
security routines, JAL, as a common carrier, ought to know the kind of valid travel
documents respondent carried. As provided in Article 1755 of the New Civil Code:
“A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances.” Thus, We find untenable JAL’s defense of
“verification of respondent’s documents” in its breach of contract of carriage. It
bears repeating that the power to admit or not an alien into343
VOL. 552, APRIL 22, 2008 343
Japan Airlines vs. Simangan
the country is a sovereign act which cannot be interfered with even by JAL.
Same; Same; Breach of Contract; Requisites.—In an action for breach of
contract of carriage, all that is required of plaintiff is to prove the existence of such
contract and its non-performance by the carrier through the latter’s failure to carry
the passenger safely to his destination. Respondent has complied with these twin
requisites.
Same; Same; Same; Damages; As a general rule, moral damages are not
recoverable in actions for damages predicated on a breach of contract for it is not
one of the items enumerated under Article 2219 of the Civil Code, except in cases in
which the mishap results in the death of a passenger, and in the cases in which the
carrier is guilty of fraud or bad faith, as provided in Article 2220.—As a general
rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract for it is not one of the items enumerated under Article 2219 of the
Civil Code. As an exception, such damages are recoverable: (1) in cases in which the
mishap results in the death of a passenger, as provided in Article 1764, in relation to
Article 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty
of fraud or bad faith, as provided in Article 2220. The acts committed by JAL against
respondent amounts to bad faith. As found by the RTC, JAL breached its contract of
carriage with respondent in bad faith. JAL personnel summarily and insolently
ordered respondent to disembark while the latter was already settled in his assigned
seat. He was ordered out of the plane under the alleged reason that the genuineness
of his travel documents should be verified.
Same; Same; Same; Same; It is firmly settled that moral damages are
recoverable in suits predicated on breach of a contract of carriage where it is
proved that the carrier was guilty of fraud or bad faith—inattention to and lack of
care for the interests of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles the
passenger to an award of moral damages.—Clearly, JAL is liable for moral
damages. It is firmly settled that moral damages are recoverable in suits predicated
on breach of a contract of carriage where it is proved that the carrier was guilty of
1
fraud or bad faith, as in this case. Inattention to and lack of care for the interests of its
passengers who are 344
344 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
entitled to its utmost consideration, particularly as to their convenience,
amount to bad faith which entitles the passenger to an award of moral damages.
What the law considers as bad faith which may furnish the ground for an award of
moral damages would be bad faith in securing the contract and in the execution
thereof, as well as in the enforcement of its terms, or any other kind of deceit.
Same; Same; Same; Same; Exemplary damages are designed by our civil law
to permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behaviour.—
JAL is also liable for exemplary damages as its above-mentioned acts constitute
wanton, oppressive and malevolent acts against respondent. Exemplary damages,
which are awarded by way of example or correction for the public good, may be
recovered in contractual obligations, as in this case, if defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner. Exemplary damages are
designed by our civil law to permit the courts to reshape behaviour that is socially
deleterious in its consequence by creating negative incentives or deterrents against
such behaviour. In requiring compliance with the standard of extraordinary diligence,
a standard which is, in fact, that of the highest possible degree of diligence, from
common carriers and in creating a presumption of negligence against them, the law
seeks to compel them to control their employees, to tame their reckless instincts and
to force them to take adequate care of human beings and their property.
Same; Same; Same; Same; Passengers have a right to be treated by the
carrier’s employees with kindness, respect, courtesy and due consideration and are
entitled to be protected against personal misconduct, injurious language, indignities
and abuses from such employees.—Neglect or malfeasance of the carrier’s
employees could give ground for an action for damages. Passengers have a right to
be treated by the carrier’s employees with kindness, respect, courtesy and due
consideration and are entitled to be protected against personal misconduct, injurious
language, indignities and abuses from such employees.
Same; Same; Same; Same; Attorney’s Fees; Words and Phrases; In its
extraordinary concept, an attorney’s fee is an indemnity for damages ordered by the
court to be paid by the losing party in a litigation, and is payable not to the lawyer
but to the client, unless 345
VOL. 552, APRIL 22, 2008 345
Japan Airlines vs. Simangan
they have agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof—the amount may be recovered as actual or
compensatory damages when exemplary damages are awarded and whenever the
court deems it just and equitable.—With respect to attorney’s fees, they may be
awarded when defendant’s act or omission has compelled plaintiff to litigate with
third persons or to incur expenses to protect his interest. The Court, in Construction
Development Corporation of the Philippines v. Estrella, 501 SCRA 228 (1997)
citing Traders Royal Bank Employees Union-Independent v. National Labor
Relations Commission, 269 SCRA 733 (1997) elucidated thus: There are two
commonly accepted concepts of attorney’s fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney’s fee is the reasonable
compensation paid to a lawyer by his client for the legal services he has rendered to
the latter. The basis of this compensation is the fact of his employment by and his
agreement with the client. In its extraordinary concept, an attorney’s fee is an
indemnity for damages ordered by the court to be paid by the losing party in a
litigation. The basis of this is any of the cases provided by law where such award can
be made, such as those authorized in Article 2208, Civil Code, and is payable not to
the lawyer but to the client, unless they have agreed that the award shall pertain to
the lawyer as additional compensation or as part thereof. It was therefore erroneous
for the CA to delete the award of attorney’s fees on the ground that the record is
devoid of evidence to show the cost of the services of respondent’s counsel. The
amount is actually discretionary upon the Court so long as it passes the test of
reasonableness. They may be recovered as actual or compensatory damages when
exemplary damages are awarded and whenever the court deems it just and equitable,
as in this case.
Interests; When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether the case falls under paragraph
1 or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.—The above liabilities of JAL in the total amount of
P800,000.00 earn legal interest pursuant to the Court’s ruling in Construction
Development Corporation of the Philippines v. Estrella, 501 SCRA 228 (2006)
citing Eastern Shipping Lines, Inc. v. Court of Appeals, 234  SCRA 78 (1994) to wit:
Regarding the imposition of legal interest at the rate of 6% from the time of the filing
of the complaint, we held in Eastern Shipping Lines, Inc. v. Court of Ap-346
346 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
peals, that when an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory damages,
subject to the following rules, to wit—1. When the obligation is breached, and it
consists in the payment of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is judicially demanded. 
In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject
to the provisions of Article 1169 of the Civil Code. x x x 3. When the judgment of
the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim
2
period being deemed to be by then an equivalent to a forbearance of credit.
(Emphasis supplied and citations omitted) Accordingly, in addition to the said total
amount of P800,000.00, JAL is liable to pay respondent legal interest. Pursuant to
the above ruling of the Court, the legal interest is 6% and it shall be reckoned from
September 21, 2000 when the RTC rendered its judgment. From the time this
Decision becomes final and executory, the interest rate shall be 12% until its
satisfaction.
Actions; Counterclaims; Damages; 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; If damages result from a party’s exercise of a right, it is damnum
absque injuria.—This compulsory counterclaim of JAL arising from the filing of the
complaint may not be granted inasmuch as the complaint against it is obviously not
malicious or unfounded. It was filed by respondent precisely to claim his right to
damages against JAL. Well-settled is the rule that the commencement of an action
does not per se make the action wrongful and subject the action to damages, for the
law could not have meant to impose a penalty on the right to litigate. We reiterate
case law that if damages result from a party’s exercise of a right, it is damnum
absque injuria. Lawful acts give rise to no injury. Walang perhuwisyong maaring
idulot ang paggamit sa sariling karapatan.347
VOL. 552, APRIL 22, 2008 347
Japan Airlines vs. Simangan
Same; Pleadings and Practice; When issues not raised by the pleadings are
tried with the express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings.—During the trial, however, JAL
presented a witness who testified that JAL suffered further damages. Allegedly,
respondent caused the publications of his subject complaint against JAL in the
newspaper for which JAL suffered damages. Although these additional damages
allegedly suffered by JAL were not incorporated in its Answer as they arose
subsequent to its filing, JAL’s witness was able to testify on the same before the
RTC. Hence, although these issues were not raised by the pleadings, they shall be
treated in all respects as if they had been raised in the pleadings. As provided in
Section 5, Rule 10 of the Rules of Court, “(w)hen issues not raised by the pleadings
are tried with the express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings.”
Freedom of Expression; Libel; The publication of a passenger’s complaint
about his being bumped off involves matters about which the public has the right to
be informed because they relate to a public issue and could not be the basis for a
claim for damages.—JAL is a common carrier. JAL’s business is mainly with the
traveling public. It invites people to avail themselves of the comforts and advantages
it offers. Since JAL deals with the public, its bumping off of respondent without a
valid reason naturally drew public attention and generated a public issue. The
publications involved matters about which the public has the right to be informed
because they relate to a public issue. This public issue or concern is a legitimate topic
of a public comment that may be validly published. Assuming that respondent,
indeed, caused the publication of his complaint, he may not be held liable for
damages for it. The constitutional guarantee of freedom of the speech and of the
press includes fair commentaries on matters of public interest.
Same; Same; Even though an airline is not a public official, the rule on
privileged commentaries on matters of public interest applies to it.—Even though
JAL is not a public official, the rule on privileged commentaries on matters of public
interest applies to it. The privilege applies not only to public officials but extends to a
great variety of subjects, and includes matters of public concern, public men, and
candidates for office. Hence, pursuant to the Borjal case, 301 SCRA 1 348
348 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
(1999), there must be an actual malice in order that a discreditable imputation
to a public person in his public capacity or to a public official may be actionable. To
be considered malicious, the libelous statements must be shown to have been written
or published with the knowledge that they are false or in reckless disregard of
whether they are false or not. Considering that the published articles involve matters
of public interest and that its expressed opinion is not malicious but based on
established facts, the imputations against JAL are not actionable. Therefore, JAL
may not claim damages for them.
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
   The facts are stated in the opinion of the Court.
  Quisumbing, Torres for petitioner.
  Edgardo V. Cruz for respondent.
REYES, R.T., J.:
WHEN an airline issues a ticket to a passenger confirmed on a particular flight
on a certain date, a contract of carriage arises, and the passenger has every right to
expect that he would fly on that flight and on that date. If he does not, then the carrier
opens itself to a suit for breach of contract of carriage.1
The power to admit or not an alien into the country is a sovereign act which
cannot be interfered with even by Japan Airlines (JAL).2
_______________
1 Yu Eng Cho v. Pan American World Airways, Inc., G.R. No. 123560, March
27, 2000, 328 SCRA 717, 735, citing Alitalia Airways v. Court of Appeals, G.R. No.
77011,  July 24, 1990, 187 SCRA 763, 770.
2 Japan Airlines v. Asuncion, G.R. No. 161730, January 28, 2005, 449 SCRA
544, 548.
349
VOL. 552, APRIL 22, 2008 349
Japan Airlines vs. Simangan
In this petition for review on certiorari,3 petitioner JAL appeals the: (1)
Decision4 dated May 31, 2005 of the Court of Appeals (CA) ordering it to pay
3
respondent Jesus Simangan moral and exemplary damages; and (2) Resolution 5 of
the same court dated September 28, 2005 denying JAL’s motion for reconsideration.
The Facts
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing
cousin, Loreto Simangan, in UCLA School of Medicine in Los Angeles, California,
U.S.A.  Upon request of UCLA, respondent undertook a series of laboratory tests at
the National Kidney Institute in Quezon City to verify whether his blood and tissue
type are compatible with Loreto’s. 6  Fortunately, said tests proved that respondent’s
blood and tissue type were well-matched with Loreto’s.7
Respondent needed to go to the United States to complete his preliminary work-
up and donation surgery. Hence, to facilitate respondent’s travel to the United States,
UCLA wrote a letter to the American Consulate in Manila to arrange for his visa. In
due time, respondent was issued an emergency U.S. visa by the American Embassy
in Manila.8
Having obtained an emergency U.S. visa, respondent purchased a round trip
plane ticket from petitioner JAL for US$1,485.00 and was issued the corresponding
boarding
_______________
3 Under Rule 45 of the 1997 Rules of Civil Procedure. The petition contains a
prayer for the issuance of a temporary restraining order and/or preliminary
injunction.
4 Rollo, pp. 58-65. Penned by Associate Justice Magdangal M. De Leon, with
Associate Justices Salvador J. Valdez, Jr. (now deceased) and Mariano C. Del
Castillo, concurring.
5 Id., at pp. 66-67.
6 Id., at pp. 126-127.
7 Id.
8 Id.
350
350 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
pass.9 He was scheduled to a particular flight bound for Los Angeles, California,
U.S.A. via Narita, Japan.10
On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino
International Airport in the company of several relatives and friends. 11 He was
allowed to check-in at JAL’s counter. 12 His plane ticket, boarding pass, travel
authority and personal articles were subjected to rigid immigration and security
routines.13 After passing through said immigration and security procedures,
respondent was allowed by JAL to enter its airplane.14
While inside the airplane, JAL’s airline crew suspected respondent of carrying a
falsified travel document and imputed that he would only use the trip to the United
States as a pretext to stay and work in Japan. 15 The stewardess asked respondent to
show his travel documents. Shortly after, the stewardess along with a Japanese and a
Filipino haughtily ordered him to stand up and leave the plane. 16 Respondent
protested, explaining that he was issued a U.S. visa. Just to allow him to board the
plane, he pleaded with JAL to closely monitor his movements when the aircraft stops
over in Narita.17 His pleas were ignored. He was then constrained to go out of the
plane.18 In a nutshell, respondent was bumped off the flight.
Respondent went to JAL’s ground office and waited there for three hours.
Meanwhile, the plane took off and he was left
_______________
9  Id., at pp. 59, 128.
10 Id.
11 Id., at p. 127.
12 Id., at p. 59.
13 Id., at p. 62.
14 Id., at pp. 59, 128.
15 Id.
16 Id.
17 Id., at p. 62.
18 Id., at pp. 62, 127-128.
351
VOL. 552, APRIL 22, 2008 351
Japan Airlines vs. Simangan
behind.19 Afterwards, he was informed that his travel documents were, indeed, in
order.20 Respondent was refunded the cost of his plane ticket less the sum of
US$500.00 which was deducted by JAL.21 Subsequently, respondent’s U.S. visa was
cancelled.22
Displeased by the turn of events, respondent filed an action for damages against
JAL with the Regional Trial Court (RTC) in Valenzuela City, docketed as Civil Case
No. 4195-V-93. He claimed he was not able to donate his kidney to Loreto; and that
he suffered terrible embarrassment and mental anguish. 23 He prayed that he be
awarded P3 million as moral damages, P1.5 million as exemplary damages and
P500,000.00 as attorney’s fees.24
JAL denied the material allegations of the complaint. It argued, among others,
that its failure to allow respondent to fly on his scheduled departure was due to “a
need for his travel documents to be authenticated by the United States
Embassy”25 because no one from JAL’s airport staff had encountered a parole visa
before.26 It posited that the authentication required additional time; that respondent
was advised to take the flight the following day, July 30, 1992.  JAL alleged that
respondent agreed to be rebooked on July 30, 1992.27
JAL also lodged a counterclaim anchored on respondent’s alleged wrongful
institution of the complaint. It prayed for litigation expenses, exemplary damages
and attorney’s fees.28
4
_______________ 29 Id., at pp. 60, 129.
30 Id., at pp. 128-129.
19 Id., at pp. 59, 127. 353
20 Id. VOL. 552, APRIL 22, 2008 353
21 Id., at pp. 60, 127.
Japan Airlines vs. Simangan
22 Id.
23 Id. Disagreeing with the RTC judgment, JAL appealed to the CA contending that it
24 Id. is not guilty of breach of contract of carriage, hence, not liable for damages. 31 It
25 Id., at p. 85. posited that it is the one entitled to recover on its counterclaim. 32
26 Id.
27 Id. CA Ruling
28 Id., at pp. 86-87.
352 In a Decision33 dated May 31, 2005, the CA affirmed the decision of the RTC
with modification in that it lowered the amount of moral and exemplary damages and
352 SUPREME COURT REPORTS ANNOTATED deleted the award of attorney’s fees. The fallo of the CA decision reads:
Japan Airlines vs. Simangan “WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION.
On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its Appellant JAPAN AIR LINES is ordered to pay appellee JESUS SIMANGAN the
decision in favor of respondent (plaintiff), disposing as follows: reduced sums, as follows: Five Hundred Thousand Pesos (P500,000.00) as moral
“WHEREFORE, judgment is hereby rendered ordering the defendant to pay the damages, and Two Hundred Fifty Thousand Pesos (P250,000.00) as exemplary
plaintiff the amount of P1,000,000.00 as moral damages, the amount of P500,000.00 damages. The award of attorney’s fees is hereby DELETED.”34
as exemplary damages and the amount of P250,000.00 as attorney’s fees, plus the The CA elucidated that since JAL issued to respondent a round trip plane ticket
cost of suit.”29 for a lawful consideration, “there arose a perfected contract between them.” 35 It
The RTC explained: found that respondent was “haughtily ejected”36 by JAL and that “he was certainly
“In summarily and insolently ordering the plaintiff to disembark while the latter embarrassed and humiliated”37 when, in the presence of other passengers, JAL’s
was already settled in his assigned seat, the defendant violated the contract of airline staff “shouted at him to stand up and arrogantly asked him to produce his
carriage; that when the plaintiff was ordered out of the plane under the pretext that travel papers, without the least courtesy every human being is entitled to;” 38 and that
the genuineness of his travel documents would be verified it had caused him “he was compelled to deplane on the grounds that his papers were fake.”39
embarrassment and besmirched reputation;  and that when the plaintiff was finally _______________
not allowed to take the flight, he suffered more wounded feelings and social
humiliation for which the plaintiff was asking to be awarded moral and exemplary 31 Id., at p. 61.
damages as well as attorney’s fees. 32 Id.
The reason given by the defendant that what prompted them to investigate the 33 Id., at pp. 58-65.
genuineness of the travel documents of the plaintiff was that the plaintiff was not 34 Id., at p. 65.
then carrying a regular visa but just a letter does not appear satisfactory. The 35 Id., at p. 62.
defendant is engaged in transporting passengers by plane from country to country 36 Id.
and is therefore conversant with the travel documents. The defendant should not be 37 Id.
allowed to pretend, to the prejudice of the plaintiff not to know that the travel 38 Id.
documents of the plaintiff are valid documents to allow him entry in the United 39 Id.
States. 354
The foregoing act of the defendant in ordering the plaintiff to deplane while 354 SUPREME COURT REPORTS ANNOTATED
already settled in his assigned seat clearly demonstrated that the defendant breached
its contract of carriage with the plaintiff as passenger in bad faith and as such the Japan Airlines vs. Simangan
plaintiff is entitled to moral and exemplary damages as well as to an award of The CA ratiocinated:
attorney’s fees.”30 “While the protection of passengers must take precedence over convenience, the
_______________ implementation of security measures must be attended by basic courtesies.

5
 In fact, breach of the contract of carriage creates against the carrier a imposition is required by public policy to suppress the wanton acts of the offender.
presumption of liability, by a simple proof of injury, relieving the injured passenger Hence, the sum of P250,000.00 is adequate under the circumstances.
of the duty to establish the fault of the carrier or of his employees; and placing on the The award of P250,000.00 as attorney’s fees lacks factual basis. Appellee was
carrier the burden to prove that it was due to an unforeseen event or to force majeure. definitely compelled to litigate in protecting his rights and in seeking relief from
That appellee possessed bogus travel documents and that he might stay illegally appellant’s misdeeds. Yet, the record is devoid of evidence to show the cost of the
in Japan are allegations without substantiation. Also, appellant’s attempt to rebook services of his counsel and/or the actual expenses incurred in prosecuting his
appellee the following day was too late and did not relieve it from liability.  The action.”43(Citations were omitted)
damage had been done. Besides, its belated theory of novation, i.e., that appellant’s When JAL’s motion for reconsideration was denied, it resorted to the petition at
original obligation to carry appellee to Narita and Los Angeles on July 29, 1992 was bar.
extinguished by novation when appellant agreed that appellee will instead take
appellant’s flight to Narita on the following day, July 30, 1992, deserves little Issues
attention.  It is inappropriate at bar. Questions not taken up during the trial cannot be
raised for the first time on appeal.”40 (Italics ours and citations were omitted) JAL poses the following issues—
Citing Ortigas, Jr. v. Lufthansa German Airlines,41 the CA declared that “(i)n I.
contracts of common carriage, inattention and lack of care on the part of the carrier WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT
resulting in the failure of the passenger to be accommodated in the class contracted RESPONDENT WAS ENTITLED TO MORAL DAMAGES, CONSIDERING
for amounts to bad faith or fraud which entitles the passengers to the award of moral THAT:
damages in accordance with Article 2220 of the Civil Code.”42 _______________
Nevertheless, the CA modified the damages awarded by the RTC. It explained:
“Fundamental in the law on damages is that one injured by a breach of a contract, 43 Id., at p. 64.
or by a wrongful or negligent act or omission shall have a fair and just compensation 356
commensurate to the loss 356 SUPREME COURT REPORTS ANNOTATED
_______________
Japan Airlines vs. Simangan
40 Id., at p. 63. A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT.
41 G.R. No. L-28773, June 30, 1975, 64 SCRA 610. B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF
42 Rollo, p. 63. CONTRACT CASES ONLY WHEN THE BREACH IS ATTENDED BY
355 FRAUD OR BAD FAITH.  ASSUMING ARGUENDO THAT JAL WAS
GUILTY OF BREACH, JAL DID NOT ACT FRAUDULENTLY OR IN
VOL. 552, APRIL 22, 2008 355
BAD FAITH AS TO ENTITLE RESPONDENT TO MORAL DAMAGES.
Japan Airlines vs. Simangan C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH
sustained as consequence of the defendant’s act. Being discretionary on the court, the EFFECTED IN GOOD FAITH FROM ONE ATTENDED BY BAD FAITH.
amount, however, should not be palpably and scandalously excessive. II.
Here, the trial court’s award of P1,000,000.00 as moral damages appears to be WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT
overblown. No other proof of appellee’s social standing, profession, financial RESPONDENT WAS ENTITLED TO EXEMPLARY DAMAGES CONSIDERING
capabilities was presented except that he was single and a businessman. To Us, the THAT:
sum of 500,000.00 is just and fair. For, moral damages are emphatically not intended A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN
to enrich a complainant at the expense of the defendant. They are awarded only to BREACH OF CONTRACT OF CARRIAGE UNLESS THE CARRIER IS
enable the injured party to obtain means, diversion or amusements that will serve to GUILTY OF WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR
alleviate the moral suffering he has undergone, by reason of the defendant’s culpable MALEVOLENT CONDUCT.
action. B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF
Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced BREACH, JAL DID NOT ACT IN A WANTON FRAUDULENT,
to a reasonable level. The award of exemplary damages is designed to permit the RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER AS TO
courts to mould behavior that has socially deleterious consequences and its ENTITLE RESPONDENT TO EXEMPLARY DAMAGES.
III.

6
ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN
AWARD OF DAMAGES, WHETHER OR NOT THE COURT OF APPEALS
AWARD OF P750,000 IN DAMAGES WAS EXCESSIVE AND
UNPRECEDENTED.
IV.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING
FOR JAL ON ITS COUNTERCLAIM.44 (Italics Ours)
_______________
44 Id., at pp. 23-24.
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VOL. 552, APRIL 22, 2008 357
Japan Airlines vs. Simangan
Basically, there are three (3) issues to resolve here: (1) whether or not JAL is
guilty of contract of carriage; (2) whether or not respondent is entitled to moral and
exemplary damages; and (3) whether or not JAL is entitled to its counterclaim for
damages.
Our Ruling
This Court is not a trier of facts.
Chiefly, the issues are factual. The RTC findings of facts were affirmed by the
CA. The CA also gave its nod to the reasoning of the RTC except as to the awards of
damages, which were reduced, and that of attorney’s fees, which was deleted.
We are not a trier of facts. We generally rely upon, and are bound by, the
conclusions on this matter of the lower courts, which are better equipped and have
better opportunity to assess the evidence first-hand, including the testimony of the
witnesses.45
We have repeatedly held that the findings of fact of the CA are final and
conclusive and cannot be reviewed on appeal to the Supreme Court provided they are
based on substantial evidence. 46 We have no jurisdiction, as a rule, to reverse their
findings.47 Among the exceptions to this rule are: (a) when the conclusion is a finding
grounded entirely on speculations, surmises or conjectures; (b) when the inference
made is manifestly mistaken, absurd or impossible; (c) where there is grave
_______________
45 Malaysian Airline System v. Court of Appeals, G.R. No. L-78015, December
11, 1987, 156 SCRA 321, 323.
46 Id., citing Alsua-Betts v. Court of Appeals, G.R. Nos. L-46430-31, July 30,
1979, 92 SCRA 332.
47 Korean Airlines Co., Ltd. v. Court of Appeals, G.R. No. L-61418, September
24, 1987, 154 SCRA 211, 213, citing Tongoy v. Court of Appeals, G.R. No. L-
45645, June 28, 1983, 123 SCRA 99; Olango v. Court of First Instance of Misamis
Oriental, G.R. No. L-55864, March 28, 1983, 121 SCRA 338.
358
358 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
abuse of discretion; (d) when the judgment is based on a misapprehension of facts;
(e) when the findings of facts are conflicting; (f) when the CA, in making its
findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee.48
The said exceptions, which are being invoked by JAL, are not found here. There
is no indication that the findings of the CA are contrary to the evidence on record or
that vital testimonies of JAL’s witnesses were disregarded. Neither did the CA
commit misapprehension of facts nor did it fail to consider relevant facts. Likewise,
there was no grave abuse of discretion in the appreciation of facts or mistaken and
absurd inferences.
We thus sustain the coherent facts as established by the courts below, there being
no sufficient showing that the said courts committed reversible error in reaching their
conclusions.
JAL is guilty of breach of 
contract of carriage.
That respondent purchased a round trip plane ticket from JAL and was issued the
corresponding boarding pass is uncontroverted.49 His plane ticket, boarding pass,
travel authority and personal articles were subjected to rigid immigration and
security procedure.50 After passing through said immigration and security procedure,
he was allowed by JAL to enter its airplane to fly to Los Angeles, California,
U.S.A. via Narita, Japan.51 Concisely, there was a contract of carriage between JAL
and respondent.
_______________
48 Malaysian Airline System v. Court of Appeals, supra note 45, at pp. 323-324,
citing Ramos v. Pepsi-Cola Bottling Co., G.R. No. L-22533, February 9, 1967, 19
SCRA 289.
49 Rollo, pp. 59, 128.
50 Id., at p. 62.
51 Id., at pp. 59, 128.
359
VOL. 552, APRIL 22, 2008 359
Japan Airlines vs. Simangan
Nevertheless, JAL made respondent get off the plane on his scheduled departure
on July 29, 1992. He was not allowed by JAL to fly.  JAL thus failed to comply with
its obligation under the contract of carriage.
JAL justifies its action by arguing that there was “a need to verify the
authenticity of respondent’s travel document.” 52 It alleged that no one from its airport
staff had encountered a parole visa before.53 It further contended that respondent
agreed to fly the next day so that it could first verify his travel document, hence,
there was novation.54 It maintained that it was not guilty of breach of contract of
7
carriage as respondent was not able to travel to the United States due to his own
voluntary desistance.55
We cannot agree. JAL did not allow respondent to fly.  It informed respondent
that there was a need to first check the authenticity of his travel documents with the
U.S. Embassy.56 As admitted by JAL, “the flight could not wait for Mr. Simangan
because it was ready to depart.”57
Since JAL definitely declared that the flight could not wait for respondent, it
gave respondent no choice but to be left behind. The latter was unceremoniously
bumped off despite his protestations and valid travel documents and notwithstanding
his contract of carriage with JAL. Damage had already been done when respondent
was offered to fly the next day on July 30, 1992. Said offer did not cure JAL’s
default.
Considering that respondent was forced to get out of the plane and left behind
against his will, he could not have freely consented to be rebooked the next day. In
short, he did not agree to the alleged novation. Since novation implies a waiver
_______________
52 Id., at pp. 25, 85.
53 Id.
54 Id., at pp. 25, 27.
55 Id., at p. 24.
56 Id., at p. 85.
57 Id., at p. 27.
360
360 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
of the right the creditor had before the novation, such waiver must be express. 58 It
cannot be supposed, without clear proof, that respondent had willingly done away
with his right to fly on July 29, 1992.
Moreover, the reason behind the bumping off incident, as found by the RTC and
CA, was that JAL personnel imputed that respondent would only use the trip to the
United States as a pretext to stay and work in Japan.59
Apart from the fact that respondent’s plane ticket, boarding pass, travel authority
and personal articles already passed the rigid immigration and security
routines,60 JAL, as a common carrier, ought to know the kind of valid travel
documents respondent carried. As provided in Article 1755 of the New Civil Code:
“A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances.”61 Thus, We find untenable JAL’s defense of
“verification of respondent’s documents” in its breach of contract of carriage.
It bears repeating that the power to admit or not an alien into the country is a
sovereign act which cannot be interfered with even by JAL.62
In an action for breach of contract of carriage, all that is required of plaintiff is to
prove the existence of such contract and its non-performance by the carrier through
the latter’s failure to carry the passenger safely to his destination. 63 Respondent has
complied with these twin requisites.
_______________
58 Garcia v. Llamas, G.R. No. 154127, December 8, 2003, 417 SCRA 292, 302,
citing Babst v. Court of Appeals, G.R. No. 99398, January  26, 2001, 350 SCRA 341.
59 Rollo, pp. 59, 128.
60 Id., at p. 62.
61 Emphasis ours.
62 Japan Airlines v. Asuncion, supra note 2.
63 Tolentino, A.M., Commentaries and Jurisprudence on the Civil Code of the
Philippines, Vol. V, 1992 ed., p. 299; Aboitiz v. 
361
VOL. 552, APRIL 22, 2008 361
Japan Airlines vs. Simangan
Respondent is entitled to moral and 
exemplary damages and attorney’s 
fees plus legal interest.
With reference to moral damages, JAL alleged that they are not recoverable in
actions ex contractu except only when the breach is attended by fraud or bad faith. It
is contended that it did not act fraudulently or in bad faith towards respondent, hence,
it may not be held liable for moral damages.
As a general rule, moral damages are not recoverable in actions for damages
predicated on a breach of contract for it is not one of the items enumerated under
Article 2219 of the Civil Code.64 As an exception, such damages are recoverable: (1)
in cases in which the mishap results in the death of a passenger, as provided in
Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in the cases in
which the carrier is guilty of fraud or bad faith, as provided in Article 2220.65
The acts committed by JAL against respondent amounts to bad faith. As found
by the RTC, JAL breached its contract of carriage with respondent in bad faith. JAL
personnel summarily and insolently ordered respondent to disembark while the latter
was already settled in his assigned seat. He was ordered out of the plane under the
alleged reason that the genuineness of his travel documents should be verified.
These findings of facts were upheld by the CA, to wit:
_______________
Court of Appeals, G.R. No. 84458, November 6, 1989, 179 SCRA 95, 105.
64 Calalas v. Court of Appeals, G.R. No. 122039, May 31, 2000, 332 SCRA
356, 365, citing Flores v. Miranda, 105 Phil. 267 (1959).
65 Id., citing Philippine Rabbit Bus Lines, Inc. v. Esguerra, G.R. No. L-31420,
October 23, 1982, 117 SCRA 741; Sabena Belgian World Airlines v. Court of
Appeals, G.R. No. 82068, March 31, 1989, 171 SCRA 620; China Airlines, Ltd. v.
Intermediate Appellate Court, G.R. No. 73835, January 17, 1989, 169 SCRA 226.
8
 362
362 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
“x x x he was haughtily ejected by appellant. He was certainly embarrassed and
humiliated when, in the presence of other passengers, the appellant’s airline staff
shouted at him to stand up and arrogantly asked him to produce his travel papers,
without the least courtesy every human being is entitled to. Then, he was compelled
to deplane on the grounds that his papers were fake. His protestation of having been
issued a U.S. visa coupled with his plea to appellant to closely monitor his
movements when the aircraft stops over in Narita, were ignored. Worse, he was
made to wait for many hours at the office of appellant only to be told later that he
has valid travel documents.”66 (Italics ours)
Clearly, JAL is liable for moral damages. It is firmly settled that moral damages
are recoverable in suits predicated on breach of a contract of carriage where it is
proved that the carrier was guilty of fraud or bad faith, as in this case. Inattention to
and lack of care for the interests of its passengers who are entitled to its utmost
consideration, particularly as to their convenience, amount to bad faith which entitles
the passenger to an award of moral damages. What the law considers as bad faith
which may furnish the ground for an award of moral damages would be bad faith in
securing the contract and in the execution thereof, as well as in the enforcement of its
terms, or any other kind of deceit.67
JAL is also liable for exemplary damages as its above-mentioned acts constitute
wanton, oppressive and malevolent acts against respondent. Exemplary damages,
which are awarded by way of example or correction for the public good, may be
recovered in contractual obligations, as in this case, if defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner.68
_______________
66 Rollo, p. 62.
67 Philippine Airlines v. Court of Appeals, G.R. No. 119641, May 17, 1996, 257
SCRA 33, 43.
68 Victory Liner v. Gammad, G.R. No. 159636, November 25, 2004, 444 SCRA
370, citing Yobido v. Court of Appeals, 346 Phil. 1, 13; 281 SCRA 1, 12 (1997).
363
VOL. 552, APRIL 22, 2008 363
Japan Airlines vs. Simangan
Exemplary damages are designed by our civil law to permit the courts to reshape
behaviour that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behaviour. In requiring compliance with the
standard of extraordinary diligence, a standard which is, in fact, that of the highest
possible degree of diligence, from common carriers and in creating a presumption of
negligence against them, the law seeks to compel them to control their employees, to
tame their reckless instincts and to force them to take adequate care of human beings
and their property.69
Neglect or malfeasance of the carrier’s employees could give ground for an
action for damages. Passengers have a right to be treated by the carrier’s employees
with kindness, respect, courtesy and due consideration and are entitled to be
protected against personal misconduct, injurious language, indignities and abuses
from such employees.70
The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary
damages in respondent’s favor is, in Our view, reasonable and realistic. This award is
reasonably sufficient to indemnify him for the humiliation and embarrassment he
suffered. This also serves as an example to discourage the repetition of similar
oppressive acts.
With respect to attorney’s fees, they may be awarded when defendant’s act or
omission has compelled plaintiff to litigate with third persons or to incur expenses to
protect his interest.71 The Court, in Construction Development Corporation of the
Philippines v. Estrella,72 citing Traders Royal Bank Em-
_______________
69 Mecenas v. Court of Appeals, G.R. No. 88052, December 14, 1989, 180
SCRA 83.
70 See note 63, citing Zulueta v. Pan-Am Airways, G.R. No. L-28589, February
29, 1972, 43 SCRA 397.
71 Singson v. Court of Appeals, G.R. No. 119995, November 18, 1997, 282
SCRA 149, 165.
72 G.R. No. 147791, September 8, 2006, 501 SCRA 228, 243-244.
364
364 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
ployees Union-Independent v. National Labor Relations Commission,73 elucidated
thus:
“There are two commonly accepted concepts of attorney’s fees, the so-called
ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the
reasonable compensation paid to a lawyer by his client for the legal services he has
rendered to the latter. The basis of this compensation is the fact of his employment
by and his agreement with the client.
In its extraordinary concept, an attorney’s fee is an indemnity for damages
ordered by the court to be paid by the losing party in a litigation. The basis of
this is any of the cases provided by law where such award can be made, such as those
authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the
client, unless they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof.”74
It was therefore erroneous for the CA to delete the award of attorney’s fees on
the ground that the record is devoid of evidence to show the cost of the services of
respondent’s counsel. The amount is actually discretionary upon the Court so long as
it passes the test of reasonableness. They may be recovered as actual or
9
compensatory damages when exemplary damages are awarded and whenever the
court deems it just and equitable,75 as in this case.
Considering the factual backdrop of this case, attorney’s fees in the amount of
P200,000.00 is reasonably modest.
The above liabilities of JAL in the total amount of P800,000.00 earn legal
interest pursuant to the Court’s ruling in Construction Development Corporation of
the Philippines v.
_______________
73 G.R. No. 120592, March 14, 1997, 269 SCRA 733.
74 Traders Royal Bank Employees Union-Independent v. National Labor
Relations Commission, id., at p. 740.
75 Vital-Gozon v. Court of Appeals, G.R. No. 129132, July 8, 1998, 292 SCRA
124; Civil Code, Art. 2208.
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VOL. 552, APRIL 22, 2008 365
Japan Airlines vs. Simangan
Estrella,76 citing Eastern Shipping Lines, Inc. v. Court of Appeals,77 to wit:
“Regarding the imposition of legal interest at the rate of 6% from the time of the
filing of the complaint, we held in Eastern Shipping Lines, Inc. v. Court of Appeals,
that when an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for
payment of interest in the concept of actual and compensatory damages, subject to
the following rules, to wit—
1. When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded.  In the
absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
2.  When an obligation, not constituting a loan or forbearance of money,
is breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of 
_______________
76 Supra note 72, at pp. 244-245.
77 G.R. No. 97412, July 12, 1994, 234 SCRA 78.
 
366
366 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
legal interest, whether the case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a
forbearance of credit.”78 (Emphasis supplied and citations omitted)
Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to
pay respondent legal interest. Pursuant to the above ruling of the Court, the legal
interest is 6% and it shall be reckoned from September 21, 2000 when the RTC
rendered its judgment. From the time this Decision becomes final and executory, the
interest rate shall be 12% until its satisfaction.
JAL is not entitled to its 
counterclaim for damages.
The counterclaim of JAL in its Answer79 is a compulsory counterclaim for
damages and attorney’s fees arising from the filing of the complaint. There is no
mention of any other counter claims.
This compulsory counterclaim of JAL arising from the filing of the complaint
may not be granted inasmuch as the complaint against it is obviously not malicious
or unfounded. It was filed by respondent precisely to claim his right to damages
against JAL. Well-settled is the rule that the commencement of an action does
not per se make the action wrongful and subject the action to damages, for the law
could not have meant to impose a penalty on the right to litigate.80
_______________
78 Eastern Shipping Lines, Inc. v. Court of Appeals, id., at pp. 95-97.
79 Rollo, pp. 86-87.
80 United Coconut Planters Bank v. Basco, G.R. No. 142668, August 31, 2004,
437 SCRA 325, 344.
367
VOL. 552, APRIL 22, 2008 367
Japan Airlines vs. Simangan
We reiterate case law that if damages result from a party’s exercise of a right, it
is damnum absque injuria.81Lawful acts give rise to no injury. Walang
perhuwisyong maaring idulot ang paggamit sa sariling karapatan.
10
 During the trial, however, JAL presented a witness who testified that JAL
suffered further damages. Allegedly, respondent caused the publications of his
subject complaint against JAL in the newspaper for which JAL suffered damages. 82
Although these additional damages allegedly suffered by JAL were not
incorporated in its Answer as they arose subsequent to its filing, JAL’s witness was
able to testify on the same before the RTC. 83 Hence, although these issues were not
raised by the pleadings, they shall be treated in all respects as if they had been raised
in the pleadings.
As provided in Section 5, Rule 10 of the Rules of Court, “(w)hen issues not
raised by the pleadings are tried with the express or implied consent of the parties,
they shall be treated in all respects as if they had been raised in the pleadings.”
Nevertheless, JAL’s counterclaim cannot be granted.
JAL is a common carrier. JAL’s business is mainly with the traveling public. It
invites people to avail themselves of the comforts and advantages it offers. 84 Since
JAL deals with the public, its bumping off of respondent without a valid reason
naturally drew public attention and generated a public issue.
The publications involved matters about which the public has the right to be
informed because they relate to a public issue. This public issue or concern is a
legitimate topic of a public comment that may be validly published.
_______________
81 Id., citing ABS-CBN Broadcasting Corporation v. Court of Appeals, G.R. No.
128690, January 21, 1999, 301 SCRA 572.
82 Rollo, pp. 60, 128.
83 Id., at pp. 60, 127-128.
84 Morris v. Court of Appeals, G.R. No. 127957, February 21, 2001, 352 SCRA
428, 435.
368
368 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
Assuming that respondent, indeed, caused the publication of his complaint, he
may not be held liable for damages for it. The constitutional guarantee of freedom of
the speech and of the press includes fair commentaries on matters of public interest.
This is explained by the Court in Borjal v. Court of Appeals,85 to wit:
“To reiterate, fair commentaries on matters of public interest are privileged and
constitute a valid defense in an action for libel or slander. The doctrine of fair
comment means that while in general every discreditable imputation publicly made
is deemed false, because every man is presumed innocent until his guilt is judicially
proved, and every false imputation is deemed malicious, nevertheless, when the
discreditable imputation is directed against a public person in his public capacity, it
is not necessarily actionable. In order that such discreditable imputation to a public
official may be actionable, it must either be a false allegation of fact or a comment
based on a false supposition. If the comment is an expression of opinion, based on
established facts, then it is immaterial that the opinion happens to be mistaken, as
long as it might reasonably be inferred from the facts.”86 (Citations omitted and
italics ours)
Even though JAL is not a public official, the rule on privileged commentaries on
matters of public interest applies to it. The privilege applies not only to public
officials but extends to a great variety of subjects, and includes matters of public
concern, public men, and candidates for office.87
Hence, pursuant to the Borjal case, there must be an actual malice in order that a
discreditable imputation to a public person in his public capacity or to a public
official may be actionable. To be considered malicious, the libelous statements must
be shown to have been written or published with
_______________
85 G.R. No. 126466, January 14, 1999, 301 SCRA 1.
86 Borjal v. Court of Appeals, id., at p. 23.
87 Baguio Midland Courier v. Court of Appeals, G.R. No. 107566, November
25, 2004, 444 SCRA 28.
369
VOL. 552, APRIL 22, 2008 369
Japan Airlines vs. Simangan
the knowledge that they are false or in reckless disregard of whether they are false or
not.88
Considering that the published articles involve matters of public interest and that
its expressed opinion is not malicious but based on established facts, the imputations
against JAL are not actionable. Therefore, JAL may not claim damages for them.
WHEREFORE, the petition is DENIED. The appealed Decision of the Court of
Appeals is AFFIRMED WITH MODIFICATION. As modified, petitioner Japan
Airlines is ordered to pay respondent Jesus Simangan the following: (1) P500,000.00
as moral damages; (2) P100,000.00 as exemplary damages; and (3) P200,000.00 as
attorney’s fees.
The total amount adjudged shall earn legal interest at the rate of 6% per
annum from the date of judgment of the Regional Trial Court on September 21, 2000
until the finality of this Decision. From the time this Decision becomes final and
executory, the unpaid amount, if any, shall earn legal interest at the rate of 12% per
annum until its satisfaction.
SO ORDERED.
Ynares-Santiago (Chairperson), Austria-Martinez, Chico-
Nazario and Nachura, JJ., concur.
Petition denied, judgment affirmed with modification.
Notes.—When a passenger contracts for a specific flight, he has a purpose in
making that choice which must be respected. (Singapore Airlines Limited vs.
Fernandez, 417 SCRA 474 [2004])
When an airline issues a ticket to a passenger, confirmed for a particular flight on
a certain date, a contract of carriage arises and the passenger has every right to
expect that he be
11
_______________

88 Borjal v. Court of Appeals, supra note 85, at pp. 28-29.

370
370 SUPREME COURT REPORTS ANNOTATED
Japan Airlines vs. Simangan
transported on that flight and on that date and it becomes the carrier’s obligation to
carry him and his luggage safely to the agreed destination. (Japan Airlines vs.
Asuncion, 449 SCRA 544 [2005])
——o0o——

G.R. No. 150843. March 14, 2003.*

CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs.SPOUSES DANIEL
VAZQUEZ and MARIA LUISA MADRIGAL VAZQUEZ, respondents.
Common Carriers; Air Transportation; Contracts; Requisites; Words and
Phrases; 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.—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) 
_______________
*
 FIRST DIVISION.
208
208  SUPREME COURT REPORTS ANNOTATED 
Cathay Pacific Airways, Ltd. vs. Vasquez
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. Undoubtedly, a
contract of carriage existed between Cathay and the Vazquezes. They voluntarily and
freely gave their consent to an agreement whose object was the transportation of the
Vazquezes from Manila to HongKong and back to Manila, with seat: in the Business
Class Section of the aircraft, and whose cause or consideration was the fare paid by
the Vazquezes to Cathay.
Same; Same; Same; Words and Phrases; “Breach of Contract” is defined as
the “failure without legal reason to comply with the terms of a contract,” or the
failure, without legal excuse, to perform any promise which forms the whole or part
of the contract.”—The only problem is the legal effect of the upgrading of the seat
accommodation of the Vazquezes. Did it constitute a breach of contract? Breach of
contract is defined as the “failure without legal reason to comply with the terms of a
contract.” It is also defined as the “[f]ailure, without legal excuse, to perform any
promise which forms the whole or part of the contract.” In previous cases, the breach
of contract of carriage consisted in either the bumping off of a passenger with

12
confirmed reservation or the downgrading of a passenger’s seat accommodation from
one class to a lower class. In this case, what happened was the reverse. The contract
between the parties was for Cathay to transport the Vazquezes to Manila on a
Business Class accommodation in Flight CX-905. After checking-in their luggage at
the Kai Tak Airport in Hong Kong, the Vazquezes were given boarding cards
indicating their seat assignments in the Business Class Section. However, during the
boarding time, when the Vazquezes presented their boarding passes, they were
informed that they had a seat change from Business Class to First Class. It turned out
that the Business Class was overbooked in that there were more passengers than the
number of seats. Thus, the seat assignments of the Vazquezes were given to
waitlisted passengers, and the Vazquezes, being members of the Marco Polo Club,
were upgraded from Business Class to First Class.
Same; Same; Same; Upgrading; Airline passengers have every right to
decline an upgrade and insist on the accommodation they had booked, and if an
airline insists on the upgrade, it breaches its contract of carriage with the
passengers.—We note that in all their pleadings, the Vazquezes never denied that
they were members of Cathay’s Marco Polo Club. They knew that as members of the
Club, they had priority for upgrading of their seat accommodation at no extra cost
when an opportunity arises. But, just like other privileges, such priority could be
waived. The Vazquezes should have been consulted first whether they wanted to
avail themselves of the privilege or would consent to a change of seat
accommodation before their seat assignments were given to other passengers.
Normally, one would appreciate and accept an upgrading, for it would mean a better
accommo-
209
VOL. 399, MARCH 14, 2003  209  Cathay Pacific Airways, Ltd. vs. Vasquez
Cathay Pacific Airways, Ltd. vs. Vasquez
dation. But, whatever their reason was and however odd it might be, the
Vazquezes had every right to decline the upgrade and insist on the Business Class
accommodation they had booked for and which was designated in their boarding
passes. They clearly waived their priority or preference when they asked that other
passengers be given the upgrade. It should not have been imposed on them over their
vehement objection. By insisting on the upgrade, Cathay breached its contract of
carriage with the Vazquezes.
Same; Same; Same; Same; Words and Phrases; “Bad Faith” and “Fraud,”
Explained; Bad faith and fraud are allegations of fact that demand clear and
convincing proof.—We are not, however, convinced that the upgrading or the breach
of contract was attended by fraud or bad faith. Thus, we resolve the second issue in
the negative. Bad faith and fraud are allegations of fact that demand clear and
convincing proof. They are serious accusations that can be so conveniently and
casually invoked, and that is why they are never presumed. They amount to mere
slogans or mudslinging unless convincingly substantiated by whoever is alleging
them. Fraud has been defined to include an inducement through insidious
machination. Insidious machination refers to a deceitful scheme or plot with an evil
or devious purpose. Deceit exists where the party, with intent to deceive, conceals or
omits to state material facts and, by reason of such omission or concealment, the
other party was induced to give consent that would not otherwise have been
given. Bad faith does not simply connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach
of a known duty through some motive or interest or ill will that partakes of the nature
of fraud.
Same; Same; Same; Same; An upgrading is for the better condition and,
definitely for the benefit of the passenger.—Neither was the transfer of the
Vazquezes effected for some evil or devious purpose. As testified to by Mr. Robson,
the First Class Section is better than the Business Class Section in terms of comfort,
quality of food, and service from the cabin crew; thus, the difference in fare between
the First Class and Business Class at that time was $250. Needless to state, an
upgrading is for the better condition and, definitely, for the benefit of the passenger.
Same; Same; Same; Overbooking; It is clear from Sec. 3 of Economic
Regulation No. 7 of the Civil Aeronautics Board, as amended, that an overbooking
that does not exceed ten percent is not considered deliberate and therefore does not
amount to bad faith.—We are not persuaded by the Vazquezes’ argument that the
overbooking of the Business Class Section constituted bad faith on the part of
Cathay. Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board,
as amended, provides: Sec. 3. Scope.—This regulation shall apply to every
Philippine and foreign air carrier with respect to its operation of flights or portions of
flights 
210
210  SUPREME COURT REPORTS ANNOTATED 
originating from or terminating at, or serving a point within the territory of the
Republic of the Philippines insofar as it denies boarding to a passenger on a flight, or
portion of a flight inside or outside the Philippines, for which he holds confirmed
reserved space. Furthermore, this Regulation is designed to cover only honest
mistakes on the part of the carriers and excludes deliberate and willful acts of non-
accommodation. Provided, however, that overbooking not exceeding 10% of the
seating capacity of the aircraft shall not be considered as a deliberate and willful act
of non-accommodation. It is clear from this section that an overbooking that does not
exceed ten percent is not considered deliberate and therefore does not amount to bad
faith. Here, while there was admittedly an overbooking of the Business Class, there
was no evidence of overbooking of the plane beyond ten percent, and no passenger
was ever bumped off or was refused to board the aircraft.
Same; Same; Same; Damages; Requisites for Award of Moral Damages.—
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury. Although incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant’s wrongful act or
omission. Thus, case law establishes the following requisites for the award of moral
13
damages: (1) there must be an injury clearly sustained by the claimant, whether
physical, mental or psychological; (2) there must be a culpable act or omission
factually established; (3) the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and (4) the award for
damages is predicated on any of the cases stated in Article 2219 of the Civil Code.
Same; Same; Same; Same; Moral damages predicated upon a breach of
contract of carriage may only be recoverable in instances where the carrier is guilty
of fraud or bad faith or where the mishap resulted in the death of a passenger.—
Moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the carrier is guilty of fraud or bad faith or where the
mishap resulted in the death of a passenger. Where in breaching the contract of
carriage the airline is not shown to have acted fraudulently or in bad faith, liability
for damages is limited to the natural and probable consequences of the breach of the
obligation which the parties had foreseen or could have reasonably foreseen. In such
a case the liability does not include moral and exemplary damages.
Same; Same; Same; Same; Attorney’s Fees; It is a requisite in the grant of
exemplary damages that the act of the offender must be accompanied by bad faith or
done in wanton, fraudulent or malevolent manner; Where the awards for moral and
exemplary damages are eliminated, so
211
VOL. 399, MARCH 14, 2003  211  Cathay Pacific Airways, Ltd. vs. Vasquez
Cathay Pacific Airways, Ltd. vs. Vasquez
must the award for attorney’s fees.—The deletion of the award for exemplary
damages by the Court of Appeals is correct. It is a requisite in the grant of exemplary
damages that the act of the offender must be accompanied by bad faith or done in
wanton, fraudulent or malevolent manner. Such requisite is absent in this case.
Moreover, to be entitled thereto the claimant must first establish his right to moral,
temperate, or compensatory damages. Since the Vazquezes are not entitled to any of
these damages, the award for exemplary damages has no legal basis. And where the
awards for moral and exemplary damages are eliminated, so must the award for
attorney’s fees.
Same; Same; Same; Same; The amount of damages awarded should not be
palpably and scandalously excessive as to indicate that it was the result of prejudice
or corruption on the part of the trial court; Passengers must not prey on
international airlines for damages awards, like “trophies in a safari,” after all
neither the social standing nor prestige of the passenger should determine the extent
to which he would suffer because of a wrong done, since the dignity affronted in the
individual is a quality inherent in him and not conferred by these social indicators.—
Before writing finis to this decision, we find it well-worth to quote the apt
observation of the Court of Appeals regarding the awards adjudged by the trial court:
We are not amused but alarmed at the lower court’s unbelievable alacrity, bordering
on the scandalous, to award excessive amounts as damages. In their complaint,
appellees asked for P1 million as moral damages but the lower court awarded P4
million; they asked for P500,000.00 as exemplary damages but the lower court
cavalierly awarded a whooping P10 million; they asked for P250,000.00 as
attorney’s fees but were awarded P2 million; they did not ask for nominal damages
but were awarded P200,000.00. It is as if the lower court went on a rampage, and
why it acted that way is beyond all tests of reason. In fact the excessiveness of the
total award invites the suspicion that it was the result of “prejudice or corruption on
the part of the trial court.” The presiding judge of the lower court is enjoined to
hearken to the Supreme Court’s admonition in Singson vs. CA (282 SCRA 149
[1997]), where it said: The well-entrenched principle is that the grant of moral
damages depends upon the discretion of the court based on the circumstances of each
case. This discretion is limited by the principle that the amount awarded should not
be palpably and scandalously excessive as to indicate that it was the result of
prejudice or corruption on the part of the trial court. . . . and in Alitalia Airways vs.
CA (187 SCRA 763 [1990]), where it was held: Nonetheless, we agree with the
injunction expressed by the Court of Appeals that passengers must not prey on
international airlines for damage awards, like “trophies in a safari.” After all neither
the social standing nor prestige of the passenger should determine the extent to
which he would suffer because of a wrong done, since the dignity affronted in the
individual is a quality inherent in him and not conferred by these social indicators.
212
212  SUPREME COURT REPORTS ANNOTATED 
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Quasha, Ancheta, Peña, Nolasco for petitioner.
     Candelaria, Candelaria & Candelaria Law Firm for private respondents.
     Bello, Gozon, Elma, Parel, Asuncion & Lucila co-counsel for private
respondents.
DAVIDE, JR., C.J.:
Is an involuntary upgrading of an airline passenger’s accommodation from one class
to a more superior class at no extra cost a breach of contract of carriage that would
entitle the passenger to an award of damages? This is a novel question that has to be
resolved in this case.
The facts in this case, as found by the Court of Appeals and adopted by petitioner
Cathay Pacific Airways, Ltd., (hereinafter Cathay) are as follows:
Cathay is a common carrier engaged in the business of transporting passengers and
goods by air. Among the many routes it services is the Manila-Hongkong-Manila
course. As part of its marketing strategy, Cathay accords its frequent flyers
14
membership in its Marco Polo Club. The members enjoy several privileges, such as
priority for upgrading of booking without any extra charge whenever an opportunity
arises. Thus, a frequent flyer booked in the Business Class has priority for upgrading
to First Class if the Business Class Section is fully booked.
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal
Vazquez are frequent flyers of Cathay and are Gold Card members of its Marco Polo
Club. On 24 September 1996, the Vazquezes, together with their maid and two
friends Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for pleasure and
business.
For their return flight to Manila on 28 September 1996, they were booked on
Cathay’s Flight CX-905, with departure time at 9:20 p.m. Two hours before their
time of departure, the Vazquezes and their companions checked in their luggage at
Cathay’s check-in counter at Kai Tak Airport and were given their respective
boarding passes, to wit, Business Class boarding passes for the Vazquezes and their
two friends, and Economy Class for their maid. They then proceeded to the Business
Class passenger lounge.
When boarding time was announced, the Vazquezes and their two friends went to
Departure Gate No. 28, which was designated for Business Class passengers. Dr.
Vazquez presented his boarding pass to the ground stewardess, who in turn inserted
it into an electronic machine reader or computer at the gate. The ground stewardess
was assisted by a ground attendant by the name of Clara Lai Han Chiu. When Ms.
Chiu glanced at the computer monitor, she saw a message that there was a "seat
change" from Business Class to First Class for the Vazquezes.
Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’
accommodations were upgraded to First Class. Dr. Vazquez refused the upgrade,
reasoning that it would not look nice for them as hosts to travel in First Class and
their guests, in the Business Class; and moreover, they were going to discuss
business matters during the flight. He also told Ms. Chiu that she could have other
passengers instead transferred to the First Class Section. Taken aback by the refusal
for upgrading, Ms. Chiu consulted her supervisor, who told her to handle the
situation and convince the Vazquezes to accept the upgrading. Ms. Chiu informed
the latter that the Business Class was fully booked, and that since they were Marco
Polo Club members they had the priority to be upgraded to the First Class. Dr.
Vazquez continued to refuse, so Ms. Chiu told them that if they would not avail
themselves of the privilege, they would not be allowed to take the flight. Eventually,
after talking to his two friends, Dr. Vazquez gave in. He and Mrs. Vazquez then
proceeded to the First Class Cabin.
Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed
to Cathay’s Country Manager, demanded that they be indemnified in the amount of
P1million for the "humiliation and embarrassment" caused by its employees. They
also demanded "a written apology from the management of Cathay, preferably a
responsible person with a rank of no less than the Country Manager, as well as the
apology from Ms. Chiu" within fifteen days from receipt of the letter.
In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s Country
Manager Argus Guy Robson, informed the Vazquezes that Cathay would investigate
the incident and get back to them within a week’s time.
On 8 November 1996, after Cathay’s failure to give them any feedback within its
self-imposed deadline, the Vazquezes instituted before the Regional Trial Court of
Makati City an action for damages against Cathay, praying for the payment to each
of them the amounts of P250,000 as temperate damages; P500,000 as moral
damages; P500,000 as exemplary or corrective damages; and P250,000 as attorney’s
fees.
In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that
they preferred to stay in Business Class, Ms. Chiu "obstinately, uncompromisingly
and in a loud, discourteous and harsh voice threatened" that they could not board and
leave with the flight unless they go to First Class, since the Business Class was
overbooked. Ms. Chiu’s loud and stringent shouting annoyed, embarrassed, and
humiliated them because the incident was witnessed by all the other passengers
waiting for boarding. They also claimed that they were unjustifiably delayed to board
the plane, and when they were finally permitted to get into the aircraft, the forward
storage compartment was already full. A flight stewardess instructed Dr. Vazquez to
put his roll-on luggage in the overhead storage compartment. Because he was not
assisted by any of the crew in putting up his luggage, his bilateral carpal tunnel
syndrome was aggravated, causing him extreme pain on his arm and wrist. The
Vazquezes also averred that they "belong to the uppermost and absolutely top elite of
both Philippine Society and the Philippine financial community, [and that] they were
among the wealthiest persons in the Philippine[s]."
In its answer, Cathay alleged that it is a practice among commercial airlines to
upgrade passengers to the next better class of accommodation, whenever an
opportunity arises, such as when a certain section is fully booked. Priority in
upgrading is given to its frequent flyers, who are considered favored passengers like
the Vazquezes. Thus, when the Business Class Section of Flight CX-905 was fully
booked, Cathay’s computer sorted out the names of favored passengers for
involuntary upgrading to First Class. When Ms. Chiu informed the Vazquezes that
they were upgraded to First Class, Dr. Vazquez refused. He then stood at the
entrance of the boarding apron, blocking the queue of passengers from boarding the
plane, which inconvenienced other passengers. He shouted that it was impossible for
him and his wife to be upgraded without his two friends who were traveling with
them. Because of Dr. Vazquez’s outburst, Ms. Chiu thought of upgrading the
15
traveling companions of the Vazquezes. But when she checked the computer, she
learned that the Vazquezes’ companions did not have priority for upgrading. She
then tried to book the Vazquezes again to their original seats. However, since the
Business Class Section was already fully booked, she politely informed Dr. Vazquez
of such fact and explained that the upgrading was in recognition of their status as
Cathay’s valued passengers. Finally, after talking to their guests, the Vazquezes
eventually decided to take the First Class accommodation.
Cathay also asserted that its employees at the Hong Kong airport acted in good faith
in dealing with the Vazquezes; none of them shouted, humiliated, embarrassed, or
committed any act of disrespect against them (the Vazquezes). Assuming that there
was indeed a breach of contractual obligation, Cathay acted in good faith, which
negates any basis for their claim for temperate, moral, and exemplary damages and
attorney’s fees. Hence, it prayed for the dismissal of the complaint and for payment
of P100,000 for exemplary damages and P300,000 as attorney’s fees and litigation
expenses.
During the trial, Dr. Vazquez testified to support the allegations in the complaint. His
testimony was corroborated by his two friends who were with him at the time of the
incident, namely, Pacita G. Cruz and Josefina Vergel de Dios.
For its part, Cathay presented documentary evidence and the testimonies of Mr.
Yuen; Ms. Chiu; Norma Barrientos, Comptroller of its retained counsel; and Mr.
Robson. Yuen and Robson testified on Cathay’s policy of upgrading the seat
accommodation of its Marco Polo Club members when an opportunity arises. The
upgrading of the Vazquezes to First Class was done in good faith; in fact, the First
Class Section is definitely much better than the Business Class in terms of comfort,
quality of food, and service from the cabin crew. They also testified that overbooking
is a widely accepted practice in the airline industry and is in accordance with the
International Air Transport Association (IATA) regulations. Airlines overbook
because a lot of passengers do not show up for their flight. With respect to Flight
CX-905, there was no overall overbooking to a degree that a passenger was bumped
off or downgraded. Yuen and Robson also stated that the demand letter of the
Vazquezes was immediately acted upon. Reports were gathered from their office in
Hong Kong and immediately forwarded to their counsel Atty. Remollo for legal
advice. However, Atty. Remollo begged off because his services were likewise
retained by the Vazquezes; nonetheless, he undertook to solve the problem in behalf
of Cathay. But nothing happened until Cathay received a copy of the complaint in
this case. For her part, Ms. Chiu denied that she shouted or used foul or impolite
language against the Vazquezes. Ms. Barrientos testified on the amount of attorney’s
fees and other litigation expenses, such as those for the taking of the depositions of
Yuen and Chiu.
In its decision1 of 19 October 1998, the trial court found for the Vazquezes and
decreed as follows:
WHEREFORE, finding preponderance of evidence to sustain the instant
complaint, judgment is hereby rendered in favor of plaintiffs Vazquez
spouses and against defendant Cathay Pacific Airways, Ltd., ordering the
latter to pay each plaintiff the following:
a) Nominal damages in the amount of P100,000.00 for each
plaintiff;
b) Moral damages in the amount of P2,000,000.00 for each
plaintiff;
c) Exemplary damages in the amount of P5,000,000.00 for each
plaintiff;
d) Attorney’s fees and expenses of litigation in the amount of
P1,000,000.00 for each plaintiff; and
e) Costs of suit.
SO ORDERED.
According to the trial court, Cathay offers various classes of seats from which
passengers are allowed to choose regardless of their reasons or motives, whether it be
due to budgetary constraints or whim. The choice imposes a clear obligation on
Cathay to transport the passengers in the class chosen by them. The carrier cannot,
without exposing itself to liability, force a passenger to involuntarily change his
choice. The upgrading of the Vazquezes’ accommodation over and above their
vehement objections was due to the overbooking of the Business Class. It was a
pretext to pack as many passengers as possible into the plane to maximize Cathay’s
revenues. Cathay’s actuations in this case displayed deceit, gross negligence, and bad
faith, which entitled the Vazquezes to awards for damages.
On appeal by the petitioners, the Court of Appeals, in its decision of 24 July
2001,2 deleted the award for exemplary damages; and it reduced the awards for moral
and nominal damages for each of the Vazquezes to P250,000 and P50,000,
respectively, and the attorney’s fees and litigation expenses to P50,000 for both of
them.
The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class,
Cathay novated the contract of carriage without the former’s consent. There was a
16
breach of contract not because Cathay overbooked the Business Class Section of
Flight CX-905 but because the latter pushed through with the upgrading despite the
objections of the Vazquezes.
However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or
meant to be discourteous to, Dr. Vazquez, although it might seemed that way to the
latter, who was a member of the elite in Philippine society and was not therefore
used to being harangued by anybody. Ms. Chiu was a Hong Kong Chinese whose
fractured Chinese was difficult to understand and whose manner of speaking might
sound harsh or shrill to Filipinos because of cultural differences. But the Court of
Appeals did not find her to have acted with deliberate malice, deceit, gross
negligence, or bad faith. If at all, she was negligent in not offering the First Class
accommodations to other passengers. Neither can the flight stewardess in the First
Class Cabin be said to have been in bad faith when she failed to assist Dr. Vazquez
in lifting his baggage into the overhead storage bin. There is no proof that he asked
for help and was refused even after saying that he was suffering from "bilateral
carpal tunnel syndrome." Anent the delay of Yuen in responding to the demand letter
of the Vazquezes, the Court of Appeals found it to have been sufficiently explained.
The Vazquezes and Cathay separately filed motions for a reconsideration of the
decision, both of which were denied by the Court of Appeals.
Cathay seasonably filed with us this petition in this case. Cathay maintains that the
award for moral damages has no basis, since the Court of Appeals found that there
was no "wanton, fraudulent, reckless and oppressive" display of manners on the part
of its personnel; and that the breach of contract was not attended by fraud, malice, or
bad faith. If any damage had been suffered by the Vazquezes, it was damnum absque
injuria, which is damage without injury, damage or injury inflicted without injustice,
loss or damage without violation of a legal right, or a wrong done to a man for which
the law provides no remedy. Cathay also invokes our decision in United Airlines,
Inc. v. Court of Appeals3 where we recognized that, in accordance with the Civil
Aeronautics Board’s Economic Regulation No. 7, as amended, an overbooking that
does not exceed ten percent cannot be considered deliberate and done in bad faith.
We thus deleted in that case the awards for moral and exemplary damages, as well as
attorney’s fees, for lack of proof of overbooking exceeding ten percent or of bad
faith on the part of the airline carrier.
On the other hand, the Vazquezes assert that the Court of Appeals was correct in
granting awards for moral and nominal damages and attorney’s fees in view of the
breach of contract committed by Cathay for transferring them from the Business
Class to First Class Section without prior notice or consent and over their vigorous
objection. They likewise argue that the issuance of passenger tickets more than the
seating capacity of each section of the plane is in itself fraudulent, malicious and
tainted with bad faith.
The key issues for our consideration are whether (1) by upgrading the seat
accommodation of the Vazquezes from Business Class to First Class Cathay
breached its contract of carriage with the Vazquezes; (2) the upgrading was tainted
with fraud or bad faith; and (3) the Vazquezes are entitled to damages.
We resolve the first issue in the affirmative.
A contract is a meeting of minds between two persons whereby one agrees to give
something or render some service to another for a consideration. There is no contract
unless the following requisites concur: (1) consent of the contracting parties; (2) an
object certain which is the subject of the contract; and (3) the cause of the obligation
which is established.4 Undoubtedly, a contract of carriage existed between Cathay
and the Vazquezes. They voluntarily and freely gave their consent to an agreement
whose object was the transportation of the Vazquezes from Manila to Hong Kong
and back to Manila, with seats in the Business Class Section of the aircraft, and
whose cause or consideration was the fare paid by the Vazquezes to Cathay.
The only problem is the legal effect of the upgrading of the seat accommodation of
the Vazquezes. Did it constitute a breach of contract?
Breach of contract is defined as the "failure without legal reason to comply with the
terms of a contract."5 It is also defined as the "[f]ailure, without legal excuse, to
perform any promise which forms the whole or part of the contract."6
In previous cases, the breach of contract of carriage consisted in either the bumping
off of a passenger with confirmed reservation or the downgrading of a passenger’s
seat accommodation from one class to a lower class. In this case, what happened was
the reverse. The contract between the parties was for Cathay to transport the
Vazquezes to Manila on a Business Class accommodation in Flight CX-905. After
checking-in their luggage at the Kai Tak Airport in Hong Kong, the Vazquezes were
given boarding cards indicating their seat assignments in the Business Class Section.
However, during the boarding time, when the Vazquezes presented their boarding
passes, they were informed that they had a seat change from Business Class to First
Class. It turned out that the Business Class was overbooked in that there were more
passengers than the number of seats. Thus, the seat assignments of the Vazquezes
were given to waitlisted passengers, and the Vazquezes, being members of the Marco
Polo Club, were upgraded from Business Class to First Class. 
We note that in all their pleadings, the Vazquezes never denied that they were
members of Cathay’s Marco Polo Club. They knew that as members of the Club,
they had priority for upgrading of their seat accommodation at no extra cost when an
opportunity arises. But, just like other privileges, such priority could be waived. The
Vazquezes should have been consulted first whether they wanted to avail themselves
of the privilege or would consent to a change of seat accommodation before their
17
seat assignments were given to other passengers. Normally, one would appreciate
and accept an upgrading, for it would mean a better accommodation. But, whatever
their reason was and however odd it might be, the Vazquezes had every right to
decline the upgrade and insist on the Business Class accommodation they had
booked for and which was designated in their boarding passes. They clearly waived
their priority or preference when they asked that other passengers be given the
upgrade. It should not have been imposed on them over their vehement objection. By
insisting on the upgrade, Cathay breached its contract of carriage with the
Vazquezes.
We are not, however, convinced that the upgrading or the breach of contract was
attended by fraud or bad faith. Thus, we resolve the second issue in the negative.
Bad faith and fraud are allegations of fact that demand clear and convincing proof.
They are serious accusations that can be so conveniently and casually invoked, and
that is why they are never presumed. They amount to mere slogans or mudslinging
unless convincingly substantiated by whoever is alleging them.
Fraud has been defined to include an inducement through insidious machination.
Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to deceive, conceals or omits to
state material facts and, by reason of such omission or concealment, the other party
was induced to give consent that would not otherwise have been given.7
Bad faith does not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of a
known duty through some motive or interest or ill will that partakes of the nature of
fraud.8
We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were
not induced to agree to the upgrading through insidious words or deceitful
machination or through willful concealment of material facts. Upon boarding, Ms.
Chiu told the Vazquezes that their accommodations were upgraded to First Class in
view of their being Gold Card members of Cathay’s Marco Polo Club. She was
honest in telling them that their seats were already given to other passengers and the
Business Class Section was fully booked. Ms. Chiu might have failed to consider the
remedy of offering the First Class seats to other passengers. But, we find no bad faith
in her failure to do so, even if that amounted to an exercise of poor judgment.
Neither was the transfer of the Vazquezes effected for some evil or devious purpose.
As testified to by Mr. Robson, the First Class Section is better than the Business
Class Section in terms of comfort, quality of food, and service from the cabin crew;
thus, the difference in fare between the First Class and Business Class at that time
was $250.9Needless to state, an upgrading is for the better condition and, definitely,
for the benefit of the passenger.
We are not persuaded by the Vazquezes’ argument that the overbooking of the
Business Class Section constituted bad faith on the part of Cathay. Section 3 of the
Economic Regulation No. 7 of the Civil Aeronautics Board, as amended, provides:
Sec 3. Scope. – This regulation shall apply to every Philippine and foreign
air carrier with respect to its operation of flights or portions of flights
originating from or terminating at, or serving a point within the territory of
the Republic of the Philippines insofar as it denies boarding to a passenger
on a flight, or portion of a flight inside or outside the Philippines, for which
he holds confirmed reserved space. Furthermore, this Regulation is
designed to cover only honest mistakes on the part of the carriers and
excludes deliberate and willful acts of non-accommodation. Provided,
however, that overbooking not exceeding 10% of the seating capacity of the
aircraft shall not be considered as a deliberate and willful act of non-
accommodation.
It is clear from this section that an overbooking that does not exceed ten percent is
not considered deliberate and therefore does not amount to bad faith.10 Here, while
there was admittedly an overbooking of the Business Class, there was no evidence of
overbooking of the plane beyond ten percent, and no passenger was ever bumped off
or was refused to board the aircraft.
Now we come to the third issue on damages.
The Court of Appeals awarded each of the Vazquezes moral damages in the amount
of P250,000. Article 2220 of the Civil Code provides:
Article 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract where
the defendant acted fraudulently or in bad faith.
18
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury. Although incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant’s wrongful act or
omission.11 Thus, case law establishes the following requisites for the award of moral
damages: (1) there must be an injury clearly sustained by the claimant, whether
physical, mental or psychological; (2) there must be a culpable act or omission
factually established; (3) the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and (4) the award for
damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 12
Moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the carrier is guilty of fraud or bad faith or where the
mishap resulted in the death of a passenger.13 Where in breaching the contract of
carriage the airline is not shown to have acted fraudulently or in bad faith, liability
for damages is limited to the natural and probable consequences of the breach of the
obligation which the parties had foreseen or could have reasonably foreseen. In such
a case the liability does not include moral and exemplary damages.14
In this case, we have ruled that the breach of contract of carriage, which consisted in
the involuntary upgrading of the Vazquezes’ seat accommodation, was not attended
by fraud or bad faith. The Court of Appeals’ award of moral damages has, therefore,
no leg to stand on.
The deletion of the award for exemplary damages by the Court of Appeals is correct.
It is a requisite in the grant of exemplary damages that the act of the offender must
be accompanied by bad faith or done in wanton, fraudulent or malevolent
manner.15 Such requisite is absent in this case. Moreover, to be entitled thereto the
claimant must first establish his right to moral, temperate, or compensatory
damages.16 Since the Vazquezes are not entitled to any of these damages, the award
for exemplary damages has no legal basis. And where the awards for moral and
exemplary damages are eliminated, so must the award for attorney’s fees. 17
The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of
contract is an award for nominal damages under Article 2221 of the Civil Code,
which reads as follows:
Article 2221 of the Civil Code provides:
Article 2221. Nominal damages are adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
Worth noting is the fact that in Cathay’s Memorandum filed with this Court, it
prayed only for the deletion of the award for moral damages. It deferred to the Court
of Appeals’ discretion in awarding nominal damages; thus:
As far as the award of nominal damages is concerned, petitioner
respectfully defers to the Honorable Court of Appeals’ discretion. Aware as
it is that somehow, due to the resistance of respondents-spouses to the
normally-appreciated gesture of petitioner to upgrade their
accommodations, petitioner may have disturbed the respondents-spouses’
wish to be with their companions (who traveled to Hong Kong with them)
at the Business Class on their flight to Manila. Petitioner regrets that in its
desire to provide the respondents-spouses with additional amenities for the
one and one-half (1 1/2) hour flight to Manila, unintended tension ensued. 18
Nonetheless, considering that the breach was intended to give more benefit and
advantage to the Vazquezes by upgrading their Business Class accommodation to
First Class because of their valued status as Marco Polo members, we reduce the
award for nominal damages to P5,000.
Before writing finis to this decision, we find it well-worth to quote the apt
observation of the Court of Appeals regarding the awards adjudged by the trial court:
We are not amused but alarmed at the lower court’s unbelievable alacrity, bordering
on the scandalous, to award excessive amounts as damages. In their complaint,
appellees asked for P1 million as moral damages but the lower court awarded P4
million; they asked for P500,000.00 as exemplary damages but the lower court
cavalierly awarded a whooping P10 million; they asked for P250,000.00 as
attorney’s fees but were awarded P2 million; they did not ask for nominal damages
but were awarded P200,000.00. It is as if the lower court went on a rampage, and
why it acted that way is beyond all tests of reason. In fact the excessiveness of the
total award invites the suspicion that it was the result of "prejudice or corruption on
the part of the trial court."
The presiding judge of the lower court is enjoined to hearken to the
Supreme Court’s admonition in Singson vs. CA (282 SCRA 149 [1997]),
where it said:
The well-entrenched principle is that the grant of moral damages
depends upon the discretion of the court based on the
circumstances of each case. This discretion is limited by the
principle that the amount awarded should not be palpably and
scandalously excessive as to indicate that it was the result of
prejudice or corruption on the part of the trial court….
19
 and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held:
Nonetheless, we agree with the injunction expressed by the Court
of Appeals that passengers must not prey on international airlines
for damage awards, like "trophies in a safari." After all neither the
social standing nor prestige of the passenger should determine the
extent to which he would suffer because of a wrong done, since the
dignity affronted in the individual is a quality inherent in him and
not conferred by these social indicators. 19
We adopt as our own this observation of the Court of Appeals.
WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the
Court of Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED,
and as modified, the awards for moral damages and attorney’s fees are set aside and
deleted, and the award for nominal damages is reduced to P5,000.
No pronouncement on costs.
SO ORDERED.
[No. L-11037. December 29, 1960]
EDGARDO CARIAGA, ET AL., plaintiffs and appellants vs. LAGUNA
TAYABAS BUS COMPANY, def endant and appellant. MANILA RAILROAD
COMPANY, defendant and appellee.
1. 1.DAMAGES; MORAL DAMAGES; RECOVERABLE ONLY IN
INSTANCES ENUMERATED IN ART. 2219 OF THE CIVIL CODE.—
Article 2219 of the Civil Code enumerates the instances when moral
damages may be recovered. Plaintiffs' claim for moral damages not falling
under any one of them, the same cannot be granted.
1. 2.ID.; ID.; WHEN RECOVERABLE FOR BREACH OF CONTRACT
UNDER ART. 2220 OF THE CIVIL CODE.—Neither could defendant
LTB be held liable to pay moral damages to plaintiffs under Art. 2220 of
the Civil Code on account of breach of its contract of carriage because said
defendant did not act fraudulently or in bad faith in connection therewith.
1. 3.ID.; ACTUAL AND COMPENSATORY DAMAGES; ONLY PARTIES
TO CONTRACTS BREACHED ARE ENTITLED TO
COMPENSATORY DAMAGES RESULTING THEREFROM—Since
the present action is based upon a breach of contract of carriage and
plaintiff's parents were not a party thereto and were not themselves injured
as a result of the collision, their claim for actual and compensatory
damages is without merit.
347
VOL. 110, DECEMBER 29, 1960  347 
Cariaga vs. Laguna Tayabas Bus Company
1. 4.ATTORNEYS-AT-LAW ; ATTORNEY'S FEES; CASE NOT FALLING
UNDER ANY OF THE INSTANCES ENUMERATED IN ART. 2208
OF THE ClVIL CODE.—The present case not falling under any of the
instances enumerated in Article 2208 of the Civil Code, plaintiffs are not
entitled to recover attorney's fees.
APPEAL from a judgment of the Court of First Instance of Laguna. Alikpala, J.
The facts are stated in the opinion of the Court.
     Ozaeta, Lichauco & Picazo for defendant and appellant.
20
      E. A. Fernandez and L. H. Fernandez for plaintiffs and appellants.
     Gov't Corp. Counsel A. Padilla and Atty. F. A. Umalifor appellee.
DIZON, J.:
At about 1:00 p. m. on June 18, 1952, Bus No. 133 of the Laguna Tayabas Bus
Company—hereinafter referred to as the LTB—driven by Alfredo Moncada, left its
station at Azcarraga St., Manila, for Lilio, Laguna, with Edgardo Cariaga, a fourth-
year medical student of the University of Santos Tomas, as one of its passengers. At
about 3:00 p. m., as the bus reached that part of the población of Bay, Laguna, where
the national highway crossed a railroad track, it bumped against the engine of a train
then passing by with such terrific force that the first six wheels of the latter were
derailed, the engine and front part of the body of the bus were wrecked, the driver of
the bus died instantly, while many of its passengers, Edgardo among them, were
severely injured. Edgardo was first confined at the San Pablo City Hospital from
5:00 p.m., June 18, 1952, to 8:25 a. m., June 20 of the same year when he was taken
to the De los Santos Clinic, Quezon City. He left that clinic on October 14 to be
transferred to the University of Santo Tomás Hospital where he stayed up to
November 15. On this last date he was taken back to the De los 
348
348  PHILIPPINE REPORTS ANNOTATED  locomotive bell at all. Both contentions are without merits.
Cariaga vs. Laguna Tayabas Bus Company
Santos Clinic where he stayed until January 15, 1953. He was unconscious during
the first 35 days after the accident: at the De los Santos Clinic Dr. Gustilo removed
the fractured bones which lacerated the right frontal lobe of his brain and at the
University of Santo Tomas Hospital Dr. Gustilo performed another operation to
cover a big hole 011 the right frontal part of the head with a tantalum plate.
The LTB paid the sum of P16,964.45 for all the hospital, medical and
miscellaneous expenses incurred from June 18, 1952 to April 1953. From January
15, 1953 up to ApriI of the same year Edgardo stayed in a private house in Quezon
City, the LTB having agreed to give him a subsistence allowance of P10.00 daily
during his convalescence, having spent in this connection the total sum of P775.30 in
addition to the amount already referred to.
On April 24, 1953 the present action was filed to recover for Edgardo Cariaga,
from the LTB and the MRR Co., the total sum of P312,000.00 as actual,
compensatory, moral and exemplary damages, and for his parents, the sum of
P18,000.00 in the same concepts. The LTB disclaimed liability claiming that the
accident was due to the negligence of its co-defendant, the Manila Railroad
Company, for not providing a crossing bar at the point where the national highway
crossed the railway track, and for this reason filed the corresponding cross-claim
against the latter company to recover the total sum of P18,194.75 representing the
expenses paid to Edgardo Cariaga. The Manila Railroad Company, in turn, denied
liability upon the complaint and cross-claim, alleging that it was the reckless
negligence of the bus driver that caused the accident.
The lower court held that it was the negligence of the bus driver that caused the
accident and, as a result, rendered judgment sentencing the LTB to pay Edgardo
Cariaga the sum of P10,490.00 as compensatory damages. with interest at the legal
rate from the filing of the complaint, and dismissing the cross-claim against the
Manila 
349
VOL. 110, DECEMBER 29, 1960  349 
Cariaga vs. Laguna Tayabas Bus Company
Railroad Company. From this decision the Cariagas and the LTB appealed.
The Cariagas claim that the trial court erred: in awarding only P10,490.00 as
compensatory damages to Edgardo; in not awarding them actual and moral damages,
and in not sentencing appellant LTB to pay attorney's fees.
On the other hand, the LTB's principal contention in this appeal is that the trial
court should have held that the collision was due to the fault of both the locomotive
driver and the bus driver and erred, as a consequence, in not holding the Manila
Railroad Company liable upon the cross-claim filed against it.
We shall first dispose of the appeal of the bus company. Its first contention is that
the driver of the train locomotive, like the bus driver, violated the law, first, in
sounding the whistle only when the collision was about to take place instead of at a
distance at least 300 meters from the crossing, and second, in not ringing the
After considering the evidence presented by both parties the lower court
expressly found:
"* * * While the train was approximately 300 meters from the crossing, the engineer
sounded two long; and two short whistles and upon reaching a point about 100
meters from the highway, he sounded a long whistle which lasted up to the time the
train was about to cross it. The bus proceeded on its way without slackening its speed
and it bumped against the train engine, causing the first six wheels of the latter to be
derailed."
*      *      *     *     *     *     *
"* * * that the train whistle had been sounded several times before it reached the
crossing;. All witnesses for the plaintiffs and the defendants are uniform in stating
that they heard the train whistle sometime before the impact and considering that
some of them were in the bus at the time, the driver thereof must have heard it
because he was seated on the left front part of the bus and it was his duty and
concern to observe such fact in connection with the safe operation of the vehicle. The
other L.T.B. bus which arrived ahead at the crossing, heeded the warning- by
stopping and allowing the train to pass and so nothing happened to said vehicle. On
the 
350
350  PHILIPPINE REPORTS ANNOTATED 
Cariaga us. Laguna Tayabas Bus Company
other hand, the driver of the bus No. 133 totally ignored the whistle and noise
produced by the approaching train and instead he tried to make the bus pass the
21
crossing before the train by not stopping' a few meters from the railway track and in
proceeding ahead."
The above findings of the lower court are predicated mainly upon the testimony of
Gregorio Ilusondo, a witness for the Manila Railroad Company. Notwithstanding the
efforts exerted by the LTB to assail his credibility, we do not find in the record any
fact or circumstance sufficient to discredit his testimony. We have, therefore, no
other alternative but to accept the findings of the trial court to the eff ect, firstly, that
the whistle of the locomotive was sounded four times—two long and two short—"as
the train was approximately 300 meters from the crossing"; secondly, that another
LTB bus which arrived at the crossing ahead of the one where Edgardo Cariaga was
a passenger, paid heed to the warning and stopped before the "crossing", while—as
the LTB itself now admits (Brief p. 5)—the driver of the bus in question totally
disregarded the warning.
But to charge the MRR Co. with contributory negligence, the LTB claims that
the engineer of the locomotive failed to ring the bell altogether, in violation of
section 91 of Article 1459, incorporated in the charter of the said MRR Co. This
contention—as is obvious—is the very f oundation of the cross-claim interposed by
the LTB against its co-defendant. The former, therefore, had the burden of proving it
affirmatively because a violation of law is never presumed. The record discloses that
this burden has not been satisfactorily discharged.
The Cariagas, as appellants, claim that the award of P10,000.00 compensatory
damages to Edgardo is inadequate considering the nature and the after effects of the
physical injuries suffered by him. After a careful consideration of the evidence on
this point we find their contention to be well founded.  studies.
351
VOL. 110, DECEMBER 29, 1960  351  should be increased to P25,000.00.
Cariaga vs. Laguna Tayabas Bus Company
From the deposition of Dr. Romeo Gustilo, a neurosurgeon, it appears that, as a
result of the injuries suffered by Edgardo, his right forehead was fractured
necessitating the removal of practically all of the right frontal lobe of his brain. From
the testimony of Dr. Jose A. Fernandez, a psychiatrist, it may be gathered that,
because of the physical injuries suffered by Edgardo, his mentality has been so
reduced that he can no longer finish his studies as a medical student; that he has
become completely misfit for any kind of work; that he can hardly walk around
without someone helping him, and has to use a brace on his left leg and feet.
Upon the whole evidence on the matter, the lower court found that the removal
of the right frontal lobe of the brain of Edgardo reduced his intelligence by about
50 % ; that due to the replacement of the right frontal bone of his head with a
tantalum plate Edgardo has to lead a quite and retired life because "if the tantalum
plate is pressed in or dented it would cause his death."
The impression one gathers f rom this evidence is that, as a result of the physical
injuries suffered by Edgardo Cariaga, he is now in a helpless condition, virtually an
invalid, both physically and mentally.
Appellant LTB admits that under Art. 2201 of the Civil Code the damages for
which the obligor, guilty of a breach of contract but who acted in good faith, is liable
shall be those that are the natural and probable consequences of the breach and which
the parties had foreseen or could have reasonably foreseen at the time the obligation
was constituted, provided such damages, according to Art. 2199 of the same Code,
have been duly proved. Upon this premise it claims that only the actual damages
suffered by Edgardo Cariaga consisting of medical, hospital and other expenses in
the total sum of P17,719.75 are within this category. We are of the opinion, however,
that the income which Edgardo Cariaga could earn if he should finish the medical
course and pass the corresponding board examinations must 
352
352  PHILIPPINE REPORTS ANNOTATED 
Cariaga vs. Laguna Tayabas Bus Company
be deemed to be within the same category because they could have reasonably been
foreseen by the parties at the time he boarded the bus No. 133 owned and operated
by the LTB. At that time he was already a fourth-year student in medicine in a
reputable university. While his scholastic record may not be first rate (Exhibits 4, 4-
A to 4C), it is, nevertheless, sufficient to justify the assumption that he could have
finished the course and would have passed the board test in due time. As regards the
income that he could possibly earn as a medical practitioner, it appears that,
according to Dr. Amado Doria, a witness for the LTB, the amount of P300.00 could
easily be expected as the minimum monthly income of Edgardo had he finished his
Upon consideration of all the facts mentioned heretofore, this Court is of the
opinion, and so holds, that the compensatory damages awarded to Edgardo Cariaga
Edgardo Cariaga's claim for moral damages and attorney's fees was denied by the
trial court, the pertinent portion of its decision reading as follows:
"Plaintiffs' claim for moral damages cannot also be granted. Article 2219 of the Civil
Code enumerates the instances when moral damages may be covered and the case
under consideration does not fall under any one of them. The present action cannot
come under paragraph 2 of said article because it is not one of quasidelict and cannot
be considered as such because of the pre-existing contractual relation between the
Laguna Tayabas Bus Company and Edgardo Cariaga. Neither could defendant
Laguna Tayabas Bus Company be held liable to pay moral damages to Edgardo
Cariaga under Article 2220 of the Civil Code on account of breach of its contract of
carriage because said defendant did not act fraudulently or in bad faith in connection
therewith. Defendant Laguna Tayabas Bus Company had exercised due diligence in
the selection and supervision of its employees like the drivers of its buses in
connection with the discharge of their duties and so it must be considered an obligor
in good faith.
"The plaintiff Edgardo Cariaga is also not entitled to recover for attorney's fees,
because this case does not fall under any of the instances enumerated in Article 2208
of the Civil Code."
22
 353
VOL. 110, DECEMBER 29, 1960  353  Cariaga vs. Laguna Tayabas Bus Company
Cariaga vs. Laguna Tayabas Bus Company
We agree with the trial court and, to the reasons given above, we add those given by
this Court in Cachero vs.Manila Yellow Taxicab Co., Inc. (101 Phil., 523, 530, 533) :
"A mere perusal of plaintiff's complaint will show that his action against the
defendant is predicated on an alleged breach of contract of carriage, i.e., the failure
of the defendant to bring him 'safely and without mishaps' to his destination, and it is
to be noted that the chauffeur of defendant's taxicab that plaintiff used when he
received the injuries involved herein, Gregorio Mira, has not even been made a party
defendant to this case.
"Considering, therefore, the nature of plaintiff's action in this case, is he entitled
to compensation for moral damages? Article 2219 of the Civil Code says the
following:
'Art. 2219. Moral damages may be recovered in the following and analogous
cases:
1. (1)A criminal offense resulting in physical injuries;
2. (2)Quasi-delicts causing physical injuries;
3. (3)Seduction, abduction, rape, or other lascivious acts;
4. (4)Adultery or concubinage;
5. (5)Illegal or arbitrary detention or arrest;
6. (6)Illegal search;
7. (7)Libel, slander or any other form of defamation;
8. (8)Malicious prosecution;
9. (9)Acts mentioned in Article 309;
10. (10)Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34
and 35.
     *     *     *     *     *
"Of the cases enumerated in the just quoted Article 2219 only the first two may
have any bearing on the case at bar. We find, however, with regard to the first that
the defendant herein has not committed in connection with this case any 'criminal
offense resulting in physical injuries'. The one that committed the offense against the
plaintiff is Gregorio Mira, and that is why he has been already prosecuted and
punished therefor. Altho (a) owners and managers of an establishment or enterprise
are responsible for damages caused by their employees in the service of the branches
in which the latter are employed or on the occasion of their functions; (b) employers
are likewise liable for damages caused by their employees and household helpers
acting within the scope of their assigned task (Article 218 of the Civil Code); and (c)
employers and corporations engaged in any kind of industry are subsidiary civilly
liable for felonies committed by their employees  can be rebutted by proof of the exercise of due care in their selection of supervision.
354
354  PHILIPPINE REPORTS ANNOTATED 
in the discharge of their duties (Art. 103, Revised Penal Code), plaintiff herein does
not maintain this action under the provisions of any of the articles of the codes just
mentioned and against all the persons who might be liable for the damages caused,
but as a result of an admitted breach of contract of carriage and against the defendant
employer alone. We, therefore, hold that the case at bar does not come within the
exception of paragraph 1, Article 2219 of the Civil Code.
"The present complaint is not based either on a 'quasi-delict causing physical
injuries' (Art. 2219, par. 2, of the Civil Code). From the report of the Code
Commission on the new Civil Code We copy the following:
'A question of nomenclature confronted the Commission. After a careful
deliberation, it was agreed to use the term 'quasi-delict' for those obligations which
do not arise from law, contracts, quasi-contracts, or criminal offenses. They are
known in Spanish legal treatises as 'culpa, aquiliana', culpa-extra-
contractual' or 'cuasi-delitos'. The phrase 'culpa-extra-contractual' or its translation
'extra-contractual-fault' was eliminated because it did not exclude quasi-contractual
or penal obligations. 'Aquilian fault' might have been selected, but it was thought
inadvisable to refer to so ancient a law as the 'Lex Aquilia'. So 'quasi-delict' was
chosen, which more nearly corresponds to the Roman Law classification of
obligations, and is in harmony with the nature of this kind of liability.'
The Commission also thought of the possibility of adopting the word "tort" from
Anglo-American law. But "tort" under that system is much broader than the Spanish-
Philippine concept of obligations arising from non-contractual negligence. 'Tort' in
AngloAmerican jurisprudence includes not only negligence, but also intentional
criminal act, such as assault and battery, false imprisonment and deceit. In the
general plan of the Philippine legal system, intentional and malicious acts are
governed by the Penal Code, although certain exceptions are made in the Project/
(Report of the Code Commission, pp. 161-162).
"In the case of Cangco, vs. Manila Railroad, 38 Phil. 768, We established the
distinction between obligation derived from negligence and obligation as a result of a
breach of contract. Thus, we said:
'lt is important to note that the foundation of the legal liability of the defendant is
the contract of carriage, and that the obligation to respond for the damage which
plaintiff has suffered arises, if at all, from the breach of that contract by reason of the
failure of defendant to exercise due care in its performance. That is to say, its
liability is direct and immediate, differing essentially in the
355
VOL. 110, DECEMBER 29, 1960  355 
Cariaga vs. Laguna Tayabas Bus Company
legal viewpoint from that presumptive responsibility for the negligence of its
servants, imposed by Article 1903 of the Civil Code (Art. 2180 of the new), which
Article 1903 is not applicable to obligations arising EX CONTRACTU, but only to
23
extra-contractual obligations—or to use the technical form of expression, that
article relates only to CULPA AQUILIANA.' and not to CULPA CONTRACTUAL.'
"The decisions in the cases of Castro vs. Acro Taxicab Co., (82 Phil., 359; 46
Off. Gaz., No. 5, p. 2023); Lilius et al. vs. Manila Railroad, 59 Phil., 758) and others,
wherein moral damages were awarded to the plaintiffs, are not applicable to the case
at bar because said decisions were rendered before the effectivity of the new Civil
Code (August 30, 1950) and for the further reason that the complaints filed therein
were based on different causes of action.
"In view of the foregoing the sum of P2,000 awarded as moral damages by the
trial court has to be eliminated, for under the law it is not a compensation awardable
in a case like the one at bar."
What has been said heretofore relative to the moral damages claimed by Edgardo
Cariaga obviously applies with greater force to a similar claim (4th assignment of
error) made by his parents.
The claim made by said spouses for actual and compensatory damages is
likewise without merits. As held by the trial court, in so far as the LTB is concerned,
the present action is based upon a breach of contract of carriage to which said
spouses were not a party, and neither can they premise their claim upon the
negligence or quasidelict of the LTB f or the simple reason that they were not
themselves injured as a result of the collision between the LTB bus and the train
owned by the Manila Railroad Company.
Wherefore, modified as above indicated, the appealed judgment is hereby
affirmed in all other respects, with costs against appellant LTB.
     Parás, C. J., Bengzon, Bautista Angelo, Labrador, Reyes, J. B.
L., Barrera, Gutierrez David, and Paredes, JJ.,concur.
Judgment affirmed with modification.

24

G.R. No. 179117. February 3, 2010.*
NORTHWEST AIRLINES, INC., petitioner, vs. SPOUSES EDWARD J.
HESHAN AND NELIA L. HESHAN AND DARA GANESSA L. HESHAN,
REPRESENTED BY HER PARENTS EDWARD AND NELIA HESHAN,
respondents.
Remedial Law; Appeals; Certiorari; In petitions for review on certiorari, the
general rule is that only questions of law may be raised by the parties and passed
upon by the Court.—As has repeatedly been underscored, in petitions for review
on certiorari, the general rule is that only questions of law may be raised by the
parties and passed upon by the Court. Factual findings of the appellate court are
generally binding on the Court, especially when in complete accord with the findings
of the trial court, as in the present case, save for some recognized exceptions.
Civil Law; Damages; While courts are given discretion to determine the
amount of damages to be awarded, it is limited by the principle that the amount
awarded should not be palpably and scandalously excessive.—The petition is in part
meritorious. There is a need to substantially reduce the moral damages awarded by
the appellate court. While courts are given discretion to determine the amount of
damages to be awarded, it is limited by the principle that the amount awarded should
not be palpably and scandalously excessive.
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
   The facts are stated in the opinion of the Court.
  Quisumbing, Torres for petitioner.
  Francisco, Paredes and Morales Law Offices for respondents.
_______________
* FIRST DIVISION.
465CARPIO-MORALES, J.:
In July 1998, Edward Heshan (Edward) purchased three (3) roundtrip tickets
from Northwest Airlines, Inc. (petitioner) for him, his wife Nelia Heshan (Nelia) and
daughter Dara Ganessa Heshan (Dara) for their trip from Manila to St. Louis,
Missouri, USA and back to attend an ice skating competition where then seven year
old Dara was to participate.1
When Dara’s participation in the ice skating event ended on August 7, 1998, the
Heshans proceeded to the airport to take the connecting flight from St. Louis to
Memphis on their way to Los Angeles. At the airport, the Heshans first checked-in
their luggage at the airport’s “curbside check-in” near the entrance.2 Since
they arrived three hours early for their 6:05 p.m. flight (Flight No. 972M), the
Heshans whiled away the time at a nearby coffee shop. At 5:15 p.m. when the check-
in counter opened, Edward took to the line where he was second in the queue. When
his turn came and presented the tickets to petitioner’s customer service agent Ken
Carns (Carns) to get the boarding passes, he was asked to step aside and wait to be
called again.3
After all the other departing passengers were given their boarding passes, the
Heshans were told to board the plane without any boarding pass given to them and to
just occupy open seats therein. Inside the plane, the Heshans noticed that only one
vacant passenger seat was available, which was offered to Dara, while Edward and
Nelia were directed to occupy two “folding seats” located at the rear portion of the
plane. To respondents, the two folding seats were crew seats intended for the
stewardesses.4
 
_______________
1 Transcript of Stenographic Notes (TSN), January 20, 2000, p. 11.
2 Records, p. 74.
3 TSN, January 20, 2000, pp. 12-16.
4 Id., at pp. 17-20.
466   Upset that there were not enough passenger seats for them, the Heshans
complained to the cabin crew about the matter but were told that if they did not like
to occupy the seats, they were free to disembark from the plane. And disembark they
did, complaining thereafter to Carns about their situation. Petitioner’s plane then
departed for Memphis without respondents onboard.5
The Heshans were later endorsed to and carried by Trans World Airways to Los
Angeles. Respondents arrived in Los Angeles at 10:30 p.m. of the same day but had
to wait for three hours at the airport to retrieve their luggage from petitioner’s Flight
No. 972M.6 Respondents stayed for five days more in the U.S. before going back
home to Manila.7
On September 24, 1998, respondents sent a letter to petitioner to demand
indemnification for the breach of contract of carriage. 8 Via letter of December 4,
1998, petitioner replied that respondents were prohibited to board Flight No. 972M
for “verbally abus[ing] [the] flight crew.”9
As their demand remained unheeded, respondents filed a complaint for breach of
contract with damages at the Regional Trial Court (RTC) of Quezon City.10
From the depositions of petitioner’s employees Carns, Mylan Brown (Brown)
and Melissa Seipel (Seipel), the following version is gathered:
The Heshans did not have reservations for particular seats on the flight. When
they requested that they be seated together, Carns denied the request and explained
that other passengers had pre-selected seats and that the computerized seating system
did not reflect that the request could be ac-
_______________
5  Id., at pp. 20-21.
6  Id., at pp. 22-26.
7  TSN, June 9, 2000, p. 31.
8  Records, pp. 77-78; Exhibit “H.”
9  TSN, January 20, 2000, pp. 29-30.
10 Records, pp. 1-6.
25
467commodated at the time. Carns nonetheless assured the Heshans that they would
be able to board the plane and be seated accordingly, as he in fact instructed them ten
minutes before the plane’s departure, to board the plane even without boarding
passes and to occupy “open seats” therein.11
By Seipel’s claim, as the Heshans were upset upon learning that they were not
seated together on the plane, she told them that she would request other passengers to
switch places to accommodate their demand; that she never had a chance to try to
carry out their demand, however, as she first had to find space for their bags in the
overhead compartment; and that the Heshans cursed her which compelled her to seek
assistance from Brown in dealing with them.12
Brown averred that she went to the back portion of the plane to help out but she
was brushed aside by Nelia who was cursing them as she stormed out of the plane
followed by Edward and Dara.13
Petitioner denied that the Heshans (hereafter respondents) were told to occupy
“folding seats” or crew seats since “[Federal Aviation Authority] regulations say no
passengers are to sit there.”14 As for respondents not having been given boarding
passes, petitioner asserted that that does not in itself mean that the flight was
overbooked, for
“[t]his is done on last minute boarding when flights are full and in order to get
passengers on their way and to get the plane out on time. This is acceptable
procedure.”15
_______________
11 Id., at pp. 108-110.
12 Id., at pp. 115-117.
13 Id., at p. 122.
14 Id., at pp. 117, 123.
15 Id., at pp. 110, 115 and 121; Depositions of Ken Carns, Melissa Seipel and
Mylan Brown.
468Branch 96 of the RTC, by Decision16 of August 20, 2002, rendered judgment
in favor of respondents, disposing as follows:
“WHEREFORE, judgment is rendered ordering [petitioner] Northwest Airlines,
Inc. to pay [respondents] Edward J. Heshan, Nelia L. Heshan and Dara Ganessa L.
Heshan the following:
1. P3,000,000.00, as moral damages;
2. P500,000.00, as exemplary damages;
3. A sum equivalent of 20% of the foregoing amounts, as attorney’s fees; and,
4. Costs of suit.
SO ORDERED.”17
In finding for respondents, the trial court noted:
“[T]hat the [respondents] held confirmed reservations for the St Louis-Memphis
leg of their return trip to the Philippines is not disputed. As such, they were
entitled as of right under their contract to be accommodated in the flight, regardless
of whether they had selected their seats in advance or not. They had arrived at the
airport early to make sure of their seating together, and, in fact, Edward was second
in the queue for boarding passes. Yet, Edward was unceremoniously sidelined and
curtly told to wait without any explanations why. His concerned seeking for
explanations was repeatedly rebuffed by the airline employees. When, at last, they
were told to board the aircraft although they had not yet been issued boarding
passes, which they thought to be highly unusual, they soon discovered, to their
dismay, that the plane was fully booked, with only one seat left for the 3 of
them. Edward and Nelia rejected the offer [to take] the crew seats.
[Respondents] were thus forced to disembark.” (italics in the original; emphasis
and underscoring supplied)
_______________
16 Id., at pp. 252-260. Penned by then Presiding Judge Lucas P. Bersamin (now
an Associate Justice of the Court).
17 Id., at p. 260.
469On appeal, the Court of Appeals, by Decision 18 of June 22, 2007, sustained
the trial court’s findings but reduced the award of moral and exemplary damages to
P2 million and P300,000, respectively.19 In affirming the findings of the trial court,
the appellate court held:
“… [I]t is clear that the only instances [sic] when the [petitioner] and its agents
allow its passengers to board the plane without any boarding pass is when the flights
are full and the plane is running late. Taking into account the fact that the
[respondents] arrived at the airport early, checked-in their baggage before hand and
were in fact at the gates of the boarding area on time, thus, it could not be said that
they can fall under the exceptional circumstance [sic]. It bears stressing at this
juncture that it becomes a highly irregular situation that despite the fact that the
[respondents] showed up on time at the boarding area[,] they were made to go
in last and sans any boarding passes. Thus, We hold that it can belogically
inferred that the reason why no boarding passes were immediately issued to the
[respondents] is because Flight 972 from St. Louis to Memphis is full and the
[respondents] were “bumped off” from their flight.” (emphasis, italics and
underscoring supplied)
Reconsideration having been denied by the appellate court, 20 petitioner filed the
present petition for review upon the issues of whether the appellate court
I
. . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO MORAL
DAMAGES…
II
. . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO
EXEMPLARY DAMAGES…
_______________
18 CA Rollo, pp. 174-196. Penned by Associate Justice Myrna Dimaranan Vidal
with Associate Justices Jose L. Sabio Jr. and Jose C. Reyes Jr. concurring.
19 Id., at p. 196.
20 Rollo, p. 90.
26
470
III
. . . ERRED IN RULING THAT RESPONDENTS WERE ENTITLED TO
ATTORNEY’S FEES…
IV
. . .ASSUMING ARGUENDO THAT RESPONDENTS WERE ENTITLED TO AN
AWARD OF DAMAGES, [ERRED IN AWARDING EXCESSIVE DAMAGES TO
RESPONDENTS].
V 26 Id., at pp. 51-54.
. . . ERRED IN NOT FINDING FOR [IT] ON ITS COUNTERCLAIM.21
To petitioner, the present petition offers compelling reasons to again review the
congruent factual findings of the lower courts which, to it, are contrary to the
evidence on record; that the lower courts disregarded vital testimonies of its
witnesses; that the appellate court premised its decision on a misapprehension of
facts and failed to consider certain relevant facts which, if properly taken into
account, will justify a different conclusion; that the appellate court made several
inferences which were manifestly mistaken and absurd; and that the appellate court
exercised grave abuse of discretion in the appreciation of facts.22
Petitioner maintains that it did not violate the contract of carriage since
respondents were eventually transported from Memphis to Los Angeles,
albeit via another airline, and that respondents made no claim of having sustained
injury during the carriage.23
Petitioner goes on to posit that if indeed crew seats were offered to respondents,
its crew would have had nowhere to sit and the plane would not have been able to
depart,24 and that in reality, respondents voluntarily disembarked from the
_______________
21 Id., at pp. 16-18.
22 Id., at pp. 297-298.
23 Id., at p. 19.
24 Id., at p. 22.
471aircraft because they were not willing to wait to be seated together.25
At all events, petitioner finds the amount of damages imposed by the appellate
court “excessive and unprecedented” and needing substantial reduction.26
In their Comment, respondents counter that since the petition is predicated on
questions of facts and the appellate court affirmed the trial court’s factual findings,
these are entitled to great weight and respect.27
Respondents thus maintain that petitioner was guilty of breach of contract. They
cite Singapore Airlines v. Fernandez,28 which ruled:
“[W]hen an airline issues a ticket to a passenger, confirmed for a particular flight on
a certain date, a contract of carriage arises. The passenger then has every right
to expect that he be transported on  that flight and on that date. If he does not, then
the carrier opens itself to a suit for a breach of contract of carriage.
The petition fails.
As has repeatedly been underscored, in petitions for review on certiorari, the
general rule is that only questions of law may be raised by the parties and passed
upon by the Court.29 Factual findings of the appellate court are generally binding on
the Court, especially when in complete accord with the findings of the trial court, as
in the present case, save for some recognized exceptions.30
_______________
25 Id., at p. 28.
27 Id., at pp. 275-276.
28 463 Phil. 145; 417 SCRA 474 (2003).
29 Section 1 of Rule 45 of the Rules of Civil Procedure.
30 These are: (1) when the findings are grounded entirely on speculation,
surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd
or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is
based on a misappre-
472The issues raised by petitioner are predicated on the appreciation of factual
issues. In weighing the evidence of the parties, the trial court found respondents’
more credible.
An examination of the evidence presented by petitioner shows that it consisted
only of depositions of its witnesses. It had in its possession and disposition pertinent
documents such as the flight manifest and the plane’s actual seating capacity and
layout which could have clearly refuted respondents’ claims that there were not
enough passenger seats available for them. It inexplicably failed to offer even a
single piece of documentary evidence. The Court thus believes that if at least the
cited documentary evidence had been produced, it would have been adverse to
petitioner’s case.31
More. Petitioner failed to satisfactorily explain why it did not issue boarding
passes to respondents who were confirmed passengers, even after they had checked-
in their luggage three hours earlier. That respondents did not reserve seats prior to
checking-in did not excuse the non-issuance of boarding passes.
From Carns’ following testimony, viz:
_______________
hension of facts; (5) when the findings of facts are conflicting; (6) when in
making its findings, the Court of Appeals went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to that of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioner’s main and reply briefs
are disputed by the respondent; (10) when the findings are premised on the supposed
absence of evidence and contradicted by the evidence on record; and (11) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different conclusion.
27
 31 Section 3 (e) of Rule 131 of the Revised Rules on Evidence; Worcester v.
Ocampo, 22 Phil. 42 (1912).
473
Q. Now you mentioned open seats, Mr. Carns, can you tell us what the
phrase or term open seats mean?
A. Well, about 10 minutes before boarding time when we cancel those who
do not take reserve seats, we know how many passengers are on the
plane and we just tell the other passengers to take whatever seat is
available at that time,32
it is gathered that respondents were made to wait for last-minute cancellations
before they were accommodated onto the plane. This, coupled with petitioner’s
failure to issue respondents their boarding passes and the eleventh-hour directive for
them to embark, reinforces the impression that the flight was overbooked.
Petitioner’s assertion that respondents disembarked from the plane when their
request to be seated together was ignored does not impress. The observation of the
appellate court, viz:
“x x x x [T]he fact that the Appellees still boarded the plane ten (10) minutes
prior to the departure time, despite knowing that they would be seated apart, is
a clear manifestation of the Appellees’ willingness to abandon their request and just
board the plane in order to catch their flight. But as it turns out, there were not
enough seats for the three of them as aptly found by the Court a quo, to which We
subscribed [sic]. x x x x,”33
merits the Court’s concurrence.
Nonetheless, the petition is in part meritorious. There is a need to substantially
reduce the moral damages awarded by the appellate court. While courts are given
discretion to determine the amount of damages to be awarded, it is limited by
_______________
32 Records, pp. 109-110.
33 Rollo, p. 79.
474the principle that the amount awarded should not be palpably and scandalously
excessive.34
Moral damages are neither intended to impose a penalty to the wrongdoer, nor to
enrich the claimant. Taking into consideration the facts and circumstances attendant
to the case, an award to respondents of P500,000, instead of P2,000,000, as moral
damages is to the Court reasonable.35
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are
AFFIRMED with MODIFICATION. The award of moral damages is reduced to
P500,000. In all other respects, the Decision is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Puno (C.J., Chairperson), Nachura, Leonardo-De Castro and Villarama, Jr.,
JJ., concur.
 
Judgment and resolution affirmed with modification.
 
Note.—While as a rule, only questions of law may be raised in a petition for
review on certiorari under Rule 45, under certain exceptions, the Supreme Court
may re-examine the evidence presented by the parties during the trial. (Manila
Doctors Hospital vs. So Un Chua, 497 SCRA 230 [2006])
——o0o——
G.R. No. 157009. March 17, 2010.*
SULPICIO LINES, INC., petitioner, vs. DOMINGO E. CURSO, LUCIA E.
CURSO, MELECIO E. CURSO, SEGUNDO E. CURSO, VIRGILIO E.
CURSO, DIOSDADA E. CURSO, and CECILIA E. CURSO, respondents.
Common Carriers; Damages; Statutory Construction; The omission from
Article 2206(3) of the brothers and sisters of the deceased passenger reveals the
legislative intent to exclude them from the recovery of moral damages for mental
anguish by reason of the death of the deceased—the solemn power and duty of the
courts to interpret and apply the law do not include the power to correct the law by
reading into it was is not written therein.—As a general rule, moral damages are not
recoverable in actions for damages predicated on a breach of contract, unless there is
fraud or bad faith. As an exception, moral damages may be awarded in case of
breach of contract of carriage that results in the death of a passenger, in accordance
with Article 1764, in relation to Article 2206 (3), of the Civil Code, which provide:
x x x The foregoing legal provisions set forth the persons entitled to moral damages.
The omission from Article 2206 (3) of the brothers and sisters of the deceased
passenger reveals the legislative intent to exclude them from the recovery of moral
damages for mental anguish by reason of the death of the deceased.  Inclusio unius
est exclusio alterius. The solemn power and duty of the courts to interpret and apply
the law do not include the power to correct the law by
_______________
* FIRST DIVISION.
576
576 SUPREME COURT REPORTS ANNOTATED
Sulpicio Lines, Inc. vs. Curso
reading into it what is not written therein. Thus, the CA erred in awarding
moral damages to the respondents.
Same; Same; Moral Damages; To be entitled to moral damages, a party must
have a right based upon law.—The purpose of moral damages is indemnity or
reparation, that is, to enable the injured party to obtain the means, diversions, or
amusements that will serve to alleviate the moral suffering he has undergone by
reason of the tragic event. According to Villanueva v. Salvador, 480 SCRA 39
(2006), the conditions for awarding moral damages are: (a) there must be an injury,
whether physical, mental, or psychological, clearly substantiated by the claimant; (b)
there must be a culpable act or omission factually established; (c) the wrongful act or
omission of the defendant must be the proximate cause of the injury sustained by the
28
claimant; and (d) the award of damages is predicated on any of the cases stated in
Article 2219 of the Civil Code. To be entitled to moral damages, the respondents
must have a right based upon law. It is true that under Article 1003 of the Civil
Code they succeeded to the entire estate of the late Dr. Curso in the absence of the
latter’s descendants, ascendants, illegitimate children, and surviving spouse.
However, they were not included among the persons entitled to recover moral
damages, as enumerated in Article 2219 of the Civil Code.
Same; Same; Same; Ejusdem Generis; The usage of the phrase analogous
cases in Article 2219 of the Civil Code means simply that the situation must be held
similar to those expressly enumerated in the law in question following the ejusdem
generis rule.—Article 2219 circumscribes the instances in which moral damages
may be awarded. The provision does not include succession in the collateral line as a
source of the right to recover moral damages. The usage of the phrase analogous
cases in the provision means simply that the situation must be held similar to those
expressly enumerated in the law in question following the ejusdem generis rule.
Hence, Article 1003 of the Civil Code is not concerned with recovery of moral
damages.
PETITION for review on certiorari of a decision of the Court of Appeals.
   The facts are stated in the opinion of the Court.
577
VOL. 615, March 17, 2010 577
Sulpicio Lines, Inc. vs. Curso
  Arthur D. Lim Law Office for petitioner.
  Clemencio C. Sabitsana for respondents.
BERSAMIN, J.:
 
Are the surviving brothers and sisters of a passenger of a vessel that sinks during
a voyage entitled to recover moral damages from the vessel owner as common
carrier?
This is the question presented in the appeal taken by the common carrier from the
reversal by the Court of Appeals (CA) of the decision of the Regional Trial Court
(RTC) dismissing the complaint for various damages filed by the surviving brothers
and sisters of the late Dr. Cenon E. Curso upon a finding that force majeure had
caused the sinking. The CA awarded moral and other damages to the surviving
brothers and sisters.
 
Antecedents
 
On October 23, 1988, Dr. Curso boarded at the port of Manila the MV Doña
Marilyn, an inter-island vessel owned and operated by petitioner Sulpicio Lines, Inc.,
bound for Tacloban City. Unfortunately, the MV Doña Marilyn sank in the
afternoon of October 24, 1988 while at sea due to the inclement sea and weather
conditions brought about by Typhoon Unsang. The body of Dr. Curso was not
recovered, along with hundreds of other passengers of the ill-fated vessel. At the
time of his death, Dr. Curso was 48 years old, and employed as a resident physician
at the Naval District Hospital in Naval, Biliran. He had a basic monthly salary of
P3,940.00, and would have retired from government service by December 20, 2004
at the age of 65.
On January 21, 1993, the respondents, allegedly the surviving brothers and
sisters of Dr. Curso, sued the petitioner in the RTC in Naval, Biliran to claim
damages based on breach of contract of carriage by sea, averring that the petitioner
had acted negligently in transporting Dr. Curso and the other
578
578 SUPREME COURT REPORTS ANNOTATED
Sulpicio Lines, Inc. vs. Curso
passengers. They stated, among others, that their parents had predeceased Dr. Curso,
who died single and without issue; and that, as such, they were Dr. Curso’s surviving
heirs and successors in interest entitled to recover moral and other damages. 1 They
prayed for judgment, as follows: (a) compensatory damages of P1,924,809.00; (b)
moral damages of P100,000.00; (c) exemplary or corrective damages in the amount
deemed proper and just; (d) expenses of litigation of at least P50,000.00; (e)
attorney’s fees of P50,000.00; and (f) costs of suit.
The petitioner denied liability, insisting that the sinking of the vessel was due
to force majeure (i.e., Typhoon Unsang), which exempted a common carrier from
liability. It averred that the MV Doña Marilyn was seaworthy in all respects, and
was in fact cleared by the Philippine Coast Guard for the voyage; and that after the
accident it conducted intensive search and rescue operations and extended assistance
and aid to the victims and their families.
 
Ruling of the RTC
 
On July 28, 1995, the RTC dismissed the complaint upon its finding that the
sinking of the vessel was due to force majeure. The RTC concluded that the officers
of the MV Doña Marilyn had acted with the diligence required of a common carrier;
that the sinking of the vessel and the death of its passengers, including Dr. Curso,
could not have been avoided; that there was no basis to consider the MVDoña
Marilyn not seaworthy at the time of the voyage; that the findings of the Special
Board of Marine Inquiry (SBMI) constituted to investigate the disaster absolved the
petitioner, its officers, and crew of any negligence and administrative liability; and
that the respondents failed to prove their claim for damages.
_______________
29
 1 Rollo, pp. 24-28.
579
VOL. 615, March 17, 2010 579
Sulpicio Lines, Inc. vs. Curso
Ruling of the CA
 
The respondents appealed to the CA, contending that the RTC erred: (a) in
considering itself barred from entertaining the case by the findings of fact of the
SBMI in SBMI-ADM Case No. 08-88; (b) in not holding that the petitioner was
negligent and did not exercise the required diligence and care in conducting Dr.
Curso to his destination; (c) in not finding that the MV Doña Marilynwas
unseaworthy at the time of its sinking; and (d) in not awarding damages to them.2
In its decision dated September 16, 2002,3 the CA held and disposed:
“Based on the events described by the appellee’s witness, the Court found
inadequate proof to show that Sulpicio Lines, Inc., or its officers and crew, had
exercised the required degree of diligence to acquit the appellee of liability.
In the first place, the court finds inadequate explanation why the officers of the
M.V. Doña Marilyn had not apprised themselves of the weather reports on the
approach of typhoon “Unsang” which had the power of a signal no. 3 cyclone,
bearing upon the general direction of the path of the M.V. Doña Marilyn. If the
officers and crew of the Doña Marilyn had indeed been adequately monitoring the
strength and direction of the typhoon, and had acted promptly and competently to
avoid the same, then such a mishap would not have occurred.
Furthermore, there was no account of the acts and decision of the crew of the ill-
fated ship from 8:00 PM on October 23, 1988 when the Chief Mate left his post until
4:00 AM the next day when he resumed duty. It does not appear what occurred
during that time, or what weather reports were received and acted upon by the ship
captain. What happened during such time is important in determining what
information about the typhoon was gathered and how the
_______________
2 Id., at p. 52.
3 Penned by Associate Justice Rodrigo V. Cosico, with Associate Justices
Josefina Guevara–Salonga and Edgardo F. Sundiam, concurring, Id., at pp. 49-60.
580
580 SUPREME COURT REPORTS ANNOTATED
Sulpicio Lines, Inc. vs. Curso
ship officers reached their decision to just change course, and not take shelter while a
strong typhoon was approaching.
Furthermore, the Court doubts the fitness of the ship for the voyage, since at the
first sign of bad weather, the ship’s hydraulic system failed and had to be repaired
mid-voyage, making the vessel a virtual derelict amidst a raging storm at sea. It is
part of the appellee’s extraordinary diligence as a common carrier to make sure that
its ships can withstand the forces that bear upon them during a voyage, whether they
be the ordinary stress of the sea during a calm voyage or the rage of a storm. The fact
that the stud bolts in the ships hydraulic system gave way while the ship was at sea
discredits the theory that the appellee exercised due diligence in maintaining the
seaworthy condition of the M.V. Doña Marilyn. xxx.4
xxx
Aside from these, the defendant must compensate the plaintiffs for moral
damages that they suffered as a result of the negligence attending the loss of the
M.V. Doña Marilyn. Plaintiffs, have established that they took great pains to recover,
in vain, the body of their brother, at their own cost, while suffering great grief due to
the loss of a loved one. Furthermore, Plaintiffs were unable to recover the body of
their brother. Moral damages worth P100,000.00 is proper.
WHEREFORE, premises considered, the appealed decision of the RTC of Naval,
Biliran, Branch 16, rendered in Civil Case No. B-0851, is hereby SET ASIDE. In
lieu thereof, judgment is hereby rendered, finding the defendant-appellee Sulpicio
Lines, Inc, to have been negligent in transporting the deceased Cenon E. Curso who
was on board the ill-fated M.V. Doña Marilyn, resulting in his untimely death.
Defendant-appellee is hereby ordered to pay the plaintiffs heirs of Cenon E. Curso
the following:
(1) Death indemnity in the amount of P50,000.00;
(2) Loss of Earning Capacity in the amount of P504,241.20;
(3) Moral Damages in the amount of P100,000.00.
(4) Costs of the suit.”5
_______________
4 Id., at pp. 55-56.
5 Id., at pp. 59-60.
581
VOL. 615, March 17, 2010 581
Sulpicio Lines, Inc. vs. Curso
 
Hence, this appeal, in which the petitioner insists that the CA committed
grievous errors in holding that the respondents were entitled to moral damages as the
brothers and sisters of the late Dr. Curso; that the CA thereby disregarded Article
1764 and Article 2206 of the Civil Code, and the ruling in Receiver for North Negros
Sugar Co., Inc. v. Ybañez,6 whereby the Supreme Court disallowed the award of
moral damages in favor of the brothers and sisters of a deceased passenger in an
action upon breach of a contract of carriage.7
 
Issues
The petitioner raises the following issues:
30
ARE THE BROTHERS AND SISTERS OF A DECEASED PASSENGER IN A
CASE OF BREACH OF CONTRACT OF CARRIAGE ENTITLED TO AN
AWARD OF MORAL DAMAGES AGAINST THE CARRIER?
ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL DAMAGES,
SHOULD THE AWARD BE GRANTED OR GIVEN TO THE BROTHER OR
SISTER NOTWITHSTANDING (THE) LACK OF EVIDENCE AS REGARDS
HIS OR HER PERSONAL SUFFERING?
 
Ruling
The petition is meritorious.
As a general rule, moral damages are not recoverable in actions for damages
predicated on a breach of contract, unless there is fraud or bad faith. 8 As an
exception, moral damages may be awarded in case of breach of contract of carriage
that
_______________
6 G.R. No. L-22183, August 30, 1968, 24 SCRA 979.
7 Rollo, p. 11.
8 Japan Airlines v. Simangan, G.R. No. 170141, April 22, 2008, 552 SCRA 341,
361.
582
582 SUPREME COURT REPORTS ANNOTATED
Sulpicio Lines, Inc. vs. Curso
results in the death of a passenger,9 in accordance with Article 1764, in relation to
Article 2206 (3), of the Civil Code, which provide:
“Article 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall
also apply to the death of a passenger caused by the breach of contract by a common
carrier.
Article 2206. The amount of damages for death caused by a crime or quasi-
delict shall be at least three thousand pesos, even though there may have been
mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity
shall in every case be assessed and awarded by the court, unless the deceased on
account of permanent physical disability not caused by the defendant, had no earning
capacity at the time of his death;
(2)  If the deceased was obliged to give support according to the provisions of
article 291, the recipient who is not an heir called to the decedent’s inheritance by the
law of testate or intestate succession, may demand support from the person causing
the death, for a period not exceeding five years, the exact duration to be fixed by the
court;
(3)  The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.”
 
The foregoing legal provisions set forth the persons entitled to moral damages.
The omission from Article 2206 (3) of the brothers and sisters of the deceased
passenger reveals the legislative intent to exclude them from the recovery of moral
damages for mental anguish by reason of the death of the deceased.  Inclusio unius
est exclusio alterius.10 The solemn
_______________
9  Victory Liner, Inc. v. Gammad, G.R. No. 159636, November 25, 2004, 444
SCRA 355, 356.
10 The express inclusion of one implies the exclusion of all others.
583
VOL. 615, March 17, 2010 583
Sulpicio Lines, Inc. vs. Curso
power and duty of the courts to interpret and apply the law do not include the power
to correct the law by reading into it what is not written therein. 11 Thus, the CA erred
in awarding moral damages to the respondents.
The petitioner has correctly relied on the holding in Receiver for North Negros
Sugar Company, Inc. v. Ybañez,12to the effect that in case of death caused by quasi-
delict, the brother of the deceased was not entitled to the award of moral damages
based on Article 2206 of the Civil Code.
Essentially, the purpose of moral damages is indemnity or reparation, that is, to
enable the injured party to obtain the means, diversions, or amusements that will
serve to alleviate the moral suffering he has undergone by reason of the tragic event.
According to Villanueva v. Salvador,13 the conditions for awarding moral damages
are: (a) there must be an injury, whether physical, mental, or psychological, clearly
substantiated by the claimant; (b) there must be a culpable act or omission factually
established; (c) the wrongful act or omission of the defendant must be the proximate
cause of the injury sustained by the claimant; and (d) the award of damages is
predicated on any of the cases stated in Article 2219 of the Civil Code.
To be entitled to moral damages, the respondents must have a right based upon
law. It is true that under Article 1003 14 of the Civil Code they succeeded to the entire
estate of the late Dr. Curso in the absence of the latter’s descendants, ascendants,
illegitimate children, and surviving spouse. However, they were not included among
the persons entitled to
_______________
11 Agote v. Lorenzo, G.R. No. 142675, July 22, 2005, 464 SCRA 60.
12 Supra, note 6.
31
 13 G.R. No. 139436, January 25, 2006, 480 SCRA 39. surviving spouse of the deceased passenger to demand moral damages for mental
14 Article  1003. If there are no descendants, ascendants, illegitimate children, anguish by reason of the death of the deceased.17
or a surviving spouse, the collateral relatives shall succeed to the entire estate of the WHEREFORE, the petition for review on certiorari is granted, and the award
deceased in accordance with the following articles. (946a) made to the respondents in the decision dated September 16, 2002 of the Court of
584 Appeals of moral damages amounting to P100,000.00 is deleted and set aside.
584 SUPREME COURT REPORTS ANNOTATED  SO ORDERED.
Puno (C.J., Chairperson), Carpio-Morales, Leonardo-De
Sulpicio Lines, Inc. vs. Curso
Castro and Villarama, Jr., JJ., concur.
recover moral damages, as enumerated in Article 2219 of the Civil Code, viz.: Petition granted.
“Article 2219. Moral damages may be recovered in the following and Note.—Much of the distinction between a “common or public carrier” and a
analogous cases: “private or special carrier” lies in the character of the business, such that if the
(1) A criminal offense resulting in physical injuries; undertaking is an isolated transaction, not a part of the business or occupation, and
(2) Quasi-delicts causing physical injuries; the carrier does not hold itself out to carry the goods for the general public or to a
(3) Seduction, abduction, rape or other lascivious acts; limited clientele, although involving the carriage of goods for a fee, the person or
(4) Adultery or concubinage; corporation providing such service could very well be just a private carrier.
(5) Illegal or arbitrary detention or arrest; (Philippine American General Insurance Company vs. PKS Shipping Company, 401
(6) Illegal search; SCRA 222 [2003])
(7) Libel, slander or any other form of defamation; ——o0o——
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34 and
35.
The parents of the female seduced, abducted, raped or abused referred to in No. 3
of this article, may also recover moral damages.
The spouse, descendants, ascendants and brothers and sisters may bring the
action mentioned in No. 9 of this article, in the order named.”
 
Article 2219 circumscribes the instances in which moral damages may be
awarded. The provision does not include succession in the collateral line as a source
of the right to recover moral damages. The usage of the phrase analogous cases in
the provision means simply that the situation must be held similar to those expressly
enumerated in the law in question15 following the ejusdem generis rule. Hence,
Article 1003 of the Civil Code is not concerned with recovery of moral damages.
_______________

15 Expertravel & Tours, Inc. v. Court of Appeals, G.R. No. 130030, June 25,
1999, 309 SCRA 141, 146.
585
VOL. 615, March 17, 2010 585
Sulpicio Lines, Inc. vs. Curso
 
In fine, moral damages may be recovered in an action upon breach of contract of
carriage only when: (a) where death of a passenger results, or (b) it is proved that the
carrier was guilty of fraud and bad faith, even if death does not result. 16 Article 2206
of the Civil Code entitles the descendants, ascendants, illegitimate children, and
32

G.R. No. 161909. April 25, 2012.*
PHILTRANCO SERVICE ENTERPRISES, INC., petitioner, vs. FELIX
PARAS AND INLAND TRAILWAYS, INC., AND HON. COURT OF
APPEALS, respondents.
Civil Law; Damages; Moral Damages; Generally, moral damages are not
recoverable in an action predicated on a breach of contract because such an action
is not included in Article 2219 of the Civil Code as one of the actions in which moral
damages may be recovered; Exceptions.—As a general rule, indeed, moral damages
are not recoverable in an action predicated on a breach of contract. This is because
such action is not included in Article 2219 of the Civil Code as one of the actions in
which moral damages may be recovered. By way of exception, moral damages are
recoverable in an action predicated on a breach of contract: (a) where the mishap
results in the death of a passenger, as provided in Article 1764, in relation to Article
2206, (3), of the Civil Code; and (b) where the common carrier has been guilty of
fraud or bad faith, as provided in Article 2220 of the Civil Code.
Remedial Law; Civil Procedure; Third-Party Complaints; Requisites for a
Third-party Action.—The requisites for a third-party action are, firstly, that the party
to be impleaded must not yet be a party to the action; secondly, that the claim against
the third-party defendant must belong to the original defendant; thirdly, the claim of
the original defendant against the third-party
_______________
* FIRST DIVISION.
25
VOL. 671, APRIL 25, 2012 25
Philtranco Service Enterprises, Inc. vs. Paras
defendant must be based upon the plaintiff’s claim against the original
defendant; and, fourthly, the defendant is attempting to transfer to the third-party
defendant the liability asserted against him by the original plaintiff.
Civil Law; Damages; Actual Damages; Actual damages, to be recoverable,
must not only be capable of proof, but must actually be proved with a reasonable
degree of certainty.—Actual damages, to be recoverable, must not only be capable of
proof, but must actually be proved with a reasonable degree of certainty. The reason
is that the court “cannot simply rely on speculation, conjecture or guesswork in
determining the fact and amount of damages,” but “there must be competent proof of
the actual amount of loss, credence can be given only to claims which are duly
supported by receipts.”
Same; Same; Temperate Damages; Article 2224 of the Civil Code expressly
authorizes the courts to award temperate damages despite lack of certain proof of
actual damages.—There is no question that Article 2224 of the Civil Code expressly
authorizes the courts to award temperate damages despite the lack of certain proof of
actual damages, to wit: Article 2224. Temperate or moderate damages, which are
more than nominal but less than compensatory damages, may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot, from
the nature of the case, be proved with certainty.
Same; Same; Loss of Earning Capacity; According to Article 2205, (1), of the
Civil Code, damages may be recovered for loss or impairment of earning capacity in
cases of temporary or permanent personal injury.—According to Article 2205, (1),
of the Civil Code, damages may be recovered for loss or impairment of earning
capacity in cases of temporary or permanent personal injury. Indeed, indemnification
for damages comprehends not only the loss suffered (actual damages or damnum
emergens) but also the claimant’s lost profits (compensatory damages or lucrum
cessans). Even so, the formula that has gained acceptance over time has limited
recovery to net earning capacity; hence, the entire amount of P72,000.00 is not
allowable. The premise is obviously that net earning capacity is the person’s capacity
to acquire money, less the necessary expense for his own living. To simplify the
determination, therefore, the net
26
26 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
earning capacity of Paras during the 9-month period of his confinement,
surgeries and consequential therapy is pegged at only half of his unearned monthly
gross income of P8,000.00 as a trader, or a total of P36,000.00 for the 9-month
period, the other half being treated as the necessary expense for his own living in that
period.
PETITION for review on certiorari of a decision of the Court of Appeals.
   The facts are stated in the opinion of the Court.
  Manuel V. Regondola for petitioner.
  Virgilio Q. Bruno for respondent F. Paras.
  Petronilo A. Dela Cruz for respondent Inland Trailways, Inc.
BERSAMIN, J.:
In an action for breach of contract of carriage commenced by a passenger against
his common carrier, the plaintiff can recover damages from a third-party defendant
brought into the suit by the common carrier upon a claim based on tort or quasi-
delict. The liability of the third-party defendant is independent from the liability of
the common carrier to the passenger.
Philtranco Service Enterprises, Inc. (Philtranco) appeals the affirmance with
modifications by the Court of Appeals (CA) of the decision of the Regional Trial
33
Court (RTC) awarding moral, actual and temperate damages, as well as attorney’s
fees and costs of suit, to respondent Felix Paras (Paras), and temperate damages to
respondent Inland Trailways, Inc. (Inland), respectively the plaintiff and the
defendant/third-party plaintiff in this action for breach of contract of carriage, upon a
finding that the negligence of the petitioner and its driver had caused the serious
physical injuries Paras sustained and the material damage Inland’s bus suffered in a
vehicular accident.27
VOL. 671, APRIL 25, 2012 27
Philtranco Service Enterprises, Inc. vs. Paras
Antecedents
The antecedent facts, as summarized by the CA, are as follows:
“Plaintiff-appellant [respondent] Felix Paras (Paras for brevity), who hails from
Cainta, Rizal is engaged in the buy and sell of fish products. Sometime on 08
February 1987, on his way home to Manila from Bicol Region, he boarded a bus
with Body No. 101 and Plate No. EVE 508, owned and operated by Inland
Trailways, Inc. (Inland for brevity) and driven by its driver Calvin Coner (Coner for
brevity).
At approximately 3:50 o’clock in the morning of 09 February 1987, while the
said bus was travelling along Maharlika Highway, Tiaong, Quezon, it was bumped at
the rear by another bus with Plate No. EVB 259, owned and operated by Philtranco
Service Enterprises, Inc. (Philtranco for brevity). As a result of the strong and violent
impact, the Inland bus was pushed forward and smashed into a cargo truck parked
along the outer right portion of the highway and the shoulder thereof. Consequently,
the said accident bought considerable damage to the vehicles involved and caused
physical injuries to the passengers and crew of the two buses, including the death of
Coner who was the driver of the Inland Bus at the time of the incident.
Paras was not spared from the pernicious effects of the accident. After an
emergency treatment at the San Pablo Medical Center, San Pablo City, Laguna,
Paras was taken to the National Orthopedic Hospital. At the latter hospital, he was
found and diagnosed by Dr. Antonio Tanchuling, Jr. to be affected with the
following injuries: a) contusion/hematoma; b) dislocation of hip upon fracture of the
fibula on the right leg; c) fractured small bone on the right leg; and d) close fracture
on the tibial plateau of the left leg. (Exh. “A,” p. 157, record)
On 04 March 1987 and 15 April 1987, Paras underwent two (2) operations
affecting the fractured portions of his body. (Exhs. “A-2” and “A-3,” pp. 159 and
160 respectively, record)
Unable to obtain sufficient financial assistance from Inland for the costs of his
operations, hospitalization, doctors’ fees and other
28
28 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
miscellaneous expenses, on 31 July 1989, Paras filed a complaint for damages based
on breach of contract of carriage against Inland.
In its answer, defendant Inland denied responsibility, by alleging, among others,
that its driver Coner had observed an utmost and extraordinary care and diligence to
ensure the safety of its passengers. In support of its disclaimer of responsibility,
Inland invoked the Police Investigation Report which established the fact that the
Philtranco bus driver of [sic] Apolinar Miralles was the one which violently bumped
the rear portion of the Inland bus, and therefore, the direct and proximate cause of
Paras’ injuries.
On 02 March 1990, upon leave of court, Inland filed a third-party complaint
against Philtranco and Apolinar Miralles (Third Party defendants). In this third-party
complaint, Inland, sought for exoneration of its liabilities to Paras, asserting that the
latter’s cause of action should be directed against Philtranco considering that the
accident was caused by Miralles’ lack of care, negligence and reckless imprudence.
(pp. 50 to 56, records).”
After trial, the RTC (Branch 71) in Antipolo, Rizal rendered its judgment on July
18, 1997,1 viz.:
“WHEREFORE, third-party defendant Philtranco and Apolinar Miralles are
hereby ordered to pay plaintiff jointly and severally, the following amounts:
1. P54,000.00 as actual damages;
2. P50,000.00 as moral damages;
3. P20,000.00 as attorney’s fees and costs.
SO ORDERED.”
All the parties appealed to the CA on different grounds.
On his part, Paras ascribed the following errors to the RTC, to wit:
I. THE TRIAL COURT ERRED IN HOLDING THAT ONLY THIRD-
PARTY DEFENDANT-APPELLANT PHILTRANCO IS
_______________
1 Rollo, pp. 66-70.
29
VOL. 671, APRIL 25, 2012 29
Philtranco Service Enterprises, Inc. vs. Paras
LIABLE FOR THE DAMAGES SUFFERED BY APPELLANT PARAS.
II. THE TRIAL COURT ERRED IN NOT HOLDING APPELLANT
INLAND TRAILWAYS INC. TO BE JOINTLY AND SEVERALLY LIABLE FOR
THE DAMAGES SUFFERED BY PARAS.
III.  THE TRIAL COURT ERRED IN NOT AWARDING UNEARNED
INCOME AS ADDITIONAL ACTUAL DAMAGES SUFFERED BY
APPELLANT PARAS AS HIS PHYSICAL DISABILITY IS PERMANENT IN
NATURE.
IV. THE TRIAL COURT ERRED IN NOT AWARDING EXEMPLARY
DAMAGES IN FAVOR OF APPELLANT PARAS.
On the other hand, Inland assigned the following errors to the RTC, namely:
34
THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD DAMAGES
UNTO THE THIRD PARTY PLAINTIFF NOTWITHSTANDING CLEAR
FINDING THAT:
‘It is clear from the evidence that the plaintiff sustained injuries because
of the reckless, negligence, and lack of precaution of third party defendant
Apolinar Miralles, an employee of Philtranco.’
AND, COMPLETELY DISREGARDED THE UNCONTROVERTED ORAL AND
DOCUMENTARY EVIDENCES ESTABLISHING THE EXTENT AND DEGREE
OF DAMAGES SUSTAINED BY THE THIRD PARTY PLAINTIFF.
Lastly, Philtranco stated that the RTC erred thuswise:
I 2.  On the third party plaintiff-appellant Inland’s claims, the third party
THE COURT A QUO MISERABLY ERRED IN AWARDING ACTUAL
DAMAGES GREATER THAN WHAT WAS ALLEGED IN THE COMPLAINT
ITSELF, AND EVEN MUCH MORE GREATER THAN WHAT WERE PROVED
DURING THE TRIAL, HENCE, PERPETUATING UNJUST ENRICHMENT.30
30 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
II
THE COURT A QUO SERIOUSLY ERRED IN AWARDING MORAL
DAMAGES TO A CAUSE OF ACTION OF CULPA-CONTRACTUAL EVEN
WITHOUT ANY EVIDENCE OF GROSS BAD FAITH; HENCE, CONTRARY
TO THE ESTABLISHED DOCTRINE IN THE CASES OF PHIL. RABBIT BUS
LINES VS. ESGUERRA; SOBERANO VS. BENGUET AUTO LINE AND FLORES
VS. MIRANDA.
III
THE COURT A QUO MISERABLY ERRED IN HOLDING THAT MIRALLES
WAS THE ONE AT FAULT MERELY ON THE STRENGTH OF THE
TESTIMONY OF THE POLICE INVESTIGATOR WHICH IS IN TURN BASED
ON THE STATEMENTS OF ALLEGED WITNESSES WHO WERE NEVER
PRESENTED ON THE WITNESS STAND.
IV
THE COURT A QUO COMMITTED A GRIEVOUS ERROR IN DISREGARDING
THE TESTIMONY OF APPELLANTS’ WITNESSES WHO TESTIFIED AS TO
THE DEFENSE OF EXERCISE OF DUE DILIGENCE IN THE SELECTION AND
SUPERVISION OF EMPLOYEES PURSUANT TO ART. 2180, LAST
PARAGRAPH, NEW CIVIL CODE.
On September 25, 2002, the CA promulgated its decision,2 disposing:
“WHEREFORE, in consideration of the foregoing premises, the assailed
decision dated 18 July 19(9)7 is perforce affirmed with the following modifications:
_______________
2 CA Rollo, pp. 115-132; penned by Associate Justice Bienvenido L. Reyes (now
a Member of the Court), with Associate Justice Hilarion L. Aquino (retired) and
Associate Justice Mario L. Guariña III (retired) concurring.
31
VOL. 671, APRIL 25, 2012 31
Philtranco Service Enterprises, Inc. vs. Paras
1. Third party defendants-appellants Philtranco and Apolinar Miralles are
ordered to pay plaintiff-appellant Felix Paras jointly and severally the following
amounts:
a) P1,397.95 as actual damages;
b) P50,000.00 as temperate damages;
c) P50,000.00 as moral damages; and
d) P20,000.00 as attorney’s fees and costs of suit.
defendant-appellants Philtranco and Apolinar Miralles are hereby ordered to pay the
former (Inland) jointly and severally the amount of P250,000.00 as and by way of
temperate damages.
SO ORDERED.”
The CA agreed with the RTC’s finding that no trace of negligence at the time of
the accident was attributable to Inland’s driver, rendering Inland not guilty of breach
of contract of carriage; that faulty brakes had caused Philtranco’s bus to forcefully
bump Inland’s bus from behind, making it hit the rear portion of a parked cargo
truck; that the impact had resulted in considerable material damage to the three
vehicles; and that Paras and others had sustained various physical injuries.
Accordingly, the CA: (a) sustained the award of moral damages of P50,000.00 in
favor of Paras pursuant to Article 2219 of the Civil Code based on quasi-delict
committed by Philtranco and its driver; (b) reduced the actual damages to be paid by
Philtranco to Paras from P54,000.00 to P1,397.95 because only the latter amount had
been duly supported by receipts; (c) granted temperate damages of P50,000.00 (in
lieu of actual damages in view of the absence of competent proof of actual damages
for his hospitalization and therapy) to be paid by Philtranco to Paras; and (d)
awarded temperate damages of P250,000.00 under the same premise to be paid by
Philtranco to Inland for the material damage caused to Inland’s bus.32
32 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
Philtranco moved for reconsideration,3 but the CA denied its motion for
reconsideration on January 21, 2004.4
Issues
Hence, this appeal, in which the petitioner submits that the CA committed grave
abuse of discretion amounting to lack of jurisdiction in awarding moral damages to
Paras despite the fact that the complaint had been anchored on breach of contract of
carriage; and that the CA committed a reversible error in substituting its own
judgment by motu proprio awarding temperate damages of P250,000.00 to Inland
and P50,000.00 to Paras despite the clear fact that temperate damages were not
raised on appeal by Paras and Inland.
35
 Ruling
The appeal lacks merit.
The Court does not disturb the unanimous findings by the CA and the RTC on
the negligence of Philtranco and its driver being the direct cause of the physical
injuries of Paras and the material damage of Inland.
Nonetheless, we feel bound to pass upon the disparate results the CA and the
RTC reached on the liabilities of Philtranco and its driver.
1.
Paras can recover moral damages
in this suit based on quasi-delict
Philtranco contends that Paras could not recover moral damages because his suit
was based on breach of contract of carriage, pursuant to which moral damages could
be recov-
_______________
3 CA Rollo, pp. 133-143.
4 Id., at pp. 129-131.
33
VOL. 671, APRIL 25, 2012 33
Philtranco Service Enterprises, Inc. vs. Paras
ered only if he had died, or if the common carrier had been guilty of fraud or bad
faith. It argues that Paras had suffered only physical injuries; that he had not adduced
evidence of fraud or bad faith on the part of the common carrier; and that,
consequently, Paras could not recover moral damages directly from it (Philtranco),
considering that it was only being subrogated for Inland.
The Court cannot uphold the petitioner’s contention.
As a general rule, indeed, moral damages are not recoverable in an action
predicated on a breach of contract. This is because such action is not included in
Article 2219 of the Civil Code5 as one of the actions in which moral damages may be
recovered. By way of exception, moral damages are recoverable in an action
predicated on a breach of contract: (a) where the mishap results in the death of a
passenger, as provided in Article 1764,6 in relation to Article 2206,
_______________
5 Article 2219. Moral damages may be recovered in the following and
analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and
35.
The parents of the female seduced, abducted, raped, or abused, referred to in No.
3 of this article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the
action mentioned in No. 9 of this article, in the order named.
6 Article 1764. Damages in cases comprised in this Section shall be awarded
in accordance with Title XVIII of this Book, con-
34
34 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
(3),7 of the Civil Code; and (b) where the common carrier has been guilty of fraud or
bad faith,8 as provided in Article 22209 of the Civil Code.
Although this action does not fall under either of the exceptions, the award of
moral damages to Paras was nonetheless proper and valid. There is no question that
Inland filed its third-party complaint against Philtranco and its driver in order to
establish in this action that they, instead of Inland, should be directly liable to Paras
for the physical injuries he had sustained because of their negligence. To be precise,
Phil-
_______________
cerning Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
7 Article 2206. The amount of damages for death caused by a crime or quasi-
delict shall be at least three thousand pesos, even though there may have been
mitigating circumstances. In addition:
(1)  The defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity
shall in every case be assessed and awarded by the court, unless the deceased on
account of permanent physical disability not caused by the defendant, had no earning
capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of
article 291, the recipient who is not an heir called to the decedent’s inheritance by the
law of testate or intestate succession, may demand support from the person causing
the death, for a period not exceeding five years, the exact duration to be fixed by the
court;
(3)  The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.
8  Japan Airlines v. Simangan, G.R. No. 170141, April 22, 2008, 552 SCRA 341,
361.
9  Article 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances, such damages
36
are justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith.
35
VOL. 671, APRIL 25, 2012 35
Philtranco Service Enterprises, Inc. vs. Paras
tranco and its driver were brought into the action on the theory of liability that the
proximate cause of the collision between Inland’s bus and Philtranco’s bus had been
“the negligent, reckless and imprudent manner defendant Apolinar Miralles drove
and operated his driven unit, the Philtranco Bus with Plate No. 259, owned and
operated by third-party defendant Philtranco Service Enterprises, Inc.” 10 The
apparent objective of Inland was not to merely subrogate the third-party defendants
for itself, as Philtranco appears to suggest, 11 but, rather, to obtain a different relief
whereby the third-party defendants would be held directly, fully and solely liable to
Paras and Inland for whatever damages each had suffered from the negligence
committed by Philtranco and its driver. In other words, Philtranco and its driver were
charged here as joint tortfeasors who would be jointly and severally be liable to Paras
and Inland.
Impleading Philtranco and its driver through the third-party complaint filed on
March 2, 1990 was correct. The device of the third-party action, also known as
impleader, was in accord with Section 12, Rule 6 of the Revised Rules of Court, the
rule then applicable, viz.:
“Section 12. Third-party complaint.—A third-party complaint is a claim that a
defending party may, with leave of court, file against a person not a party to the
action, called the third-party defendant, for contribution, indemnity, subrogation or
any other relief, in respect of his opponent’s claim.”12
_______________
10 Rollo, p. 57.
11 Id., at p. 13.
12 The rule, as revised in 1997, presently provides:
Section 11. Third, (fourth, etc.)-party complaint.—A third (fourth, etc.)-party
complaint is a claim that a defending party may, with leave of court, file against a
person not a party to the action, called the third (fourth, etc.)-party defendant, for
contribution, indemnity, subrogation or any other relief, in respect of his opponent’s
claim. (12a)
36
36 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
Explaining the application of Section 12, Rule 6, supra, the Court said
in Balbastro v. Court of Appeals,13 to wit:
“Section 12 of Rule 6 of the Revised Rules of Court authorizes a defendant to
bring into a lawsuit any person “not a party to the action . . . for contribution,
indemnity, subrogation or any other relief in respect of his opponent’s claim.” From
its explicit language it does not compel the defendant to bring the third-parties into
the litigation, rather it simply permits the inclusion of anyone who meets the standard
set forth in the rule. The secondary or derivative liability of the third-party is central
—whether the basis is indemnity, subrogation, contribution, express or implied
warranty or some other theory. The impleader of new parties under this rule is
proper only when a right to relief exists under the applicable substantive law.
This rule is merely a procedural mechanism, and cannot be utilized unless there
is some substantive basis under applicable law.
Apart from the requirement that the third-party complainant should assert
a derivative or secondary claim for relief from the third-party defendant there
are other limitations on said party’s ability to implead. The rule requires that
the third-party defendant is “not a party to the action” for otherwise the proper
procedure for asserting a claim against one who is already a party to the suit is
by means of counterclaim or cross-claim under sections 6 and 7 of Rule 6. In
addition to the aforecited requirement, the claim against the third-party
defendant must be based upon plaintiff’s claim against the original defendant
(third-party claimant). The crucial characteristic of a claim under section 12 of
Rule 6, is that the original “defendant is attempting to transfer to the third-
party defendant the liability asserted against him by the original plaintiff.”
Accordingly, the requisites for a third-party action are, firstly, that the party to be
impleaded must not yet be a party to the action; secondly, that the claim against the
third-party
_______________
13 No. 33255, November 29, 1972, 48 SCRA 231 (bold emphasis supplied)
37
VOL. 671, APRIL 25, 2012 37
Philtranco Service Enterprises, Inc. vs. Paras
defendant must belong to the original defendant; thirdly, the claim of the original
defendant against the third-party defendant must be based upon the plaintiff’s claim
against the original defendant; and, fourthly, the defendant is attempting to transfer to
the third-party defendant the liability asserted against him by the original plaintiff. 14
As the foregoing indicates, the claim that the third-party complaint asserts
against the third-party defendant must be predicated on substantive law. Here, the
substantive law on which the right of Inland to seek such other relief through its
third-party complaint rested were Article 2176 and Article 2180 of the Civil Code,
which read:
“Article 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this chapter. (1902a)
Article 2180. The obligation imposed by article 2176 is demandable not only
for one’s own acts or omissions, but also for those of persons for whom one is
responsible.
xxx
37
 Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
xxx
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.” (1903a)
Paras’ cause of action against Inland (breach of contract of carriage) did not need
to be the same as the cause of action of Inland against Philtranco and its driver (tort
or quasi-delict) in the impleader. It is settled that a defendant in a contract
_______________
14 Id., at pp. 236-237.
38
38 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
action may join as third-party defendants those who may be liable to him in tort for
the plaintiff’s claim against him, or even directly to the plaintiff. 15 Indeed, Prof.
Wright, et al., commenting on the provision of the Federal Rules of Procedure of the
United States from which Section 12, supra, was derived, observed so, to wit:16
“The third-party claim need not be based on the same theory as the main claim.
For example, there are cases in which the third-party claim is based on an express
indemnity contract and the original complaint is framed in terms of negligence.
Similarly, there need not be any legal relationship between the third-party defendant
and any of the other parties to the action. Impleader also is proper even though the
third party’s liability is contingent, and technically does not come into existence until
the original defendant’s liability has been established. In addition, the words ‘is or
may be liable’ in Rule 14(a) make it clear that impleader is proper even though the
third-party defendant’s liability is not automatically established once the third-party
plaintiff’s liability to the original plaintiff has been determined.”
Nor was it a pre-requisite for attachment of the liability to Philtranco and its
driver that Inland be first declared and found liable to Paras for the breach of its
contract of carriage with him. 17 As the Court has cogently discoursed in Samala v.
Judge Victor:18
“Appellants argue that since plaintiffs filed a complaint for damages against the
defendants on a breach of contract of carriage, they cannot recover from the third-
party defendants on a cause of action based on quasi-delict. The third party
defendants, they allege,
_______________
15 Viluan v. Court of Appeals, Nos. L-21477-81, April 29, 1966, 16 SCRA
742; Samala v. Judge Victor, G.R. No. L-53969, February 21, 1989, 170 SCRA 453,
460.
16 Wright, Miller & Kane, Federal Practice and Procedure, Vol. 6, §1446, 1990
Edition, pp. 372-373.
17 Viluan v. Court of Appeals, supra, note 15.
18 Samala v. Judge Victor, supra, note 15.
39
VOL. 671, APRIL 25, 2012 39
Philtranco Service Enterprises, Inc. vs. Paras
are never parties liable with respect to plaintiff’s claim although they are with respect
to the defendants for indemnification, subrogation, contribution or other reliefs.
Consequently, they are not directly liable to the plaintiffs. Their liability commences
only when the defendants are adjudged liable and not when they are absolved from
liability as in the case at bar.
Quite apparent from these arguments is the misconception entertained by
appellants with respect to the nature and office of a third party complaint.
Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint
as a “claim that a defending party may, with leave of court, file against a person not a
party to the action, called the third-party defendant, for contribution, indemnification,
subrogation, or any other relief, in respect of his opponent’s claim.” In the case
of Viluan vs. Court of Appeals, et al., 16 SCRA 742 [1966], this Court had occasion
to elucidate on the subjects covered by this Rule, thus:
... As explained in the Atlantic Coast Line R. Co. vs. U.S. Fidelity &
Guaranty Co., 52 F. Supp. 177 (1943:)
 ‘From the sources of Rule 14 and the decisions herein cited, it is clear
that this rule, like the admiralty rule, ‘covers two distinct subjects, the
addition of parties defendant to the main cause of action, and the bringing in
of a third party for a defendant’s remedy over.’ xxx
‘If the third party complaint alleges facts showing a third party’s
direct liability to plaintiff on the claim set out in plaintiff’s petition, then
third party ‘shall’ make his defenses as provided in Rule 12 and his
counterclaims against plaintiff as provided in Rule 13. In the case of
alleged direct liability, no amendment (to the complaint) is necessary or
required. The subject-matter of the claim is contained in plaintiff’s
complaint, the ground of third party’s liability on that claim is alleged in
third party complaint, and third party’s defense to set up in his answer
to plaintiff’s complaint. At that point and without amendment, the
plaintiff and third party are at issue as to their rights respecting the
claim.
The provision in the rule that, ‘The third-party defendant may assert any
defense which the third-party plaintiff may as-
40
40 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
sert to the plaintiffs claim,’ applies to the other subject, namely, the alleged
liability of third party defendant. The next sentence in the rule, ‘The third-
party defendant is bound by the adjudication of the third party plaintiffs
liability to the plaintiff, as well as of his own to the plaintiff or to the third-
party plaintiff applies to both subjects. If third party is brought in as liable
38
 only to defendant and judgment is rendered adjudicating plaintiff’s right to
recover against defendant and defendant’s rights to recover against third
party, he is bound by both adjudications. That part of the sentence refers to
the second subject. If third party is brought in as liable to plaintiff, then third
party is bound by the adjudication as between him and plaintiff. That refers to
the first subject. If third party is brought in as liable to plaintiff and also over
to defendant, then third party is bound by both adjudications. xxx
Under this Rule, a person not a party to an action may be impleaded by the
defendant either (a) on an allegation of liability to the latter; (b) on the ground of
direct liability to the plaintiff; or, (c) both (a) and (b). The situation in (a) is covered
by the phrase “for contribution, indemnity or subrogation”; while (b) and (c) are
subsumed under the catch all “or any other relief, in respect of his opponent’s claim.”
The case at bar is one in which the third party defendants are brought into
the action as directly liable to the plaintiffs upon the allegation that “the
primary and immediate cause as shown by the police investigation of said
vehicular collision between (sic) the above-mentioned three vehicles was the
recklessness and negligence and lack of imprudence (sic) of the third-party
defendant Virgilio (should be Leonardo) Esguerra y Ledesma then driver of the
passenger bus.” The effects are that “plaintiff and third party are at issue as to
their rights respecting the claim” and “the third party is bound by the
adjudication as between him and plaintiff.” It is not indispensable in the
premises that the defendant be first adjudged liable to plaintiff before the third-
party defendant may be held liable to the plaintiff, as precisely, the theory of
defendant is that it is the third party defendant, and not he, who is directly
liable to plaintiff. The situation contemplated by appellants would properly
pertain to situation (a) above wherein the third party defendant is  witness, Emerlinda Maravilla, to the effect that the bus had been damaged beyond
41
VOL. 671, APRIL 25, 2012 41
Philtranco Service Enterprises, Inc. vs. Paras
being sued for contribution, indemnity or subrogation, or simply stated, for a
defendant’s “remedy over.”19
It is worth adding that allowing the recovery of damages by Paras based
on quasi-delict, despite his complaint being upon contractual breach, served the
judicial policy of avoiding multiplicity of suits and circuity of actions by disposing
of the entire subject matter in a single litigation.20
2.
Award of temperate damages was in order
Philtranco assails the award of temperate damages by the CA considering
that, firstly, Paras and Inland had not raised the matter in the trial court and in their
respective appeals; secondly, the CA could not substitute the temperate damages
granted to Paras if Paras could not properly establish his actual damages despite
evidence of his actual expenses being easily available to him; and, thirdly, the CA
gravely abused its discretion in granting motu proprio the temperate damages of
P250,000.00 to Inland although Inland had not claimed temperate damages in its
pleading or during trial and even on appeal.
The Court cannot side with Philtranco.
Actual damages, to be recoverable, must not only be capable of proof, but must
actually be proved with a reasonable degree of certainty. The reason is that the court
“cannot simply rely on speculation, conjecture or guesswork in determining the fact
and amount of damages,” but “there must be competent proof of the actual amount of
loss, credence can be given only to claims which are duly supported by receipts.” 21
_______________
19 Id., at pp. 458-460 (bold underscoring supplied for emphasis).
20 Id., at p. 460.
21 Viron Transportation Co., Inc. v. Delos Santos, G.R. No. 138296, November
22, 2000, 345 SCRA 509, 519.
42
42 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
The receipts formally submitted and offered by Paras were limited to the costs of
medicines purchased on various times in the period from February 1987 to July 1989
(Exhibits E to E-35, inclusive) totaling only P1,397.95. 22The receipts by no means
included hospital and medical expenses, or the costs of at least two surgeries as well
as rehabilitative therapy. Consequently, the CA fixed actual damages only at that
small sum of P1,397.95. On its part, Inland offered no definite proof on the repairs
done on its vehicle, or the extent of the material damage except the testimony of its
economic repair.23The CA rejected Inland’s showing of unrealized income worth
P3,945,858.50 for 30 months (based on alleged average weekly income of
P239,143.02 multiplied by its guaranteed revenue amounting to 55% thereof, then
spread over a period of 30 months, the equivalent to the remaining 40% of the
vehicle’s un-depreciated or net book value), finding such showing arbitrary,
uncertain and speculative.24 As a result, the CA allowed no compensation to Inland
for unrealized income.
Nonetheless, the CA was convinced that Paras should not suffer from the lack of
definite proof of his actual expenses for the surgeries and rehabilitative therapy; and
that Inland should not be deprived of recourse to recover its loss of the economic
value of its damaged vehicle. As the records indicated, Paras was first rushed for
emergency treatment to the San Pablo Medical Center in San Pablo City, Laguna,
and was later brought to the National Orthopedic Hospital in Quezon City where he
was diagnosed to have suffered a dislocated hip, fracture of the fibula on the right
leg, fracture of the small bone of the right leg, and closed fracture on the tibial
plateau of the left leg. He underwent surgeries on
_______________
22 Records, pp. 176-185.
23 Rollo, p. 35.
39
 24 Id., at p. 36.
43
VOL. 671, APRIL 25, 2012 43
Philtranco Service Enterprises, Inc. vs. Paras
March 4, 1987 and April 15, 1987 to repair the fractures. 25Thus, the CA awarded to
him temperate damages of P50,000.00 in the absence of definite proof of his actual
expenses towards that end. As to Inland, Maravilla’s testimony of the bus having
been damaged beyond economic repair showed a definitely substantial pecuniary
loss, for which the CA fixed temperate damages of P250,000.00. We cannot disturb
the CA’s determination, for we are in no position today to judge its reasonableness
on account of the lapse of a long time from when the accident occurred. 26
In awarding temperate damages in lieu of actual damages, the CA did not err,
because Paras and Inland were definitely shown to have sustained substantial
pecuniary losses. It would really be a travesty of justice were the CA now to be held
bereft of the discretion to calculate moderate or temperate damages, and thereby
leave Paras and Inland without redress from the wrongful act of Philtranco and its
driver.27 We are satisfied that the CA exerted effort and practiced great care to ensure
that the causal link between the physical injuries of Paras and the material loss of
Inland, on the one hand, and the negligence of Philtranco and its driver, on the other
hand, existed in fact. It also rejected arbitrary or speculative proof of loss. Clearly,
the costs of Paras’ surgeries and consequential rehabilitation, as well as the fact that
repairing Inland’s vehicle would no longer be economical justly warranted the CA to
calculate temperate damages of P50,000.00 and P250,000.00 respectively for Paras
and Inland.
There is no question that Article 2224 of the Civil Code expressly authorizes the
courts to award temperate damages despite the lack of certain proof of actual
damages, to wit:
_______________
25 TSN, October 18, 1991, pp. 11-12.
26 The Civil Code states:
 Article 2225. Temperate damages must be reasonable under the circumstances.
27 Government Service Insurance System v. Labung-Deang, G.R. No. 135644,
September 17, 2001, 365 SCRA 341, 350.
44
44 SUPREME COURT REPORTS ANNOTATED
Philtranco Service Enterprises, Inc. vs. Paras
“Article 2224. Temperate or moderate damages, which are more than nominal
but less than compensatory damages, may be recovered when the court finds that
some pecuniary loss has been suffered but its amount cannot, from the nature of the
case, be proved with certainty.”
The rationale for Article 2224 has been stated in Premiere Development Bank v.
Court of Appeals28 in the following manner:
“Even if not recoverable as compensatory damages, Panacor may still be
awarded damages in the concept of temperate or moderate damages. When the court
finds that some pecuniary loss has been suffered but the amount cannot, from the
nature of the case, be proved with certainty, temperate damages may be recovered.
Temperate damages may be allowed in cases where from the nature of the case,
definite proof of pecuniary loss cannot be adduced, although the court is convinced
that the aggrieved party suffered some pecuniary loss.
The Code Commission, in explaining the concept of temperate damages under
Article 2224, makes the following comment:
In some States of the American Union, temperate damages are allowed.
There are cases where from the nature of the case, definite proof of pecuniary
loss cannot be offered, although the court is convinced that there has been
such loss. For instance, injury to one’s commercial credit or to the goodwill
of a business firm is often hard to show with certainty in terms of money.
Should damages be denied for that reason? The judge should be empowered
to calculate moderate damages in such cases, rather than that the plaintiff
should suffer, without redress from the defendant’s wrongful act.”
_______________
28 G.R. No. 159352, April 14, 2004, 427 SCRA 686, 699.
45
VOL. 671, APRIL 25, 2012 45
Philtranco Service Enterprises, Inc. vs. Paras
3.
Paras’ loss of earning capacity 
must be compensated
In the body of its decision, the CA concluded that considering that Paras had a
minimum monthly income of P8,000.00 as a trader he was entitled to recover
compensation for unearned income during the 3-month period of his hospital
confinement and the 6-month period of his recovery and rehabilitation; and
aggregated his unearned income for those periods to P72,000.00. 29 Yet, the CA
omitted the unearned income from the dispositive portion.
The omission should be rectified, for there was credible proof of Paras’ loss of
income during his disability. According to Article 2205 (1), of the Civil Code,
damages may be recovered for loss or impairment of earning capacity in cases of
temporary or permanent personal injury. Indeed, indemnification for damages
comprehends not only the loss suffered (actual damages or damnum emergens) but
also the claimant’s lost profits (compensatory damages or lucrum cessans).30 Even
so, the formula that has gained acceptance over time has limited recovery to net
earning capacity; hence, the entire amount of P72,000.00 is not allowable. The
premise is obviously that net earning capacity is the person’s capacity to acquire
money, less the necessary expense for his own living.31 To simplify the
determination, therefore, the net earning capacity of Paras during the 9-month period
of his confinement, surgeries and consequential therapy is pegged at only half of his
unearned monthly gross income of P8,000.00 as a trader, or a total of P36,000.00 for
the 9-month period, the
_______________
40
 29 Rollo, pp. 34-35. Inland equivalent to 10% of the total amounts hereby awarded to them, in lieu of
30 Titan-Ikeda Construction and Development Corporation v. Primetown only P20,000.00 for that purpose granted to Paras.
Property Group, Inc., G.R. No. 158768, February 12, 2008, 544 SCRA 466, 491.
31 Villa Rey Transit, Inc. v. Court of Appeals, 31 SCRA 511, 515-517. 5.
46 Legal interest on the amounts awarded
46 SUPREME COURT REPORTS ANNOTATED
Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals, 38 legal interest at
Philtranco Service Enterprises, Inc. vs. Paras
the rate of 6% per annumaccrues on the amounts adjudged reckoned from July 18,
other half being treated as the necessary expense for his own living in that period.
1997, the date when the RTC rendered its judgment; and legal interest at the rate of
It is relevant to clarify that awarding the temperate damages (for the substantial
12% per annum shall be imposed from the finality of the judgment until its full
pecuniary losses corresponding to Paras’ surgeries and rehabilitation and for the
satisfaction, the interim period being regarded as the equivalent of a forbearance of
irreparability of Inland’s damaged bus) and the actual damages to compensate lost
credit.
earnings and costs of medicines give rise to no incompatibility. These damages cover
WHEREFORE, the Court AFFIRMS WITH MODIFICATION the decision of
distinct pecuniary losses suffered by Paras and Inland, 32 and do not infringe the
the Court of Appeals promulgated on September 25, 2002, by ordering
statutory prohibition against recovering damages twice for the same act or
PHILTRANCO SERVICE ENTERPRISES, INC. and APOLINAR MIRALLES to
omission.33
pay, jointly and severally, as follows:
1. To Felix Paras:
4. (a) P1,397.95, as reimbursement for the costs of medicines purchased
Increase in award of attorney’s fees between February 1987 and July 1989;
(b) P50,000.00 as temperate damages;
Although it is a sound policy not to set a premium on the right to litigate, 34 we (c) P50,000.00 as moral damages;
consider the grant to Paras and Inland of reasonable attorney’s fees warranted. Their (d) P36,000.00 for lost earnings;
entitlement to attorney’s fees was by virtue of their having been compelled to litigate (e) 10% of the total of items (a) to (d) hereof as attorney’s fees; and
or to incur expenses to protect their interests, 35 as well as by virtue of the Court now _______________
further deeming attorney’s fees to be just and equitable.36 37 New World International Development (Phils.), Inc. v. NYK-FilJapan
_______________ Shipping Corp., G.R. No. 171468/174241, August 24, 2011,  656 SCRA 129.
32 See, e.g., Ramos v. Court of Appeals, G.R. No. 124354, December 29, 1999, 38 G.R. No. 97412, July 12, 1994, 234 SCRA 78, 96-97.
321 SCRA 584, 624-625. 48
33 The Civil Code provides:
 Article  2177. Responsibility for fault or negligence under the preceding 48 SUPREME COURT REPORTS ANNOTATED
article is entirely separate and distinct from the civil liability arising from negligence Philtranco Service Enterprises, Inc. vs. Paras
under the Penal Code. But the plaintiff cannot recover damages twice for the same (f) Interest of 6% per annum from July 18, 1997 on the total of items (a)
act or omission of the defendant. (n) to (d) hereof until finality of this decision, and 12% per
34 Durban Apartments Corporation v. Pioneer Insurance and Surety annumthereafter until full payment.
Corporation, G.R. No. 179419, January 12, 2011, 639 SCRA 441, 454; see 2. To Inland Trailways, Inc.:
also Bank of the Philippine Islands v. Casa Montessori International, G.R. Nos. (a) P250,000.00 as temperate damages;
149454 & 149507, May 28, 2004, 430 SCRA 261, 296. (b) 10% of item (a) hereof; and
35 Article 2208, par. 2, Civil Code. (c) Interest of 6% per annum on item (a) hereof from July 18, 1997 until
36 Article 2208, par. 11, Civil Code. finality of this decision, and 12% per annum thereafter until full
47 payment.
VOL. 671, APRIL 25, 2012 47 3. The petitioner shall pay the costs of suit.
SO ORDERED.
Philtranco Service Enterprises, Inc. vs. Paras
Corona (C.J., Chairperson), Leonardo-De Castro, Del Castillo and Villarama,
In view of the lapse of a long time in the prosecution of the claim, 37 the Court Jr., JJ., concur.
considers it reasonable and proper to grant attorney’s fees to each of Paras and Judgment affirmed with modification.

41
 Notes.—The indemnity for loss of earning capacity of the deceased is awarded
not for loss of earnings, but for loss of capacity to earn money. (Philippine Hawk
Corporation vs. Lee, 612 SCRA 576 [2010])
The rule is that evidence not objected to is deemed admitted and may be validly
considered by the court in arriving at its judgment. (People vs. Lopez, 643 SCRA 524
[2011])
——o0o——  damages is bereft of merit.—The Court also sustains the CA’s finding that
G.R. No. 206468. August 2, 2017.*
JUDITH D. DARINES and JOYCE D. DARINES, petitioners, vs. EDUARDO
QUIÑONES and ROLANDO QUITAN, respondents.
Civil Law; Common Carriers; Breach of Contract; Moral Damages; In an
action for breach of contract, moral damages may be recovered only when a) death
of a passenger results; or b) the carrier was guilty of fraud and bad faith even if
death does not result.—The Court fully agrees with the CA’s ruling that in an action
for breach of contract, moral damages may be recovered only when a) death of a
passenger results; or b) the carrier was guilty of fraud and bad faith even if death
does not result; and that neither of these circumstances were present in the case at
bar. The CA correctly held that, since no moral damages was awarded then, there is
no basis to grant exemplary damages and attorney’s fees to petitioners. To stress, this
case is one for breach of contract of carriage (culpa contractual) where it is
necessary to show the existence of the contract between the parties, and the failure of
the common carrier to transport its passenger safely to his or her destination. An
action for breach of contract differs from quasi-delicts (also referred as culpa
aquiliana or culpa extra contractual) as the latter emanate from the negligence of the
tortfeasor including such instance where a person is injured in a vehicular accident
by a party other than the carrier where he is a passenger.
Same; Same; Same; Same; There being neither allegation nor proof that
respondents acted in fraud or in bad faith in performing their duties arising from
their contract of carriage, they are then not liable for moral damages.—Here,
petitioners impute negligence on the part of respondents when, as paying passengers,
they sustained injuries when the bus owned and operated by respondent Quiñones,
and driven by respondent Quitan, collided with another vehicle. Petitioners
propounded on the negligence of respondents, but did not discuss or impute fraud or
bad faith, or such gross negligence which would amount to bad faith, against
respondents. There being neither
_______________
*  FIRST DIVISION.
 
 
213
VOL. 834, AUGUST 2, 2017 213
Darines vs. Quiñones
allegation nor proof that respondents acted in fraud or in bad faith in
performing their duties arising from their contract of carriage, they are then not liable
for moral damages.
Same; Same; Same; Since petitioners are not entitled to either moral,
temperate, liquidated, or compensatory damages, then their claim for exemplary
petitioners are not entitled to exemplary damages. Pursuant to Articles 2229 and
2234 of the Civil Code, exemplary damages may be awarded only in addition to
moral, temperate, liquidated, or compensatory damages. Since petitioners are not
entitled to either moral, temperate, liquidated, or compensatory damages, then their
claim for exemplary damages is bereft of merit.
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
The facts are stated in the opinion of the Court.
   Willbroth B. Managtag for petitioners.
   Melissa L. Quitan-Corpuz for respondents.
DEL CASTILLO, J.:
 
This Petition for Review on Certiorari assails the October 29, 2012 Decision 1 of
the Court of Appeals (CA) in C.A.-G.R. CV No. 95638, which reversed and set aside
the July 14, 2010 Decision 2 of the Regional Trial Court (RTC) of Baguio City,
Branch 3 in Civil Case No. 6363-R for “Breach of Contract of Carriage &
Damages.” Also challenged is the March 6, 2013 CA Resolution3 denying the motion
for reconsideration on the assailed Decision.
_______________
1  CA Rollo (Vol. III), pp. 69-74; penned by Associate Justice Florito S.
Macalino, and concurred in by Associate Justices Sesinando E. Villon and Socorro
B. Inting.
2  Records, pp. 410-423; penned by Presiding Judge Fernando Vil Pamintuan.
3  CA Rollo (Vol. III), pp. 124-125.
 
 
214
214 SUPREME COURT REPORTS ANNOTATED
Darines vs. Quiñones
Factual Antecedents
 
Judith D. Darines (Judith) and her daughter, Joyce D. Darines (Joyce)
(petitioners) alleged in their Complaint 4that on December 31, 2005, they boarded the
Amianan Bus Line with Plate No. ACM 497 and Body No. 808 as paying
passengers en route from Carmen, Rosales, Pangasinan to Baguio City. Respondent
Rolando M. Quitan (Quitan) was driving the bus at that time. While travelling on
42
Camp 3, Tuba, Benguet along Kennon Road, the bus crashed into a truck (with Plate
No. XSE 578) which was parked on the shoulder of Kennon Road. As a result, both
vehicles were damaged; two passengers of the bus died; and the other passengers,
including petitioners, were injured. In particular, Joyce suffered cerebral concussion
while Judith had an eye wound which required an operation.
Petitioners argued that Quitan and respondent Eduardo Quiñones (Quiñones), the
operator of Amianan Bus Line, breached their contract of carriage as they failed to
bring them safely to their destination. They also contended that Quitan’s reckless and
negligent driving caused the collision. Consequently, they prayed for actual, moral,
exemplary and temperate damages, and costs of suit.
For their part, Quiñones and Quitan (respondents) countered in their
Answer5 that, during the December 31, 2005 incident, Quitan was driving in a
careful, prudent, and dutiful manner at the normal speed of 40 kilometers per hour.
According to them, the proximate cause of the incident was the negligence of the
truck driver, Ronald C. Fernandez, who parked the truck at the roadside right after
the curve without having installed any early warning device. They also claimed that
Quiñones observed due diligence in the selection and supervision of his employees
as he conducted seminars on
_______________
4  Records, pp. 2-6.
5  Id., at pp. 18-22.
 
215
VOL. 834, AUGUST 2, 2017 215
Darines vs. Quiñones
road safety measures; and Quitan attended such seminars including those required by
the government on traffic safety. They likewise averred that Quitan was a licensed
professional driver who, in his 12 years as a public utility driver, had not figured in
any incident like the one at hand.
During the trial, Judith testified that Quitan was driving at a very fast pace
resulting in a collision with the truck parked at the shoulder of the
road.6 Consequently, the bone holding her right eye was fractured and had to be
operated.7 She claimed that, as a result of incident, she failed to report for work for
two months.8
To prove the actual damages that she suffered, Judith presented receipts for
medicine, and a summary of expenses, which included those incurred for the
ritual dao-is. She explained that she and Joyce are Igorots, being members of Ibaloi,
Kankanay-ey, an indigenous tribe;9 and as their customary practice, when a member
who meets an accident is released from the hospital, they butcher pigs to remove or
prevent bad luck from returning to the family.10
Moreover, to support her claim for moral damages, Judith testified that she
suffered sleepless nights since she worried about the result and possible effect of her
operation.11
On the other hand, respondents presented Ernesto Benitez (Benitez), who, on
behalf of respondents, testified that he bought the medicines and paid petitioners’
hospitalization expenses, as evidenced by receipts he submitted in court. 12
_______________
6   Id., at pp. 342-344.
7   Id., at pp. 345-346.
8   Id., at p. 353.
9   Id., at p. 365.
10  Id., at pp. 355-356.
11  Id., at p. 357.
12  Id., at pp. 383-388.
 
 
216
216 SUPREME COURT REPORTS ANNOTATED
Darines vs. Quiñones
Ruling of the Regional Trial Court
On July 14, 2010, the RTC rendered its Decision ordering respondents to pay
petitioners the following:
1. Moral Damages of One Hundred Thousand Pesos (P100,000.00);
2. Exemplary Damages of Thirty Thousand Pesos (P30,000.00);
3. Attorney’s Fees of Fifteen Percent (15%) of the Damages, plus Total Appearance
Fees of Sixteen Thousand Five Hundred Pesos (P16,500.00); and
4. Costs of Suit.13
 
The RTC held that since the respondents already paid the actual damages relating
to petitioners’ medical and hospitalization expenses, then the only remaining matters
for resolution were: whether respondents were liable to pay petitioners a) actual
damages representing the expenses incurred during the dao-is ritual; and, Judith’s
alleged lost income; b) moral and exemplary damages; and, c) attorney’s fees.
The RTC noted that petitioners did not present any receipt as regards the
expenses they incurred during the dao-is ritual. As regards their claim for Judith’s
lost income, the RTC held that petitioners similarly failed to substantiate the same as
there was no showing that Judith’s failure to report for work for two months was
because of the incident. Thus, the RTC did not award actual damages for lack of
evidence.
However, the RTC awarded moral damages grounded on Judith’s testimony
regarding her pain and suffering. It likewise awarded exemplary damages by way of
43
correction, and to serve as example to common carriers to be extraordinarily diligent
in transporting passengers. It also granted petition-
_______________
13  Id., at p. 423.
 
217
VOL. 834, AUGUST 2, 2017 217
Darines vs. Quiñones
ers attorney’s fees plus costs of suit on the ground that petitioners were compelled to
litigate the case.
Aggrieved, respondents appealed to the CA.
 
Ruling of the Court of Appeals
In its October 29, 2012 Decision, the CA reversed and set aside the RTC
Decision.
The CA stressed that respondents did not dispute that they were liable for breach
of contract of carriage; in fact, they paid for the medical and hospital expenses of
petitioners. Nonetheless, the CA deleted the award of moral damages because
petitioners failed to prove that respondents acted fraudulently or in bad faith, as
shown by the fact that respondents paid petitioners’ medical and hospitalization
expenses. The CA held that, since no moral damages was awarded, then there was no
basis to grant exemplary damages. Finally, it ruled that because moral and exemplary
damages were not granted, then the award of attorney’s fees must also be deleted.
On March 6, 2013, the CA denied petitioners’ Motion for Reconsideration.
 
Issues
 
Hence, petitioners filed this Petition raising the issues as follows:
1. WHETHER OR NOT THE CASE OF PETITIONERS FALL[S] UNDER
ARTICLES 20, 1157, 1759, 2176, 2180 AND 2219 OF THE CIVIL CODE
THEREBY ENTITL[ING THEM] TO MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY’S FEES;
2. WHETHER OR NOT THE X X X AWARD OF DAMAGES AND
ATTORNEY’S FEES BY THE TRIAL COURT BECAME FINAL AND
EXECU-
 
 
218
218 SUPREME COURT REPORTS ANNOTATED
Darines vs. Quiñones
TORY SINCE HEREIN RESPONDENTS DID NOT QUESTION THE SAME IN
THEIR APPEAL BUT MERELY QUESTIONED THE AMOUNTS OF AWARD
[FOR BEING] EXORBITANT.14
Petitioners’ Arguments
Petitioners maintain that respondents are liable to pay them moral and exemplary
damages because the proximate cause of their injuries was the reckless driving of
Quitan. As regards Quiñones, his fault is presumed considering that he did not offer
proof that he exercised extraordinary diligence in the selection and supervision of his
employees. They added that the negligence of respondents resulted in the latter’s
failure to transport them to their destination thereby constituting a breach of their
contract of carriage. They also argued that the RTC’s grant of damages and
attorney’s fees in their favor already attained finality because when respondents
appealed to the CA, they only questioned the amounts given by the RTC for being
exorbitant, but not the award itself.
Respondents’ Arguments
 
Respondents, on their end, posit that they are not liable to pay moral damages
because their acts were not attended by fraud or bad faith. They add that since
petitioners are not entitled to moral damages, then it follows that they are also not
entitled to exemplary damages; and same is true with regard to the grant of attorney’s
fees as the same necessitates the grant of moral and exemplary damages.
 
Our Ruling
 
The Court denies the Petition.
_______________
14   Rollo, p. 40.
 
 
219
VOL. 834, AUGUST 2, 2017 219
Darines vs. Quiñones
First of all, petitioners contend that the awards of moral and exemplary damages
and attorney’s fees by the RTC already attained finality because respondents did not
dispute such grants when they appealed to the CA but only the fact that the amounts
were exorbitant.
Such contention is without merit.
A plain reading of the assigned errors 15 and issues16 in the Appellants’ Brief of
respondents with the CA reveals that they questioned the awards of moral and
exemplary damages as well as attorney’s fees made by the RTC to petitioners. Since
44
respondents timely challenged the awards when they interposed an appeal to the CA,
the same had not yet attained finality.
Going now to the main issue, the Court fully agrees with the CA’s ruling that in
an action for breach of contract, moral damages may be recovered only when a)
death of a passenger results; or b) the carrier was guilty of fraud and bad faith even if
death does not result; and that neither of these circumstances were present in the case
at bar. The CA correctly held that, since no moral damages was awarded then, there
is no basis to grant exemplary damages and attorney’s fees to petitioners.
To stress, this case is one for breach of contract of carriage (culpa contractual)
where it is necessary to show the existence of the contract between the parties, and
the failure of the common carrier to transport its passenger safely to his or her
destination. An action for breach of contract differs from quasi-delicts (also referred
as culpa aquiliana or culpa extra contractual) as the latter emanate from the
negligence of the tortfeasor17 including such instance where a person is injured
_______________
15  CA  Rollo (Vol. III), p. 30.
16  Id., at p. 33.
17  Calalas v. Court of Appeals, 388 Phil. 146, 150-151; 332 SCRA 356, 361
(2000).
 
 
220
220 SUPREME COURT REPORTS ANNOTATED
Darines vs. Quiñones
in a vehicular accident by a party other than the carrier where he is a passenger.
The principle that, in an action for breach of contract of carriage, moral damages
may be awarded only in case (1) an accident results in the death of a passenger; or
(2) the carrier is guilty of fraud or bad faith, is pursuant to Article 1764, in relation to
Article 2206(3) of the Civil Code, and Article 2220 thereof,18 as follows:
Article 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall
also apply to the death of a passenger caused by the breach of contract by a
common carrier. (Emphasis supplied)
Article 2206. The amount of damages for death caused by a crime or quasi-
delict shall be at least three thousand pesos, even though there may have been
mitigating circumstances. In addition:
x x x x
(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.
Article 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances, such damages
are justly due. The same rule applies to breaches of contract where the defendant
acted fraudulentlyor in bad faith. (Emphasis supplied)
 
The aforesaid concepts of fraud or bad faith and negligence are basic as they are
distinctly differentiated by law. Specifically, fraud or bad faith connotes “deliberate
or wanton wrong-
_______________
18  Id., at p. 155; p. 365.
 
 
221
VOL. 834, AUGUST 2, 2017 221
Darines vs. Quiñones
doing”19 or such deliberate disregard of contractual obligations 20 while negligence
amounts to sheer carelessness. 21
More particularly, fraud includes “inducement through insidious
machination.”22 In turn, insidious machination refers to such deceitful strategy or
such plan with an evil purpose. On the other hand, bad faith does not merely pertain
to bad judgment or negligence but relates to a dishonest purpose, and a deliberate
doing of a wrongful act. Bad faith involves “breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud.”23
In Viluan v. Court of Appeals,24 and Bulante v. Chu Liante,25 the Court
disallowed the recovery of moral damages in actions for breach of contract for lack
of showing that the common carrier committed fraud or bad faith in performing its
obligation. Similarly, in Verzosa v. Baytan,26 the Court did not also grant moral
damages in an action for breach of contract as there was neither allegation nor proof
that the common carrier committed fraud or bad faith. 27 The Court declared that “[t]o
award moral damages for breach of contract, therefore, without proof of bad faith or
malice on the part of the defendant, as required by [Article 2220 of the Civil Code],
would be to violate the clear provisions of the law, and constitute unwarranted
judicial legislation.28
_______________
19  Verzosa v. Baytan, 107 Phil. 1010, 1017 (1960), citing Fores v. Miranda, 105
Phil. 266, 276 (1959).
20  Victory Liner, Inc. v. Gammad, 486 Phil. 574, 593; 444 SCRA 355, 370
(2004).
21  Verzosa v. Baytan, supra.
22  Cathay Pacific Airways, Ltd. v. Vazquez, 447 Phil. 306, 321; 399 SCRA 207,
220 (2003).
23  Id., at pp. 321-322; p. 220.
24  123 Phil. 561; 16 SCRA 742 (1966).
25  132 Phil. 87; 23 SCRA 604 (1968).
45
 26  Verzosa v. Baytan, supra. exemplary damages may be awarded only in addition to moral, temperate, liquidated,
27  Id., at p. 1015. or compensatory damages. Since petitioners are not entitled to either moral,
28  Id., at p. 1016, citing Fores v. Miranda, supra. temperate, liquidated, or compensatory damages, then their claim for exemplary
  damages is bereft of merit.
  Finally, considering the absence of any of the circumstances under Article
222 220833 of the Civil Code where attor-
222 SUPREME COURT REPORTS ANNOTATED _______________
Darines vs. Quiñones
32  Article 2229. Exemplary or corrective damages are imposed, by way of
Meanwhile, in Gatchalian v. Delim,29 and Mr. & Mrs. Fabre, Jr. v. Court of example or correction for the public good, in addition to the moral, temperate,
Appeals,30 the Court found the common carriers liable for breach of contract of liquidated or compensatory damages.
carriage and awarded moral damages to the injured passengers on the ground that the Article 2234. While the amount of the exemplary damages need not be proved,
common carrier committed grossnegligence, which amounted to bad faith. the plaintiff must show that he is entitled to moral, temperate or compensatory
Particularly, in Mr. & Mrs. Fabre, Jr., the gross negligence of the common carrier damages before the court may consider the question of whether or not exemplary
was determined from the fact that its driver was not engaged to drive long distance damages should be awarded. x x x
travels; he was also unfamiliar with the area where he detoured the bus as it was his 33  Article 2208. In the absence of stipulation, attorney’s fees and expenses of
first time to ply such route; the road was slippery because it was raining, yet the bus litigation, other than judicial costs, cannot be recovered, except:
was running at 50 kilometers per hour resulting in its skidding to the left shoulder of (1) When exemplary damages are awarded;
the road; and the bus hit the steel brace on the road at past 11:30 p.m. The Court also (2) When the defendant’s act or omission has compelled the plaintiff to litigate
noted that other than the imputation of gross negligence, the injured passengers with third persons or to incur expenses to protect his interest;
therein pursued their claim not on the theory of breach of contract of carriage alone (3) In criminal cases of malicious prosecution against the plaintiff;
but also on quasi-delicts. (4) In case of a clearly unfounded civil action or proceeding against the
Clearly, unless it is fully established (and not just lightly inferred) that plaintiff;
negligence in an action for breach of contract is so gross as to amount to malice, then (5) Where the defendant acted in gross and evident bad faith in refusing to
the claim of moral damages is without merit.31 satisfy the plaintiffs plainly valid, just and demandable claim;
Here, petitioners impute negligence on the part of respondents when, as paying (6) In actions for legal support;
passengers, they sustained injuries when the bus owned and operated by respondent (7) In actions for the recovery of wages of household helpers, laborers and
Quiñones, and driven by respondent Quitan, collided with another vehicle. skilled workers;
Petitioners propounded on the negligence of respondents, but did not discuss or (8) In actions for indemnity under workmen’s compensation and employer’s
impute fraud or bad faith, or such gross negligence which would amount to bad faith, liability laws;
against respondents. There being neither allegation nor proof that respondents acted  
in fraud or in bad faith in performing their duties arising from their contract of  
carriage, they are then not liable for moral damages. 224
_______________
224 SUPREME COURT REPORTS ANNOTATED
29  280 Phil. 137; 203 SCRA 126 (1991). Darines vs. Quiñones
30  328 Phil. 774; 259 SCRA 426 (1996). ney’s fees may be awarded, the same cannot be granted to petitioners.
31  Supra note 19. All told, the CA correctly ruled that petitioners are not entitled to moral and
  exemplary damages as well as attorney’s fees.
  WHEREFORE, the Petition is DENIED. The October 29, 2012 Decision and
223 March 6, 2013 Resolution of the Court of Appeals in C.A.-G.R. CV No. 95638
VOL. 834, AUGUST 2, 2017 223 are AFFIRMED.
SO ORDERED.
Darines vs. Quiñones
Sereno (CJ., Chairperson), Leonardo-De Castro, Perlas-
The Court also sustains the CA’s finding that petitioners are not entitled to Bernabe and Caguioa, JJ., concur.
exemplary damages. Pursuant to Articles 2229 and 2234 32 of the Civil Code,
46
 Petition denied, judgment and resolution affirmed.
Notes.—Moral damages predicated upon a breach of a carriage contract is only
recoverable in instances where the mishap results in the death of a passenger, or
where the carrier is guilty of fraud or bad faith. (Bernales vs. Northwest Airlines, 772
SCRA 25 [2015])
Common carriers are required to exercise extraordinary diligence in the
performance of its obligations under the contract of carriage. (Manay, Jr. vs. Cebu
Air, Inc., 788 SCRA 155 [2016])
 
——o0o——
G.R. No. 203902. July 19, 2017.*
SPOUSES DIONISIO ESTRADA and JOVITA R. ESTRADA,
petitioners, vs. PHILIPPINE RABBIT BUS LINES, INC. and EDUARDO R.
SAYLAN, respondents.
Civil Law; Damages; Moral Damages; Though incapable of pecuniary
computation, moral damages may be recovered if they are the proximate result of
the defendant’s wrongful act or omission.—Moral damages include physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the proximate
result of the defendant’s wrongful act or omission. Under Article 2219 of the Civil
Code, moral damages are recoverable in the following and analogous cases: (1) a
criminal offense resulting in physical injuries; (2) quasi-delicts causing physical
injuries; (3) seduction, abduction, rape or other lascivious acts; (4) adultery or
concubinage; (5) illegal or arbitrary detention or arrest; (6) illegal search; (7) libel,
slander, or any other form of defamation; (8) malicious prosecution; (9) acts
mentioned in Article 309; and (10) acts and actions referred to in Articles 21, 26, 27,
28, 29, 30, 32, 34, and 35.
_______________
*  FIRST DIVISION.
350
350 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
Same; Same; Same; Breach of Contract of Carriage; Since breach of contract
is not one of the items enumerated under Article 2219, moral damages, as a general
rule, are not recoverable in actions for damages predicated on breach of contract.—
Since breach of contract is not one of the items enumerated under Article 2219,
moral damages, as a general rule, are not recoverable in actions for damages
predicated on breach of contract. “x x x As an exception, such damages are
recoverable [in an action for breach of contract:] (1) in cases in which the mishap
results in the death of a passenger, as provided in Article 1764, in relation to Article
2206(3) of the Civil Code; and (2) in x x x cases in which the carrier is guilty of
fraud or bad faith, as provided in Article 2220.”
Same; Same; Same; Same; Bad Faith; Fraud; Allegations of bad faith and
fraud must be proved by clear and convincing evidence.—It has been held, however,
that “allegations of bad faith and fraud must be proved by clear and convincing
evidence.” They are never presumed considering that they are serious accusations
that can be so conveniently and casually invoked. And unless convincingly
substantiated by whoever is alleging them, they amount to mere slogans or
mudslinging. In this case, the fraud or bad faith that must be convincingly proved by
petitioners should be one which was committed by Philippine Rabbit in breaching its
contract of carriage with Dionisio. Unfortunately for petitioners, the Court finds no
47
persuasive proof of such fraud or bad faith. Fraud has been defined to include an
inducement through insidious machination. Insidious machination refers to a
deceitful scheme or plot with an evil or devious purpose. Deceit exists where the
party, with intent to deceive, conceals or omits to state material facts and, by reason
of such omission or concealment, the other party was induced to give consent that
would not otherwise have been given.
Same; Same; Same; Same; Same; Bad faith “does not simply connote bad
judgment or negligence; it imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, a breach of a known duty through some motive or
interest or ill will that partakes of the nature of fraud.”—Bad faith, on the other
hand, “does not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of a
known duty through some motive or interest or ill will that partakes of the nature of
fraud.” There is no showing here that
 
 
351
VOL. 831, JULY 19, 2017 351
Estrada vs. Philippine Rabbit Bus Lines, Inc.
Philippine Rabbit induced Dionisio to enter into a contract of carriage with the
former through insidious machination. Neither is there any indication or even an
allegation of deceit or concealment or omission of material facts by reason of which
Dionisio boarded the bus owned by Philippine Rabbit. Likewise, it was not shown
that Philippine Rabbit’s breach of its known duty, which was to transport Dionisio
from Urdaneta to La Union, was attended by some motive, interest, or ill will. From
these, no fraud or bad faith can be attributed to Philippine Rabbit.
Same; Same; Actual Damages; Loss of Earning Capacity; It is settled that
“damages for loss [or impairment] of earning capacity is in the nature of actual
damages.”—It is settled that “damages for loss [or impairment] of earning capacity
is in the nature of actual damages x x x.” Actual or compensatory damages are those
awarded in order to compensate a party for an injury or loss he suffered. They arise
out of a sense of natural justice, aimed at repairing the wrong done. To be
recoverable, they must be duly proved with a reasonable degree of certainty. A court
cannot rely on speculation, conjecture, or guesswork as to the fact and amount of
damages, but must depend upon competent proof that they have suffered, and on
evidence of the actual amount thereof. Thus, as a rule, documentary evidence should
be presented to substantiate the claim for damages for loss of earning capacity. By
way of exception, damages for loss [or impairment] of earning capacity may be
awarded despite the absence of documentary evidence when (1) the deceased [or
the injured] was self-employed and earning less than the minimum wage under
current labor laws, in which case, judicial notice may be taken of the fact that in
the deceased’s line of work no documentary evidence is available; or (2) the
deceased was employed as a daily worker earning less than the minimum wage
under current labor laws.
Same; Same; Temperate Damages; Under Article 2224, “[t]emperate
or moderate damages, which are more than nominal but less than compensatory
damages, may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with
certainty.”—Nonetheless, since it was established that Dionisio lost his right arm,
temperate damages in lieu of actual damages for loss/impairment of earning capacity
may be awarded in his favor. Under Article 2224,
 
 
352
352 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
“[t]emperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary
loss has been suffered but its amount cannot, from the nature of the case, be proved
with certainty.”
Legal Interest; The amounts of damages awarded are declared subject to legal
interest of six percent (6%) per annum from the finality of this Decision until full
satisfaction.—In addition, the amounts of damages awarded are declared subject to
legal interest of 6% per annum from the finality of this Decision until full
satisfaction.
Caguioa, J., Concurring Opinion:
Civil Law; Breach of Contract of Carriage; Quasi-Delicts; View that in cases
of breach of contract of carriage (culpa contractual) the liability of the common
carrier or employer is direct and immediate, not merely subsidiary or
secondary while in cases of quasi-delict (culpa aquiliana), the liability of the
common carrier (employer) and the negligent driver (employee) is direct, primary,
and solidary.—While the trial court treated Dionisio’s complaint for damages as one
predicated on breach of contract of carriage, it nonetheless found that Philippine
Rabbit failed to exercise the diligence of a good father of a family in the selection
and supervision of its negligent driver, rendering it solidarily liable for damages.
This standard (diligence of a good father of a family in the selection and supervision
of an employee) is applicable in cases of quasi-delict, not breach of contract of
carriage, as the latter carries a different standard (exercise of extraordinary diligence
in the performance of its contractual obligation). Moreover, in cases of breach of
contract of carriage (culpa contractual) the liability of the common carrier or
employer is direct and immediate, not merely subsidiary or secondary, while in cases
of quasi-delict (culpa aquiliana), the liability of the common carrier (employer) and
the negligent driver (employee) is direct, primary, and solidary. Thus, in a case of
breach of contract of carriage, the common carrier is the person liable and not the
driver, while in a case of quasi-delict, both the common carrier and the driver are
liable.
Same; Damages; Actual Damages; View that testimonial evidence may be
sufficient to establish the award of actual damages for loss of compensation, in cases
48
where the victim is: (1) self-employed and earning less than the minimum wage
under current labor laws,
 
353
VOL. 831, JULY 19, 2017 353
Estrada vs. Philippine Rabbit Bus Lines, Inc.
in which case, judicial notice may be taken of the fact that in the deceased’s
line of work, no documentary evidence is available; or (2) was employed as a daily
wage worker earning less than the minimum wage under current labor laws.—On
the issue of actual damages, I believe that they could have been granted based on the
testimony of Dionisio. Testimonial evidence may be sufficient to establish the award
of actual damages for loss of compensation, in cases where the victim is: (1) self-
employed and earning less than the minimum wage under current labor laws, in
which case, judicial notice may be taken of the fact that in the deceased’s line of
work, no documentary evidence is available; or (2) was employed as a daily wage
worker earning less than the minimum wage under current labor laws.
Same; Same; Same; Loss of Earning Capacity; View that as a self-employed
part-time tricycle driver, who was earning less than the minimum wage under
current labor laws and judicial notice is taken that no documentary evidence is
available to prove the minimum wage in that line of work, Dionisio’s testimony is
sufficient to support the award of five hundred thousand pesos (P500,000.00) for
loss of earning capacity as computed by him.—While Dionisio was employed as a
public schoolteacher at the time of the accident, he also worked part-time as a
tricycle driver. Dionisio testified that P80.00 is his average daily earnings in his
sideline as a tricycle driver. The amount could not possibly pertain to his loss of
income as a public schoolteacher because he continued practicing his profession
despite the amputation of his right arm. Rather, the loss of his right arm has a direct
bearing on his ability to drive a tricycle. That Dionisio has to drive a tricycle to
augment his salary as a public schoolteacher is both lamentable and condemnable. If
a tricycle passenger pays P20.00 for a special trip, which is a conservative estimate,
then P80.00 covers only four (4) trips. Thus, as a self-employed part-time tricycle
driver, who was earning less than the minimum wage under current labor laws and
judicial notice is taken that no documentary evidence is available to prove the
minimum wage in that line of work, Dionisio’s testimony is sufficient to support the
award of P500,000.00 for loss of earning capacity as computed by him.
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
The facts are stated in the opinion of the Court.
 
 
354
354 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
   Michael Henry C. Sevilleja for petitioners.
   Juan B. Valdez for respondents.
del castillo, j.:
The Court restates in this petition two principles on the grant of
damages. First, moral damages, as a general rule, are not recoverable in an action for
damages predicated on breach of contract. 1 Second, temperate damages in lieu of
actual damages for loss of earning capacity may be awarded where earning capacity
is plainly established but no evidence was presented to support the allegation of the
injured party’s actual income.2
This Petition for Review on Certiorari assails the May 16, 2012 Decision 3 and
October 1, 2012 Resolution4 of the Court of Appeals (CA) in C.A.-G.R. CV No.
95520, which partially granted the appeal filed therewith by respondent Philippine
Rabbit Bus Lines, Inc. (Philippine Rabbit) and denied petitioners spouses Dionisio C.
Estrada (Dionisio) and Jovita R. Estrada’s motion for reconsideration thereto.
 
Factual Antecedents
 
On April 13, 2004, petitioners filed with the Regional Trial Court (RTC) of
Urdaneta City, Pangasinan, a Complaint 5 for Damages against Philippine Rabbit and
respondent Eduardo R. Saylan (Eduardo).
_______________
1  Japan Airlines v. Simangan, 575 Phil. 359, 375; 552 SCRA 341, 361 (2008).
2  Tan v. OMC Carriers, Inc., 654 Phil. 443, 457; 639 SCRA 471, 484 (2011).
3  CA Rollo, pp. 68-75; penned by Associate Justice Florito S. Macalino, and
concurred in by Associate Justices Remedios A. Salazar-Fernando and Ramon M.
Bato, Jr.
4  Id., at pp. 91-92.
5  Records, pp. 2-5.
 
 
355
VOL. 831, JULY 19, 2017 355
Estrada vs. Philippine Rabbit Bus Lines, Inc.
The facts as succinctly summarized by the RTC are as follows:
[A] mishap occurred on April 9, 2002 along the national highway
in Barangay Alipangpang, Pozorrubio, Pangasinan, between the passenger bus with
plate number CVK-964 and body number 3101, driven by [respondent] Eduardo
Saylan and owned by [respondent] Philippine Rabbit Bus Lines, Inc., and the Isuzu
truck with plate number UPB-974 driven by Willy U. Urez and registered in the
name of Rogelio Cuyton, Jr. At the time of the incident, the Philippine Rabbit bus
was going towards the north direction, while the Isuzu truck was travelling towards
the south direction. The collision happened at the left lane or the lane properly
49
belonging to the Isuzu truck. The right front portion of the Isuzu Truck appears to
have collided with the right side portion of the body of the Philippine Rabbit bus.
x x x Before the collision, the bus was following closely a jeepney. When the
jeepney stopped, the bus suddenly swerved to the left encroaching upon the rightful
lane of the Isuzu truck, which resulted in the collision of the two (2) vehicles. x x x
The [petitioner] Dionisio Estrada, who was among the passengers of the Philippine
Rabbit bus, as evidenced by the ticket issued to him, was injured on the [right] arm
as a consequence of the accident. His injured right arm was amputated at the
Villaflor Medical Doctor’s Hospital in Dagupan City x x x. For the treatment of his
injury, he incurred expenses as evidenced by x x x various receipts.6
 
Dionisio argued that pursuant to the contract of carriage between him and
Philippine Rabbit, respondents were duty-bound to carry him safely as far as human
care and foresight can provide, with utmost diligence of a very cautious person, and
with due regard for all the circumstances from the point of his origin in Urdaneta
City to his destination in Pugo, La Union. However, through the fault and negligence
of Philip-
_______________
6  Id., at pp. 351-352.
 
 
356
356 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
pine Rabbit’s driver, Eduardo, and without human care foresight, and due regard for
all circumstances, respondents failed to transport him safely by reason of the
aforementioned collision which resulted in the amputation of Dionisio’s right arm.
And since demands for Philippine Rabbit 7 to pay him damages for the injury he
sustained remained unheeded, Dionisio filed the said complaint wherein he prayed
for the following awards: moral damages of P500,000.00, actual damages of
P60,000.00, and attorney’s fees of P25,000.00.
Petitioners’ claim for moral damages, in particular, was based on the following
allegations:
9. [The] amount of P500,000.00 as moral damages for the amputation of
[Dionisio’s] right arm for life including his moral sufferings for such [loss] of right
arm is reasonable.
Said amount is computed and derived using the formula (2/3 x [80 – age of the
complainant when the injury is sustained] = life expectancy) adopted in the
American Expectancy Table of Mortality or the actuarial of Combined Experience
Table of Mortality. From such formula, [Dionisio] is expected to live for 18 years,
which is equivalent [to] about 6570 days. For each day, [Dionisio] is claiming
P80.00 as he is expected to work for 8 hours a day with his amputated arm or to
enjoy the same for at least 8 hours a day (or is claiming P10.00 for each hour) for 18
years (6570 days). The amount that can be computed thereof would be P525,600.00
(6570 days x P80.00). [Dionisio] then [rounded] it off to P500,000.00, the moral
damages consisted [of] his moral sufferings due to the [loss] of his right arm for life. 8
 
Denying any liability, Philippine Rabbit in its Answer 9averred that it carried
Dionisio safely as far as human care and foresight could provide with the utmost
diligence of a
_______________
7  Id., at pp. 8-9.
8  Id., at pp. 3-4.
9  Id., at pp. 54-57.
 
 
357
VOL. 831, JULY 19, 2017 357
Estrada vs. Philippine Rabbit Bus Lines, Inc.
very cautious person and with due regard for all the circumstances prevailing. While
it did not contest that its bus figured in an accident, Philippine Rabbit nevertheless
argued that the cause thereof was an extraordinary circumstance independent of its
driver’s action or a fortuitous event. Hence, it claimed to be exempt from any
liability arising therefrom. In any case, Philippine Rabbit averred that it was the
Isuzu truck coming from the opposite direction which had the last clear chance to
avoid the mishap. Instead of slowing down upon seeing the bus, the said truck
continued its speed such that it bumped into the right side of the bus. The proximate
cause of the accident, therefore, was the wrongful and negligent manner in which the
Isuzu truck was operated by its driver. In view of this, Philippine Rabbit believed
that Dionisio has no cause of action against it.
With respect to Eduardo, he was declared in default after he failed to file an
Answer despite due notice.10
 
Ruling of the Regional Trial Court
 
Treating petitioners’ Complaint for damages as one predicated on breach of
contract of carriage, the RTC rendered its Decision11 on December 1, 2009.
In concluding that Eduardo was negligent in driving the Philippine Rabbit bus,
the said court ratiocinated, viz.:
Evidently, prior to the accident, [Eduardo] was tailgating the jeepney ahead of
him. When the jeepney stopped, [Eduardo] suddenly swerved the bus to the left,
encroaching in the process the rightful lane of the oncoming Isuzu truck, thereby
resulting in the collision. The fact that [Eduardo] did not apply the brakes, but
instead swerved to the other lane, fairly suggests that he was not
_______________
50
 10  Id., at p. 43.
11  Id., at pp. 351-370; penned by Acting Judge Teodorico Alfonso P. Bauzon of
RTC-Branch 48, Urdaneta City, Pangasinan.
 
 
358
358 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
only unnecessarily close to the jeepney, but that he was operating the bus at a speed
greater than what was reasonably necessary for him to be able to bring his vehicle to
a full stop to avoid hitting the vehicle he was then following. Clearly, immediately
before the collision, [Eduardo] was actually violating Section 35 of the Land
Transportation and Traffic Code, Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed.—(a) Any person driving a motor
vehicle on a highway shall drive the same at a careful and prudent speed, not
greater nor less than [what] is reasonable and proper, having due regard for
the traffic, the width of the highway, and or any other condition then and
there existing; and no person shall drive any motor vehicle upon a highway at
such a speed as to endanger the life, limb and property of any person, nor at a
speed greater than will permit him to bring the vehicle to a stop within the
clear distance ahead.
Too, when [Eduardo] swerved to the left and encroached on the rightful lane of
the Isuzu truck, he was violating Section 41 of the same Traffic Code:
Sec. 41. Restriction on overtaking and passing.—(a) The driver of a
vehicle shall not drive to the left side of the center line of a highway in
overtaking or passing another vehicle, proceeding in the same direction,
unless such left side is clearly visible, and is free of oncoming traffic for a
sufficient distance ahead to permit such overtaking or passing to be made in
safety.
The fact that the collision occurred immediately after the bus swerved on the left
lane clearly [indicates] that the other lane was not clear and free of oncoming vehicle
at the time x x x [Eduardo] tried to overtake the jeepney to avoid hitting it.
 
 
359
VOL. 831, JULY 19, 2017 359
Estrada vs. Philippine Rabbit Bus Lines, Inc.
It is presumed that a person driving a motor vehicle has been negligent if at the
time of the mishap, he was violating any traffic regulation, unless there is proof to
the contrary (Article 2185 of the Civil Code). [Eduardo] failed to rebut this legal
presumption as he chose not to answer the complaint and to testify in court.
[Philippine Rabbit was also] unsuccessful in overthrowing the said legal
presumption. x x x
[Eduardo’s] failure to observe the proper and safe distance from the vehicle
ahead of him and in running the bus at a speed greater than what was reasonably
necessary to control and stop the vehicle when warranted by the circumstances,
clearly were reflective of his lack of precaution, vigilance, and foresight in operating
his vehicle. As an experienced driver, he should have known about the danger posed
by tailgating another vehicle and driving his vehicle at an unreasonable speed called
for by the circumstances. For, the sudden stopping of a motor vehicle, for whatever
[reason], is not an uncommon and [unforeseeable] occurrence in the highway. If only
he had exercised diligence, vigilance and foresight, he would have refrained from
tailgating another vehicle at a dangerously close range. What he should have done
instead was to maintain a reasonable distance from the jeepney and drove his vehicle
at a speed not greater than will permit him to bring the vehicle to a stop within the
assured clear distance ahead. This he failed to do. As a consequence, when the
jeepney stopped, he was unable to control and stop the bus. Instead, he was forced to
swerve the bus to the left lane blocking the path of the oncoming Isuzu truck. While
he averted smashing the jeepney, he however collided with the Isuzu truck. No
doubt, it was [Eduardo’s] lack of precaution, vigilance and foresight that led to the
accident. Otherwise stated, it was his recklessness or negligence that was the
proximate cause of the mishap.
[Philippine Rabbit’s] imputation of fault to the driver of the Isuzu truck, claiming
that it was the latter [which] had the last clear chance to avoid the accident, deserves
scant consideration. As the evidence would show, the impact occurred immediately
after the bus
 
 
360
360 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
swerved and while in the process of encroaching on the left lane. This is evidenced
by the fact that the front portion of the Isuzu truck collided with the right side portion
of the bus. The driver of the Isuzu truck, before the accident, was cruising on the lane
properly belonging to him. He had every right to expect that all the vehicles,
including the bus coming from the opposite direction would stay on their proper lane.
He certainly was not expected to know what prompted the bus driver to suddenly
swerve his vehicle to the left. The abruptness by which the bus swerved without a
warning could not have given him the luxury of time to reflect and anticipate the
bus’ encroachment of his lane for him to be able to avoid it. Needless to point out,
there was no last clear chance to speak of on the part of the driver of the Isuzu truck
to avoid the accident. Besides, the ‘last clear chance’ principle is not applicable in
this case since the instant suit is between the passenger and the common carrier.
x x x12
 
The RTC then proceeded to determine whether Philippine Rabbit, as it claimed,
exercised the diligence of a good father of a family in the selection and supervision
51
of its drivers as to negate any liability for damages. The said court, however, was
unconvinced after it found that (1) Philippine Rabbit failed to show that it had taken
all the necessary and actual steps to thoroughly examine the qualifications of
Eduardo as a driver worthy of employment; and (2) no proof relative to the existence
of company rules and regulations, instructions, and policies affecting its drivers, as
well as to their actual implementation and observance, were presented. Hence,
Philippine Rabbit was held jointly and severally liable with Eduardo for the awards
made in favor of Dionisio as follows:
The emotional anguish and suffering of x x x Dionisio Estrada as a consequence
of the injury and amputation of his right arm due to the reckless driving of x x x
Eduardo, which resulted in the accident, cannot be over-
_______________
12  Id., at pp. 358-361.
 
 
361
VOL. 831, JULY 19, 2017 361
Estrada vs. Philippine Rabbit Bus Lines, Inc.
emphasized. The loss of the use of his right arm and the humiliation of being tagged
in the public [eye] as a person with only one arm would certainly be borne by him
for the rest of his life. The amount of moral damages he is praying appears to be
reasonable under the circumstances.
Too, the award of attorney’s fees is proper considering that x x x [Dionisio] was
forced to litigate after x x x [Philippine Rabbit] refused to heed his demand for the
payment of damages as a consequence of the accident.
WHEREFORE, judgment is hereby rendered ordering x x x Philippine Rabbit
Bus Lines, Inc. and Eduardo Saylan to pay jointly and severally x x x Dionisio
Estrada the following amounts:
1. Five Hundred Thousand Pesos (P500,000.00) as moral damages;
2. Fifty-Seven Thousand Seven Hundred Sixty-Six Pesos and Twenty-Five
Centavos (P57,766.25), as actual damages; and
3. Twenty-Five Thousand Pesos (P25,000.00), as attorney’s fees; and the costs
of suit.
SO ORDERED.13
 
Philippine Rabbit filed a Motion for Reconsideration 14but the same was denied
for lack of merit in an Order15dated May 31, 2010.
 
Ruling of the Court of Appeals
On appeal, Philippine Rabbit imputed error upon the RTC in not finding that it
exercised the diligence of a good father of a family in the selection and supervision
of its drivers. In any case, it argued that moral damages are not recoverable in an
action for damages predicated on breach of contract except
_______________
13  Id., at pp. 369-370.
14  Id., at pp. 373-376.
15  Id., at pp. 380-383.
 
 
362
362 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
when death results or when the carrier is guilty of fraud or bad faith. Since none of
the two aforementioned circumstances are present in this case, Philippine Rabbit
contended that it is Eduardo alone who should be held civilly liable.
In a Decision16 dated May 16, 2012, the CA partially granted the appeal on the
following ratiocination:
Based from [sic] the aforecited allegations in the complaint, it was rightly
regarded by the trial court as an action to recover damages arising from breach of
contract of carriage. There was in fact, an admission that [Dionisio] was a passenger
of a bus owned by [Philippine Rabbit]. In an action for breach of contract of carriage,
all that is required is to prove the existence of such contract and its nonperformance
by the carrier through the latter’s failure to carry the passenger safely to his
destination. In the present case, it was duly established that there was a collision and
as a result of which, [Dionisio] sustained an injury.
[Philippine Rabbit] was therefore properly found liable for breach of contract
of carriage. A common carrier is bound to carry its passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons,
with due regard to all the circumstances. In a contract of carriage, it is presumed that
the common carrier was at fault or was negligent when a passenger dies or is injured.
Unless the presumption is rebutted, the court need not even make an express finding
of fault or negligence on the part of the common carrier. This presumption may only
be overcome by evidence that the carrier exercised extraordinary diligence, and this
presumption remained unrebutted in this case. The trial court found that the accident
which led to the amputation of [Dionisio’s] arm was due to the reckless driving and
negligence of [Philippine Rabbit’s] driver and stated that:
_______________
16  CA Rollo, pp. 68-75.
 
363
VOL. 831, JULY 19, 2017 363
Estrada vs. Philippine Rabbit Bus Lines, Inc.
52
 No doubt, it was x x x [Eduardo’s] lack of precaution, vigilance and
foresight that led to the accident. Otherwise stated, it was his recklessness or
negligence that was the proximate cause of the mishap.
Such negligence and recklessness is binding against [Philippine Rabbit] pursuant
to Article 1759 of the Civil Code which provides:
Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the former’s employees, although
such employees may have acted beyond the scope of their authority or in
violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
Thus, [Philippine Rabbit’s] defense that it acted with the diligence of a good
father of a family in its selection of its driver, Eduardo R. Saylan, is unavailing.
[Philippine Rabbit] however is correct in its contention that moral damages are not
recoverable in actions for damages predicated on a breach of contract, unless death
of a passenger results, or it is proved that the carrier was guilty of fraud or bad faith,
even if death does not result.
There was no evidence on record indicative of fraud or bad faith on [Philippine
Rabbit’s] part. Bad faith should be established by clear and convincing evidence. The
settled rule is that the law always presumes good faith such that any person who
seeks to be awarded damages due to the acts of another has the burden of proving
that the latter acted in bad faith or with ill motive. The award for attorney’s fees must
likewise be deleted considering that moral damages cannot be granted and none of
the instances enumerated in Article 2208 of the Civil Code is present in the instant
case. However, the actual damages awarded by the trial court are ade-
 
 
364
364 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
quately substantiated by official receipts. Therefore, the same shall be sustained.
The driver on the other hand, may not be held liable under the contract of
carriage, not being a party to the same. The basis of a cause of action of a passenger
against the driver is either culpa criminal or culpa aquiliana. A passenger may file a
criminal case based on culpa criminal punishable under the Revised Penal Code or a
civil case based on culpa aquiliana under Articles 2176 and 2177 of the Civil Code.
A cause of action based on culpa contractual is also separate and distinct from a
cause of action based on culpa aquiliana. x x x
x x x x
The trial court therefore erred in ruling that [Philippine Rabbit] bus company and
[respondent] driver are jointly and severally liable. The driver cannot be held jointly
and severally liable with the carrier in case of breach of the contract of carriage. The
contract of carriage is between the carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively responsible [therefor] to the passenger,
even if such breach be due to the negligence of his driver. The carrier can neither
shift his liability on the contract to his driver nor share it with him for his driver’s
negligence is his.17
 
Accordingly, the CA modified the RTC Decision in that it declared Philippine
Rabbit as solely and exclusively liable to Dionisio for actual damages in the amount
of P57,766.25 and deleted the award of moral damages and attorney’s fees.
Petitioners filed a Motion for Reconsideration 18 but the same was denied by the
CA for lack of merit in a Resolution19 dated October 1, 2012.
_______________
17  Id., at pp. 72-74.
18  Id., at pp. 78-84.
19  Id., at pp. 91-92.
 
 
365
VOL. 831, JULY 19, 2017 365
Estrada vs. Philippine Rabbit Bus Lines, Inc.
Hence, this Petition for Review on Certiorari raising the following issues:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
DECLARING THAT THERE WAS NO EVIDENCE ON RECORD INDICATIVE
OF FRAUD OR BAD FAITH ON [PHILIPPINE RABBIT’S] PART.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
NOT [CONSIDERING] X X X THE [COST OF THE] REPLACEMENT OF
PETITIONER [DIONISIO’S AMPUTATED RIGHT ARM] WITH [AN]
ARTIFICIAL ONE AS ACTUAL DAMAGES.20
The Parties’ Arguments
 
Petitioners dispute the findings of lack of fraud or bad faith on the part of
Philippine Rabbit as to make it liable for moral damages. According to them, the
assertions of Philippine Rabbit in its Answer, i.e., that it carried Dionisio safely; that
it was not an insurer of all risks; that the accident was caused by a fortuitous event;
that in any event, it was the negligent manner by which the Isuzu truck was operated
which was the proximate cause of the accident; and that Dionisio has no cause of
action against Philippine Rabbit, were made with the intention to evade liability.
Petitioners claim that the said assertions are clear indication of fraud or bad faith.
In justifying their claim for moral damages, petitioners aver that in their
Complaint, they did not seek for moral damages in terms of physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injuryper se, but for moral damages
based purely on the fact that Dionisio lost his right arm. They argue that while in a
53
strict sense, Dionisio incurred actual damages through the amputation of his right  
arm, such loss may rightly be considered as falling 367
_______________ VOL. 831, JULY 19, 2017 367
Estrada vs. Philippine Rabbit Bus Lines, Inc.
20  Rollo, p. 9.
  Under Article 2219 of the Civil Code, moral damages are recoverable in the
  following and analogous cases: (1) a criminal offense resulting in physical injuries;
366 (2) quasi-delicts causing physical injuries; (3) seduction, abduction, rape or other
lascivious acts; (4) adultery or concubinage; (5) illegal or arbitrary detention or
366 SUPREME COURT REPORTS ANNOTATED arrest; (6) illegal search; (7) libel, slander, or any other form of defamation; (8)
Estrada vs. Philippine Rabbit Bus Lines, Inc. malicious prosecution; (9) acts mentioned in Article 309; 22and (10) acts and actions
under moral damages. This is because a right arm is beyond the commerce of man referred to in Articles 21,23 26,2427,25 28,26 29,27 30,28 32,29 34,30 and 35.31
and loss thereof necessarily brings physical suffering, mental anguish, besmirched _______________
reputation, social humiliation and similar injury to a person. At any rate, should this
Court award the amount of P500,000.00 as actual damages due to the loss of 22  Civil Code, Article 309. Any person who shows disrespect to the dead, or
Dionisio’s right arm, petitioners also find the same proper and appropriate under the wrongfully interferes with a funeral shall be liable to the family of the deceased for
circumstances. damages, material or moral.
Now jointly represented by one counsel, respondents, on the other hand, reiterate 23  Civil Code, Article 21. Any person who willfully causes loss or injury to
the rule that moral damages are not recoverable in an action for damages predicated another in a manner that is contrary to morals, good customs or public policy shall
on a breach of contract, as in this case, since breach of contract is not one of the compensate the latter for the damage.
items enumerated in Article 2219 of the Civil Code. Only as an exception, moral 24  Civil Code, Article 26. Every person shall respect the dignity, personality,
damages may be recovered in an action for breach of contract of carriage when the privacy and peace of mind of his neighbors and other persons. The following and
mishap results in death or if the carrier acted fraudulently or in bad faith. Since similar acts, though they may not constitute a criminal offense, shall produce a cause
Dionisio did not die in the mishap nor was Philippine Rabbit found guilty of fraud or of action for damages, prevention and other relief:
bad faith, respondents argue that an award for moral damages is improper for having (1) Prying into the privacy of another’s residence;
no basis in fact and in law. (2) Meddling with or disturbing the private life or family relations of another;
  (3) Intriguing to cause another to be alienated from his friends;
Our Ruling (4) Vexing or humiliating another on account of his religious beliefs, lowly
  station in life, place of birth, physical defect, or other personal condition.
The Court modifies the CA ruling. 25  Civil Code, Article 27. Any person suffering material or moral loss
  because a public servant or employee refuses or neglects, without just cause, to
Moral damages; Instances perform his official duty may file an action for damages and other relief against the
when moral damages can latter, without prejudice to any disciplinary administrative action that may be taken.
be awarded in an action 26  Civil Code, Article 28. Unfair competition in agricultural, commercial or
for breach of contract. industrial enterprises or in labor through the use of force, intimidation, deceit,
  machination or any other unjust, oppressive or highhanded method shall give rise to
Moral damages include physical suffering, mental anguish, fright, serious a right of action by the person who thereby suffers damage.
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,  
and similar injury. Though incapable of pecuniary computation, moral damages may  
be recovered if they are the proximate result of the defendant’s wrongful act or 368
omission.21 368 SUPREME COURT REPORTS ANNOTATED
_______________
Estrada vs. Philippine Rabbit Bus Lines, Inc.
21  Civil Code, Article 2217. _______________
 

54
 27  Civil Code, Article 29. When the accused in a criminal prosecution is
acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a
civil action for damages for the same act or omission may be instituted. Such action
requires only a preponderance of evidence. Upon motion of the defendant, the court
may require the plaintiff to file a bond to answer for damages in case the complaint
should be found to be malicious.
If in a criminal case the judgment of acquittal is based upon reasonable doubt,
the court shall so declare. In the absence of any declaration to that effect, it may be
inferred from the text of the decision whether or not the acquittal is due to that
ground.
28  Civil Code, Article 30. When a separate civil action is brought to demand
civil liability arising from a criminal offense, and no criminal proceedings are
instituted during the pendency of the civil case, a preponderance of evidence shall
likewise be sufficient to prove the act complained of.
29  Civil Code, Article 32. Any public officer or employee, or any private
individual, who directly or indirectly obstructs, defeats, violates or in any manner
impedes or impairs any of the following rights and liberties of another person shall
be liable to the latter for damages:
(1) Freedom of religion;
(2) Freedom of speech;
(3) Freedom to writ for the press or to maintain a periodical publication;
(4) Freedom from arbitrary or illegal detention;
(5) Freedom of suffrage;
(6) The right against deprivation of property without due process of law;
(7) The right to a just compensation when private property is taken for public
use;
(8) The right to the equal protection of the laws;
(9) The right to be secured in one’s person, house, papers, and effects against
unreasonable searches and seizures;
(10) The liberty of abode and of changing the same;
(11) The privacy of communication and correspondence;
(12) The right to become a member of associations or societies for purposes not
contrary to law;
(13) The right to take part in a peaceable assembly to petition the Government
for redress of grievances;
(14) The right to be free from involuntary servitude in any form;
 
369
VOL. 831, JULY 19, 2017 369
Estrada vs. Philippine Rabbit Bus Lines, Inc.
_______________
(15) The right of the accused against excessive bail;
(16) The right of the accused to be heard by himself and counsel, to be
informed of the nature and cause of the accusation against him, to have a speedy and
public trial, to meet the witnesses face to face, and to have compulsory process to
secure the attendance of witness in his behalf;
(17) Freedom from being compelled to be a witness against one’s self, or from
being forced to confess guilt, or from being induced by a promise of immunity or
reward to make such confession, except when the person confessing becomes a State
witness;
(18) Freedom from excessive fines, or cruel and unusual punishment, unless
the same is imposed or inflicted in accordance with a statute which has not been
judicially declared unconstitutional; and
(19) Freedom of access to the courts.
In any of the cases referred to in this article, whether or not the defendant’s act or
omission constitutes a criminal offense, the aggrieved party has a right to commence
an entirely separate and distinct civil action for damages, and for other relief. Such
civil action shall proceed independently of any criminal prosecution (if the latter be
instituted) and may be proved by a preponderance of evidence.
The indemnity shall include moral damages. Exemplary damages may also be
adjudicated.
The responsibility herein set forth is not demandable from a judge unless his act
or omission constitutes a violation of the Penal Code or other penal statute.
30  Civil Code, Article 34. When a member of a city or municipal police force
refuses or fails to render aid or protection to any person in case of danger to life or
property, such peace officer shall be primarily liable for damages, and the city or
municipality shall be subsidiarily responsible therefor. The civil action herein
recognized shall be independent of any criminal proceedings, and a preponderance of
evidence shall suffice to support such action.
31  Civil Code, Article 35. When a person, claiming to be injured by a
criminal offense, charges another with the same, for which no independent civil
action is granted in this Code or any special law, but the justice of the peace finds no
reasonable grounds to believe that a crime has been committed, or the prosecuting
attorney refuses or fails to institute criminal proceedings, the complainant may bring
a civil action for damages against the alleged offender. Such civil action may be
supported by a preponderance of
 
 
370
370 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
x x x [C]ase law establishes the following requisites for the award of moral
damages: (1) there must be an injury clearly sustained by the claimant, whether
physical, mental or psychological; (2) there must be a culpable act or omission
factually established; (3) the wrongful act or omission of the defendant is the
55
proximate cause of the injury sustained by the claimant; and (4) the award for
damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 32
 
Since breach of contract is not one of the items enumerated under Article 2219,
moral damages, as a general rule, are not recoverable in actions for damages
predicated on breach of contract.33
“x x x As an exception, such damages are recoverable [in an action for breach of
contract:] (1) in cases in which the mishap results in the death of a passenger, as
provided in Article 1764,34 in relation to Article 2206(3)35 of the Civil Code; and (2)
in x x x cases in which the car-
_______________
evidence. Upon the defendant’s motion, the court may require the plaintiff to file a
bond to indemnify the defendant in case the complaint should be found to be
malicious.
 If during the pendency of the civil action, an information should be presented by
the prosecuting attorney, the civil action shall be suspended until the termination of
the criminal proceedings.
32  Cathay Pacific Airways, Ltd. v. Vazquez, 447 Phil. 306, 323-324; 399 SCRA
207, 222 (2003).
33  Supra note 1.
34  Civil Code, Article 1764. Damages in cases comprised in this Section shall
be awarded in accordance with Title XVIII of this Book, concerning Damages.
Article 2206 shall also apply to the death of a passenger caused by the breach of
contract by a common carrier.
35  Civil Code, Article 2206. The amount of damages for death caused by a
crime or quasi-delict shall be at least Three thousand pesos, even though there may
have been mitigating circumstances. In addition:
x x x x
(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.
 
 
371
VOL. 831, JULY 19, 2017 371
Estrada vs. Philippine Rabbit Bus Lines, Inc.
rier is guilty of fraud or bad faith, as provided in Article 2220.36”37
 
Moral damages are not
recoverable in this case.
 
It is obvious that this case does not come under the first of the above mentioned
exceptions since Dionisio did not die in the mishap but merely suffered an injury.
Nevertheless, petitioners contend that it falls under the second category since they
aver that Philippine Rabbit is guilty of fraud or bad faith.
It has been held, however, that “allegations of bad faith and fraud must be proved
by clear and convincing evidence.”38 They are never presumed considering that they
are serious accusations that can be so conveniently and casually invoked. 39 And
unless convincingly substantiated by whoever is alleging them, they amount to mere
slogans or mudslinging.40
In this case, the fraud or bad faith that must be convincingly proved by
petitioners should be one which was committed by Philippine Rabbit in breaching its
contract of carriage with Dionisio. Unfortunately for petitioners, the Court finds no
persuasive proof of such fraud or bad faith.
Fraud has been defined to include an inducement through insidious machination.
Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to
_______________
36  Civil Code, Article 2220. Willful injury to property may be a legal ground
for awarding moral damages if the court should find that, under the circumstances,
such damages are justly due. The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
37  Supra note 1 at pp. 375-376; p. 361.
38  Palada v. Solidbank Corporation, 668 Phil. 172, 174; 653 SCRA 10, 11
(2011).
39  Supra note 32 at p. 321; p. 220.
40  Id.
 
 
372
372 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
deceive, conceals or omits to state material facts and, by reason of such omission or
concealment, the other party was induced to give consent that would not otherwise
have been given.41
 
Bad faith, on the other hand, “does not simply connote bad judgment or
negligence; it imports a dishonest purpose or some moral obliquity and conscious
doing of a wrong, a breach of a known duty through some motive or interest or ill
will that partakes of the nature of fraud.”42
There is no showing here that Philippine Rabbit induced Dionisio to enter into a
contract of carriage with the former through insidious machination. Neither is there
any indication or even an allegation of deceit or concealment or omission of material
facts by reason of which Dionisio boarded the bus owned by Philippine Rabbit.
Likewise, it was not shown that Philippine Rabbit’s breach of its known duty, which
was to transport Dionisio from Urdaneta to La Union, 43 was attended by some
56
motive, interest, or ill will. From these, no fraud or bad faith can be attributed to damages consisted [of] his moral sufferings due to the [loss] of his right arm for
Philippine Rabbit. life.44
Still, petitioners insist that since the defenses it pleaded in its Answer were  
designed to evade liability, Philippine Rabbit is guilty of fraud or bad faith. Suffice it It thus appears that while petitioners denominated their claim for P500,000.00 as
to state, however, that the allegations which made up Philippine Rabbit’s defenses moral damages, their computation
are hardly the kind of fraud or bad faith contemplated by law. Again, it bears to _______________
mention that the fraud or bad faith must be one which attended the contractual breach
or one which induced Dionisio to enter into contract in the first place. 44  Records, pp. 3-4.
Clearly, moral damages are not recoverable in this case. The CA, therefore, did  
not err in deleting the award for moral damages.  
_______________ 374
374 SUPREME COURT REPORTS ANNOTATED
41  Id.
Estrada vs. Philippine Rabbit Bus Lines, Inc.
42  Id., at pp. 321-322; p. 220.
43  See China Airlines v. Chiok, 455 Phil. 169, 187; 407 SCRA 432, 446 (2003). was actually based on the supposed loss/impairment of Dionisio’s earning capacity.
  Loss or impairment of earning capacity finds support under Article 2205(1) of
  the Civil Code, to wit:
373 Art. 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or
VOL. 831, JULY 19, 2017 373 permanent personal injury.
Estrada vs. Philippine Rabbit Bus Lines, Inc. x x x x
Actual damages for loss/  
impairment of earning capac- It is, however, settled that “damages for loss [or impairment] of earning capacity
ity are also not recoverable. In is in the nature of actual damages x x x.”45
lieu thereof, the Court awards Actual or compensatory damages are those awarded in order to compensate a
temperate damages. party for an injury or loss he suffered. They arise out of a sense of natural justice,
  aimed at repairing the wrong done. To be recoverable, they must be duly proved with
In an attempt to recover the P500,000.00 awarded by the RTC as moral damages a reasonable degree of certainty. A court cannot rely on speculation, conjecture, or
but deleted by the CA, petitioners would instead want this Court to grant them the guesswork as to the fact and amount of damages, but must depend upon competent
same amount as just and proper compensation for the loss of Dionisio’s right arm. proof that they have suffered, and on evidence of the actual amount thereof. 46
It can be recalled that in the Complaint, petitioners justified their claim for moral Thus, as a rule, documentary evidence should be presented to substantiate the
damages as follows: claim for damages for loss of earning capacity. By way of exception, damages for
9. [The] amount of P500,000.00 as moral damages for the amputation of loss [or impairment] of earning capacity may be awarded despite the absence of
[Dionisio’s] right arm for life including his moral sufferings for such [loss] of right documentary evidence when (1) the deceased [or the injured] was self-employed
arm is reasonable. and earning less than the minimum wage under current labor laws, in which
Said amount is computed and derived using the formula (2/3 x [80 – age of the case, judicial notice may be taken of the fact that in the deceased’s line of work
complainant when the injury is sustained] = life expectancy) adopted in the no documentary evidence is available; or (2) the de-
American Expectancy Table of Mortality or the actuarial of Combined Experience _______________
Table of Mortality. From such formula, [Dionisio] is expected to live for 18 years,
which is equivalent [to] about 6570 days. For each day, [Dionisio] is claiming 45  Serra v. Mumar, 684 Phil. 363, 374; 668 SCRA 335, 347 (2012).
P80.00 as he is expected to work for 8 hours a day with his amputated arm or to 46  Philippine National Railways v. Brunty, 537 Phil. 161, 177-178; 506 SCRA
enjoy the same for at least 8 hours a day (or is claiming P10.00 for each hour) for 18 685, 702 (2006).
years (6570 days). The amount that can be computed thereof would be P525,600.00  
(6570 days x P80.00). [Dionisio] then [rounded] it off to P500,000.00, the moral  
375

57
 VOL. 831, JULY 19, 2017 375 A: More than 53 years old sir, less than 54.
Q: If you are claiming for x x x moral damages of P80.00 a day, how come you are
Estrada vs. Philippine Rabbit Bus Lines, Inc.
asking for P500,000.00?
ceased was employed as a daily worker earning less than the minimum wage A: If you compute that it is P2,400.00 monthly. If I still [live by] about 20-30 years
under current labor laws.47 [more], I can still [earn] that amount.48
   
Here, it is unlikely that petitioners presented evidence to prove a claim for actual It must be emphasized, though, that documentary proof of Dionisio’s actual
damages based on loss/impairment of earning capacity since what they were income cannot be dispensed with since based on the above testimony, Dionisio does
claiming at the outset was an award for moral damages. The Court has nonetheless not fall under any of the two exceptions aforementioned. Thus, as it stands, there is
gone over the records to find out if they have sufficiently shown during trial that they no competent proof substantiating his actual income and because of this, an award
are entitled to such compensatory damages that they are now claiming. for actual damages for loss/impairment of earning capacity cannot be made.
Unfortunately, no documentary evidence supporting Dionisio’s actual income is Nonetheless, since it was established that Dionisio lost his right arm, temperate
extant on the records. What it bears is the mere testimony of Dionisio on the damages in lieu of actual damages for loss/impairment of earning capacity may be
matter, viz.: awarded in his favor. Under Article 2224, “[t]emperate or moderate damages, which
COURT: are more than nominal but less than compensatory damages, may be recovered when
Q: By the way, why did you submit the original copy of your exhibits to the GSIS? the court finds that some pecuniary loss has been suffered but its amount cannot,
A: I am claiming my GSIS compensation because I am a government employee. from the nature of the case, be proved with certainty.”
ATTY. SEVILLEJA: The case of Tan v. OMC Carriers, Inc.49 enumerates several instances wherein
Q: What particular government [agency do] you belong? the Court awarded temperate damages in lieu of actual damages for loss of earning
A: DECS. capacity, viz.:
Q: You are a teacher? _______________
A: Yes sir.
Q: You are still continuing your profession as a teacher until now? 48  TSN dated February 23, 2006, pp. 6-7.
A: Yes sir.  
Q: By the way Mr. witness, you are claiming x x x moral damages of P500,000.00?  
How did you compute that P500,000.00? 377
A: I based that from [sic] my income which is about P80.00 a day or P10.00 per
hour. VOL. 831, JULY 19, 2017 377
_______________ Estrada vs. Philippine Rabbit Bus Lines, Inc.
In the past, we awarded temperate damages in lieu of actual damages for loss of
47  Enriquez v. Isarog Line Express Transport, Inc., G.R. No. 212008, earning capacity where earning capacity is plainly established but no evidence was
November 16, 2016, 809 SCRA 223; emphasis supplied. presented to support the allegation of the injured party’s actual income.
  In Pleno v. Court of Appeals, we sustained the award of temperate damages in
  the amount of P200,000.00 instead of actual damages for loss of earning capacity
376 because the plaintiff’s income was not sufficiently proven.
376 SUPREME COURT REPORTS ANNOTATED We did the same in People v. Singh, and People v. Almedilla, granting temperate
damages in place of actual damages for the failure of the prosecution to present
Estrada vs. Philippine Rabbit Bus Lines, Inc.
sufficient evidence of the deceased’s income.
Q: Is that x x x gross or not? Similarly, in Victory Liner, Inc. v. Gammad, we deleted the award of damages
A: Net sir. for loss of earning capacity for lack of evidentiary basis of the actual extent of the
Q: What are your other sideline? loss. Nevertheless, because the income-earning capacity lost was clearly established,
A: I know [how] to drive a tricycle. we awarded the heirs P500,000.00 as temperate damages.50
Q: Because of [the] amputation of your right arm, you mean to say you [cannot]  
drive anymore a tricycle?
A: Yes sir.
Q: By the way Mr. witness, how old are you when you met [the] accident?
58
 Accordingly, the Court in Tan awarded to the heirs of the therein deceased
victim, who was working as a tailor at the time of his death, temperate damages in
the amount of P300,000.00 in lieu of compensatory damages.51
In the subsequent case of Orix Metro Leasing and Finance Corporation v.
Mangalinao,52 the Court likewise awarded temperate damages as follows:
 
While the net income had not been sufficiently established, the Court recognizes
the fact that the Mangalinao heirs had suffered loss deserving of compensation. What
the CA awarded is in actuality a form of temperate damages. Such form of damages
under Article 2224 of the
_______________
49  Supra note 2.
50  Id., at pp. 457-458; p. 484.
51  Id.
52  680 Phil. 89; 664 SCRA 87 (2012).
 
 
378
378 SUPREME COURT REPORTS ANNOTATED
Estrada vs. Philippine Rabbit Bus Lines, Inc.
Civil Code is given in the absence of competent proof on the actual damages
suffered. In the past, we awarded temperate damages in lieu of actual damages for
loss of earning capacity where earning capacity is plainly established but no evidence
was presented to support the allegation of the injured party’s actual income. In this
case, Roberto Mangalinao, the breadwinner of the family, was a businessman
engaged in buying and selling palay and agricultural supplies that required high
capital in its operations and was only 37 at the time of his death. Moreover, the
Pathfinder which the Mangalinaos own, became a total wreck. Under the
circumstances, we find the award of P500,000.00 as temperate damages as
reasonable.53
 
And in the more recent case of People v. Salahuddin,54the lower courts’ award of
P4,398,000.00 as compensation for loss of earning capacity of a murdered lawyer
was disallowed due to insufficiency of evidence. Again in lieu thereof, temperate
damages of P1,000,000.00 was awarded.55
In view of the above rulings and under the circumstances of this case, the Court
finds reasonable to award Dionisio temperate damages of P500,000.00 in lieu of
actual damages for the loss/impairment of his earning capacity.
Actual damages by way
of medical expenses
must be supported by
official receipts.
 
Anent petitioners’ assertion that actual damages should be awarded to them for
the cost of replacement of Dionisio’s amputated right arm, suffice it to state that
petitioners failed to show during trial that the said amputated right arm was actually
replaced by an artificial one. All that petitioners
_______________
53  Id., at pp. 108-109; pp. 106-107.
54  G.R. No. 206291, January 18, 2016, 781 SCRA 154.
55  Id., at p. 185.
 
379
VOL. 831, JULY 19, 2017 379
Estrada vs. Philippine Rabbit Bus Lines, Inc.
submitted was a quotation of P160,000.00 for a unit of elbow prosthesis 56 and
nothing more. It has been held that actual proof of expenses incurred for medicines
and other medical supplies necessary for treatment and rehabilitation must be
presented by the claimant, in the form of official receipts, to show the exact cost of
his medication and to prove that he indeed went through medication and
rehabilitation. In the absence of the same, such claim must be negated. 57
At any rate, the RTC already granted petitioners actual damages by way of
medical expenses based on the official hospital receipts submitted. 58 There is,
however, a need to correct the amount, that is, the same should be P57,658.25 as
borne by the receipts and not P57,766.25.
 
Legal interest is imposed
on the amounts awarded.
 
In addition, the amounts of damages awarded are declared subject to legal
interest of 6% per annum from the finality of this Decision until full satisfaction. 59
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed
May 16, 2012 Decision and October 1, 2012 Resolution of the Court of Appeals in
C.A.-G.R. CV No. 95520 are AFFIRMED with MODIFICATIONS as follows: (1)
petitioners are declared entitled to temperate damages of P500,000.00; (2) the award
of actual damages is set at the amount of P57,658.25; and (3) all damages awarded
are subject to legal interest of 6% per annum from the finality of this Decision until
full satisfaction. SO ORDERED.
59