Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

 

G.R. No. L-25499 February 18, 1970

VILLA REY TRANSIT, INC., petitioner, vs.THE COURT OF APPEALS, TRINIDAD A. QUINTOS, PRIMA A. QUINTOS, AND JULITA A. QUINTOS,respondents.

Laurea and Pison for petitioner.

Bonifacio M. Abad, Jr. for respondents.

 

CONCEPCION, C.J.:

Petitioner, Villa Rey Transit, Inc., seeks the review by certiorari of a decision of the Court of Appeals affirming that of the Court of First Instance of Pangasinan. The basic facts are set forth in said decision of the Court of Appeals, from which We quote:

At about 1:30 in the morning of March 17, 1960, an Izuzu First Class passenger bus owned and operated by the defendant, bearing Plate No. TPU-14871-Bulacan and driven by Laureano Casim, left Lingayen, Pangasinan, for Manila. Among its paying passengers was the deceased, Policronio Quintos, Jr. who sat on the first seat, second row, right side of the bus. At about 4:55 o'clock a.m. when the vehicle was nearing the northern approach of the Sadsaran Bridge on the national highway in barrio Sto. Domingo, municipality of Minalin, Pampanga, it frontally hit the rear side of a bullcart filled with hay. As a result the end of a bamboo pole placed on top of the hayload and tied to the cart to hold it in place, hit the right side of the windshield of the bus. The protruding end of the bamboo pole, about 8 feet long from the rear of the bullcart, penetrated through the glass windshield and landed on the face of Policronio Quintos, Jr. who, because of the impact, fell from his seat and was sprawled on the floor. The pole landed on his left eye and the bone of the left side of his face was fractured. He suffered other multiple wounds and was rendered unconscious due, among other causes to severe cerebral concussion. A La Mallorca passenger bus going in the opposite direction towards San Fernando, Pampanga, reached the scene of the mishap and it was stopped by Patrolman Felino Bacani of the municipal police force of Minalin who, in the meantime, had gone to the scene to investigate. Patrolman Bacani placed Policronio Quintos, Jr. and three other injured men who rode on the bullcart aboard the La Mallorca bus and brought them to the provincial hospital of Pampanga at San Fernando for medical assistance. Notwithstanding

such assistance, Policronio Quintos, Jr. died at 3:15 p.m. on the same day, March 17, 1960, due to traumatic shock due to cerebral injuries.

The private respondents, Trinidad, Prima and Julita, all surnamed Quintos, are the sisters and only surviving heirs of Policronio Quintos Jr., who died single, leaving no descendants nor ascendants. Said respondents herein brought this action against herein petitioner, Villa Rey Transit, Inc., as owner and operator of said passenger bus, bearing Plate No. TPU-14871-Bulacan, for breach of the contract of carriage between said petitioner and the deceased Policronio Quintos, Jr., to recover the aggregate sum of P63,750.00 as damages, including attorney's fees. Said petitioner — defendant in the court of first instance — contended that the mishap was due to a fortuitous event, but this pretense was rejected by the trial court and the Court of Appeals, both of which found that the accident and the death of Policronio had been due to the negligence of the bus driver, for whom petitioner was liable under its contract of carriage with the deceased. In the language of His Honor, the trial Judge:

The mishap was not the result of any unforeseeable fortuitous event or emergency but was the direct result of the negligence of the driver of the defendant. The defendant must, therefore, respond for damages resulting from its breach of contract for carriage. As the complaint alleged a total damage of only P63,750.00 although as elsewhere shown in this decision the damages for wake and burial expenses, loss of income, death of the victim, and attorneys fee reach the aggregate of P79,615.95, this Court finds it just that said damages be assessed at total of only P63,750.00 as prayed for in plaintiffs' amended complaint.

The despositive part of the decision of the trial Court reads:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay to the plaintiffs the amount of P63,750.00 as damages for breach of contract of carriage resulting from the death of Policronio Quintos, Jr.

which, as above indicated, was affirmed by the Court of Appeals. Hence, the present petition for review on certiorari, filed by Villa Rey Transit, Inc.

The only issue raised in this appeal is the amount of damages recoverable by private respondents herein. The determination of such amount depends, mainly upon two (2) factors, namely: (1) the number of years on the basis of which the damages shall be computed and (2) the rate at which the losses sustained by said respondents should be fixed.

The first factor was based by the trial court — the view of which was concurred in by the Court of Appeals — upon the life expectancy of Policronio Quintos, Jr., which was placed at 33-1/3 years — he being over 29 years of age (or around 30 years for purposes of computation) at the time of his demise — by applying the formula (2/3 x [80-301 = life expectancy) adopted in the American Expectancy Table of Mortality or the actuarial of Combined Experience Table of Mortality. Upon the other hand, petitioner maintains that the lower courts had erred in adopting said formula and in not acting in accordance with Alcantara v. Surro1 in which the damages were computed on a four (4) year basis, despite the fact that the victim therein was 39 years old, at the time of his death, and had a life expectancy of 28.90 years.

The case cited is not, however, controlling in the one at bar. In the Alcantara case, none of the parties had questioned the propriety of the four-year basis adopted by the trial court in making its award of damages. Both parties appealed, but only as regards the amount thereof. The plaintiffs assailed the non-inclusion, in its computation, of the bonus that the corporation, which was the victim's employer, had awarded to deserving officers and employees, based upon the profits earned less than two (2) months before the accident that resulted in his death. The defendants, in turn, objected to the sum awarded for the fourth year, which was treble that of the previous years, based upon the increases given, in that fourth year, to other employees of the same corporation. Neither this objection nor said claim for inclusion of the bonus was sustained by this Court. Accordingly, the same had not thereby laid down any rule on the length of time to be used in the computation of damages. On the contrary, it declared:

The determination of the indemnity to be awarded to the heirs of a deceased person has therefore no fixed basis. Much is left to the discretion of the court considering the moral and material damages involved, and so it has been said that "(t)here can be no exact or uniform rule for measuring the value of a human life and the measure of damages cannot be arrived at by precise mathematical calculation, but the amount recoverable depends on the particular facts and circumstances of each case. The life expectancy of the deceased or of the beneficiary, whichever is shorter, is an important factor.' (25 C.J.S. 1241.) Other factors that are usually considered are: (1) pecuniary loss to plaintiff or beneficiary (25 C.J.S. 1243-1250) ; (2) loss of support (25 C.J.S., 1250-1251); (3) loss of service (25 C.J.S. 1251-1254); (4) loss of society (25 C.J.S. 1254-1255); (5) mental suffering of beneficiaries (25 C.J.S., 1258-1259) ; and (6) medical and funeral expenses (26 C.J.S., 1254-1260)."2

Thus, life expectancy is, not only relevant, but, also, an important element in fixing the amount recoverable by private respondents herein. Although it is not the sole element determinative of said amount, no cogent reason has been given to warrant its disregard and the adoption, in the case at bar, of a purely arbitrary standard, such as a four-year rule. In short, the Court of Appeals has not erred in basing the computation of petitioner's liability upon the life expectancy of Policronio Quintos, Jr.

With respect to the rate at which the damages shall be computed, petitioner impugns the decision appealed from upon the ground that the damages awarded therein will have to be paid now, whereas most of those sought to be indemnified will be suffered years later. This argument is basically true, and this is, perhaps, one of the reasons why the Alcantara case points out the absence of a "fixed basis" for the ascertainment of the damages recoverable in litigations like the one at bar. Just the same, the force of the said argument of petitioner herein is offset by the fact that, although payment of the award in the case at bar will have to take place upon the finality of the decision therein, the liability of petitioner herein had been fixed at the rate only of P2,184.00 a year, which is the annual salary of Policronio Quintos, Jr. at the time of his death, as a young "training assistant" in the Bacnotan Cement Industries, Inc. In other words, unlike the Alcantara case, on which petitioner relies, the lower courts did not consider, in the present case, Policronio's potentiality and capacity to increase his future income. Indeed, upon the conclusion of his training period, he was supposed to have a better job and be promoted from time to time, and, hence, to earn more, if not — considering the growing importance of trade, commerce and industry and the concomitant rise in the income level of officers and employees therein — much more.

At this juncture, it should be noted, also, that We are mainly concerned with the determination of the losses or damages sustained by the private respondents, as dependents and intestate heirs of the deceased, and that said damages consist, not of the full amount of his earnings, but of the support, they received or would have received from him had he not died in consequence of the negligence of petitioner's agent. In fixing the amount of that support, We must reckon with the "necessary expenses of his own living", which should be deducted from his earnings. Thus, it has been consistently held that earning capacity, as an element of damages to one's estate for his death by wrongful act is necessarily his net earning capacity or his capacity to acquire money, "less the necessary expense for his own living.3 Stated otherwise, the amount recoverable is not loss of the entire earning, but rather the loss of that portion of the earnings which the beneficiary would have received.4 In other words, only net earnings, not gross earning, are to be considered5 that is, the total of the earnings less expenses necessary in the creation of such earnings or income6 and less living and other incidental expenses.7

All things considered, We are of the opinion that it is fair and reasonable to fix the deductible living and other expenses of the deceased at the sum of P1,184.00 a year, or about P100.00 a month, and that, consequently, the loss sustained by his sisters may be roughly estimated at P1,000.00 a year or P33,333.33 for the 33-1/3 years of his life expectancy. To this sum of P33,333.33, the following should be added: (a) P12,000.00, pursuant to Arts. 104 and 107 of the Revised Penal Code, in relation to Article 2206 of our Civil Code, as construed and applied by this Court;8 (b) P1,727.95, actually spent by private respondents for medical and burial expenses; and (c) attorney's fee, which was fixed by the trial court, at P500.00, but which, in view of the appeal taken by petitioner herein, first to the Court of Appeals and later to this Supreme Court, should be increased to P2,500.00. In other words, the amount adjudged in the decision appealed from should be reduced to the aggregate sum of P49,561.28, with interest thereon, at the legal rate, from December 29, 1961, date of the promulgation of the decision of the trial court.

Thus modified, said decision and that of the Court of Appeals are hereby affirmed, in all other respects, with costs against petitioner, Villa Rey Transit, Inc. It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Teehankee, Barredo and Villamor, JJ., concur.

AIR FRANCE, petitioner, vs.RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.

Lichauco, Picazo and Agcaoili for petitioner.Bengzon Villegas and Zarraga for respondent R. Carrascoso.

 

SANCHEZ, J.:

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

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

The case is now before us for review on certiorari.

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

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

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

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

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

A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law, however, solely insists that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn. 9 A court of justice is not hidebound to write in its decision every bit and piece of evidence 10 presented by one party and the other upon the issues raised. Neither is it to be burdened with the obligation "to specify in the sentence the facts"which a party "considered as proved". 11 This is but a part of the mental process from which the Court draws the essential ultimate facts. A decision is not to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court of Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom "any specific finding of facts with respect to the evidence for the defense". Because as this Court well observed, "There is no law that so requires". 12 Indeed,

"the mere failure to specify (in the decision) the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the same contrary to the requirements of the provisions of law and the Constitution". It is in this setting that inManigque, it was held that the mere fact that the findings "were based entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant's side in the controversy as shown by his own testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the testimony of each witness for, or each item of evidence presented by, the defeated party, it does not mean that the court has overlooked such testimony or such item of evidence. 14 At any rate, the legal presumptions are that official duty has been regularly performed, and that all the matters within an issue in a case were laid before the court and passed upon by it. 15

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

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

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

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

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

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

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

Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that the passenger to whom the same had been issued, would be accommodated in the first-class compartment, for as in the case of plaintiff he had yet to make arrangements upon arrival at every station for the necessary first-class reservation. We are not impressed by such a reasoning. We cannot understand how a

reputable firm like defendant airplane company could have the indiscretion to give out tickets it never meant to honor at all. It received the corresponding amount in payment of first-class tickets and yet it allowed the passenger to be at the mercy of its employees. It is more in keeping with the ordinary course of business that the company should know whether or riot the tickets it issues are to be honored or not.22

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

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

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

A. That the space is confirmed.

Q. Confirmed for first class?

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

x x x           x x x           x x x

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

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

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the Court of Appeals in all other respects. We hold the view that such a judgment of affirmance has merged the judgment of the lower court. 24Implicit in that affirmance is a determination by the Court of Appeals that the proceeding in the Court of First Instance was free from prejudicial error and "all questions raised by the assignments of error and all questions that might have been raised are to be regarded as finally adjudicated against the appellant". So also, the judgment affirmed "must be regarded as free from all error". 25 We reached this policy construction because nothing in the decision of the Court of

Appeals on this point would suggest that its findings of fact are in any way at war with those of the trial court. Nor was said affirmance by the Court of Appeals upon a ground or grounds different from those which were made the basis of the conclusions of the trial court. 26

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

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

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

3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable consideration, the latter acting as general agents for and in behalf of the defendant, under which said contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff, First Class passage on defendant's plane during the entire duration of plaintiff's tour of Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila, ... .

4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok, defendant furnished to the plaintiff First Class accommodation but only after protestations, arguments and/or insistence were made by the plaintiff with defendant's employees.

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

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

x x x           x x x           x x x

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

x x x           x x x           x x x

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

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

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

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

and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain of the plane who was asked by the manager of defendant company at Bangkok to intervene even refused to do so. It is noteworthy that no one on behalf of

defendant ever contradicted or denied this evidence for the plaintiff. It could have been easy for defendant to present its manager at Bangkok to testify at the trial of the case, or yet to secure his disposition; but defendant did neither. 37

The Court of appeals further stated —

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

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

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

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

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

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

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term "bad faith". But can it be doubted that the recital of facts therein points to bad faith? The manager not only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment -

just to give way to another passenger whose right thereto has not been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different from what is understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive design or with some motive of self-interest or will or for ulterior purpose." 39

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

The evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith, with the aggravating circumstances that defendant's Manager in Bangkok went to the extent of threatening the plaintiff in the presence of many passengers to have him thrown out of the airplane to give the "first class" seat that he was occupying to, again using the words of the witness Ernesto G. Cuento, a "white man" whom he (defendant's Manager) wished to accommodate, and the defendant has not proven that this "white man" had any "better right" to occupy the "first class" seat that the plaintiff was occupying, duly paid for, and for which the corresponding "first class" ticket was issued by the defendant to him.40

5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is well settled in law. 41 For the willful malevolent act of petitioner's manager, petitioner, his employer, must answer. Article 21 of the Civil Code says:

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

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

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

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

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of contract and a tort, giving a right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand payment under threat of ejection, though the language used was not insulting and she was not ejected." 46 And this,

because, although the relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the contract may be also a tort". 47 And in another case, "Where a passenger on a railroad train, when the conductor came to collect his fare tendered him the cash fare to a point where the train was scheduled not to stop, and told him that as soon as the train reached such point he would pay the cash fare from that point to destination, there was nothing in the conduct of the passenger which justified the conductor in using insulting language to him, as by calling him a lunatic," 48 and the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said passenger.1awphîl.nèt

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

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

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

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

Q Was she able to note it?

A No, because I did not give my ticket.

Q About that purser?

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

Mr. VALTE —

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

COURT —

I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook reading "First class passenger was forced to go to the tourist class against his

will, and that the captain refused to intervene" is predicated upon evidence [Carrascoso's testimony above] which is incompetent. We do not think so. The subject of inquiry is not the entry, but the ouster incident. Testimony on the entry does not come within the proscription of the best evidence rule. Such testimony is admissible. 49a

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

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

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

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

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

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

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

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar and Castro, JJ., concur.Bengzon, J.P., J., took no part.

G.R. No. 165266               December 15, 2010

AIR FRANCE, Petitioner, vs.BONIFACIO H. GILLEGO, substituted by his surviving heirs represented by Dolores P. Gillego, Respondent.

D E C I S I O N

VILLARAMA, JR., J.:

For review is the Decision1 dated June 30, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 56587 which affirmed the Decision2 dated January 3, 1996 of the Regional Trial Court (RTC) of Makati City, Branch 137 in Civil Case No. 93-2328.

The facts follow:

Sometime in April 1993, respondent Bonifacio H. Gillego,3 then incumbent Congressman of the Second District of Sorsogon and Chairman of the House of Representatives Committee on Civil, Political and Human Rights, was invited to participate as one of the keynote speakers at the 89th Inter-Parliamentary Conference Symposium on Parliament Guardian of Human Rights to be held in Budapest, Hungary and Tokyo, Japan from May 19 to 22, 1993. The Philippines is a member of the Inter-Parliamentary Union which organized the event.4

On May 16, 1993, respondent left Manila on board petitioner Air France’s aircraft bound for Paris, France. He arrived in Paris early morning of May 17, 1993 (5:00 a.m.). While waiting at the De’ Gaulle International Airport for his connecting flight to Budapest scheduled at 3:15 p.m. that same day, respondent learned that petitioner had another aircraft bound for Budapest with an earlier departure time (10:00 a.m.) than his scheduled flight. He then went to petitioner’s counter at the airport and made arrangements for the change in his booking. He was given a corresponding ticket and boarding pass for Flight No. 2024 and also a new baggage claim stub for his checked-in luggage.5

However, upon arriving in Budapest, respondent was unable to locate his luggage at the claiming section. He sought assistance from petitioner’s counter at the airport where petitioner’s representative verified from their computer that he had indeed a checked-in luggage. He was advised to just wait for his luggage at his hotel and that petitioner’s representatives would take charge of delivering the same to him that same day. But said luggage was never delivered by petitioner’s representatives despite follow-up inquiries by respondent.

Upon his return to the Philippines, respondent’s lawyer immediately wrote petitioner’s Station Manager complaining about the lost luggage and the resulting damages he suffered while in Budapest. Respondent claimed that his single luggage contained his personal effects such as clothes, toiletries, medicines for his hypertension, and the speeches he had prepared, including the notes and reference materials he needed for the conference. He was thus left with only his travel documents, pocket money and the clothes he was wearing.

Because petitioner’s representatives in Budapest failed to deliver his luggage despite their assurances and his repeated follow-ups, respondent was forced to shop for personal items including new clothes and his medicines. Aside from these unnecessary expenditures of about $1,000, respondent had to prepare another speech, in which he had difficulty due to lack of data and information. Respondent thus demanded the sum of P1,000,000.00 from the petitioner as compensation for his loss, inconvenience and moral damages.6 Petitioner, however, continued to ignore respondent’s repeated follow-ups regarding his lost luggage.

On July 13, 1993, respondent filed a complaint7 for damages against the petitioner alleging that by reason of its negligence and breach of obligation to transport and deliver his luggage, respondent suffered inconvenience, serious anxiety, physical suffering and sleepless nights. It was further alleged that due to the physical, mental and emotional strain resulting from the loss of his luggage, aggravated by the fact that he failed to take his regular medication, respondent had to be taken to a medical clinic in Tokyo, Japan for emergency treatment. Respondent asserted that as a common carrier which advertises and offers its services to the public, petitioner is under obligation to observe extraordinary diligence in the vigilance over checked-in luggage and to see to it that respondent’s luggage entrusted to petitioner’s custody would accompany him on his flight and/or could be claimed by him upon arrival at his point of destination or delivered to him without delay. Petitioner should therefore be held liable for actual damages ($2,000.00 or P40,000.00), moral damages (P1,000,000.00), exemplary damages (P500,000.00), attorney’s fees (P50,000.00) and costs of suit.

Petitioner filed its answer8 admitting that respondent was issued tickets for the flights mentioned, his subsequent request to be transferred to another flight while at the Paris airport and the loss of his checked-in luggage upon arrival at Budapest, which luggage has not been retrieved to date and the respondent’s repeated follow-ups ignored. However, as to the rest of respondent’s allegations, petitioner said it has no knowledge and information sufficient to form a belief as to their truth. As special and affirmative defense, petitioner contended that its liability for lost checked-in baggage is governed by the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage. Under the said treaty, petitioner’s liability for lost or delayed registered baggage of respondent is limited to 250 francs per kilogram or US$20.00, which constitutes liquidated damages and hence respondent is not entitled to any further damage.

Petitioner averred that it has taken all necessary measures to avoid loss of respondent’s baggage, the contents of which respondent did not declare, and that it has no intent to cause such loss, much less knew that such loss could occur. The loss of respondent’s luggage is due to or occasioned by force majeure or fortuitous event or other causes beyond the carrier’s control. Diligent, sincere and timely efforts were exerted by petitioner to locate respondent’s missing luggage and attended to his problem with utmost courtesy, concern and dispatch. Petitioner further asserted that it exercised due diligence in the selection and supervision of its employees and acted in good faith in denying respondent’s demand for damages. The claims for actual, moral and exemplary damages and attorney’s fees therefore have no basis in fact and in law, and are, moreover speculative and unconscionable.

In his Reply,9 respondent maintained that the loss of his luggage cannot be attributed to anything other than petitioner’s simple negligence and its failure to perform the diligence required of a common carrier.

On January 3, 1996, the trial court rendered its decision in favor of respondent and against the petitioner, as follows:

WHEREFORE, premises considered, judgment is rendered ordering defendant to pay plaintiff:

1. The sum of P1,000,000.00 as moral damages;

2. The sum of P500,000.00 as exemplary damages;

3. The sum of P50,000.00 as attorney’s fees; and

4. The costs.

SO ORDERED.10

The trial court found there was gross negligence on the part of petitioner which failed to retrieve respondent’s checked-in luggage up to the time of the filing of the complaint and as admitted in its answer, ignored respondent’s repeated follow-ups. It likewise found petitioner guilty of willful misconduct as it persistently disregarded the rights of respondent who was no ordinary individual but a high government official. As to the applicability of the limited liability for lost baggage under the Warsaw Convention, the trial court rejected the argument of petitioner citing the case of Alitalia v. Intermediate Appellate Court.11

Petitioner appealed to the CA, which affirmed the trial court’s decision. The CA noted that in the memorandum submitted by petitioner before the trial court it was mentioned that respondent’s luggage was eventually found and delivered to him, which was not denied by respondent and thus resulted in the withdrawal of the claim for actual damages. As to the trial court’s finding of gross negligence, bad faith and willful misconduct which justified the award of moral and exemplary damages, the CA sustained the same, stating thus:

It bears stressing that defendant-appellant committed a breach of contract by its failure to deliver the luggage of plaintiff-appellee on time despite demand from plaintiff-appellee. The unreasonable delay in the delivery of the luggage has not been satisfactorily explained by defendant-appellant, either in its memorandum or in its appellant’s brief. Instead of justifying the delay, defendant-appellant took refuge under the provisions of the Warsaw Convention to escape liability. Neither was there any showing of apology on the part of defendant-appellant as to the delay. Furthermore, the unapologetic defendant-appellant even faulted plaintiff-appellee for not leaving a local address in Budapest in order for the defendant-appellant to contact him (plaintiff-appellee) in the event the luggage is found. This actuation of defendant-appellant is a clear showing of willful misconduct and a deliberate design to avoid liability. It amounts to bad faith. As elucidated by Chief Justice Hilario Davide, Jr., "[b]ad 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."12(Emphasis supplied.)

Its motion for reconsideration having been denied, petitioner filed the present Rule 45 petition raising the following grounds:

I.

THE AMOUNTS AWARDED TO RESPONDENT AS MORAL AND EXEMPLARY DAMAGES ARE EXCESSIVE, UNCONSCIONABLE AND UNREASONABLE.

II.

THERE IS NO LEGAL AND FACTUAL BASIS TO THE FINDINGS OF THE TRIAL COURT AND THE COURT OF APPEALS THAT PETITIONER’S ACTIONS WERE ATTENDED BY GROSS NEGLIGENCE, BAD FAITH AND WILLFUL MISCONDUCT AND THAT IT ACTED IN A WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER, TO JUSTIFY THE AWARD OF MORAL AND EXEMPLARY DAMAGES.13

Petitioner assails the trial and appellate courts for awarding extravagant sums to respondent that already tend to punish the petitioner and enrich the respondent, which is not the function at all of moral damages. Upon the facts established, the damages awarded are definitely not proportionate or commensurate to the wrong or injury supposedly inflicted. Without belittling the problems respondent experienced in Budapest after losing his luggage, petitioner points out that despite the unfortunate incident, respondent was able to reconstruct the speeches, notes and study guides he had earlier prepared for the conference in Budapest and Tokyo, and to attend, speak and participate therein as scheduled. Since he prepared the research and wrote his speech, considering his acknowledged and long-standing expertise in the field of human rights in the Philippines, respondent should have had no difficulty delivering his speech even without his notes. In addition, there is no evidence that members of the Inter-Parliamentary Union made derogatory statements or even knew that he was unprepared for the conference. Bearing in mind that the actual damages sought by respondent was only $2,000.00, then clearly the trial court went way beyond that amount in determining the appropriate damages, inspite of the fact that the respondent eventually got back his baggage.14

Comparing the situation in this case to other cases awarding similar damages to the aggrieved passenger as a result of breaches of contract by international carriers, petitioner argues that even assuming that respondent was entitled to moral and exemplary damages, the sums adjudged should be modified or reduced. It is stressed that petitioner or its agents were never rude or discourteous toward respondent; he was not subjected to humiliating treatment or comments as in the case of Lopez, et al. v. Pan American World Airways,15 Ortigas, Jr. v. Lufthansa German Airlines16 and Zulueta v. Pan American World Airways, Inc.17. The mere fact that respondent was a Congressman should not result in an automatic increase in the moral and exemplary damages recoverable. As held in Kierulf v. Court of Appeals18 the social and financial standing of a claimant may be considered only if

he or she was subjected to contemptuous conduct despite the offender’s knowledge of his or her social and financial standing.19

In any event, petitioner invokes the application of the exception to the rule that only questions of law may be entertained by this Court in a petition for review under Rule 45 as to allow a factual review of the case. First, petitioner contends that it has always maintained that the "admission" in its answer was only made out of inadvertence, considering that it was inconsistent with the special and affirmative defenses set forth in the same pleading. The trial court incorrectly concluded that petitioner had not prepared a Property Irregularity Report (PIR) but fabricated one only as an afterthought. A PIR can only be initiated upon the instance of a passenger whose baggage had been lost, and in this case it was prepared by the station where the loss was reported. The PIR in this case was automatically and chronologically recorded in petitioner’s computerized system. Respondent himself admitted in his testimony that he gave his Philippine address and telephone number to the lady in charge of petitioner’s complaint desk in Budapest. It was not necessary to furnish a passenger with a copy of the PIR since its purpose is for the airline to trace a lost baggage. What respondent ought to have done was to make a xerox copy thereof for himself.20

Petitioner reiterates that there was no bad faith or negligence on its part and the burden is on the respondent to prove by clear and convincing evidence that it acted in bad faith. Respondent in his testimony miserably failed to prove that bad faith, fraud or ill will motivated or caused the delay of his baggage. This Court will surely agree that mere failure of a carrier to deliver a passenger’s baggage at the agreed place and time did not ipso facto amount to willful misconduct as to make it liable for moral and exemplary damages. Petitioner adduced evidence showing that it exerted diligent, sincere and timely efforts to locate the missing baggage, eventually leading to its recovery. It attended to respondent’s problem with utmost courtesy, concern and dispatch. Respondent, moreover, never alleged that petitioner’s employees were at anytime rude, mistreated him or in anyway showed improper behavior.21

The petition is partly meritorious.

A business intended to serve the travelling public primarily, a contract of carriage is imbued with public interest.22The law governing common carriers consequently imposes an exacting standard. Article 1735 of the Civil Codeprovides that in case of lost or damaged goods, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required by Article 1733. Thus, in an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier.23

That respondent’s checked-in luggage was not found upon arrival at his destination and was not returned to him until about two years later24 is not disputed. The action filed by the respondent is founded on such breach of the contract of carriage with petitioner who offered no satisfactory explanation for the unreasonable delay in the delivery of respondent’s baggage. The presumption of negligence was not overcome by the petitioner and hence its liability for the delay was sufficiently established. However, upon receipt of the said luggage during the pendency of the case in the trial court, respondent did not anymore press on his

claim for actual or compensatory damages and neither did he adduce evidence of the actual amount of loss and damage incurred by such delayed delivery of his luggage. Consequently, the trial court proceeded to determine only the propriety of his claim for moral and exemplary damages, and attorney’s fees.

In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith.25 Not every case of mental anguish, fright or serious anxiety calls for the award of moral damages.26 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.27

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.28

In the case of Tan v. Northwest Airlines, Inc.,29 we sustained the CA’s deletion of moral and exemplary damages awarded to a passenger whose baggage were loaded to another plane with the same expected date and time of arrival but nevertheless not delivered to her on time. We found that respondent carrier was not motivated by malice or bad faith in doing so due to weight and balance restrictions as a safety measure. In another case involving the off-loading of private respondents’ baggage to another destination, taken together with petitioner airline’s neglect in providing the necessary accommodations and assistance to its stranded passengers, aggravated by the discourteous acts of its employees, we upheld the CA in sustaining the trial court’s decision awarding moral and exemplary damages and attorney’s fees. We pointed out that it is PAL’s duty to provide assistance to private respondents and to any other passenger similarly inconvenienced due to delay in the completion of the transport and the receipt of their baggage.30

After a careful review, we find that petitioner is liable for moral damages.

Petitioner’s station manager, Ma. Lourdes Reyes, testified that upon receiving the letter-complaint of respondent’s counsel, she immediately began working on the PIR from their computerized data. Based on her testimony, a PIR is issued at the airline station upon complaint by a passenger concerning missing baggage. From the information obtained in the computer-printout, it appears that a PIR31 was initiated at petitioner’s Budapest counter. A search telex for the missing luggage was sent out on the following dates: May 17, May 21 and May 23, 1993. As shown in the PIR printout, the information respondent supposedly furnished to petitioner was only his Philippine address and telephone number, and not the address and contact number of the hotel where he was billeted at Budapest. According to the witness, PIR usually is printed in two originals, one is kept by the station manager and the other copy given to the passenger. The witness further claimed that there was no record or entry in the PIR of any follow-up call made by the respondent while in Budapest.32 Respondent, on the other hand, claimed that he was not given a copy of this PIR and that his repeated telephone calls to inquire about his lost luggage were ignored.

We hold that the trial and appellate courts did not err in finding that petitioner acted in bad faith in repeatedly ignoring respondent’s follow-up calls. The alleged entries in the PIR deserve scant consideration, as these have not been properly identified or authenticated by the airline station representative in Budapest who initiated and inputed the said entries. Furthermore, this Court cannot accept the convenient excuse given by petitioner that respondent should be faulted in allegedly not giving his hotel address and telephone number. It is difficult to believe that respondent, who had just lost his single luggage containing all his necessities for his stay in a foreign land and his reference materials for a speaking engagement, would not give an information so vital such as his hotel address and contact number to the airline counter where he had promptly and frantically filed his complaint. And even assuming arguendo that his Philippine address and contact number were the only details respondent had provided for the PIR, still there was no explanation as to why petitioner never communicated with respondents concerning his lost baggage long after respondent had already returned to the Philippines. While the missing luggage was eventually recovered, it was returned to respondent only after the trial of this case.

Furthermore, the alleged copy of the PIR confirmed that the only action taken by the petitioner to locate respondent’s luggage were telex searches allegedly made on May 17, 21 and 23, 1993. There was not even any attempt to explain the reason for the loss of respondent’s luggage. Clearly, petitioner did not give the attention and care due to its passenger whose baggage was not transported and delivered to him at his travel destination and scheduled time. Inattention to and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages.33 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.34

While respondent failed to cite any act of discourtesy, discrimination or rudeness by petitioner’s employees, this did not make his loss and moral suffering insignificant and less deserving of compensation. In repeatedly ignoring respondent’s inquiries, petitioner’s employees exhibited an indifferent attitude without due regard for the inconvenience and anxiety he experienced after realizing that his luggage was missing. Petitioner was thus guilty of bad faith in breaching its contract of carriage with the respondent, which entitles the latter to the award of moral damages.1awphi1

However, we agree with petitioner that the sum of P1,000,000.00 awarded by the trial court is excessive and not proportionate to the loss or suffering inflicted on the passenger under the circumstances. As in Trans World Airlines v. Court of Appeals35 where this Court after considering the social standing of the aggrieved passenger who is a lawyer and director of several companies, the amount of P500,000.00 awarded by the trial court as moral damages was still reduced to P300,000.00, the moral damages granted to herein respondent should likewise be adjusted.

The purpose of awarding moral damages is to enable the injured party to obtain means, diversion or amusement that will serve to alleviate the moral suffering he has undergone by reason of defendant's culpable action. On the other hand, the aim of awarding exemplary damages is to deter serious wrongdoings.36 Article 2216 of the Civil Code provides that

assessment of damages is left to the discretion of the court according to the circumstances of each case. This discretion is limited by the principle that the amount awarded should not be palpably excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court. Simply put, the amount of damages must be fair, reasonable and proportionate to the injury suffered.37

Where as in this case the air carrier failed to act timely on the passenger’s predicament caused by its employees’ mistake and more than ordinary inadvertence or inattention, and the passenger failed to show any act of arrogance, discourtesy or rudeness committed by the air carrier’s employees, the amounts of P200,000.00, P50,000.00 andP30,000.00 as moral damages, exemplary damages and attorney’s fees would be sufficient and justified.38

WHEREFORE, the petition is DENIED. The Decision dated June 30, 2004 of the Court of Appeals in CA-G.R. CV No. 56587 is hereby AFFIRMED with MODIFICATION in that the award of moral damages, exemplary damages and attorney’s fees are hereby reduced to P200,000.00, P50,000.00 and P30,000.00, respectively.

With costs against the petitioner.

SO ORDERED.

MARTIN S. VILLARAMA, JR.Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALESAssociate Justice

Chairperson

LUCAS P. BERSAMINAssociate Justice

JOSE CATRAL MENDOZA*

Associate Justice

MARIA LOURDES P. A. SERENOAssociate Justice

CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL VAZQUEZ, respondents.

D E C I S I O N

DAVIDE, JR., C.J.:

Is an involuntary upgrading of an airline passenger’s accommodation from one class to a more superior class at no extra cost a breach of contract of

carriage that would entitle the passenger to an award of damages? This is a novel question that has to be resolved in this case.

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

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

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

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

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

Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’ accommodations were upgraded to First Class.  Dr. Vazquez refused the upgrade, reasoning that it would not look nice for them as hosts to travel in First Class and their guests, in the Business Class; and moreover, they were going to discuss business matters during the flight.  He also told Ms. Chiu that she could have other passengers instead transferred to the First Class

Section.  Taken aback by the refusal for upgrading, Ms. Chiu consulted her supervisor, who told her to handle the situation and convince the Vazquezes to accept the upgrading.  Ms. Chiu informed the latter that the Business Class was fully booked, and that since they were Marco Polo Club members they had the priority to be upgraded to the First Class.  Dr. Vazquez continued to refuse, so Ms. Chiu told them that if they would not avail themselves of the privilege, they would not be allowed to take the flight. Eventually, after talking to his two friends, Dr. Vazquez gave in.  He and Mrs. Vazquez then proceeded to the First Class Cabin.

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

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

On 8 November 1996, after Cathay’s failure to give them any feedback within its self-imposed deadline, the Vazquezes instituted before the Regional Trial Court of Makati City an action for damages against Cathay, praying for the payment to each of them the amounts ofP250,000 as temperate damages; P500,000 as moral damages; P500,000 as exemplary or corrective damages; and P250,000 as attorney’s fees.

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

and absolutely top elite of both Philippine Society and the Philippine financial community, [and that] they were among the wealthiest persons in the Philippine[s].”

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

Cathay also asserted that its employees at the Hong Kong airport acted in good faith in dealing with the Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of disrespect against them (the Vazquezes).  Assuming that there was indeed a breach of contractual obligation, Cathay acted in good faith, which negates any basis for their claim for temperate, moral, and exemplary damages and attorney’s fees.  Hence, it prayed for the dismissal of the complaint and for payment of P100,000 for exemplary damages andP300,000 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 decision[1] of 19 October 1998, the trial court found for the Vazquezes and decreed as follows:

WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby rendered in favor of plaintiffs Vazquez spouses and against defendant Cathay Pacific Airways, Ltd., ordering the latter to pay each plaintiff the following:

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

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

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

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

e)           Costs of suit.

SO ORDERED.

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

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

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

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

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

Cathay seasonably filed with us this petition in this case.  Cathay maintains that the award for moral damages has no basis, since the Court of Appeals found that there was no “wanton, fraudulent, reckless and oppressive” display of manners on the part of its personnel; and that the breach of contract was not attended by fraud, malice, or bad faith. If any damage had been suffered by the Vazquezes, it wasdamnum 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 Appeals [3]  where we recognized that, in accordance with the Civil Aeronautics Board’s Economic Regulation No. 7, as amended, an overbooking that does not exceed ten percent cannot be considered deliberate and done in bad faith. We thus deleted in that case the awards for moral and exemplary damages, as well as attorney’s fees, for lack of proof of overbooking exceeding ten percent or of bad faith on the part of the airline carrier.

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

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

We resolve the first issue in the affirmative.

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

aircraft, and whose cause or consideration was the fare paid by the Vazquezes to Cathay.

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

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

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

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

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

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

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

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

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

Neither was the transfer of the Vazquezes effected for some evil or devious purpose.  As testified to by Mr. Robson, the First Class Section is better than the Business Class Section in terms of comfort, quality of food, and service from the cabin crew; thus, the difference in fare between the First Class and Business Class at that time was $250. [9] Needless to state, an upgrading is for the better condition and, definitely, for the benefit of the passenger.

We are not persuaded by the Vazquezes’ argument that the overbooking of the Business Class Section constituted bad faith on the part of Cathay.

Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board, as amended, provides:

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

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

Now we come to the third issue on damages.

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

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

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

Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the carrier is guilty of fraud or bad faith or

where the mishap resulted in the death of a passenger. [13] Where in breaching the contract of carriage the airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of the obligation which the parties had foreseen or could have reasonably foreseen.  In such a case the liability does not include moral and exemplary damages.[14]

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

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

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

Article 2221 of the Civil Code provides:

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

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

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

provide the respondents-spouses with additional amenities for the one and one-half (1 1/2) hour flight to Manila, unintended tension ensued.[18]

Nonetheless, considering that the breach was intended to give more benefit and advantage to the Vazquezes by upgrading their Business Class accommodation to First Class because of their valued status as Marco Polo members, we reduce the award for nominal damages toP5,000.

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

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

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

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

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

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

We adopt as our own this observation of the Court of Appeals.

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

No pronouncement on costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 88052 December 14, 1989

JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P. MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P. MECENAS; and OFELIA M. JAVIER, petitioners, vs.HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and NEGROS NAVIGATION CO., INC.,respondents.

Benito P. Favie and Jose Dario Magno for petitioners.

Hernandez, Velicaria, Vibar & Santiago for private respondents.

 

FELICIANO, J.:

At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a barge-type oil tanker of Philippine registry, with a gross tonnage of 1,241,68 tons, owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and headed towards Bataan. At about 1:00 o'clock in the afternoon of that same day, the M/V "Don Juan," an interisland vessel, also of Philippine registry, of 2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc. (Negros Navigation) left Manila bound for Bacolod with seven hundred fifty (750) passengers listed in its manifest, and a complete set of officers and crew members.

On the evening of that same day, 22 April 1980, at about 10:30 o'clock, the "Tacloban City" and the "Don Juan" collided at the Talbas Strait near Maestra de Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred, the sea was calm, the weather fair and visibility good. As a result of this collision, the M/V "Don Juan" sank and hundreds of its passengers perished. Among the ill-fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by petitioners.

On 29 December 1980, petitioners filed a complaint in the then Court- of First Instance of Quezon City, docketed as Civil Case No. Q-31525, against private respondents Negros Navigation and Capt. Roger Santisteban, the captain of the "Don Juan" without, however, impleading either PNOC or PNOC Shipping. In their complaint, petitioners alleged that they were the seven (7) surviving legitimate children of Perfecto Mecenas and Sofia Mecenas and that the latter spouses perished in the collision which had resulted from the negligence of Negros Navigation and Capt. Santisteban. Petitioners prayed for actual damages of not less than P100,000.00 as well as moral and exemplary damages in such amount as the Court may deem reasonable to award to them.

Another complaint, docketed as Civil Case No. Q-33932, was filed in the same court by Lilia Ciocon claiming damages against Negros Navigation, PNOC and PNOC Shipping for the death of her husband Manuel Ciocon, another of the luckless passengers of the "Don Juan." Manuel Ciocon's body, too, was never found.

The two (2) cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, Branch 82. On 17 July 1986, after trial, the trial court rendered a decision, the dispositive of which read as follows:

WHEREFORE, the Court hereby renders judgment ordering:

a) The defendant Negros Navigation Co., Inc. and Capt. Roger Santisteban jointly and severally liable to pay plaintiffs in Civil Case No Q-31525, the sum of P400,000.00 for the death of plaintiffs' parents, Perfecto A. Mecenas and Sofia P. Mecenas; to pay said plaintiff's the sum of P15.000,00 as and for attorney's fees; plus costs of the suit.

b) Each of the defendants Negros Navigation Co Inc. and Philippine National Oil Company/PNOC Shipping and Transportation Company, to pay the plaintiff in Civil Case No. Q-33932, the sum of P100,000.00 for the death of Manuel Ciocon, to pay said plaintiff jointly and severally, the sum of P1 5,000.00 as and for attorney's fees, plus costs of the suit. 1

Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial court's decision to the Court of Appeals. Later, PNOC and PNOC Shipping withdrew their appeal citing a compromise agreement reached by them with Negros Navigation; the Court of Appeals granted the motion by a resolution dated 5 September 1988, subject to the reservation made by Lilia Ciocon that she could not be bound by the compromise agreement and would enforce the award granted her by the trial court.

In time, the Court of Appeals rendered a decision dated 26 January 1989 which decreed the following:

WHEREFORE, in view of the foregoing, the decision of the court a quo is hereby affirmed as modified with respect to Civil Case No. 31525, wherein defendant appellant Negros Navigation Co. Inc. and Capt. Roger Santisteban are held jointly and severally liable to pay the plaintiffs the amount of P100,000. 00 as actual and compensatory damages and P15,000.00 as attorney's fees and the cost of the suit. 2

The issue to be resolved in this Petition for Review is whether or not the Court of Appeals had erred in reducing the amount of the damages awarded by the trial court to the petitioners from P400,000.00 to P100,000.00.

We note that the trial court had granted petitioners the sum of P400,000,00 "for the death of [their parents]" plus P15,000.00 as attorney's fees, while the Court of Appeals awarded them P100,000.00 "as actual and compensatory damages" and P15,000.00 as attorney's fees. To determine whether such reduction of the damages awarded was proper, we must first determine whether petitioners were entitled to an award of damages other than actual or compensatory damages, that is, whether they were entitled to award of moral and exemplary damages.

We begin by noting that both the trial court and the Court of Appeals considered the action (Civil Case No. Q-31525) brought by the sons and daughters of the deceased Mecenas spouses against Negros Navigation as based on quasi-delict. We believed that action is more appropriately regarded as grounded on contract, the contract of carriage between the Mecenas spouses as regular passengers who paid for their boat tickets and Negros Navigation; the surviving children while not themselves passengers are in effect suing the carrier in representation of their deceased parents. 3 Thus, the suit (Civil Case No. Q-33932) filed by the widow Lilia Ciocon was correctly treated by the trial and appellate courts as based on contract (vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC and PNOC Shipping). In an action based upon a breach of the contract of carriage, the carrier under our civil law is liable for the death of passengers arising from the negligence or willful act of the carrier's employees although such employees may have acted beyond the scope of their authority or even in violation of the instructions of the carrier, 4 which liability may include liability for moral damages. 5 It follows that petitioners would be entitled to moral damages so long as the collision with the "Tacloban City" and the sinking of the "Don Juan" were caused or attended by negligence on the part of private respondents.

In respect of the petitioners' claim for exemplary damages, it is only necessary to refer to Article 2232 of the Civil Code:

Article 2332. In contracts and quasi-contracts, the court may exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 6

Thus, whether petitioners are entitled to exemplary damages as claimed must depend upon whether or not private respondents acted recklessly, that is, with gross negligence.

We turn, therefore, to a consideration of whether or not Negros Navigation and Capt. Santisteban were grossly negligent during the events which culminated in the collision with "Tacloban City" and the sinking of the "Don Juan" and the resulting heavy loss of lives.

The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 March 1981, held that the "Tacloban City" was "primarily and solely [sic] at fault and responsible for the collision." 7 Initially, the Minister of National Defense upheld the decision of Commodore Ochoco. 8 On Motion for Reconsideration, however, the Minister of National Defense reversed himself and held that both vessels had been at fault:

It is therefore evident from a close and thorough review of the evidence that fault is imputable to both vessels for the collision. Accordingly, the decision dated March 12, 1982, subject of the Motion for Reconsideration filed by counsel of M/T Tacloban City, is hereby reversed. However, the administrative penalties

imposed oil both vessels and their respective crew concerned are hereby affirmed. 9

The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion that the Minister of National Defense had reached that both the "Tacloban City" and the "Don Juan" were at fault in the collision. The trial court summarized the testimony and evidence of PNOC and PNOC Shipping as well as of Negros Navigation in the following terms:

Defendant PNOC's version of the incident:

M/V Don Juan was first sighted at about 5 or 6 miles from Tacloban City (TSN, January 21, 1985, p. 13); it was on the starboard (right) side of Tacloban City. This was a visual contact; not picked up by radar (p. 15, Ibid). Tacloban City was travelling 310 degrees with a speed of 6 knots, estimated speed of Don Juan of 16 knots (TSN, May 9, pp. 5-6). As Don Juan approached, Tacloban City gave a leeway of 1 0 degrees to the left. 'The purpose was to enable Tacloban to see the direction of Don Juan (p. 19, Ibid). Don Juan switched to green light, signifying that it will pass Tacloban City's right side; it will be a starboard to starboard passing (p. 21, Ibid) Tacloban City's purpose in giving a leeway of 10 degrees at this point, is to give Don Juan more space for her passage (p. 22, Ibid). This was increased by Tacloban City to an additional 15 degrees towards the left (p. 22, Ibid). The way was clear and Don Juan has not changed its course (TSN, May 9,1985, p. 39).

When Tacloban City altered its course the second time, from 300 degrees to 285 degrees, Don Juan was about 4.5 miles away (TSN, May 9,1985, p. 7).

Despite executing a hardport maneuver, the collision nonetheless occurred. Don Juan rammed the Tacloban City near the starboard bow (p. 7, Ibid)."

NENACO's [Negros Navigation] version.

Don Juan first sighted Tacloban City 4 miles away, as shown by radar (p. 13, May 24, 1983). Tacloban City showed its red and green lights twice; it proceeded to, and will cross, the path of Don Juan. Tacloban was on the left side of Don Juan (TSN, April 20,1983, p. 4).

Upon seeing Tacloban's red and green lights, Don Juan executed hard starboard (TSN, p. 4, Ibid.) This maneuver is in conformity with the rule that 'when both vessels are head on or nearly head on, each vessel must turn to the right in order to avoid each other. (p. 5, Ibid). Nonetheless, Tacloban appeared to be heading towards Don Juan (p. 6, Ibid),

When Don Juan executed hard starboard, Tacloban was about 1,500 feet away (TSN, May 24,1983, p. 6). Don Juan, after execution of hard starboard, will move forward 200 meters before the vessel will respond to such maneuver (p. 7, Ibid). The speed of Don Juan at that time was 17 knits; Tacloban City 6.3 knots. t "Between 9 to 15 seconds from execution of hard starboard, collision occurred (p. 8, Ibid). (pp. 3-4 Decision). 10

The trial court concluded:

M/ V Don Juan and Tacloban City became aware of each other's presence in the area by visual contact at a distance of something like 6 miles from each other. They were fully aware that if they continued on their course, they will meet head on. Don Juan - steered to the right; Tacloban City continued its course to the left. There can be no excuse for them not to realize that, with such maneuvers, they will collide. They executed maneuvers inadequate, and too late, to avoid collision.

The Court is of the considered view that the defendants are equally negligent and are liable for damages. (p. 4, decision). 11

The Court of Appeals, for its part, reached the same conclusion. 12

There is, therefore, no question that the "Don Juan" was at least as negligent as the M/T "Tacloban City" in the events leading up to the collision and the sinking of the "Don Juan." The remaining question is whether the negligence on the part of the "Don Juan" reached that level of recklessness or gross negligence that our Civil Code requires for the imposition of exemplary damages. Our own review of the record in the case at bar requires us to answer this in the affirmative.

In the first place, the report of the Philippine Coast Guard Commandant (Exhibit "l 0"), while holding the "Tacloban City" as "primarily and solely [sic] at fault and responsible for the collision," did itself set out that there had been fault or negligence on the part of Capt. Santisteban and his officers and crew before the collision and immediately after contact of the two (2) vessels. The decision of Commodore Ochoco said:

x x x x x x x x x

M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing mahjong before and up to the time of collision. Moreover, after the collision, he failed to institute appropriate measures to delay the sinking MS Don Juan and to supervise properly the execution of his order of abandonship. As regards the officer on watch, Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform Capt. Santisteban of the imminent danger of collision and of the actual collision itself Also, he failed to assist his master to prevent the fast sinking of the ship. The record also indicates that Auxiliary Chief Mate Antonio Labordo displayed laxity in maintaining order among the passengers after the collision.

x x x x x x x x x. 13

We believe that the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence-

[t]he duty 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. 14

The record does not show that was the first or only time that Capt. Santisteban had entertained himself during a voyage by playing mahjong with his officers and passengers; Negros Navigation in permitting, or in failing to discover and correct such behaviour, must be deemed grossly negligent.

Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, "to institute appropriate measures to delay the sinking of M/V Don Juan." This appears to us to be a euphemism for failure to maintain the sea-worthiness or the water-tight integrity of the "Don Juan." The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with the "Tacloban City. 15 While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself "

There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. The Certificate of Inspection 16 dated 27 August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the Don Juan's home port, states:

Passengers allowed : 810

Total Persons Allowed : 864

The report of the Philippine Coast Guard (Exhibit "10") stated that the "Don Juan" had been "officially cleared with 878 passengers on board when she sailed from the port of Manila on April 22, 1980 at about 1:00 p.m." This head-count of the passengers "did not include the 126 crew members, children below three (3) years old and two (2) half-paying passengers" which had been counted as one adult passenger. 17 Thus, the total number of persons on board the "Don Juan" on that ill-starred night of 22 April 1 980 was 1,004, or 140 persons more than the maximum lumber that could be safely carried by the "Don Juan," per its own Certificate of Inspection. 18 We note in addition, that only 750 passengers had been listed in its manifest for its final voyage; in other words, at least 128 passengers on board had not even been entered into the "Don Juan's" manifest. The "Don Juan's" Certificate of Inspection showed that she carried life boat and life raft accommodations for only 864 persons, the maximum number of persons she was permitted to carry; in other words, she did not carry enough boats and life rafts for all the persons actually on board that tragic night of 22 April 1980.

We hold that under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew) and of its ship-owner arises; this presumption was never rebutted by Negros Navigation.

The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the context of the following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that of the "Tacloban City" was 6.3. knots. 19 Secondly, the "Don Juan" carried the full complement of

officers and crew members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which was functioning that night. Fourthly, the "Don Juan's" officer on-watch had sighted the "Tacloban City" on his radar screen while the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don Juan" while the "Tacloban City" was still 2.7 miles away. 20 In the total set of circumstances which existed in the instant case, the "Don Juan," had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban City," Indeed, the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely.

It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power- driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. 21 The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time) 150 to port side while the "Don Juan" veered hard to starboard. This circumstance, while it may have made the collision immediately inevitable, cannot, however, be viewed in isolation from the rest of the factual circumstances obtaining before and up to the collision. In any case, Rule 18 like all other International Rules of the Road, are not to be obeyed and construed without regard to all the circumstances surrounding a particular encounter between two (2) vessels. 22 In ordinary circumstances, a vessel discharges her duty to another by a faithful and literal observance of the Rules of Navigation, 23 and she cannot be held at fault for so doing even though a different course would have prevented the collision. This rule, however, is not to be applied where it is apparent, as in the instant case, that her captain was guilty of negligence or of a want of seamanship in not perceiving the necessity for, or in so acting as to create such necessity for, a departure from the rule and acting accordingly. 24 In other words, "route observance" of the International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules. 25

In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing to take early preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could choose its own distance. 26, It is noteworthy that the "Tacloban City," upon turning hard to port shortly before the moment of collision, signalled its intention to do so by giving two (2) short blasts with horn. 26A The "Don Juan " gave no answering horn blast to signal its own intention and proceeded to turn hatd to starboard. 26B

We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of passengers. We find no necessity for passing upon the degree of negligence or culpability properly attributable to PNOC and PNOC Shipping or the master of the "Tacloban City," since they were never impleaded here.

It will be recalled that the trial court had rendered a lump sum of P400,000.00 to petitioners for the death of their parents in the "Don Juan" tragedy. Clearly, the trial court should have included a breakdown of the lump sum award into its component parts: compensatory damages, moral damages and exemplary damages. On appeal, the Court of Appeals could have and should have itself broken down the lump sum award of the trial court into its constituent parts; perhaps, it did, in its own mind. In any case, the Court of Appeals apparently relying upon Manchester Development Corporation V. Court of Appeals 27 reduced the P400,000.00 lump sum award into a P100,000.00 for actual and compensatory damages only.

We believe that the Court of Appeals erred in doing so, It is true that the petitioners' complaint before the trial court had in the body indicated that the petitioner-plaintiffs believed that moral

damages in the amount of at least P1,400,000.00 were properly due to them (not P12,000,000.00 as the Court of Appeals erroneously stated) as well as exemplary damages in the sum of P100,000.00 and that in the prayer of their complaint, they did not specify the amount of moral and exemplary damages sought from the trial court. We do not believe, however, that theManchester doctrine, which has been modified and clarified in subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. 28 can be applied in the instant case so as to work a striking out of that portion of the trial court's award which could be deemed nationally to constitute an award of moral and exemplary damages.Manchester was promulgated by the Court on 7 May 1987. Circular No. 7 of this Court, which embodied the doctrine inManchester, is dated 24 March 1988. Upon the other hand, the complaint in the case at bar was filed on 29 December 1980, that is, long before either Manchester or Circular No. 7 of 24 March 1988 emerged. The decision of the trial court was itself promulgated on 17 July 1986, again, before Manchester and Circular No. 7 were promulgated. We do not believe that Manchester should have been applied retroactively to this case where a decision on the merits had already been rendered by the trial court, even though such decision was then under appeal and had not yet reached finality. There is no indication at allthat petitioners here sought simply to evade payment of the court's filing fees or to mislead the court in the assessment of the filing fees. In any event, we apply Manchester as clarified and amplified by Sun Insurance Office Ltd. (SIOL), by holding that the petitioners shall pay the additional filing fee that is properly payable given the award specified below, and that such additional filing fee shall constitute a lien upon the judgment.

We consider, finally, the amount of damages-compensatory, moral and exemplary-properly imposable upon private respondents in this case. The original award of the trial court of P400,000.00 could well have been disaggregated by the trial court and the Court of Appeals in the following manner:

1. actual or compensatory damages proved in the course of trial consisting of actual expenses

incurred by petitioners

in their search for their

parents' bodies- -P126,000.00

2. actual or compensatory

damages in case of

wrongful death

(P30,000.00 x 2) -P60,000.00 29

(3) moral damages -P107,000.00

(4) exemplary damages -P107,000.00

Total -P400,000.00

Considering that petitioners, legitimate children of the deceased spouses Mecenas, are seven (7) in number and that they lost both father and mothe in one fell blow of fate, and considering

the pain and anxiety they doubtless experienced while searching for their parents among the survivors and the corpses recovered from the sea or washed ashore, we believe that an additional amount of P200,000.00 for moral damages, making a total of P307,000.00 for moral damages, making a total of P307,000.00 as moral damages, would be quite reasonable.

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 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 seels 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. The Court will take judicial notive of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. Considering the foregoing, we believe that an additional award in the amount of P200,000.00 as exmplary damages, is quite modest.

The Court is aware that petitioners here merely asked for the restoration of the P 400.000.00 award of the trial court. We underscore once more, however, the firmly settled doctrine that this Court may consider and resolved all issues which must be decided in order to render substantial justice to the parties, including issues not explicity raised by the party affected. In the case at bar, as in Kapalaran Bus Line v. Coronado, et al., 30 both the demands of sustantial justice and the imperious requirements of public policy compel us to the conclusion that the trial court's implicit award of moral and exemplary damages was erronoeusly deledted and must be restored and augmented and brought more nearely to the level required by public policy and substantial justice.

WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the Decision of the Court of Appeals insofar as it redurce the amount of damages awarded to petitioners to P100,000.00 is hereby REVERSED and SET ASIDE. The award granted by the trial court is hereby RESTORED and AUGMENTED as follows:

(a) P 126,000.00 for actual damages;

(b) P 60,000.00 as compensatory damages for wrongful death;

(c) P 307,000.00 as moral damages;

(d) P 307,000.00 as exemplary damages making a total of P 800,000.00; and

(e) P 15,000.00 as attorney's fees.

Petitioners shall pay the additional filing fees properly due and payable in view of the award here made, which fees shall be computed by the Clerks of Court of the trial court, and shall constitute a lien upon the judgment here awarded. Cost against private respondents.

SO ORDERED.

Fernan,C.J., Gutierrez, Jr., Bibin and Cortes, JJ., concur.

JAPAN AIRLINES, petitioner, vs. THE COURT OF APPEALS ENRIQUE AGANA, MARIA ANGELA NINA AGANA, ADALIA B. FRANCISCO and JOSE MIRANDA, respondents.

D E C I S I O N

ROMERO, J.:

Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal of the decision of the Court of Appeals, [1] which affirmed with modification the award of damages made by the trial court in favor of herein private respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose Miranda.

On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San Francisco, California bound for Manila. Likewise, on the same day private respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left Los Angeles, California for Manila via JAL flight No. JL 061.  As an incentive for travelling on the said airline, both flights were to make an overnight stopover at Narita, Japan, at the airlines’ expense, thereafter proceeding to Manila the following day.

Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita for the night.  The next day, private respondents, on the final leg of their journey, went to the airport to take their flight to Manila.  However, due to the Mt. Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International Airport (NAIA), rendering it inaccessible to airline traffic.  Hence, private respondents’ trip to Manila was cancelled indefinitely.

To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers on flight No. 741 due to depart on June 16, 1991 and also paid for the hotel expenses for their unexpected overnight stay.  On June 16, 1991, much to the dismay of the private respondents, their long anticipated flight to Manila was again cancelled due to NAIA’s indefinite closure.  At this point, JAL informed the private respondents that it would no longer defray their hotel and accommodation expense during their stay in Narita.

Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to pay for their accommodations and meal expenses from their personal funds from June 16 to June 21, 1991.  Their unexpected stay in Narita ended on June 22, 1991 when they arrived in Manila on board JL flight No. 741.

Obviously, still reeling from the experience,  private respondents, on July 25, 1991, commenced an action  for damages against JAL before the Regional Trial Court of Quezon City, Branch 104.[2] To support their claim, private respondents asserted  that JAL failed to live up to its duty to provide care and comfort to its stranded passengers when it refused to pay for their hotel and accommodation expenses from June 16 to 21, 1991 at Narita, Japan.  In other words, they insisted that JAL was obligated to shoulder

their expenses as long as they were still stranded in Narita.  On the other hand, JAL denied this allegation and averred that airline passengers have no vested right to these amenities in case a flight is cancelled due to “force majeure.”

On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL  liable for damages, viz.:

“WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant Japan Airlines to pay the plaintiffs Enrique Agana, Adalia B. Francisco and Maria Angela Nina Agana the sum of One million Two Hundred forty-six Thousand Nine Hundred Thirty-Six Pesos (P1,246,936.00) and Jose Miranda the sum of Three Hundred Twenty Thousand Six Hundred sixteen and 31/100 (P320,616.31) as actual, moral and exemplary damages and pay attorney’s fees in the amount of Two Hundred Thousand Pesos (P200,000.00), and to pay the costs of suit.”

Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the exception of lowering the damages awarded affirmed the trial court’s finding,[3] thus:

“Thus, the award of moral damages should be as it is hereby reduced to P200,000.00 for each of the plaintiffs, the exemplary damages toP300,000.00 and the attorney’s fees to P100,000.00 plus the costs.

WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby AFFIRMED in all other respects.”

JAL filed a motion for reconsideration which proved futile and unavailing.[4]

Failing in its bid to reconsider the decision, JAL has now filed this instant petition.

The  issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of its stranded passengers until they have reached their final destination, even if the delay were caused by “force majeure.”

To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to Manila on schedule.  Likewise, private respondents concede that such event can be considered as “force majeure” since their delayed arrival in Manila was not imputable to JAL.[5]

However, private respondents contend that while JAL cannot be held responsible for the delayed arrival in Manila, it was nevertheless liable for their living expenses during their unexpected stay in Narita since airlines have the obligation to ensure the comfort and convenience of its passengers.  While we sympathize with the private respondents’ plight, we are unable to accept this contention.

We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a contract to transport passengers is quite different in kind and degree from

any other contractual relation.  It is safe to conclude that it is a  relationship imbued with public interest. Failure on the part of the common carrier to live up to  the exacting standards of  care and diligence renders it liable for any damages that may be sustained by its passengers.  However, this is not to say that common carriers are absolutely responsible for all injuries or damages even if the same were caused by a fortuitous event.  To rule otherwise would render the defense of “force majeure,” as an exception from any liability, illusory and ineffective.

Accordingly, there is no question that when a party is unable to fulfill his obligation because of “force majeure,” the general rule is that he cannot be held liable for damages for non-performance.[6] Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL.  Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991.

Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for the private respondents.  To be sure, they underwent distress and anxiety during their unanticipated stay in Narita, but their predicament was not due to the fault or negligence of JAL but the closure of NAIA to international flights.   Indeed, to hold JAL, in the absence of bad faith or negligence, liable for the amenities of its stranded passengers by reason of a fortuitous event is too much of a burden to assume.

Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel.[7] In this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of which the passenger must assume or expect.  After all, common carriers are not the insurer of all risks.[8]

Paradoxically, the Court of Appeals, despite the presence of “force majeure,” still ruled  against JAL relying in our decision in PAL v. Court of Appeals,[9] thus:

“The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law.  Undisputably, PAL’s diversion of its flight due to inclement weather was a fortuitous event.  Nonetheless, such occurrence did not terminate PAL’s contract with its passengers.  Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar.  What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier’s premises.  Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination.  On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place.”

The reliance is misplaced.  The factual background of the PAL case is different from the instant petition.  In that case there was indeed a fortuitous event resulting in the diversion of the PAL flight.  However, the unforeseen diversion was worsened when “private respondents (passenger) was left at the airport and could not even hitch a ride in a Ford Fiera loaded with PAL personnel,” [10] not to mention the apparent apathy of the PAL station manager as to the predicament of the stranded passengers.[11] In light of these circumstances, we held that if the fortuitous event was accompanied by neglect and malfeasance by the carrier’s employees, an action for damages against the carrier is permissible.  Unfortunately, for private respondents, none of these conditions are present in the instant petition.

We are not prepared, however, to completely  absolve petitioner JAL from any liability. It must be noted that private respondents bought tickets from the United States with Manila as their final destination. While JAL was no longer required to defray private respondents’ living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary   arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private respondents from “transit passengers” to “new passengers”  as a result of which private respondents were obliged to make the necessary arrangements themselves for  the next flight to Manila.  Private respondents were placed on the waiting  list  from June 20 to June 24.  To assure themselves of a seat on an available  flight, they  were compelled to stay in the airport the whole day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised that they could be accommodated in said flight which flew at about 9:00 a.m. the next day.

We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21, 1991 caused considerable disruption in passenger booking and reservation.  In fact, it would be unreasonable to expect, considering NAIA’s closure, that JAL flight operations would be normal on the days affected. Nevertheless, this does not excuse JAL from its obligation to make the necessary arrangements to transport private respondents on its first available flight to Manila. After all, it had a contract to transport private respondents from the United States to Manila as their final destination.

Consequently, the award of nominal damages is in order.  Nominal damages are adjudicated in order that a right of a plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying any loss suffered by him.[12] The court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in every case where any property right has been invaded.[13]

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22, 1993 is hereby MODIFIED.  The award of actual, moral and exemplary damages is hereby DELETED.  Petitioner JAL is ordered to pay each of the private respondents nominal  damages in the sum of P100,000.00 each including attorney’s fees of P50,000.00 plus costs.

SO ORDERED.

Narvasa, C.J. (Chairman), Kapunan and P