Air Transpo Cases
Air Transpo Cases
Air Transpo Cases
This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules of Court seeks to
prohibit respondent Civil Aeronautics Board from exercising jurisdiction over private respondent's
Application for the issuance of a Certificate of Public Convenience and Necessity, and to annul and set
aside a temporary operating permit issued by the Civil Aeronautics Board in favor of Grand International
Airways (GrandAir, for brevity) allowing the same to engage in scheduled domestic air transportation
services, particularly the Manila-Cebu, Manila-Davao, and converse routes.
The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support its petition is the fact
that GrandAir does not possess a legislative franchise authorizing it to engage in air transportation
service within the Philippines or elsewhere. Such franchise is, allegedly, a requisite for the issuance of a
Certificate of Public Convenience or Necessity by the respondent Board, as mandated under Section 11,
Article XII of the Constitution.
Respondent GrandAir, on the other hand, posits that a legislative franchise is no longer a requirement for
the issuance of a Certificate of Public Convenience and Necessity or a Temporary Operating Permit,
following the Court's pronouncements in the case of Albano vs. Reyes,1 as restated by the Court of
Appeals in Avia Filipinas International vs. Civil Aeronautics Board 2 and Silangan Airways, Inc. vs. Grand
International Airways, Inc., and the Hon. Civil Aeronautics Board. 3
On November 24, 1994, private respondent GrandAir applied for a Certificate of Public Convenience and
Necessity with the Board, which application was docketed as CAB Case No. EP-12711.4 Accordingly, the
Chief Hearing Officer of the CAB issued a Notice of Hearing setting the application for initial hearing on
December 16, 1994, and directing GrandAir to serve a copy of the application and corresponding notice
to all scheduled Philippine Domestic operators. On December 14, 1994, GrandAir filed its Compliance,
and requested for the issuance of a Temporary Operating Permit. Petitioner, itself the holder of a
legislative franchise to operate air transport services, filed an Opposition to the application for a
Certificate of Public Convenience and Necessity on December 16, 1995 on the following grounds:
A. The CAB has no jurisdiction to hear the petitioner's application until the latter has first
obtained a franchise to operate from Congress.
C. Approval of petitioner's application would violate the equal protection clause of the
constitution.
D. There is no urgent need and demand for the services applied for.
At the initial hearing for the application, petitioner raised the issue of lack of jurisdiction of the Board to
hear the application because GrandAir did not possess a legislative franchise.
On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying petitioner's
Opposition. Pertinent portions of the Order read:
PAL alleges that the CAB has no jurisdiction to hear the petitioner's application until the
latter has first obtained a franchise to operate from Congress.
The Civil Aeronautics Board has jurisdiction to hear and resolve the application. In Avia
Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that under Section 10 (c) (I) of
R.A. 776, the Board possesses this specific power and duty.
SO ORDERED.
Meantime, on December 22, 1994, petitioner this time, opposed private respondent's application for a
temporary permit maintaining that:
1. The applicant does not possess the required fitness and capability of operating the
services applied for under RA 776; and,
2. Applicant has failed to prove that there is clear and urgent public need for the services
applied for.6
On December 23, 1994, the Board promulgated Resolution No. 119(92) approving the issuance of a
Temporary Operating Permit in favor of Grand Air 7 for a period of three months, i.e., from December 22,
1994 to March 22, 1994. Petitioner moved for the reconsideration of the issuance of the Temporary
Operating Permit on January 11, 1995, but the same was denied in CAB Resolution No. 02 (95) on
February 2, 1995. 8 In the said Resolution, the Board justified its assumption of jurisdiction over
GrandAir's application.
WHEREAS , the CAB is specifically authorized under Section 10-C (1) of Republic Act
No. 776 as follows:
(c) The Board shall have the following specific powers and duties:
(1) In accordance with the provision of Chapter IV of this Act, to issue, deny, amend
revise, alter, modify, cancel, suspend or revoke, in whole or in part, upon petitioner-
complaint, or upon its own initiative, any temporary operating permit or Certificate of
Public Convenience and Necessity; Provided, however; that in the case of foreign air
carriers, the permit shall be issued with the approval of the President of the Republic of
the Philippines.
WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein the
Supreme Court held that the CAB can even on its own initiative, grant a TOP even before
the presentation of evidence;
WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365), promulgated on
October 30, 1991, held that in accordance with its mandate, the CAB can issue not only a
TOP but also a Certificate of Public Convenience and Necessity (CPCN) to a qualified
applicant therefor in the absence of a legislative franchise, citing therein as basis the
decision of Albano vs. Reyes (175 SCRA 264) which provides (inter alia) that:
a) Franchises by Congress are not required before each and every public utility may
operate when the law has granted certain administrative agencies the power to grant
licenses for or to authorize the operation of certain public utilities;
b) The Constitutional provision in Article XII, Section 11 that the issuance of a franchise,
certificate or other form of authorization for the operation of a public utility does not
necessarily imply that only Congress has the power to grant such authorization since our
statute books are replete with laws granting specified agencies in the Executive Branch
the power to issue such authorization for certain classes of public utilities.
WHEREAS, Executive Order No. 219 which took effect on 22 January 1995, provides in
Section 2.1 that a minimum of two (2) operators in each route/link shall be encouraged
and that routes/links presently serviced by only one (1) operator shall be open for entry to
additional operators.
On March 21, 1995, upon motion by private respondent, the temporary permit was extended for a period
of six (6) months or up to September 22, 1995.
Petitioners argue that the respondent Board acted beyond its powers and jurisdiction in taking cognizance
of GrandAir's application for the issuance of a Certificate of Public Convenience and Necessity, and in
issuing a temporary operating permit in the meantime, since GrandAir has not been granted and does not
possess a legislative franchise to engage in scheduled domestic air transportation. A legislative franchise
is necessary before anyone may engage in air transport services, and a franchise may only be granted by
Congress. This is the meaning given by the petitioner upon a reading of Section 11, Article XII, 9 and
Section 1, Article VI, 10 of the Constitution.
To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of Justice, which reads:
Sir:
This has reference to your request for opinion on the necessity of a legislative franchise
before the Civil Aeronautics Board ("CAB") may issue a Certificate of Public Convenience
and Necessity and/or permit to engage in air commerce or air transportation to an
individual or entity.
You state that during the hearing on the application of Cebu Air for a congressional
franchise, the House Committee on Corporations and Franchises contended that under
the present Constitution, the CAB may not issue the abovestated certificate or permit,
unless the individual or entity concerned possesses a legislative franchise. You believe
otherwise, however, for the reason that under R.A. No. 776, as amended, the CAB is
explicitly empowered to issue operating permits or certificates of public convenience and
necessity and that this statutory provision is not inconsistent with the current charter.
We concur with the view expressed by the House Committee on Corporations and
Franchises. In an opinion rendered in favor of your predecessor-in-office, this Department
observed that, —
. . . it is useful to note the distinction between the franchise to operate and a permit to
commence operation. The former is sovereign and legislative in nature; it can be
conferred only by the lawmaking authority (17 W and P, pp. 691-697). The latter is
administrative and regulatory in character (In re Application of Fort Crook-Bellevue
Boulevard Line, 283 NW 223); it is granted by an administrative agency, such as the
Public Service Commission [now Board of Transportation], in the case of land
transportation, and the Civil Aeronautics Board, in case of air services. While a legislative
franchise is a pre-requisite to a grant of a certificate of public convenience and necessity
to an airline company, such franchise alone cannot constitute the authority to commence
operations, inasmuch as there are still matters relevant to such operations which are not
determined in the franchise, like rates, schedules and routes, and which matters are
resolved in the process of issuance of permit by the administrative. (Secretary of Justice
opn No. 45, s. 1981)
Indeed, authorities are agreed that a certificate of public convenience and necessity is an
authorization issued by the appropriate governmental agency for the operation of public
services for which a franchise is required by law (Almario, Transportation and Public
Service Law, 1977 Ed., p. 293; Agbayani, Commercial Law of the Phil., Vol. 4, 1979 Ed.,
pp. 380-381).
In both cases, the issue resolved was whether or not the Civil Aeronautics Board can issue the Certificate
of Public Convenience and Necessity or Temporary Operating Permit to a prospective domestic air
transport operator who does not possess a legislative franchise to operate as such. Relying on the
Court's pronouncement in Albano vs. Reyes (supra), the Court of Appeals upheld the authority of the
Board to issue such authority, even in the absence of a legislative franchise, which authority is derived
from Section 10 of Republic Act 776, as amended by P.D. 1462. 11
The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a Temporary Operating
Permit. This rule has been established in the case of Philippine Air Lines Inc., vs. Civil Aeronautics Board,
promulgated on June 13, 1968. 12 The Board is expressly authorized by Republic Act 776 to issue a
temporary operating permit or Certificate of Public Convenience and Necessity, and nothing contained in
the said law negates the power to issue said permit before the completion of the applicant's evidence and
that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit
"upon its own initiative" strongly suggests the power to exercise said authority, even before the
presentation of said evidence has begun. Assuming arguendo that a legislative franchise is prerequisite
to the issuance of a permit, the absence of the same does not affect the jurisdiction of the Board to hear
the application, but tolls only upon the ultimate issuance of the requested permit.
The power to authorize and control the operation of a public utility is admittedly a prerogative of the
legislature, since Congress is that branch of government vested with plenary powers of legislation.
The franchise is a legislative grant, whether made directly by the legislature itself, or by
any one of its properly constituted instrumentalities. The grant, when made, binds the
public, and is, directly or indirectly, the act of the state. 13
The issue in this petition is whether or not Congress, in enacting Republic Act 776, has delegated the
authority to authorize the operation of domestic air transport services to the respondent Board, such that
Congressional mandate for the approval of such authority is no longer necessary.
Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the
operation of certain public utilities. With the growing complexity of modern life, the multiplication of the
subjects of governmental regulation, and the increased difficulty of administering the laws, there is a
constantly growing tendency towards the delegation of greater powers by the legislature, and towards the
approval of the practice by the courts. 14 It is generally recognized that a franchise may be derived
indirectly from the state through a duly designated agency, and to this extent, the power to grant
franchises has frequently been delegated, even to agencies other than those of a legislative nature. 15 In
pursuance of this, it has been held that privileges conferred by grant by local authorities as agents for the
state constitute as much a legislative franchise as though the grant had been made by an act of the
Legislature. 16
The trend of modern legislation is to vest the Public Service Commissioner with the power to regulate and
control the operation of public services under reasonable rules and regulations, and as a general rule,
courts will not interfere with the exercise of that discretion when it is just and reasonable and founded
upon a legal right. 17
It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a reading of the pertinent
issuances governing the Philippine Ports Authority, 18 proves that the PPA is empowered to undertake by
itself the operation and management of the Manila International Container Terminal, or to authorize its
operation and management by another by contract or other means, at its option. The latter power having
been delegated to the to PPA, a franchise from Congress to authorize an entity other than the PPA to
operate and manage the MICP becomes unnecessary.
Given the foregoing postulates, we find that the Civil Aeronautics Board has the authority to issue a
Certificate of Public Convenience and Necessity, or Temporary Operating Permit to a domestic air
transport operator, who, though not possessing a legislative franchise, meets all the other requirements
prescribed by the law. Such requirements were enumerated in Section 21 of R.A. 776.
There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an
indispensable requirement for an entity to operate as a domestic air transport operator. Although Section
11 of Article XII recognizes Congress' control over any franchise, certificate or authority to operate a
public utility, it does not mean Congress has exclusive authority to issue the same. Franchises issued by
Congress are not required before each and every public utility may operate. 19 In many instances,
Congress has seen it fit to delegate this function to government agencies, specialized particularly in their
respective areas of public service.
A reading of Section 10 of the same reveals the clear intent of Congress to delegate the authority to
regulate the issuance of a license to operate domestic air transport services:
Sec. 10. Powers and Duties of the Board. (A) Except as otherwise provided herein, the
Board shall have the power to regulate the economic aspect of air transportation, and
shall have general supervision and regulation of, the jurisdiction and control over air
carriers, general sales agents, cargo sales agents, and air freight forwarders as well as
their property rights, equipment, facilities and franchise, insofar as may be necessary for
the purpose of carrying out the provision of this Act.
In support of the Board's authority as stated above, it is given the following specific powers and duties:
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend,
revise, alter, modify, cancel, suspend or revoke in whole or in part upon petition or
complaint or upon its own initiative any Temporary Operating Permit or Certificate of
Public Convenience and Necessity: Provided however, That in the case of foreign air
carriers, the permit shall be issued with the approval of the President of the Republic of
the Philippines.
Petitioner argues that since R.A. 776 gives the Board the authority to issue "Certificates of Public
Convenience and Necessity", this, according to petitioner, means that a legislative franchise is an
absolute requirement. It cites a number of authorities supporting the view that a Certificate of Public
Convenience and Necessity is issued to a public service for which a franchise is required by law, as
distinguished from a "Certificate of Public Convenience" which is an authorization issued for the operation
of public services for which no franchise, either municipal or legislative, is required by law. 20
This submission relies on the premise that the authority to issue a certificate of public convenience and
necessity is a regulatory measure separate and distinct from the authority to grant a franchise for the
operation of the public utility subject of this particular case, which is exclusively lodged by petitioner in
Congress.
Many and varied are the definitions of certificates of public convenience which courts and legal writers
have drafted. Some statutes use the terms "convenience and necessity" while others use only the words
"public convenience." The terms "convenience and necessity", if used together in a statute, are usually
held not to be separable, but are construed together. Both words modify each other and must be
construed together. The word 'necessity' is so connected, not as an additional requirement but to modify
and qualify what might otherwise be taken as the strict significance of the word necessity. Public
convenience and necessity exists when the proposed facility will meet a reasonable want of the public
and supply a need which the existing facilities do not adequately afford. It does not mean or require an
actual physical necessity or an indispensable thing. 21
The terms "convenience" and "necessity" are to be construed together, although they are
not synonymous, and effect must be given both. The convenience of the public must not
be circumscribed by according to the word "necessity" its strict meaning or an essential
requisites. 22
The use of the word "necessity", in conjunction with "public convenience" in a certificate of authorization
to a public service entity to operate, does not in any way modify the nature of such certification, or the
requirements for the issuance of the same. It is the law which determines the requisites for the issuance
of such certification, and not the title indicating the certificate.
Congress, by giving the respondent Board the power to issue permits for the operation of domestic
transport services, has delegated to the said body the authority to determine the capability and
competence of a prospective domestic air transport operator to engage in such venture. This is not an
instance of transforming the respondent Board into a mini-legislative body, with unbridled authority to
choose who should be given authority to operate domestic air transport services.
Congress, in this instance, has set specific limitations on how such authority should be exercised.
Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or policies:
Sec. 4. Declaration of policies. In the exercise and performance of its powers and duties
under this Act, the Civil Aeronautics Board and the Civil Aeronautics Administrator shall
consider the following, among other things, as being in the public interest, and in
accordance with the public convenience and necessity:
(a) The development and utilization of the air potential of the Philippines;
(c) The regulation of air transportation in such manner as to recognize and preserve the
inherent advantages of, assure the highest degree of safety in, and foster sound
economic condition in, such transportation, and to improve the relations between, and
coordinate transportation by, air carriers;
(d) The promotion of adequate, economical and efficient service by air carriers at
reasonable charges, without unjust discriminations, undue preferences or advantages, or
unfair or destructive competitive practices;
(e) Competition between air carriers to the extent necessary to assure the sound
development of an air transportation system properly adapted to the need of the foreign
and domestic commerce of the Philippines, of the Postal Service, and of the National
Defense;
More importantly, the said law has enumerated the requirements to determine the competency of a
prospective operator to engage in the public service of air transportation.
Sec. 12. Citizenship requirement. Except as otherwise provided in the Constitution and
existing treaty or treaties, a permit authorizing a person to engage in domestic air
commerce and/or air transportation shall be issued only to citizens of the Philippines 24
Sec. 21. Issuance of permit. The Board shall issue a permit authorizing the whole or any
part of the service covered by the application, if it finds: (1) that the applicant is fit, willing
and able to perform such service properly in conformity with the provisions of this Act and
the rules, regulations, and requirements issued thereunder; and (2) that such service is
required by the public convenience and necessity; otherwise the application shall be
denied.
Furthermore, the procedure for the processing of the application of a Certificate of Public Convenience
and Necessity had been established to ensure the weeding out of those entities that are not deserving of
public service. 25
In sum, respondent Board should now be allowed to continue hearing the application of GrandAir for the
issuance of a Certificate of Public Convenience and Necessity, there being no legal obstacle to the
exercise of its jurisdiction.
ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to DISMISS the instant
petition for lack of merit. The respondent Civil Aeronautics Board is hereby DIRECTED to CONTINUE
hearing the application of respondent Grand International Airways, Inc. for the issuance of a Certificate of
Public Convenience and Necessity.
SO ORDERED.
x-----------------------x
DECISION
PERALTA, J.:
Before us are consolidated petitions for review on certiorari under Rule 45 of the Rules of Court assailing
the Decision1 dated August 30, 2013, and Resolution2 dated March 31, 2014 of the Court of
Appeals (CA) in CA-G.R. CV No. 93496 which affirmed the Decision 3 dated September 9, 2008 of the
Regional Trial Court (RTC), Branch 97, Quezon City in Civil Case No. Q-N-02-46727 finding Northwest
Airlines, Inc. (Northwest) liable for breach of contract of carriage.
The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest Airlines, Inc.
and are holders of Elite Platinum World Perks Card, the highest category given to frequent flyers of the
carrier.4 They are known in the musical instruments and sports equipments industry in the Philippines
being the owners of JB Music and JB Sports with outlets all over the country. They likewise own the five
(5) star Hotel Elizabeth in Baguio City and Cebu City, and the chain of Fersal Hotels and Apartelles in the
country.5
The Fernandos initiated the filing of the instant case which arose from two (2) separate incidents: first,
when Jesus Fernando arrived at Los Angeles (LA) Airport on December 20, 2001; second, when the
Fernandos were to depart from the LA Airport on January 29, 2002. The factual antecedents are as
follows:
Sometime on December 20, 2001, Jesus Fernando arrived at the LA Airport via Northwest Airlines Flight
No. NW02 to join his family who flew earlier to the said place for a reunion for the Christmas holidays. 6
When Jesus Fernando presented his documents at the immigration counter, he was asked by the
Immigration Officer to have his return ticket verified and validated since the date reflected thereon is
August 2001. So he approached a Northwest personnel who was later identified as Linda
Puntawongdaycha, but the latter merely glanced at his ticket without checking its status with the computer
and peremptorily said that the ticket has been used and could not be considered as valid. He then
explained to the personnel that he was about to use the said ticket on August 20 or 21, 2001 on his way
back to Manila from LA but he could not book any seat because of some ticket restrictions so he, instead,
purchased new business class ticket on the said date. 7 Hence, the ticket remains unused and perfectly
valid.
To avoid further arguments, Jesus Fernando gave the personnel the number of his Elite Platinum World
Perks Card for the latter to access the ticket control record with the airline's computer and for her to see
that the ticket is still valid. But Linda Puntawongdaycha refused to check the validity of the ticket in the
computer but, instead, looked at Jesus Fernando with contempt, then informed the Immigration Officer
that the ticket is not valid because it had been used.8
The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration and
Naturalization Services (INS) where he was asked humiliating questions for more than two (2) hours.
When he was finally cleared by the Immigration Officer, he was granted only a twelve (12)-day stay in the
United States (US), instead of the usual six (6) months. 9
When Jesus Fernando was finally able to get out of the airport, to the relief of his family, Elizabeth
Fernando proceeded to a Northwest Ticket counter to verify the status of the ticket. The personnel
manning the counter courteously assisted her and confirmed that the ticket remained unused and
perfectly valid. To avoid any future problems that may be encountered on the validity of the ticket, a new
ticket was issued to Jesus Fernando. 10
Since Jesus Fernando was granted only a twelve (12)-day stay in the US, his scheduled plans with his
family as well as his business commitments were disrupted. He was supposed to stay with his family for
the entire duration of the Christmas season because his son and daughter were then studying at
Pepperton University in California. But he was forced to fly back to Manila before the twelve (12)-day stay
expired and flew back to the US on January 15, 2002. The Fernandos were, likewise, scheduled to attend
the Musical Instrument Trade Show in LA on January 1 7, 2002 and the Sports Equipment Trade Show in
Las Vegas on January 21 to 23, 2002 which were both previously scheduled. Hence, Jesus Fernando
had to spend additional expenses for plane fares and other related expenses, and missed the chance to
be with his family for the whole duration of the Christmas holidays. 11
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos were on their way back to the Philippines. They have confirmed
bookings on Northwest Airlines NW Flight No. 001 for Narita, Japan and NW 029 for Manila. They
checked in with their luggage at the LA Airport and were given their respective boarding passes for
business class seats and claim stubs for six (6) pieces of luggage. With boarding passes, tickets and
other proper travel documents, they were allowed entry to the departure area and joined their business
associates from Japan and the Philippines who attended the Musical Instrument Trade Show in LA on
January 17, 2002 and the Sports Equipment Trade Show in Las Vegas on January 21 to 23, 2002. When
it was announced that the plane was ready for boarding, the Fernandos joined the long queue of business
class passengers along with their business associates. 12
When the Fernandos reached the gate area where boarding passes need to be presented, Northwest
supervisor Linda Tang stopped them and demanded for the presentation of their paper tickets (coupon
type). They failed to present the same since, according to them, Northwest issued electronic tickets
(attached to the boarding passes) which they showed to the supervisor. 13 In the presence of the other
passengers, Linda Tang rudely pulled them out of the queue. Elizabeth Fernando explained to Linda
Tang that the matter could be sorted out by simply verifying their electronic tickets in her computer and all
she had to do was click and punch in their Elite Platinum World Perks Card number. But Linda Tang
arrogantly told them that if they wanted to board the plane, they should produce their credit cards and pay
for their new tickets, otherwise Northwest would order their luggage off-loaded from the plane.
Exasperated and pressed for time, the Fernandos rushed to the Northwest Airline Ticket counter to clarify
the matter. They were assisted by Northwest personnel Jeanne Meyer who retrieved their control number
from her computer and was able to ascertain that the Fernandos' electronic tickets were valid and they
were confirmed passengers on both NW Flight No. 001 for Narita Japan and NW 029 for Manila on that
day. To ensure that the Fernandos would no longer encounter any problem with Linda Tang, Jeanne
Meyer printed coupon tickets for them who were then advised to rush back to the boarding gates since
the plane was about to depart. But when the Fernandos reached the boarding gate, the plane had already
departed. They were able to depart, instead, the day after, or on January 30, 2002, and arrived in the
Philippines on January 31,2002. 14
a.) The arrival at the Los Angeles Airport on December 20, 2001.
Northwest claimed that Jesus Fernando travelled from Manila to LA on Northwest Airlines on December
20, 2001. At the LA Airport, it was revealed that Jesus Fernando's return ticket was dated August 20 or
21, 2001 so he encountered a problem in the Immigration Service. About an hour after the aircraft had
arrived, Linda Puntawongdaycha, Northwest Customer Service Agent, was called by a US Immigration
Officer named "Nicholas" to help verify the ticket of Jesus Fernando. Linda Puntawongdaycha then asked
Jesus Fernando to "show" her "all the papers." Jesus Fernando only showed her the passenger receipt of
his ticket without any ticket coupon attached to it. The passenger receipt which was labelled "Passenger
Receipt" or "Customer Receipt" was dated August 2001. Linda Puntawongdaycha asked Jesus Fernando
several times whether he had any other ticket, but Jesus Fernando insisted that the "receipt" was "all he
has", and the passenger receipt was his ticket. He failed to show her any other document, and was not
able to give any other relevant information about his return ticket. Linda Puntawongdaycha then
proceeded to the Interline Department and checked Jesus Fernando's Passenger Name
Record (PNR) and his itinerary. The itinerary only showed his coming from Manila to Tokyo and Los
Angeles; nothing would indicate about his flight back to Manila. She then looked into his record and
checked whether he might have had an electronic ticket but she could not find any. For failure to find any
other relevant information regarding Fernando's return ticket, she then printed out Jesus Fernando's PNR
and gave the document to the US Immigration Officer. Linda Puntawongdaycha insisted that she did her
best to help Jesus Fernando get through the US Immigration. 15
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos took Northwest for their flight back to Manila. In the trip, the
Fernandos used electronic tickets but the tickets were dated January 26, 2002 and August 21, 2001.
They reached the boarding gate few minutes before departure. Northwest personnel Linda Tang was then
the one assigned at the departure area. As a standard procedure, Linda Tang scanned the boarding
passes and collected tickets while the passengers went through the gate. When the Fernandos presented
their boarding passes, Linda Tang asked for their tickets because there were no tickets stapled on their
boarding passes. She explained that even though the Fernandos had electronic tickets, they had made
"several changes on their ticket over and over". And when they made the booking/reservation at
Northwest, they never had any ticket number or information on the reservation. 16
When the Fernandos failed to show their tickets, Linda Tang called Yong who was a supervisor at the
ticket counter to verify whether the Fernandos had checked in, and whether there were any tickets found
at the ticket counter. Upon verification, no ticket was found at the ticket counter, so apparently when the
Fernandos checked in, there were no tickets presented. Linda Tang also checked with the computer the
reservation of the Fernandos, but again, she failed to see any electronic ticket number of any kind, and/or
any ticket record. So as the Fernandos would be able to get on with the flight considering the amount of
time left, she told them that they could purchase tickets with their credit cards and deal with the refund
later when they are able to locate the tickets and when they reach Manila. Linda Tang believed that she
did the best she could under the circumstances. 17
However, the Fernandos did not agree with the solution offered by Linda Tang. Instead, they went back to
the Northwest ticket counter and were attended to by Jeanne Meyer who was "courteous" and "was very
kind enough" to assist them. Jeanne Meyer verified their bookings and "printed paper tickets" for them.
Unfortunately, when they went back to the boarding gate, the plane had departed. Northwest offered
alternative arrangements for them to be transported to Manila on the same day on another airline, either
through Philippine Airlines or Cathay Pacific Airways, but they refused. Northwest also offered them free
hotel accommodations but they, again, rejected the offer 18 Northwest then made arrangements for the
transportation of the Fernandos from the airport to their house in LA, and booked the Fernandos on a
Northwest flight that would leave the next day, January 30, 2002. On January 30, 2002, the Fernandos
flew to Manila on business class seats. 19
On April 30, 2002, a complaint for damages 20 was instituted by the Fernandos against Northwest before
the RTC, Branch 97, Quezon City. During the trial of the case, the Fernandos testified to prove their
claim. On the part of Northwest, Linda Tang-Mochizuki and Linda Puntawongdaycha testified through oral
depositions taken at the Office of the Consulate General, Los Angeles City. The Northwest Manager for
HR-Legal Atty. Cesar Veneracion was also presented and testified on the investigation conducted by
Northwest as a result of the letters sent by Elizabeth Fernando and her counsel prior to the filing of the
complaint before the RTC.21
On September 9, 2008, the RTC issued a Decision, the dispositive portion of which states, thus:
WHEREFORE, in view of the foregoing, this Court rendered judgment in favor of the plaintiffs and against
defendant ordering defendant to pay the plaintiffs, the following:
4. Cost of suit.
SO ORDERED.22
Both parties filed their respective appeals which were dismissed by the CA in a Decision dated August
30, 2013, and affirmed the RTC Decision.
The Fernandos and Northwest separately filed motions for a reconsideration of the Decision, both of
which were denied by the CA on March 31, 2014.
The Fernandos filed a petition for review on certiorari23before this court docketed as G.R. No. 212038.
Northwest followed suit and its petition 24 was docketed as G.R. No. 212043. Considering that both
petitions involved similar parties, emanated from the same Civil Case No. Q-N-02-46727 and assailed the
same CA judgment, they were ordered consolidated in a Resolution 25 dated June 18, 2014.
WHETHER OR NOT THE ACTS OF THE PERSONNEL AND THAT OF DEFENDANT NORTHWEST
ARE WANTON, MALICIOUS, RECKLESS, DELIBERATE AND OPPRESSIVE IN CHARACTER,
AMOUNTING TO FRAUD AND BAD FAITH;
In G.R. No. 212043, Northwest anchored its petition on the following assigned errors:
II
III
The Issues
The arguments proffered by the parties can be summed up into the following issues: (1) whether or not
there was breach of contract of carriage and whether it was done in a wanton, malevolent or reckless
manner amounting to bad faith; (2) whether or not Northwest is liable for the payment of moral damages
and attorney's fees and whether it is liable to pay more than that awarded by the RTC; (3) whether or not
Northwest is liable for the payment of exemplary damages; and (4) whether or not Northwest Airlines is
entitled to recover on its counterclaim.
In their petition, the Fernandos contended that it was the personal misconduct, gross negligence and the
rude and abusive attitude of Northwest employees Linda Puntawongdaycha and Linda Tang which
subjected them to indignities, humiliation and embarrassment. The attitude of the aforesaid employees
was wanton and malevolent allegedly amounting to fraud and bad faith. According to the Fernandos, if
only Linda Puntawongdaycha had taken the time to verify the validity of the ticket in the computer, she
would have not given the wrong information to the Immigration Officer because the August 2001 return
ticket remained unused and valid for a period of one (1) year, or until August 2002. The wrong information
given by Linda Puntawongdaycha aroused doubts and suspicions on Jesus Fernando's travel plans. The
latter was then subjected to two (2) hours of questioning which allegedly humiliated him. He was even
suspected of being an "illegal alien". The negligence of Linda Puntawongdaycha was allegedly so gross
and reckless amounting to malice or bad faith.
As to the second incident, the Fernandos belied the accusation of Northwest that they did not present any
tickets. They presented their electronic tickets which were attached to their boarding passes. If they had
no tickets, the personnel at the check-in counter would have not issued them their boarding passes and
baggage claim stubs. That's why they could not understand why the coupon-type ticket was still
demanded by Northwest.
On the award of moral damages, the Fernandos referred to the testimony of Elizabeth Fernando that she
could not sleep and had a fever the night after the second incident. Thus, the Fernandos demanded that
they should be given more than the "token amount" granted by the RTC which was affirmed by the CA.
They stated that their status in the society and in the business circle should also be considered as a
factor in awarding moral damages. They averred that they are well-known in the musical instruments and
sports equipment industry in the country being the owners of JB Music and JB Sports with outlets all over
the country. They own hotels, a chain of apartelles and a parking garage building in Indiana, USA. And
since the breach of contract allegedly amounted to fraud and bad faith, they likewise demanded for the
payment of exemplary damages and attorney's fees more than the amount awarded by the RTC.
On the other hand, Northwest stated in its petition that Linda Puntawongdaycha tried her best to help
Jesus Fernando get through the US Immigration. Notwithstanding that Linda Puntawongdaycha was not
able to find any relevant information on Jesus Fernando's return ticket, she still went an extra mile by
printing the PNR of Jesus Fernando and handling the same personally to the Immigration Officer. It
pointed out that the Immigration Officer "noticed in the ticket that it was dated sometime August 20 or 21,
2001, although it was already December 2001."
As to the incident with Linda Tang, Northwest explained that she was only following Northwest standard
boarding procedures when she asked the Fernandos for their tickets even if they had boarding passes.
Thus, the conduct cannot be construed as bad faith. The dates indicated on the tickets did not match the
booking. Elizabeth Fernando was using an electronic ticket dated August 21, 2001, while the electronic
ticket of Jesus Fernando was dated January 26, 2002. According to Northwest, even if the Fernandos
had electronic tickets, the same did not discount the fact that, on the face of the tickets, they were for
travel on past dates. Also, the electronic tickets did not contain the ticket number or any information
regarding the reservation. Hence, the alleged negligence of the Fernandos resulted in the confusion in
the procedure in boarding the plane and the eventual failure to take their flight.
Northwest averred that the award of moral damages and attorney's fees were exorbitant because such
must be proportionate to the suffering inflicted. It argued that it is not obliged to give any "special
treatment" to the Fernandos just because they are good clients of Northwest, because the supposed
obligation does not appear in the contract of carriage. It further averred that it is entitled to its
counterclaim in the amount of ₱500,000.00 because the Fernandos allegedly acted in bad faith in
prosecuting the case which it believed are baseless and unfounded.
In the Comment28 of Northwest, it insisted that assuming a mistake was committed by Linda Tang and
Linda Puntawongdaycha, such mistake alone, without malice or ill will, is not equivalent to fraud or bad
faith that would entitle the Fernandos to the payment of moral damages.
In the Reply29 of the Fernandos, they asserted that it was a lie on the part of Linda Puntawongdaycha to
claim that she checked the passenger name or PNR of Jesus Fernando from the computer and, as a
result, she was not allegedly able to find any return ticket for him. According to Jesus Fernando, Linda
Puntawongdaycha merely looked at his ticket and declared the same to be invalid. The Fernandos
reiterated that after Jesus Fernando was released by the US Immigration Service, Elizabeth Fernando
proceeded to a Northwest Ticket counter to verify the status of the ticket. The personnel manning the
counter courteously assisted her and confirmed that the ticket remained unused and perfectly valid. The
personnel merely punched the Elite Platinum World Perks Card number of Jesus Fernando and was able
to verify the status of the ticket. The Fernandos further argued that if there was a discrepancy with the
tickets or reservations, they would not have been allowed to check in, and since they were allowed to
check in then they were properly booked and were confirmed passengers of Northwest.
Our Ruling
We find merit in the petition of the Spouses Jesus and Elizabeth Fernando. The Fernandos' cause of
action against Northwest stemmed from a breach of contract of carriage. A contract is a meeting of minds
between two persons whereby one agrees to give something or render some service to another for a
consideration. There is no contract unless the following requisites concur: (1) consent of the contracting
parties; (2) an object certain which is the subject of the contract; and (3) the cause of the obligation which
is established. 30
A contract of carriage is defined as one whereby a certain person or association of persons obligate
themselves to transport persons, things, or goods from one place to another for a fixed price. Under
Article 1732 of the Civil Code, this "persons, corporations, firms, or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering
their services to the public" is called a common carrier. 31 Undoubtedly, a contract of carriage existed
between Northwest and the Fernandos. They voluntarily and freely gave their consent to an agreement
whose object was the transportation of the Fernandos from LA to Manila, and whose cause or
consideration was the fare paid by the Fernandos to Northwest. 32
In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a ticket to a passenger confirmed for
a particular flight on a certain date, a contract of carriage arises. The passenger then has every right to
expect that he would fly on that flight and on that date. If he does not, then the carrier. opens itself to a
suit for breach of contract of carriage. 34
When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the Fernandos
on their flight on 29 January 2002.
We note that the witness35 of Northwest admitted on cross-examination that based on the documents
submitted by the Fernandos, they were confirmed
In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that
the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract
and the fact of its non-performance by the carrier. 37 As the aggrieved party, the Fernandos only had to
prove the existence of the contract and the fact of its non-performance by Northwest, as carrier, in order
to be awarded compensatory and actual damages. 38
Therefore, having proven the existence of a contract of carriage between Northwest and the Fernandos,
and the fact of non-performance by Northwest of its obligation as a common carrier, it is clear that
Northwest breached its contract of carriage with the Fernandos. Thus, Northwest opened itself to claims
for compensatory, actual, moral and exemplary damages, attorney's fees and costs of suit. 39
Moreover, Article 1733 of the New Civil Code provides that common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them, according to all the
circumstances of each case. Also, Article 1755 of the same Code states that a common carrier is bound
to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence
of very cautious persons, with due regard for all the circumstances.
We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of contract "in
failing to provide the spouses with the proper assistance to avoid any inconvenience" and that the
actuations of Northwest in both subject incidents "fall short of the utmost diligence of a very cautious
person expected of it". Both ruled that considering that the Fernandos are not just ordinary passengers
but, in fact, frequent flyers of Northwest, the latter should have been more courteous and accommodating
to their needs so that the delay and inconveniences they suffered could have been avoided. Northwest
was remiss in its duty to provide the proper and adequate assistance to them.
Nonetheless, We are not in accord with the common finding of the CA and the RTC when both ruled out
bad faith on the part of Northwest. While We agree that the discrepancy between the date of actual travel
and the date appearing on the tickets of the Fernandos called for some verification, however, the
Northwest personnel failed to exercise the utmost diligence in assisting the Fernandos. The actuations of
Northwest personnel in both subject incidents are constitutive of bad faith.
On the first incident, Jesus Fernando even gave the Northwest personnel the number of his Elite Platinum
World Perks Card for the latter to access the ticket control record with the airline's computer for her to see
that the ticket is still valid. But Linda Puntawongdaycha refused to check the validity of the ticket in the
computer. As a result, the Immigration Officer brought Jesus Fernando to the interrogation room of the
INS where he was interrogated for more than two (2) hours. When he was finally cleared by the
Immigration Officer, he was granted only a twelve (12)-day stay in the United States (US), instead of the
usual six (6) months.40
As in fact, the RTC awarded actual or compensatory damages because of the testimony of Jesus
Fernando that he had to go back to Manila and then return again to LA, USA, two (2) days after requiring
him to purchase another round trip ticket from Northwest in the amount of $2,000.00 which was not
disputed by Northwest.41 In ignoring Jesus Fernando's pleas to check the validity of the tickets in the
computer, the Northwest personnel exhibited an indifferent attitude without due regard for the
inconvenience and anxiety Jesus Fernando might have experienced.
Passengers do not contract merely for transportation. They have a right to be treated by the carrier's
employees with kindness, respect, courtesy and due consideration. They are entitled to be protected
against personal misconduct, injurious language, indignities and abuses from such employees. So it is,
that any rule or discourteous conduct on the part of employees towards a passenger gives the latter an
action for damages against the carrier. 42
In requiring compliance with the standard of extraordinary diligence, a standard which is, in fact, that of
the highest possible degree of diligence, from common carriers and in creating a presumption of
negligence against them, the law seeks to compel them to control their employees, to tame their reckless
instincts and to force them to take adequate care of human beings and their property. 43
Notably, after the incident, the Fernandos proceeded to a Northwest Ticket counter to verify the status of
the ticket and they were assured that the ticked remained unused and perfectly valid. And, to avoid any
future problems that may be encountered on the validity of the ticket, a new ticket was issued to Jesus
Fernando. The failure to promptly verify the validity of the ticket connotes bad faith on the part of
Northwest.
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some
moral obliquity and conscious doing of a wrong. It means breach of a known duty through some motive,
interest or ill will that partakes of the nature of fraud. A finding of bad faith entitles the offended party to
moral damages.44
As to the second incident, there was likewise fraud or bad faith on the part of Northwest when it did not
allow the Fernandos to board their flight for Manila on January 29, 2002, in spite of confirmed tickets. We
need to stress that they have confirmed bookings on Northwest Airlines NW Flight No. 001 for Narita,
Japan and NW 029 for Manila. They checked in with their luggage at LA Airport and were given their
respective boarding passes for business class seats and claim stubs for six (6) pieces of luggage. With
boarding passes and electronic tickets, apparently, they were allowed entry to the departure area; and,
they eventually joined the long queue of business class passengers along with their business associates.
However, in the presence of the other passengers, Northwest personnel Linda Tang pulled the
Fernandos out of the queue and asked for paper tickets (coupon type). Elizabeth Fernando explained to
Linda Tang that the matter could be sorted out by simply verifying their electronic tickets in her computer
and all she had to do was click and punch in their Elite Platinum World Perks Card number. Again, the
Northwest personnel refused to do so; she, instead, told them to pay for new tickets so they could board
the plane. Hence, the Fernandos rushed to the Northwest Airline Ticket counter to clarify the matter. They
were assisted by Northwest personnel Jeanne Meyer who retrieved their control number from her
computer and was able to ascertain that the Fernandos' electronic tickets were valid, and they were
confirmed passengers on both NW Flight No. 001 for Narita Japan and NW 029 for Manila on that day.
In Ortigas, Jr. v. Lufthansa German Airlines,45 this Court declared that "(i)n contracts of common carriage,
in attention and lack of care on the part of the carrier resulting in the failure of the passenger to be
accommodated in the class contracted for amounts to bad faith or fraud which entitles the passengers to
the award of moral damages in accordance with Article 2220 of the Civil Code."
In Pan American World Airways, Inc. v. Intermediate Appellate Court,46 where a would-be passenger had
the necessary ticket, baggage claim and clearance from immigration, all clearly and unmistakably
showing that she was, in fact, included in the passenger manifest of said flight, and yet was denied
accommodation in said flight, this Court did not hesitate to affirm the lower court's finding awarding her
damages on the ground that the breach of contract of carriage amounted to bad faith.47 For the indignity
and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an
award of moral damages.48
In this case, We need to stress that the personnel who assisted the Fernandos even printed coupon
tickets for them and advised them to rush back to the boarding gates since the plane was about to depart.
But when the Fernandos reached the boarding gate, the plane had already departed. They were able to
depart, instead, the day after, or on January 30, 2002.
In Japan Airlines v. Jesus Simangan, 49 this Court held that the acts committed by Japan Airlines against
Jesus Simangan amounted to bad faith, thus:
x x x JAL did not allow respondent to fly. It informed respondent that there was a need to first check
the authenticity of his travel documents with the U.S. Embassy. As admitted by JAL, "the flight could
not wait for Mr. Simangan because it was ready to depart."
Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice
but to be left behind. The latter was unceremoniously bumped off despite his protestations and valid
travel documents and notwithstanding his contract of carriage with JAL. Damage had already been done
when respondent was offered to fly the next day on July 30, 1992. Said offer did not cure JAL's
default.50
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 51 where private respondent was not allowed to
board the plane because her seat had already been given to another passenger even before the
allowable period for passengers to check in had lapsed despite the fact that she had a confirmed
ticket and she had arrived on time, this Court held that petitioner airline acted in bad faith in violating
private respondent's rights under their contract of carriage and is, therefore, liable for the injuries she has
sustained as a result.52
Under Article 222053 of the Civil Code of the Philippines, an award of moral damages, in breaches of
contract, is in order upon a showing that the defendant acted fraudulently or in bad faith. 54 Clearly, in this
case, the Fernandos are entitled to an award of moral damages. The purpose of awarding moral
damages is to enable the injured party to obtain means, diversion or amusement that will serve to
alleviate the moral suffering he has undergone by reason of defendant's culpable action. 55
We note that even if both the CA and the RTC ruled out bad faith on the part of Northwest, the award of
"some moral damages" was recognized. Both courts believed that considering that the Fernandos are
good clients of Northwest for almost ten (10) years being Elite Platinum World Perks Card holders, and
are known in their business circle, they should have been given by Northwest the corresponding special
treatment.56 They own hotels and a chain of apartelles in the country, and a parking garage building in
Indiana, USA. From this perspective, We adopt the said view. We, thus, increase the award of moral
damages to the Fernandos in the amount of ₱3,000,000.00.
As held in Kierulf v. Court of Appeals,57 the social and financial standing of a claimant may be considered
if he or she was subjected to contemptuous conduct despite the offender's knowledge of his or her social
and financial standing.
In Trans World Airlines v. Court of Appeals,58 this Court considered the social standing of the aggrieved
passenger:
At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner
of a big law firm in Manila. He was a director of several companies and was active in civic and
social organizations in the Philippines. Considering the circumstances of this case and the social
standing of private respondent in the community, he is entitled to the award of moral and exemplary
damages. x x x This award should be reasonably sufficient to indemnify private respondent for the
humiliation and embarrassment that he suffered and to serve as an example to discourage the
repetition of similar oppressive and discriminatory acts. 59
Exemplary damages, which are awarded by way of example or correction for the public good, may be
recovered in contractual obligations, if defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.60 They are designed by our civil law to permit the courts to reshape behavior that is
socially deleterious in its consequence by creating negative incentives or deterrents against such
behavior.61 Hence, given the facts and circumstances of this case, We hold Northwest liable for the
payment of exemplary damages in the amount of ₱2,000,000.00.
In the case of Northwest Airlines, Inc. v. Chiong, 62 Chiong was given the run-around at the Northwest
check-in counter, instructed to deal with a man in barong to obtain a boarding pass, and eventually barred
from boarding a Northwest flight to accommodate an American passenger whose name was merely
inserted in the Flight Manifest, and did not even personally check-in at the counter. Under the foregoing
circumstances, the award of moral and exemplary damages was given by this Court.
Time and again, We have declared that a contract of carriage, in this case, air transport, is primarily
intended to serve the traveling public and thus, imbued with public interest. The law governing common
carriers consequently imposes an exacting standard of conduct. 63 A contract to transport passengers is
quite different in kind and degree from any other contractual relation because of the relation which an air-
carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of
the comforts and advantages it 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 or damages. 64
As to the payment of attorney's fees, We sustain the award thereof on the ground that the Fernandos
were ultimately compelled to litigate and incurred expenses to protect their rights and interests, and
because the Fernandos are entitled to an award for exemplary damages. Pursuant to Article 2208 of the
Civil Code, attorney's fees may be awarded when exemplary damages are awarded, or a party is
compelled to litigate or incur expenses to protect his interest, or where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim.
Records show that the Fernandos demanded payment for damages from Northwest even before the filing
of this case in court.1âwphi1 Clearly, the Fernandos were forced to obtain the services of counsel to
enforce a just claim, for which they should be awarded attorney's fees. 65 We deem it just and equitable to
grant an award of attorney's fees equivalent to 10% of the damages awarded.
Lastly, the counterclaim of Northwest in its Answer66 is a compulsory counterclaim for damages and
attorney's fees arising from the filing of the complaint. This compulsory counterclaim of Northwest arising
from the filing of the complaint may not be granted inasmuch as the complaint against it is obviously not
malicious or unfounded. It was filed by the Fernandos precisely to claim their right to damages against
Northwest. Well-settled is the rule that the commencement of an action does not per se make the action
wrongful and subject the action to damages, for the law could not have meant to impose a penalty on the
right to litigate.67
WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated March 31, 2014 of the
Court of Appeals, in CA-G.R. CV No. 93496 are hereby AFFIRMED WITH MODIFICATION. The award of
moral damages and attorney's fees are hereby increased to ₱3,000,000.00 and ten percent (10%) of the
damages awarded, respectively. Exemplary damages in the amount of ₱2,000,000.00 is also awarded.
Costs against Northwest Airlines.
The total amount adjudged shall earn legal interest at the rate of twelve percent (12%) per
annum computed from judicial demand or from April 30, 2002 to June 30 2013, and six percent (6%) per
annum from July 1, 2013 until their full satisfaction.
SO ORDERED.
CASE 3
SECOND DIVISION
ALFREDO MANAY, JR., FIDELINO SAN LUIS, ADRIAN SAN LUIS, ANNALEE SAN LUIS, MARK
ANDREW JOSE, MELISSA JOSE, CHARLOTTE JOSE, DAN JOHN DE GUZMAN, PAUL MARK
BALUYOT, AND CARLOS S. JOSE, PETITIONERS, VS. CEBU AIR,INC, RESPONDENT.
DECISION
LEONEN, J.:
The Air Passenger Bill of Rights[1] mandates that the airline must inform the passenger in writing of all the
conditions and restrictions in the contract of carriage. [2] Purchase of the contract of carriage binds the
passenger and imposes reciprocal obligations on both the airline and the passenger. The airline must
exercise extraordinary diligence in the fulfillment of the terms and conditions of the contract of carriage.
The passenger, however, has the correlative obligation to exercise ordinary diligence in the conduct of his
or her affairs.
This resolves a Petition for Review on Certiorari [3] assailing the Court of Appeals Decision [4] dated
December 13, 2013 in CA-G.R. SP. No. 129817. In the assailed Decision, the Court of Appeals reversed
the Metropolitan Trial Court Decision [5] dated December 15, 2011 and the Regional Trial Court
Decision[6] dated November 6, 2012 and dismissed the Complaint for Damages filed by petitioners Alfredo
Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark Andrew Jose, Melissa Jose,
Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose against respondent Cebu
Air, Incorporated (Cebu Pacific).[7]
On June 13, 2008, Carlos S. Jose (Jose) purchased 20 Cebu Pacific round-trip tickets from Manila to
Palawan for himself and on behalf of his relatives and friends. [8] He made the purchase at Cebu Pacific's
branch office in Robinsons Galleria. [9]
Jose alleged that he specified to "Alou," the Cebu Pacific ticketing agent, that his preferred date and time
of departure from Manila to Palawan should be on July 20, 2008 at 0820 (or 8:20 a.m.) and that his
preferred date and time for their flight back to Manila should be on July 22, 2008 at 1615 (or 4:15
p.m.).[10] He paid a total amount of P42,957.00 using his credit card. [11] He alleged that after paying for the
tickets, Alou printed the tickets,[12] which consisted of three (3) pages, and recapped only the first page to
him.[13] Since the first page contained the details he specified to Alou, he no longer read the other pages
of the flight information.[14]
On July 20, 2008, Jose and his 19 companions boarded the 0820 Cebu Pacific flight to Palawan and had
an enjoyable stay.[15]
On the afternoon of July 22, 2008, the group proceeded to the airport for their flight back to
Manila.[16] During the processing of their boarding passes, they were informed by Cebu Pacific personnel
that nine (9)[17] of them could not be admitted because their tickets were for the 1005 (or 10:05
a.m.)[18] flight earlier that day.[19] Jose informed the ground personnel that he personally purchased the
tickets and specifically instructed the ticketing agent that all 20 of them should be on the 4:15 p.m. flight to
Manila.[20]
Upon checking the tickets, they learned that only the first two (2) pages had the schedule Jose
specified.[21] They were left with no other option but to rebook their tickets. [22] They then learned that their
return tickets had been purchased as part of the promo sales of the airline, and the cost to rebook the
flight would be P7,000.00 more expensive than the promo tickets. [23] The sum of the new tickets
amounted to P65,000.00.[24]
They offered to pay the amount by credit card but were informed by the ground personnel that they only
accepted cash.[25] They then offered to pay in dollars, since most of them were balikbayans and had the
amount on hand, but the airline personnel still refused. [26]
Eventually, they pooled enough cash to be able to buy tickets for five (5) of their companions.[27] The
other four (4) were left behind in Palawan and had to spend the night at an inn, incurring additional
expenses.[28] Upon his arrival in Manila, Jose immediately purchased four (4) tickets for the companions
they left behind, which amounted to P5,205.[29]
Later in July 2008, Jose went to Cebu Pacific's ticketing office in Robinsons Galleria to complain about
the allegedly erroneous booking and the rude treatment that his group encountered from the ground
personnel in Palawan.[30] He alleged that instead of being assured by the airline that someone would
address the issues he raised, he was merely "given a run around." [31]
Jose and his companions were frustrated and annoyed by Cebu Pacific's handling of the incident so they
sent the airline demand letters dated September 3, 2008 [32] and January 20, 2009 [33] asking for a
reimbursement of P42,955.00, representing the additional amounts spent to purchase the nine (9) tickets,
the accommodation, and meals of the four (4) that were left behind.[34] They also filed a
complaint[35] before the Department of Trade and Industry. [36]
On February 24, 2009, Cebu Pacific, through its Guest Services Department, sent petitioners' counsel an
email[37] explaining that "ticketing agents, like Alou, recap [the] flight details to the purchaser to avoid
erroneous booking[s]."[38] The recap is given one other time by the cashier. [39] Cebu Pacific stated that
according to its records, Jose was given a full recap and was made aware of the flight restriction of promo
tickets,[40] "which included [the] promo fare being non-refundable."[41]
Jose and his companions were unsatisfied with Cebu Pacific's response so they filed a Complaint [42] for
Damages against Cebu Pacific before Branch 59 of the Metropolitan Trial Court of Mandaluyong. [43] The
Complaint prayed for actual damages in the amount of P42,955.00, moral damages in the amount of
P45,000.00, exemplary damages in the amount of P50,000.00, and attorney's fees. [44]
In its Answer,[45] Cebu Pacific essentially denied all the allegations in the Complaint and insisted that Jose
was given a full recap of the tickets. [46] It also argued that Jose had possession of the tickets 37 days
before the scheduled flight; hence, he had sufficient time and opportunity to check the flight information
and itinerary.[47] It also placed a counterclaim of PI00,000.00 by reason that it was constrained to litigate
and it incurred expenses for litigation. [48]
On December 15, 2011, the Metropolitan Trial Court rendered its Decision ordering Cebu Pacific to pay
Jose and his companions P41,044.50 in actual damages and P20,000.00 in attorney's fees with costs of
suit.[49] The Metropolitan Trial Court found that as a common carrier, Cebu Pacific should have exercised
extraordinary diligence in performing its contractual obligations. [50] According to the Metropolitan Trial
Court, Cebu Pacific's ticketing agent "should have placed markings or underlined the time of the
departure of the nine passengers" [51] who were not in the afternoon flight since it was only logical for Jose
to expect that all of them would be on the same flight. [52] It did not find merit, however, in the allegation
that the airline's ground personnel treated Jose and his companions rudely since this allegation was
unsubstantiated by evidence. [53]
Cebu Pacific appealed to the Regional Trial Court, reiterating that its ticketing agent gave Jose a full
recap of the tickets he purchased. [54]
On November 6, 2012, Branch 212 of the Regional Trial Court of Mandaluyong rendered the Decision
dismissing the appeal.[55] The Regional Trial Court affirmed the findings of the Metropolitan Trial Court but
deleted the award of attorney's fees on the ground that this was granted without stating any ground under
Article 2208 of the Civil Code to justify its grant.[56]
Cebu Pacific appealed to the Court of Appeals, arguing that it was not at fault for the damages caused to
the passengers.[57]
On December 13, 2013, the Court of Appeals rendered the Decision granting the appeal and reversing
the Decisions of the Metropolitan Trial Court and the Regional Trial Court. [58] According to the Court of
Appeals, the extraordinary diligence expected of common carriers only applies to the carriage of
passengers and not to the act of encoding the requested flight schedule.[59] It was incumbent upon the
passenger to exercise ordinary care in reviewing flight details and checking schedules. [60] Cebu Pacific's
counterclaim, however, was denied since there was no evidence that Jose and his companions filed their
Complaint in bad faith and with malice. [61]
Aggrieved, Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark Andrew Jose,
Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and Carlos S. Jose (Jose, et al.)
filed before this Court a Petition for Review on Certiorari [62] assailing the Court of Appeals' December 13,
2013 Decision.[63]
Cebu Pacific was ordered to comment on the Petition. Upon compliance, [65] Jose, et al. submitted their
Reply.[66] The parties were then directed [67] to submit their respective memoranda. [68]
Jose, et al. argue that Cebu Pacific is a common carrier obligated to exercise extraordinary diligence to
carry Jose, et al. to their destination at the time clearly instructed to its ticketing agent.[69] They argue that
they have the decision to choose flight schedules and that Cebu Pacific should not choose it for
them.[70] They insist that they have made their intended flight schedule clear to the ticketing agent and it
would have been within normal human behavior for them to expect that their entire group would all be on
the same flight.[71] They argue that they should not have to ask for a full recap of the tickets since they are
under no obligation, as passengers, to remind Cebu Pacific's ticketing agent of her duties. [72]
Jose, et al. further pray that they be awarded actual damages in the amount of P43,136.52 since the
Metropolitan Trial Court erroneously failed to add the costs of accommodations and dinner spent on by
four (4) of the petitioners who were left behind in Palawan. [73] They also pray for PI00,000.00 in moral
damages and P100,000.00 in exemplary damages for the "profound distress and anxiety" [74] they have
undergone from the experience, with PI00,000.00 in attorney's fees to represent the reasonable expenses
incurred from "engaging the services of their counsel." [75]
Cebu Pacific, on the other hand, argues that the damage in this case was caused by Jose, et al.'s "gross
and inexplicable [negligence.]"[76] It maintains that Jose, et al. should have read the details of their flight,
and if there were errors in the encoded flight details, Jose, et al. would still have ample time to have the
error corrected.[77] It argues further that its ticketing agent did not neglect giving Jose a full recap of his
purchase since the tickets clearly indicated in the "Comments" section: "FULL RECAP GVN TO CARLOS
JOSE."[78]
Cebu Pacific further posits that according to the Parol Evidence Rule, the plane tickets issued to Jose, et
al. contain all the terms the parties agreed on, and it was agreed that nine (9) of the passengers would be
on the July 22, 2008, 1005 flight to Manila. [79] It argues that Jose, et al. have not been able to present any
evidence to substantiate their allegation that their intent was to be on the July 22, 2008 1615 flight to
Manila.[80]
From the arguments in the parties' pleadings, the sole issue before this Court is whether respondent
Cebu Air, Inc. is liable to petitioners Alfredo Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San
Luis, Mark Andrew Jose, Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul Mark Baluyot, and
Carlos S. Jose for damages for the issuance of a plane ticket with an allegedly erroneous flight schedule.
Although it was not mentioned by the parties, a procedural issue must first be addressed before delving
into the merits of the case.
Petitioners received the assailed Court of Appeals Decision on December 27, 2013. [81] They chose to
forego the filing of a motion for reconsideration. Instead, petitioners filed before this Court a Motion for
Extension of Time[82] on January 13, 2014.
Under Rule 45, Section 2 of the Rules of Court, [83] petitioners only had 15 days or until January 11, 2014
to file their petition. Since January 11, 2014 fell on a Saturday, petitioners could have filed their pleading
on the following Monday, or on January 13, 2014.
In their Motion for Extension of Time, however, petitioners requested an additional 30 days from January
13, 2014 within which to file their petition for review on certiorari. [84]
This Court already clarified the periods of extension in A.M. No. 00-2-14-SC:[85]
Whereas, the question has been raised if the period is extended ipso jure to the next working day
immediately following where the last day of the period is a Saturday, Sunday or a legal holiday, so that
when a motion for extension of time is filed, the period of extension is to be reckoned from the next
working day and not from the original expiration of the period.
NOW THEREFORE, the Court Resolves, for the guidance of the Bench and the Bar, to declare
that Section 1, Rule 22 speaks only of "the last day of the period" so that when a party seeks an
extension and the same is granted, the due date ceases to be the last day and hence, the provision no
longer applies. Any extension of time to file the required pleading should therefore be counted from the
expiration of the period regardless of the fact that said due date is a Saturday, Sunday or legal holiday.
(Emphasis supplied)
Thus, petitioners' request for extension of time should have been reckoned from the original due date on
January 11, 2014, even if this day fell on a Saturday. A request for extension of 30 days would have
ended on February 10, 2014.[86]
Petitioners subsequently filed their Petition for Review on Certiorari on February 12, 2014. [87] Pursuant to
A.M. No. 00-2-14-SC,[88] this Petition would have been filed out of time.
We are not, however, precluded from granting the period of extension requested and addressing the
Petition filed on its merits, instead of outright dismissing it. After all, "[l]itigations should, as much as
possible, be decided on the merits and not on technicalities." [89]
However, it does not follow that in the relaxation of the procedural rules, this Court automatically rules in
favor of petitioners. Their case must still stand on its own merits for this Court to grant the relief petitioners
pray for.
II
Common carriers are required to exercise extraordinary diligence in the performance of its obligations
under the contract of carriage. This extraordinary diligence must be observed not only in
the transportation of goods and services but also in the issuance of the contract of carriage, including its
ticketing operations.
Article 1732 of the Civil Code defines a common carrier as "persons, corporations or firms, or
associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their services to the public." Articles 1733, 1755, and 1756 of the
Civil Code outline the degree of diligence required of common carriers:
....
ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.
ARTICLE 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
prescribed in articles 1733 and 1755.
Respondent, as one of the four domestic airlines in the country, [90] is a common carrier required by law to
exercise extraordinary diligence. Extraordinary diligence requires that the common carrier must transport
goods and passengers "safely as far as human care and foresight can provide," and it must exercise the
"utmost diligence of very cautious persons . . . with due regard for all the circumstances."[91]
When a common carrier, through its ticketing agent, has not yet issued a ticket to the prospective
passenger, the transaction between them is still that of a seller and a buyer. The obligation of the airline
to exercise extraordinary diligence commences upon the issuance of the contract of carriage. [92] Ticketing,
as the act of issuing the contract of carriage, is necessarily included in the exercise of extraordinary
diligence.
A contract of carriage is defined as "one whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place to another for a fixed price." [93] In Cathay
Pacific Airways v. Reyes:[94]
[W]hen an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a
contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and
on that date. If he does not, then the carrier opens itself to a suit for breach of contract of
carriage.[95] (Emphasis supplied)
Once a plane ticket is issued, the common carrier binds itself to deliver the passenger safely on the date
and time stated in the ticket. The contractual obligation of the common carrier to the passenger is
governed principally by what is written on the contract of carriage.
In this case, both parties stipulated [96] that the flight schedule stated on the nine (9) disputed tickets was
the 10:05 a.m. flight of July 22, 2008. According to the contract of carriage, respondent's obligation as a
common carrier was to transport nine (9) of the petitioners safely on the 10:05 a.m. flight of July 22, 2008.
Petitioners, however, argue that respondent was negligent in the issuance of the contract of carriage
since the contract did not embody their intention. They insist that the nine (9) disputed tickets should have
been scheduled for the 4:15 p.m. flight of July 22, 2008. Respondent, on the other hand, denies this and
states that petitioner Jose was fully informed of the schedules of the purchased tickets and petitioners
were negligent when they failed to correct their ticket schedule.
Respondent relies on the Parol Evidence Rule in arguing that a written document is considered the best
evidence of the terms agreed on by the parties. Petitioners, however, invoke the exception in Rule 130,
Section 9(b) of the Rules of Court that evidence may be introduced if the written document fails to
express the true intent of the parties: [97]
Section 9. Evidence of written agreements. When the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed upon and there can be, between the parties
and their successors in interest, no evidence of such terms other than the contents of the written
agreement.
However, a party may present evidence to modify, explain or add to the terms of the written agreement if
he puts in issue in his pleading:
(d) The existence of other terms agreed to by the parties or their successors in interest after the execution
of the written agreement.
It is a cardinal rule of evidence, not just one of technicality but of substance, that the written document is
the best evidence of its own contents. It is also a matter of both principle and policy that when the written
contract is established as the repository of the parties stipulations, any other evidence is excluded and
the same cannot be used as a substitute for such contract, nor even to alter or contradict them. This rule,
however, is not without exception. Section 9, Rule 130 of the Rules of Court states that a party may
present evidence to modify, explain or add to the terms of the agreement if he puts in issue in his
pleading the failure of the written agreement to express the true intent and agreement of the parties.[99]
It is not disputed that on June 13, 2008, petitioner Jose purchased 20 Manila-Palawan-Manila tickets from
respondent's ticketing agent. Since all 20 tickets were part of a single transaction made by a single
purchaser, it is logical to presume that all 20 passengers would prefer the same flight schedule, unless
the purchaser stated otherwise.
In petitioners' Position Paper before the Metropolitan Trial Court, they maintain that respondent's ticketing
agent was negligent when she failed to inform or explain to petitioner Jose that nine (9) members of their
group had been booked for the 10:05 a.m. flight, and not the 4:15 p.m. flight. [100]
The first page of the tickets contained the names of eight (8) passengers. [101] In the Information box on
the left side of the ticket, it reads:
The second page contained the names of three (3) passengers. [104] In the Information box, it reads:
The third page contained the names of nine (9) passengers. [107] In the Information box, it reads:
Respondent explained that as a matter of protocol, flight information is recapped to the purchaser twice:
first by the ticketing agent before payment, and second by the cashier during payment. The tickets were
comprised of three (3) pages. Petitioners argue that only the first page was recapped to petitioner Jose
when he made the purchase.
The common carrier's obligation to exercise extraordinary diligence in the issuance of the contract of
carriage is fulfilled by requiring a full review of the flight schedules to be given to a prospective passenger
before payment. Based on the information stated on the contract of carriage, all three (3) pages were
recapped to petitioner Jose.
The only evidence petitioners have in order to prove their true intent of having the entire group on the
4:15 p.m. flight is petitioner Jose's self-serving testimony that the airline failed to recap the last page of
the tickets to him. They have neither shown nor introduced any other evidence before the Metropolitan
Trial Court, Regional Trial Court, Court of Appeals, or this Court.
Even assuming that the ticketing agent encoded the incorrect flight information, it is incumbent upon the
purchaser of the tickets to at least check if all the information is correct before making the purchase. Once
the ticket is paid for and printed, the purchaser is presumed to have agreed to all its terms and co nditions.
In Ong Yiu v. Court of Appeals:[110]
While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the
provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation." It is
what is known as a contract of "adhesion," in regards which it has been said that contracts of adhesion
wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at
bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent. [111]
One of the terms stated in petitioners' tickets stipulates that the photo identification of the passenger must
match the name entered upon booking:
Guests should present a valid photo ID to airport security and upon check-in. Valid IDs for this purpose
are Company ID, Driver's License, Passport, School ID, SSS Card, TIN Card. The name in the photo-ID
should match the guest name that was entered upon booking. Failure to present a valid photo ID will
result in your being refused check-in.[112]
Considering that respondent was entitled to deny check-in to passengers whose names do not match
their photo identification, it would have been prudent for petitioner Jose to check if all the names of his
companions were encoded correctly. Since the tickets were for 20 passengers, he was expected to have
checked each name on each page of the tickets in order to see if all the passengers' names were
encoded and correctly spelled. Had he done this, he would have noticed that there was a different flight
schedule encoded on the third page of the tickets since the flight schedule was stated directly above the
passengers' names.
Petitioners' flight information was not written in fine print. It was clearly stated on the left portion of the
ticket above the passengers' names. If petitioners had exercised even the slightest bit of prudence, they
would have been able to remedy any erroneous booking.
This is not the first time that this Court has explained that an air passenger has the correlative duty to
exercise ordinary care in the conduct of his or her affairs.
In Crisostomo v. Court of Appeals,[113] Estela Crisostomo booked a European tour with Caravan Travel
and Tours, a travel agency. She was informed by Caravan's travel agent to be at the airport on Saturday,
two (2) hours before her flight. Without checking her travel documents, she proceeded to the airport as
planned, only to find out that her flight was actually scheduled the day before. She subsequently filed a
suit for damages against Caravan Travel and Tours based on the alleged negligence of their travel agent
in informing her of the wrong flight details. [114]
This Court, while ruling that a travel agency was not a common carrier and was not bound to exercise
extraordinary diligence in the performance of its obligations, also laid down the degree of diligence
concurrently required of passengers:
Contrary to petitioner's claim, the evidence on record shows that respondent exercised due diligence in
performing its obligations under the contract and followed standard procedure in rendering its services to
petitioner. As correctly observed by the lower court, the plane ticket issued to petitioner clearly reflected
the departure date and time, contrary to petitioner's contention. The travel documents, consisting of the
tour itinerary, vouchers and instructions, were likewise delivered to petitioner two days prior to the trip.
Respondent also properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioner's hotel accommodation as well as food, land transfers
and sightseeing excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as everything
else that was essential to book petitioner for the tour. Had petitioner exercised due diligence in the
conduct of her affairs, there would have been no reason for her to miss the flight. Needless to say, after
the travel papers were delivered to petitioner, it became incumbent upon her to take ordinary care of her
concerns. This undoubtedly would require that she at least read the documents in order to assure herself
of the important details regarding the trip.[115] (Emphasis supplied)
Most of the petitioners were balikbayans. [116] It is reasonable to presume that they were adequately
versed with the procedures of air travel, including familiarizing themselves with the itinerary before
departure. Moreover, the tickets were issued 37 days before their departure from Manila and 39 days
from their departure from Palawan. There was more than enough time to correct any alleged mistake in
the flight schedule.
Petitioners, in failing to exercise the necessary care in the conduct of their affairs, were without a doubt
negligent. Thus, they are not entitled to damages.
Before damages may be awarded, "the claimant should satisfactorily show the existence of the factual
basis of damages and its causal connection to defendant's acts." [117] The cause of petitioners' injury was
their own negligence; hence, there is no reason to award moral damages. Since the basis for moral
damages has not been established, there is no basis to recover exemplary damages [118] and attorney's
fees[119] as well.
III
Traveling by air for leisure is a fairly new concept to the average Filipino. From 1974, there was only one
local airline commanding a monopoly on domestic air travel. [120] In 1996, respondent introduced the
concept of a budget airline in the Philippines, touting "low-cost services to more destinations and routes
with higher flight frequency within the Philippines than any other airline." [121] In its inception, respondent
offered plane fares that were "40% to 50% lower than [Philippine Airlines]." [122]
On March 1, 2007, to celebrate its new fleet of aircraft, respondent offered a promo of P1.00 base fare for
all their domestic and international destinations. [123] The fare was non-refundable and exclusive of taxes
and surcharges.[124]
Despite the conditions imposed on these "piso fares," more people were enticed to travel by air. From
January to June 2007, respondent had a total number of 2,256,289 passengers while Philippines Airlines
had a total of 1,981,267 passengers. [125] The domestic air travel market also had a 24% increase in the
first half of 2007.[126]
Promotional fares encouraged more Filipinos to travel by air as the number of fliers in the country
increased from 7.2 million in 2005 to 16.5 million in 2010.127 The emergence of low-cost carriers
"liberalized [the] aviation regime" [128] and contributed to an "unprecedented and consistent double digit
growth rates of domestic and international travel" [129] from 2007 to 2012.
This development, however, came with its own set of problems. Numerous complaints were filed before
the Department of Trade and Industry and the Department of Transportation and Communications,
alleging "unsatisfactory airline service" [130] as a result of flight overbooking, delays, and cancellations. [131]
Section 4 of the Joint Administrative Order requires airlines to provide the passenger with accurate
information before the purchase of the ticket:
Section 4. Right to Full, Fair, and Clear Disclosure of the Service Offered and All the Terms and
Conditions of the Contract of Carriage. Every passenger shall, before purchasing any ticket for a
contract of carriage by the air carrier or its agents, be entitled to the full, fair, and clear disclosure of all the
terms and conditions of the contract of carriage about to be purchased. The disclosure shall include,
among others, documents required to be presented at check-in, provisions on check-in deadlines, refund
and rebooking policies, and procedures and responsibility for delayed and/or cancelled flights. These
terms and conditions may include liability limitations, claim-filing deadlines, and other crucial conditions.
4.1 An air carrier shall cause the disclosure under this Section to be printed on or attached to the
passenger ticket and/or boarding pass, or the incorporation of such terms and conditions of carriage by
reference. Incorporation by reference means that the ticket and/or boarding pass shall clearly state that
the complete terms and conditions of carriage are available for perusal and/or review on the air carrier's
website, or in some other document that may be sent to or delivered by post or electronic mail to the
passenger upon his/her request.
....
4.3 Aside from the printing and/or publication of the above disclosures, the same shall likewise be
verbally explained to the passenger by the air carrier and/or its agent/s in English and Filipino, or in a
language that is easily understood by the purchaser, placing emphasis on the limitations and/or
restrictions attached to the ticket.
.....
4.5 Any violation of the afore-stated provisions shall be a ground for the denial of subsequent applications
for approval of promotional fare, or for the suspension or recall of the approval made on the advertised
fare/rate. (Emphasis in the original)
The Air Passenger Bill of Rights recognizes that a contract of carriage is a contract of adhesion, and thus,
all conditions and restrictions must be fully explained to the passenger before the purchase of the ticket:
WHEREAS, such a contract of carriage creates an asymmetrical relationship between an air carrier and a
passenger, considering that, while a passenger has the option to buy or not to buy the service, the
decision of the passenger to buy the ticket binds such passenger, by adhesion, to all the conditions
and/or restrictions attached to the air carrier ticket on an all-or-nothing basis, without any say,
whatsoever, with regard to the reasonableness of the individual conditions and restrictions attached to the
air carrier ticket;[132]
Section 4.4 of the Air Passenger Bill of Rights requires that "all rebooking, refunding, baggage allowance
and check-in policies" must be stated in the tickets:
4.4 The key terms of a contract of carriage, which should include, among others, the rebooking,
refunding, baggage allowance and check-in policies, must be provided to a passenger and shall
substantially be stated in the following manner and, if done in print, must be in bold letters:
(English)
"NOTICE:
The ticket that you are purchasing is subject to the following conditions/restrictions:
1. _______________
2. _______________
3. _______________
Your purchase of this ticket becomes a binding contract on your part to follow the terms and
conditions of the ticket and of the flight. Depending on the fare rules applicable to your ticket,
non-use of the same may result in forfeiture of the fare or may subject you to the payment of
penalties and additional charges if you wish to change or cancel your booking.
For more choices and/or control in your flight plans, please consider other fare types."
(Filipino)
"PAALALA:
Ang tiket na ito ay binibili ninyo nang may mga kondisyon/ restriksyon:
1. _______________
2. _______________
3. _______________
Para sa mas maraming pagpipilian at malawak na control sa inyong flight, inaanyayahan kayong
bumili ng iba pang klase ng tiket galing sa air carrier." (Emphasis in the original)
The Air Passenger Bill of Rights acknowledges that "while a passenger has the option to buy or not to buy
the service, the decision of the passenger to buy the ticket binds such passenger[.]"[133] Thus, the airline is
mandated to place in writing all the conditions it will impose on the passenger.
However, the duty of an airline to disclose all the necessary information in the contract of carriage does
not remove the correlative obligation of the passenger to exercise ordinary diligence in the conduct of
his or her affairs. The passenger is still expected to read through the flight information in the contract of
carriage before making his or her purchase. If he or she fails to exercise the ordinary diligence expected
of passengers, any resulting damage should be borne by the passenger.
SO ORDERED.
CASE 4
DECISION
WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a certain date, a
contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and
on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. 1
The power to admit or not an alien into the country is a sovereign act which cannot be interfered with
even by Japan Airlines (JAL).2
In this petition for review on certiorari,3 petitioner JAL appeals the: (1) Decision 4 dated May 31, 2005 of
the Court of Appeals (CA) ordering it to pay respondent Jesus Simangan moral and exemplary damages;
and (2) Resolution 5 of the same court dated September 28, 2005 denying JAL's motion for
reconsideration.
The Facts
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in
UCLA School of Medicine in Los Angeles, California, U.S.A. Upon request of UCLA, respondent
undertook a series of laboratory tests at the National Kidney Institute in Quezon City to verify whether his
blood and tissue type are compatible with Loreto's.6 Fortunately, said tests proved that respondent's
blood and tissue type were well-matched with Loreto's.7
Respondent needed to go to the United States to complete his preliminary work-up and donation surgery.
Hence, to facilitate respondent's travel to the United States, UCLA wrote a letter to the American
Consulate in Manila to arrange for his visa. In due time, respondent was issued an emergency U.S. visa
by the American Embassy in Manila. 8
Having obtained an emergency U.S. visa, respondent purchased a round trip plane ticket from petitioner
JAL for US$1,485.00 and was issued the corresponding boarding pass. 9 He was scheduled to a particular
flight bound for Los Angeles, California, U.S.A. via Narita, Japan. 10
On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport in the
company of several relatives and friends. 11 He was allowed to check-in at JAL's counter.12 His plane
ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration and
security routines.13 After passing through said immigration and security procedures, respondent was
allowed by JAL to enter its airplane. 14
While inside the airplane, JAL's airline crew suspected respondent of carrying a falsified travel document
and imputed that he would only use the trip to the United States as a pretext to stay and work in
Japan.15 The stewardess asked respondent to show his travel documents. Shortly after, the stewardess
along with a Japanese and a Filipino haughtily ordered him to stand up and leave the
plane.16 Respondent protested, explaining that he was issued a U.S. visa. Just to allow him to board the
plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in Narita. 17 His
pleas were ignored. He was then constrained to go out of the plane. 18 In a nutshell, respondent was
bumped off the flight.
Respondent went to JAL's ground office and waited there for three hours. Meanwhile, the plane took off
and he was left behind.19 Afterwards, he was informed that his travel documents were, indeed, in
order.20 Respondent was refunded the cost of his plane ticket less the sum of US$500.00 which was
deducted by JAL.21 Subsequently, respondent's U.S. visa was cancelled. 22
Displeased by the turn of events, respondent filed an action for damages against JAL with the Regional
Trial Court (RTC) in Valenzuela City, docketed as Civil Case No. 4195-V-93. He claimed he was not able
to donate his kidney to Loreto; and that he suffered terrible embarrassment and mental anguish. 23 He
prayed that he be awarded P3 million as moral damages, P1.5 million as exemplary damages
and P500,000.00 as attorney's fees.24
JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow
respondent to fly on his scheduled departure was due to "a need for his travel documents to be
authenticated by the United States Embassy" 25 because no one from JAL's airport staff had encountered
a parole visa before.26 It posited that the authentication required additional time; that respondent was
advised to take the flight the following day, July 30, 1992. JAL alleged that respondent agreed to be
rebooked on July 30, 1992. 27
JAL also lodged a counterclaim anchored on respondent's alleged wrongful institution of the complaint. It
prayed for litigation expenses, exemplary damages and attorney's fees. 28
On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of
respondent (plaintiff), disposing as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the
amount of P1,000,000.00 as moral damages, the amount of P500,000.00 as exemplary damages
and the amount of P250,000.00 as attorney's fees, plus the cost of suit. 29
In summarily and insolently ordering the plaintiff to disembark while the latter was already settled
in his assigned seat, the defendant violated the contract of carriage; that when the plaintiff was
ordered out of the plane under the pretext that the genuineness of his travel documents would be
verified it had caused him embarrassment and besmirched reputation; and that when the plaintiff
was finally not allowed to take the flight, he suffered more wounded feelings and social
humiliation for which the plaintiff was asking to be awarded moral and exemplary damages as
well as attorney's fees.
The reason given by the defendant that what prompted them to investigate the genuineness of
the travel documents of the plaintiff was that the plaintiff was not then carrying a regular visa but
just a letter does not appear satisfactory. The defendant is engaged in transporting passengers
by plane from country to country and is therefore conversant with the travel documents. The
defendant should not be allowed to pretend, to the prejudice of the plaintiff not to know that the
travel documents of the plaintiff are valid documents to allow him entry in the United States.
The foregoing act of the defendant in ordering the plaintiff to deplane while already settled in his
assigned seat clearly demonstrated that the defendant breached its contract of carriage with the
plaintiff as passenger in bad faith and as such the plaintiff is entitled to moral and exemplary
damages as well as to an award of attorney's fees. 30
Disagreeing with the RTC judgment, JAL appealed to the CA contending that it is not guilty of breach of
contract of carriage, hence, not liable for damages. 31 It posited that it is the one entitled to recover on its
counterclaim.32
CA Ruling
In a Decision33 dated May 31, 2005, the CA affirmed the decision of the RTC with modification in that it
lowered the amount of moral and exemplary damages and deleted the award of attorney's fees. The fallo
of the CA decision reads:
WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION. Appellant JAPAN AIR
LINES is ordered to pay appellee JESUS SIMANGAN the reduced sums, as follows: Five
Hundred Thousand Pesos (P500,000.00) as moral damages, and Two Hundred Fifty Thousand
Pesos (P250,000.00) as exemplary damages. The award of attorney's fees is hereby
DELETED.34
The CA elucidated that since JAL issued to respondent a round trip plane ticket for a lawful consideration,
"there arose a perfected contract between them." 35 It found that respondent was "haughtily ejected" 36 by
JAL and that "he was certainly embarrassed and humiliated" 37 when, in the presence of other
passengers, JAL's airline staff "shouted at him to stand up and arrogantly asked him to produce his travel
papers, without the least courtesy every human being is entitled to"; 38 and that "he was compelled to
deplane on the grounds that his papers were fake." 39
The CA ratiocinated:
While the protection of passengers must take precedence over convenience, the implementation of
security measures must be attended by basic courtesies.
In fact, breach of the contract of carriage creates against the carrier a presumption of liability, by
a simple proof of injury, relieving the injured passenger of the duty to establish the fault of the
carrier or of his employees; and placing on the carrier the burden to prove that it was due to an
unforeseen event or to force majeure.
That appellee possessed bogus travel documents and that he might stay illegally in Japan are
allegations without substantiation. Also, appellant's attempt to rebook appellee the following day
was too late and did not relieve it from liability. The damage had been done. Besides, its belated
theory of novation, i.e., that appellant's original obligation to carry appellee to Narita and Los
Angeles on July 29, 1992 was extinguished by novation when appellant and appellant agreed that
appellee will instead take appellant's flight to Narita on the following day, July 30, 1992, deserves
little attention. It is inappropriate at bar. Questions not taken up during the trial cannot be raised
for the first time on appeal. 40 (Underscoring ours and citations were omitted)
Citing Ortigas, Jr. v. Lufthansa German Airlines,41 the CA declared that "(i)n contracts of common
carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to
be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passengers
to the award of moral damages in accordance with Article 2220 of the Civil Code." 42
Here, the trial court's award of P1,000,000.00 as moral damages appears to be overblown. No
other proof of appellee's social standing, profession, financial capabilities was presented except
that he was single and a businessman. To Us, the sum of 500,000.00 is just and fair. For, moral
damages are emphatically not intended to enrich a complainant at the expense of the defendant.
They are awarded only to enable the injured party to obtain means, diversion or amusements that
will serve to alleviate the moral suffering he has undergone, by reason of the defendant's
culpable action.
The award of P250,000.00 as attorney's fees lacks factual basis. Appellee was definitely
compelled to litigate in protecting his rights and in seeking relief from appellant's misdeeds. Yet,
the record is devoid of evidence to show the cost of the services of his counsel and/or the actual
expenses incurred in prosecuting his action.43 (Citations were omitted)
When JAL's motion for reconsideration was denied, it resorted to the petition at bar.
Issues
I.
II.
B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT
IN A WANTON FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT
MANNER AS TO ENTITLE RESPONDENT TO EXEMPLARY DAMAGES.
III.
IV.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING FOR JAL ON
ITS COUNTERCLAIM.44 (Underscoring Ours)
Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty of contract of
carriage; (2) whether or not respondent is entitled to moral and exemplary damages; and (3) whether or
not JAL is entitled to its counterclaim for damages.
Our Ruling
Chiefly, the issues are factual. The RTC findings of facts were affirmed by the CA. The CA also gave its
nod to the reasoning of the RTC except as to the awards of damages, which were reduced, and that of
attorney's fees, which was deleted.
We are not a trier of facts. We generally rely upon, and are bound by, the conclusions on this matter of
the lower courts, which are better equipped and have better opportunity to assess the evidence first-hand,
including the testimony of the witnesses. 45
We have repeatedly held that the findings of fact of the CA are final and conclusive and cannot be
reviewed on appeal to the Supreme Court provided they are based on substantial evidence. 46 We have
no jurisdiction, as a rule, to reverse their findings. 47 Among the exceptions to this rule are: (a) when the
conclusion is a finding grounded entirely on speculations, surmises or conjectures; (b) when the inference
made is manifestly mistaken, absurd or impossible; (c) where there is grave abuse of discretion; (d) when
the judgment is based on a misapprehension of facts; (e) when the findings of facts are conflicting; (f)
when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee. 48
The said exceptions, which are being invoked by JAL, are not found here. There is no indication that the
findings of the CA are contrary to the evidence on record or that vital testimonies of JAL's witnesses were
disregarded. Neither did the CA commit misapprehension of facts nor did it fail to consider relevant facts.
Likewise, there was no grave abuse of discretion in the appreciation of facts or mistaken and absurd
inferences.
We thus sustain the coherent facts as established by the courts below, there being no sufficient showing
that the said courts committed reversible error in reaching their conclusions.
That respondent purchased a round trip plane ticket from JAL and was issued the corresponding
boarding pass is uncontroverted. 49 His plane ticket, boarding pass, travel authority and personal articles
were subjected to rigid immigration and security procedure. 50 After passing through said immigration and
security procedure, he was allowed by JAL to enter its airplane to fly to Los Angeles, California, U.S.A.
via Narita, Japan.51 Concisely, there was a contract of carriage between JAL and respondent.
Nevertheless, JAL made respondent get off the plane on his scheduled departure on July 29, 1992. He
was not allowed by JAL to fly. JAL thus failed to comply with its obligation under the contract of carriage.
JAL justifies its action by arguing that there was "a need to verify the authenticity of respondent's travel
document."52 It alleged that no one from its airport staff had encountered a parole visa before. 53 It further
contended that respondent agreed to fly the next day so that it could first verify his travel document,
hence, there was novation. 54 It maintained that it was not guilty of breach of contract of carriage as
respondent was not able to travel to the United States due to his own voluntary desistance. 55
We cannot agree. JAL did not allow respondent to fly. It informed respondent that there was a need to
first check the authenticity of his travel documents with the U.S. Embassy. 56 As admitted by JAL, "the
flight could not wait for Mr. Simangan because it was ready to depart." 57
Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice
but to be left behind. The latter was unceremoniously bumped off despite his protestations and valid
travel documents and notwithstanding his contract of carriage with JAL. Damage had already been done
when respondent was offered to fly the next day on July 30, 1992. Said offer did not cure JAL's default.
Considering that respondent was forced to get out of the plane and left behind against his will, he could
not have freely consented to be rebooked the next day. In short, he did not agree to the alleged novation.
Since novation implies a waiver of the right the creditor had before the novation, such waiver must be
express.58 It cannot be supposed, without clear proof, that respondent had willingly done away with his
right to fly on July 29, 1992.
Moreover, the reason behind the bumping off incident, as found by the RTC and CA, was that JAL
personnel imputed that respondent would only use the trip to the United States as a pretext to stay and
work in Japan.59
Apart from the fact that respondent's plane ticket, boarding pass, travel authority and personal articles
already passed the rigid immigration and security routines, 60 JAL, as a common carrier, ought to know the
kind of valid travel documents respondent carried. As provided in Article 1755 of the New Civil Code: "A
common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances."61 Thus, We find untenable JAL's defense of "verification of respondent's documents" in
its breach of contract of carriage.
It bears repeating that the power to admit or not an alien into the country is a sovereign act which cannot
be interfered with even by JAL. 62
In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of
such contract and its non-performance by the carrier through the latter's failure to carry the passenger
safely to his destination.63 Respondent has complied with these twin requisites.
Respondent is entitled to moral and exemplary damages and attorney's fees plus legal interest.
With reference to moral damages, JAL alleged that they are not recoverable in actions ex contractu
except only when the breach is attended by fraud or bad faith. It is contended that it did not act
fraudulently or in bad faith towards respondent, hence, it may not be held liable for moral damages.
As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of
contract for it is not one of the items enumerated under Article 2219 of the Civil Code. 64 As an exception,
such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as
provided in Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in the cases in which the
carrier is guilty of fraud or bad faith, as provided in Article 2220. 65
The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached
its contract of carriage with respondent in bad faith. JAL personnel summarily and insolently ordered
respondent to disembark while the latter was already settled in his assigned seat. He was ordered out of
the plane under the alleged reason that the genuineness of his travel documents should be verified.
x x x he was haughtily ejected by appellant. He was certainly embarrassed and humiliated when,
in the presence of other passengers, the appellant's airline staff shouted at him to stand up and
arrogantly asked him to produce his travel papers, without the least courtesy every human being
is entitled to. Then, he was compelled to deplane on the grounds that his papers were fake. His
protestation of having been issued a U.S. visa coupled with his plea to appellant to closely
monitor his movements when the aircraft stops over in Narita, were ignored. Worse, he was made
to wait for many hours at the office of appellant only to be told later that he has valid travel
documents.66 (Underscoring ours)
Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits
predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad
faith, as in this case. Inattention to and lack of care for the interests of its passengers who are entitled to
its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the
passenger to an award of moral damages. What the law considers as bad faith which may furnish the
ground for an award of moral damages would be bad faith in securing the contract and in the execution
thereof, as well as in the enforcement of its terms, or any other kind of deceit. 67
JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and
malevolent acts against respondent. Exemplary damages, which are awarded by way of example or
correction for the public good, may be recovered in contractual obligations, as in this case, if defendant
acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. 68
Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is
socially deleterious in its consequence by creating negative incentives or deterrents against such
behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is, in
fact, that of the highest possible degree of diligence, from common carriers and in creating a presumption
of negligence against them, the law seeks to compel them to control their employees, to tame their
reckless instincts and to force them to take adequate care of human beings and their property. 69
Neglect or malfeasance of the carrier's employees could give ground for an action for damages.
Passengers have a right to be treated by the carrier's employees with kindness, respect, courtesy and
due consideration and are entitled to be protected against personal misconduct, injurious language,
indignities and abuses from such employees. 70
With respect to attorney's fees, they may be awarded when defendant's act or omission has compelled
plaintiff to litigate with third persons or to incur expenses to protect his interest.71 The Court,
in Construction Development Corporation of the Philippines v. Estrella,72 citing Traders Royal Bank
Employees Union-Independent v. National Labor Relations Commission,73 elucidated thus:
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the
court to be paid by the losing party in a litigation. The basis of this is any of the cases
provided by law where such award can be made, such as those authorized in Article 2208, Civil
Code, and is payable not to the lawyer but to the client, unless they have agreed that the
award shall pertain to the lawyer as additional compensation or as part thereof.74
It was therefore erroneous for the CA to delete the award of attorney's fees on the ground that the record
is devoid of evidence to show the cost of the services of respondent's counsel. The amount is actually
discretionary upon the Court so long as it passes the test of reasonableness. They may be recovered as
actual or compensatory damages when exemplary damages are awarded and whenever the court deems
it just and equitable,75 as in this case.
Considering the factual backdrop of this case, attorney's fees in the amount of P200,000.00 is reasonably
modest.
The above liabilities of JAL in the total amount of P800,000.00 earn legal interest pursuant to the Court's
ruling in Construction Development Corporation of the Philippines v. Estrella,76 citing Eastern Shipping
Lines, Inc. v. Court of Appeals,77 to wit:
Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the
complaint, we held in Eastern Shipping Lines, Inc. v. Court of Appeals, that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for payment of interest in the concept of actual and
compensatory damages, subject to the following rules, to wit -
1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.78 (Emphasis supplied and citations omitted)
Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay respondent legal
interest. Pursuant to the above ruling of the Court, the legal interest is 6% and it shall be reckoned from
September 21, 2000 when the RTC rendered its judgment. From the time this Decision becomes final and
executory, the interest rate shall be 12% until its satisfaction.
The counterclaim of JAL in its Answer79 is a compulsory counterclaim for damages and attorney's fees
arising from the filing of the complaint. There is no mention of any other counter claims.
This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted inasmuch
as the complaint against it is obviously not malicious or unfounded. It was filed by respondent precisely to
claim his right to damages against JAL. Well-settled is the rule that the commencement of an action does
not per se make the action wrongful and subject the action to damages, for the law could not have meant
to impose a penalty on the right to litigate. 80
We reiterate case law that if damages result from a party's exercise of a right, it is damnum absque
injuria.81 Lawful acts give rise to no injury. Walang perhuwisyong maaring idulot ang paggamit sa
sariling karapatan.
During the trial, however, JAL presented a witness who testified that JAL suffered further damages.
Allegedly, respondent caused the publications of his subject complaint against JAL in the newspaper for
which JAL suffered damages.82
Although these additional damages allegedly suffered by JAL were not incorporated in its Answer as they
arose subsequent to its filing, JAL's witness was able to testify on the same before the RTC. 83 Hence,
although these issues were not raised by the pleadings, they shall be treated in all respects as if they had
been raised in the pleadings.
As provided in Section 5, Rule 10 of the Rules of Court, "(w)hen issues not raised by the pleadings are
tried with the express or implied consent of the parties, they shall be treated in all respects as if they had
been raised in the pleadings."
JAL is a common carrier. JAL's business is mainly with the traveling public. It invites people to avail
themselves of the comforts and advantages it offers. 84 Since JAL deals with the public, its bumping off of
respondent without a valid reason naturally drew public attention and generated a public issue.
The publications involved matters about which the public has the right to be informed because they relate
to a public issue. This public issue or concern is a legitimate topic of a public comment that may be validly
published.
Assuming that respondent, indeed, caused the publication of his complaint, he may not be held liable for
damages for it. The constitutional guarantee of freedom of the speech and of the press includes fair
commentaries on matters of public interest. This is explained by the Court in Borjal v. Court of
Appeals,85 to wit:
To reiterate, fair commentaries on matters of public interest are privileged and constitute a valid
defense in an action for libel or slander. The doctrine of fair comment means that while in general
every discreditable imputation publicly made is deemed false, because every man is presumed
innocent until his guilt is judicially proved, and every false imputation is deemed malicious,
nevertheless, when the discreditable imputation is directed against a public person in his public
capacity, it is not necessarily actionable. In order that such discreditable imputation to a public
official may be actionable, it must either be a false allegation of fact or a comment based on a
false supposition. If the comment is an expression of opinion, based on established facts, then it
is immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred
from the facts.86 (Citations omitted and underscoring ours)
Even though JAL is not a public official, the rule on privileged commentaries on matters of public interest
applies to it. The privilege applies not only to public officials but extends to a great variety of subjects, and
includes matters of public concern, public men, and candidates for office. 87
Hence, pursuant to the Borjal case, there must be an actual malice in order that a discreditable imputation
to a public person in his public capacity or to a public official may be actionable. To be considered
malicious, the libelous statements must be shown to have been written or published with the knowledge
that they are false or in reckless disregard of whether they are false or not. 88
Considering that the published articles involve matters of public interest and that its expressed opinion is
not malicious but based on established facts, the imputations against JAL are not actionable. Therefore,
JAL may not claim damages for them.
WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Appeals is AFFIRMED
WITH MODIFICATION. As modified, petitioner Japan Airlines is ordered to pay respondent Jesus
Simangan the following: (1) P500,000.00 as moral damages; (2) P100,000.00 as exemplary damages;
and (3) P200,000.00 as attorney's fees.
The total amount adjudged shall earn legal interest at the rate of 6% per annum from the date of
judgment of the Regional Trial Court on September 21, 2000 until the finality of this Decision. From the
time this Decision becomes final and executory, the unpaid amount, if any, shall earn legal interest at the
rate of 12% per annum until its satisfaction.
SO ORDERED.
CASE 5
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision1 dated 17 August 2001, rendered by the Court of Appeals in CA-G.R. SP No. 48664, affirming in
toto the Order2 dated 9 June 1998, of Branch 30 of the Regional Trial Court (RTC) of Iloilo City,
dismissing the Motion to Dismiss filed by petitioner Philippine Airlines Inc. (PAL) in the case
entitled, Simplicio Griño v. Philippine Airlines, Inc. and Singapore Airlines, docketed as Civil Case No.
23773.
PAL is a corporation duly organized under Philippine law, engaged in the business of providing air
carriage for passengers, baggage and cargo. 3
Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of the Iloilo RTC, where Civil
Case No. 23773 was filed; while private respondent Simplicio Griño is the plaintiff in the aforementioned
case.
Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in
Jakarta, Indonesia. He and several companions decided to purchase their respective passenger tickets
from PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA.
Private respondent and his companions were made to understand by PAL that its plane would take them
from Manila to Singapore, while Singapore Airlines would take them from Singapore to Jakarta. 4
On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived
at about 6:00 o’clock in the evening. Upon their arrival, they proceeded to the Singapore Airlines office to
check-in for their flight to Jakarta scheduled at 8:00 o’clock in the same evening. Singapore Airlines
rejected the tickets of private respondent and his group because they were not endorsed by PAL. It was
explained to private respondent and his group that if Singapore Airlines honored the tickets without PAL’s
endorsement, PAL would not pay Singapore Airlines for their passage. Private respondent tried to contact
PAL’s office at the airport, only to find out that it was closed. 5
Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a
loss where to go; and was subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear
and distress. Eventually, private respondent and his companions were forced to purchase tickets from
Garuda Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about 12:00
o’clock midnight, the party who was supposed to fetch them from the airport had already left and they had
to arrange for their transportation to the hotel at a very late hour. After the series of nerve-wracking
experiences, private respondent became ill and was unable to participate in the tournament. 6
Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent
a demand letter to PAL on 20 December 1993 and another to Singapore Airlines on 21 March 1994.
However, both airlines disowned liability and blamed each other for the fiasco. On 15 August 1997,
private respondent filed a Complaint for Damages before the RTC docketed as Civil Case No. 23773,
seeking compensation for moral damages in the amount of P1,000,000.00 and attorney’s fees. 7
Instead of filing an answer to private respondent’s Complaint, PAL filed a Motion to Dismiss 8 dated 18
September 1998 on the ground that the said complaint was barred on the ground of prescription under
Section 1(f) of Rule 16 of the Rules of Court. 9 PAL argued that the Warsaw Convention, 10 particularly
Article 29 thereof,11 governed this case, as it provides that any claim for damages in connection with the
international transportation of persons is subject to the prescription period of two years. Since the
Complaint was filed on 15 August 1997, more than three years after PAL received the demand letter on
25 January 1994, it was already barred by prescription.
On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It maintained that the
provisions of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention, were
applicable to the present case.
The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the Petition for
Certiorari filed by PAL and affirmed the 9 June 1998 Order of the RTC. It pronounced that the application
of the Warsaw Convention must not be construed to preclude the application of the Civil Code and other
pertinent laws. By applying Article 1144 of the Civil Code, 13 which allowed for a ten-year prescription
period, the appellate court declared that the Complaint filed by private respondent should not be
dismissed.14
Hence, the present Petition, in which petitioner raises the following issues:
THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION AS
RESPONDENT JUDGE COMMITED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OF JURSIDICTION IN DENYING PAL’S MOTION TO DISMISS.
II
THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE WARSAW
CONVENTION DESPITE THE FACT THAT GRIÑO’S CAUSE OF ACTION AROSE FROM A
BREACH OF CONTRACT FOR INTERNATIONAL AIR TRANSPORT.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT FILED BY
GRIÑO BEYOND THE TWO (2)-YEAR PERIOD PROVIDED UNDER THE WARSAW
CONVENTION IS ALREADY BARRED BY PRESCRIPTION.15
In determining whether PAL’s Motion to Dismiss should have been granted by the trial court, it must be
ascertained if all the claims made by the private respondent in his Complaint are covered by the Warsaw
Convention, which effectively bars all claims made outside the two-year prescription period provided
under Article 29 thereof. If the Warsaw Convention covers all of private respondent’s claims, then Civil
Case No. 23773 has already prescribed and should therefore be dismissed. On the other hand, if some, if
not all, of respondent’s claims are outside the coverage of the Warsaw Convention, the RTC may still
proceed to hear the case.
The Warsaw Convention applies to "all international transportation of persons, baggage or goods
performed by any aircraft for hire." It seeks to accommodate or balance the interests of passengers
seeking recovery for personal injuries and the interests of air carriers seeking to limit potential liability. It
employs a scheme of strict liability favoring passengers and imposing damage caps to benefit air
carriers.16 The cardinal purpose of the Warsaw Convention is to provide uniformity of rules governing
claims arising from international air travel; thus, it precludes a passenger from maintaining an action for
personal injury damages under local law when his or her claim does not satisfy the conditions of liability
under the Convention.17
Article 19 of the Warsaw Convention provides for liability on the part of a carrier for "damages occasioned
by delay in the transportation by air of passengers, baggage or goods." Article 24 excludes other
remedies by further providing that "(1) in the cases covered by articles 18 and 19, any action for
damages, however founded, can only be brought subject to the conditions and limits set out in this
convention." Therefore, a claim covered by the Warsaw Convention can no longer be recovered under
local law, if the statute of limitations of two years has already lapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes
that the Warsaw Convention does not "exclusively regulate" the relationship between passenger and
carrier on an international flight. This Court finds that the present case is substantially similar to cases in
which the damages sought were considered to be outside the coverage of the Warsaw Convention.
In United Airlines v. Uy,18 this Court distinguished between the (1) damage to the passenger’s baggage
and (2) humiliation he suffered at the hands of the airline’s employees. The first cause of action was
covered by the Warsaw Convention which prescribes in two years, while the second was covered by the
provisions of the Civil Code on torts, which prescribes in four years.
Similar distinctions were made in American jurisprudence. In Mahaney v. Air France,19 a passenger was
denied access to an airline flight between New York and Mexico, despite the fact that she held a
confirmed reservation. The court therein ruled that if the plaintiff were to claim damages based solely on
the delay she experienced – for instance, the costs of renting a van, which she had to arrange on her own
as a consequence of the delay – the complaint would be barred by the two-year statute of limitations.
However, where the plaintiff alleged that the airlines subjected her to unjust discrimination or undue or
unreasonable preference or disadvantage, an act punishable under the United States laws, then the
plaintiff may claim purely nominal compensatory damages for humiliation and hurt feelings, which are not
provided for by the Warsaw Convention. In another case, Wolgel v. Mexicana Airlines,20 the court
pronounced that actions for damages for the "bumping off" itself, rather than the incidental damages due
to the delay, fall outside the Warsaw Convention and do not prescribe in two years.
In the Petition at bar, private respondent’s Complaint alleged that both PAL and Singapore Airlines were
guilty of gross negligence, which resulted in his being subjected to "humiliation, embarrassment, mental
anguish, serious anxiety, fear and distress." 21 The emotional harm suffered by the private respondent as
a result of having been unreasonably and unjustly prevented from boarding the plane should be
distinguished from the actual damages which resulted from the same incident. Under the Civil Code
provisions on tort,22 such emotional harm gives rise to compensation where gross negligence or malice is
proven.
In Lathigra, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days
before departure and failing to inform the latter that the flight had already been discontinued is not among
the acts covered by the Warsaw Convention, since the alleged negligence did not occur during the
performance of the contract of carriage but, rather, days before the scheduled flight.
In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines
flight because PAL allegedly failed to endorse the tickets of private respondent and his companions,
despite PAL’s assurances to respondent that Singapore Airlines had already confirmed their passage.
While this fact still needs to be heard and established by adequate proof before the RTC, an action based
on these allegations will not fall under the Warsaw Convention, since the purported negligence on the
part of PAL did not occur during the performance of the contract of carriage but days before the
scheduled flight. Thus, the present action cannot be dismissed based on the statute of limitations
provided under Article 29 of the Warsaw Convention.
Had the present case merely consisted of claims incidental to the airlines’ delay in transporting their
passengers, the private respondent’s Complaint would have been time-barred under Article 29 of the
Warsaw Convention. However, the present case involves a special species of injury resulting from the
failure of PAL and/or Singapore Airlines to transport private respondent from Singapore to Jakarta – the
profound distress, fear, anxiety and humiliation that private respondent experienced when, despite PAL’s
earlier assurance that Singapore Airlines confirmed his passage, he was prevented from boarding the
plane and he faced the daunting possibility that he would be stranded in Singapore Airport because the
PAL office was already closed.
These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw
Convention. Hence, the applicable prescription period is that provided under Article 1146 of the Civil
Code:
Art. 1146. The following actions must be instituted within four years:
Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was less than four
years since PAL received his extrajudicial demand on 25 January 1994. Thus, private respondent’s
claims have not yet prescribed and PAL’s Motion to Dismiss must be denied.
Moreover, should there be any doubt as to the prescription of private respondent’s Complaint, the more
prudent action is for the RTC to continue hearing the same and deny the Motion to Dismiss. Where it
cannot be determined with certainty whether the action has already prescribed or not, the defense of
prescription cannot be sustained on a mere motion to dismiss based on what appears to be on the face of
the complaint.24 And where the ground on which prescription is based does not appear to be indubitable,
the court may do well to defer action on the motion to dismiss until after trial on the merits.25
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 48664, promulgated on 17 August 2001 is AFFIRMED. Costs against the
petitioner.
SO ORDERED.
CASE 6
DECISION
Jurisdictio est potestas de publico introducta cum necessitate juris dicendi. Jurisdiction is a power
introduced for the public good, on account of the necessity of dispensing justice. 1
Factual Antecedents
On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint 2 for damages against respondent
British Airways before the Regional Trial Court (RTC) of Makati City. She alleged that on February 28,
2005, she took respondent’s flight 548 from London, United Kingdom to Rome, Italy. Once on board, she
allegedly requested Julian Halliday (Halliday), one of the respondent’s flight attendants, to assist her in
placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and
assist her, and even sarcastically remarked that "If I were to help all 300 passengers in this flight, I would
have a broken back!"
Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight attendant,
Nickolas Kerrigan (Kerrigan), singled her out from among all the passengers in the business class section
to lecture on plane safety. Allegedly, Kerrigan made her appear to the other passengers to be ignorant,
uneducated, stupid, and in need of lecturing on the safety rules and regulations of the plane. Affronted,
petitioner assured Kerrigan that she knew the plane’s safety regulations being a frequent traveler.
Thereupon, Kerrigan allegedly thrust his face a mere few centimeters away from that of the petitioner and
menacingly told her that "We don’t like your attitude."
Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an apology.
However, the latter declared that the flight stewards were "only doing their job."
Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay ₱5 million as
moral damages, ₱2 million as nominal damages, ₱1 million as exemplary damages, ₱300,000.00 as
attorney’s fees, ₱200,000.00 as litigation expenses, and cost of the suit.
On May 16, 2005, summons, together with a copy of the complaint, was served on the respondent
through Violeta Echevarria, General Manager of Euro-Philippine Airline Services, Inc.3
On May 30, 2005, respondent, by way of special appearance through counsel, filed a Motion to
Dismiss4 on grounds of lack of jurisdiction over the case and over the person of the respondent.
Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over
the complaint for damages pursuant to the Warsaw Convention, 5 Article 28(1) of which provides:
An action for damages must be brought at the option of the plaintiff, either before the court of domicile of
the carrier or his principal place of business, or where he has a place of business through which the
contract has been made, or before the court of the place of destination.
Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over the person of the
respondent because the summons was erroneously served on Euro-Philippine Airline Services, Inc.
which is not its resident agent in the Philippines.
On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her
Comment/Opposition on the Motion to Dismiss within 10 days from notice thereof, and for respondent to
file a Reply thereon.7 Instead of filing a Comment/Opposition, petitioner filed on June 27, 2005, an Urgent
Ex-Parte Motion to Admit Formal Amendment to the Complaint and Issuance of Alias
Summons.8 Petitioner alleged that upon verification with the Securities and Exchange Commission, she
found out that the resident agent of respondent in the Philippines is Alonzo Q. Ancheta. Subsequently, on
September 9, 2005, petitioner filed a Motion to Resolve Pending Incident and Opposition to Motion to
Dismiss.9
Ruling of the Regional Trial Court
On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order 10 granting respondent’s
Motion to Dismiss. It ruled that:
The Court sympathizes with the alleged ill-treatment suffered by the plaintiff. However, our Courts have to
apply the principles of international law, and are bound by treaty stipulations entered into by the
Philippines which form part of the law of the land. One of this is the Warsaw Convention. Being a
signatory thereto, the Philippines adheres to its stipulations and is bound by its provisions including the
place where actions involving damages to plaintiff is to be instituted, as provided for under Article 28(1)
thereof. The Court finds no justifiable reason to deviate from the indicated limitations as it will only run
counter to the provisions of the Warsaw Convention. Said adherence is in consonance with the comity of
nations and deviation from it can only be effected through proper denunciation as enunciated in the
Santos case (ibid). Since the Philippines is not the place of domicile of the defendant nor is it the principal
place of business, our courts are thus divested of jurisdiction over cases for damages. Neither was
plaintiff’s ticket issued in this country nor was her destination Manila but Rome in Italy. It bears stressing
however, that referral to the court of proper jurisdiction does not constitute constructive denial of plaintiff’s
right to have access to our courts since the Warsaw Convention itself provided for jurisdiction over cases
arising from international transportation. Said treaty stipulations must be complied with in good faith
following the time honored principle of pacta sunt servanda.
The resolution of the propriety of service of summons is rendered moot by the Court’s want of jurisdiction
over the instant case.
WHEREFORE, premises considered, the present Motion to Dismiss is hereby GRANTED and this case is
hereby ordered DISMISSED.
Petitioner filed a Motion for Reconsideration but the motion was denied in an Order11 dated January 4,
2006.
Petitioner now comes directly before us on a Petition for Review on Certiorari on pure questions of law,
raising the following issues:
Issues
Petitioner’s Arguments
Petitioner argues that her cause of action arose not from the contract of carriage, but from the tortious
conduct committed by airline personnel of respondent in violation of the provisions of the Civil Code on
Human Relations. Since her cause of action was not predicated on the contract of carriage, petitioner
asserts that she has the option to pursue this case in this jurisdiction pursuant to Philippine laws.
Respondent’s Arguments
In contrast, respondent maintains that petitioner’s claim for damages fell within the ambit of Article 28(1)
of the Warsaw Convention. As such, the same can only be filed before the courts of London, United
Kingdom or Rome, Italy.
Our Ruling
The Warsaw Convention has the force and effect of law in this country.
It is settled that the Warsaw Convention has the force and effect of law in this country. In Santos III v.
Northwest Orient Airlines,12 we held that:
The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating
to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on
February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on
May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on
October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention
became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon
Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, "to the end that the
same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of
the Philippines and the citizens thereof."
The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as
such, has the force and effect of law in this country. 13
The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was
between the United Kingdom and Italy, which are both signatories to the Warsaw Convention.
1. This Convention applies to all international carriage of persons, luggage or goods performed by
aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air
transport undertaking.
2. For the purposes of this Convention the expression "international carriage" means any carriage
in which, according to the contract made by the parties, the place of departure and the place of
destination, whether or not there be a break in the carriage or a transhipment, are situated either
within the territories of two High Contracting Parties, or within the territory of a single High
Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty,
suzerainty, mandate or authority of another Power, even though that Power is not a party to this
Convention. A carriage without such an agreed stopping place between territories subject to the
sovereignty, suzerainty, mandate or authority of the same High Contracting Party is not deemed
to be international for the purposes of this Convention. (Emphasis supplied)
Thus, when the place of departure and the place of destination in a contract of carriage are situated within
the territories of two High Contracting Parties, said carriage is deemed an "international carriage". The
High Contracting Parties referred to herein were the signatories to the Warsaw Convention and those
which subsequently adhered to it. 14
In the case at bench, petitioner’s place of departure was London, United Kingdom while her place of
destination was Rome, Italy.15 Both the United Kingdom 16 and Italy17 signed and ratified the Warsaw
Convention. As such, the transport of the petitioner is deemed to be an "international carriage" within the
contemplation of the Warsaw Convention.
Since the Warsaw Convention applies in the instant case, then the jurisdiction over the subject matter of
the action is governed by the provisions of the Warsaw Convention.
Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –
2. the court where the carrier has its principal place of business;
3. the court where the carrier has an establishment by which the contract has been made; or
In this case, it is not disputed that respondent is a British corporation domiciled in London, United
Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional
rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the
passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the
ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the
option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and respondent
aver that the place of destination is Rome, Italy, which is properly designated given the routing presented
in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the
courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction
over the case filed by the petitioner.
Petitioner contends that Santos III v. Northwest Orient Airlines 19 cited by the trial court is inapplicable to
the present controversy since the facts thereof are not similar with the instant case.
We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus:
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a
venue provision. First, the wording of Article 32, which indicates the places where the action for damages
"must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is
consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the
conditions of international transportation by air." Third, the Convention does not contain any provision
prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to
jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32
specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot
be left to the will of the parties regardless of the time when the damage occurred.
xxxx
In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual
concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of the
Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to
the applicable domestic law. Only after the question of which court has jurisdiction is determined will the
issue of venue be taken up. This second question shall be governed by the law of the court to which the
case is submitted.22
Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines 23 is analogous to the
instant case because (1) the domicile of respondent is London, United Kingdom; 24 (2) the principal office
of respondent airline is likewise in London, United Kingdom; 25 (3) the ticket was purchased in Rome,
Italy;26 and (4) the place of destination is Rome, Italy.27 In addition, petitioner based her complaint on
Article 217628 of the Civil Code on quasi-delict and Articles 1929 and 2130 of the Civil Code on Human
Relations. In Santos III v. Northwest Orient Airlines, 31 Augusto Santos III similarly posited that Article 28
(1) of the Warsaw Convention did not apply if the action is based on tort. Hence, contrary to the
contention of the petitioner, the factual setting of Santos III v. Northwest Orient Airlines32 and the instant
case are parallel on the material points.
Tortious conduct as ground for the petitioner’s complaint is within the purview of the Warsaw Convention.
Petitioner contends that in Santos III v. Northwest Orient Airlines, 33 the cause of action was based on a
breach of contract while her cause of action arose from the tortious conduct of the airline personnel and
violation of the Civil Code provisions on Human Relations. 34 In addition, she claims that our
pronouncement in Santos III v. Northwest Orient Airlines 35 that "the allegation of willful misconduct
resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention,"
is more of an obiter dictum rather than the ratio decidendi. 36 She maintains that the fact that said acts
occurred aboard a plane is merely incidental, if not irrelevant. 37
We disagree with the position taken by the petitioner. Black defines obiter dictum as "an opinion entirely
unnecessary for the decision of the case" and thus "are not binding as precedent." 38 In Santos III v.
Northwest Orient Airlines,39 Augusto Santos III categorically put in issue the applicability of Article 28(1) of
the Warsaw Convention if the action is based on tort.
In the said case, we held that the allegation of willful misconduct resulting in a tort is insufficient to
exclude the case from the realm of the Warsaw Convention. In fact, our ruling that a cause of action
based on tort did not bring the case outside the sphere of the Warsaw Convention was our ratio decidendi
in disposing of the specific issue presented by Augusto Santos III. Clearly, the contention of the herein
petitioner that the said ruling is an obiter dictum is without basis.
Relevant to this particular issue is the case of Carey v. United Airlines, 40 where the passenger filed an
action against the airline arising from an incident involving the former and the airline’s flight attendant
during an international flight resulting to a heated exchange which included insults and profanity. The
United States Court of Appeals (9th Circuit) held that the "passenger's action against the airline carrier
arising from alleged confrontational incident between passenger and flight attendant on international flight
was governed exclusively by the Warsaw Convention, even though the incident allegedly involved
intentional misconduct by the flight attendant." 41
In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action against the airline in the state
court, arising from a confrontation with the flight attendant during an international flight to Mexico. The
United States Court of Appeals (9th Circuit) held that the "Warsaw Convention governs actions arising
from international air travel and provides the exclusive remedy for conduct which falls within its
provisions." It further held that the said Convention "created no exception for an injury suffered as a result
of intentional conduct" 43 which in that case involved a claim for intentional infliction of emotional distress.
It is thus settled that allegations of tortious conduct committed against an airline passenger during the
course of the international carriage do not bring the case outside the ambit of the Warsaw Convention.
Respondent, in seeking remedies from the trial court through special appearance of counsel, is not
deemed to have voluntarily submitted itself to the jurisdiction of the trial court.
Petitioner argues that respondent has effectively submitted itself to the jurisdiction of the trial court when
the latter stated in its Comment/Opposition to the Motion for Reconsideration that "Defendant [is at a loss]
x x x how the plaintiff arrived at her erroneous impression that it is/was Euro-Philippines Airlines Services,
Inc. that has been making a special appearance since x x x British Airways x x x has been clearly
specifying in all the pleadings that it has filed with this Honorable Court that it is the one making a special
appearance."44
In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v. Court of
Appeals45 where we held that even if a party "challenges the jurisdiction of the court over his person, as
by reason of absence or defective service of summons, and he also invokes other grounds for the
dismissal of the action under Rule 16, he is not deemed to be in estoppel or to have waived his objection
to the jurisdiction over his person." 46
This issue has been squarely passed upon in the recent case of Garcia v. Sandiganbayan, 47 where we
reiterated our ruling in La Naval Drug Corporation v. Court of Appeals 48 and elucidated thus:
Voluntary Appearance
The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly provides:
Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent
to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of
jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.
Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his person,
together with other grounds raised therein, is not deemed to have appeared voluntarily before the court.
What the rule on voluntary appearance – the first sentence of the above-quoted rule – means is that the
voluntary appearance of the defendant in court is without qualification, in which case he is deemed to
have waived his defense of lack of jurisdiction over his person due to improper service of summons.
The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that she voluntarily
appeared without qualification. Petitioner filed the following pleadings in Forfeiture I: (a) motion to dismiss;
(b) motion for reconsideration and/or to admit answer; (c) second motion for reconsideration; (d) motion to
consolidate forfeiture case with plunder case; and (e) motion to dismiss and/or to quash Forfeiture I. And
in Forfeiture II: (a) motion to dismiss and/or to quash Forfeiture II; and (b) motion for partial
reconsideration.
The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely for special
appearance with the purpose of challenging the jurisdiction of the SB over her person and that of her
three children. Petitioner asserts therein that SB did not acquire jurisdiction over her person and of her
three children for lack of valid service of summons through improvident substituted service of summons in
both Forfeiture I and Forfeiture II. This stance the petitioner never abandoned when she filed her motions
for reconsideration, even with a prayer to admit their attached Answer Ex Abundante Ad Cautelam dated
January 22, 2005 setting forth affirmative defenses with a claim for damages. And the other subsequent
pleadings, likewise, did not abandon her stance and defense of lack of jurisdiction due to improper
substituted services of summons in the forfeiture cases. Evidently, from the foregoing Sec. 20, Rule 14 of
the 1997 Revised Rules on Civil Procedure, petitioner and her sons did not voluntarily appear before the
SB constitutive of or equivalent to service of summons.
Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant case. Said case
elucidates the current view in our jurisdiction that a special appearance before the court––challenging its
jurisdiction over the person through a motion to dismiss even if the movant invokes other grounds––is not
tantamount to estoppel or a waiver by the movant of his objection to jurisdiction over his person; and such
is not constitutive of a voluntary submission to the jurisdiction of the court.1avvphi1
Thus, it cannot be said that petitioner and her three children voluntarily appeared before the SB to cure
the defective substituted services of summons. They are, therefore, not estopped from questioning the
jurisdiction of the SB over their persons nor are they deemed to have waived such defense of lack of
jurisdiction. Consequently, there being no valid substituted services of summons made, the SB did not
acquire jurisdiction over the persons of petitioner and her children. And perforce, the proceedings in the
subject forfeiture cases, insofar as petitioner and her three children are concerned, are null and void for
lack of jurisdiction. (Emphasis supplied)
In this case, the special appearance of the counsel of respondent in filing the Motion to Dismiss and other
pleadings before the trial court cannot be deemed to be voluntary submission to the jurisdiction of the
said trial court. We hence disagree with the contention of the petitioner and rule that there was no
voluntary appearance before the trial court that could constitute estoppel or a waiver of respondent’s
objection to jurisdiction over its person.
WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the Regional Trial Court of Makati
City, Branch 132, dismissing the complaint for lack of jurisdiction, is AFFIRMED.
SO ORDERED.
CASE 7
Is an involuntary upgrading of an airline passenger’s accommodation from one class to a more superior
class at no extra cost a breach of contract of carriage that would entitle the passenger to an award of
damages? This is a novel question that has to be resolved in this case.
The facts in this case, as found by the Court of Appeals and adopted by petitioner Cathay Pacific
Airways, Ltd., (hereinafter Cathay) are as follows:
Cathay is a common carrier engaged in the business of transporting passengers and goods by air.
Among the many routes it services is the Manila-Hongkong-Manila course. As part of its marketing
strategy, Cathay accords its frequent flyers membership in its Marco Polo Club. The members enjoy
several privileges, such as priority for upgrading of booking without any extra charge whenever an
opportunity arises. Thus, a frequent flyer booked in the Business Class has priority for upgrading to First
Class if the Business Class Section is fully booked.
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are frequent
flyers of Cathay and are Gold Card members of its Marco Polo Club. On 24 September 1996, the
Vazquezes, together with their maid and two friends Pacita Cruz and Josefina Vergel de Dios, went to
Hongkong for pleasure and business.
For their return flight to Manila on 28 September 1996, they were booked on Cathay’s Flight CX-905, with
departure time at 9:20 p.m. Two hours before their time of departure, the Vazquezes and their
companions checked in their luggage at Cathay’s check-in counter at Kai Tak Airport and were given their
respective boarding passes, to wit, Business Class boarding passes for the Vazquezes and their two
friends, and Economy Class for their maid. They then proceeded to the Business Class passenger
lounge.
When boarding time was announced, the Vazquezes and their two friends went to Departure Gate No.
28, which was designated for Business Class passengers. Dr. Vazquez presented his boarding pass to
the ground stewardess, who in turn inserted it into an electronic machine reader or computer at the gate.
The ground stewardess was assisted by a ground attendant by the name of Clara Lai Han Chiu. When
Ms. Chiu glanced at the computer monitor, she saw a message that there was a "seat change" from
Business Class to First Class for the Vazquezes.
Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’ accommodations were upgraded to
First Class. Dr. Vazquez refused the upgrade, reasoning that it would not look nice for them as hosts to
travel in First Class and their guests, in the Business Class; and moreover, they were going to discuss
business matters during the flight. He also told Ms. Chiu that she could have other passengers instead
transferred to the First Class Section. Taken aback by the refusal for upgrading, Ms. Chiu consulted her
supervisor, who told her to handle the situation and convince the Vazquezes to accept the upgrading. Ms.
Chiu informed the latter that the Business Class was fully booked, and that since they were Marco Polo
Club members they had the priority to be upgraded to the First Class. Dr. Vazquez continued to refuse,
so Ms. Chiu told them that if they would not avail themselves of the privilege, they would not be allowed to
take the flight. Eventually, after talking to his two friends, Dr. Vazquez gave in. He and Mrs. Vazquez then
proceeded to the First Class Cabin.
Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to Cathay’s Country
Manager, demanded that they be indemnified in the amount of P1million for the "humiliation and
embarrassment" caused by its employees. They also demanded "a written apology from the management
of Cathay, preferably a responsible person with a rank of no less than the Country Manager, as well as
the apology from Ms. Chiu" within fifteen days from receipt of the letter.
In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s Country Manager Argus Guy
Robson, informed the Vazquezes that Cathay would investigate the incident and get back to them within
a week’s time.
On 8 November 1996, after Cathay’s failure to give them any feedback within its self-imposed deadline,
the Vazquezes instituted before the Regional Trial Court of Makati City an action for damages against
Cathay, praying for the payment to each of them the amounts of P250,000 as temperate damages;
P500,000 as moral damages; P500,000 as exemplary or corrective damages; and P250,000 as attorney’s
fees.
In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that they preferred to stay in
Business Class, Ms. Chiu "obstinately, uncompromisingly and in a loud, discourteous and harsh voice
threatened" that they could not board and leave with the flight unless they go to First Class, since the
Business Class was overbooked. Ms. Chiu’s loud and stringent shouting annoyed, embarrassed, and
humiliated them because the incident was witnessed by all the other passengers waiting for boarding.
They also claimed that they were unjustifiably delayed to board the plane, and when they were finally
permitted to get into the aircraft, the forward storage compartment was already full. A flight stewardess
instructed Dr. Vazquez to put his roll-on luggage in the overhead storage compartment. Because he was
not assisted by any of the crew in putting up his luggage, his bilateral carpal tunnel syndrome was
aggravated, causing him extreme pain on his arm and wrist. The Vazquezes also averred that they
"belong to the uppermost and absolutely top elite of both Philippine Society and the Philippine financial
community, [and that] they were among the wealthiest persons in the Philippine[s]."
In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade passengers to the
next better class of accommodation, whenever an opportunity arises, such as when a certain section is
fully booked. Priority in upgrading is given to its frequent flyers, who are considered favored passengers
like the Vazquezes. Thus, when the Business Class Section of Flight CX-905 was fully booked, Cathay’s
computer sorted out the names of favored passengers for involuntary upgrading to First Class. When Ms.
Chiu informed the Vazquezes that they were upgraded to First Class, Dr. Vazquez refused. He then stood
at the entrance of the boarding apron, blocking the queue of passengers from boarding the plane, which
inconvenienced other passengers. He shouted that it was impossible for him and his wife to be upgraded
without his two friends who were traveling with them. Because of Dr. Vazquez’s outburst, Ms. Chiu
thought of upgrading the traveling companions of the Vazquezes. But when she checked the computer,
she learned that the Vazquezes’ companions did not have priority for upgrading. She then tried to book
the Vazquezes again to their original seats. However, since the Business Class Section was already fully
booked, she politely informed Dr. Vazquez of such fact and explained that the upgrading was in
recognition of their status as Cathay’s valued passengers. Finally, after talking to their guests, the
Vazquezes eventually decided to take the First Class accommodation.
Cathay also asserted that its employees at the Hong Kong airport acted in good faith in dealing with the
Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of disrespect against
them (the Vazquezes). Assuming that there was indeed a breach of contractual obligation, Cathay acted
in good faith, which negates any basis for their claim for temperate, moral, and exemplary damages and
attorney’s fees. Hence, it prayed for the dismissal of the complaint and for payment of P100,000 for
exemplary damages and P300,000 as attorney’s fees and litigation expenses.
During the trial, Dr. Vazquez testified to support the allegations in the complaint. His testimony was
corroborated by his two friends who were with him at the time of the incident, namely, Pacita G. Cruz and
Josefina Vergel de Dios.
For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen; Ms. Chiu; Norma
Barrientos, Comptroller of its retained counsel; and Mr. Robson. Yuen and Robson testified on Cathay’s
policy of upgrading the seat accommodation of its Marco Polo Club members when an opportunity arises.
The upgrading of the Vazquezes to First Class was done in good faith; in fact, the First Class Section is
definitely much better than the Business Class in terms of comfort, quality of food, and service from the
cabin crew. They also testified that overbooking is a widely accepted practice in the airline industry and is
in accordance with the International Air Transport Association (IATA) regulations. Airlines overbook
because a lot of passengers do not show up for their flight. With respect to Flight CX-905, there was no
overall overbooking to a degree that a passenger was bumped off or downgraded. Yuen and Robson also
stated that the demand letter of the Vazquezes was immediately acted upon. Reports were gathered from
their office in Hong Kong and immediately forwarded to their counsel Atty. Remollo for legal advice.
However, Atty. Remollo begged off because his services were likewise retained by the Vazquezes;
nonetheless, he undertook to solve the problem in behalf of Cathay. But nothing happened until Cathay
received a copy of the complaint in this case. For her part, Ms. Chiu denied that she shouted or used foul
or impolite language against the Vazquezes. Ms. Barrientos testified on the amount of attorney’s fees and
other litigation expenses, such as those for the taking of the depositions of Yuen and Chiu.
In its decision1 of 19 October 1998, the trial court found for the Vazquezes and decreed as follows:
d) Attorney’s fees and expenses of litigation in the amount of P1,000,000.00 for each
plaintiff; and
e) Costs of suit.
SO ORDERED.
According to the trial court, Cathay offers various classes of seats from which passengers are allowed to
choose regardless of their reasons or motives, whether it be due to budgetary constraints or whim. The
choice imposes a clear obligation on Cathay to transport the passengers in the class chosen by them.
The carrier cannot, without exposing itself to liability, force a passenger to involuntarily change his choice.
The upgrading of the Vazquezes’ accommodation over and above their vehement objections was due to
the overbooking of the Business Class. It was a pretext to pack as many passengers as possible into the
plane to maximize Cathay’s revenues. Cathay’s actuations in this case displayed deceit, gross
negligence, and bad faith, which entitled the Vazquezes to awards for damages.
On appeal by the petitioners, the Court of Appeals, in its decision of 24 July 2001, 2 deleted the award for
exemplary damages; and it reduced the awards for moral and nominal damages for each of the
Vazquezes to P250,000 and P50,000, respectively, and the attorney’s fees and litigation expenses to
P50,000 for both of them.
The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class, Cathay novated the
contract of carriage without the former’s consent. There was a breach of contract not because Cathay
overbooked the Business Class Section of Flight CX-905 but because the latter pushed through with the
upgrading despite the objections of the Vazquezes.
However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or meant to be discourteous
to, Dr. Vazquez, although it might seemed that way to the latter, who was a member of the elite in
Philippine society and was not therefore used to being harangued by anybody. Ms. Chiu was a Hong
Kong Chinese whose fractured Chinese was difficult to understand and whose manner of speaking might
sound harsh or shrill to Filipinos because of cultural differences. But the Court of Appeals did not find her
to have acted with deliberate malice, deceit, gross negligence, or bad faith. If at all, she was negligent in
not offering the First Class accommodations to other passengers. Neither can the flight stewardess in the
First Class Cabin be said to have been in bad faith when she failed to assist Dr. Vazquez in lifting his
baggage into the overhead storage bin. There is no proof that he asked for help and was refused even
after saying that he was suffering from "bilateral carpal tunnel syndrome." Anent the delay of Yuen in
responding to the demand letter of the Vazquezes, the Court of Appeals found it to have been sufficiently
explained.
The Vazquezes and Cathay separately filed motions for a reconsideration of the decision, both of which
were denied by the Court of Appeals.
Cathay seasonably filed with us this petition in this case. Cathay maintains that the award for moral
damages has no basis, since the Court of Appeals found that there was no "wanton, fraudulent, reckless
and oppressive" display of manners on the part of its personnel; and that the breach of contract was not
attended by fraud, malice, or bad faith. If any damage had been suffered by the Vazquezes, it
was damnum absque injuria, which is damage without injury, damage or injury inflicted without injustice,
loss or damage without violation of a legal right, or a wrong done to a man for which the law provides no
remedy. Cathay also invokes our decision in United Airlines, Inc. v. Court of Appeals3 where we
recognized that, in accordance with the Civil Aeronautics Board’s Economic Regulation No. 7, as
amended, an overbooking that does not exceed ten percent cannot be considered deliberate and done in
bad faith. We thus deleted in that case the awards for moral and exemplary damages, as well as
attorney’s fees, for lack of proof of overbooking exceeding ten percent or of bad faith on the part of the
airline carrier.
On the other hand, the Vazquezes assert that the Court of Appeals was correct in granting awards for
moral and nominal damages and attorney’s fees in view of the breach of contract committed by Cathay
for transferring them from the Business Class to First Class Section without prior notice or consent and
over their vigorous objection. They likewise argue that the issuance of passenger tickets more than the
seating capacity of each section of the plane is in itself fraudulent, malicious and tainted with bad faith.
The key issues for our consideration are whether (1) by upgrading the seat accommodation of the
Vazquezes from Business Class to First Class Cathay breached its contract of carriage with the
Vazquezes; (2) the upgrading was tainted with fraud or bad faith; and (3) the Vazquezes are entitled to
damages.
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.
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. Nominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.
Worth noting is the fact that in Cathay’s Memorandum filed with this Court, it prayed only for the deletion
of the award for moral damages. It deferred to the Court of Appeals’ discretion in awarding nominal
damages; thus:
As far as the award of nominal damages is concerned, petitioner respectfully defers to the
Honorable Court of Appeals’ discretion. Aware as it is that somehow, due to the resistance of
respondents-spouses to the normally-appreciated gesture of petitioner to upgrade their
accommodations, petitioner may have disturbed the respondents-spouses’ wish to be with their
companions (who traveled to Hong Kong with them) at the Business Class on their flight to
Manila. Petitioner regrets that in its desire to provide the respondents-spouses with additional
amenities for the one and one-half (1 1/2) hour flight to Manila, unintended tension ensued. 18
Nonetheless, considering that the breach was intended to give more benefit and advantage to the
Vazquezes by upgrading their Business Class accommodation to First Class because of their valued
status as Marco Polo members, we reduce the award for nominal damages to P5,000.
Before writing finis to this decision, we find it well-worth to quote the apt observation of the Court of
Appeals regarding the awards adjudged by the trial court:
We are not amused but alarmed at the lower court’s unbelievable alacrity, bordering on the scandalous,
to award excessive amounts as damages. In their complaint, appellees asked for P1 million as moral
damages but the lower court awarded P4 million; they asked for P500,000.00 as exemplary damages but
the lower court cavalierly awarded a whooping P10 million; they asked for P250,000.00 as attorney’s fees
but were awarded P2 million; they did not ask for nominal damages but were awarded P200,000.00. It is
as if the lower court went on a rampage, and why it acted that way is beyond all tests of reason. In fact
the excessiveness of the total award invites the suspicion that it was the result of "prejudice or corruption
on the part of the trial court."
The presiding judge of the lower court is enjoined to hearken to the Supreme Court’s admonition
in Singson vs. CA (282 SCRA 149 [1997]), where it said:
The well-entrenched principle is that the grant of moral damages depends upon the
discretion of the court based on the circumstances of each case. This discretion is limited
by the principle that the amount awarded should not be palpably and scandalously
excessive as to indicate that it was the result of prejudice or corruption on the part of the
trial court….
and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held:
Nonetheless, we agree with the injunction expressed by the Court of Appeals that
passengers must not prey on international airlines for damage awards, like "trophies in a
safari." After all neither the social standing nor prestige of the passenger should
determine the extent to which he would suffer because of a wrong done, since the dignity
affronted in the individual is a quality inherent in him and not conferred by these social
indicators. 19
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.
CASE 8
SECOND DIVISION
DECISION
LEONEN, J.:
The plaintiff may first prove the employer's ownership of the vehicle involved in a mishap by presenting
the vehicle's registration in evidence. Thereafter, a disputable presumption that the requirements for an
employer's liability under Article 2180 [1] of the Civil Code have been satisfied will arise. The burden of
evidence then shifts to the defendant to show that no liability under Article 2180 has ensued. This case,
thus, harmonizes the requirements of Article 2180, in relation to Article 2176 [2] of the Civil Code, and the
so-called registered-owner rule as established in this court's rulings in Aguilar, Sr. v. Commercial Savings
Bank,[3] Del Carmen, Jr. v. Bacoy,[4] Filcar Transport Services v. Espinas,[5] and Mendoza v. Spouses
Gomez.[6]
Through this Petition for Review on Certiorari, [7] Caravel Travel and Tours International, Inc. (Caravan)
prays that the Decision [8] dated October 3, 2005 and the Resolution[9] dated November 29, 2005 of the
Court of Appeals Twelfth Division be reversed and set aside. [10]
On July 13, 2000, Jesmariane R. Reyes (Reyes) was walking along the west-bound lane of Sampaguita
Street, United Parañaque Subdivision IV, Parañaque City.[11] A Mitsubishi L-300 van with plate number
PKM 195[12] was travelling along the east-bound lane, opposite Reyes. [13] To avoid an incoming vehicle,
the van swerved to its left and hit Reyes. [14] Alex Espinosa (Espinosa), a witness to the accident, went to
her aid and loaded her in the back of the van. [15] Espinosa told the driver of the van, Jimmy Bautista
(Bautista), to bring Reyes to the hospital. [16] Instead of doing so, Bautista appeared to have left the van
parked inside a nearby subdivision with Reyes still in the van. [17] Fortunately for Reyes, an unidentified
civilian came to help and drove Reyes to the hospital. [18]
Upon investigation, it was found that the registered owner of the van was Caravan. [19] Caravan is a
corporation engaged in the business of organizing travels and tours. [20] Bautista was Caravan's employee
assigned to drive the van as its service driver. [21]
Caravan shouldered the hospitalization expenses of Reyes. [22] Despite medical attendance, Reyes died
two (2) days after the accident.[23]
Respondent Ermilinda R. Abejar (Abejar), Reyes' paternal aunt and the person who raised her since she
was nine (9) years old,[24] filed before the Regional Trial Court of Parañaque a Complaint [25] for damages
against Bautista and Caravan. In her Complaint, Abejar alleged that Bautista was an employee of
Caravan and that Caravan is the registered owner of the van that hit Reyes. [26]
Summons could not be served on Bautista. [27] Thus, Abejar moved to drop Bautista as a
defendant.[28] The Regional Trial Court granted her Motion. [29]
After trial, the Regional Trial Court found that Bautista was grossly negligent in driving the vehicle. [30] It
awarded damages in favor of Abejar, as follows:
WHEREFORE, considering that the [respondent] was able to provide by preponderance of evidence her
cause of action against the defendants, judgment is hereby rendered ordering defendants JIMMY
BAUTISTA and CARAVAN TRAVEL and TOURS[,] INC., to jointly and solidarity pay the plaintiff, the
following, to wit:
SO ORDERED.[31]
Caravan's Motion for Reconsideration [32] was denied through the October 20, 2003 Order[33] of the
Regional Trial Court.
The Court of Appeals affirmed with modification the Regional Trial Court's July 31, 2003 Decision and
October 20, 2003 Order, as follows:
WHEREFORE, premises considered, the instant appeal is DENIED for lack of merit. The assailed
Decision dated 31 July 2003 and Order dated 20 October 2003 of the Regional Trial Court, City of
Para[ñ]aque, Branch 258, in Civil Case No. 00-0447 are AFFIRMED with the following MODIFICATIONS:
3. The Php 35,000.00 actual damages, Php 200,000.00 moral damages, Php 30,000.00 exemplary
damages and Php 50,000.00 attorney's fees shall earn interest at the rate of 6% per
annum computed from 31 July 2003, the date of the [Regional Trial Court's] decision; and upon
finality of this Decision, all the amounts due shall earn interest at the rate of 12% per annum, in
lieu of 6% per annum, until full payment; and
4. The Php 50,000.00 death indemnity shall earn interest at the rate of 6% per annum computed
from the date of promulgation of this Decision; and upon finality of this Decision, the amount due
shall earn interest at the rate of 12% per annum, in lieu of 6% per annum, until full payment.
SO ORDERED.[34]
Caravan filed a Motion for Reconsideration, but it was denied in the Court of Appeals' assailed November
29, 2005 Resolution.[35]
Caravan argues that Abejar has no personality to bring this suit because she is not a real party in interest.
According to Caravan, Abejar does not exercise legal or substitute parental authority. She is also not the
judicially appointed guardian or the only living relative of the deceased. [36] She is also not "the executor or
administrator of the estate of the deceased." [37] According to Caravan, only the victim herself or her heirs
can enforce an action based on culpa aquiliana such as Abejar's action for damages.[38]
Caravan adds that Abejar offered no documentary or testimonial evidence to prove that Bautista, the
driver, acted "within the scope of his assigned tasks" [39] when the accident occurred.[40] According to
Caravan, Bautista's tasks only pertained to the transport of company personnel or products, and when the
accident occurred, he had not been transporting personnel or delivering products of and for the
company.[41]
Caravan also argues that "it exercised the diligence of a good father of a family in the selection and
supervision of its employees."[42]
Caravan further claims that Abejar should not have been awarded moral damages, actual damages,
death indemnity, exemplary damages, and attorney's fees. [43] It questions the Certificate provided by
Abejar as proof of expenses since its signatory, a certain Julian Peñaloza (Peñaloza), was not presented
in court, and Caravan was denied the right to cross-examine him.[44] Caravan argues that the statements
in the Certification constitute hearsay.[45] It also contends that based on Article 2206(3)[46] of the Civil
Code, Abejar is not entitled to moral damages. [47] It insists that moral and exemplary damages should not
have been awarded to Abejar because Caravan acted in good faith. [48] Considering that moral and
exemplary damages are unwarranted, Caravan claims that the award of attorney's fees should have also
been removed.[49]
Lastly, Caravan argues that it should not be held solidarily liable with Bautista since Bautista was alre ady
dropped as a party.[50]
Abejar counters that Caravan failed to provide proof that it exercised the requisite diligence in the
selection and supervision of Bautista. [51] She adds that the Court of Appeals' ruling that Caravan is
solidarily liable with Bautista for moral damages, exemplary damages, civil indemnity ex delicto, and
attorney's fees should be upheld. [52] Abejar argues that since Caravan is the registered owner of the van,
it is directly, primarily, and solidarity liable for the tortious acts of its driver.[53]
First, whether respondent Ermilinda R. Abejar is a real party in interest who may bring an action for
damages against petitioner Caravan Travel and Tours International, Inc. on account of Jesmariane R.
Reyes' death; and
Second, whether petitioner should be held liable as an employer, pursuant to Article 2180 of the Civil
Code.
Having exercised substitute parental authority, respondent suffered actual loss and is, thus, a real party in
interest in this case.
In her Complaint, respondent made allegations that would sustain her action for damages: that she
exercised substitute parental authority over Reyes; that Reyes' death was caused by the negligence of
petitioner and its driver; and that Reyes' death caused her damage. [54] Respondent properly filed an
action based on quasi-delict. She is a real party in interest.
Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a real party in interest:
....
SECTION 2. Parties in Interest. — A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the name of the real
party in interest.
"To qualify a person to be a real party in interest in whose name an action must be prosecuted, he [or
she] must appear to be the present real owner of the right sought to be enforced." [55] Respondent's
capacity to file a complaint against petitioner stems from her having exercised substitute parental
authority over Reyes.
Article 216 of the Family Code identifies the persons who exercise substitute parental authority:
Art. 216. In default of parents or a judicially appointed guardian, the following persons shall exercise
substitute parental authority over the child in the order indicated:
(2) The oldest brother or sister, over twenty-one years of age, unless unfit or disqualified; and
(3) The child's actual custodian, over twenty-one years of age, unless unfit or disqualified.
Whenever the appointment or a judicial guardian over the property of the child becomes necessary, the
same order of preference shall be observed. (Emphasis supplied)
Article 233 of the Family Code provides for the extent of authority of persons exercising substitute
parental authority, that is, the same as those of actual parents:
Art. 233. The person exercising substitute parental authority shall have the same authority over the
person of the child as the parents. (Emphasis supplied)
Both of Reyes' parents are already deceased. [57] Reyes' paternal grandparents are also both
deceased.[58] The whereabouts of Reyes' maternal grandparents are unknown. [59] There is also no record
that Reyes has brothers or sisters. It was under these circumstances that respondent took custody of
Reyes when she was a child, assumed the role of Reyes' parents, and thus, exercised substitute parental
authority over her.[60] As Reyes' custodian, respondent exercised the full extent of the statutorily
recognized rights and duties of a parent. Consistent with Article 220 [61] of the Family Code, respondent
supported Reyes' education [62] and provided for her personal needs. [63] To echo respondent's words in her
Complaint, she treated Reyes as if she were her own daughter. [64]
First, respondent suffered actual personal loss. With her affinity for Reyes, it stands to reason that whe n
Reyes died, respondent suffered the same anguish that a natural parent would have felt upon the loss of
one's child. It is for this injury—as authentic and personal as that of a natural parent—that respondent
seeks to be indemnified.
Second, respondent is capacitated to do what Reyes' actual parents would have been capacitated to do.
In Metro Manila Transit Corporation v. Court of Appeals,[65] Tapdasan, Jr. v. People,[66] and Aguilar, Sr. v.
Commercial Savings Bank,[67] this court allowed natural parents of victims to recover damages for the
death of their children. Inasmuch as persons exercising substitute parental authority have the full range of
competencies of a child's actual parents, nothing prevents persons exercising substitute parental
authority from similarly possessing the right to be indemnified for their ward's death.
We note that Reyes was already 18 years old when she died. Having reached the age of majority, she
was already emancipated upon her death. While parental authority is terminated upon
emancipation,[68] respondent continued to support and care for Reyes even after she turned 18. [69] Except
for the legal technicality of Reyes' emancipation, her relationship with respondent remained the same.
The anguish and damage caused to respondent by Reyes' death was no different because of Reyes'
emancipation.
In any case, the termination of respondent's parental authority is not an insurmountable legal bar that
precludes the filing of her Complaint. In interpreting Article 1902 [70] of the old Civil Code, which is
substantially similar to the first sentence of Article 2176 [71] of the Civil Code, this court in The Receiver For
North Negros Sugar Company, Inc. v. Ybañez, et al. [72] ruled that brothers and sisters may recover
damages, except moral damages, for the death of their sibling. [73] This court declared that Article 1902 of
the old Civil Code (now Article 2176) is broad enough to accommodate even plaintiffs who are not
relatives of the deceased, thus: [74]
This Court said: "Article 1902 of the Civil Code declares that any person who by an act or omission,
characterized by fault or negligence, causes damage to another shall be liable for the damage done ... a
person is liable for damage done to another by any culpable act; and by any culpable act is meant any act
which is blameworthy when judged by accepted legal standards. The idea thus expressed is undoubtedly
broad enough to include any rational conception of liability for the tortious acts likely to be developed in
any society." The word "damage" in said article, comprehending as it does all that are embraced in its
meaning, includes any and all damages that a human being may suffer in any and all the manifestations
of his life: physical or material, moral or psychological, mental or spiritual, financial, economic, social,
political, and religious.
It is particularly noticeable that Article 1902 stresses the passive subject of the obligation to pay damages
caused by his fault or negligence. The article does not limit or specify the active subjects, much less the
relation that must exist between the victim of the culpa aquiliana and the person who may recover
damages, thus warranting the inference that, in principle, anybody who suffers any damage from culpa
aquiliana, whether a relative or not of the victim, may recover damages from the person responsible
therefor[.][75] (Emphasis supplied, citations omitted)
II
Respondent's Complaint is anchored on an employer's liability for quasi-delict provided in Article 2180, in
relation to Article 2176 of the Civil Code. Articles 2176 and 2180 read:
ARTICLE 2176. Whoever by act or omission causes damage to another, there being fault or negligence,
is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
.....
ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by
the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under their
authority and live in their company.
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.
The State is responsible in like manner when it acts through a special agent; but not when the damage
has been caused by the official to whom the task done properly pertains, in which case what is provided
in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their
pupils and students or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage. (Emphasis supplied)
Contrary to petitioner's position, it was not fatal to respondent's cause that she herself did not adduce
proof that Bautista acted within the scope of his authority. It was sufficient that Abejar proved that
petitioner was the registered owner of the van that hit Reyes.
The resolution of this case must consider two (2) rules. First, Article 2180's specification that "[e]mployers
shall be liable for the damages caused by their employees . . . acting within the scope of their assigned
tasks[.]" Second, the operation of the registered-owner rule that registered owners are liable for death or
injuries caused by the operation of their vehicles. [76]
These rules appear to be in conflict when it comes to cases in which the employer is also the registered
owner of a vehicle. Article 2180 requires proof of two things: first, an employment relationship between
the driver and the owner; and second, that the driver acted within the scope of his or her assigned tasks.
On the other hand, applying the registered-owner rule only requires the plaintiff to prove that the
defendant-employer is the registered owner of the vehicle.
The registered-owner rule was articulated as early as 1957 in Erezo, et al. v. Jepte,[77] where this court
explained that the registration of motor vehicles, as required by Section 5(a) [78] of Republic Act No. 4136,
the Land Transportation and Traffic Code, was necessary "not to make said registration the operative act
by which ownership in vehicles is transferred, . . . but to permit the use and operation of the vehicle upon
any public highway[.]"[79] Its "main aim . . . is to identify the owner so that if any accident happens, or that
any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed
on a definite individual, the registered owner." [80]
Erezo notwithstanding, Castilex Industrial Corporation v. Vasquez, Jr. [81] relied on Article 2180 of the Civil
Code even though the employer was also the registered owner of the vehicle. [82] The registered-owner
rule was not mentioned.
In Castilex, Benjamin Abad (Abad) was a manager of Castilex Industrial Corporation (Castilex). Castilex
was also the registered owner of a Toyota Hi-Lux pick-up truck. While Abad was driving the pick-up truck,
it collided with a motorcycle driven by Romeo Vasquez (Vasquez). Vasquez died a few days after.
Vasquez's parents filed a case for damages against Abad and Castilex.[83] Castilex denied liability,
arguing that Abad was acting in his private capacity at the time of the accident. [84]
This court absolved Castilex of liability, reasoning that it was incumbent upon the plaintiff to prove that the
negligent employee was acting within the scope of his assigned tasks.[85] Vasquez's parents failed to
prove this.[86] This court outlined the process necessary for an employer to be held liable for the acts of its
employees and applied the process to the case:
Under the fifth paragraph of Article 2180, whether or not engaged in any business or industry, an
employer is liable for the torts committed by employees within the scope of his assigned tasks. But it is
necessary to establish the employer-employee relationship; once this is done, the plaintiff must show, to
hold the employer liable, that the employee was acting within the scope of his assigned task when the tort
complained of was committed. It is only then that the employer may find it necessary to interpose the
defense of due diligence in the selection and supervision of the employee.
....
Since there is paucity of evidence that ABAD was acting within the scope of the functions entrusted to
him, petitioner CASTILEX had no duty to show that it exercised the diligence of a good father of a family
in providing ABAD with a service vehicle. Thus, justice and equity require that petitioner be relieved of
vicarious liability for the consequences of the negligence of ABAD in driving its vehicle. (Emphasis
supplied, citations omitted)[87]
Aguilar, Sr. v. Commercial Savings Bank recognized the seeming conflict between Article 2180 and the
registered-owner rule and applied the latter. [88]
In Aguilar, Sr., a Mitsubishi Lancer, registered in the name of Commercial Savings Bank and driven by
the bank's assistant vice-president Ferdinand Borja, hit Conrado Aguilar, Jr. The impact killed Conrado
Aguilar, Jr. His father, Conrado Aguilar, Sr. filed a case for damages against Ferdinand Borja and
Commercial Savings Bank. The Regional Trial Court found Commercial Savings Bank solidarity liable
with Ferdinand Borja.[89]
However, the Court of Appeals disagreed with the trial court's Decision and dismissed the complaint
against the bank. The Court of Appeals reasoned that Article 2180 requires the plaintiff to prove that at
the time of the accident, the employee was acting within the scope of his or her assigned tasks. The
Court of Appeals found no evidence that Ferdinand Borja was acting as the bank's assistant vice-
president at the time of the accident. [90]
The Court of Appeals' ruling was reversed by this court. [91] Aguilar, Sr. reiterated the following
pronouncements made in Erezo in ruling that the bank, as the registered owner of the vehicle, was
primarily liable to the plaintiff: [92]
The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that
any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed
on a definite individual, the registered owner....
....
A victim of recklessness on the public highways is usually without means to discover or identify the
person actually causing the injury or damage. He has no means other than by a recourse to the
registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims
to extend to him would become illusory were the registered owner given the opportunity to escape liability
by disproving his ownership. [93]
In our view, respondent bank, as the registered owner of the vehicle, is primarily liable for Aguilar, Jr.'s
death. The Court of Appeals erred when it concluded that the bank was not liable simply because (a)
petitioner did not prove that Borja was acting as the bank's vice president at the time of the accident; and
(b) Borja had, according to respondent bank, already bought the car at the time of the mishap. For as
long as the respondent bank remained the registered owner of the car involved in the vehicular accident,
it could not escape primary liability for the death of petitioner's son.[94] (Emphasis supplied)
Preference for the registered-owner rule became more pronounced in Del Carmen, Jr. v. Bacoy:[95]
Without disputing the factual finding of the [Court of Appeals] that Allan was still his employee at the time
of the accident, a finding which we see no reason to disturb, Oscar Jr. contends that Allan drove the jeep
in his private capacity and thus, an employer's vicarious liability for the employee's fault under Article
2180 of the Civil Code cannot apply to him.
The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank, the car of therein
respondent bank caused the death of Conrado Aguilar, Jr. while being driven by its assistant vice
president. Despite Article 2180, we still held the bank liable for damages for the accident as said
provision should defer to the settled doctrine concerning accidents involving registered motor
vehicles, i.e., that the registered owner of any vehicle, even if not used for public service, would primarily
be responsible to the public or to third persons for injuries caused the latter while the vehicle was being
driven on the highways or streets. We have already ratiocinated that:
The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that
any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed
on a definite individual, the registered owner. Instances are numerous where vehicles running on public
highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the
owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or injuries caused on public
highways.[96] (Emphasis supplied, citations omitted)
Filcar Transport Services v. Espinas[97] stated that the registered owner of a vehicle can no longer use the
defenses found in Article 2180: [98]
Neither can Filcar use the defenses available under Article 2180 of the Civil Code - that the employee
acts beyond the scope of his assigned task or that it exercised the due diligence of a good father of a
family to prevent damage - because the motor vehicle registration law, to a certain extent, modified Article
2180 of the Civil Code by making these defenses unavailable to the registered owner of the motor
vehicle. Thus, for as long as Filcar is the registered owner of the car involved in the vehicular accident, it
could not escape primary liability for the damages caused to Espinas. [99]
Mendoza v. Spouses Gomez[100] reiterated this doctrine.
However, Aguilar, Sr., Del Carmen, Filcar, and Mendoza should not be taken to mean that Article 2180 of
the Civil Code should be completely discarded in cases where the registered-owner rule finds application.
Thus, it is imperative to apply the registered-owner rule in a manner that harmonizes it with Articles 2176
and 2180 of the Civil Code. Rules must be construed in a manner that will harmonize them with other
rules so as to form a uniform and consistent system of jurisprudence. [103] In light of this, the words used
in Del Carmen are particularly notable. There, this court stated that Article 2180 "should defer to" [104] the
registered-owner rule. It never stated that Article 2180 should be totally abandoned.
Therefore, the appropriate approach is that in cases where both the registered-owner rule and Article
2180 apply, the plaintiff must first establish that the employer is the registered owner of the vehicle in
question. Once the plaintiff successfully proves ownership, there arises a disputable presumption that the
requirements of Article 2180 have been proven. As a consequence, the burden of proof shifts to the
defendant to show that no liability under Article 2180 has arisen.
This disputable presumption, insofar as the registered owner of the vehicle in relation to the actual driver
is concerned, recognizes that between the owner and the victim, it is the former that should carry the
costs of moving forward with the evidence. The victim is, in many cases, a hapless pedestrian or motorist
with hardly any means to uncover the employment relationship of the owner and the driver, or any act that
the owner may have done in relation to that employment.
The registration of the vehicle, on the other hand, is accessible to the public.
Here, respondent presented a copy of the Certificate of Registration[105] of the van that hit Reyes.[106] The
Certificate attests to petitioner's ownership of the van. Petitioner itself did not dispute its ownership of the
van. Consistent with the rule we have just stated, a presumption that the requirements of Article 2180
have been satisfied arises. It is now up to petitioner to establish that it incurred no liability under Article
2180. This it can do by presenting proof of any of the following: first, that it had no employment
relationship with Bautista; second, that Bautista acted outside the scope of his assigned tasks; or third,
that it exercised the diligence of a good father of a family in the selection and supervision of Bautista. [107]
On the first, petitioner admitted that Bautista was its employee at the time of the accident. [108]
On the second, petitioner was unable to prove that Bautista was not acting within the scope of his
assigned tasks at the time of the accident. When asked by the court why Bautista was at the place of the
accident when it occurred, Sally Bellido, petitioner's accountant and supervisor, [109] testified that she did
not "have the personal capacity to answer [the question]" [110] and that she had no knowledge to answer it:
COURT :Madam Witness, do you know the reason why your driver, Jimmy Bautista, at around 10:00 o'
clock in the morning of July 13, 2000 was in the vicinity of Barangay Marcelo Green, United
Parañaque Subdivision 4?
Sally Bellido's testimony does not affect the presumption that Article 2180's requirements have been
satisfied. Mere disavowals are not proof that suffice to overturn a presumption. To this end, evidence
must be adduced. However, petitioner presented no positive evidence to show that Bautista was acting in
his private capacity at the time of the incident.
On the third, petitioner likewise failed to prove that it exercised the requisite diligence in the selection and
supervision of Bautista.
In its selection of Bautista as a service driver, petitioner contented itself with Bautista's submission of
a non-professional driver's license.[112] Hence, in Sally Balledo's cross-examination:
Q : . . . when he was promoted as service driver, of course, there were certain requirements and
among other else, you made mention about a driver's license.
A : Yes, Sir.
Q : Would you be able to show to this Honorable Court whether indeed this person did submit a
driver's license to your company?
A : Yes, Sir.
....
Q : Do you recall what kind of driver's license is this?
A : Non-professional.
Employing a person holding a non-professional driver's license to operate another's motor vehicle violates
Section 24 of the Land Transportation and Traffic Code, which provides:
....
No owner of a motor vehicle shall engage, employ, or hire any person to operate such motor vehicle,
unless the person sought to be employed is a duly licensed professional driver.
Evidently, petitioner did not only fail to exercise due diligence when it selected Bautista as service driver;
it also committed an actual violation of law.
To prove that it exercised the required diligence in supervising Bautista, petitioner presented copies of
several memoranda and company rules.[114] These, however, are insufficient because petitioner failed to
prove actual compliance. Metro Manila Transit Corporation v. Court of Appeals [115] emphasized that to
establish diligence in the supervision of employees, the issuance of company policies must be coupled
with proof of compliance:
Due diligence in the supervision of employees, on the other hand, includes the formulation of suitable
rules and regulations for the guidance of employees and the issuance of proper instructions intended for
the protection of the public and persons with whom the employer has relations through his or its
employees and the imposition of necessary disciplinary measures upon employees in case of breach or
as may be warranted to ensure the performance of acts indispensable to the business of and beneficial to
their employer. To this, we add that actual implementation and monitoring of consistent compliance with
said rules should be the constant concern of the employer, acting through dependable supervisors who
should regularly report on their supervisory functions.
In order that the defense of due diligence in the selection and supervision of employees may be deemed
sufficient and plausible, it is not enough to emptily invoke the existence of said company guidelines
and policies on hiring and supervision. As the negligence of the employee gives rise to the
presumption of negligence on the part of the employer, the latter has the burden of proving that it has
been diligent not only in the selection of employees but also in the actual supervision of their work. The
mere allegation of the existence of hiring procedures and supervisory policies, without anything more, is
decidedly not sufficient to overcome presumption.
We emphatically reiterate our holding, as a warning to all employers, that "(t)he mere formulation of
various company policies on safety without showing that they were being complied with is not
sufficient to exempt petitioner from liability arising from negligence of its employees. It is incumbent upon
petitioner to show that in recruiting and employing the erring driver the recruitment procedures and
company policies on efficiency and safety were followed." Paying lip-service to these injunctions or
merely going through the motions of compliance therewith will warrant stern sanctions from the
Court.[116] (Emphasis supplied, citations omitted)
For failing to overturn the presumption that the requirements of Article 2180 have been satisfied,
petitioner must be held liable.
III
Petitioner's argument that it should be excused from liability because Bautista was already dropped as a
party is equally unmeritorious. The liability imposed on the registered owner is direct and primary. [117] It
does not depend on the inclusion of the negligent driver in the action. Agreeing to petitioner's assertion
would render impotent the rationale of the motor registration law in fixing liability on a definite person.
Bautista, the driver, was not an indispensable party under Rule 3, Section 7 [118] of the 1997 Rules of Civil
Procedure. Rather, he was a necessary party under Rule 3, Section 8. [119] Instead of insisting that
Bautista—who was nothing more than a necessary party—should not have been dropped as a defendant,
or that petitioner, along with Bautista, should have been dropped, petitioner (as a co-defendant insisting
that the action must proceed with Bautista as party) could have opted to file a cross-claim against
Bautista as its remedy.
The 1997 Rules of Civil Procedure spell out the rules on joinder of indispensable and necessary parties.
These are intended to afford "a complete determination of all possible issues, not only between the
parties themselves but also as regards to other persons who may be affected by the judgment." [120]
However, while an exhaustive resolution of disputes is desired in every case, the distinction between
indispensable parties and necessary parties delineates a court's capacity to render effective judgment. As
defined by Rule 3, Section 7, indispensable parties are "[p]arties in interest without whom no final
determination can be had of an action[.]" Thus, their non-inclusion is debilitating: "the presence of
indispensable parties is a condition for the exercise of juridical power and when an indispensable party is
not before the court, the action should be dismissed." [121]
In contrast, a necessary party's presence is not imperative, and his or her absence is not debilitating.
Nevertheless, it is preferred that they be included in order that relief may be complete.
The concept of indispensable parties, as against parties whose inclusion only allows complete relief, was
explained in Arcelona v. Court of Appeals:[122]
An indispensable party is a party who has such an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has
not only an interest in the subject matter of the controversy, but also has an interest of such nature that a
final decree cannot be made without affecting his interest or leaving the controversy in such a condition
that its final determination may be wholly inconsistent with equity and good conscience. It has also been
considered that an indispensable party is a person in whose absence there cannot be a determination
between the parties already before the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also, a person is not an indispensable
party if his presence would merely permit complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the action. It is not a sufficient reason to declare a
person to be an indispensable party that his presence will avoid multiple litigation. [123]
Petitioner's interest and liability is distinct from that of its driver. Regardless of petitioner's employer-
employee relationship with Bautista, liability attaches to petitioner on account of its being the registered
owner of a vehicle that figures in a mishap. This alone suffices. A determination of its liability as owner
can proceed independently of a consideration of how Bautista conducted himself as a driver. While
certainly it is desirable that a determination of Bautista's liability be made alongside that of the owner of
the van he was driving, his non-inclusion in these proceedings does not absolutely hamper a judicious
resolution of respondent's plea for relief.
IV
The Court of Appeals committed no reversible error when it awarded actual damages to respondent.
Respondent's claim for actual damages was based on the Certificate [124] issued and signed by a certain
Peñaloza showing that respondent paid Peñaloza P35,000.00 for funeral expenses.
Contrary to petitioner's claim, this Certificate is not hearsay. Evidence is hearsay when its probative value
is based on the personal knowledge of a person other than the person actually testifying. [125] Here, the
Certificate sought to establish that respondent herself paid Peñaloza P35,000.00 as funeral expenses for
Reyes' death:[126]
It was respondent herself who identified the Certificate. She testified that she incurred funeral expenses
amounting to P35,000.00, that she paid this amount to Peñaloza, and that she was present when
Peñaloza signed the Certificate:
[ATTY. Did you incur any expenses?
LIM] :
A: Meron po.
Q: How much did you spend for the death of Jesmarian [sic] Reyes?
A: Meron po.
Q: Contractor of what?
....
ATTY. There is a signature at the top of the printed name Julian Penalosa [sic]. Whose signature is this?
LIM :
....
The Court of Appeals likewise did not err in awarding civil indemnity and exemplary damages.
ARTICLE 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least
three thousand pesos, even though there may have been mitigating circumstances[.]
Further, Article 2231 of the Civil Code provides:
ARTICLE 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross
negligence.
Both the Court of Appeals and the Regional Trial Court found Bautista grossly negligent in driving the van
and concluded that Bautista's gross negligence was the proximate cause of Reyes' death. Negligence
and causation are factual issues. [129] Findings of fact, when established by the trial court and affirmed by
the Court of Appeals, are binding on this court unless they are patently unsupported by evidence or
unless the judgment is grounded on a misapprehension of facts.[130] Considering that petitioner has not
presented any evidence disputing the findings of the lower courts regarding Bautista's negligence, these
findings cannot be disturbed in this appeal. The evidentiary bases for the award of civil indemnity and
exemplary damages stand. As such, petitioner must pay the exemplary damages arising from the
negligence of its driver.[131] For the same reasons, the award of P50,000.00 by way of civil indemnity is
justified.[132]
ARTICLE 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least
three thousand pesos, even though there may have been mitigating circumstances. In addition:
....
(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased. (Emphasis supplied)
For deaths caused by quasi-delict, the recovery of moral damages is limited to the spouse, legitimate and
illegitimate descendants, and ascendants of the deceased. [133]
Persons exercising substitute parental authority are to be considered ascendants for the purpose of
awarding moral damages. Persons exercising substitute parental authority are intended to stand in place
of a child's parents in order to ensure the well-being and welfare of a child. [134] Like natural parents,
persons exercising substitute parental authority are required to, among others, keep their wards in their
company,[135] provide for their upbringing, [136] show them love and affection, [137] give them advice and
counsel,[138] and provide them with companionship and understanding. [139] For their part, wards shall
always observe respect and obedience towards the person exercising parental authority. [140] The law
forges a relationship between the ward and the person exercising substitute parental authority such that
the death or injury of one results in the damage or prejudice of the other.
Moral damages are awarded to compensate the claimant for his or her actual injury, and not to penalize
the wrongdoer.[141] Moral damages enable the injured party to alleviate the moral suffering resulting from
the defendant's actions.[142] It aims to restore—to the extent possible—"the spiritual status quo ante[.]"[143]
Given the policy underlying Articles 216 and 220 of the Family Code as well as the purposes for awarding
moral damages, a person exercising substitute parental authority is rightly considered an ascendant of
the deceased, within the meaning of Article 2206(3) of the Civil Code. Hence, respondent is entitled to
moral damages.
As exemplary damages have been awarded and as respondent was compelled to litigate in order to
protect her interests, she is rightly entitled to attorney's fees. [144]
However, the award of interest should be modified. This modification must be consistent with Nacar v.
Gallery Frames,[145] in which we ruled:
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit. [146] (Emphasis supplied)
WHEREFORE, the Decision of the Court of Appeals dated October 3, 2005 is AFFIRMED with the
following MODIFICATIONS: (a) actual damages in the amount of P35,000.00 shall earn interest at the
rate of 6% per annum from the time it was judicially or extrajudicially demanded from petitioner Caravan
Travel and Tours International, Inc. until full satisfaction; (b) moral damages, exemplary damages, and
attorney's fees shall earn interest at the rate of 6% per annum from the date of the Regional Trial Court
Decision until full satisfaction; and (c) civil indemnity shall earn interest at the rate of 6% per annum from
the date of the Court of Appeals Decision until full satisfaction.
SO ORDERED.