ACTIONS AND DAMAGES

Case Digests

Construction Devt Corp. of the Phil. (CDCP) v. Estrella, Batangas Laguna Tayabas Bus. Co. (BLTB), et.al

Owner of the other vehicle which collided with a common carrier is solidarily liable to the injured passenger of the same; irrespective of whether liability arose from a contract or a quasi-delict. It is settled therefore that the bus company, its driver, the operator of the other vehicle and the driver of the vehicle are solidarily held liable to the injured passenger or the latters heirs.

Facts:

A woman and her granddaughter boarded a BLTB bus from San Pablo City to Pasay City. However, they never reached their destination because the bus was rammed from behind by a tractor-truck of CDCP who was driving fast. The strong impact pushed forward their seats and pinned their knees to the seats in front of them. They regained consciousness only when the rescuers created a hole in the bus and extricated their legs from under the seats. Thus, they filed a complaint for damages against both BLTB and CDCP imputing gross negligence on BLTB and CDCP on the supervision and selection of their employees. CDCP claims that only BLTB should be held liable as the award for damages is based on culpa contractual. RTC held BLTB and CDCP solidarily liable. CA affirmed with modifications

Issue:

WON CDCP may be held solidarily liable.

Held:

CDCP and BLTB are solidarily liable as the injured did not stake out their claim against only either the carrier or the third party but instead they held both CDCP and BLTB liable.

It has been settled that the owner of the other vehicle which collided with a common carrier is solidarily liable to the injured passenger of the same. The injured may file a complaint against the bus company, its driver, the operator of the other vehicle and the driver of the vehicle and hold them jointly and severally liable. It does not make any difference that the liability of the bus owner springs from contract while that of the owner of the other vehicle arises from quasi-delict. Such is the case because one is permitted to allege alternative causes of action and join as many parties as may be liable on such causes of action so long as there is no double recovery.

One is held jointly liable when they are held liable for the whole amount and not pro rata.

Thus, in the instant case, as the injured filed a claim against CDCP and BLTB, they may be held jointly liable for the damage caused to the injured.

Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp.

A tort may arise despite the absence of a contractual relationship; consequently, the responsibility of two or more persons who are liable for a quasi-delict is solidary.

Facts:

Columbia engaged the services of Glodel for the release and the withdrawal of 132 bundles of electric copper cathodes (cargoes) from the pier and is subsequent delivery to its warehouse/ plants. Glodel, in turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbias warehouses. However, out of the 12 truckloads of cargoes, one did not reach its destination because it was hijacked or robbed. R&B, being the insurer of Columbia, indemnified the latter. Consequently, R&B filed the present claim for damages against both Loadmasters and Glodel for the loss of the subject cargo, it being subrogated to the rights of Columba.

RTC held Glodel liable; however, CA modified the decision and held Loadmasters liable as well.

Loadmaster claims that it should not be held liable as it was never a privy to the contract entered into by Glodel with the consignee Columbia or R&B Insurance.

Issue:

Who bet. Loadmasters or Glodel is liable.

Held:

Loadmasters and Glodel are solidarily liable to R&B Insurance for the loss of the subject cargo.

It is undisputed that R&B became subrogated to the rights of Columbia upon payment by the former to the latter of the insurance proceeds. Further, as Loadmaster and Glodel are considered as common carriers, they are obliged to exercise extra-ordinary diligence in the transportation of the cargoes.

Loadmaster is considered as a common carrier as, other than the fact that it admitted itself as one, it is engaged in the business of transporting goods by land through its trucking service and it holds itself out to carry goods for the public. Likewise, Glodel is a common carrier because being a company engaged in the business of customs brokering, the transportation of goods is an integral part of its business.

Nonetheless, despite the absence of a contract between Loadmaster and Columbia/ R&B, it is still held liable as it is liable for tort. It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees were instrumental in the hijacking or robbery of the shipment. As an employer, Loadmasters should be made answerable for the damages caused by its employees who acted within the scope of their assigned tasks.

Likewise, Glodel is liable because it failed to exercise extraordinary diligence. It failed to ensure that Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the designated destination.

Phil. Charter Insurance Corp. v. Chemoil Lighterage Corporation (2005)

The filing of a claim with the carrier within the time limitation constitutes a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to, the goods. Hence, the shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former.

Facts:

Samkyung Chemical Company, Ltd., based in South Korea, shipped 62.02 metric tons of liquid chemical DIOCTYL PHTHALATE (DOP) on board MT Tachibana to the Philippines with Plastic Groups Phils. (PGP) as consignee. PGP insured the cargo with Phil. Charter Insurance (PCIC) against all risks. MT Tachibana unloaded the cargo to Tanker Barge of Chemoil Lighterage to transport it to Pasig River in which the latter would unload the cargo to tanker trucks still owned by Chemoil and haul it by land to PGPs storage tanks in Laguna. However, during the process of unloading, PGP noticed that the DOP samples were discolored from yellowish to amber. Hence, due to the contamination, PGP filed an insurance claim for the loss against PCIC. Upon payment by PCIC to PGP, the former instituted an action for damages against Chemoil.

Chemoil claims that it exercised extraordinary diligence in the handling of the cargo. RTC then adjudged Chemoil liable. During appeal, Chemoil claimed that PGP failed to file any notice, claim or protest within the period required by Art. 366 of the Code of Commerce, which is a condition precedent to the accrual of a right to action against the carrier. Chemoil claims that the telephone call made by the employee of PGP to the VP of Chemoil was not the notice required for in Art. 366.

Issue:

WON the claim was filed within the prescribed period and WON the damage to the cargo was due to the negligence of Chemoil.

Held:

The claim was not filed within the prescribed period as though a telephone call was made by an employee of PGP through telephone to a responsible official, the VP, of the Chemoil there was no evidence to show that it was timely relayed or filed within the requirements provided for in Art. 366 of the Code of Commerce.

For easy reference, Art. 366 of the Code of Commerce provides:

Art. 366. Within 24 hrs. following the receipt of the merchandise a claim may be made against the carrier on account of damage or average found upon opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from exterior of said packages, in which case said claim shall only be admitted at the time of the receipt of the packages.

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

Aboitiz Shipping Corp. v. Insurance Corp. of North America

Stipulations requiring notice of loss or claim for damage as a condition precedent to the right of recovery from a carrier must be given a reasonable and practical construction, adapted to the circumstances of the case under adjudication, and their application is limited to cases falling fairly within their object and purpose.

Facts:

MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS) procured an all-risk marine insurance policy from Insurance Company of North America (ICNA). The insurance was a transshipment of certain wooden work tools and workbenches purchased for the consignee Science Teaching Improvement Project (STIP). The cargo came from Germany wherein it was issued a clean bill of lading. It was then off-loaded to Singapore and then to Manila wherein it was received by Aboitiz with the bill of lading containing the notation grounded outside warehouse. Upon arrival at STIP, it was found that upon opening of the cargo, the tools which were stored inside the crate were already corroded and the work tools and workbenches were found to have been completely soaked in water with most of the packaging cartons already disintegrating. STIP then claimed the insurance from ICNA. Consequently, the latter filed a formal complaint against Aboitiz.

Aboitiz disavowed liability and asserted that the claim had no factual and legal bases as the cause of action was barred and the suit was premature there being no claim made upon Aboitiz. RTC held that ICNA is not entitled to the relief. CA reversed the decision and ruled that ICNA is entitled to reimbursement by reason of its right of subrogation.

Issue:

WON the claim was filed within the prescribed period required under Art. 366 of the Code of Commerce.

Held:

ICNAs cause of action is founded on it being subrogated to the rights of the consignee of the damaged shipment. Likewise, there was a substantial compliance with the filing of notice as required by law.

In the instant case, when Willig, the representative of STIP, received the shipment, he relayed the information that the delivered goods were discovered to have sustained water damage to the Claims head of Aboitiz who was then able to investigate the claims himself and indeed confirmed that the goods were corroded.

Further, the call made 2 days from delivery to STIP was a reasonable period considering that the goods could not have corroded instantly overnight such that it could only have sustained the damage during transit. Hence, the substantial compliance requirement was satisfied.

UCPB Gen. insurance Co., Inc. v. Aboitiz Shipping Corp.

Claim for damage must be made within 24 hrs. from receipt of the merchandise if the damage cannot be ascertained from the outside packaging. However, a written notice may be dispensed with if the state of the goods has at the time of their receipt subject to a joint investigation.

Facts:

3 units of waste water treatment plant with accessories were purchased by San Miguel Corp. (SMC) from Super Max Engineering Enterprises of Taiwan. The goods came from USA and arrived at the port of Manila. It was then transported to Cebu where it was delivered to SMC at is plant site. It was, however, discovered that one electrical motor of DBS Drive was damaged even prior to its arrival in Manila. Pursuant to an insurance agreement, UCPB paid SMC. UCPB then filed a complaint from East Asia (EAST), DAMCO (ship owner), Pimentel Brokerage and Aboitiz.

The trial court declared the defendants liable. However, on appeal, CA reversed the decision and ruled that UCPBs right of action did not accrue because UCPB failed to file a formal complaint within 24 hrs. from SMCs receipt of the damaged merchandise under Art. 366 of the Code of Commerce. UCPB, however, contended that such Article does not apply because the damage to the cargo had already been known to the carrier; hence UCPB claims that this knowledge dispenses with the need to give the carrier a formal notice of claim as provided for under Carriage of Goods by Sea Act (COGSA) which states that notice of loss need not be given if the condition of the cargo has been the subject of joint inspection, in this case in the presence of Eagle Express.

Issue:

WON UCPB may recover from defendants.

Held:

No, UCPB may not recover having failed to file the claim within the prescribed period.

Art. 366 of the Code of Commerce requires that the claim for damage or average must be made within 24 hrs. from receipt of the merchandise if, as in this case, damage cannot be ascertained merely from the outside packaging of the cargo.

Herein, the shipment was received by SMC on August 2, 1991. However, the claims were dated October 30, 1991, more than 3 months from receipt of the shipment. Hence, the claim was clearly filed beyond the 24-hr time frame prescribed by Art. 366 of the Code of Commerce.

Likewise, Sec. 3 (6) of COGSA provides that notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection. Herein, Eagle Express did not act as an agent of DAMCO but East Asiatic. Thus, Eagle Expresss knowledge of the damage to the cargo does not serve to preclude or dispense with the 24-hr notice to the carrier required by Art. 366 CC because Eagle Express acted as an agent of the freight consolidator and not that of the carrier to whom the notice should have been made.

Victory Liner v. Rosalito Gammad

Art. 1764 in rel. to Art. 2206 NCC: In a breach of contract of carriage by a common carrier that results to the death of a passenger is liable for the ff.: 1) Indemnity for death (P50k); 2) Indemnity for loss of earning capacity; and 3) moral damages. Exemplary damages, on the other hand, are awarded by example or correction for the public good and may be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. Further, attorneys fees may be recovered where exemplary damages are awarded pursuant to Art. 2208 NCC.

The award of compensatory damages, as a general rule, must be substantiated by documentary evidence. However, as an exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: 1) the deceased is self-employed earning less that minimum wage under current labor laws, and judicial notice may be taken of the fact that in the deceaseds line of work no documentary evidence is available; or 2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.

Temperate or Moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty.

Only substantiated and proven expenses or those that appear to have genuinely incurred in connection with the death, wake or burial of the victim will be recognized as actual damages.

Facts:

A certain Marie Grace Paguluyan-Gammad (Grace) was on board an air-conditioned Victory Liner bus bound for Cagayan from Manila. However, at around 3AM the bus while running at a high speed fell on a ravine which resulted to the death of Grace and physical injuries to other passengers. Hence, the heirs of Grace filed this instant case for damages arising from culpa contractual against Victory Liner. After a period of constant failure by Victory Liner and its counsel to appear, the court rendered a decision which granted actial, exemplary, moral and compensatory damages and death indemnity, attorneys fees and cost of the suit. CA affirmed but modified the decision granting only actual, compensatory, moral and exemplary damages as well as attorneys fees.

Victory Liner claims that he was deprived his day in court because of the gross negligence of its counsel and that the award of damages were without basis and should be deleted.

Issue:

WON Victory Liner should be held liable for breach of contract of carriage and WON the award of damages was proper.

Held:

Yes, Victory Liner is liable for breach of contract of carriage; consequently, the award of damages though proper must be modified. Further, it is held that the acts of the counsel of Victory Liner bound him. There is no gross negligence imputed upon the counsel as he in fact filed certain pleadings; in addition, there was contributory negligence on the part of Victory Liner when it failed to appear in court despite notices.

Herein, the statutory presumption of negligence of the common carrier remained unrebutted. Such presumption was shown when passengers died and was injured. Thus, Victory Liner is without doubt guilty of breach of contract of carriage.

However, the award of damages must be modified:

1. Indemnity for damages P50K

2. Compensatory damages deleted because respondent Rosalito merely testified that the deceased was 39 y.o. and a Section Chief of the BIR; hence, such testimonial evidence alone is insufficient to justify an award for loss of earning capacity, especially if such does not fall within the exception.

3. Temperate Damages P50K as the fact of loss has been established and in lieu of damages for loss of earning capacity which was not substantiated by the required documentary proof.

4. Moral P100K due to breach of contract of carriage and failure of common carrier to exercise extraordinary diligence

5. Exemplary P100K

6. Attorneys fees 10% of the total amount adjudged against Victory Liner

7. Interest as damages for breach of contract of carriage computed upon finality of this decision at 12% per annum upon satisfaction.

Sps. Ong v. CA (GR 117103)

Article 2199 of the Civil Code expressly mandates that "[e]xcept as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved.

Physical injury is not a pecuniary loss as it is not susceptible of exact monetary estimation; hence an award for moral damages may instead be given. Further, in some instances, the Court may award the cost of medical procedures to restore the injured person to his or her former condition ONLY when there is the presence of an expert testimony on the cost of possible restorative medical procedure.

Facts:

Sps. Ong boarded Inland bus which was owned and operated by Inland Trailways with Philtranco. It was driven by Calvin Coronel. At around 3:50am, the Inland bus slowed down to avoid a stalled cargo truck but it was bumped from the rear by another bus owned and operated by Philtranco. Sps. Ong were injured hence they filed the instant action for damages and presented evidence such as their payroll, medical certificates, etc. Philtranco claimed that it was not liable as it exercised diligence and that the proximate cause of the accident was the negligence of either the cargo truck or Inland bus. Inland, however, contends that the it was the driver of the Philtranco bus which was at fault as shown by the Police report which was merely annexed to the answer without formally offering it as evidence. RTC held Philtranco liable on the basis of the said report. CA, however, resolved Philtrancos liability for the damages and held Inland liable instead with modifications on the award for damages.

Issue:

WON the Police Report was formally offered in evidence to establish a claim against Philtranco based on cupla acquiliana and WON the reduction of damages awarded was proper.

Held:

CA was correct in not considering the Police Report as evidence as it was not formally offered; consequently, the reduction of damages awarded was proper.

Section 34, Rule 132 of the Rules of Court, provides that " [t]he court shall consider no evidence which has not been formally offered." A formal offer is necessary, since judges are required to base their findings of fact and their judgment solely and strictly upon the evidence offered by the parties at the trial. To allow parties to attach any document to their pleadings and then expect the court to consider it as evidence, even without formal offer and admission, may draw unwarranted consequences. Opposing parties will be deprived of their chance to examine the document and to object to its admissibility. On the other hand, the appellate court will have difficulty reviewing documents not previously scrutinized by the court below. Hence, the mere annexation of Inland of the Police Report without formal offer as evidence cannot be the basis of the judgment of the trial court.

Likewise, the award for moral and exemplary damages is proper as Mrs. Ongs arm could not function in a normal manner and that, as a result, she suffered mental anguish and anxiety. However, as petitioner failed to present expert testimonial evidence regarding the feasibility or practicability and the cost of a restorative medical operation on her arm, there is no basis to grant her P48,000 for such expense. Likewise, the actual damages cannot be given as her bare and unsubstantiated assertion that she usually earned P200 a day from her market stall is not the best evidence to prove her claim of unrealized income for the eight-month period that her arm was in plaster cast. Lastly, the award for attorneys fees is without basis as such is an indemnity for damages ordered by a court to be paid by the losing party to the prevailing party, based on any of the cases authorized by law. It is payable not to the lawyer but to the client, unless the two have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof. Herein, as the counsels performance does not justify the award of damages, such must likewise be denied.

Northwest Airlines Inc. v. Steven Choing

Moreover, attorney's fees 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 or where the defendant acted in gross and evident bad faith in refusing to satisfy the plantiffs plainly valid, just and demandable claim.

Facts:

Philimare Shipping and Seagull Maritime Corp. (Philimare), as the authorized Philippine agent of TransOcean Lines (TransOcean) hired Steven Chiong (Chiong) as 3rd Engineer of TransOceans vessel at San Diego, California. Hence, Philimare purchased for Chiong a Northwest plane ticket. 10 days before his scheduled departure, Chiong fetched his entire family from Samar and brought them to Manila to see him off at the airport. He arrived 3 hours before the scheduled time of departure. Marilyn Calvo, Philimares Liaison officer met with him and proceeded to the Philippine Coast Guard (PCG) Counter to present Choings seaman service record book for clearance. His passport was duly stamped. However, Chiong remained at queue at the Northwest check-in counter. When it was his turn, the Northwest personnel informed him that his name did not appear in the computers list of confirmed departing passengers thus he was directed to speak to a man in barong who demanded US$100.00 in exchange for him to board. Ultimately, Chiong was not allowed to board the flight and was unable to work. It appeared thereafter that Chiongs name was crossed out and substituted with W.Costine Hence, Chiong filed the instant case for damages. RTC rendered a decision awarding him with compensatory, exemplary, moral, incurred and punitive damages and attorneys fees plus costs of suit. CA affirmed in toto.

Northwest claims that it was not liable as in truth and in fact Choing was a no show.

Issue:

WON Northwest may be held liable and WON the award for damages was proper.

Held:

Yes, Northwest is liable as it breached its contract of carriage; consequently, the award for exemplary, moral, actual, compensatory damages and attorneys fees and cost of suit is proper.

Chiong was sufficiently able to prove through evidence that a contract has been entered into by him and Northwest upon the purchasing of the tickets. Further, the stamp on the book of records, the testimony of the Liaison officer as well as of the PCG officers showed that Chiong was at the airport at the said departure date contrary to the claims of Northwest Airlines. Hence, having failed to comply with its obligations, Northwest Airlines breached its contract of carriage with Chiong. Consequently, as Chiong was able to prove the existence of the contract and the fact of its non-performance by Northwest, it is thus entitled to the award of compensatory and actual damages.

In the instant case, it moral and exemplary damages is likewise proper as the evidence given show that Northwest acted in an oppressive manner towards Chiong when it gave him a run-around at the Northwest Check-in counter and eventually barred him from boarding the flight to accommodate an American whose name was merely inserted in the Flight Manifest. Attorneys fees is likewise proper.

Japan Airlines (JAL) v. Jesus Simangan

As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Article 2219 of the Civil Code. As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Article 1764, in relation to Article 2206 (3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Article 2220.

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. Moreover, attorney's fees may be awarded when defendant's act or omission has compelled plaintiff to litigate with third persons or to incur expenses to protect his. There are two kinds of attorneys fees: 1) ordinary which is the compensation paid to the lawyer by his client for the legal services he has rendered to the latter; and 2) extraordinary concept which is an indemnity for damages ordered by the court to be paid by the losing party in litigation which is payable to the client unless otherwise agreed upon.

Facts:

Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto, in UCLA School of Medicine in Los Angeles. Upon request of UCLA, Jesus undertook a series of laboratory tests to which fortunately matched Loretos. Jesus then needed to go to the US to complete his preliminary work-up and donation surgery. Hence, to facilitate Jesus travel to US, UCLA wrote a letter to American Consulate to arrange for his visa. Hence, he was issued an emergency US visa by the American Embassy. He then bought a round-trip ticket to US via Japan aboard JAL. On the day of his departure, he was able to pass through rigid immigration and safety routines. Upon being seated in his assigned seat, however, Jesus was asked to show his travel documents and consequently leave the plane on the alleged ground that there was a need to verify his travel documents as they never encountered a parole visa before. Hence, Jesus was unable to board the plane as he was haughtily ejected the flight. Thus, this instant suit by Jesus. RTC granted exemplary and moral damages and attorneys fees. CA modified and reduced the award to merely moral and exemplary damages.

Issue:

WON JAL is guilty of breach of contract of carriage and WON Jesus is entitled to moral and exemplary damages.

Held:

Yes JAL guilty of breach of contract of carriage consequently Jesus is entitled to moral and exemplary damages.

It is without doubt that there exists a contract of carriage between JAL and Jesus as the latter bought a ticket from the former who consequently allowed Jesus to enter its plane. Hence, JALs act of subsequently disallowing Jesus to fly the said plane constituted a breach of contract of carriage.

Therefore, the award for damages is sufficiently in order. It is proved that JALs acts amounted to bad faith when its personnel summarily and insolently shouted ordered Jesus to disembark the plane in the presence of numerous passengers without the least courtesy while the latter was already settled in his assigned seat. In summary, there was bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms. Hence, JAL is liable for moral damages. Likewise, it is liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and malevolent acts against Jesus.

Phil. Airlines Inc. v. CA (GR 123238)

In breach of contract of air carriage, moral damages may be recovered where: 1) mishap results in the death of a passenger; or 2) where the carrier is guilty of fraud or bad faith; or 3) where the negligence of the carrier is so gross and reckless as to virtually amount to bad faith. Moreover, exemplary damages may be awarded only if it is proven that plaintiff is entitled to moral damages. However, for an attorneys fees to be awarded, the trial court must state the factual, legal, or equitable justification for awarding the same and hence must not only be dealt with in the dispositive portion of the decision. Nonetheless, it must be kept in mind that the award of damages must be fair, reasonable and proportionate to the injury suffered and not palpably excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court.

Gross negligence implies a want or absence of or failure to exercise even slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.

Facts:

Manuel and Aurora Buncio (Sps. Buncio) purchased from PAL 2 plane tickets for their minor children Deanna (9 yrs. Old) and Nikolai (8 yrs. Old) from Manila to San Francisco, California, USA with a connecting flight to Los Angeles where their grandmother, Mrs. Regalado will meet them. Since Deanna and Nikolai will travel as unaccompanied minors, PAL required Sps. Buncio to accomplish, sign and submit an indemnity bond.

However, when they arrived at San Francisco Airport, the staff of United Airways refused to take aboard Deanna and Nikolai for their connecting flight to Los Angeles because PALs personnel in San Francisco could not produce the indemnity bond accomplished and submitted by Sps. Buncio. The said indemnity bond was lost by PALs personnel during the previous stop-over flight in Hawaii. Thus, the children were left stranded at San Francisco where Mr. Strigl (Strigl), the Lead Traffic Agent of PAL in San Francisco, took them to his residence in San Francisco where they stayed overnight.

Meanwhile, while Mrs. Regalado and several relatives waited for the arrival of the kids, and were not subsequently able to find them in their designated flight, they asked the stewardess if there were any minor passengers aboard, and the latter said no. Upon inquiry with PALs personnel, they merely said they were verifying their whereabouts. The next morning, Strigl took Deanna and Nikolai to the airport where the two were boarded a Western Airlines plane bound for Los Angeles. They were subsequently met by Mrs. Regalado.

Thus, Sps. Buncio filed the instant case for damages on the ground that there was gross negligence and malevolent conduct of PALs personnel when it lost the required indemnity bond. PAL contends, however, that: 1) it exercised diligence of a good father of a family in the selection, supervision and control of its employees; 2) that moral damages may only be awarded in breach of contract of air carriage when death or injury results or if there is a finding of ill will; 3) there was no liability on its part because mere carelessness does not result to malice or bad faith; 4) exemplary damages may not be awarded because there was no showing that plaintiff was entitled to moral damages; and 5) no premium should be placed on the right to litigate. RTC granted the petition of Sps. Buncio and ordered PAL to pay moral and exemplary damages, attorneys fees and costs of the suit. CA affirmed in toto.

Issue:

WON PAL may be held liable for damages.

Held:

Yes, as the contract of carriage was breached; PAL must be held liable for the consequent damages of moral and exemplary damages. However, attorneys fees is not proper as such was merely cited by the dispositive portion of the decision.

PAL and Sps. Buncio entered into a contract of air carriage when the former purchased two plane tickets from the latter. Hence, PAL obligated itself to transport the passengers according to the tenor of the agreement. However, as the kids herein were unable to board their connecting flights and were subsequently left stranded and was only able to arrive at Los Angeles via another airline, Western Airlines, PAL clearly breached its contract of carriage with respondents.

Herein, gross negligence was attributed to PAL that it amounted to bad faith when: 1) there was utter lack of care for and inattention to the welfare of Deanna and Nikolai as unaccompanied minor passengers; 2) it failed to exercise slight care and diligence in handling the indemnity bond; and 3) it was unable to prevent the inconveniences of delay in the transportation. Thus, such act constituted radical departure from the extraordinary standard of care required of common carriers.

Consequently, an award of exemplary damages is warranted because it is ascertained that respondents are entitled to moral damages. However, as the trial court only placed the attorneys fees in the dispositive portion without factual and legal basis, the same must be deleted. Moreover, the court finds that the amount awarded to Deanna, Nikolai, Mrs. Buncio and Mrs. Regalado was proper.

Canada v. All Commodities

Actual damages, to be properly awarded, must be duly substantiated. In case it cannot be substantiated, but the court is certain that pecuniary damages have been sustained by the plaintiff, it can award temperate damages in lieu of the actual damages.

Facts:

Ernesto Canada (Canada) operates a trucking and hauling operation under the name of Hi-Ball Freight Services. One of its valued clients was a corporation known as All Commodities Marketing Corporation (All Commodities).

In one of their transactions, which involved the transport of 1,000 bags of sugar (as covered by the Way Bills and the Delivery Receipt which purported to have been issued by All Star Transport [All Star] but was duly signed by Canadas driver) from the port of Manila to the manufacturing plant of Pepsi Cola (Pepsi), the two parties encountered a problem. The bags of sugar, together with the drivers, haulers and helpers, disappeared. Thus, All Commodities demanded from Canada the value of the sugar he purportedly lost, but Canada did not heed the demand.

Thus, a complaint for sum of money and damages was filed by All Commodities against Canada with the Regional Trial Court (RTC). In his defense, he argued that (a) the sugar was delivered to Pepsi, or in the alternative, if the same was lost, it was due to (b) the fault of All Commodities or (c) due to fortuitous event. The RTC rendered a judgment against Canada, ordering him to pay Php350,000 as actual damages. On appeal, the Court of Appeals (CA) affirmed the decision of the RTC. The CA likewise rejected the new theory advanced by Canada on appeal: that he was not the common carrier and that it was All Star who was the carrier, as evidenced by the way bills and the delivery receipt. Thus, Canada appealed to the Supreme Court (SC).

Issue:

Are the RTC and CA correct in finding fault in Canada regarding the transport of the sugar and is the CA correct in rejecting the new theory advanced by Canada on appeal?

Ruling and Discussion:

The RTC and CA are correct in finding fault in Canada regarding the transport and the CA is correcting in rejecting Canadas new theory on appeal.

As regards the rejection by the CA of Canadas new theory on appeal, the CA was correct in rejecting it, because it cannot now change his theory on the matter after the promulgation of the adverse decision. His failure to advance this theory that he was not the common carrier engaged by All Commodities was fatal to his cause. Generally, points of law, theories, issues and arguments not brought to the attention of the lower court ordinarily will not be considered on appeal. This is consistent with due process, because if this would be permitted, a party would be deprived of his opportunity to controvert the theory of the adverse party.

Moreover, Canada could not now adopt this theory, because he already admitted the existence of a contract of carriage. As a rule, judicial admissions, written or verbal, made by a party in the course of the proceedings in the same case, does not require proof. It may only be contradicted if shown that it was made through palpable mistake or that no such admission was made. Neither was shown in this case.

In the trial court, Canadas first defenses were that the goods arrived at their destination, or in the alternative, if there was really loss, it was due to either the fault of All-Commodities or due to fortuitous event. None of these defenses were proven. The fact that the goods did not arrive at their destination was duly established. The alternative defenses, however, were not duly established. There was no finding of fault on the part of All Commodities, nor was there fortuitous event.

In order to plead fortuitous event, it must be shown that: (a) the cause of the unforeseen or unexpected occurrence was independent of human will, (b) it was impossible to foresee such occurrence and it was impossible to avoid, (c) the occurrence of the unforeseen or unexpected occurrence rendered the performance of the obligation impossible in a normal manner, and (d) the person tasked to perform must not have participated in any course or conduct that aggravated the incident. In the case, none of these were shown by Canada.

Lastly, however, the award of Php 350,000 as actual damages was erroneous, because based on the records, the amount was not duly substantiated. In lieu thereof, the Court may award temperate damages, which can only be awarded if actual damages cannot be substantiated but the Court is convinced that there was pecuniary loss. The temperate damages of Php 250,000 was awarded.

Sulpicio v. Curso

Brothers and sisters, while being legal heirs of a deceased passenger, cannot claim moral damages from the death, arising from an incident in breach of the contract of carriage, because the law explicitly excludes them from those persons who have legal personality to sue for moral damages.

Facts:

Dr. Curso (Curso) is a passenger of ill-fated vessel called MV Doa Marilyn (Doa), owned by Sulpicio Lines, Inc. (Sulpicio). Doa was in voyage when it was hurled by the strong waves and heavy rains caused by typhoon Unsang. It capsized, killing hundreds of passengers including Curso.

Having no widow or issue, his alleged brothers and sisters sued Sulpicio for moral damages for the loss of Curso. They filed a complaint for damages with the Regional Trial Court (RTC), which dismissed the complaint, because the incident was caused by fortuitous event. On appeal, the Court of Appeals (CA) reversed the RTC on the ground that Sulpicio failed to show proof of exercise of extraordinary diligence as a common carrier, awarding, among others, moral damages. Sulpicio appealed to the Supreme Court, asking whether the brothers and sisters of Curso have the legal personality to sue for moral damages predicated on the death of Curso.

Issue:

Do the brothers and sisters of Curso have the legal personality to sue for moral damages on the death of Curso?

Ruling and Discussion:

No, they do not have the legal personality to sue for moral damages on the death of Curso.

As a rule, moral damages are not recoverable in actions for damages predicated on breach of contract, unless there is fraud or bad faith. However, where there is breach of contract of carriage and that breach results in the death of a passenger, moral damages may be recovered.

The law applicable here is Art. 1764, in relation to Art. 2206. Provided in these laws are the different circumstances from which moral damages may be predicated and the persons who can recoverable if such circumstances exist. Therein, only the spouse, legitimate and illegitimate descendants and ascendants can recover moral damages. Basic is the rule that where the law deliberately excludes a class or a person, the legislative intent is that they should be excluded. Inclusio unius est exclusio alterius. And the Court does not have the power to fill in the words of the law as its authority is to interpret it. Brothers and sisters are deliberately excluded from the enumeration. And the fact that, in succession, they are considered legal heirs in default of a spouse, descendant or ascendant (whether legitimate or illegitimate), cannot qualify them to be the person who have been given legal personality to sue for damages in case of death of a passenger in a common carrier.

Therefore, they cannot claim for moral damages on the death of Curso.

Sps. Cruz v. Sun Holidays

Regarding damages for potential loss of income, the net earning capacity is computed by multiplying life expectancy against the net annual income. Life expectancy is computed by getting 2/3 of the difference between 80 (the standard number according to the American Expectancy Table) and the age of the deceased when he died. Net annual income is derived from the difference between the gross annual income of the deceased and his reasonable and necessary living expenses, because the loss is not equivalent to the entire earnings of the deceased, but only such portion as he would have used to support his dependents or heirs.

Facts:

Ruelito, the son of Sps. Cruz, just wedded his fianc when they met their tragic end. After their wedding, Ruelito and his wife spent their honeymoon in Coco Beach Resort (Coco), which offered tour packages, including motor boat services in island hopping. One of Cocos motor boats was named M/B Coco Beach III.

Ruelito and his wife were scheduled to do the island-hopping tour when the wind was strong at the side of the island where they were staying. They were told that they could proceed with their island-hopping tour if they leave from the other side, where allegedly the wind could not penetrate because of the mountainous terrain. M/C Coco Beach III was waiting there to be boarded. Some 16 other persons were with Ruelito and his wife during the tour. They complied and proceeded with their tour. It was unfortunate, however, that when they were at sea, the wind blew and the waves grew bigger. The motorboat finally gave in and capsized, killing some of the passengers, including Ruelito and his wife.

Sps. Cruz now sued Coco for breach of contract of carriage with the Regional Trial Court (RTC). Ruelito was 28 and was earning $900 a month as a contractor worker in Saudi Arabia.

In Cocos defense, it argued that (a) it is not a common carrier, because (i) it does not offer the services of the motor boat to the public and (ii) no additional fee is charged for those who opt to avail of the tour package; nevertheless, (b) it exercise utmost diligence in the operation of the motorboat and (c) it was caused by fortuitous event.

The RTC dismissed the Complaint, ruling that Coco was a private carrier. This was affirmed by the Court of Appeals (CA). Thus, the case was filed with the Supreme Court (SC).

Issue:

Are the RTC and CA correct in dismissing the complaint against Coco?

Ruling and Discussion:

No, the RTC and CA are not correct in dismissing the complaint against Coco.

First, Coco is a common carrier. As held in De Guzman v. Court of Appeals, the law does not distinguish whether the carrier does its transport activity as its main business or merely incidental to his legitimate business. In fact, the regularity in the transport function is immaterial. Also, the fact that no additional fee is added cannot exculpate Coco from its liability, because it is absurd for a business owner to not include in the cost of each and every aspect of the service. Where the customer does not opt to avail of the tour service, he would only be considered to have overpaid. Consequently, when Coco offers its tour package to the public included therein is the use of the motor boat, in an all-inclusive fee arrangement it is deemed to have been offering its services to the public. Thus, it is not a private carrier.

In regard to the exercise of utmost diligence, Coco was not able to exercise extraordinary diligence. For one, PAGASA issued a 24-hour public weather forecast concerning a tropical cyclone for shipping one day before and on the day of the tour package. A very cautious person would not run the risk of sailing where there is such warning from the government arm on weather forecast.

Also, regarding the defense of fortuitous event, Cocos argument is untenable. The defense of fortuitous event can only be raised if: (a) the cause is unforeseen and unexpected, independent of the human will, (b) that it must be impossible to avoid it, (c) the occurrence of this unforeseen and unexpected event rendered the performance of the obligation to be done not in a normal way, and (d) the obligor must not have aggravated the damage. In the case, the squall could not be said to have been unforeseen or unexpected by feigning ignorance of the public warning by PAGASA. As a common carrier, he is charged with such knowledge. Thus, a squall which is a concomitant occurrence of a weather disturbance cannot be said to be unforeseen or unexpected.

Regarding damages for potential loss of income, the net earning capacity is computed by multiplying life expectancy against the net annual income. Life expectancy is computed by getting 2/3 of the difference between 80 (the standard number according to the American Expectancy Table) and the age of the deceased when he died. Net annual income is derived from the difference between the gross annual income of the deceased and his reasonable and necessary living expenses, because the loss is not equivalent to the entire earnings of the deceased, but only such portion as he would have used to support his dependents or heirs.

Reduced in formula:

Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).

Where:

Life expectancy = 2/3 x [80 age of deceased at the time of death]

Calculation omitted.

Heirs of Ochoa v. G&S Transport

An award of loss of earning capacity must be based on an unbiased, not self-serving piece of evidence, though there is no particular document that is deemed to be the only evidence to base the award. As long as the document is found unbiased and not self-serving, it may be the basis of an award of loss of earning capacity.

Facts:

Jose Marcial Ochoa (Ochoa) is a Division Head for Human Resources of USAID. Upon arriving in the Philippines, he boarded a taxi with the trade name Avis, owned by G&S Transport. (G&S) The taxi on which boarded was driven by one Bibiano Padilla, Jr. (Padilla). While the taxi was cruising through a flyover, Padilla was driving at high speed and attempted to overtake a delivery van, but failed. Instead, the taxi he was driving rubbed at the left-side gutter of the flyover, which tossed it into the air. It dropped at the left side of EDSA where it split into two. The driver sustained major injuries and lived, but Ochoa was declared dead on arrival.

Because of this, the widow and the children of Ochoa demanded for indemnification from G&S. The demand left unheeded, they filed a complaint with the Regional Trial Court (RTC), which found G&S liable for the death of Ochoa, for being a common carrier and for failure to exercise extraordinary diligence. Among others, loss of earning capacity was awarded by it. The award was based on the certification issued by USAID that Ochoa, being a division head, earned Php450,000 plus annually. On appeal, the Court of Appeals likewise found liability of G&S, but deleted the award of loss earning capacity, reasoning that the award does not have a basis, as there was no income tax presented. The certification could not be sufficient.

Both parties filed their petition for review with the Supreme Court (SC).

Issue:

Is the CA correct in deleting the award of loss of earning capacity?

Ruling and Discussion:

The CA is not correct in deleting the award of loss of earning capacity.

The general rule is that an award for loss of earning capacity must be duly substantiated. The rule, however, on proper substantiation has exceptions: (1) self-employed earning less than the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the victim's line of work no documentary evidence is available; or (2) employed as a daily-wage worker earning less than the minimum wage under current labor laws. Admittedly, the case does not fall in any of the exceptions. However, it is ruled that there is proper substantiation in this case.

The Court of Appeals deleted the award because it found the certification by USAID to be self-serving, and thus according to jurisprudence, it cannot be a sufficient basis for the award of loss of earning capacity. A self-serving evidence is one refers only to acts or declarations made by a party in his own interest at some place and time out of court, from which he stands to benefit from it.

First, the certification is not self-serving because it does not refer to acts or declarations made by the heirs, but made by the USAID, the employer of Ochoa. Second, there is no way that USAID stands to benefit from such declaration, where it is an organization presumably fully funded by the governments of the United States. Moreover, no jurisprudence requires that the proof be in a particular form or government document, like an income tax return. They may be best pieces of evidence, but they are not the sole evidence to prove it. At the very least, what is required is an unbiased declaration from an entity or party credible to testify about the income of the deceased. Clearly, the certification by USAID in this case satisfies this requirement.

Therefore, the award of loss of earning capacity must be reinstated. Note, however, that the Court found it necessary to adjust the computation of the RTC.

Philtranco v. Paras

In an action for breach of contract of carriage commenced by a passenger against his common carrier, the plaintiff can recover damages from a third-party defendant brought into the suit by the common carrier upon a claim based on tort or quasi-delict. The liability of the third-party defendant is independent from the liability of the common carrier to the passenger.

While generally, moral damages cannot be awarded in case of breach of contract, by way of exception, they can be awarded where: (a) there is bad faith on the part of the erring party or (b) the contract is a contract of carriage. Additionally, in this case another exception is given by the Court, that is, when under the circumstances, it is warranted.

Facts:

Felix Paras (Paras) is engaged in the buying and selling of fish. He rode a bus owned by one Inland Trailways (Inland) and while the bus was traversing a highway, its rear was bumped by another bus owned by Philtranco Service Enterprises (Philtranco). Because of the accident, Paras sustained major injuries, which caused him to be operated and admitted in the hospital. It also made him incapable of doing his business for some time.

Because of this, Paras filed a complaint for damages against Inland for breach of contract of carriage with the Regional Trial Court (RTC). Inland, in turn, with leave of court, filed a third-party complaint against Philitranco. The RTC ruled in favor of Paras and ordered Philtranco to pay him, being adjudged as the tortfeasor. Moral damages were awarded. This was objected to by Philtransco, arguing that the award of moral damages is not proper because he did not die. This was affirmed by the Court of Appeals (CA), reducing however the actual damages to only Php 1k, the extent of the amount substantiate by receipts. Temperate damages, however, were awarded. Inland was also granted temperate damages as to its damaged bus. Philtranco, subsequently appealed the case, to the Supreme Court (SC).

Issue:

Is the CA correct in affirming the RTC decision, modifying however the actual damages?

Ruling and Discussion:

Yes, the CA is correct.

In an action for breach of contract of carriage commenced by a passenger against his common carrier, the plaintiff can recover damages from a third-party defendant brought into the suit by the common carrier upon a claim based on tort or quasi-delict. The liability of the third-party defendant is independent from the liability of the common carrier to the passenger.

Thus, Paras can recover damages from the third-party tortfeasor in this case, Philtranco.

Regarding the award of damages, as a general rule, indeed, moral damages are not recoverable in an action predicated on a breach of contract. This is because such action is not included in Article 2219 of the Civil Code as one of the actions in which moral damages may be recovered. By way of exception, moral damages are recoverable in an action predicated on a breach of contract: (a) where the mishap results in the death of a passenger, and (b) where the common carrier has been guilty of fraud or bad faith.

Although this action does not fall under either of the exceptions, the award of moral damages to Paras was nonetheless proper and valid, in view of the circumstances attendant to this case.

Also, the award of temperate damages is correct. Even though there has already been an award of actual damages, the award of temperate damages is still warranted, because the receipts only covered the expenses of the medicine. However, the Court is convinced that Paras suffered pecuniary loss when he was operated and hospitalized because of the injuries caused by the accident.

Lastly, loss of earning capacity is also warranted because he was incapacitated from engaging in his trade due to the injuries suffered. Attorneys fees also were proper, because Paras incurred the expense when he was forced to litigate to enforce his right under the law and circumstances.

Malayan Insurance v. First Philippines Insurance Company

In a contract of carriage undertaken by a private carrier, it is best not to stipulate that the carrier shall be liable for any loss or damage, even those caused by force majeure, because the action is on the contract accion contractual and as such the stipulation is generally binding upon the parties, the provisions of ordinary contracts being the governing law between/among the parties.

Facts:

Reputable Forwarding (Reputable) is engaged the business of forwarding of goods of Wyeth. It caters to Wyeth alone. As a requirement in their contracts, it was customary that each procure insurance over their interests in the goods transported. Reputable insured its interest as the carrier with Malayan Insurance (Malayan), while Wyeth insured its interest with First Philippine Insurance Company (First Phil.). In the contract of carriage, Reputable undertook to be held liable for any damage or loss of the goods resulting from external causes, including force majeure.

While the goods were transported through a delivery truck, hijackers successfully stopped the truck and took control over the truck. Days after the hijacking, the truck was found without the goods now. Wyeth filed a claim for the insurance proceeds with First Phil., which paid the same after proper inspection and adjustment. First Phil. now as a subrogee filed a complaint for sum of money against Reputable, which maintained that Reputable is a common carrier. In the case, Reputable filed a third-party complaint against Malayan Insurance, its insurer. Malayan raises as its defense that Reputable is not a common carrier, thus First Phil. does not have a cause of action against it, because being a common carrier, it could not be held liable for damage or loss caused by force majeure.

The Regional Trial Court (RTC) found Reputable to be a private carrier but still liable for the loss, because it is bound by the contract it executed with Wyeth. Thus, Malayan should pay the insurance proceeds to First Phil., being the claimant against Reputable. This was affirmed by the Court of Appeals (CA). Now before the Supreme Court (SC), Malayan contends that First Phil.s stance that Reputable is a common carrier should be binding on First Phil., and as such the RTCs and CAs holding that Reputable is a private carrier is erroneous. Being a common carrier, it cannot be bound by the terms of the contract with Wyeth, it being contrary to law, because a common carrier cannot be held liable for loss or damage caused by force majeure.

Issue:

Are the RTC and CA correct in finding that Reputable is a private carrier and for holding Malayan liable for the insurance proceeds?

Ruling and Discussion:

Yes, the RTC and CA are correct in finding

A common carrier is an individual, corporation, partnership or association engaged in the business of the transporting goods or passengers, or both, for compensation, by land, water or air, offering its services to the public. In this case, Reputable was correctly found to be a private carrier, not a common carrier, because it does not offer its services to the public it only had Wyeth as its client. The argument that the stance of First Phil. is binding to it for being a judicial admission is untenable, because the stance of First Phil. cannot be considered as conclusive against Reputable, most especially because the nature of its business is questioned, because it is not Reputable who pleaded that it is a common carrier.

As a private carrier, therefore, it is bound by the terms of the contract it executed with Wyeth. The suit is upon the contract between Wyeth and Reputable, brought by the First Phil., as a subrogee of Wyeth. In the contract, it was uncontroverted that Reputable undertook to be held liable for any damage or loss arising from causes including force majeure. Because there was no dispute that the hijacking was a force majeure, Reputable is clearly liable for the loss or damage arising from it. Malayan, as the insurer, should be held liable for the loss to the extent of the insurance coverage.

Sps. Perena v. Sps. Zarate

Despite the actions being distinct from each other, the common carrier and the tortfeasor may be held solidarily liable for the damages adjudged.

The award of loss of earning capacity is still correct, even though the deceased is not yet actually earning income, because what is compensated is not the loss of income, but the loss of earning capacity.

Facts:

Sps. Perena operate a school service van, which caters to those who wish to avail of their services. One of their clients are Sps. Zarate, whose son was named Aaron. On one fateful morning, Aaron rode the school van at the rear. There were about 14 others all children who were with him. The van was air-conditioned and loud music was played during the trip. Because they were running late and because the traffic was really heavy, the driver decided to take a shortcut by crossing a railroad. At that time, the van was running at high speed, aiming to overtake a bus which was also crossing the railroad. The van, however, failed to overtake the bus, and its rear was hit by the train crossing the railroad. The hit threw the children-passengers away from the van. Aaron, however, was caught by the train, which severed his head, causing instantaneous death.

Aggrieved by the death of their son, Sps. Zarate filed a complaint for damages against Sps. Perena, the driver and the Philippine National Railways (PNR). Sps. Perena deny liability because they are not a common carrier. As such, they are only charged to exercise due diligence in the selection of its employees. The Regional Trial Court (RTC) ruled that Sps. Perena should be held liable for the death of Aaron. Also, it held PNR solidarily liable with them. Moral and exemplary damages were awarded, as well as loss of earning capacity. Only Sps. Perena appealed with the Court of Appeals (Ca), which affirmed in toto the RTC decision.

Thus, Sps. Perena filed a petition for review with the Supreme Court (SC), assailing the findings of the RTC and CA, arguing that it is not a common carrier and that there was no basis in adjudging the loss of earning capacity, Aaron being a high school student and earning no income.

Issue:

Are the RTC and CA correct in their finding that Sps. Perena should be held liable for the death of Aaron and in computing the amount award for loss of earning capacity?

Ruling and Discussion:

Yes, they are correct in finding that Sps. Perena should be held liable for the death of Aaron. Also, the award of loss of earning is correct.

A common carrier is an individual, corporation, partnership or association, engaged in the transport of goods or passengers, or both, for compensation, by land, water or air, offering its services to the public. Sps. Perena in this case are considered common carrier, because they offer their services to the public. The fact that they only had limited clientele does not make them a private carrier. They cater to anyone interested to avail of their services. Thus, no matter how limited their clientele is, the fact that they offer their services of transport of passengers to the public, they are still considered as common carrier.

As a common carrier it is charged to exercise extraordinary diligence, such that where there is loss or damage or injury, it is presumed to be negligent. It is burdened therefore to rebut the presumption. In the case, however, it failed to rebut the presumption. In fact, there was finding that the driver was negligent in that it allowed that a loud music be played inside the air-conditioned van. This most probably made the driver imperceptive to the bell warnings of an approaching train. Also, the speed at which it is running is also beyond the speed limit, considering that it was taking a crowded road. Lastly, it was in violation of traffic rules when the accident occurred, because it failed to stop or slow down upon approaching a railway. These are findings pointing to the negligence of the driver of the common carrier. The common carrier is bound by the acts of its employees.

Sps. Perena are adjuged to be solidarily liable with PNR, which did not appeal the judgment of liability against, even though the causes of action against them are distinct. Sps. Perenas liability springs from the breach of contract of carriage, while that of PNR is based on quasi-delict.

Lastly, the award of loss of earning capacity is still correct, even though the deceased is not yet actually earning income, because what is compensated is not the loss of income, but the loss of earning capacity. The RTC and CA correctly applied the possible income of Aaron based on the minimum wage, despite him being a high school student and not earning actual income.

PAL v. Lim

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 nonperformance by the carrier.

In the award of moral damages, there must be evidence on record, mostly testimonial, that the plaintiff suffered moral suffering, to base the award. Also, exemplary damages may properly be awarded, where moral, temperate, liquidated or compensatory damages are awarded.

Facts:

Francisco Lao Lim (Lim), Henry Go (Go) and Manuel Limtong (Limtong) were partners in a business venture with a German buyer and Chinese client. They were given a deadline and a place where to close the deal, by reason of which they scheduled with Rainbow Tours (Rainbow) connecting flights from Cebu to Manila, and Manila to Hong Kong and back.

On the day of the scheduled flight, however, Lim and Go were not permitted to board their designated flights, because it was said that their tickets were cancelled. However, they were not informed of such cancellation. Limtong, however, was able to board the designated flight. It was only the next day that Lim and Go were able to fly to Hong Kong. However, their arrival was in vain, as the German buyer already left for Germany, while the Chinese client pulled off the deal, because she wanted to meet the three of them, and engaged with another seller.

When they got back, they filed a complaint for damages against PAL for their besmirched reputation, wounded feelings and the unrealized deal, predicated upon PALs failure to carry them according to their contract of carriage. The Regional Trial Court (RTC) ruled in favor of Lim and Go, stating however that Limtong did not entitled to damages from PAL because he was carried and transported according to their contract. The Court of Appeals (CA) affirmed the RTC decision with modifications as to the award of damages. Thus, PAL filed a petition for review with the Supreme Court (SC).

Issue:

Are the RTC and CA correct in finding liability in PAL?

Ruling and Discussion:

Yes, they are correct in finding liability in PAL.

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 nonperformance by the carrier.

In the case, there was really non-performance on the part of PAL when it did not permit Lim and Go to board the plane, despite them having confirmed tickets. It was argued that there was instruction from the travel agency their tickets, but the same, as found by the RTC and CA, were not proven. Damages were proper.

However, the Court deleted the award of moral damages to Go, because he failed to testify as to his moral suffering. Even though he was dead already, his heirs could have testified to that effect, but they did not. Moral damages must be backed up by evidence on record that the plaintiff suffered moral sufferings. Temperate damages, however, were properly awarded in lieu of this. Moral damages awarded to Lim were proper. However, Limtong, as correctly held, is not entitled to damages, even though he suffered in the consequences of the unrealized deal, because he was carried by PAL according to their contract of carriage.

The award of exemplary damages was also proper, because it may be awarded where moral, temperate, liquidated or compensatory damages are awarded. Since moral and temperate damages were awarded in this case, exemplary damages were warranted.

Lastly, PAL should be solidarily liable with Rainbow because thy caused the confusion together which led to the damage suffered by Go and Lim.

Cathay Pacific v. Reyes

Nominal damages are recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown.

Facts:

The Reyes family arranged with Sampaguita Travel (Sampaguita) a travel reservation for their family trip to Australia. Upon booking, Sampaguita confirmed their round-trip tickets with Cathay Pacific (Cathay).

They were safely transported from the Philippines to Australia. One week before their scheduled flight back to the Philippines, they confirmed with Cathay Pacific their booking which said that it was still okay as scheduled. However, on the date of the flight, they were informed that their bookings were unconfirmed, except for one. Due to their adamant pleas, they were allowed to board the plane to Hong Kong. In Hong Kong, however, they were unfortunately not permitted to board, except one. The next day, they were allowed to board and got back to the Philippines safely.

In the Philippines, they filed complaint for damages against Cathay and Sampaguita with the Regional Trial Court (RTC). In its defense, Cathay argued that they only based their decision not to permit them to board on their computerized booking system, which showed that their bookings were unconfirmed. It also said that they had every reason to cancel the bookings, because there was no correct ticket number inputted within the prescribed period. It had the right, as per standard operating procedure, to assume that there was no ticket sold. It filed a cross-claim against Sampaguita, which tried to exonerate itself from liability arguing that the complaint for damages was predicated on a contract of carriage between the Reyes family and Cathay, to which contract it is not privy. The RTC dismissed the complaint, which dismissal was reversed by the Court of Appeals (CA), awarding them nominal damages. Cathay appealed the case to the Supreme Court (SC).

Issue:

Was the CA correct in reversing the RTC dismissal and awarding nominal damages to the Reyeses?

Ruling and Discussion:

Yes, the CA is correct.

The determination of whether or not the award of damages is correct depends on the nature of the respondents' contractual relations with Cathay Pacific and Sampaguita Travel.

On Cathays Liability

While Cathay blames Sampaguita for the cancellation, because there was no valid ticket number inputted, it cannot be exonerated from liability. The Reyeses are not privy to whatever misunderstanding and confusion that may have transpired in their bookings. On its face, the airplane ticket is a valid written contract of carriage. 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.

Clearly, Cathay breached its contract of carriage with respondents when it disallowed them to board the plane in Hong Kong going to Manila on the date reflected on their tickets.

On Sampaguitas Liability

Sampaguita, with whom the Reyes had a contract of service, was expected to exercise due diligence which a reasonable man would exercise in his dealings. However, when it failed to input the correct and valid ticket numbers in the online booking system of Cathay, which caused the cancellation of the booking of the tickets of the Reyeses, it failed to exercise such diligence. Because of that, it also becomes liable for damages.

Actual damages, however, could not be awarded, because there was failure on the part of the Reyeses, especially Wilfredo, who claimed actual damages for the alleged unrealized deal, because the claim was not properly substantiated.

Moreover, the award of moral damages could not be given because there was no bad faith on the part of Cathay when it did not permit them to board the plane. In fact, the want of bad faith is seen when it allowed them to board the plane from Australia to Hong Kong despite the absence of confirmation.

The award of nominal damages is correct. Nominal damages are recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown.

Nacar v. Gallery Frames

Where in Eastern Shipping Lines case, there was a distinction between breached obligations from forbearance of money (in which case 12% per annum) and those from others (in which case, only 6% per annum), in the present day however, the legal interest is only 6% regardless of the nature of the obligation breached., by virtue of the new BSP-MB Circular No. 976-2013.

Facts:

Nacar is one employee unjustly dismissed by Gallery Frames (Gallery). Because of the illegal dismissal, he filed a complaint with the Labor Arbiter, which awarded him backwages and reasonable separation pay, according to the law. The NLRC sustained the decision of the Labor Arbited. The Court of Appeals (CA) also affirmed the award. Thus, the case was appealed to the Supreme Court (SC), which decided in favor of Nacar. An entry of judgment was made on May 27, 2002. The case was referred back to the Labor Arbiter for execution.

Subsequently, Nacar filed a petition for the correction of computation of the backwages, from the date of dismissal up to the finality of the Resolution of the SC. Upon execution, Gallery sought to quash the writ of execution because the amount to executed therein is contrary to the original award. An alias writ was subsequently issued. Upon motion of Gallery, the award was recomputed and reverted to the original amount. Nacar appealed to the NLRC and CA, which both denied the appeal. Thus, Nacar appealed the denial of his appeal for re-computation with the SC, arguing that while there was an original award by the Labor Arbiter, the same was never final until reinstatement or finality of decision.

Issue:

Are the NLRC and CA correct in the re-computation according to the motion of Nacar?

Ruling and Discussion:

No, they are not correct.

The re-computation is necessary and correct. Under the terms of the decision which is sought to be executed by the petitioner, no essential change is made by a re-computation as this step is a necessary consequence that flows from the nature of the illegality of dismissal declared by the Labor Arbiter in that decision. The damage sustained is not finally repaired until reinstatement or the finality of the judgment of the court. This is a necessary consequence from the illegal act of Gallery.

That the amount respondents shall now pay has greatly increased is a consequence that it cannot avoid as it is the risk that it ran when it continued to seek recourses against the Labor Arbiter's decision.

On interest

The Court took cognizance of Bangko Sentral ng Pilipinas Monetary Board circular no. 796-2013. Where in Eastern Shipping Lines case, there was a distinction between breached obligations from forbearance of money (in which case 12% per annum) and those from others (in which case, only 6% per annum), in the present day however, the legal interest is only 6% regardless of the nature of the obligation breached. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable.

The rules are quoted here verbatim for future guidelines:

I. 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 damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II.With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

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 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of 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.

Seven Brothers Shipping Corporation v. DMC Construction

Temperate or moderate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. The amount this kind of damage is generally left to the discretion of the court, but the same must be reasonable.

Facts:

Seven Brothers Shipping Corporation (Seven Bros.) owns a vessel named Diamond Rabbit (Diamond), which was about to dock in a port. The weather condition was bad at that time, but the Master of the vessel insisted on docking the ship. During docking, unfortunately, it became uncontrollable as the waves hit it. Its main engine could not be used for maneuvering because the propeller was tangled with the rope of which was supposedly attached to it during the docking but snapped because of the vicissitudes of the sea. This caused it to maneuver toward the port, causing damage to the port and some pieces of equipment stationed therein. One of the damaged equipment was the coal conveyor owned by DMC Construction (DMC). The conveyor was about 5 years old and had 10 years of estimated useful life. It was worth Php7M.

A demand was sent by DMC to Seven Bros. for the damage. Its demand being unheeded, DMC filed with the Regional Trial Court (RTC) a complaint for damages against Seven Bros. The RTC ruled in favor of DMC and awarded actual damages of half the value of the conveyor, because it was 5 years old at the time of the damage with a 10-year reasonable useful life. The Court of Appeals (CA) modified the damage into nominal damages, in lieu of actual damages, which DMC failed to substantiate. Seven Bros. appealed the case to the Supreme Court (SC).

Issue:

Was the CA correct in modifying the damages from actual damages to nominal damages, when the latter could not be substantiated?

Ruling and Discussion:

No, the CA is not correct insofar as it modified to nominal damages. Instead it should have awarded temperate damages.

Actual damages cannot be presumed and the court cannot rely on pure speculation, conjecture or guesswork as to the amount of damages. It must be duly substantiated duly supported by receipts. Nominal damages may be awarded in order that the plaintiff's right, 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.

Temperate or moderate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. The amount this kind of damage is generally left to the discretion of the court, but the same must be reasonable.

In the case, the claim for actual damages was not duly substantiated, because DMC could not produce the necessary documents on the actual value of equipment. However, its testimony as to the value, being uncontroverted by evidence, could be the basis of the court in awarding temperate damages.

The computation, therefore, is correct when it was computed at half the value, because it was damaged at 5 years old, when it had the useful life of 10 years.