DAMAGES Davila vs. PAL G.R. No.

L-28512 February 28, 1973

Facts: There was a plane crash that involved PALs planes, the route of which was from Iloilo-Romblon-Manila. It crashed at Mt. Baco, Mindoro, one hour and fifteen minutes after take-off. All passengers and crew of the said plane died. The plane in this case was a DC-3 type of aircraft, manufactured in 1942 and acquired by the defendant in 1948. It had flown almost 18,000 hours at the time of its ill-fated flight. Despite its age, however, it had been certified as airworthy by the Civil Aeronautics Administration. The petitioners of this case are the parents of Pedro Avila Jr. who was one of the passengers of this flight. At the time of his death, he was single and 30 years of age. His life expectancy was 25 years. The route prescribed by the Civil Aeronautics Administration for the flight of the plane in the afternoon of November 23, 1960 was Iloilo-Romblon-Manila, the latter stage, denominated as airway "Amber I," being a straight lane from Romblon to Manila. The prescribed elevation of the flight was 6,000 ft. The plane reported its position after takeoff and again when it was abeam the Roxas homer. However, it did not intercept airway "Amber I" over Romblon as it was supposed to do, and the pilot did not give his position then although Romblon was a compulsory checking point. The fact was that the plane had deviated from the prescribed route by 32 miles to the west when it crashed at Mt. Baco. The reading of the altimeter of the plane when its wreckage was found was 6,800 ft. It was suggested that in the course of the flight between Romblon and Mindoro the aircraft was drifted westward by the cross-winds then blowing in the region. The defendant, however, has not given a definite explanation as to why, if such was the case, the pilot failed to make the necessary correction in his flight to compensate for the drift. According to the defendant's witness, Maj. Mijares, Chief of the Aviation Safety Division of the Civil Aeronautics Administration and Chairman of the CAA Investigating Committee, there was a navigational error, to which several factors contributed: "the weather observation at that time from the Weather Bureau was not so good between Mt. Baco and Romblon and the wind aloft was quite strong, which would be also one of the causes for the drifting of the aircraft; and the other strong probability, I would say, would be the malfunction of the aircraft's navigational instrument." He further explained that "a crosswind can drift the plane if the pilot will not make the necessary correction, if his navigational instrument is malfunctioning and the visual reference outside the aircraft could not make the necessary corrections." There is nothing in the testimony of Maj. Mijares to show just how strong the cross-winds were in the region at the time, although in the investigation of the accident by the Senate Committee on transportation there was testimony that the cross-winds had a

velocity of either 20 to 25 knots or 25 to 35 knots an hour. Considering the relatively short distance from Romblon to Mt. Baco and the brief span of time it would take to fly that distance, cross-winds with the velocity stated could not have possibly deviated the plane by as much as 32 miles. What is undisputed therefore is that the pilot did not follow the route prescribed for his flight, at least between Romblon and Manila. Since up to that point over Romblon, where he was supposed to intersect airway "Amber I" the weather was clear, the most reasonable conclusion is that his failure to do so was intentional, and that he probably wanted to fly on a straight line to Manila. It was a violation of air-craft traffic rules to which, under the circumstances, the accident may be directly attributable. So, the Davila spouses filed an action for damages against PAL for the death of their son, and the CFI Iloilo awarded the spouses the following sums: (1) For the death of Pedro T. Davila, Jr. the amount of P6,000.00; (2) For the loss of the earning capacity of the deceased at the rate of P12,000.00 per annum for five (5) years in the amount of Sixty Thousand Pesos. (P60,000.00); (3) For moral damages in favor of the plaintiffs Ten Thousand Pesos (P10,000.00); (4) For exemplary damages in the amount of Ten Thousand Pesos (P10,000.00); (5) For actual damages the amount of Five Thousand Pesos (P5,000.00) broken down to as follows: A rolex watch valued at P600.00; a pistol worth P300.00; burial expenses P600.00; for the lot and the mausoleum P3,500.00; (6) For Attorney's fees the amount of Ten Thousand Pesos (P10,000.00) or a total amount of One Hundred and One Thousand Pesos (P101,000.00) To pay the costs of this proceedings. The Davila spouses appealed this ruling directly to the Supreme Court asking for an increase in the indemnity awarded for the death of their son, while PAL asked for exoneration, if not mitigation, of such liability. Issue: How much should be awarded to the Davila spouses, if any? Held: According to Article 2206, paragraph (1), of the Civil Code, "the defendant shall be liable for the loss of the earning capacity of the deceased and indemnity shall be paid to the heirs of the latter." This Article, while referring to "damages for death caused by crime or quasi-delict," is expressly made applicable by Article 1764 "to the death of a passenger caused by the breach of contract by a common carrier." The deceased, Pedro Davila, Jr., was single and 30 years of age when he died. At that age one's normal life expectancy is 33-1/3 years, according to the formula (2/3 x [80-30]) adopted by this Court in the case of Villa Rey Transit, Inc. vs. Court of Appeals on the basis of the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. However, although the deceased was in relatively good health, his medical history shows that he had complained of and been treated for such

ailments as backaches, chest pains and occasional feelings of tiredness. It is reasonable to make an allowance for these circumstances and consider, for purposes of this case, a reduction of his life expectancy to 25 years. In the same case of Villa Revenue Transit this Court stated: "... earning capacity, as an element of damages to one's estate for his death by wrongful act is necessarily his net earning capacity or his capacity to acquire money, less the necessary expense for his own living. Stated otherwise, the amount recoverable is not loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses." Considering the fact that the deceased was getting his income from three (3) different sources, namely from managing a radio station, from law practice and from farming, the expenses incidental to the generation of such income were necessarily more than if he had only one source. Together with his living expenses, a deduction of P600.00 a month, or P7,200.00 a year, seems to Us reasonable, leaving a net yearly income of P7,800.00. This amount, multiplied by 25 years, or P195,000.00 is the amount which should be awarded to the plaintiffs in this particular respect. Actual losses sustained consist of the following, as found by the trial court: "Rolex Watch P600.00; pistol P300.00; Burial Expenses P600.00; and cost of cemetery lot and mausoleum - P3,500.00." Under Article 2206, in relation to Article 1764, of the Civil Code, the parents of the deceased are entitled to moral damages for their mental anguish. The trial court awarded P10,000.00 in this concept, and We find no justification to change the award, considering the long period of uncertainty and suffering the plaintiffs underwent from November 23, when the plane crash occurred, to December 19, when they received a letter from the defendant's president confirming the death of their son, and again to the following December 29, when his body was finally recovered and taken back to them. With respect to the award of P10,000.00 as exemplary damages, it is Our opinion that the same should be eliminated. According to Article 2232 of the Civil Code, in contracts and quasi-contracts the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The failure of the defendant here to exercise extraordinary diligence, as required by law, does not amount to anyone of the circumstances contemplated in the said provision. The trial court has awarded attorney's fees of P10,000.00. We do not find this award groundless or the amount thereof unreasonable. The total of the different items above enumerated is P232,000.00. The judgment of the court a quo is therefore modified accordingly and the defendant is ordered to pay the said amount to the plaintiffs, with legal interest thereon from the finality of this judgment. With costs against the defendant.

KLM vs. CA G.R. No. L-31150 (July 22, 1975) Facts: Spouses Mendoza approached Mr. Reyes, the branch manager of Philippine Travel Bureau, for consultation about a world tour which they were intending to make with their daughter and niece. Three segments of the trip, the longest, was via KLM. Respondents decided that one of the routes they will take was a Barcelona-Lourdes route with knowledge that only one airline, Aer Lingus, served it. Reyes made the necessary reservations. To this, KLM secured seat reservations for the Mendozas and their companions from the carriers which would ferry them throughout their trip, which the exception of Aer Lingus. When the Mendozas left the Philippines, they were issued KLM tickets for the entire trip. However, their coupon for Aer Lingus was marked on request. When they were in Germany, they went to the KLM office and obtained a confirmation from Aer Lingus. At the airport in Barcelona, the Mendozas and their companions checked in for their flight to Lourdes. However, although their daughter and niece were allowed to take the flight, the spouses Mendozas were off loaded on orders of the Aer Lingus manager, who brusquely shoved them aside and shouted at them. So the spouses Mendozas took a train ride to Lourdes instead. On March 17, 1966 the respondents, referring to KLM as the principal of Aer Lingus, filed a complaint for damages with the Court of First Instance of Manila arising from breach of contract of carriage and for the humiliating treatment received by them at the hands of the Aer Lingus manager in Barcelona. RTC and CA favored Medozas. KLM contentions: (a) The air tickets issued to the respondents stipulate that carriage thereunder is subject to the "Convention for the Unification of Certain Rules Relating to International Transportation by Air," otherwise known as the "Warsaw Convention," to which the Philippine Government is a party by adherence, and which pertinently provides. 1 ART. 30. (1) In the case of transportation to be performed by various successive carriers and failing within the definition set out in the third paragraph of Article I, each carrier who accepts passengers, baggage, or goods shall be subject to the rules set out in the convention, and shall be deemed to be one of the contracting parties to the contract of transportation insofar as the contract deals with that part of transportation which is performed under his supervision. 2

(2) In the case of transportation of this nature, the passenger or his representative can take action only against the carrier who performed the transportation during which the accident or the delay occured, save in the case where, by express agreement, the first carrier has assumed liability for the whole journey. (emphasis supplied)

(b) On the inside front cover of each ticket the following appears under the heading "Conditions of Contract": 1 ... (a) Liability of carrier for damages shall be limited to occurrences on its own line, except in the case of checked baggage as to which the passenger also has a right of action against the first or last carrier. A carrier issuing a ticket or checking baggage for carriage over the lines of others does so only as agent.. (c) All that the KLM did after the respondents completed their arrangements with the travel agency was to request for seat reservations among the airlines called for by the itinerary submitted to the KLM and to issue tickets for the entire flight as a ticket-issuing agent. On the other hand, Medozas contend that mentioned provision is not applicable and that the condition of contract specifically provided that their contract was one of continuous transportation carriage" includes the air carrier issuing this ticket and all carriers that carry or undertake to carry the passenger or his baggage hereunder or perform any other service incidental to such air carriage... Carriage to be performed hereunder by several successive carrier is regarded as a single operation. ISSUE: WON KLM IS LIABLE FOR DAMAGES ARISING FROM BREACH OF CONTRACT OF CARRIAGE AND FOR THE HUMULIATING TREATMENT RECEIVED BY THEM FROM AER LINGUS. HELD: Yes, SC held that KLM IS LIABLE on the following points. 1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to transport the respondents to their planned and contracted destination. 2. The argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus because of the provision printed on the respondents' tickets expressly limiting the KLM's liability for damages only to occurrences on its own lines is unacceptable. As noted by the Court of Appeals that condition was printed in letters so small that one would have to use a magnifying glass to read the words. Under the circumstances, it would be unfair and inequitable to charge the respondents with automatic knowledge or notice of the said condition so as to preclude any doubt that it was fairly and freely agreed upon by the respondents when they accepted the passage tickets issued to them by the KLM. As the airline which issued those tickets with the knowledge that the respondents would be flown on the various legs of their journey by different air carriers, the KLM was chargeable with the duty and responsibility of specifically informing the respondents of conditions prescribed in their tickets or, in the very least, to ascertain that the respondents read them before they accepted their

passage tickets. A thorough search of the record, however, inexplicably fails to show that any effort was exerted by the KLM officials or employees to discharge in a proper manner this responsibility to the respondents. Consequently, we hold that the respondents cannot be bound by the provision in question by which KLM unilaterally assumed the role of a mere ticket-issuing agent for other airlines and limited its liability only to untoward occurrences on its own lines. 3. Moreover, as maintained by the respondents and the Court of Appeals, the passage tickets of the respondents provide that the carriage to be performed thereunder by several successive carriers "is to be regarded as a single operation," which is diametrically incompatible with the theory of the KLM that the respondents entered into a series of independent contracts with the carriers which took them on the various segments of their trip. This position of KLM we reject. The respondents dealt exclusively with the KLM which issued them tickets for their entire trip and which in effect guaranteed to them that they would have sure space in Aer Lingus flight 861. The respondents, under that assurance of the internationally prestigious KLM, naturally had the right to expect that their tickets would be honored by Aer Lingus to which, in the legal sense, the KLM had indorsed and in effect guaranteed the performance of its principal engagement to carry out the respondents' scheduled itinerary previously and mutually agreed upon between the parties.

4. The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to transport the respondents on the Barcelona-Lourdes segment of their itinerary. It is but just and in full accord with the policy expressly embodied in our civil law which enjoins courts to be more vigilant for the protection of a contracting party who occupies an inferior position with respect to the other contracting party, that the KLM should be held responsible for the abuse, injury and embarrassment suffered by the respondents at the hands of a supercilious boor of the Aer Lingus. Ca affirmed.

United Airlines vs. CA FACTS: On March 1, 1989, private respondent Aniceto Fontanilla purchased from petitioner United Airlines, through the Philippine Travel Bureau in Manila, three (3) Visit the U.S.A. tickets for himself, his wife and his minor son Mychal. On April 24, 1989, Aniceto Fontanilla bought two (2) additional coupons each for himself, his wife and his son from petitioner at its office in Washington Dulles Airport. After paying the penalty for rewriting their tickets, the Fontanillas were issued tickets with corresponding boarding passes with the words CHECK-IN REQUIRED. There were two differing versions of the story. Fontanilla claimed that after being attended to by an employee (LINDA) who punched something in the computer then asked them to wait for the flight which would commence boarding in 15 minutes. When said flight did begin boarding, he and his family were not allowed by the stewardess to board the flight as they had no seat

numbers. Fontanilla further claimed that Linda uttered derogatory remarks and offered him $50 for each person. They were not booked for the next flight and it was only at 12:00 noon that they were able to leave Los Angeles on United Airlines Flight No. 803. United Airlines has a different version of what occurred at the Los Angeles Airport on May 5, 1989. According to United Airlines, the Fontanillas did not initially go to the check-in counter to get their seat assignments for UA Flight 1108. They instead proceeded to join the queue boarding the aircraft without first securing their seat assignments as required in their ticket and boarding passes. Having no seat assignments, the stewardess at the door of the plane instructed them to go to the checkin counter. When the Fontanillas proceeded to the check-in counter, Linda Allen, the United Airlines Customer Representative at the counter informed them that the flight was overbooked. She booked them on the next available flight and offered them denied boarding compensation. Allen vehemently denies uttering the derogatory and racist words attributed to her by the Fontanillas. LEGAL ISSUE: Whether or not there was a breach of contract in bad faith on the part of the petitioner in not allowing the Fontanillas to board United Airlines Flight 1108? NO REASONING: Aniceto Fontanillas assertion that upon arrival at the airport at 9:45 a.m., he immediately proceeded to the check-in counter, and that Linda Allen punched in something into the computer is specious and not supported by the evidence on record. In support of their allegations, private respondents submitted a copy of the boarding pass. Explicitly printed on the boarding pass are the words Check-In Required. Curiously, the said pass did not indicate any seat number. If indeed the Fontanillas checked in at the designated time as they claimed, why then were they not assigned seat numbers? Absent any showing that Linda was so motivated, we do not buy into private respondents' claim that Linda intentionally deceived him, and made him the laughing stock among the passengers. Their failure to check in, as expressly required in their boarding passes, is the very reason why they were not given their respective seat numbers, which resulted in their being denied boarding. Although, the contract of carriage was to be performed in the United States, the tickets were purchased through petitioners agent in Manila. It is true that the tickets were rewritten in Washington, D.C. However, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila. (LEX LOCI CONTRACTUSApply the law where the ticket was issued.) The CA erred in applying US laws in the case at bar in claiming that petitioners failure to check in DID not defeat his claim for denied boarding compensation. The law of the forum on the subject matter is Economic Regulations No. 7 as amended by Boarding Priority and Denied Boarding Compensation of the Civil Aeronautics Board, which provides that the check-in requirement be complied with before a passenger may claim against a carrier for being denied boarding. With regard to the issue of overbooking: 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. What this Court considers as bad faith is the willful and deliberate overbooking on the part of the airline carrier. The above-mentioned law clearly states that when the overbooking does not exceed ten percent (10%), it is not considered as deliberate and therefore does not amount to bad faith. While there may have been overbooking in this case, private respondents were not able to prove that the overbooking on United Airlines Flight 1108 exceeded ten percent.

Private respondents were not able to prove that they were subjected to coarse and harsh treatment by the ground crew of United Airlines. Neither were they able to show that there was bad faith on part of the carrier airline.

Zalamea vs. CA FACTS: Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea, purchased three (3) airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a flight to New York to Los Angeles on June 6, 1984. Liana Zalamea appeared as the No. 13 on the wait-list while the two other Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names on the wait list, the first 22 names were eventually allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The two others, on the other hand, at No. 34, being ranked lower than 22, were not able to fly. As it were, those holding full-fare tickets were given first priority among the wait-listed passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter, was allowed to board the plane; while his wife and daughter, who presented the discounted tickets were denied boarding. According to Mr. Zalamea, it was only later when he discovered the he was holding his daughter's full-fare ticket. Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated because it was also fully booked. Thus, they were constrained to book in another flight and purchased two tickets from American Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars. Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract of air carriage before the Regional Trial Court of Makati. LEGAL ISSUE: WON TWA breached its contract of carriage entitling Petitioners to damages. YES. In accordance with Article 2201, respondent TWA should, therefore, be responsible for all damages which may be reasonably attributed to the non-performance of its obligation. RULING: That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or regulation allegedly authorizing overbooking has never been proved. Foreign laws do not prove themselves nor can the courts take judicial notice of them. Like any other fact, they must be alleged and proved. TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside from said statement, no official publication of said code was presented as evidence. Thus, respondent court's finding that overbooking is specifically allowed by the US Code of Federal Regulations has no basis in fact. Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in accordance with the principle of lex loci contractus which require that the law of the place where the airline ticket was issued should be applied by the court where the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline. Since the tickets were sold and issued in the Philippines, the applicable law in this case would be Philippine law. Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to an award of moral damages. 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 . Existing jurisprudence abounds with rulings where the breach of contract of carriage amounts to bad faith. Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not informing its passengers beforehand that it could breach the contract of carriage even if they have confirmed tickets if there was overbooking. Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of giving less priority to discounted tickets. It is respondent TWA's position that the practice of overbooking and the airline system of boarding priorities are reasonable policies, which when implemented do not amount to bad faith. But the issue raised in this case is not the reasonableness of said policies but whether or not said policies were incorporated or deemed written on petitioners' contracts of carriage. Respondent TWA failed to show that there are provisions to that effect. Neither did it present any argument of substance to show that petitioners were duly apprised of the overbooked condition of the flight or that there is a hierarchy of boarding priorities in booking passengers. It is evident that petitioners had the right to rely upon the assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets represented confirmed seats without any qualification. Zulueta vs. Pan Am 4 SCRA 397 FACTS: Plaintiff Zulueta, his wife and daughter were passengers aboard defendants plane from Honolulu to Manila. Upon reaching Wake Island the passengers were advised that they could disembark for a stopover for about30 minutes. Plaintiff went to the toilet at the terminal building but finding it full walked 200 yards away. Upon returning he told an employee of the defendant that they almost made him miss the flight because of a defective announcing system. He had a discussion with either the plan captain or the terminal manager. He was told that they would open his bags which he refused and he warned them of the consequences. Just the same they opened his bags and found nothing prohibited. They forced him to go out of the plane and left him at Wake Island. To add further humiliation and heap indignity on plaintiffs, when Mrs. Zulueta arrived at Manila and appealed to defendant's Manila manager, Mr. Oppenheimer, to see to it that her husband got back as soon as possible and was made as comfortable as possible, at defendant's expense, Mr. Oppenheimer refused to acknowledge any obligation to transport Mr. Zulueta back to Manila and forcing Mrs. Zulueta to send her husband $100.00 for pocket money and pay for his fare from Wake to Manila, thru Honolulu and Tokyo which took him 2 days. WON PANAM IS LIABLE FOR DAMAGES HELD: YES It is urged, however, that plaintiff is, at most, entitled to actual damages only, because he was the first to commit a breach of contract, for having gone over 200 yards away from the terminal, where he could not expect to be paged. But, PANAM has not pointed out what part of the contract has been violated thereby, apart from the fact that the award for damages made in the decision appealed from was due, not to PANAM's failure

to so page the plaintiff, but to the former's deliberate act of leaving him at Wake Island, and the embarrassment and humiliation caused to him and his family in the presence of many other persons. Then, also, considering the flat nature of the terrain in Wake Island, and the absence of buildings and structures, other than the terminal and a modest "hotel," as well as plaintiff's need of relieving himself, he had to find a place beyond the view of the people and near enough the sea to wash himself up before going back to the plane. It is next argued that plaintiff was, also, guilty of contributory negligence for failure to reboard the plane within the 30 minutes announced before the passengers debarked therefrom. This might have justified a reduction of the damages, had plaintiff been unwittingly left by the plane, owing to the negligence of PANAM personnel, or even, perhaps, wittingly, if he could not be found before the plane's departure. It does not, and cannot have such justification in the case at bar, plaintiff having shown up before the plane had taken off, and he having been off-loaded intentionally and with malice aforethought, for his "belligerent" attitude, according to Captain Zentner; for having dared - despite his being one of "three monkeys," - the term used by Captain Zentner to refer to the Zulueta family - to answer him back - when he (Captain Zentner) 5said: "what in the hell do you think you are ?" - in a way he had "not been spoken to" in his "whole adult life," in the presence of the passengers and other PANAM employees; for having responded to a command of either Zentner or Sitton to open his (plaintiff's) bags, with a categorical refusal and a challenge for Zentner or Sitton to open the bags without a search warrant therefor, thereby making manifest the lack of authority of the aforementioned representative of PANAM to issue said command and exposing him to ridicule before said passengers and employees. Besides, PANAM's own witness and employee, Wayne Pendleton, testified the plane could not take off at 4:30, as scheduled, because "we were still waiting for two (2) local passengers." Article 2201 of our Civil Code reads: In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. This responsibility applies to common carriers. Pursuant to Article 1759 of the same Code: ART. 1759. Common carriers are liable for the death or injuries to passengers through the negligence or wilful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.

This liability of the common carriers does not cease proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. Referring now to the specific amounts to damages due to plaintiffs herein, We note that the sum of P5,502.85 awarded to them as actual damages is not seriously disputed by PANAM. As regards the moral and exemplary damages claimed by the plaintiffs, our Civil Code provides: ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of defendant's wrongful act or omission. ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate liquidated or compensatory damages. ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The records amply establish plaintiffs' right to recover both moral and exemplary damages. Indeed, the rude and rough reception plaintiff received at the hands of Sitton or Captain Zentner when the latter met him at the ramp ("what in the hell do you think you are? Get on that plane"); the menacing attitude of Zentner or Sitton and the supercilious manner in which he had asked plaintiff to open his bags ("open your bag," and when told that a fourth bag was missing, "I don't give a damn"); the abusive language and highly scornful reference to plaintiffs as monkeys by one of PANAM's employees (who turning to Mrs. Zulueta and Miss Zulueta remarked, "will you pull these three monkeys out of here?"); the unfriendly attitude, the ugly stares and unkind remarks to which plaintiffs were subjected, and their being cordoned by men in uniform as if they were criminals, while plaintiff was arguing with Sitton; the airline officials' refusal to allow plaintiff to board the plane on the pretext that he was hiding a bomb in his luggage and their arbitrary and high-handed decision to leave him in Wake; Mrs. Zulueta's having suffered a nervous breakdown for which she was hospitalized as a result of the embarrassment, insults and humiliations to which plaintiffs were exposed by the conduct of PANAM's employees; Miss Zulueta's having suffered shame, humiliation and embarrassment for the treatment received by her parents at the airport 6- all these justify an award for moral damages resulting from mental anguish, serious anxiety, wounded feelings, moral shock, and social humiliation thereby suffered by plaintiffs.

The relation between carrier and passenger involves special and peculiar obligations and duties, differing in kind and degree, from those of almost every other legal or contractual relation. On account of the peculiar situation of the parties the law implies a promise and imposes upon the carrier the corresponding duty of protection and courteous treatment. Therefore, the carrier is under the absolute duty of protecting his passengers from assault or insult by himself or his servants. A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation tended with a public duty. Neglect or malfeasance of the carrier's employees naturally could give ground for an action for damages. Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are titled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any rude or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the A carrier of passengers is as much bound to protect them from humiliation and insult as from physical injury .. It is held in nearly all jurisdictions, if not universally, that a carrier is liable to a passenger for humiliation and mental suffering caused by abusive or insulting language directed at such passenger by an employee of the carrier. Where a conductor uses language to a passenger which is calculated to insult, humiliate, or wound the feelings of a person of ordinary feelings and sensibilities, the carrier is liable, because the contract of carriage impliedly stipulates for decent, courteous, and respectful treatment, at hands of the carrier's employees. The general rule that a carrier owes to a passenger highest degree of care has been held to include the duty to protect the passenger from abusive language by the carrier's agents, or by others if under such circumstances that the carrier's agents should have known about it and prevented it. Some of the courts have mentioned the implied duty of the carrier, arising out of the contract of carriage, not to insult the passenger, or permit him to be insulted, and even where no mention is made of this basis for liability, it is apparent that it is the ground upon which recovery is allowed. Lopez vs. Pan Am Facts: Reservation for first class accommodation in Pan American Airlines from Tokyo to San Francisco was made by Delfin Faustino for then Senator Fernando Lopez and company. First class tickets were issued and paid for. The party left Manila for Tokyo as scheduled. Senator Lopez requested Minister Busuego to contact the airlines regarding their accommodation. However, they were informed that there was no accommodation for

them. Because of some urgent matters to attend to in San Francisco, they were constrained to take the tourist flight under protest. Issues: Issue 1: Whether the defendant acted in bad faith for deliberate refusal to comply with its contract to provide first-class accommodation to the plaintiff Held: From the evidence of defendant it is in effect admitted that defendant - through its agents - first cancelled plaintiffs, reservations by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel agent the fact of said cancellation, letting them go on believing that their first class reservations stood valid and confirmed. In so misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed reservations for the same, when in fact they had none, defendant willfully and knowingly placed itself into the position of having to breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation by other passengers before flight time, as it turned out in this case. Such actuation of defendant may indeed have been prompted by nothing more than the promotion of its self-interest in holding on to Senator Lopez and party as passengers in its flight and foreclosing on their chances to seek the services of other airlines that may have been able to afford them first class accommodations. All the time, in legal contemplation such conduct already amounts to action in bad faith. For bad faith means a breach of a known duty through some motive of interest or ill-will. At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that their reservation had not been cancelled. Such willfulnon-disclosure of the cancellation or pretense that the reservations for plaintiffs stood and not simply the erroneous cancellation itself - is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in this respect defendant clearly acted in bad faith.

Issue 2; Whether moral and exemplary damages should be awarded Held: First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets issued by defendant and yet they were given only the tourist class. At stop-overs, they were expected to be among the first-class passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages. In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts in the future by defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or corrective damages. Victory Liner Inc. vs. Gammad (same with the previous Victory Liner case)

Facts: The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace Pagulayan-Gammad, was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries to other passengers. On May 14, 1996, respondent heirs of the deceased filed a complaint for damages arising from culpa contractual against petitioner. In its answer, the petitioner claimed that the incident was purely accidental and that it has always exercised extraordinary diligence in its 50 years of operation. After several re-settings, pre-trial was set on April 10, 1997.For failure to appear on the said date, petitioner was declared as in default. However, on petitioners motion to lift the order of default, the same was granted by the trial court. At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the deceased was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for their part, did not accept petitioners proposal to pay P50,000.00. After respondent Rosalito Gammad completed his direct testimony, cross-examination was scheduled for November 17, 1997 but moved to December 8, 1997, because the parties and the counsel failed to appear. On December 8, 1997, counsel of petitioner was absent despite due notice and was deemed to have waived right to cross-examine respondent Rosalito. Petitioners motion to reset the presentation of its evidence to March 25, 1998 was granted. However, on March 24, 1998, the counsel of petitioner sent the court a telegram requesting postponement but the telegram was received by the trial court on March 25, 1998, after it had issued an order considering the case submitted for decision for failure of petitioner and counsel to appear. On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive portion of which reads: WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered in favor of the plaintiffs and against the defendant Victory Liner, Incorporated, ordering the latter to pay the following: 1. Actual Damages -------------------- P 122,000.00 2. Death Indemnity --------------------- 50,000.00 3. Exemplary and Moral Damages----- 400,000.00 4. Compensatory Damages ---------- 1,500,000.00 5. Attorneys Fees ------------ 10% of the total amount granted 6. Cost of the Suit. On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification as follows: 1. Actual Damages in the amount of P88,270.00; 2. Compensatory Damages in the amount of P1,135,536,10;

3. Moral and Exemplary Damages in the amount of P400,000.00; and 4. Attorneys fees equivalent to 10% of the sum of the actual, compensatory, moral, and exemplary damages herein adjudged. The court a quos judgment of the cost of the suit against defendant-appellant is hereby AFFIRMED. Issue 3: Whether the award of damages was proper. NO. MODIFY. Article 1764 in relation to Article 2206 of the Civil Code, holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages. In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace which under current jurisprudence is fixed at P50,000.00. The award of compensatory damages for the loss of the deceaseds earning capacity should be deleted for lack of basis. As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the 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. In People v. Oco,the the Court held that testimonial evidence alone is insufficient to justify an award for loss of earning capacity. Likewise, in People v. Caraig, damages for loss of earning capacity was not awarded because the circumstances of the 3 deceased did not fall within the recognized exceptions, and except for the testimony of their wives, no documentary proof about their income was presented by the prosecution. Thus for lack of documentary proof, no indemnity for loss of earning capacity can be given in these cases. (Emphasis supplied) Here, the trial court and the Court of Appeals computed the award of compensatory damages for loss of earning capacity only on the basis of the testimony of respondent Rosalito that the deceased was 39 years of age and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a salary of P83,088.00 per annum when she died.No other evidence was presented. The award is clearly erroneous because the deceaseds earnings does not fall within the exceptions. However, the fact of loss having been established, temperate damages in the amount of P500,000.00 should be awarded to respondents. Under Article 2224 of the Civil Code, 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. In Pleno v. Court of Appeals, the Court sustained the trial courts award of P200,000.00 as temperate damages in lieu of actual damages for loss of earning capacity because the income of the victim was not sufficiently proven. We rule that the lower courts awards of damages are more consonant with the factual circumstances of the instant case. The trial courts findings of facts are clear and welldeveloped. Each item of damages is adequately supported by evidence on record.

Anent the award of moral damages, the same cannot be lumped with exemplary damages because they are based on different jural foundations. These damages are different in nature and require separate determination. In culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of contractual obligations and, as in this case, when the act of breach of contract itself constitutes the tort that results in physical injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also be awarded in case the death of a passenger results from a breach of carriage. On the other hand, exemplary damages, which are awarded by way of example or correction for the public good may be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. Respondents in the instant case should be awarded moral damages to compensate for the grief caused by the death of the deceased resulting from the petitioners breach of contract of carriage. Furthermore, the petitioner failed to prove that it exercised the extraordinary diligence required for common carriers, it is presumed to have acted recklessly. Thus, the award of exemplary damages is proper. Under the circumstances, we find it reasonable to award respondents the amount of P100,000.00 as moral damages and P100,000.00 as exemplary damages. These amounts are not excessive. The actual damages awarded by the trial court reduced by the Court of Appeals should be further reduced. In People v. Duban, it was held that only substantiated and proven expenses or those that appear to have been genuinely incurred in connection with the death, wake or burial of the victim will be recognized. A list of expenses (and the contract/receipt for the construction of the tomb in this case, cannot be considered competent proof and cannot replace the official receipts necessary to justify the award. Hence, actual damages should be further reduced to P78,160.00 which was the amount supported by official receipts. Pursuant to Article 2208 of the Civil Code, attorneys fees may also be recovered in the case at bar where exemplary damages are awarded. The Court finds the award of attorneys fees equivalent to 10% of the total amount adjudged against petitioner reasonable. Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established

with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of 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. (Emphasis supplied). In the instant case, petitioner should be held liable for payment of interest as damages for breach of contract of carriage. Considering that the amounts payable by petitioner has been determined with certainty only in the instant petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, per paragraph 3 of the aforecited rule. Petitioner Victory Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3) P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5) P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys fees; and the costs of suit. Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12% per annum computed from the finality of this decision until fully paid.

Sulpicio Lines Inc. vs. CA FACTS: October 23, 1988: Tito Duran Tabuquilde (Tito) and his 3-year old daughter Jennifer Anne (Anne) boarded the M/V Dona Marilyn at North Harbor, Manila, bringing with them several pieces of luggage. Storm Signal No. 2 had been raised by the PAG-ASA authorities over Leyte as early as 5:30 P.M. of October 23, 1988 and which signal was raised to Signal No. 3 by 10 P.M. The ship captain ordered the vessel to proceed to Tacloban when prudence dictated that he should have taken it to the nearest port for shelter, thus violating his duty to exercise extraordinary diligence in the carrying of passengers safely to their destination October 24, 1988 morning: M/V Dona Marilyn, while in transit, encountered inclement weather which caused huge waves due to Typhoon Unsang. Angelina Tabuquilde contacted the Sulpicio Office to verify radio reports that the vessel M/V Dona Marilyn was missing. Sulpicio Lines assured her that the ship was merely "hiding" thereby assuaging her anxiety October 24, 1988 2:00 P.M.: vessel capsized, throwing Tito and Anne, along with hundreds of passengers, into the sea. Tito tried to keep himself and his daughter afloat but to no avail as the waves got stronger and he was subsequently separated from his daughter despite his efforts.

October 25, 1988 11:00 A.M.: He found himself on Almagro Island in Samar. He immediately searched for his daughter among the survivors in the island, but failed. Angelina tried to seek the assistance of the Sulpicio Lines in Manila to no avail. Angelina spent sleepless nights worrying about her husband and daughter in view of the refusal of Sulpicio Lines to release a verification of the sinking of the ship. October 26, 1988: Tito and other survivors in the Almagro Island were fetched and were brought to Tacloban Medical Center for treatment October 31, 1988: Tito reported the loss of his daughter and was informed that the corpse of a child with his daughter's description had been found. Tito wrote a letter to his wife, reporting the sad fact that Jennifer Anne was dead. Angelina suffered from shock and severe grief upon receipt of the news. Tito filed a claim for damages against Sulpicio Lines for the death of Anne and the loss of his belongings worth P27,580 Regional Trial Court: in favor of Tito o actual damages, P30,000.00 for the death of Anne o P100,000.00 as moral damages o P50,000.00 as exemplary damages o P50,000.00 as attorney's fees, and costs ISSUE: W/N Tito has a right to recover damage for his lost belongings HELD: NO. Court of Appeals is AFFIRMED with the MODIFICATION that the award of P27,580.00 as actual damages for the loss of the contents of the pieces of baggage is deleted and that the award of P30,000.00 under Article 2206 in relation Article 1764 is increased to P50,000.00. There is no showing that the value of the contents of the lost pieces of baggage was based on the bill of lading or was previously declared by Tito before he boarded the ship Article 2206 of the Civil Code of the Philippines: Only deaths caused by a crime as quasi delict are entitled to actual and compensatory damages without the need of proof of the said damages 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. . . . Deducing alone from said provision, one can conclude that damages arising from culpa contractual are not compensable without proof of special damages sustained by the heirs of the victim. With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa contractual except when the presence of bad faith was proven in breach of contract of carriage, moral damages may be recovered when it results in the death of a passenger With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the Court the discretion to grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless manner The crew assumed a greater risk when, instead of dropping anchor in or at the periphery

of the Port of Calapan, or returning to the port of Manila which is nearer, proceeded on its voyage on the assumption that it will be able to beat and race with the typhoon and reach its destination before it (Unsang) passes. People vs. More How to compute earning capacity: Net earning capacity = life expectancy multiplied by gross annual incomeless living expenses. Life expectancy = 2/3 x (80 age of deceased) Award of damages: Moral damages are not meant to enrich the heirs of the victim but only to compensate them for injuries sustained to their feelings. P50,000.00 consistent with prevailing jurisprudence. Actual damages must be substantiated with receipts. Another P50,000 for the death of victim Tugade vs. CA Facts (as in super brief): Tugade was a taxi driver who bumped another vehicle. He was charged with Reckless Imprudence Resulting in Damage to Property. Tugades defense: faulty brakes (fortuitous event) Tugade was found guilty by the trial court. Held: Tugade, by reason of proof beyond reasonable doubt against him, was found guilty of the charge against him. Faulty brakes cannot be considered as a fortuitous event. As such, he was sentenced to pay a [fine of one thousand (P1,000.00) pesos], with subsidiary imprisonment in case of insolvency in accordance with the provisions of Article 39 of the Revised, Penal Code, as amended, to indemnify the Sta. Ines Mining Corporation in the amount of P778.10 by way of actual damages; and to pay the costs..