Darines vs. Quiñones

In an action for breach of contract of carriage (culpa contractual), moral damages may be awarded only when (1) an accident results in the death of a passenger, or (2) the carrier is guilty of fraud or bad faith; absent either, exemplary damages and attorney’s fees cannot be awarded.

Petitioners were paying passengers on an Amianan Bus Line bus en route from Carmen, Rosales, Pangasinan to Baguio City. While travelling along Kennon Road in Camp 3, Tuba, Benguet, the bus crashed into a truck parked on the shoulder. Two passengers died, and petitioners were injured. Petitioners claimed breach of contract of carriage and sought damages. Respondents denied liability, blamed the truck driver’s negligence, and asserted due diligence in the selection and supervision of employees.

Petitioners Judith D. Darines and her daughter Joyce D. Darines alleged in their Complaint that on December 31, 2005, they boarded the Amianan Bus Line with Plate No. ACM 497 and Body No. 808 as paying passengers en route from Carmen, Rosales, Pangasinan to Baguio City. Respondent Rolando M. Quitan was driving the bus, while respondent Eduardo Quiñones was the operator of Amianan Bus Line. While travelling on Camp 3, Tuba, Benguet along Kennon Road, the bus crashed into a truck with Plate No. XSE 578 that was parked on the shoulder of Kennon Road. Both vehicles were damaged, two passengers of the bus died, and the other passengers, including petitioners, were injured; Joyce suffered cerebral concussion while Judith had an eye wound that required an operation.

Petitioners argued that Quitan and Quiñones breached their contract of carriage by failing to bring them safely to their destination, and that Quitan’s reckless and negligent driving caused the collision; they prayed for actual, moral, exemplary and temperate damages, and costs of suit. Respondents countered in their Answer that during the incident Quitan was driving in a careful, prudent, and dutiful manner at the normal speed of 40 kilometers per hour. According to respondents, the proximate cause of the incident was the negligence of truck driver Ronald C. Fernandez, who parked the truck at the roadside right after the curve without having installed any early warning device. They also claimed that Quiñones observed due diligence in the selection and supervision of his employees as he conducted seminars on road safety measures, and that Quitan attended such seminars including those required by the government on traffic safety. They likewise averred that Quitan was a licensed professional driver who, in his 12 years as a public utility driver, had not figured in any incident like the one at hand.

During the trial, Judith testified that Quitan was driving at a very fast pace resulting in a collision with the truck parked at the shoulder of the road. Consequently, the bone holding her right eye was fractured and had to be operated, and she claimed that as a result of the incident she failed to report for work for two months. To prove actual damages, Judith presented receipts for medicine and a summary of expenses, which included those incurred for the ritual dao-is. She explained that she and Joyce are Igorots, being members of Ibaloi, Kankanay-ey, an indigenous tribe, and that as their customary practice, when a member who meets an accident is released from the hospital, they butcher pigs to remove or prevent bad luck from returning to the family. To support her claim for moral damages, Judith testified that she suffered sleepless nights since she worried about the result and possible effect of her operation. Respondents presented Ernesto Benitez, who, on behalf of respondents, testified that he bought the medicines and paid petitioners’ hospitalization expenses, as evidenced by receipts he submitted in court.

After trial, the RTC found that respondents had already paid the actual damages relating to petitioners’ medical and hospitalization expenses. It noted that petitioners did not present any receipt for the expenses incurred during the dao-is ritual, and that they failed to substantiate Judith’s lost income because there was no showing that her failure to report for work for two months was because of the incident. The RTC also considered Judith’s testimony regarding her pain and suffering.

• Petitioners maintained that respondents are liable to pay moral and exemplary damages because the proximate cause of their injuries was the reckless driving of Quitan.
• As regards Quiñones, his fault is presumed considering that he did not offer proof that he exercised extraordinary diligence in the selection and supervision of his employees.
• The negligence of respondents resulted in their failure to transport petitioners to their destination, constituting a breach of their contract of carriage.
• Petitioners invoked Articles 20, 1157, 1759, 2176, 2180 and 2219 of the Civil Code as bases for moral and exemplary damages and attorney’s fees.
• They also argued that the RTC’s grant of damages and attorney’s fees in their favor already attained finality because when respondents appealed to the CA, they only questioned the amounts given by the RTC for being exorbitant, but not the award itself.

• Respondents posited that they are not liable to pay moral damages because their acts were not attended by fraud or bad faith.
• They added that since petitioners are not entitled to moral damages, then it follows that they are also not entitled to exemplary damages.
• The same is true with regard to the grant of attorney’s fees as the same necessitates the grant of moral and exemplary damages.
• They also claimed that Quitan was driving carefully and that the proximate cause was the negligence of the truck driver, Ronald C. Fernandez, who parked the truck without an early warning device.
• They asserted that Quiñones observed due diligence in the selection and supervision of employees, and that Quitan was a licensed professional driver with 12 years of experience and no prior similar incident.

• Entitlement to Moral and Exemplary Damages and Attorney’s Fees: Whether the case of petitioners falls under Articles 20, 1157, 1759, 2176, 2180 and 2219 of the Civil Code, thereby entitling them to moral and exemplary damages and attorney’s fees.
• Finality of RTC Award: Whether the award of damages and attorney’s fees by the trial court became final and executory since respondents did not question the same in their appeal but merely questioned the amounts of award for being exorbitant.

• Entitlement to Moral and Exemplary Damages and Attorney’s Fees: No. In an action for breach of contract of carriage, moral damages may be recovered only when a passenger dies or the carrier is guilty of fraud or bad faith. Neither circumstance was present. Since no moral damages may be awarded, there is no basis to grant exemplary damages and attorney’s fees.
• Finality of RTC Award: No. A plain reading of the assigned errors and issues in the Appellants’ Brief of respondents with the CA reveals that they questioned the awards of moral and exemplary damages as well as attorney’s fees made by the RTC. Since respondents timely challenged the awards when they interposed an appeal to the CA, the same had not yet attained finality.

• Entitlement to Moral and Exemplary Damages and Attorney’s Fees: The SC agreed with the CA that in an action for breach of contract, moral damages may be recovered only when (a) death of a passenger results; or (b) the carrier was guilty of fraud and bad faith even if death does not result. Neither circumstance was present. This case is one for breach of contract of carriage (culpa contractual), where it is necessary to show the existence of the contract between the parties and the failure of the common carrier to transport its passenger safely to his or her destination. An action for breach of contract differs from quasi-delicts (culpa aquiliana or culpa extra contractual), which emanate from the negligence of the tortfeasor, including an instance where a person is injured in a vehicular accident by a party other than the carrier where he is a passenger. The principle that moral damages in breach of contract of carriage may be awarded only in case of death of a passenger or fraud or bad faith is pursuant to Article 1764, in relation to Article 2206(3) of the Civil Code, and Article 2220 thereof. Fraud or bad faith connotes “deliberate or wanton wrong doing” or such deliberate disregard of contractual obligations, while negligence amounts to sheer carelessness. Fraud includes “inducement through insidious machination,” which refers to such deceitful strategy or such plan with an evil purpose. Bad faith does not merely pertain to bad judgment or negligence but relates to a dishonest purpose and a deliberate doing of a wrongful act; it involves “breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.” In Viluan v. Court of Appeals and Bulante v. Chu Liante, the SC disallowed recovery of moral damages in actions for breach of contract for lack of showing that the common carrier committed fraud or bad faith. In Verzosa v. Baytan, the SC did not grant moral damages in an action for breach of contract as there was neither allegation nor proof that the common carrier committed fraud or bad faith. The SC declared that “[t]o award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by [Article 2220 of the Civil Code], would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation.” Meanwhile, in Gatchalian v. Delim and Mr. & Mrs. Fabre, Jr. v. Court of Appeals, the SC found common carriers liable for breach of contract of carriage and awarded moral damages to injured passengers on the ground that the common carrier committed gross negligence, which amounted to bad faith. In Mr. & Mrs. Fabre, Jr., the gross negligence was determined from the fact that the driver was not engaged to drive long distance travels; he was unfamiliar with the area where he detoured the bus as it was his first time to ply such route; the road was slippery because it was raining, yet the bus was running at 50 kilometers per hour resulting in its skidding to the left shoulder of the road; and the bus hit the steel brace on the road at past 11:30 p.m. The SC also noted that other than the imputation of gross negligence, the injured passengers therein pursued their claim not on the theory of breach of contract of carriage alone but also on quasi-delicts. Clearly, unless it is fully established (and not just lightly inferred) that negligence in an action for breach of contract is so gross as to amount to malice, the claim of moral damages is without merit. Here, petitioners imputed negligence on the part of respondents, but did not discuss or impute fraud or bad faith, or such gross negligence which would amount to bad faith, against respondents. There being neither allegation nor proof that respondents acted in fraud or in bad faith in performing their duties arising from their contract of carriage, they are not liable for moral damages. The SC also sustained the CA’s finding that petitioners are not entitled to exemplary damages. Pursuant to Articles 2229 and 2234 of the Civil Code, exemplary damages may be awarded only in addition to moral, temperate, liquidated, or compensatory damages. Since petitioners are not entitled to either moral, temperate, liquidated, or compensatory damages, their claim for exemplary damages is bereft of merit. Finally, considering the absence of any of the circumstances under Article 2208 of the Civil Code where attorney’s fees may be awarded, the same cannot be granted to petitioners.
• Finality of RTC Award: The SC held that petitioners’ contention that the awards of moral and exemplary damages and attorney’s fees by the RTC already attained finality is without merit. A plain reading of the assigned errors and issues in the Appellants’ Brief of respondents with the CA reveals that they questioned the awards of moral and exemplary damages as well as attorney’s fees made by the RTC to petitioners. Since respondents timely challenged the awards when they interposed an appeal to the CA, the same had not yet attained finality.

• Moral damages in breach of contract of carriage — In an action for breach of contract of carriage, moral damages may be recovered only when (1) an accident results in the death of a passenger; or (2) the carrier is guilty of fraud or bad faith even if death does not result. The SC applied this rule and found neither circumstance present.
• Fraud or bad faith distinguished from negligence — Fraud or bad faith connotes deliberate or wanton wrongdoing or deliberate disregard of contractual obligations, while negligence amounts to sheer carelessness. Fraud includes inducement through insidious machination; bad faith involves a dishonest purpose and a deliberate doing of a wrongful act, or breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud. Petitioners only imputed negligence, not fraud or bad faith.
• Gross negligence amounting to bad faith — Unless it is fully established, and not just lightly inferred, that negligence in an action for breach of contract is so gross as to amount to malice, the claim for moral damages is without merit. The SC found no such gross negligence in this case.
• Exemplary damages — Exemplary damages may be awarded only in addition to moral, temperate, liquidated, or compensatory damages. Since petitioners were not entitled to any of these damages, exemplary damages could not be awarded.
• Attorney’s fees — In the absence of stipulation, attorney’s fees and expenses of litigation cannot be recovered except under the circumstances enumerated in Article 2208 of the Civil Code. None of those circumstances was present.
• Finality of judgment on appeal — An award does not attain finality if it is timely challenged on appeal. The SC found that respondents questioned the awards in their Appellants’ Brief, so the RTC awards had not become final and executory.

• “in an action for breach of contract, moral damages may be recovered only when a) death of a passenger results; or b) the carrier was guilty of fraud and bad faith even if death does not result”
• “fraud or bad faith connotes ‘deliberate or wanton wrong doing’ or such deliberate disregard of contractual obligations while negligence amounts to sheer carelessness.”
• “unless it is fully established (and not just lightly inferred) that negligence in an action for breach of contract is so gross as to amount to malice, then the claim of moral damages is without merit.”
• “[t]o award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by [Article 2220 of the Civil Code], would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation.”
• “exemplary damages may be awarded only in addition to moral, temperate, liquidated, or compensatory damages.”

• Viluan v. Court of Appeals, 123 Phil. 561 (1966) — Disallowed recovery of moral damages in actions for breach of contract for lack of showing that the common carrier committed fraud or bad faith.
• Bulante v. Chu Liante, 132 Phil. 87 (1968) — Also disallowed recovery of moral damages in an action for breach of contract for lack of showing of fraud or bad faith.
• Verzosa v. Baytan, 107 Phil. 1010 (1960) — Did not grant moral damages in an action for breach of contract as there was neither allegation nor proof that the common carrier committed fraud or bad faith; cited for the rule that awarding moral damages without proof of bad faith or malice would constitute unwarranted judicial legislation.
• Gatchalian v. Delim, 280 Phil. 137 (1991) — Found the common carrier liable for breach of contract of carriage and awarded moral damages to injured passengers on the ground that the common carrier committed gross negligence, which amounted to bad faith.
• Mr. & Mrs. Fabre, Jr. v. Court of Appeals, 328 Phil. 774 (1996) — Awarded moral damages where the common carrier’s gross negligence amounted to bad faith; the injured passengers pursued their claim not on breach of contract alone but also on quasi-delicts.
• Calalas v. Court of Appeals, 388 Phil. 146 (2000) — Cited for the distinction between an action for breach of contract and quasi-delicts.
• Fores v. Miranda, 105 Phil. 266 (1959) — Cited in Verzosa for the rule on fraud or bad faith and the warning against unwarranted judicial legislation.
• Victory Liner, Inc. v. Gammad, 486 Phil. 574 (2004) — Cited for the concept of deliberate disregard of contractual obligations.
• Cathay Pacific Airways, Ltd. v. Spouses Vazquez, 447 Phil. 306 (2003) — Cited for the definitions of fraud as inducement through insidious machination and bad faith as breach of a known duty through motive, interest, or ill will partaking of the nature of fraud.

• Article 1764, Civil Code — Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of the Civil Code concerning Damages; Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. Applied to limit moral damages in breach of contract of carriage to cases of death or fraud/bad faith.
• Article 2206(3), Civil Code — The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. Applied: no death of a passenger in this case.
• Article 2220, Civil Code — Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due; the same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Applied: no fraud or bad faith was alleged or proved.
• Article 2229, Civil Code — Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. Applied: no moral, temperate, liquidated, or compensatory damages were awarded.
• Article 2234, Civil Code — While the amount of exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. Applied: petitioners failed to show entitlement to any predicate damages.
• Article 2208, Civil Code — In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except in the enumerated circumstances. Applied: none of the circumstances was present.
• Articles 20, 1157, 1759, 2176, 2180 and 2219, Civil Code — Invoked by petitioners in their issue as bases for moral and exemplary damages and attorney’s fees. The SC resolved the case under Articles 1764, 2206(3), 2220, 2229, 2234, and 2208.

• Sereno, C.J. (Chairperson)
• Leonardo-De Castro, J.
• Perlas-Bernabe, J.
• Caguioa, J.

None.