Expertravel & Tours, Inc. vs. Court of Appeals and Ricardo Lo

The mere institution of a clearly unfounded civil suit does not justify an award of moral damages to the prevailing defendant, because the law could not have meant to impose a penalty on the right to litigate, and the anguish suffered by a person made a defendant is no different from the usual worry and anxiety suffered by anyone haled to court. Moral damages are recoverable only when the four conditions for their award are met and the case falls under those enumerated in Article 2219 of the Civil Code or analogous cases under the ejusdem generis rule.

Expertravel & Tours, Inc. ("Expertravel") is a domestic corporation engaged in the travel agency business. Ricardo Lo was a client who purchased travel services from Expertravel. The dispute concerned whether Lo had paid for four round-trip plane tickets to Hongkong, with hotel accommodations and transfers, totaling P39,677.20. The case required the Court to apply the law on moral damages under Articles 2219 and related provisions of the Civil Code, particularly whether a defendant who prevails in a civil suit may recover moral damages from the plaintiff who filed a clearly unfounded complaint.

On 07 October 1987, Expertravel & Tours, Inc., a domestic corporation engaged in the travel agency business, issued to Ricardo Lo four round-trip plane tickets for Hongkong, together with hotel accommodations and transfers, for a total cost of P39,677.20. Alleging that Lo had failed to pay the amount due, Expertravel caused several demands to be made. Since the demands were ignored by Lo, Expertravel filed a court complaint for recovery of the amount claimed plus damages.

Lo explained in his answer that his account with Expertravel had already been fully paid. The outstanding account was remitted to Expertravel through its then Chairperson, Ms. Ma. Rocio de Vega, who was theretofore authorized to deal with the clients of Expertravel. The payment was evidenced by a Monte de Piedad Check No. 291559, dated 06 October 1987, for P42,175.20, for which Ms. de Vega, in turn, issued City Trust Check No. 417920 in favor of Expertravel for the amount of P50,000.00, with the notation "placement advance for Ricardo Lo, etc." Per its own invoice, Expertravel received the sum on 10 October 1987.

The trial court, affirmed by the appellate court, held that the payment made by Lo was valid and binding on Expertravel. Even on the assumption that Ms. de Vega had not been specifically authorized by Expertravel, both courts said, the fact that the amount delivered to the latter remained in its possession up to the present meant that the amount redounded to the benefit of petitioner Expertravel, in view of the second paragraph of Article 1241 of the Civil Code to the effect that payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor.

• Moral Damages for Unfounded Suit: Petitioner argued that moral damages cannot be recovered in a clearly unfounded suit, since the filing of such a suit has almost invariably been held not to be a ground for an award of moral damages.
• Moral Damages for Quasi-Delict Without Physical Injury: Petitioner argued that moral damages cannot be awarded for negligence or quasi-delict that did not result in physical injury to the offended party.

N/A — The decision does not recount the specific arguments raised by respondent Ricardo Lo on appeal.

• Moral Damages for Unfounded Suit: Whether moral damages can be recovered in a clearly unfounded suit.
• Moral Damages for Quasi-Delict Without Physical Injury: Whether moral damages can be awarded for negligence or quasi-delict that did not result in physical injury to the offended party.

• Moral Damages for Unfounded Suit: No. Although the institution of a clearly unfounded civil suit can at times be a legal justification for an award of attorney's fees, such filing has almost invariably been held not to be a ground for an award of moral damages, because the law could not have meant to impose a penalty on the right to litigate.
• Moral Damages for Quasi-Delict Without Physical Injury: No. In culpa aquiliana or quasi-delict, moral damages may be recovered only when an act or omission causes physical injuries or where the defendant is guilty of intentional tort; the award of moral damages requires that the case fall under any of the instances enumerated in Article 2219 of the Civil Code or analogous cases under the ejusdem generis rule.

• Moral Damages for Unfounded Suit: Moral damages are not punitive in nature but are designed to compensate and alleviate in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly caused to a person. Although incapable of pecuniary computation, moral damages must somehow be proportional to and in approximation of the suffering inflicted. Such damages, to be recoverable, must be the proximate result of a wrongful act or omission the factual basis for which is satisfactorily established by the aggrieved party. The rationale for the rule that a clearly unfounded suit does not justify moral damages is that the law could not have meant to impose a penalty on the right to litigate. The anguish suffered by a person for having been made a defendant in a civil suit would be no different from the usual worry and anxiety suffered by anyone who is haled to court, a situation that cannot by itself be a cogent reason for the award of moral damages. If the rule were otherwise, then moral damages must every time be awarded in favor of the prevailing defendant against an unsuccessful plaintiff.

• Moral Damages for Quasi-Delict Without Physical Injury: An award of moral damages requires certain conditions to be met: (1) there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) there must be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award of damages is predicated on any of the cases stated in Article 2219. Under the provisions of this law, 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 his contractual obligation and, exceptionally, when the act of breach of contract itself is constitutive of tort resulting in physical injuries. In culpa aquiliana or quasi-delict, moral damages may aptly be recovered (a) when an act or omission causes physical injuries, or (b) where the defendant is guilty of intentional tort. The term "analogous cases" referred to in Article 2219, following the ejusdem generis rule, must be held similar to those expressly enumerated by the law.

• Conditions for Award of Moral Damages — For moral damages to be recoverable, four conditions must be met: (1) there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) there must be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code. The Court applied this four-part test to determine that the award of moral damages to Lo could not stand.

• Unfounded Suit Not a Ground for Moral Damages — The institution of a clearly unfounded civil suit, while it can at times justify an award of attorney's fees, has almost invariably been held not to be a ground for an award of moral damages. The rationale is that the law could not have meant to impose a penalty on the right to litigate, and the anguish of being made a defendant is no different from the usual worry and anxiety suffered by anyone haled to court. The Court applied this doctrine to delete the award of moral damages to Lo.

• Ejusdem Generis in Article 2219 — The term "analogous cases" referred to in Article 2219 of the Civil Code, following the ejusdem generis rule, must be held similar to those expressly enumerated by the law. The Court invoked this rule to limit the recoverable instances of moral damages to those akin to the enumerated cases.

• Moral Damages in Quasi-Delict — In culpa aquiliana or quasi-delict, moral damages may be recovered (a) when an act or omission causes physical injuries, or (b) where the defendant is guilty of intentional tort. The Court applied this rule to reject the award of moral damages where no physical injury resulted from the alleged negligence.

• "Moral damages are not punitive in nature but are designed to compensate and alleviate in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly caused to a person." — This passage defines the nature and purpose of moral damages, establishing that they are compensatory rather than punitive, which underlies the Court's restrictive approach to their award.

• "Although the institution of a clearly unfounded civil suit can at times be a legal justification for an award of attorney's fees, such filing, however, has almost invariably been held not to be a ground for an award of moral damages." — This is the core ratio decidendi of the case, stating the rule that an unfounded suit does not justify moral damages even though it may justify attorney's fees.

• "The rationale for the rule is that the law could not have meant to impose a penalty on the right to litigate. The anguish suffered by a person for having been made a defendant in a civil suit would be no different from the usual worry and anxiety suffered by anyone who is haled to court, a situation that cannot by itself be a cogent reason for the award of moral damages." — This passage articulates the policy rationale for refusing moral damages in unfounded suits, emphasizing the protection of the right to litigate.

• "If the rule were otherwise, then moral damages must every time be awarded in favor of the prevailing defendant against an unsuccessful plaintiff." — This passage highlights the absurd consequence that would follow if moral damages were awarded in every unfounded suit, supporting the Court's restrictive interpretation.

• Dee Hua Liong Electrical Equipment Corp. vs. Reyes, 145 SCRA 713 — Cited for the proposition that moral damages are designed to compensate and alleviate suffering, and that such damages must be the proximate result of a wrongful act or omission factually established by the aggrieved party.
• Philtranco Service Enterprises, Inc. vs. CA, 273 SCRA 562 — Cited for the principle that moral damages must be proportional to and in approximation of the suffering inflicted.
• San Miguel Brewery, Inc. vs. Magno, 21 SCRA 292 — Cited for the requirement that moral damages must be the proximate result of a wrongful act or omission satisfactorily established by the aggrieved party.
• Phil. Airlines vs. Court of Appeals, 106 SCRA 391; Singson vs. Bank of P.I., 23 SCRA 1117; Air France vs. Carrascoso, 18 SCRA 155 — Cited for the rule on moral damages in culpa contractual or breach of contract.
• Bagumbayan Corp. vs. IAC, 132 SCRA 441 — Cited for the application of the ejusdem generis rule to the term "analogous cases" in Article 2219.
• Enervida vs. Dela Torre, 55 SCRA 339; Ramos vs. Ramos, 61 SCRA 284; Manila Gas Corporation vs. CA, 100 SCRA 602; Philippine National Bank vs. Court of Appeals, 159 SCRA 433 — Cited for the rule that the filing of a clearly unfounded civil suit is not a ground for an award of moral damages.
• Philippine National Bank vs. Court of Appeals, 159 SCRA 433 — Cited for the rationale that the anguish of being made a defendant is no different from the usual worry and anxiety of anyone haled to court.
• Filinvest Credit Corp. vs. Mendez, 152 SCRA 593 — Cited for the proposition that if the rule were otherwise, moral damages must every time be awarded in favor of the prevailing defendant against an unsuccessful plaintiff.

• Article 1241, Civil Code — Provides that payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. The trial court and the Court of Appeals applied this provision to hold that Lo's payment through Ms. de Vega was valid and binding on Expertravel because the amount remained in its possession.
• Article 2219, Civil Code — Enumerates the cases where moral damages may be recovered, including criminal offenses resulting in physical injuries, quasi-delicts causing physical injuries, seduction, adultery, illegal detention, illegal search, defamation, malicious prosecution, and acts referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35. The Court applied this provision to determine that the award of moral damages to Lo was not predicated on any of the enumerated cases.
• Article 2208(4), Civil Code — Allows the recovery of attorney's fees when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. The Court distinguished attorney's fees from moral damages, noting that a clearly unfounded suit can justify attorney's fees but not moral damages.
• Article 1764, in relation to Article 2206, Civil Code — Provides a special rule allowing moral damages in case the death of a passenger results from a breach of carriage. The Court cited this as an exceptional instance where moral damages may be awarded in a contractual context.

Panganiban, Purisima, and Gonzaga-Reyes, JJ., concurred. Romero, J., was abroad on official business leave.

N/A — No dissenting opinions are noted in the provided text.