G.R. No. 108670 - LBC Express, Inc. vs. Court of Appeals

Petitioner: LBC Express, Inc. (an air cargo and logistics company).
Private Respondent: Adolfo M. Carloto, President-Manager of Rural Bank of Labason, Inc.
Other Respondent: Rural Bank of Labason, Inc. (an artificial person as a corporate entity).

On November 12, 1984, Carloto was in Cebu City transacting business with the Central Bank Regional Office.
He received instruction to proceed to Manila on or before November 21, 1984 to follow up on his bank’s payment plan for rediscounting obligations with the Central Bank’s main office.
Carloto purchased a round-trip plane ticket to Manila.
He contacted his sister, Elsie Carloto-Concha, requesting ONE THOUSAND PESOS (P1,000.00) for pocket money and the necessary rediscounting documents to be transmitted via LBC’s Dipolog City office.

On November 16, 1984, Mrs. Concha, through her clerk Adelina Antigo, consigned the documents along with the cash (P1,000.00) via LBC Dipolog Branch.
The transaction was evidenced by LBC Air Cargo, Inc.’s Cashpack Delivery Receipt No. 34805.
On November 17, 1984, the documents arrived at the destination but the cashpack was missing.
Carloto made personal follow-ups on November 17, 19, and 20, 1984 at LBC’s Cebu office, but the cashpack was not delivered.

As the cash remained undelivered, Carloto went to Dipolog City on November 24, 1984, and then back to the Cebu office on November 27, 1984, to claim the money.
He was informed that the money had been returned to LBC’s office in Dipolog City upon the shipper’s request.
On demanding the ONE THOUSAND PESOS (P1,000.00) along with a refund of revenue charges amounting to FORTY-NINE PESOS (P49.00), he eventually received the money on December 15, 1984, less the revenue charges.

Carloto claimed that due to the delay in the transmission of the cashpack, he could not submit the rediscounting documents on time to the Central Bank.
Consequently, his rural bank was penalized with a payment of THIRTY-TWO THOUSAND PESOS (P32,000.00) as penalty interest for failing to meet its rediscount obligations.

Up to the trial court: Carloto initiated an action for Damages Arising from Non-performance of Obligation as Civil Case No. 3679 before the Regional Trial Court of Dipolog City on January 4, 1985.
The trial court awarded moral damages, exemplary damages, attorney’s fees, litigation expenses, and reimbursement for the penalty interest paid by the rural bank.
On appeal, the Court of Appeals modified the judgment by deleting the award of attorney’s fees.
Petitioner LBC subsequently filed a Petition for Review on Certiorari questioning the appellate decision.

Whether the Rural Bank of Labason, Inc. – being an artificial person – is entitled to be awarded moral damages.

Inquiry into the capacity of a corporation to experience physical suffering, mental anguish, and similar injuries that justify moral damages.

Whether the award of THIRTY-TWO THOUSAND PESOS (P32,000.00) as penalty interest constitutes a grave abuse of discretion.

Consideration of whether the penalties imposed are justifiable as natural and probable consequences of the breach, or if they are excessive in light of the circumstances.

Whether the respondent Court of Appeals committed grave abuse of discretion by affirming the trial court’s decision to award moral and exemplary damages despite the petitioner’s performance of its obligation.

Evaluation of the actions of petitioner LBC regarding the timely forwarding of the cashpack.
Analysis of the necessity of proving intentional bad faith or gross negligence by LBC in the delay of cashpack delivery.