Case Summary (G.R. No. 170141)
Contract formation, travel arrangements, and boarding
Respondent intended to donate a kidney in the United States and obtained an emergency U.S. visa after medical compatibility tests. He purchased from JAL a round-trip ticket (US$1,485.00), received a boarding pass, and underwent immigration and security procedures at Ninoy Aquino International Airport. JAL permitted him to board the aircraft for the July 29, 1992 flight bound for Los Angeles via Narita.
Facts
Bumping incident, refund, and visa cancellation
While on board, airline personnel allegedly suspected respondent of carrying falsified travel documents and intending to use the trip as a pretext to remain in Japan. Crew members ordered respondent to disembark. He protested, produced his visa, and requested monitoring during the Narita stopover, but was compelled to leave the aircraft. He waited at JAL’s ground office for hours; the aircraft departed without him. Later, JAL refunded the ticket less US$500; respondent’s U.S. visa was subsequently cancelled. Respondent was thereby unable to proceed with the kidney donation.
Procedural history
Trial court judgment and relief claimed
Respondent sued JAL in the Regional Trial Court (Civil Case No. 4195-V-93) seeking moral and exemplary damages and attorney’s fees, alleging breach of the contract of carriage, embarrassment, and mental anguish. The RTC found for respondent and awarded P1,000,000 as moral damages, P500,000 as exemplary damages, and P250,000 as attorney’s fees.
Procedural history
Court of Appeals modification
On appeal the Court of Appeals affirmed liability but modified damages: it reduced moral damages to P500,000, exemplary damages to P250,000, and deleted the award of attorney’s fees for lack of proof of counsel’s costs. The CA relied on the existence of a perfected contract of carriage and held that the manner of respondent’s ejection caused humiliation and warranted moral and exemplary awards.
Issues presented on review
Issues advanced by petitioner (JAL)
JAL’s petition raised primarily: (1) whether JAL breached the contract of carriage; (2) whether moral damages were properly awarded (arguing moral damages are recoverable in contract cases only if fraud or bad faith is shown, which JAL denied); (3) whether exemplary damages were justified (JAL contending absence of wanton, reckless, or malicious conduct); (4) whether the CA’s aggregate award was excessive; and (5) whether JAL should have prevailed on its counterclaim for damages arising from respondent’s conduct.
Standard of review and findings of fact
Deference to trial and appellate findings
The Supreme Court emphasized that it is not a trier of facts and that the findings of the RTC, affirmed by the CA, are binding if supported by substantial evidence. The Court reviewed the record for the limited exceptions that would permit overturning factual findings (speculation, manifestly mistaken inferences, grave abuse of discretion, etc.) and found none. The CA’s factual conclusions were sustained.
Breach of contract of carriage
Existence of contract and JAL’s nonperformance
The Court found a contract of carriage was established: respondent purchased a round-trip ticket, cleared immigration and security, received a boarding pass, and boarded the aircraft. JAL’s subsequent order that respondent disembark and its refusal to carry him on the scheduled flight constituted nonperformance of its contractual obligation. JAL’s asserted justification — the need to verify the authenticity of a parole visa with the U.S. Embassy and that the flight could not wait — did not excuse nonperformance, particularly because verification was possible without infringing the sovereign prerogative to admit aliens. The Court stressed that admitting or excluding aliens is a sovereign act that private carriers cannot usurp, and that JAL, as common carrier, was obliged to exercise utmost diligence under Article 1755 of the Civil Code.
Novation and consent
Novation argument rejected; lack of voluntary waiver
JAL’s contention that respondent agreed to be rebooked for July 30, 1992 (novating the original obligation) was rejected. Novation requires an express and voluntary waiver of the original right; the Court held respondent did not freely consent, having been forced off the aircraft and left no realistic choice but to accept alternative arrangements. Therefore novation did not occur and JAL remained in breach.
Moral damages
Legal basis for moral damages in carriage cases and application
The Court reiterated the general rule that moral damages are not ordinarily recoverable for breach of contract unless the breach is attended by fraud or bad faith, or in cases involving death of a passenger as provided elsewhere in the Civil Code. Applying the exception, the Court agreed with the trial courts that JAL’s conduct—summarily and insolently ejecting respondent, publicly humiliating him, ignoring his valid visa, and making him wait for hours—constituted bad faith and inattention to passenger interests. Such conduct satisfied the exception, supporting an award of moral damages. The CA’s reduced award of P500,000 was deemed reasonable by the Supreme Court in the context of indemnifying respondent for humiliation and embarrassment.
Exemplary damages
Basis for exemplary damages and application
Exemplary damages were appropriate because JAL’s actions were characterized as wanton, oppressive, and malevolent. The Court reiterated that exemplary damages in contractual relations are recoverable when the defendant’s conduct is wanton, fraudulent, reckless, oppressive, or malevolent, and serve to deter socially deleterious conduct by carriers. The Supreme Court found respondent entitled to exemplary damages and found the CA’s figure reasonable after reduction from the RTC award.
Attorney’s fees and interest
Attorney’s fees, measure, and legal interest
The Supreme Court reversed the CA’s deletion of attorney’s fees. It treated attorney’s fees as a permissible form of compensatory damages when exemplary damages are awarded and when the court deems it just and equitable; the amount is discretionary within reasonableness standards. The Court awarded P200,000 as attorney’s fees. The Court also applied the jurisprudential rule on legal interest for obligations breached other than monetary loans: interest at 6% per annum from the date of the RTC judgment (September 21, 2000) until finality of the decision, thereafter 12% per annum until full satisfaction.
Counterclaim and freedom of speech
Denial of JAL’s counterclaim and privileged public commentary
JAL’s compulsory counterclaim for damages arising from respondent’s publication or dissemination of the complaint (allegedly causing reputational injury and press coverage) was denied. The Court observed that the initiation of a lawful action does not render the act wrongful per se; litigation is a protected right. Further, the publications concerned a matter of public interest implicating the constitutional guarantee of freedom of speech and of the press under the 1987 Constitution. The Court applied the d
Case Syllabus (G.R. No. 170141)
Case Citation and Panel
- Supreme Court of the Philippines, Third Division, G.R. No. 170141, April 22, 2008; reported at 575 Phil. 359.
- Decision authored by Justice R.T. Reyes; concurred in by Justices Ynares‑Santiago (Chairperson), Austria‑Martinez, Chico‑Nazario, and Nachura.
Procedural Posture
- Petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure by petitioner Japan Airlines (JAL) from:
- Court of Appeals (CA) Decision dated May 31, 2005 ordering payment of moral and exemplary damages to respondent; and
- CA Resolution dated September 28, 2005 denying JAL’s motion for reconsideration.
- Underlying action: Civil Case No. 4195‑V‑93 filed by respondent before the Regional Trial Court (RTC) in Valenzuela City.
- RTC Decision rendered September 21, 2000 in favor of respondent; CA affirmed with modification on May 31, 2005; Supreme Court denial of petition except for modification of amounts.
Facts — Travel, Medical Purpose, and Bumping Incident
- In 1991, respondent Jesus Simangan decided to donate a kidney to his cousin Loreto Simangan, who was to be operated on at UCLA School of Medicine in Los Angeles, U.S.A.
- At UCLA’s request, respondent underwent laboratory tests at the National Kidney Institute in Quezon City; tests showed blood and tissue compatibility.
- UCLA arranged with the American Consulate for respondent’s visa; respondent was issued an emergency U.S. visa by the American Embassy in Manila.
- Respondent purchased a round‑trip ticket from JAL for US$1,485.00 and was issued the corresponding boarding pass; scheduled flight bound for Los Angeles, California via Narita, Japan.
- On July 29, 1992, respondent arrived at Ninoy Aquino International Airport with relatives and friends, checked in at JAL counter, and passed rigid immigration and security procedures; he was allowed by JAL to enter the airplane.
- While inside the airplane, JAL crew suspected respondent of carrying a falsified travel document and alleged he would use the trip as a pretext to stay and work in Japan; a stewardess asked for his documents and he was haughtily ordered to stand up and leave the plane.
- Respondent protested, explained he had a U.S. visa, and pleaded that JAL monitor him at Narita so he could be allowed to board; his pleas were ignored and he was compelled to deplane.
- Respondent waited for three hours at JAL’s ground office while the plane took off without him; he was later informed his travel documents were in order.
- JAL refunded the cost of the plane ticket but deducted US$500.00; subsequently, respondent’s U.S. visa was cancelled.
- Respondent alleged he was prevented from donating his kidney and suffered embarrassment and mental anguish; he filed suit seeking P3,000,000.00 moral damages, P1,500,000.00 exemplary damages, and P500,000.00 attorney’s fees.
Pleadings and Defendant’s Contentions
- JAL denied material allegations and contended the refusal to allow respondent to fly was due to a need to authenticate his travel documents with the U.S. Embassy because its airport staff had not encountered a parole visa before.
- JAL asserted that verification required additional time, that respondent was advised to take the flight the following day (July 30, 1992), and that respondent agreed to be rebooked on July 30, 1992 (argument of novation/voluntary desistance).
- JAL filed a counterclaim alleging wrongful institution of the complaint and prayed for litigation expenses, exemplary damages and attorney’s fees.
RTC Ruling (September 21, 2000)
- RTC found in favor of respondent and rendered judgment ordering JAL to pay:
- P1,000,000.00 as moral damages;
- P500,000.00 as exemplary damages; and
- P250,000.00 as attorney’s fees; plus costs of suit.
- RTC rationale: JAL summarily and insolently ordered respondent to deplane while settled in his assigned seat, violating the contract of carriage and causing embarrassment, wounded feelings and social humiliation; JAL, as a carrier, should have known the validity of respondent’s documents and its conduct demonstrated bad faith.
Court of Appeals Decision (May 31, 2005)
- CA affirmed RTC’s factual findings that a perfected contract of carriage existed and that respondent was “haughtily ejected,” embarrassed and humiliated.
- CA imposed presumption of liability for breach of contract of carriage and placed burden on the carrier to prove unforeseeable event or force majeure.
- CA rejected JAL’s unsubstantiated allegations that respondent possessed bogus documents or intended to remain illegally in Japan, and rejected the novation argument raised for the first time on appeal.
- CA modified damages: reduced moral damages to P500,000.00 and exemplary damages to P250,000.00; deleted award of attorney’s fees for lack of factual basis showing cost of counsel.
Issues Presented by JAL (as stated in the petition)
- Whether respondent was entitled to moral damages considering:
- (A) JAL was not guilty of breach of contract; and
- (B) moral damages in breach of contract cases are recoverable only when the breach is attended by fraud or bad faith, which JAL claims it did not commit.
- Whether respondent was entitled to exemplary damages considering that such damages are recoverable only if the carrier acted wantonly, fraudulently, recklessly, oppressively or malevolently, which JAL contends it did not.
- Whether the CA award of P750,000.00 in damages (as originally modified by CA) was excessive and unprecedented.
- Whether the CA erred in not awarding