G.R. No. 77194 - Gaston vs. Republic Planters Bank

Case Summary (G.R. No. 77194)

Procedural History

Respondents filed a damage suit against petitioner for breach of contract of carriage allegedly attended by bad faith. After trial, the regional trial court rendered judgment for respondents awarding actual, moral, and exemplary damages, attorney’s fees and litigation expenses. On appeal, the Court of Appeals affirmed the trial court except it deleted the awards of moral and exemplary damages and adjusted transportation expenses. The Court of Appeals denied reconsideration. Petitioner elevated the case by petition for review to the Supreme Court.

Applicable Law and Constitutional Basis

Because the Supreme Court’s judgment was rendered after 1990, the 1987 Philippine Constitution governs the legal context of the decision. The dispositive substantive law applied in the decision is the Civil Code provision governing carriers: common carriers are bound to exercise extraordinary diligence (Article 1733 as cited), the carrier’s liability period extends while the goods are in the carrier’s possession (Article 1736 as cited), and specified exceptions to liability are enumerated under Article 1734 (flood, war, act/omission of shipper, defects in packing, order of public authority, etc.). The decision applies these Civil Code standards to determine the carrier’s responsibility and to assess damages.

Facts Found by the Trial Court and the Appellate Court

The record established that Fatima boarded petitioner’s Bus No. 5 on the evening of August 31, 1984, with three pieces of luggage. Her brother Raul testified that he helped pack and load the luggage into the bus baggage compartment; an employee of petitioner also assisted in loading without requiring declaration, weighing, receipting, or payment. During a stopover at Daet, it was discovered that all but one bag remained in the open compartment and the others were missing, presumably dropped along the way. Respondents reported the incident to petitioner’s regional and head offices, the police, and the NBI; petitioner apologized in writing and stated that a team had been sent to recover the items. Other passengers also suffered loss and petitioner offered a P1,000 settlement to one passenger, which she accepted. Respondents exerted extensive efforts to recover property and to reconstitute vital documents, including traveling between Bicol and Manila and executing an affidavit of loss.

Legal Issue(s) Presented

Primary legal issues resolved by the courts were: (1) whether petitioner, as a common carrier, was liable for the loss of Fatima’s luggage; (2) whether petitioner’s conduct rose to negligence or bad faith justifying awards of moral and exemplary damages; and (3) the proper measure and quantum of actual and exemplary/moral damages and related expenses.

Standards for Carrier Liability Applied

The courts applied the well-established rule that common carriers, by the nature of their business and for reasons of public policy, must exercise extraordinary diligence in the care and custody of goods accepted for transport. Liability attaches from the time the goods are unconditionally placed in the carrier’s possession until they are delivered to the entitled recipient, subject only to the enumerated exceptions in Article 1734. When a carrier accepts luggage (including where an employee assists in loading) and does not require declaration, weighing, or issuance of a receipt, the carrier assumes custody and responsibility; failure to exercise extraordinary diligence renders the carrier liable for loss.

Evaluation of Evidence and Determination of Liability

The courts accepted respondents’ documentary and testimonial evidence showing that Fatima brought three bags, that one was recovered, and that petitioner’s personnel assisted in loading without requiring declaration or payment. Petitioner’s October 1, 1984 letter of apology and statement that a team had been dispatched was treated as a tacit admission of responsibility. The physical cause of the loss was attributed to petitioner’s negligence—specifically, failure to ensure that the baggage compartment doors were securely fastened—resulting in luggage being lost during transit and to the prejudice of paying passengers. Because the loss did not fall within any of the statutory exceptions (e.g., natural disaster, act of shipper, defective packing, etc.), ordinary application of the carrier’s strict standard of extraordinary diligence resulted in petitioner’s liability for the lost property.

Analysis and Quantification of Actual Damages

The trial court awarded P30,000 for Fatima’s lost personal belongings (net of the value of the recovered bag) and P90,000 for transportation expenses and moral damages, plus exemplaries and costs, totaling P140,000. The Court of Appeals modified the award by reducing transportation expenses to P30,000 and deleting moral and exemplary damages, resulting in a lower total award (as reflected in the appellate disposition). The Supreme Court agreed with the trial court and Court of Appeals that actual damages to respondents were properly proven and that P30,000 for lost items and P30,000 for transportation expenses were appropriate, given the evidence of losses, travel to testify, and expenses incurred to reconstitute documents.

Analysis and Justification for Moral and Exemplary Damages

The Court of Appeals had deleted the awards of moral and exemplary damages. The Supreme Court, however, found that the facts showed both negligence and bad faith on the part of petitioner. The combination of petitioner’s lax handling (employee-assisted loading without precautions), the systemic failure to secure the baggage compartment, the initial inadequate settlement effort (offering only P1,000 per bag), and the burden respondents bore to recover and reconstitute vital documents justified reinstatement of non-pecuniary relief. Accordin

Case Syllabus (G.R. No. 77194)

Procedural Posture

Petition for review to the Supreme Court seeking reversal of the Court of Appeals decision in CA-G.R. CV No. 18979 promulgated January 13, 1993, and its resolution of February 19, 1993, which denied petitioner’s motion for reconsideration as a mere rehash of prior arguments.
Case originated from a damage suit filed by respondents Dr. Elino G. Fortades, Marisol A. Fortades and Fatima Minerva Fortades against petitioner Sarkies Tours Philippines, Inc. for breach of contract of carriage allegedly attended by bad faith.
Trial court rendered judgment in favor of respondents on June 15, 1988. The Court of Appeals affirmed but modified certain awards and deleted awards of moral and exemplary damages. The petition to the Supreme Court followed.

Relevant Facts

On August 31, 1984, Fatima Minerva Fortades boarded petitioner’s De Luxe Bus No. 5 in Manila bound for Legazpi City.
Fatima’s brother Raul aided in loading three pieces of luggage containing optometry review books, materials and equipment, trial lenses, trial contact lenses, passport and visa, and Marisol’s U.S. immigration (green) card, among other documents and personal belongings.
The luggage was kept in the baggage compartment of the bus.
During a stopover at Daet it was discovered that all but one bag remained in the open compartment; the other bags, including Fatima’s, were missing and could have dropped along the way.
Some passengers suggested retracing the route to recover the lost items; the driver ignored the suggestion and proceeded to Legazpi City.
Fatima immediately reported the loss to her mother Marisol, who went to petitioner’s office in Legazpi City and later to the head office in Manila; petitioner offered P1,000.00 for each piece of lost luggage, which offer was turned down.
Respondents sought assistance from radio stations and Philtranco drivers; one of Fatima’s bags was recovered with the help of a Philtranco bus driver.
Marisol reported the incident to the National Bureau of Investigation (NBI) field office in Legazpi City and to the local police.
On September 20, 1984 respondents, through counsel, made a formal demand on petitioner. Petitioner’s letter dated October 1, 1984 apologized for the delay and stated a team had been dispatched to Bicol to recover or obtain full details of the incident.
After more than nine months without satisfactory recovery or compensation, respondents filed suit to recover the value of the remaining lost items and sought moral and exemplary damages, attorney’s fees and litigation expenses.
Petitioner denied liability on the ground that Fatima allegedly did not declare any excess baggage upon boarding.

Evidence Presented at Trial

Testimonial evidence that Fatima boarded De Luxe Bus No. 5 on the evening of August 31, 1984, and brought three pieces of luggage: testimony of brother Raul (TSN, August 4, 1986, pp. 29, 34, 40-41, 54, 57, 70).
Recovery of one bag with help from a Philtranco bus driver.
Petitioner’s October 1, 1984 letter apologizing for delay and indicating efforts to recover lost items—interpreted as tacit admission of liability.
Reports to the police, the NBI, and petitioner’s regional and head offices; efforts by respondents to secure recovery and replacements (including execution of an affidavit of loss to expedite replacement of U.S. immigration documents).
Testimony that other passengers also lost baggage: Dr. Lita Samarista (petitioner offered and she accepted P1,000.00 for lost baggage; TSN, August 4, 1986, p. 83); Carleen Carullo-Magno lost review materials; her brother lost abaca products (TSN, February 5, 1988, pp. 8, 14-16).
Trial exhibits including affidavit of loss (Exhibit “E”) and record references (rollo, TSNs).

Trial Court Ruling (June 15, 1988)

Judgment rendered in favor of plaintiffs (respondents) and against defendant petitioner, ordering payment within 30 days of:
- P30,000.00 — equivalent to the value of Fatima’s personal belongings less the value of one recovered luggage.
- P90,000.00 — for transportation expenses as well as moral damages.
- P10,000.00 — exemplary damages.
- P5,000.00 — attorney’s fees.
- P5,000.00 — litigation expenses.
Total award ordered: P140,000.00.

Court of Appeals Ruling

Court of Appeals affirmed the trial court’s decision except that it:
- Modified the award for transportation expenses to P30,000.00.
- Deleted the award of moral damages and exemplary damages.
The Court of Appeals’ decision as modified was affirmed, with costs against defendant-appellant.
Petitioner’s motion for reconsideration to the Court of Appeals w