G.R. No. 159636 - Victory Liner, Inc. vs. Gammad

Case Summary (G.R. No. 159636)

Factual Background

On March 14, 1996, Marie Grace Pagulayan‑Gammad was a passenger on an air‑conditioned Victory Liner bus en route from Manila to Tuguegarao when the bus, allegedly running at high speed, fell into a ravine in Barangay Baliling, Sta. Fe, Nueva Vizcaya, resulting in her death and injuries to other passengers.

Commencement of Suit and Pleadings

On May 14, 1996, the heirs of the deceased filed a complaint for damages arising from culpa contractual against Victory Liner, Inc.; the petitioner filed an answer denying negligence and asserting that the incident was accidental and that it exercised extraordinary diligence in its operations.

Pre‑trial Proceedings and Alleged Counsel Negligence

Pre‑trial was repeatedly scheduled and reset before being set on April 10, 1997; Victory Liner was declared in default for failure to appear but obtained an order setting aside the default. The petitioner’s counsel, Atty. Antonio B. Paguirigan, participated in pre‑trial and proposed settlement but later failed to appear at several scheduled hearings, leading to orders that the petitioner had waived the right to cross‑examine the complainant’s witness and the right to present evidence, and to the trial court’s issuance of an order considering the case submitted for decision.

Trial Court Judgment

On November 6, 1998, the Regional Trial Court rendered judgment for the plaintiffs and against Victory Liner, Inc., awarding actual damages of P122,000.00; death indemnity of P50,000.00; exemplary and moral damages of P400,000.00; compensatory damages of P1,500,000.00; attorneys’ fees of ten percent of the total; and costs of suit.

Court of Appeals Disposition

On appeal, the Court of Appeals affirmed with modification on April 11, 2003, reducing actual damages and compensatory damages and preserving moral and exemplary damages of P400,000.00 while affirming the cost judgment; the petitioner filed a motion for reconsideration and then sought relief before the Supreme Court, invoking APEX Mining, Inc. v. Court of Appeals (377 Phil. 482 (1999)) to argue that counsel’s negligence deprived it of due process.

Issues Presented to the Supreme Court

The Supreme Court framed the issues as whether the petitioner’s counsel was guilty of gross negligence that deprived the petitioner of due process; whether Victory Liner, Inc. was liable for breach of contract of carriage; and whether the trial court’s awards of damages were proper.

Counsel Negligence and Due Process Analysis

The Court reiterated the general rule that negligence of counsel binds the client because acts within counsel’s general or implied authority are attributable to the client, but recognized exceptions where gross or palpable negligence deprives a client of due process or results in outright deprivation of liberty or property; applying those principles, the Court found the exceptions inapplicable because Atty. Paguirigan had filed an answer, a pre‑trial brief, successfully moved to lift the default, proposed settlement at pre‑trial, and timely filed an appeal from the trial court’s decision, and because Victory Liner itself bore contributory fault for delayed execution of a special power of attorney and for failing to appear despite several notices.

Liability for Breach of Contract of Carriage

The Court affirmed that a common carrier is bound to carry passengers safely with the utmost diligence and that, under the governing jurisprudence, when a passenger dies or is injured the law presumes the carrier’s fault; this presumption may be overcome only by proof of extraordinary diligence. Finding no evidence that Victory Liner exercised extraordinary diligence, the Court held that the petitioner was liable for breach of contract of carriage.

Assessment and Modification of Damages

The Court modified the awards as follows: the heirs were entitled to death indemnity of P50,000.00 under Article 1764 in relation to Article 2206; the award of compensatory damages for loss of earning capacity was deleted for lack of documentary proof because the testimonial evidence did not fall within the recognized exceptions permitting recovery without documentary evidence; in place of the unsubstantiated claim for loss of earning capacity, the Court awarded temperate damages of P500,000.00 pursuant to Article 2224 to compensate for pecuniary loss shown but not proven with certainty; moral and exemplary damages were separately awarded on distinct jural grounds, P100,000.00 as moral damages for grief caused by the death and P100,000.00 as exemplary damages because the petitioner failed to prove extraordinary diligence and was presumed to have acted recklessly.

Reduction of Actual Damages and Attorneys’ Fees

The Court further reduced actual damages to P78,160.00 because only those items supported

Case Syllabus (G.R. No. 159636)

Parties and Procedural Posture

VICTORY LINER, INC. was the petitioner before the Supreme Court and the defendant below in Civil Case No. 5023 of the Regional Trial Court, Tuguegarao, Branch 5.
ROSALITO GAMMAD and the other respondents were the plaintiffs below and the heirs of the deceased passenger, Marie Grace Pagulayan-Gammad.
The Regional Trial Court rendered judgment in favor of the respondents on November 6, 1998, awarding damages for breach of contract of carriage.
The Court of Appeals affirmed the trial court decision with modification by decision dated April 11, 2003.
The petition to the Supreme Court assailed the Court of Appeals decision principally on the ground that the gross negligence of petitioner’s former counsel deprived VICTORY LINER, INC. of due process.

Key Factual Allegations

On March 14, 1996, Marie Grace Pagulayan-Gammad was a passenger on an air-conditioned Victory Liner bus bound for Tuguegarao from Manila when the bus ran at high speed and fell into a ravine in Barangay Baliling, Sta. Fe, Nueva Vizcaya at about 3:00 a.m.
The accident resulted in the death of Marie Grace and physical injuries to other passengers.
The respondent heirs filed a complaint for damages arising from culpa contractual on May 14, 1996.
VICTORY LINER, INC. pleaded that the incident was accidental and that it exercised extraordinary diligence in its operations.

Procedural History

Notices to appear at pre-trial were issued and received on October 23, 1996, January 30, 1997, and March 26, 1997.
VICTORY LINER, INC. was declared in default for failing to appear at pre-trial on April 10, 1997, but the order of default was later set aside on motion.
The petitioner’s counsel waived the right to cross-examine by failing to appear for a scheduled cross-examination on December 8, 1997, and the trial court considered the case submitted on March 25, 1998 for failure to appear.
The trial court rendered judgment on November 6, 1998; the petitioner appealed to the Court of Appeals, which issued its decision on April 11, 2003, and denied reconsideration on August 21, 2003.
The petition for review on certiorari to the Supreme Court followed, raising principally the alleged deprivation of due process by counsels negligence and the propriety of damages awarded.

Issues

Whether the negligence of petitioner’s former counsel amounted to gross or palpable negligence that deprived VICTORY LINER, INC. of due process.
Whether VICTORY LINER, INC. is liable for breach of contract of carriage for the death of Marie Grace Pagulayan-Gammad.
Whether the awards of actual, compensatory, moral, exemplary, temperate damages, attorneys’ fees, costs, and interest were proper and correctly quantified.

Contentions

VICTORY LINER, INC. contended that the mistake and gross negligence of its counsel, Atty. Antonio B. Paguirigan, in failing to appear and to timely move for reconsideration deprived it of its day in court and warranted remand for cross-examination and presentation of evidence or dismissal of the complaint, invoking APEX Mining, Inc. v. Court of Appeals.
The respondents contended that counsel’s lapses did not constitute gross negligence that deprived the petitioner of due process and that the statutory presumption of carrier negligence applied because petitioner failed to prove extraordinary diligence.
The parties disputed the basis and quantum of the various items of damages.

Ruling and Disposition

The Supreme Court PARTIALLY GRANTED the petition and AFFIRMED with modification the April 11, 2003 decision of the Court of Appeals.
The Court held that the negligence of petitioner’s counsel did not amount to gross or palpable negligence that would relieve VICT